Take a minute to read this analysis of health care spending by Michael F. Cannon of the Cato Institute.

Thirty years ago, an enormous and well–respected study (the RAND Health Insurance Experiment) randomly assigned thousands of people with all sorts of health problems to different health plans with varying coinsurance levels. Unsurprisingly, researchers found that the less patients had to pay out–of–pocket, the more medical care they consumed. Patients who paid nothing out–of–pocket — for whom healthcare was effectively “free” — consumed 43 percent more than those with a deductible of a few thousand dollars.

More surprising was that, overall, the additional care produced no better health outcomes. A lot of the added expenditures were simply wasted on low– and zero–value care.

America’s dysfunctional healthcare system seems to be conducting a similar experiment over time. Back in 1965, patients paid, on average, 44 percent of their medical care out–of–pocket. Since then, that share has fallen to 14 percent. In other words, for every dollar of healthcare a patient receives, on average the patient pays only 14 cents from their own wallet.

The results have been predictable. Patients demand more low–value medical care, they file more health insurance claims, and year after year, health insurance premiums rise faster than family incomes.

The problems with the health care industry in America are largely caused by intrusion into the free market and by a foolishly designed “insurance” system.

Increasingly numerous and onerous government dictates, both federal and state, have artificially driven up costs much like similarly well intentioned mandatory automobile insurance, fuel economy, and safety equipment regulations drive up the cost of owning and operating a car.  The government, of course, doesn’t realize that they are causing many of the problems and believe that (hold your laughter) they can solve the problems they created with more government.

Health insurance as we know it is the other major problem.  What we have isn’t insurance.  Insurance protects you against the unexpected, like your house burning down or a car accident.  Our health “insurance” covers far too many procedures and treatments, many of them decidedly not unexpected, and obfuscates the true cost of the service from the consumers.  It’s no wonder that patients are notoriously poor consumers.  They probably spend more time pondering the taste-to-cost ratio of the various candy bars in the local 7-11 than they do which medical procedures are worth the money and which doctors provide the best value.  “Insurance pays for it,” they’ll tell you.

Also, check out a run down of how some presidential candidates feel about health care at Degree of Madness.

Today President Bush issued his second veto against increased federal funding of embryonic stem cell research.  It is only the third veto of his entire administration.  As before, I support Bush’s ultimate decision, although my rationale is a bit different.

Beware of political canards associated with the debate over stem cell research.  Proponents argue that embryonic stem cell research could cure just about everything.  I don’t doubt that it could ultimately prove fruitful, but private investment into embryonic stem cell research - which is legal - is a great barometer of the potential upside.  You’ll read and hear about how many embryos will be discarded because of Bush’s veto.  Why aren’t companies in the medical field purchasing those embryos for research?  Say what you will about their focus on profits rather than patients, but it they felt that embryonic stem cell research could result in dramatic cures then they would dump tons of money into research in order to reap the greater rewards on the back end.

It’s easy for politicians, actors and other lay people to tout the virtues of embryonic stem cell research, but if people in the know aren’t putting their own money at risk investing in research it makes me think that the claims of proponents just might be over hyped.

If you work, pay taxes, and have health care costs then you’ve no doubt heard about - and probably take advantage of - the tax free medical flex accounts.  The plans allow you to set aside a predetermined amount of your income into a special account and use that money throughout the year on approved health care expenses.  The withheld money is exempt from federal income taxes.

But as usual there is a hitch.  At the beginning of the plan year you must determine exactly how much money will be set aside tax free.  If you do not use all of that money on health care expenses the balance is forfeited.  That’s right - you just flat out lose that money.  According to benefit specialists, employees typically forfeit more than $100 each year.  It gets worse!  You might have to pay taxes on the money that is forfeited.

My wife and I use one of these plans, but while I was sitting in my company’s annual benefits update meeting I was wondering about their true cost. 

The first cost to consider is an explicit cost: the administrative fee.  My company’s administrator charges about $5 per employee per month.  Whether you pay this directly or your employer pays it for you it is part of your total compensation.  So, right out of the gate the plan costs each employee $60 per year.

The remaining costs are not explicit, but rather costs associated with lost time.  For the purposes of quantifying these costs I’ll use the median income for Madison County, which was about $49,000 in 2004.  A typical number of working hours in a year is 2,080, which means that our average person earns $23.56 per hour.  For the sake of simplicity I’ll assume this is the taxable income.  Using current federal income tax rates the total income tax owed would be $6,567.50 (Imagine if you had to write a check for that amount at the end of the year rather than having the government take your money before it reached your pocket!).  The marginal tax bracket is 15% and the effective tax rate is 13.4%.

