Minor Thoughts from me to you

Health Care Cost Increase Is Projected for New Law - NYTimes.com

A government analysis of the new health care law says it will not slow the overall growth of health spending because the expansion of insurance and services to 34 million people will offset cost reductions in Medicare and other programs.

The study, by the chief Medicare actuary, Richard S. Foster, provides a detailed, rigorous analysis of the law.

In signing the measure last month, President Obama said it would "bring down health care costs for families and businesses and governments."

But Mr. Foster said, "Overall national health expenditures under the health reform act would increase by a total of $311 billion," or nine-tenths of 1 percent, compared with the amounts that would otherwise be spent from 2010 to 2019.

This analysis isn't really a surprise to me. It seems pretty obvious that adding lots and lots to uninsured people to Medicare will increase costs by quite a bit. And, this picture, is actually a best case scenario. It assumes that politicians won't act like politicians.

Mr. Foster says the law will save Medicare more than $500 billion in the coming decade and will postpone exhaustion of the Medicare trust fund by 12 years, so it would run out of money in 2029, rather than 2017. In addition, he said, the reduction in the growth of Medicare will lead to lower premiums and co-payments for Medicare beneficiaries.

But, Mr. Foster said, these savings assume that the law will be carried out as written, and that may be an unrealistic assumption. The cuts, he said, "could become unsustainable" because they may drive some hospitals and nursing homes into the red, "possibly jeopardizing access to care for beneficiaries."

If you believe that politicians are actually going to cut payments to Medicare physicians and hospitals, then you obviously haven't been paying attention to the votes that have been taken in Washington over the last two decades. Congress loves to talk about cutting payments to Medicare. Then, every time the cuts come due, there's a bipartisan rush to postpone the cuts. Government spending is going up. Way up.

Obamacare delenda est

Why We Need Generic Copies of Biologic Drugs - NYTimes.com

we continue to spend more on drugs -- in part because of the increasing use of so-called biologic medicines, which cost, on average, 22 times as much as ordinary drugs. In 2008, 28 percent of sales from the pharmaceutical industry's top 100 products came from biologics; by 2014, that share is expected to rise to 50 percent.

Biologic drugs can be more expensive to manufacture; they are grown inside living cells rather than put together chemically, as conventional drugs are. But this does not fully account for their high prices. Another important factor is that they very rarely face competition from generic copies.

Congress has an opportunity to change this by including in health care reform incentives for generic drug makers to compete in the biologics marketplace. But unfortunately, both the House and the Senate versions of health care reform contain provisions that would discourage the development and significantly delay the approval of generic biologics.

In general, I'm in favor of swinging the pendulum back towards less intellectual property protection. This sounds like a bad idea to me.

"Let me be clear: if you like your doctor, you can keep him". Who hasn't heard the President make that promise by now? The problem is, it makes a huge assumption. That promise assumes that your doctor isn't going to retire as a result of healthcare reform.

The New England Journal of Medicine reports that more than 30% of physicians want to leave medical practice if the current healthcare reform plans are implemented.

In other news, nurses report that they spent 25% of their time doing "indirect patient care".

Nurses reported having to document patient care information in multiple locations, in addition to having to complete logs, checklists and other redundant paperwork that prevented them from having more time with their patients. Beyond these paperwork redundancies, nurses reported significant time being wasted trying to secure needed equipment and supplies.

When asked for solutions to these challenges, nurses recommended a combination of ancillary staff support, hospital-wide communications technology and reductions in redundant regulatory requirements.

Adding more bureaucracy, rules, and paperwork to the medical process is unlikely to make things better. Doctors may quit and nurses may quit. But, by all means, bring on the healthcare reform. If you like your doctor, the President has promised you can keep him. And the President is an honorable man.

Greg Mankiw explains the spending problems with the healthcare bill through a short, imagined dialog between two friends. Here's the kicker:

Even if you believe that the spending cuts and tax increases in the bill make it deficit-neutral, the legislation will still make solving the problem of the fiscal imbalance harder, because it will use up some of the easier ways to close the shortfall. The remaining options will be less attractive, making the eventual fiscal adjustment more painful.

With the President's current budgeting trends (spend as much as you can, as fast as you can), we're facing an $11.3 trillion deficit by 2020. By that time, the federal debt will be a staggering $20.3 trillion. (The debt was $5.8 trillion at the end of 2008.)

