Planning the Patient-Centered Health Plan for America

Current Issue:

The Medicare Monster Continued

A cautionary tale-Part III

The deliberations about the cost of the hospital-insurance program make for a fascinating and almost comical story. Because it is hard to predict changes in medical technology and hospital costs, it was decided that the program could only be projected out 25 years, instead of the 75-year horizon that is used for Social Security projections. Even with this shorter time horizon, the projections turned out to be wildly inaccurate.

The most serious error the planners made was the assumption that hospital costs wouldn’t rise faster than wages. Hospital costs had been rising 2.7 percentage points a year faster than wages over the previous decade. But the House Ways and Means Committee said it was a “reasonable” and “conservative” assumption that the difference between the rates of increase for wages and hospital costs would disappear by 1975, after which wages and hospital costs would rise at the same rate. Obviously, if hospital costs rose faster than wages, there would have to be a sharp increase in either the payroll-tax rate or the wage base against which it was levied.

A 1965 House Ways and Means Committee report on the actuarial basis for the hospital-insurance program proudly declared that “Congress has very carefully considered the cost aspects of the proposed hospital insurance system” and that “Congress very strongly believes that the financing basis of the new hospital insurance program should be developed on a conservative basis.” The report acknowledged that hospital costs were rising faster than wages. But it dismissed the alternative scenarios that have turned out to be closer to what has in fact happened.

“It is inconceivable,” the committee report says, “that hospital prices would rise indefinitely at a rate faster than earnings because eventually individuals—even currently employed workers, let alone older persons—could not afford to go to a hospital under such cost circumstances….Quite obviously, it is an untenable assumption that there can be a sizable differential between the increase in hospitalization costs and the increase in earnings levels that will continue for a long period into the future.” This airtight logic didn’t consider the effect of the increased demand that Medicare set off.

Anticipating a 3.5-percent annual inflation rate, government actuaries predicted that the cost of a day’s hospital stay by 1985 would be $155 and that the hospital insurance portion of Medicare would cost $9 billion by 1990. The actual average cost of a hospital day by 1985 was over $600; instead of $9 billion, the hospital-insurance program cost $63 billion in 1990.

By the time Medicare passed the cost assumptions had been a subject of controversy for several years, especially with Ways and Means Chairman Mills. In a 1963 Ways and Means hearing, Mills clashed with the Social Security Administration’s chief actuary, Robert Myers, about the accuracy of cost estimates made for previous Medicare proposals. Mills pointed out that if any of the previous bills had been passed in the late 1950s or early 1960s, they would already be underfunded. A few excerpts from the transcript tell the story:

“The Chairman: I am concerned about your estimates of the cost of the present [1963] program as I look back to see what happened to your estimates of cost with respect to these other programs….Isn’t it a fact that it would be about 100 percent underfunded today if we had enacted it in 1958 and provided exactly the tax then suggested as appropriate…?

“Mr. Myers: Mr. Chairman, I can’t answer that question exactly now. [A week later Myers submitted a memorandum to Mills concluding that the program would have been about 50-percent underfunded.]

“The Chairman: What would be the situation had we enacted the so-called Kennedy-Anderson program in 1960 and continued the payroll tax then suggested as being appropriate….l think today you would find it would be about one-third underfinanced.

“Mr. Myers: It is possible that that is right. [Myers’s subsequent memorandum confirmed Mills’s view on this second bill as well.]

“The Chairman: What do you do with hospital costs? Do they remain constant, or do you contemplate in your estimates an increase in those costs?

“Mr. Myers: The cost estimates really can be looked at in either of two ways.

“Either it is assumed that hospital costs will remain level in the same way that wages do, or that, if they rise, eventually wages will catch up with them….[A]lthough in the past, hospital costs have been rising faster than wages, it seems reasonable to me to assume that over the long run these two elements will move at about the same rate.

“The Chairman: What is there in the program to give us any assurance that hospital costs can be so contained that they will not continue to rise by 3 or 4 percent more rapidly than earnings levels in these future years?

“Mr. Myers: This, as you point out, is matter of judgment.”

Mills continued to press Myers on the subject, with a series of questions aimed at preventing Myers from wiggling out of the issue with bureaucratic equivocations. Myers finally had to admit that a doubling of the projected payroll tax rate was possible.

“Mr. Myers: My difficulty [with Mills’s scenario] is that if the increase continued indefinitely, hospital costs would pyramid so high that they would be eventually as much as the total of all wages [i.e., the wage base against which the payroll tax would be levied], but let me try to make an assumption that is a little more finite in this respect.

“The Chairman: All right.

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Previous Issue:

The Medicare Monster

A cautionary tale-Part I

Steven Hayward & Erik Peterson from the January 1993 issue – WSJ

The scene is Capitol Hill. It’s the year 2035. Thousands of elderly protesters assemble outside the Capitol building. Inside, the House Ways and Means Committee meets to enact huge cuts in both Medicare and the national health-insurance program. Members are reluctant to take this step, but there’s no choice. Although Congress raised the Medicare payroll-tax rate to 15 percent a decade ago, the Medicare program is still woefully insolvent, consuming 40 percent of the $10-trillion federal budget. Because the total burden of payroll taxes for all social programs has reached 45 percent, the Congressional Budget Office estimates that half of the U.S. economy has gone “underground,” like Latin American economies in the 1980s. Another hike in payroll taxes would only drive more of the economy underground. But elderly voters, who now make up a majority of the electorate, have swarmed to Washington demanding “fairness,” since they have paid into the system for so many years.

Sound farfetched? The numbers suggest that this scenario could actually come to pass as soon as the next decade, not way off in 2035. The Medicare program is heading for a smashup, yet our political leaders speak only of instituting new federal health-insurance programs that would cover everyone.

The rhetoric and specific policy claims being made on behalf of the various universal government health insurance reforms today are remarkably similar to the promises made on behalf of Medicare a generation ago. Indeed, when Medicare became law, many of both its supporters and opponents predicted that it was the first step toward universal health care provided by the federal government. When Medicare finally passed in 1965, Rep. Phil Burton (D–Calif.) expressed the sentiments of many among its Great Society enthusiasts when he said, “I am equally certain that before many years Congress will choose to extend comprehensive medical care as a matter of right to every man, woman, and child in this country.”

So the history of Medicare and the outlook for the program over the next generation provide a sobering lesson for today’s would-be designers of national health insurance. Unfortunately, no one seems to be paying attention to what the Medicare experience has to teach.

Today’s proposals for a universal national health-care policy typically divide into either a government-run “single-payer” system like Canada’s or a “play or pay” scheme that would require employers to provide health insurance for every worker or pay a payroll tax into a government insurance program. Advocates of such policies claim these programs won’t cost much because significant savings can be had through cost containment and other efficiencies of scale. The experience of 25 years of Medicare says otherwise.

The two primary lessons of Medicare are the chronic problem of woefully underestimating program costs and the impossibility of genuine cost control. A closer look at Medicare shows why these two problems are certain to plague a government-administered universal health-care plan.

The cost of Medicare is a good place to begin. At its start, in 1966, Medicare cost $3 billion. The House Ways and Means Committee estimated that Medicare would cost only about $12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly “conservative” estimate. But in 1990 Medicare actually cost $107 billion.

This is a mere bagatelle compared with “conservative” projections for the next generation. The Congressional Budget Office estimates that Medicare will cost $223 billion by 1997. Constance Homer, deputy secretary of Health and Human Services, warns that “by the year 2003, at the current rates, we will be spending more on Medicare than we do on Social Security.”

The news gets even worse for the “out years” after that. The Health Care Finance Administration has given up making long-range projections of budget outlays of Medicare. Instead, HCFA makes calculations about the “actuarial balance” of the program—how much of the nation’s payroll will be required to pay for the program.

The 1992 annual report of the Federal Hospital Insurance Trust Fund, which pays for the hospital-insurance portion of Medicare, warns that the Medicare program “is severely out of financial balance” and could go bust as soon as the year 2000. The report says expenditures from the hospital fund represented 1.3 percent of the nation’s gross domestic product in 1991 and will grow to 4.7 percent by 2065. To cover the cost, the Medicare payroll-tax rate will have to more than quadruple, from the current rate of 2.9 percent to 13.79 percent.

The full narrative of Medicare’s enactment in 1965, a classic tale of legislative and interest-group infighting, is too long to recount in detail here. Proposals for Medicare-style programs began surfacing in Congress during World War II but didn’t have a serious prospect of passage until the Kennedy administration.

Repeatedly in the early 1960s a coalition of Republicans and conservative Democrats defeated Medicare. The key figure in this perennial drama was Wilbur Mills, the legendary chairman of the House Ways and Means Committee. Mills refused to pass a Medicare bill out of that key committee, supposedly out of concern that Medicare would threaten the integrity of the Social Security program (to which Medicare is attached).

Following the Democratic landslide in the election of 1964, which gave Democrats a 2-to-1 majority in both houses of Congress, President Lyndon Johnson exerted his influence to stack the Ways and Means Committee with new Democrats sympathetic to Medicare. Wilbur Mills changed his mind and embraced Medicare. “Mills can count” was the explanation given for his flip-flop. This new political landscape virtually assured that Medicare would sail through Congress with huge majorities.

