Category: Issues

Should Medicare be means-tested? Quite simply, I say “yes.” This solution to the well-documented problem of out-of-control entitlement spending may not be “fair,” assuming that further changes are not made and that high-income people will continue to contribute disproportionately to the program, but government programs are never “fair.”

That’s why, when I’m presented with the opportunity to shrink a major government program, I can’t help myself but to say “yes.”

After all, today’s productive workers are footing the bill for Medicare and Social Security programs that are far beyond what will benefit them. That is not fair, either.According to a New York Times article outlining concerns about means-testing provisions contained in the 2003 expansion of Medicare, the two major objections to means-testing are (1) wealthy retirees will abandon the program and rely on private insurance instead, leaving poorer, sicker people in Medicare; and (2) higher premiums could drive people with higher incomes out of Medicare, thus making Medicare a welfare program rather than a universal social insurance program.

The second point is the key, because it follows directly from the first. Many supporters of means testing will quibble with these facts and attempt to gloss over the very real political issues associated with transforming Medicare into a welfare program, but I do not.

Calling Medicare “welfare” only articulates what has always been true about it: Any entitlement program that annually transfers $418 billion from one group of people to another (as Medicare did in 2006) must be considered “welfare.” The only difference is that one welfare program (the current version of Medicare) essentially buys the support of higher-income Americans by giving them access to basically the same welfare as low income recipients.

Taking money from productive taxpayers and arbitrarily allocating it to another group, no matter how wealthy, is still welfare. We see this regularly with “corporate welfare” that is given to multi-billion-dollar corporations. All of this is not to say that people who oppose Medicare means-testing are being disingenuous. They really do have the right to be afraid that if welfare were means-tested, political pressure might build to alter or even eliminate the program.

Of course, the end of Medicare in its current form is exactly what I (and presumably most advocates of limited government) want. Many conservatives and nearly all libertarians believe that Medicare is a deeply flawed program and even a regrettable mistake. That said, if we simply move forward under the assumption that some kind of health care program for seniors will always be with us, then means testing could help open the door for other reforms. These include the adoption of more market-based insurance mechanisms such as health savings accounts, which allow patients to plan for medical expenses and retirement as a whole, or some form of block-granting of Medicare money, as was done in 1996 with welfare reform.

Empowering patients would be a major positive step in reducing the burden of this program on taxpayers and, along with means-testing, would serve the very people who need help without shoe-horning everyone into the same unsustainable government program. Means testing may not be the silver bullet needed to put Medicare on a path to sustainability, but by altering political calculations, needed reforms may be in the offing.

Paul Gessing is president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico, based on principles of limited government, economic freedom, and individual responsibility (www.riograndefoundation.org).

The full symposium document can be found at:http://www.americanexperiment.org/uploaded/files/should_medicare_be_meanstested.pdf

I had the opportunity to attend the recent New Mexico First event on health care. I was pleased to see so many concerned citizens take time out of their busy lives to get together and work out solutions to one of our state’s most pressing problems, but amazed at how complicated and convoluted the health care issue has become.

Much of the blame must be placed at the feet of Congress and the federal government that has created the misguided and bizarre incentives under which all states must operate. Health Savings Accounts, which give individuals greater control over their health care needs, were a necessary first step. But these somewhat complicated accounts would be unnecessary if Congress would heed President Bush’s call to offer to individuals the same tax incentives now given only to companies.

The fact that these tax incentives are given to employers is a historical anachronism that does nothing but place health insurance companies between health care consumers and their providers. Whereas socialized medicine and other “universal” models simply replace health care companies with government bureaucrats as our health care gatekeepers, giving individuals control over their health care dollars would restore that patient-doctor relationship. Unfortunately, corporate and union interests have teamed up to strangle this needed reform in the cradle.

Another change that Congress needs to make is to bring federalism to health care. One of the great strokes of genius made by the Founding Fathers, federalism forces states to compete with each other.

Unfortunately, in the area of health insurance, this concept has been lost as insurance companies have successfully walled off each state, thus protecting themselves from competition and subjecting consumers to costly mandates and regulations imposed by the individual states.

New Mexico, for example, has 45 mandates covering everything from alcoholism and acupuncture to TMJ Disorders. While such coverage may be nice to have, they add significantly to the cost of health insurance. The costs associated with New Mexico’s large number of mandates contribute to our having the second-highest rate of uninsured.

Legislation that would have allowed individuals to purchase insurance across state lines was proposed by Rep. John Shadegg, R-Ariz., and then-speaker Dennis Hastert, R-Ill., last year, but died. Absent congressional action, New Mexico can and should allow residents to purchase health insurance from out-of-state.

Any discussion of health care in New Mexico would be incomplete without an analysis of the perverse incentives created by Medicaid. Due in part to the generous federal subsidy the federal government gives New Mexico (a 3-1 match depending on the specific program), many of our elected leaders view Medicaid as a means of generating economic growth at the expense of taxpayers in other states.

This rationale was among the justifications for successful efforts to raise from $4,000 to $10,200, the earnings threshold for low-income adults under which they can still qualify for Medicaid. The change is expected to add an additional 18,000 adults to the program, costing the state “only” $11 million— and costing taxpayers in other states probably three times as much.

While the incentives are certainly there for New Mexico to expand Medicaid to the greatest extent possible, this is not going to lift the poor out of poverty or improve health care coverage. Instead, Gov. Bill Richardson and the Legislature should request that the federal government allow New Mexico to follow the successful welfare reform model developed in the 1990s by receiving its Medicaid money in the form of a block grant and developing unique, New Mexico-centric solutions to our health care mess.