It's not enough to be happy that we're maintaining the current levels of spending or -- even worse -- that we're managing to spend more in a "deficit neutral" way. It's serious business and it's time we stopped "kicking the can down the road to future generations", as the President likes to say.

Insurer's Gone Wild

"We allow the insurance industry to run wild in this country," President Obama declared on Monday. "We can't have a system that works better for the insurance companies than it does for the American people."

Yet Obama's plan to tame health insurers would boost their business, protect them from competition, and guarantee their profits, all at the expense of consumers and taxpayers. It is therefore not surprising that the insurance companies, while they object to the president's rhetoric and quibble over some of the details, are happy to be domesticated. Here are five ways in which Obama would help insurers while pretending to fight them.

There's nothing progressive about a plan that forces people to buy products from specific companies, under penalty of law. And there's nothing conservative about that plan either. It guarantees profits, eliminates risks, and rips off the American public. Is it any wonder that the American public opposes this plan 2-1?

"Let me be clear. If you like the health plan you have, you can keep it." President Obama has made this claim multiple times about healthcare reform. But it's simply not true. Let me offer one small example.

My wife and I enjoy our Flex Spending Account. We put in enough money each year to cover the various drugs we'll need to buy (both prescription and non-prescription), a new pair of glasses, and money to cover any other medical expenses we anticipate. Next year, I'm planning on putting in an extra $4000 for corrective laser eye surgery, so that I can finally stop wearing glasses. We like the plan we have.

Well, under the Senate healthcare bill, we'll no longer have that plan.

Both the House and Senate bills include a change in the definition of a “qualified medical expense” that impacts reimbursements and withdrawals under all types of health care accounts (i.e., FSAs, HRAs, HSAs, and Archer MSAs). As of 2011, expenses incurred for over-the-counter (OTC) medications and products will no longer be eligible for payment or reimbursement from any of the health care accounts. The House bill definition appears to apply to all OTC medications. However, the Senate bill would still allow OTC medicines obtained with a prescription and insulin to be reimbursed or paid tax-free from the health care accounts.

The most significant change likely to be enacted is an annual limit on contributions made by employees to flexible spending arrangements (FSAs) for health care. Both the House and Senate versions of health reform legislation would limit contributions to no more than $2,500 annually. The limit would be indexed to inflation for future years. Under the House bill, these changes would not take effect until 2013. In the Senate bill, these changes would take effect in 2011.

If the current "reform" bills, I wouldn't be able to buy OTC drugs -- Sudafed, Mucinex, ibuprofen, Tylenol -- tax free. If the "reform" bills pass, I wouldn't be able to save tax free for corrective eye surgery. I would no longer have the plan I like.

It's just one more broken promise from a president that's building quite a pile of them. Apparently, "yes we can" act just like any other politician.

At the request of BlueCross BlueShield, Oliver Wyman did a study of the Senate health care bill. Unsurprisingly, this study estimates that the bill will cost consumers quite a bit more than the CBO estimated.

John Goodman summarized the findings this way:

Premiums for individuals and families purchasing coverage on their own will go up 54%. Premiums for small businesses will go up 20%. Both numbers are over 5 years and both numbers exclude the impact of medical inflation.

I skimmed through the study and it looks pretty interesting. The study points out that reform won't work unless everyone is forced to purchase insurance.

The key implication of our analysis is simple: For these types of insurance reforms to be successful and sustainable, it is imperative to get broad participation. Young and healthy people need to be part of the insurance pool, and people cannot defer buying insurance until they are sick or at high risk. This is true no matter who is paying the premiums--individuals, employers, or the government.

The study then goes on to indicate that the current bill likely will allow people to free-ride, with bad results. They're basing their conclusions on several states' experiments with healthcare reform.

• New York and Vermont: Average premiums in the individual market today are about 60% higher than the national average

• New Jersey: Reform caused much higher premiums forcing thousands of individuals to drop coverage. The individual market decreased from 157,000 people in 1993 to 88,000 in 2007

• Maine: Individual market enrollment in Maine dropped from 90,000 to 41,000 between 1993 and 2007 following the state's reforms.