The time associated with personally dealing with the flex accounts is not negligible.  Considerable planning must be done up front to avoid forfeiting money or drastically under utilizing the tax saving potential.  Then during the year you must keep track of all associated receipts and frequently must fill out and file a claim form.  If your plan administrator issues you a “debit” type card for health care purchases you’ll still be periodically demanded to produce some receipt from a debit card purchase.  It’s not easy to quantify the sum total of five minutes here and fifteen minutes there over the course of the year, but I would estimate it to be about 3 hours.  That is $70.68 per year for our average Madison County resident.

So the total costs per year are about $131 dollars.  It doesn’t sound like much, but since the marginal tax bracket is 15% our average person would have to spend $873 dollars on health care expenses just to break even.  Anything less than that and you are losing money.  Of course, that doesn’t take into account the frustration associated with filling out forms, filing claims, and dealing with plan administrators when things don’t go smoothly.

As usual, even “good” plans that are built upon our convoluted income tax code result in associated costs and inefficiencies that make them quite a bit less attractive than at first blush.

Is it just me or does it seem like every time somebody perceives a problem they automatically call for government regulation?  This column on Slate is a perfect example.  It’s a discussion of the pitfalls of the fertility industry and it delves in to the issue of twins, triplets, etc. caused by in vitro fertilization (IVF).

Some European countries limit the number of embryos a doctor can transfer during IVF; Great Britain, for instance, allows only two embryos, or three if a woman is over 40. The United States, by contrast, has no federal regulations on embryo limits. So, while a conservative doctor may opt for one or two, a cowboy physician—hoping to increase his clinic’s pregnancy rates and thereby draw more patients—may implant four or five or more.

Why does there need to be a damn federal regulation on this?  When are people going to realize that as we continue to add layer upon layer of regulation we begin to become a command economy rather than a free economy?  Some people may want more than one or two children at a time.  Others are completely within their rights to demand that their physician implants no more than two embryos.  Given our litigious society, they will have no problem getting damages from that person should he violate their agreement.  Let people decide, not the government.

From the NY Times:

When Maine became the first state in years to enact a law intended to provide universal health care, one of its goals was to cover the estimated 130,000 residents who had no insurance by 2009, starting with 31,000 of them by the end of 2005, the program’s first year.

So far, it has not come close to that goal. Only 18,800 people have signed up for the state’s coverage and many of them already had insurance.

This is a good example of why the federal government should not pursue nationalized health care.  Decisions such as that should be left to the states so that if a plan is a huge debacle it doesn’t hurt the entire country.

Click here to listen to an NPR story about Oregon Senator Ron Wyden’s “Healthy Americans Act.”  Details about the legislation: 

The Healthy Americans Act

Sen. Ron Wyden (D-OR) has introduced a bill that would guarantee all Americans the right to private health coverage. The legislation proposes that access to health insurance should not depend on an individual’s employment.
 
Expanding Coverage: Tax benefits and premium reductions written into the bill are designed to help citizens afford private health plans. Health problems, occupation, genetic information, gender and age will no longer be allowed to impact eligibility or increase insurance costs.
 
Employers who currently provide employee health benefits will be required to convert their health-care premiums into higher wages. Employees can use these increased wages to purchase their own private health insurance.
 
Promoting Competition: The bill relies on competition between insurers to drive down costs and promote quality. Individuals will no longer be grouped according to their employers, so in theory, the pool of health-care consumers will be expanded.
 
State Coordination: Each state, with funding from the federal government and insurance companies, will establish a “Health Help Agency.” Health Help Agencies will coordinate insurance payments from employers, individuals and the government.
 
Focus on Prevention: The legislation’s proposed system provides a financial incentive to insurance companies to keep their subscribers healthy; individuals will be more likely to stick with an insurer that is providing good preventive care. Subscribers will also be rewarded when they or their children successfully participate in wellness programs. It is expected that better preventive care will avoid spending taxpayer dollars on expensive visits to the emergency room.

Decoupling health insurance from employers is the lynchpin of health care reform.  “Requiring” employers to convert high premiums into higher wages seems heavy handed and betrays a total lack of confidence in free market principles.

Bob Riley has proposed to give a tax break to small businesses that offer health care coverage.

Riley’s plan would allow companies with 25 or fewer workers to deduct twice the amount they pay for health insurance premiums from their state income taxes. Also, small business employees with incomes of up to $50,000 would be able to deduct twice the amount they pay for health insurance from their individual income taxes.

The proposal has been introduced in the Alabama House’s Education Appropriations Committee, said Alabama Rep. Jay Love, R-Montgomery, the sponsor of the measure. It could be considered in a couple of weeks, he said.