When it became apparent after the 1964 election that Medicare’s passage was likely to be a slam dunk, the American Medical Association and Republicans scurried to put forward an alternative. The AMA foolishly tried to exploit public confusion over the fact that the Medicare proposal covered only hospital expenses but not costs for doctors, surgeons, dentists, and other outpatient services.

Arguing now that Medicare didn’t go far enough, the AMA sought to outflank Medicare with an alternative program that would include outpatient services as well as hospital expenses. “Eldercare,” as it was called, provided for a voluntary comprehensive insurance program, administered through the states and financed through means-tested premiums from recipients and federal matching funds. Not to be outdone by the AMA, House Republicans, under new leader Gerald Ford, offered their own alternative, which was similar to Eldercare except that it would be administered by the federal government.

The crafty Wilbur Mills responded to these alternatives by saying, in essence, thank you very much, we’ll just add features from both of these onto the existing bill and create an even bigger program. Mills called the result “a three layer cake.” Supplemental Medical Insurance was added to cover costs of doctors and other outpatient services. Finally, Medicaid was created to provide medical care for the nonelderly poor. (The costs of the Medicaid program, which requires state matching funds, now threaten to bankrupt many states.)

The hospital-insurance portion of Medicare was to be supported through a payroll tax shared equally by employers and employees. The voluntary Supplemental Medical Insurance was to be financed by premiums paid by the participants with dollar-for-dollar federal matching funds. The mechanism for increasing revenue for the hospital-insurance plan, when necessary, was the raising of the taxable earnings base.

To keep solvent, the Supplemental Medical Insurance system would adjust the insurance premium until premiums and matching funds covered expenditures. Congress generally dismissed fears of cost overruns. Rep. Claude Pepper (D–Fla.) said: “The cost will not be greater than our present efficient [sic] and wasteful fee-for-service system. According to experts the charge to the average family under a national health-insurance program will actually be less than it pays now, partly because the employer and government will contribute to the fund.”

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Past Issue:

Single-Payer National Health Insurance around the World Part VIII

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick

(Continued from the  July 2015  HPUSA Newsletter)

Reforming the U.S. Health Care System: Designing an Ideal Health Care System


Chapter Twenty-three

Among people who believe the American health care system needs serious reform, attention invariably turns to the large number of people without health insurance. An estimated 43.6 million people, or 15.2 percent of the U.S. population, were without coverage for at least part of 2002.1 What can be done about this problem?

There are typically two types of proposals: (1) force people to buy private health insurance whether they want to or not, or force their employers to buy it for them (which amounts to the same thing); and

(2) have government pay for all or most of the cost of their insurance by subsidizing private premiums or enrolling them in public insurance.

The first proposal not only involves government coercion, but also constitutes a dangerous further intrusion of government into the medical marketplace.

The second proposal would require new taxes and inject billions of additional dollars into a health care system that is already the most expensive in the world.

As we shall see in the next chapter, neither reform is necessary or desirable.

In fact, we can have a workable form of universal health insurance without intrusive mandates or more government spending.


But before turning to a solution, we should consider a more basic question.

Why should government be involved at all?

Designing an Ideal Health Care System

04-130 (24) Ch 23/Part 3 4/8/04 10:31 AM Page 217

The Free Rider Argument

Aside from the burden of providing charity care to the poor, is there any reason for government to care whether people have health insurance? The traditional argument for government intervention is that health insurance has social benefits apart from the personal benefits to the person who chooses to insure. The reason is that people who fail to insure are likely to get health care anyway, even if they can’t pay for it. And the reason for that is that the rest of the community is unwilling to allow the uninsured to go without health care, even if their lack of insurance is willful and negligent. This set of circumstances creates opportunities for some people to be free riders on other people’s generosity. In particular, free riders can choose not to pay insurance premiums and to spend the money on other consumption instead—confident that the community as a whole will provide them with care even if they cannot pay for it when they need it. In other words, being a free rider works. It works because of a tacit community agreement that no one will be allowed to go without health care. And this tacit agreement is so established that it operates as a social contract that many people substitute for a private insurance contract.

Evidence of a Free Rider Problem: The Growing Number of Uninsured

What evidence is there that free riders are a problem? One piece of evidence is the number of uninsured. According to the Census Bureau, a larger percentage of the population was uninsured in 2002 than a decade earlier (see figure 23.1). The rise in the number of uninsured occurred throughout the 1990s, a time in which per capita income and wealth, however measured, were rising.

Although it is common to think of the uninsured as having low incomes, many families who lack insurance are solidly middle class (see figure 23.2).

And the largest increase in the number of uninsured in recent years has occurred among higher-income families:

  • About one in seven uninsured persons lives in a family with an income between $50,000 and $75,000, and almost one in six earns more than $75,000.
  • Further, between 1993 and 1999, the number of uninsured increased by 57 percent in households earning between $50,000 to $75,000 and by 114 percent among households earning $75,000 or more.
  • By contrast, in households earning less than $50,000 the number of uninsured decreased approximately 2 percent.

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Past Issue:

Single-Payer National Health Insurance around the World Part VII

In 2002 and 2003, we reviewed The Twenty Myths of health care reform. Now a decade later the authors have updated the book, renamed it, and added important 21st century data.

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick

(Continued from the  April 2015  HPUSA Newsletter)

Chapter 22: Is Managed Competition the Answer?

Most of the problems of single-payer health care insurance are well known to policy makers and government officials and even to many ordinary citizens in countries with national health insurance. Many of the obstacles posed by the politics of medicine also are well known.

As a result, throughout the 1990s there was growing interest—particularly in Europe—in a new type of system, one in which health care resources would be allocated by competition in the marketplace rather than by politicians.

Such a system would not be a free market in the ordinary sense of that term; rather it would be a market in which the rules of competition were set and managed by government. So long as the competitors played by the rules, market forces rather than political forces would determine who got health care and how much. Such a system is called managed competition. And to obtain a model of it, Europeans turned, of all places, to the United States.2

Employees, for example, of the federal government make an annual choice among a dozen or more competing health plans.3 A similar choice system is in place for employees of many state and local governments.4 Many private employers also give employees a choice of health plans, and where these plans are independent organizations they effectively compete against each other to enroll members.5

The competition that exists in these programs, again, is not the same as one would find in a free market. It takes place under artificial rules managed by the employer or some other sponsoring organization. During its first term, the Clinton administration proposed such managed competition nationwide. Its adherents, including Stanford professor Alain Einthoven, still think this is the answer to the nation’s health care woes.6. . .

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Past Issue:

Single-Payer National Health Insurance around the World Part VI

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick

(Continued from the  January 2015 HPUSA Newsletter)

The Politics of Medicine

Part 2 / Chapter 21 / P 187

“Public choice” is the discipline that attempts to integrate economics and political science.1 Its chief goal is to explain political phenomena, just as economists explain purely economic phenomena. The name, however, is potentially misleading. The new discipline could more accurately be called “modern political science.”

A fascinating discovery of this discipline is that economic principles, if carefully applied, explain much of what happens in politics. Take the concept of competition. Just as producers of goods and services compete for consumer dollars, so politicians in a democracy compete for votes. Moreover, the process of competition leads to certain well-defined results.

In the economic marketplace, competition inevitably forces producers to choose the most efficient method of production. Those who fail to do so either go out of business or mend their ways. The outcome—efficient production—is independent of any particular producer’s wishes or desires.

In a similar way, political competition inexorably leads candidates to adopt specific positions, called the winning platform.2 The idea of a winning platform is a fairly simple one. It is a set of political policies that can defeat any other set of policies in an election. Politicians who want to be elected or reelected have every incentive to endorse the winning platform. If they do not, they become vulnerable; for if their opponents adopt the winning platform and they do not, the opponents will win.

Of course in the real world, things are rarely so simple. Many factors influence voters other than substantive political issues—a candidate’s religion, ethnicity, gender, general appearance, speaking ability, party affiliation, and so forth. Even when voters are influenced by real political issues, politicians do not always know what the winning platform is. Often they must guess at it. Nonetheless, public choice theory holds that, other things being equal, a candidate always improves his chances of winning by endorsing the winning platform. Hence, all candidates have an incentive to identify and endorse this platform.

This line of reasoning leads to the conclusion that in democratic systems with two major political parties, both tend to adopt the same policies. They do so not because the party leaders think alike or share the same ideological preferences, but because their top priority is to win elections and hold office.

Two corollaries follow from this conclusion. The first is that it is absurd to complain about the fact that “major candidates all sound alike” or that “it doesn’t seem to make any difference who wins.” The complaints are merely evidence that political competition is working precisely as the theory predicts.

Indeed, the more accurate information political candidates receive through better polling techniques and computerization, the more similar they will become. The theory predicts that, in a world of perfect information, the policies of the two major parties would be identical.

The second corollary is more relevant to our purposes. In its extreme form, the corollary asserts that “politicians don’t matter.” Over the long haul, if we want to explain why we have the political policies we have, it is futile to investigate the motives, personalities and characters of those who hold office.

Instead, we must focus on those factors that determine the nature of the winning platform.