Even in Massachusetts, there is evidence that individuals are selectively jumping in and out of the market when they need healthcare. Data from health insurers in Massachusetts indicate that the number of peopl ein the individual market with coverage of less than 12 months has doubled post reform. These individuals have a significantly higher claims to premium ration when compared to those who had coverage for more than 12 months but let it lapse or those that are active.

Without strong penalties, similar types of behavior are likely to emerge in the reformed individual market--resulting in significantly higher premiums for the insured.

This is one of the reasons why I believe that the "reform" bills will just make American healthcare worse than it already is.

Here's Warren Meyer, talking about the different types of rationing.

So here is what it boils down to: For every product or service purchase, someone makes a price-value trade-off to determine if that product or service should be purchased for a given price in that particular instance.

One option for making this decision is to have the person who actually will consume the product or service — and whose money will also be used to complete the transaction — make this price-value tradeoff.

... A second way to do this would be to have someone who has you specifically in mind make the price value tradeoffs for you. This might be like your wife volunteering to go out to buy you some new underwear.

... So a third model, and almost certainly the worst in terms of individual satisfaction, is to have a third party make price-value tradeoffs for me only with some notion of average preferences for average people, or worse, with an incentive system that has absolutely nothing to do with my satisfaction at all. This is clearly the case for the government, and is probably the case for many private insurers today[.]

When it comes to your health care choices, who do you want making your decisions? I definitely want to make my own decisions and I think most Americans would agree with me. But the reforms that are on the table would cement the status-quo. The status-quo overwhelmingly encourages us to pre-purchase our health care through expensive health "insurance" policies. Then a bureaucracy will take a look at our care and decide what to reimburse and what to deny. That's true whether you're on an HMO plan, a PPO plan, or a government (Medicare / Medicaid) plan.

Isn't it time that we had real reform? Isn't it time that we put patients back in charge of their own health care decisions?

Jon R. Gabel writes in the New York Times today, saying that we shouldn't fear the cost of health care reform because the CBO has a long history of underestimating the savings from reforms.

In the early 1980s, Congress changed the way Medicare paid hospitals so that payments would no longer be based on costs incurred. ... The Congressional Budget Office predicted that, from 1983 to 1986, this change would slow Medicare hospital spending (which had been rising much faster than the rate of inflation) by $10 billion, and that by 1986 total spending would be $60 billion. Actual spending in 1986 was $49 billion. The savings in 1986 alone were as much as three years of estimated savings.

In the 1990s, the biggest change in Medicare came with the Balanced Budget Act of 1997, a compromise between a Republican-controlled Congress and a Democratic administration. ... The actual savings turned out to be 50 percent greater in 1998 and 113 percent greater in 1999 than the budget office forecast.

In the current decade, the major legislative change to the system was the Medicare Modernization Act of 2003, which added a prescription drug benefit. In assessing how much this new program would cost, the Congressional Budget Office assumed that prices would rise as patients demanded more drugs, and estimated that spending on the drug benefit would be $206 billion.

Actual spending was nearly 40 percent less than that.

I find it interesting though that his savings numbers only extend out a few years. For instance, he talks about how much was saved in 1986, from the 1983 bill, but doesn't talk about hospital spending trends since then. How much has the 1983 bill saved over the past 26 years? He talks about how much money was saved in 1998 and 1999 as a result of the Balanced Budget Act of 1997, but he doesn't talk about how much has been saved in the intervening 10 years. Did the trend continue?

Then I saw this graph, of Congressional health care underestimates. (Courtesy of John Goodman, courtesy of the Joint Economic Commitee. You can read the full report.)

It looks like health care costs are underestimated far more than they're overestimated.

I should know by now that whenever I try to explain something John Stossel has already explained it better. First, he delivers a great quote about why competition keeps prices low.

In a free market, a business that is complacent about costs learns that its prices are too high when it sees lower-cost competitors winning over its customers.

I posted yesterday about why "exchanges" are worse than free markets. Stossel takes that on too and does a far better job than I did.

... Competition is not a bunch of companies offering the same products and services in the same way. That sterile notion of competition assumes we already know all that there is to know.

But consumers often don't know what they want until it's offered, and their preferences and requirements change. Businesses don't know exactly what consumers want or the most efficient way to produce it until they are in the thick of the competitive hustle and bustle.