Would Riley’s plan help small businesses?  Of course!  But, the plan would further exacerbate one of the primary problems with our health care system: employer provided health insurance.

Employer provided health insurance makes us all bad consumers.  Decoupling health insurance from employers - just like auto or homeowners insurance - would impress upon people the true cost of health care and encourage people to make wiser choices.  Many people pay only a small portion of their health insurance premiums.  The balance of the plan that is paid for by the employer essentially depresses the worker’s wages by an equal amount, but that is a hard concept for some to grasp.  When people get something for nothing (or very little) they don’t truly appreciate the cost.  If workers could take home that additional pay and shop around for a health plan that fit their needs they might think twice about what they buy and how they use it.

Businesses only offer health insurance as a fringe benefit because of the tax deduction.  Some might have started offering the benefit without the deduction, but I seriously doubt the practice would be widespread.  Riley would only further ingrain the practice with his new tax plan.  One of the smarter domestic policies Bush has mentioned was to take the tax deduction away from businesses and give it to citizens.

I’m going to think this through while I type, so indulge me.  I would hazard a guess that the universal socialized health care fans (mainly Dems) have a vested interest in keeping the current employer provided insurance system.  They want to change health insurance from a fringe benefit that rewards people whose contributions to their company (and the economy in general) merit such compensation to a birth right.  My reasoning is that it is much easier for the federal government to impose requirements on companies under the broadly interpreted interstate commerce clause than it is for them to impose requirements on individuals.  Bush’s plan fell on deaf ears in the Democratic controlled legislature.  It doesn’t fit their long term plans of lording over our health care decisions.  Maybe he should have floated the idea during his first six years when he could have just told the GOP to vote yes.

Like nearly any decent American I am upset at the shoddy health care our government is providing to our war veterans.  Obviously the DoD did a very poor job planning ahead for the increased percentage of non fatal injuries that any nominally intelligent observer could see coming.  Each successive war over the past 100 years has had a lower death rate than the one before, which means more injured soldiers.  It becomes clearer every day that whether or not the decision to go to war in Iraq was right or wrong the execution of that decision has been abysmal.

Another thing to take from the issues at Walter Reed is that if this is how our government takes care of war heroes how do we think they’ll take care of average citizens like you and me when we get the socialized health care that Democrats and Mitt Romney seem to favor?  Lack of competition spawns problems like what we’re seeing at Walter Reed.  The last thing I want is for everyone to have to suffer the same fate.

Mitt Romney’s government mandated health care insurance program is already turning into a disaster (subscription required).

When then-Gov. Mitt Romney, a Republican, introduced a universal health-insurance plan in the Bay State early last year, it was widely acclaimed. But less than a year after passage, RomneyCare is in the intensive care unit, soon to be wheeled into hospice.

The first signs of trouble appeared last August. In a filing to support general obligation bonds, officials projected that the new plan would increase state government health-care spending by $276.4 million in 2007. That’s $151 million more than what the public had been told the plan would cost. Meanwhile, the state’s new bureaucracy, busily signing up people for free care, has run into trouble finding affordable plans for those who have to pay. The premiums for subsidized plans would consume up to 6% of a person’s income — prompting calls from activists and echoes from politicians that they should be exempted from the individual mandate. So much for universal coverage.

Reality fully hit in late January of this year, when private insurers submitted bids to the bureaucracy that would administer the new program. The average premium for the unsubsidized plans was not $200 per month — as Mr. Romney promised from the stump — but rather $380. That’s more than 15% of the target audiences’ income — and for a plan with a $2,000 deductible and a total cost sharing of $5,000. People were stunned, outraged. Naturally, “greedy” private insurers were blamed. Politicians called for price controls.

Price controls.  Sounds like a great plan.

The article didn’t quite hammer home the cost increase for 2007 enough.  While Wall Street Journal readers can be expected to be math savvy, the math challenged masses need to be bludgeoned over the head.  The original 2007 cost estimate was $125 million.  It new projection is $276 million - more than double what the public was told.  Keep that in mind next time you hear a politician touting a “universal” (i.e. government) health care plan.

Kudos to Rob.

This is simply amazing.

Born only 21 weeks and six days after conception, Amillia Taylor weighed just under 10oz and was only 91/2 inches long.

Medical staff, however, were given a clue to her fighting spirit when the tiny scrap tried to cry and breathe on her own.

And now, four months later and weighing 4lb, she has been allowed home – the world’s most premature baby to have survived.

Interesting concluding sentence given one of my recent posts:

Babies can still be aborted for non-medical reasons at up to 24 weeks (in Britain). Recent evidence shows that, of those born at 25 weeks, half of them manage to live.