This corollary is crucial to understanding single-payer health insurance. A great many British health economists who support socialized medicine are quick to concede that the British NHS has defects. But these defects, in their view, are not those of socialism; they merely represent a failure of political will or of the politicians in office. The ultimate goal, they hold, is to retain the system of socialized medicine and make it work better.

By contrast, we argue that the defects of single-payer health insurance systems are inevitable consequences of placing the market for health under the control of politicians. It is not true that British health care policy just happens to be as it is. Enoch Powell, a former minister of health who ran the British NHS, seems to have appreciated this insight. Powell wrote that “whatever is entrusted to politicians becomes political even if it is not political anyhow,”3 and he went on to say that The phenomena of Medicine and Politics . . . result automatically and necessarily from the nationalization of medical care and its provision gratis at the point of consumption . . . These phenomena are implicit in such an organization and are not the accidental or incidental results of blemishes which can be “reformed” away while leaving the system as such intact.4

An extensive analysis of the British health care system shows that all of the major features of national health insurance can be explained in terms of public choice theory.5 That is, far from being the consequence of preferences of politicians (who could be replaced by different politicians with different preferences in the next election), the major features of single-payer systems of national health insurance follow inevitably from the fact that politicians have the authority to allocate health care resources, and from that fact alone. The following is a brief summary.


One argument used to justify national health insurance is that, left to their own devices, individuals will not spend as much as they ought to spend on health care. This was a major reason why many middle- and upper-middleclass  British citizens supported national health insurance for the working class. It was also a major reason why they supported formation of the NHS in 1948.6 Many expected that, under socialized medical care, more total dollars would be spent on health care than would otherwise have been the case.

Yet, it is not clear that socialized medicine in Britain has increased overall spending on health care. It may even have had the opposite result. This was the contention of Dennis Lees, professor of economics at the University of Nottingham, who wrote that “the British people, left free to do so, would almost certainly have chosen to spend more on health services themselves than governments have chosen to spend on their behalf.”7 The same may be true of the single-payer systems in other countries.

To see why this is true, let us first imagine a situation in which a politician is trying to win over a single voter. To keep the example simple, suppose the politician has access to ten dollars to spend on the voter’s behalf. To maximize his chance of winning, the politician should spend the ten dollars precisely as the voter wants it spent. If the voter’s choice is five dollars on medical care, three dollars on a retirement pension and two dollars on a rent subsidy, that should also be the choice of the vote-maximizing politician. If the politician does not choose to spend the ten dollars in this way, he risks losing this voter to a clever opponent.

Now it might seem that if the voter wants five dollars spent on medical care, we can conclude that he would have spent the five dollars on medicalcare himself if he were spending ten dollars of his own money. But this is not quite true. State-provided medical care has one feature that is generally missing from private medical markets and other government spending programs—nonprice rationing. Nonprice rationing, as we have seen, imposes heavy costs on patients (the cost of waiting and other inconveniences), leads to deterioration in the quality of services rendered and creates various forms of waste and inefficiency.

Thus, other things being equal, five dollars of spending on government health care will be less valuable to the average voter than five dollars of spending in a private medical marketplace. It also means that, under socialized medicine, spending for health care will be less attractive to voters relative to spending programs that do not involve nonprice rationing.

Public choice theory, then, predicts that the average voter will desire less spending on health care, relative to other goods and services, when healthcare is rationed by nonmarket devices. Moreover, the greater the rationing problems, the less attractive health care spending will be. So we would expect even less spending on health care in a completely “free” service like the NHS than in a health service that charged user fees.

In the real world, politicians can rarely tailor their spending to the desires of a specific voter. Generally, they must allocate spending among programs that affect thousands of voters. New spending for a hospital, for example, provides benefits for everyone in the surrounding community. And no matter what level of spending is chosen, some voters will prefer more and others less. Often, the vote-maximizing level of spending will be the level of spending preferred by the average voter.

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Past Issue:

Single-Payer National Health Insurance around the World Part V

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick

(Continued from the October 2014 HPUSA Newsletter)


Despite the official rhetoric, over the course of the past decade almost every European country with a national health care system has introduced market-oriented reforms and turned to the private sector to reduce the costs of care and increase the value, availability and effectiveness of treatments.19 In making these changes, more often than not these countries looked to the United States for guidance.

  • About seven million people in Britain now have private health insurance; and since the Labor government assumed power, the number of patients paying out of pocket for medical treatment has increased by 40 percent.
  • To reduce its waiting lists, the British National Health Service (NHS) recently announced that it will treat some patients in private hospitals, reversing a long-standing policy of using only public hospitals;21 and, the NHS has even contracted with HCA International, America’s largest health care provider, to treat 10,000 NHS cancer patients at its facilities in Britain.
  • Australia has turned to the private sector to reform its public health care system to such an extent that it is now second only to the United States among industrialized nations in the share of health care spending that is private.
  • Since 1993, the German government has experimented with American style managed competition by giving Germans the right to choose among t he country’s competing sickness funds (insurers).
  • The Netherlands also has American-style managed competition, with an extensive network of private health care providers and slightly more than one-third of the population insured privately.
  • Sweden is introducing reforms that will allow private providers to deliver more than 40 percent of all health care services and about 80 percent of primary care in Stockholm.
  • Even Canada has changed, using the United States as a partial safety valve for its overtaxed health care system; provincial governments and patients spend more than $1 billion a year on U.S. medical care.

In each of these countries, growing frustration with government health programs has led to a reexamination of the fundamental principles of health care delivery. Through bitter experience, many of the countries that once touted the benefits of government control have learned that the surest remedy for their countries’ health care crises is not increasing government power, but increasing patient power instead.27


This book is not intended as a defense of the existing health care system in the United States. To the contrary, we count ourselves among its harshest critics.

Our goal here is to dispel certain myths about health care as delivered in countries that have national health insurance. These myths have gained the status of fact in both the United States and abroad, even though the evidence shows a far different reality.

In this book we will examine the critical failures of national health insurance systems without focusing on minor blemishes or easily correctable problems.

In doing so, our goal is to identify the problems common to all countries with national health insurance and to explain why these problems emerge. Most national health care systems are in a state of sustained internal crisis as costs rise and the stated goals of universal access and quality care are not met. In almost all cases, the reason is the same: the politics of medicine. The problems of government-run health care systems flow inexorably from the fact that they are government-run rather than market driven.

We have chosen to focus primarily, though not exclusively, on the health care systems of English-speaking countries whose cultures are similar to our own. Britain, Canada and New Zealand in particular are often pointed to by advocates of national health insurance as models for U.S. health care system reform. In amassing evidence of how these systems actually work, many of our sources are government publications or commentary and analysis by reporters and scholars who fully support the concept of socialized medicine.

The failure of national health insurance is a secret of modern social science.

Not only have scholars failed to understand the defects of national health insurance, too often advocates and ordinary citizens hold an idealized view of it. For that reason, we present much of the information in the form of rebuttals to commonly held myths.

Read this introduction at . . .

Read the Twenty Myths . . . (Expanded from the twenty myths of 1991, previously reviewed in 2003)

In April we will review Part II: The Politics And Economics Of Health Care Systems

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Past Issue:

Congressional Reform Act of 2012

Warren Buffet is asking each addressee to forward this message to a minimum of twenty people on their address list; in turn ask each of those to do likewise. In three days, most people in The United States of America will have the message.  This is one idea that really should be passed around.

*Congressional Reform Act of 2012*

  1. No Tenure / No Pension.

A Congressman/woman collects a salary while in office and receives no pay when they’re out of office.

  1. Congress (past, present & future) participates in Social Security.

All funds in the Congressional retirement fund move to the Social Security system immediately.  All future funds flow into the Social Security system, and Congress participates with the American people. It may not be used for any other purpose.

  1. Congress can purchase their own retirement plan, just as all Americans do.
  2. Congress will no longer vote themselves a pay raise.

Congressional pay will rise by the CPI

  1. Congress loses their current health care system and participates in the same health care system as the American people.
  2. Congress must equally abide by all laws they impose on the American people.
  3. All contracts with past and present Congressmen/women are void effective 12/31/12.

The American people did not make this contract with Congressmen/women. Congressmen/women made all these contracts for themselves. Serving in Congress is an honor, not a career. The Founding Fathers envisioned citizen legislators, so ours should serve their term(s), then go home and back to work.


If each person contacts a minimum of twenty people then it will only take three days for
most people (in the U.S.) to receive the message.

Don’t you think it’s time?


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Past Issue:

A Member of the European Parliament’s Warning to America

The perils of following us toward greater regulation, higher taxes and centralized power.


On a U.S. talk-radio show recently, I was asked what I thought about the notion that Barack Obama had been born in Kenya. “Pah!” I replied. “Your president was plainly born in Brussels.”

American conservatives have struggled to press the president’s policies into a meaningful narrative. Is he a socialist? No, at least not in the sense of wanting the state to own key industries. Is he a straightforward New Deal big spender, in the model of FDR and LBJ? Not exactly.

My guess is that, if anything, Obama would verbalize his ideology using the same vocabulary that Eurocrats do. He would say he wants a fairer America, a more tolerant America, a less arrogant America, a more engaged America. When you prize away the cliché, what these phrases amount to are higher taxes, less patriotism, a bigger role for state bureaucracies, and a transfer of sovereignty to global institutions.