Nobel laureate F.A. Hayek taught that competition is a "discovery procedure." In other words, the "data" of supply and demand emerge only through the market process. We need open-ended competition not merely to see which rival is better, but to learn things we didn't know before and aren't likely to learn any other way.

"Competition is valuable only because, and so far as, its results are unpredictable and on the whole different from those which anyone has, or could have, deliberately aimed at," Hayek wrote.

The health care bills are perfect examples. If competition is a discovery process, the congressional bills would impose the opposite of competition. They would forbid real choice.

In place of the variety of products that competition would generate, we would be forced "choose" among virtually identical insurance plans. Government would define these plans down to the last detail. Every one would have at least the same "basic" coverage, including physical exams, maternity benefits, well-baby care, alcoholism treatment, and mental-health services. Consumers could not buy a cheap, high-deductible catastrophic policy. Every insurance company would have to use an identical government-designed pricing structure. Prices would be the same for sick and healthy.

Yowza. This is Jerry Pournelle on education and "cherry picking".

On education, the usual critique of charter schools is that they are guilty of "cherry picking" which is to say, they accept only students who want to learn something and are willing to be disciplined. Thus an academically accomplished charter school in DC was not allowed. Cherry picking is supposed to be a bad thing? As opposed to the current practice of making those who would like to learn in DC go to a school that accepts those who do not want to learn and refuse to be disciplined? And this from people who are supposed to be liberal? It seems to me a very good way to keep the blacks in their place. Make them go to lousy schools filled with disorder while you send yours to schools that have discipline, and then on to Harvard. Is that the goal of liberalism? To keep the blacks down? Because I think of no better way to accomplish that goal than what is happening in DC. Tons of money spent on truly horrible schools that no one who could possibly escape them would go to? Would anyone who had in mind the good of black children in DC permit the current school system there to exist for ten minutes more?

The money is spent, and the results are known, and nothing is to be done. Yet under the Constitution the Congress is responsible. One presumes that both parties intend the results obtained since neither party makes any attempt to do anything about it.

That's the best response to the cherry picking argument that I've seen yet.

In today's New York Times, David Leonhardt talks about the problem of health care choice. Specifically, the fact that most people don't have any choice. He starts out making a lot of sense.

Health insurers often act like monopolies -- like a cable company or the Department of Motor Vehicles -- because they resemble monopolies. Consumers, instead of being able to choose freely among insurers, are restricted to the plans their employer offers. So insurers are spared the rigors of true competition, and they end up with high costs and spotty service.

But then, discussing the Wyden-Bennett bill, he makes less sense.

In the simplest version, families would receive a voucher worth as much as their employer spends on their health insurance. They would then buy an insurance plan on an "exchange" where insurers would compete for their business. The government would regulate this exchange. Insurers would be required to offer basic benefits, and insurers that attracted a sicker group of patients would be subsidized by those that attracted a healthier group.

The immediate advantage would be that people could choose a plan that fit their own preferences, rather than having to accept a plan chosen by human resources. You would be able to carry your plan from one job to the next -- or hold onto it if you found yourself unemployed. You would never have to switch doctors because your employer switched insurance plans.

The problem with this idea is that it really doesn't offer much choice. Insurance companies are still protected from competition by the friendly confines of a government controlled "exchange". True choice would consist of an open market place where any entrepreneur can offer any product to any interested consumer. The success or failure of the product would depend on one all important criteria: whether or not consumers saw any value in it. Insurers would no longer be able to foist their plans on consumers who don't want them. And entrepreneurs would be free to introduce radical, new products that threaten the current insurance companies.

That kind of free choice wouldn't exist under an insurance "exchange". Each new product would have to be carefully weighed and analyzed by government bureaucrats. Nothing new would be approved unless they determined that it was worthwhile and useful. Existing insurance companies would have a hand in writing the regulations and only products that conform to the current status-quo would be allowed in. Anything that threatens that status-quo would be barred from the "exchange" and never offered to consumers. The end result would be akin to Ford's infamous statement that consumers could buy any color car they wanted -- as long as it was black.

Instead of fostering innovation and creativity in health care, the Wyden-Bennett bill would take the current "insurance" industry and lock it in cement. Consumers would continue to be forced to buy health insurance not health care and bureaucrats would continue to dicatate how, when, and where their health care dollars can be spent.

All of this makes me happy to hear that Wyden-Bennett doesn't have much support in the Senate.

Any bureaucracy -- public or private -- is going to make pointless decisions and complicate your life. This applies to health "insurance" as much as it applies to anything else. It's easy to find stories of people who were heartlessly treated by their health bureaucracy. In Britain, the bureaucracy is the government run NHS. In America, it's often a private company. But the end result is often the same.

John Goodman points to a recent story and then offers an alternative.

Is there a better way? Yes. It's called casualty insurance -- similar to the kind of insurance most people have on their homes and automobiles. In the case of a catastrophic illness, the insurer makes a lump sum available -- ideally enough to cover all reasonable care. But when there are differences of opinion, patients can add their own funds to the insurer's payment and buy any type of care from any provider. For Medicaid, additional funds could be provided by private charity (which is what is happening anyway for Dr. Pollard's patients).

This is not a small change from the current system. It is a huge change. It would lead to a real market for catastrophic care in which patients and their families become real, empowered buyers. Providers would compete for patients based on price and, therefore, on quality. Doctors would be free to act as the agents of their patients rather than agents of third-party-payer bureaucracies.

Why would you want to hand control over your health care over to a bureaucracy? And why would you believe that a government bureaucracy would run more smoothly -- and treat you more fairly -- than a private bureaucracy?

I finished listening to an old EconTalk podcast, during my commute this morning. Russ Roberts was talking to Karol Boudreaux about her fieldwork on property rights and economic reforms in Rwanda and South Africa. They spent the first half of the conversation talking about Rwandan reforms and the second half talking about South African reforms. I was most fascinated by the South African portion. (It starts at about 30 minutes into the podcast.)

Karol talked about Langa township in South Africa. It was established as a place for blacks to live, but they weren't given any rights to the properties whatsoever. They had to get permission from the city government even to paint or repair their homes. By 1994, the government had started to turn over ownership to the people who lived in the homes.

I was thrilled to hear the story of Sheila, a very entrepreneurial woman in Langa township. (Her story starts about 39 minutes into the podcast.) Sheila had been a domestic helper in Capetown when she saw a receipt for two glasses of wine and a plate of cheese. She was stunned to see that that sold for more than she got paid in a month. She knew she was worth more than that. So, she decided to prove it.

After a few false starts, she hit on the right business plan. Tourists had been driving through Langa Township for years, to see the results of apartheid. But they never got out of their tourist buses. Sheila decided to give them an opportunity to start getting out. She opened up a restaurant in her house (after she'd received the title to it). She now serves meals to tourists, while telling them the story of her life and her experiences under apartheid. Her restaurant is well known for "authentic" South African food. It's primarily advertised through word of mouth and bloggers (how great is that?). The restaurant doesn't just support Sheila. She also employs five other people to keep things humming along.

Does South Africa have more economic freedom than the U.S.? In some ways, it does. Try opening a restaurant out of your home and see how long it lasts before the local authorities shut it down. But, in South Africa, Sheila was able to use her home to create a living for herself, create income for others, create something for tourists to see and do, and educate many people along the way. And it all happened because she had the economic freedom to use her property in the way she saw fit. Her tourist guests use their freedom to eat where they see fit and her desire to keep her restaurant's reputation protects her customers as they eat.

Sheila's story is a perfect example of the win-win results that come from letting people make their own economic decisions and bear both the profits and losses that they generate. It's also an example of how far you can go if you decide to change your circumstances instead of complaining about them.

Health care will be rationed. The only question is "who will do the rationing?". Will you make the decisions or will someone else? Megan McArdle illustrates this with a great quote.

Fears of "death panels" are way overblown. Fears of "Are second knee replacements worth it?" panels are not.

This morning, the Wall Street Journal reported on another one of the goodies that's buried in the House healthcare "reform" bill. If the bill passes, the IRS will fine you for any mistakes you make on your tax returns.

Under current law, taxpayers who lose an argument with the IRS can generally avoid penalties by showing they tried in good faith to comply with the tax law. In a broad range of circumstances, the health-care bill would change the law to impose strict liability penalties for income-tax underpayments, meaning that taxpayers will no longer have the luxury of making an honest mistake. The ability of even the IRS to waive penalties in sympathetic cases would be sharply curtailed.