He is not pursuing a set of random initiatives but a program of comprehensive Europeanization: European health care, European welfare, European carbon taxes, European day care, European college education, even a European foreign policy, based on engagement with supranational technocracies, nuclear disarmament and a reluctance to deploy forces overseas.

No previous president has offered such uncritical support for European integration. On his very first trip to Europe as president, Mr. Obama declared, “In my view, there is no Old Europe or New Europe. There is a united Europe.”

I don’t doubt the sincerity of those Americans who want to copy the European model. A few may be snobs who wear their euro-enthusiasm as a badge of sophistication. . . .

All right, growth would be slower, but the quality of life might improve. All right, taxes would be higher, but workers need no longer fear sickness or unemployment. All right, the U.S. would no longer be the world’s superpower, but perhaps that would make it more popular. Is a European future truly so terrible?

Yes. I have been an elected member of the European Parliament for 11 years. I have seen firsthand what the European political model means.

The critical difference between the American and European unions has to do with the location of power. The U.S. was founded on what we might loosely call the Jeffersonian ideal: the notion that decisions should be taken as closely as possible to the people they affect. The European Union was based on precisely the opposite ideal. Article One of its foundational treaty commits its nations to establish “an ever-closer union.”

From that distinction, much follows. The U.S. has evolved a series of unique institutions designed to limit the power of the state: recall mechanisms, ballot initiatives, balanced budget rules, open primaries, localism, states’ rights, term limits, the direct election of public officials from the sheriff to the school board. The EU places supreme power in the hands of 27 unelected Commissioners invulnerable to public opinion.

The will of the people is generally seen by Eurocrats as an obstacle to overcome, not a reason to change direction. When France, the Netherlands and Ireland voted against the European Constitution, the referendum results were swatted aside and the document adopted regardless. For, in Brussels, the ruling doctrine—that the nation-state must be transcended—is seen as more important than freedom, democracy or the rule of law. . .

Why is a European politician urging America to avoid Europeanization? As a Briton, I see the American republic as a repository of our traditional freedoms. The doctrines rooted in the common law, in the Magna Carta, and in the Bill of Rights found their fullest and most sublime expression in the old courthouse of Philadelphia. Britain, as a result of its unhappy membership in the European Union, has now surrendered a large part of its birthright. But our freedoms live on in America. . .

So you can imagine how I feel when I see the U.S. making the same mistakes that Britain has made: expanding its government, regulating private commerce, centralizing its jurisdiction, breaking the link between taxation and representation, abandoning its sovereignty.

You deserve better, cousins. And we expect better.

Mr. Hannan is a member of the European Parliament. This essay is adapted from the Encounter Books Broadside, “Why America Must Not Follow Europe.”

Read the entire essay, subscription required, based on Mr. Hannan’s book . . .
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Past Issue:

World Health Report 2000 was an intellectual fraud of historic consequence

The Worst Study Ever? | By Scott W. Atlas | Commentary Magazine | April 2011

A profoundly deceptive document that only marginally measured health-care performance at all.

The World Health Organization’s World Health Report 2000, which ranked the health-care systems of nearly 200 nations, stands as one of the most influential social-science studies in history. For the past decade, it has been the de facto basis for much of the discussion of the health-care system in the United States, routinely cited in public discourse by members of government and policy experts. Its most notorious finding—that the United States ranked a disastrous 37th out of the world’s 191 nations in “overall performance”—provided supporters of President Barack Obama’s transformative health-care legislation with a data-driven argument for swift and drastic reform, particularly in light of the fact that the U.S. spends more on health than any other nation.

In October 2008, candidate Obama used the study to claim that “29 other countries have a higher life expectancy and 38 other nations have lower infant mortality rates.” On June 15, 2009, as he was beginning to make the case for his health-care bill, the new president said: “As I think many of you are aware, for all of this spending, more of our citizens are uninsured, the quality of our care is often lower, and we aren’t any healthier. In fact, citizens in some countries that spend substantially less than we do are actually living longer than we do.” The perfect encapsulation of the study’s findings and assertions came in a September 9, 2009, editorial in Canada’s leading newspaper, the Globe and Mail: “With more than 40 million Americans lacking health insurance, another 25 million considered badly underinsured, and life expectancies and infant mortality rates significantly worse that those of most industrialized Western nations, the need for change seems obvious and pressing to some, especially when the United States is spending 16 percent of GDP on health care, roughly twice the average of other modern developed nations, all of which have some form of publicly funded system.”

In fact, World Health Report 2000 was an intellectual fraud of historic consequence—a profoundly deceptive document that is only marginally a measure of health-care performance at all. The report’s true achievement was to rank countries according to their alignment with a specific political and economic ideal—socialized medicine—and then claim it was an objective measure of “quality.”

WHO researchers divided aspects of health care into subjective categories and tailored the definitions to suit their political aims. They allowed fundamental flaws in methodology, large margins of error in data, and overt bias in data analysis, and then offered conclusions despite enormous gaps in the data they did have. The flaws in the report’s approach, flaws that thoroughly undermine the legitimacy of the WHO rankings, have been repeatedly exposed in peer-reviewed literature by academic experts who have examined the study in detail. Their analysis made clear that the study’s failings were plain from the outset and remain patently obvious today; but they went unnoticed, unmentioned, and unexamined by many because World Health Report 2000 was so politically useful. This object lesson in the ideological misuse of politicized statistics should serve as a cautionary tale for all policymakers and all lay people who are inclined to accept on faith the results reported in studies by prestigious international bodies.

Before WHO released the study, it was commonly accepted that health care in countries with socialized medicine was problematic. But the study showed that countries with nationally centralized health-care systems were the world’s best. As Vincente Navarro noted in 2000 in the highly respected Lancet, countries like Spain and Italy “rarely were considered models of efficiency or effectiveness before” the WHO report. Polls had shown, in fact, that Italy’s citizens were more displeased with their health care than were citizens of any other major European country; the second worst was Spain. But in World Health Report 2000, Italy and Spain were ranked #2 and #7 in the global list of best overall providers.
Most studies of global health care before it concentrated on health-care outcomes. But that was not the approach of the WHO report. It sought not to measure performance but something else. “In the past decade or so there has been a gradual shift of vision towards what WHO calls the ‘new universalism,’” WHO authors wrote, “respecting the ethical principle that it may be necessary and efficient to ration services.”

The report went on to argue, even insist, that “governments need to promote community rating (i.e. each member of the community pays the same premium), a common benefit package and portability of benefits among insurance schemes.” For “middle income countries,” the authors asserted, “the policy route to fair prepaid systems is through strengthening the often substantial, mandatory, income-based and risk-based insurance schemes.” It is a curious version of objective study design and data analysis to assume the validity of a concept like “the new universalism” and then to define policies that implement it as proof of that validity.

The nature of the enterprise came more fully into view with WHO’s introduction and explanation of the five weighted factors that made up its index. Those factors are “Health Level,” which made up 25 percent of “overall care”; “Health Distribution,” which made up another 25 percent; “Responsiveness,” accounting for 12.5 percent; “Responsiveness Distribution,” at 12.5 percent; and “Financial Fairness,” at 25 percent.
The definitions of each factor reveal the ways in which scientific objectivity was a secondary consideration at best. What is “Responsiveness,” for example? WHO defined it in part by calculating a nation’s “respect for persons.” How could it possibly quantify such a subjective notion? It did so through calculations of even more vague subconditions—“respect for dignity,” “confidentiality,” and “autonomy.”

And “respect for persons” constituted only 50 percent of a nation’s overall “responsiveness.” The other half came from calculating the country’s “client orientation.” That vague category was determined in turn by measurements of “prompt attention,” “quality of amenities,” “access to social support networks,” and “choice of provider.”

Scratch the surface a little and you find that “responsiveness” was largely a catchall phrase for the supposedly unequal distribution of health-care resources. “Since poor people may expect less than rich people, and be more satisfied with unresponsive services,” the authors wrote, “measures of responsiveness should correct for these differences.”

Correction, it turns out, was the goal. “The object is not to explain what each country or health system has attained,” the authors declared, “so much as to form an estimate of what should be possible.” They appointed themselves determinants of what “should” be possible “using information from many countries but with a specific value for each country.” This was not so much a matter of assessing care but of determining what care should be in a given country, based on WHO’s own priorities regarding the allocation of national resources. The WHO report went further and judged that “many countries are falling far short of their potential, and most are making inadequate efforts in terms of responsiveness and fairness.”

Consider the discussion of Financial Fairness (which made up 25 percent of a nation’s score). “The way health care is financed is perfectly fair if,” the study declared, “the ratio of total health contribution to total non-food spending is identical for all households, independently of their income, their health status or their use of the health system.” In plain language, higher earners should pay more for health care, period. And people who become sick, even if that illness is due to high-risk behavior, should not pay more. According to WHO, “Financial fairness is best served by more, as well as by more progressive, prepayment in place of out-of-pocket expenditure. And the latter should be small not only in the aggregate but relative to households’ ability to pay.”