Recent experience shows that Congress needs to be careful about imposing no-fault penalties. In 2004, Congress adopted very large automatic penalties for failures of taxpayers to attach a tax-shelter reporting form to their tax returns. While penalties make sense where a taxpayer deliberately fails to file a return, the approach here was too unforgiving.

The normal ability of the IRS to waive penalties was taken away. Predictably, the result was some taxpayers getting hit with penalties they didn't deserve.

Last June, the Small Business Council of America sent some compelling tales of woe to Congress, including one in which a 72-year-old owner of a coin operated car wash set up retirement plans for his seven employees and got socked for his good deed with a $900,000 penalty for not reporting the plans properly. The company and its owner are now headed for bankruptcy. In another case, a penalty of $100,000 each was imposed on the six minor children of an owner of a small business in Utah for not filing the right tax forms.

I think I'll call Congresswoman Baldwin's office. I'm very curious to know if she supports this measure; if so, why; or, if not, what she's going to do about it.

The Safeway grocery store chain created its own health plan for its employees. That's not unique -- many employers do that. Over the past four years, the average U.S. company has seen per-capita health care costs rise by 38%. Over the past four years, Safeway's per-capita health care costs have remained flat. That's a tremendous accomplishment and a great competitive advantage.

They did it by giving their employees responsibility over their own health and their own healthcare costs.

Safeway's plan capitalizes on two key insights gained in 2005. The first is that 70% of all health-care costs are the direct result of behavior. The second insight, which is well understood by the providers of health care, is that 74% of all costs are confined to four chronic conditions (cardiovascular disease, cancer, diabetes and obesity). Furthermore, 80% of cardiovascular disease and diabetes is preventable, 60% of cancers are preventable, and more than 90% of obesity is preventable.

... As with most employers, Safeway's employees pay a portion of their own health care through premiums, co-pays and deductibles. The big difference between Safeway and most employers is that we have pronounced differences in premiums that reflect each covered member's behaviors. Our plan utilizes a provision in the 1996 Health Insurance Portability and Accountability Act that permits employers to differentiate premiums based on behaviors. Currently we are focused on tobacco usage, healthy weight, blood pressure and cholesterol levels.

Safeway's Healthy Measures program is completely voluntary and currently covers 74% of the insured nonunion work force. Employees are tested for the four measures cited above and receive premium discounts off a "base level" premium for each test they pass. Data is collected by outside parties and not shared with company management. If they pass all four tests, annual premiums are reduced $780 for individuals and $1,560 for families. Should they fail any or all tests, they can be tested again in 12 months. If they pass or have made appropriate progress on something like obesity, the company provides a refund equal to the premium differences established at the beginning of the plan year.

Not only have these incentives saved employees a lot of money, they've also dramatically improved employee health.

Our obesity and smoking rates are roughly 70% of the national average and our health-care costs for four years have been held constant. When surveyed, 78% of our employees rated our plan good, very good or excellent.

Safeway would like to make their program even better. But the Federal government won't let them.

Today, we are constrained by current laws from increasing these incentives. We reward plan members $312 per year for not using tobacco, yet the annual cost of insuring a tobacco user is $1,400. Reform legislation needs to raise the federal legal limits so that incentives can better match the true incremental benefit of not engaging in these unhealthy behaviors. If these limits are appropriately increased, I am confident Safeway's per capita health-care costs will decline for at least another five years as our work force becomes healthier.

That's reform that won't cost taxpayers anything. That's reform that will actually "bend the cost curve" and reduce the cost of insurance. That's reform that will improve health not just finances.

Why isn't Washington working on that kind of reform? Why does Washington prevent insurance companies and employers from offering more of those incentives?

Shawn Tully, at Fortune, details 4 reasons why the current healthcare "reform" bill will do more to raise costs than lower them.

First, they will impose rich, standard packages of benefits, with low deductibles, for all Americans. Those policies, typically containing everything from in-vitro fertilization to mental health benefits, are usually far more expensive than anything most people would pay for with their own money.