This matter-of-fact endorsement of wealth redistribution and centralized administration should have had nothing to do with WHO’s assessment of the actual quality of health care under different systems. But instead, it was used as the definition of quality. For the authors of the study, the policy recommendation preceded the research. Automatically, this pushed capitalist countries that rely more on market incentives to the bottom of the list and rewarded countries that finance health care by centralized government-controlled single-payer systems. In fact, two of the major index factors, Health Distribution and Responsiveness Distribution, did not even measure health care itself. They were both strictly measures of equal distribution of health and equal distribution of health-care delivery.

Perhaps what is most striking about the categories that make up the index is how WHO weighted them. Health Distribution, Responsiveness Distribution, and Financial Fairness added up to 62.5 percent of a country’s health-care score. Thus, almost two-thirds of the study was an assessment of equality. The actual health outcomes of a nation, which logic dictates should be of greatest importance in any health-care index, accounted for only 25 percent of the weighting. In other words, the WHO study was dominated by concerns outside the realm of health care.

Not content with penalizing free-market economies on the fairness front, the WHO study actually held a nation’s health-care system accountable for the behavior of its citizens. “Problems such as tobacco consumption, diet, and unsafe sexual activity must be included in an assessment of health system performance,” WHO declared. But the inclusion of such problems is impossible to justify scientifically. For example, WHO considered tobacco consumption equivalent, as an indicator of medical care, to the treatment of measles: “Avoidable deaths and illness from childbirth, measles, malaria or tobacco consumption can properly be laid” at a nation’s health-care door.”

From a political standpoint, of course, the inclusion of behaviors such as smoking is completely logical. As Samuel H. Preston and Jessica Ho of the University of Pennsylvania observed in a 2009 Population Studies Center working paper, a “health-care system could be performing exceptionally well in identifying and administering treatment for various diseases, but a country could still have poor measured health if personal health-care practices were unusually deleterious.” This takes on additional significance when one considers that the United States has “the highest level of cigarette consumption per capita in the developed world over a 50-year period ending in the mid-80s.”

At its most egregious, the report abandoned the very pretense of assessing health care. WHO ranked the U.S. 42nd in life expectancy. In their book, The Business of Health, Robert L. Ohsfeldt and John E. Schneider of the University of Iowa demonstrated that this finding was a gross misrepresentation. WHO actually included immediate deaths from murder or fatal high-speed motor-vehicle accidents in their assessment, as if an ideal health-care system could turn back time to undo car crashes and prevent homicides. Ohsfeldt and Schneider did their own life-expectancy calculations using nations of the Organisation for Economic Co-operation and Development (OECD). With fatal car crashes and murders included, the U.S. ranked 19 out of 29 in life expectancy; with both removed, the U.S. had the world’s best life-expectancy numbers (see table above).

But even if you dismiss all that, the unreliability of World Health Report 2000 becomes inarguable once you confront the sources of the data used. In the study, WHO acknowledged that it “adjusted scores for overall responsiveness, as well as a measure of fairness based on the informants’ views as to which groups are most often discriminated against in a country’s population and on how large those groups are” [emphasis added]. A second survey of about 1,000 “informants” generated opinions about the relative importance of the factors in the index, which were then used to calculate an overall score.
Judgments about what constituted “high quality” or “low quality” health care, as well as the effect of inequality, were made by people WHO called “key informants.” Astonishingly, WHO provided no details about who these key informants were or how they were selected. According to a 2001 Lancet article by Celia Almeida, half the responders were members of the WHO staff. Many others were people who had gone to the WHO website and were then invited to fill out the questionnaire, a clear invitation to political and ideological manipulation.

Another problem emerges in regard to the references used by the report. Of the cited 32 methodological references, 26 were from internal WHO documents that had not gone through a peer-review process. Moreover, only two were written by people whose names did not appear among the authors of World Health Report 2000. To sum up: the report featured data and studies largely generated inside WHO, with no independent, peer-reviewed verification of the findings. Even these most basic requirements of valid research were not met.

The report’s margin of error is similarly ludicrous in scientific terms. The margin for error in its data falls outside any respectable form of reporting. For example, its data for any given country were “estimated to have an 80 percent probability of falling within the uncertainty interval, with chances of 10 percent each of falling below the low value or above the high one.” Thus, as Whitman noted, in one category—the “overall attainment” index—the U.S. could actually rank anywhere from seventh to 24th. Such a wide variation renders the category itself meaningless and comparisons with other countries invalid.

And then there is the plain fact that much of the necessary data to determine a nation’s health-care performance were simply missing. The WHO report stated that data was used “to calculate measures of attainment for the countries where information could be obtained . . . to estimate values when particular numbers were judged unreliable, and to estimate attainment and performance for all other Member States.”

According to a shocking 2003 Lancet article by Philip Musgrove, who served as editor in chief of part of the WHO study, “the attainment values in WHO’s World Health Report 2000 are spurious.” By his calculation, the WHO “overall attainment index” was actually generated by complete information from only 35 of the 191 countries. Indeed, according to Musgrove, WHO had data from only 56 countries for Health Inequality, a subcategory; from only 30 countries for Responsiveness; and from only 21 countries for Fair Financing. Nonetheless, rankings were “calculated” for all 191 countries.

Musgrove gives specific examples of overtly deficient data that was directly misused by WHO. He stated that “three values obtained from expert informants (for Chile, Mexico, and Sri Lanka) were discarded in favor of imputed (i.e. estimated) values” and that “in two cases, informants gave opinions on one province or state rather than the entire country.” Musgrove wrote to Christopher Murray, WHO’s director of the Global Program on Evidence for Health Policy at the time, on August 30, 2000, about the study’s handling of the missing statistics: “If it doesn’t qualify as manipulating the data, I don’t know what does . . . at the very least, it gravely undermines the claim to be honest with the data and to report what we actually find.”

If World Health Report 2000 had simply been issued and forgotten, it would still be a case study in how to produce a wretched and unreliable piece of social science masquerading as legitimate research. That it served so effectively as a catalyst for unprecedented legislation is evidence of something more disturbing. The executive and legislative branches of the United States government used WHO’s document as an implicit Exhibit A to justify imposing radical changes to America’s health-care system, even in the face of objections from the American people. To blur the line between politics and objective analysis is to do violence to them both.

Despite the compelling studies that undermine this erroneous document, many government officials, policymakers, insurers, and academics have continued to use it to justify their ideology-based agenda, one that seeks centralized, government-run health care. Donald Berwick, later up for the position of Obama’s director of the Center for Medicare & Medicaid, used its questionable data to make a grand case against the U.S. health-care system in 2008: “Even though U.S. health-care expenditures are far higher than those of other developed countries, our results are no better. Despite spending on health care being nearly double that of the next most costly nation, the United States ranks thirty-first among nations on life expectancy, thirty-sixth on infant mortality, twenty-eighth on male healthy life expectancy, and twenty-ninth on female healthy life expectancy.” (This last bit came from updated 2006 WHO data.)

What we have here is a prime example of the misuse of social science and the conversion of statistics from pseudo-data into propaganda. The basic principle, casually referred to as “garbage in, garbage out,” is widely accepted by all researchers as a cautionary dictum. To the authors of World Health Report 2000, it functioned as its opposite—a method to justify a preconceived agenda. The shame is that so many people, including leaders in whom we must repose our trust and whom we expect to make informed decisions based on the best and most complete data, made such blatant use of its patently false and overtly politicized claims.

About the Author: Scott W. Atlas is a senior fellow at the Hoover Institution and professor of radiology and chief of neuroradiology at the Stanford University Medical Center.

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Past Issue:

2012: The Make or Break for America

AGENDA GAMES: How Today’s High-Stakes Political Combat Works.
By B. K. Eakman

First, the “It” girl—a concept that means more than mere “perfection.” The “It” factor captures that certain “something” one can’t quite define, but that redirects the attention from anything else whenever “It” appears.

Professional entertainers and those celebrity-centric people who follow this sort of thing attribute the term to Elinor Glyn, who wrote the magazine article that inspired the It film in 1927 starring Clara Bow—although the honors for this particular perception of “It” actually go to Rudyard Kipling.

But no matter. In frenzied succession, there followed a series of “Its”: female celebrities, “It” hairdos, “It” fashions, “It” songs, foods, and even exercise regimens. All seemed to define their era, the prevailing mentality, or even an entire generation.

By extension, the “It” phenomenon took on another meaning, as in “This is ‘it’!” Whenever “It” appeared, everyone was to understand that “It” was irreplaceable; that “It” would never be—
and could never be—superseded. So, “It” also took on yet another connotation: “The End,” or “The Defining Moment.”

In American politics, the “It” moments came with the close of World War II (“happy days” were here again), with the Communist takeover Saigon (the first “war” America ever “lost”)—and in 2012, the first time the Republic had ever been thought of as “threatened.” The “It” years—the years everything changed, up close and visible.

Since the 1970s, traditionalists and patriots have seen “It” coming, and dreaded that there would come a time when American ideals would not just be ridiculed in the media, but dismantled by the courts. They worried that elections would eventually be manipulated to such a degree that American values and ethics could no longer be sustained. In the year 2012, the crossroads became clear.

But for this author, it happened in a most unexpected way.

The following is a true story:

I was sitting with a neighbor in a café over lunch. It was the week before Christmas, 2011. Though this neighbor had never been a particularly close friend (given our wildly divergent political views), we had lived in the same community for so many years, and even helped each other out on so many occasions, that we were, one could say, on very good terms as long-time acquaintances, if not exactly confidantes.

Many of my other neighbors jokingly called this woman the “resident Commie” behind her back, mostly because she proudly and openly admitted to being a Marxist in the hippie-dippy days of our 1960s youth. She had participated in protests and demonstrations, somehow managing to squeeze them in amongst her college studies and various doctoral degrees.

But on this particular day, she was protesting something altogether different. She confided, to my astonishment, that she was leaving the Washington area—this place where everything is vital and “happening”: the museums, the Kennedy Center, the Fireworks  over the Capital on the Fourth of July, the plentiful ethnic restaurants, and Capitol Hill. She was headed for fairer fields in the Great Southwest, of all places—home to the same Confederacy and “rednecks” she had often denigrated.

“But why?” I asked, perplexed. “I mean, you just revamped your entire house two years ago!”
Because, she said, “I don’t like the turn the lifestyle has taken here.” What’s more, she saw “no change in sight, regardless of who’s elected.”

My neighbor was blissfully unaware, apparently, that the District of Columbia and its surrounding bedroom communities exemplified the very lifestyle for which she had once demonstrated, marched and chanted slogans during our coming-of-age years—the only era, we both once thought, that really mattered.

Regardless of our politics (we didn’t even know each other then), we imagined ourselves on the cusp. We were first-wave Baby Boomers, born immediately after the War. The “times, they were achangin’,” and lucky us, we were part of “It”! We were the “It Generation,” the Ones Who’d Change the World.

The disappointed, graying visage looking at me from across the table came as something of a shock. Instead of being a smug representative of our “It” generation—her side had “won,” after all—there was only “Me.”
Despite her multiple Ph.D.’s in cutting-edge disciplines such as women’s studies, political “science” and environmentalism, in my neighbor’s mind, the “Its” had accomplished next to nothing, leaving the “Me Generation” in charge.

Like most young people our age, I was never part of the “It” crowd, having stupidly declared a major in a financially responsible (if not particularly emotionally satisfying) career. I’d looked around for (and gratefully found) Mr. Right, rewarded my parents with respectable, if not exactly stellar, grades, and “ate my peas” (to use a quip from President Obama).

So, I was mightily disturbed to hear that now, nearing retirement age, anybody at all was actually in charge, much less this “Me Generation.”

“It” was all very confusing… When did “It” turn into “Me”?

Was it merely “all so simple then,” as per the song from the tear-jerker film, The Way We Were, starring Barbra Streisand and Robert Redford?

Well, from the way my neighbor was now shaking her gray locks, things certainly hadn’t turned out as expected.

“Too many rules…,” she complained. “And surveillance cameras—can you believe it, @#$% surveillance EVERYWHERE?” In cathartic-like fashion, she elaborated:
… Can’t even take your dog for a romp in the woods without some @#$% lazy pig snooping around making sure you have a baggie clipped to your belt! And no trash cans! All these taxes, and not a single @#$% garbage bin to dump your baggie full of droppings! Do they really think people want to walk for an hour in  the great, green outdoors with a bag full of p_ _p in their hands?
And speaking of TAXES! For what? The lights go out every time we have a little rain! In the Capital of the Nation, for God’s sakes! I mean, this isn’t 1950! Aren’t we due a few upgrades for all this money we’re shelling out? And my prescriptions….”

By now my neighbor’s voice had reached enough pitch to draw attention:
“Do you believe,” she continued, “that just two weeks after being hospitalized for a hysterectomy, my pharmacy gets grief from the frigging government over a two-bit bottle of pain medication! I mean, you’d think I was asking for crack, when all I wanted was a refill that my doctor had already approved!”
I smiled. In commiseration…among other things….

As my neighbor carried on with her laundry list of grievances, my mind wandered: For some reason, I fancied how she might have looked as a 10-year-old, riding a bike and thrilling to the feel of the wind blowing through her hair. I imagined her frolicking into the school building in the morning, flagging down a friend in the hallway—no gauntlet of metal detectors and pat-downs standing in her way. No concerns that some monster would jump out of nowhere and start shooting.

I imagined her laughter and delight as she and her siblings lighted “sparklers” on the Fourth of July. She might have caught me smiling, but it was not at her rant. Rather, it was at the image of her enjoying buying a gooey ice-cream sandwich from a machine at the local theater on a Saturday afternoon, with no notion of some entity called the “food police.” Or as a teenager, with a bunch of other kids at Tops Drive-in, ordering a burger—and the best, thickest milkshake in town.

I pictured her…or maybe I was picturing us—or maybe the little girl in my mind’s eye was…me…?
The 1960s Boomers. The “Me Generation.”

Whatever became of those of us who were hopelessly…well, “nerdy” in today’s lingo? Never “brave” enough, or “popular” enough, or self-serving enough to qualify for the “It” crowd. All those “Me’s” who didn’t have the leisure (much less the parental support) to demonstrate against anything! We didn’t know it then, but We were still in the majority—on our way to independence, selfsufficiency and self-reliance. Unfortunately, press accounts of the 60s pretended otherwise, so we had no idea. “Changes … they were a-comin’,” the pundits said. And the world would belong to the counterculture radicals. It would be the “It” kids—like my nowgrown neighbor—the “radicals” and the “counterculture” fighting against the Establishment—who would rule America.

Yet, somehow “We, the People” had found each other and reconnected, in cities all around the country via the Internet. We may not have been actual classmates, but we had similar stories, and deep down each of us knew an “It” day is a-comin’.

And now, apparently, so did my left-leaning neighbor.

So, she had decided to run, to run away—down to “Dixie,” of all places.
I wondered if she realized that the great liberal activist folk singer we all loved, Joan Baez—even with her astonishing voice and range—today would never make it past the stage door with her signature piece, “The Night They Drove Old Dixie Down.” The word “Dixie,” in any context, is so politically incorrect that it cannot be uttered in public. Like the old Christmas standby, “I Saw Mommy Kissing Santa Claus,” Baez’s “Dixie” song is a relic of the past, when terms like “husband,” “wife” and “fiancé” were not referred to as “partners” in TV ads.

What a difference a few years makes! I mused.

My neighbor, unfortunately, will not escape the rules she helped precipitate—and now despises—in the Great Southwest. So, who, will stand as the “resisters” now? Which side will throw in the towel—or maybe throw down the gauntlet? “It” was kind of hard to say.

The world’s billionaires and the “mainstream” media work long and hard to narrow America’s choice of candidates, be it national, state or local races—and no matter who, technically, sits atop the heap with the most endorsements from average Americans. Yet, both the media and the political parties tell us, over and over, that “every vote counts.” Most people think it doesn’t.


What if “We, the People” did the unexpected? What if a candidate played the game and tricked the pollsters? Polls, after all, are mostly extrapolations from a sampling of a few hundred individuals. The media pays attention to them? Should we?

With a start, my attention returned to my grumbling neighbor. Just how “radical” was she? Would someone like her—a member of the “It” 60s-counterculture—be a help or a hindrance now?
Maybe my neighbor’s frame of mind was merely signaling a “fight or flight” response—like before the Nazis invaded Poland in the 1930s, or before the tanks rolled into Hungary in the 50s, or ahead of the Rwandan genocide in the 1990s… Maybe she’d go to the polls at election time and vote the way she always had—Left.
In any case, my neighbor’s angst made me think: Maybe this was really “It”!

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Past Issue:

Single-Payer National Health Insurance around the World Part I

In 2002 and 2003, we reviewed The Twenty Myths of health care reform. Now a decade later the authors have updated the book, renamed it, and added important 21st century data.
Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick
Published in cooperation with the National Center for Policy Analysis
Lanham • Boulder • New York • Toronto • Oxford

Introduction: Thinking about Reform

As we move further into the twenty-first century, it is clear that we are living with a number of institutions that were not designed for the Information Age. One of those institutions is health care.
Virtually everyone agrees that our health care system needs reform. But what kind of reform? Some on the right would like to see us return to the type of system that prevailed in the 1950s. Some on the left would like to see us copy one of the government-run systems established in the mid-twentieth century and variously called socialized medicine, national health insurance and, more recently, single-payer health insurance. For example, Physicians for a National Health Program, claiming membership of 8,000 physicians and medical students, contends that “single-payer national health insurance would resolve virtually all of the major problems facing America’s health care system today.”

We believe that neither of these two alternatives will work. But before we explain why, let us stop to consider some central problems that every reform faces. Most commentaries on health policy tend to ignore three very important facts about modern health systems:

1. We can potentially spend our entire gross domestic product (GDP) on health care in useful ways.
2. Whatever portion of our income we are spending on health care today, we are likely to want to spend more in the future.
3. We have suppressed normal market forces in dealing with characteristics one and two.

These facts are not in dispute. Rather, they are readily acknowledged by all health policy analysts.

Also, the first two characteristics are not unique to health care. They are true of many other goods and services as well. But when combined with the third characteristic, they have devastating implications.