Second, the plans would impose on a federal level the doctrine of community rating, in which all customers have to be offered the same rates, regardless of their health risks. Community rating forces young people to pay far more than their actual cost, a main reason for today's 46 million uninsured, while it subsidizes older patients.

Third, Obama would ban consumers from buying private insurance across state lines, perpetuating the price differences in today's fragmented market, instead of allowing all Americans to shop anywhere for the best deals.

Fourth, both plans propose what's known as a "public option," or a Medicare-style plan that would compete with the private offerings. The previous three proposals would make the private plans extremely expensive. With the same subsidies, the Medicare-style plan could put them out of business.

This plan will only lower the price of health care if by "price" you mean premiums and payments made directly to insurers or health care organizations. But if you include the necessary taxes and subsidies in your definition of "price", well, the price is going to go straight through the roof.

Earlier today, the American Academy of Physician Assistants issued an urgent Action Alert:

In a speech before the American Medical Association today, President Obama once again restated his commitment to building America's primary care workforce of "physicians and nurse practitioners" - omitting PAs from the discussion.

Please contact President Obama today. Let him know that PAs are listening- and that we are gravely concerned that we're not hearing a similar commitment to physician assistants.

PAs are the future of health care, and must make their voices heard. Contact the President today with a special message: PAs are a Critical Part of Health Care Reform.

I knew about it because a friend -- who's studying to become a PA -- emailed me and asked me to contact President Obama. She asked me to emphasize how important it was that PA's be part of the solution. Here was my response.

I can't do that. I disagree with the entire premise of healthcare "reform". The AAPA and Congress are both operating on a flawed assumption: the idea that it's even possible to create a plan that works for all Americans. It's not.

No one person, or group of people -- no matter how smart -- has the ability to create a health plan that meets the needs of 300 million unique individuals. No one group has enough information to make good decisions for everyone. Every patient has different needs, different backgrounds, different abilities, different family structure, different reactions, and different prejudices. I know you've seen this in your experiences in healthcare.

Through family, through friends, through my wife and through my job, I've heard a lot of stories about healthcare. One thing I've learned is that doctors (and PA's) have trouble coming up with a treatment plan that works for one patient. Often, the patient and the doctor have to work together over a period of time to figure out what works best for the specific condition and patient. How much harder -- how much more impossible -- is it to define a plan that works for everyone?

The necessary knowledge doesn't exist in one database, one field, one speciality. It's dispersed through many different people, each holding incomplete and sometimes seemingly contradictory information. I'm not just talking about medical information either. Each patient has a different willingness to undergo treatments, a different tolerance for discomfort, and a different preference for how long to continue treatment. How can one committee, how can one plan, possibly work for all people?

The answer is not to centralize decision making in Washington, D.C. or even in Madison, WI and Albany, NY. The answer is to give each patient, each doctor, each PA, the full freedom they need to reach the decisions that work best in the individual circumstances.

In the end, it's the patient that must be free to make all of the required decisions. Doctors, nurses, PAs, and healthcare organizations ultimately listen to whoever is paying the bills. Right now, that's Medicare, Medicaid, and the insurance companies. As a result, healthcare professionals are far more responsive to the desires of big government and big insurance -- not to patients. The solution is to return control to the patients -- not to take it further away from them.

Here's an interesting statistic (page 417): in 1960, 55 cents of every dollar of health care was out-of-pocket. In 2003, it was down to 16 cents. Today, the rest is paid through taxes and insurance premiums. And all of that insurance hasn't saved anybody any money. Healthcare costs today are 80% higher than they were in 1960. Put a different way, patients are only paying 16% of the costs out of pocket but the total costs have skyrocketed. That hasn't exactly turned out to be a great deal.

I feel very strongly that we'd be much better off if we started paying for healthcare the same way we did in the 1960s. If patients pay more out of pocket at the place of service, they'll ultimately get higher quality care. Overall costs will drop (through increased price transparency and competition) and patients will save money in the end.

And, yes, there will always be people who's injuries and illnesses exceed their financial resources. But they would be better served through block grants than through government plans, payments, and rationing. If they need financial assistance, give them extra finances. But allow them to control how, when, and where they're treated.

That's healthcare reform that will truly change things. Trying to create a nationwide plan by getting all of the special interests involved will just result in more of the same failed healthcare policies that we've seen over the last 20 years.