Medical research has pushed the boundaries of what doctors can do for us in every direction. The Cooper Clinic in Dallas now offers an extensive checkup (with a full body scan) for about $1,500 or more.2 Its clients include Ross Perot, Larry King, and other high-profile individuals. Yet, if everyone in America took advantage of this opportunity, we would increase our nation’s annual health care bill by a third. More than 900 diagnostic tests can be done on blood alone,3and one doesn’t need too much imagination to justify, say, $5,000 worth of tests each year. But if everyone did so, we would double the nation’s health care bill. Americans purchase nonprescription drugs almost twelve billion times a year and almost all of these are acts of self-medication.

Yet, if everyone sought a physician’s advice before making such purchases, we would need twenty-five times the number of primary care physicians we currently have.4 Some 1,100 tests can be done on our genes to determine if we have a predisposition toward one disease or another.5 At, say, $1,000 a test, it would cost more than $1 million for a patient to run the full gamut. But if every American did so, the total cost would run to about thirty times the nation’s total output of goods and services!6

Notice that in hypothetically spending all of this money we have not yet cured a single disease or treated an actual illness. In these examples, we are simply collecting information. If in the process of search we actually found something that warranted treatment, we could spend even more. One of the cardinal beliefs of advocates of single-payer health insurance is that health care should be free at the point of consumption, regardless of willingness or ability to pay. But if health care really were free, people would have an incentive to obtain each and every service so long as it had any value to them.

In other words, everybody would have at least an economic incentive to get the Cooper Clinic annual checkup, order dozens of blood tests, check out all their genes and consult physicians at the drop of a hat. In short order, unconstrained patients would attempt to spend the entire gross domestic product (GDP) on
health care even though, as a practical matter, that would be impossible.

“Free” health care is of course not really free. It is care paid directly by employers, government or some other entity, and indirectly by workers and taxpayers. The more employers pay for health care the less employees receive in wages. The more the government pays, the less after-tax income taxpayers have. Therefore, allowing patients to go on an unconstrained shopping spree in the medical marketplace would ultimately impoverish all of us.

No serious person wants this result. Not even the advocates of single-payer health insurance want it. Instead, they envision placing many obstacles in the path of patients and doctors in order to constrain spending. These obstacles may not be prices, but they most certainly involve costs, such as the cost of waiting for care. Although its advocates call national health insurance “singlepayer insurance” these days, its distinguishing characteristic is not control of demand. It is control of supply.

Like the systems of Canada and Britain, American health maintenance organizations (HMOs) also make health care free to their enrollees at the point of delivery. They then control access to care, especially  expensive care, on a case-by-case basis. Whether or not an HMO patient gets an MRI brain scan, for example, depends upon the symptoms and the probable outcome of the scan, as well as its cost. HMOs, therefore, control costs by curtailing demand.

Nothing like that happens in countries with national health insurance, however. For one thing, doctors in Canada would have no idea how much a scan actually costs and therefore would have no basis for comparing costs with probable medical benefits. The number of brain scans is controlled in Canada, not on the basis of a case-by-case review of patient conditions, but because of spending constraints to limit the number of MRI scanners.

Many American doctors have endorsed the single-payer idea, in part because they envy the ability of Canadian doctors to practice medicine without managed care-type, third-party interference. What they overlook is that, at least from a budget perspective, Canadian officials have no reason to care what decisions doctors make. They limit the number of scanners, and therefore the expense of scanning, before doctors see even a single patient. American physicians who support single-payer insurance also tend to discount lack of access to expensive diagnostic equipment in Canada, believing that the problem could be ameliorated by just spending more. They do not realize that the only reason the Canadian system works at all is because the government controls supply. If Canadian doctors (who, again, have no idea what anything costs) had access to an unlimited supply of MRI units, they might spend Canada’s entire GDP on brain scans!

In general, countries with national health insurance control costs by imposing arbitrary limits. They strictly control the number of doctors who can be specialists. They limit access to modern medical technology. The more expensive the service, the more difficult they make access. As a result, in countries with national health insurance, people wait. They wait in the offices of general practitioners. They wait to see specialists. They wait for surgeries. And waiting is a rationing device comparable to money prices in a market system.

In this book we will stress many differences between the U.S. health care system and government-run health care systems. But on the demand side, the differences are not as great as one might suppose. Although health care is not free at the point of consumption for the average American, it is almost free. On the average, every time a patient spends a dollar on hospital care in our country, only two cents comes out of the patient’s own pocket. The other ninety-eight cents is paid by a third party (an employer, insurer or government.). On the average, for every dollar patients spend on physician care, only twelve cents comes out of their own pockets. And for the health care system as a whole, patients pay directly only eighteen cents of every dollar they spend. The rest is spent by some other entity.7

On the demand side, the problem with a system with no money prices is that people view each good or service as though its price were zero. As a result, they tend to try to consume the item so long as it has any value at all. The problem this creates is enormous waste. People seek services until the value to them is almost zero, even though the cost of these services may be quite high. The upshot is that people consume services for which the social benefit is well below the social cost. In Britain, for example, people have to pay out of pocket to see a movie, go to the theater or witness a sporting event.

But the only costs to see a physician are the costs of travel and waiting time. So although the government makes an enormous investment in their training, British physicians spend an inordinate amount of time on trivial complaints.

In the United States, things are not that much better. Although no one wants to enter a hospital, once there, the typical patient in this country has an incentive to use hospital services until they are worth only two cents at the margin (or about 1/50th of the actual cost). Aside from the costs of time and travel and the risk of being around other sick people, patients have an incentive to utilize physicians’ services until they are worth only twelve cents on the dollar. And for the health care system as a whole, our incentive is to spend until the services we receive are worth only eighteen cents on the dollar. No wonder there is so much waste!
In principle, there are not many solutions to this problem. Someone must choose between health care and other uses of money. The question is, who will that someone be? The answer of single-payer advocates is medical bureaucracies answerable to politicians. And much of this book will be spent looking in some detail at how rationing decisions are made in these systems.

A second method for choosing between health care and other uses of money is the method of managed care. The paradigm is the HMO. As noted above, HMOs have far less rationing by waiting than do national health insurance schemes. One reason for the difference is that HMOs tend to make rationing decisions based on medical and economic rather than political considerations. Because some policy analysts believe that a system of competing managed care organizations can solve the problems of single-payer health insurance, we devote a chapter to that idea.

The third method of choosing between health care and other uses of money is to allow patients themselves to choose. A vehicle that facilitates such choices is a health saving account (HSA), from which patients pay medical expenses directly. Funds not spent on health care grow in the account and may be used for other purposes. Singapore has had a compulsory system of “medisave” accounts since 1984.8 Medical savings accounts (MSAs) were introduced in South Africa in the early 1990s and today represent 65 percent of the market for private health insurance in that country.9 The United States experimented with a pilot program for several years and as of January 1, 2004, HSAs are available to all nonelderly Americans.10
So far, these accounts have mainly been used to pay relatively small medical bills, less than a few thousand dollars. These are the expenses that fall under a health insurance deductible. But as the accounts grow and if health insurance evolves toward the casualty model, the accounts could play a role in almost every aspect of health care. Consider homeowner’s casualty insurance, for example. If hail damages a roof, an insurance adjuster surveys the damage and agrees to a sum sufficient to cover the cost of repair—usually by a repair service the insurer knows. But the homeowner is not restricted to this option. He or she can choose other, more expensive repair services or even choose to replace the damaged roof with a nicer roof.
In principle, health insurance could work the same way. In the case of expensive heart surgery or cancer care, the insurer could direct the patient to a hospital or clinic and agree to pay the full cost. But the patient would be free to take the same reimbursement amount and apply it to another hospital or clinic, paying any extra charges from an HSA account.

In the world of casualty insurance, auto repair shops act as agents of automobile owners. Roofing repair services act as agents of homeowners. Suppliers of these services do not see themselves as agents of third-party insurers.

In a similar way, HSAs could free patients to become the real decision makers, choosing between health care and other uses of money in virtually every part of the health care system. In such a world, doctors, nurses and other providers would see themselves as agents of their patients rather than agents of impersonal bureaucracies.

Read the complete book: (PDF | 5MB)
Continued in the April, 2014 HPUSA newsletter. . .

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Past Issue:

Single-Payer National Health Insurance around the World Part II

In 2002 and 2003, we reviewed The Twenty Myths of health care reform. Now a decade later the authors have updated the book, renamed it, and added important 21st century data.
Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick
(Continued from the January 2014 HPUSA Newsletter)

Let’s now turn to a second well-documented, but rarely discussed, fact about modern health care systems.

Whatever we are spending on health care today, we are probably going to want to spend more tomorrow. This is true for two reasons: first, the average age in all developed countries is rising and health needs increase with age, and second, health care is a “superior good,” which means as income grows people choose to spend more of it on health care.

At 15.2 percent of the GDP, the United States spends more of its income on health care than any other nation, a sum that equals $1.6 trillion.11 This fact is a usual source of criticism both at home and abroad. But if you think 15 percent is high, you haven’t seen anything yet. Currently, senior citizens (over sixty-five years of age) spend about 45 percent of all their consumption (regardless of who pays for it) on  medical care. By 2020, it is estimated that three-fourths of all consumption by seniors will be on health care.

Is such spending good or bad? That depends on whether people are getting their money’s worth for the dollars they spend. If people are getting value for money, nothing is wrong with devoting more resources to health care. If they are not getting value for money, something is wrong with it. This way of looking at the issue is very different from what one hears in most public policy discussions. The standard complaint is that health care “costs” are rising. And innumerable conferences, briefings, books, articles, essays and so forth have sought to “solve the problem” of rising health care costs.

Note that in a general sense “spending” and “costs” are the same thing.

If people are aging and their incomes are rising, one can predict with great confidence that they will want to devote more of their income to medical care. Not only is this not a “problem,” it is a natural and inevitable part of life. Indeed, to the degree that this phenomenon is viewed as a problem, it is not a problem that is going to be solved. It will only get worse through time.

We noted above that in a system with no prices, decision makers cannot determine what value people place on different services. Thus, they cannot know what’s being oversupplied or undersupplied. A similar problem arises with respect to total spending on health care. Given that it should rise over time, by how much should it rise? How would one know? Without markets through which people can reveal their preferences for health care versus other goods and services, it’s anybody’s guess.

American employers who complain about the “problem” of rising health care costs are in a similar situation. Because decisions about health care typically are made collectively at the workplace and because the premiums employees pay rarely reflect real costs, employers have no way of discerning their employees’ willingness to trade off higher wages for more health care, except through union negotiations and other imperfect devices.

Fortunately, when American employers make a mistake, its consequences are confined to their companies and their workforces. But when the managers of national health insurance make mistakes, the whole nation suffers.

To be continued in the July, 2014, HPUSA Newsletter

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Past Issue:

Single-Payer National Health Insurance around the World Part III

In 2002 and 2003, we reviewed The Twenty Myths of health care reform. Now a decade later the authors have updated the book, renamed it, and added important 21st century data.
Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick
(Continued from the April 2014 HPUSA Newsletter)

Some of the things we have been saying about health care are also true of other goods and services. For example, we could probably spend our entire gross domestic product on automobiles, with each of us owning several to use over different terrains and in different seasons. But no one ever asserts that this is a problem. To the contrary, most people regard it as an opportunity. The fact that automobile manufacturers have discovered so many different ways to satisfy our needs makes us better off, not worse off (pollution problems aside).

Similarly, fine wine is probably a superior good. As people’s income rises, they tend to buy more of it. And in recent years, supply has increased to meet demand, as vineyards have expanded all over the world. Again, no one regards this as a problem.

So what makes automobiles and fine wine different from health care? Why are problems that cause so much hand-wringing in health care not seen as problems in the other two markets? The answer is that in this country and in all developed countries we have suppressed the ability of the market to allocate health care resources.

The suppression of the market in health care began more than 100 years ago. It started with controls on who could be a physician and how those licensed to practice should behave. By the mid-twentieth century, controls were extended to the hospital sector and then to health insurance. By the 1970s, with government paying more and more medical bills, policy makers realized that prices and markets were not able to do their job. Similar trends occurred in other developed countries.

What does it mean to suppress normal market forces in health care? Not long ago, if a doctor competed aggressively against other doctors, say, the way auto companies compete against each other, he or she could be in real trouble. For example, if the doctor posted his normal fees and compared them to other doctors’ fees, if he compared the quality of his practice to that of another physician or if he advertised at all he could be expelled from the county medical society. That, in turn, would lead to a loss of privileges at all the hospitals in his area. If the offense were bad enough (irritating enough to his fellow physicians), he could lose his license to practice medicine.

Until very recently, the hospital sector was dominated by nonprofit institutions whose sole task was to facilitate the doctors’ goal of treating patients.

Not only were hospitals not supposed to function like businesses, they went out of their way to avoid certain common business practices. For example, for a hospital to compare the quality of its care to the quality offered by a competitor would have been unthinkable. Advertising itself was unthinkable. Not only did hospitals not post their prices, no one paid them other than the occasional uninsured patient. At the time Medicare (for seniors) and Medicaid (for the poor) were adopted in the 1960s, virtually every hospital in the United States was paid by insurers based on cost-plus reimbursement. And when the federal government set up Medicare, it joined the cost-plus system, paying for health care the way it paid for weapons systems. All in all, the health care system in this country and throughout the developed world functioned according to rules that resembled a medieval guild more than a complex modern market.

Times have changed. And they have changed more in the United States than anywhere else. Other countries have left in place the medieval guild approach to medicine and tried to control costs in crude ways that we will examine. In this country, however, we have made dismantling the guild and promoting competition a public policy goal.

Doctors today can compete in almost any way they like. They can post prices; they can advertise; they can boast about the quality of care they deliver.

Hospitals can do the same. And insurers can pay hospitals based on any arrangement that can be reached through no-holds-barred voluntary exchange in the marketplace. But although the shackles have been removed and although the law no longer protects it, the 100-year-old culture that has dominated medical practice has not disappeared.

Pick up almost any daily newspaper and you will find evidence that the medical marketplace is still not functioning like other markets. “Hospitals Say They’re Penalized by Medicare for Improving Care,” blares a front page headline in the New York Times.14 “More Care Is Not Better Care,” leads a Times guest editorial, citing evidence that Medicare spends twice as much on seniors in Manhattan as it does Portland, Oregon, without getting any improvement in quality or patient satisfaction.15

But there are two consoling observations: first, the medical marketplace is becoming more competitive, and second, things are much worse in every other country. Read the entire article. . .

Continued in the October 2014, HPUSA Newsletter . . .

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Past Issue:

Single-Payer National Health Insurance around the World Part IV

Lives at Risk by John C. Goodman, Gerald L. Musgrave, and Devon M. Herrick
(Continued from the July 2014 HPUSA Newsletter)

American advocates of single-payer national health insurance propose to16

• Eliminate HMOs and most other forms of managed care
• Have all health care financed by the government, with no premiums or copayments from those covered
• Control costs by assigning global budgets to hospitals and setting fees and salaries for physicians
• Prohibit private insurance or personal payment for any service covered by the single-payer system. In advancing this idea, they point to other countries as examples of health care systems that are superior to our own. Are they right?

The promise of national health insurance is that government will make health care available on the basis of need rather than ability to pay. That implies a government commitment to meet health care needs. It implies that rich and poor will have equal access to care. And it implies that more serious needs will be given priority over the less serious. Unfortunately, these promises have not been kept.

• Wherever national health insurance has been tried, rationing by waiting is pervasive—with waits that force patients to endure pain and sometimes put their lives at risk.

• Not only is access to health care not equal, if anything it tends to correlate with income—with the   middle class getting more access than the poor and the rich getting more access than the middle class, especially when income classes are weighted by incidence of illness.

• Not only are health care resources not allocated on the basis of need, these systems tend to overspend on the relatively healthy while denying the truly sick access to specialist care and lifesaving medical technology.

• And far from establishing national priorities that get care first to those who need it most, these systems leave rationing choices up to local bureaucracies that, for example, fill hospital beds with chronic patients while acute patients wait for care.

It might seem that some of these problems could be easily remedied. Yet, as the years of failed reform efforts in Britain and Canada have shown, the defects of single-payer systems of national health insurance are not easily remedied. The reason: the characteristics described above are not accidental byproducts of government-run health care systems. They are the natural and inevitable consequences of placing the health care market under the control of politicians.17 It is not true that health care policies in countries with singlepayer health insurance just happen to be what they are. In most cases, they could not be otherwise.

Why do single-payer health insurance schemes skimp on expensive services to the seriously ill while providing so many inexpensive services to the marginally ill? Because the latter services benefit millions of people (read: millions of voters), while acute and intensive care services concentrate large amounts of
money on a handful of patients (read: small numbers of voters). Democratic political pressures dictate the redistribution of resources from the few to the many.

Why are sensitive rationing decisions and other issues of hospital management left to hospital bureaucracies? As a practical matter, no government can make it a national policy to let 25,000 of its citizens die from lack of the best cancer treatment every year, as apparently happens in Britain.18 Nor can any government announce that some people must wait for surgery so that the elderly can use hospitals as nursing homes or that elderly patients must be moved so that surgery can proceed. These decisions are so emotionally loaded that no elected official could afford to claim responsibility for them. Important decisions on who will receive care and how that care will be delivered are left to the hospital bureaucracy because no other course is politically possible. Why do low-income patients fare so poorly under national health insurance?

Because such insurance is almost always a middle-class phenomenon. Prior to its introduction, every country had some government-funded program to meet the health care needs of the poor. The middle-class working population not only paid for its own health care, but also paid taxes to fund health
care for the poor. Single-payer health insurance extends the “free ride” to those who pay taxes to support it. Such systems respond to the political demands of the middle-class population and serve the interests of this population.

Why do the rich and the powerful manage to jump the queues and obtain care that is denied to others? Because it could not be otherwise. These are the people with the power to change the system. If members of Parliament had to wait in line for their care like ordinary people, the system would not last for a minute. Follow this series . . .

Continued in the January 2015, HPUSA Newsletter . .

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