Unfortunately, while each reform I have outlined above would simplify and restore some logic to the health care system we all know and despise, each faces strong opposition from certain entrenched interests. Nevertheless, there are sensible free-market solutions to our health care problems that will expand coverage dramatically while also enhancing the patient-doctor relationship and cutting costs.

It may seem easier to throw up our hands and demand “universal coverage” with the government in charge, but government policies created many of these problems in the first place. We should hardly expect the government, the insurance companies, and other special interests to give up their power under a “socialized” scheme.

Paul Gessing is president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Although Sen. Domenici’s role in the ongoing flap over the fired U.S. Attorneys has garnered New Mexico’s senior senator a good deal of unwanted attention recently, another more substantive policy matter should be of greater concern to conservatives. Polls indicate that health care is one of the most important issues on voters’ minds. To this end, the concept of making health care more affordable is a mantra that has been adopted by politicians of both parties.

Domenici — working in conjunction with the usually conservative Mike Enzi (R.-Wyo.) and the reliably left-wing Ted Kennedy (D.-Mass.) — is now leading an effort that would ultimately drive up the costs of health insurance and may even inflict harm on the very people the senators are trying to help.

The legislation, which has already passed out of one Senate committee, is known as the “Mental Health Parity Act.”

While the desire to help those with mental illness is noble, the senators’ proposal will inevitably, if inadvertently, harm both the mentally ill and the uninsured.

This bill would require health insurance policies that provide coverage for mental illness provide it in the same way that they provide benefits for other conditions. Thus, if the co-pay to see a family doctor is $20, then the co-pay to see a psychiatrist must also be $20.

In a free market, the decision of how to cover mental health benefits is left to the insurer and the insured. A mandate to require that mental health coverage be given parity eliminates that freedom. Proponents of the mandate claim that it adds little to no extra cost to health insurance. They point to a study showing that there was no costs increase in mental health benefits when mental health parity was enacted in the Federal Employee Health Benefits (FEHB) program.

The reason costs didn’t increase is that the use of mental health benefits didn’t increase either. Most of the plans in the FEHB used managed care organizations to manage the mental health benefits, suggesting that use didn’t increase because the insurance programs restricted access to benefits.

Other research, which examines programs that didn’t restrict access, suggests that mental health parity is one of the most costly of benefit mandates. Using actuarial data, the Council for Affordable Health Insurance, an insurance industry group, estimates that it can add between five and ten percent to the cost of a health insurance policy.

More expensive health insurance means that means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured. Another route that businesses might pursue is simply dropping their mental illness coverage from their insurance policies, meaning that employees will have less access to mental health benefits.

A reading of the Mental Health Parity Act suggests that its supporters recognize that it will lead to higher costs. The bill tries to shield small businesses from rising health insurance costs by exempting any business with fewer than fifty employees. It also exempts any business whose health insurance costs rise more than 2% due to the mental health parity mandate.

Attempts to ask any of the three Senators what they thought about the cost of the bill proved fruitless. All three Senate offices responded to our calls, made over a two-week period, by saying the staff members who could address our questions were out of the office.

Thus far, only four benefit mandates exist at federal level.

Unfortunately, benefit mandates are extremely common among the states, as most states have dozens, mandating everything from hair prostheses to massage therapists.  New Mexico, for example, has 45 such mandates while Maryland has the most in the nation with 60 and Idaho has the least with only 14.

State level mandates have become such a problem that one of the most promising — albeit unsuccessful — efforts to reform health care in recent years was led by then-House Speaker Dennis Hastert (R-IL) and Rep. John Shadegg (R-AZ), both of whom wanted to change federal law to allow individuals to purchase insurance across state lines. This effort essentially would have forced insurance companies to compete across state lines.  That, in turn, would have pressured states to tailor their health care regulations in order to compete against each other.

Costs aside, what makes federal mental health parity legislation so troubling is that it could start a trend that shifts mandates from the state to the federal level, thus closing off a potential route to reform and future cost reductions. Instead of creating new mandates, Congress should be working to cut health care costs by allowing consumers to purchase health insurance — including mental health insurance — across state lines.

Mr. Gessing is the president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

Mr. Hogberg, formerly with Capital Research Center, is a senior policy analyst at the National Center for Public Policy Research.

Outside of the Iraq War, the debate over health care reform is one of the most contentious issues in politics today. With ongoing debate in Washington and a flurry of activity in the states, the need to make health care more affordable is a mantra being adopted by politicians of both parties.

Unfortunately, despite the high-minded rhetoric, political intervention more often results in higher medical costs. One of New Mexico’s own senators, Republican Senator Pete Domenici – in conjunction with Senators Mike Enzi (R-WY) and Ted Kennedy (D-MA) – is now leading an effort that would ultimately drive up the costs of health insurance and may even inflict harm on the very people the Senators are trying to help.

The legislation, which has already passed out of one Senate committee, is known as the “Mental Health Parity Act.”

Although, Domenici’s desire to help those with mental illness is noble, it has led him to support a proposal that inevitably, if inadvertently, will harm both the mentally ill and the uninsured.

This bill would require that health insurance policies that provide coverage for mental illness must provide it in the same way that they provide benefits for other conditions. Thus, if the co-pay to see a family doctor is $20, then the co-pay to see a psychiatrist must also be $20.

In a free market, the decision of how to cover mental health benefits is left to the insurer and the insured. A mandate to require that mental health coverage be given parity eliminates that freedom.  Furthermore, mental health parity is one of the most costly of benefit mandates. Using actuarial data, the Council for Affordable Health Insurance, an insurance industry group, estimates that it can add between five and ten percent to the cost of a health insurance policy.

Few of the likely consequences of imposing a mental health parity mandate are good for employees. Forcing insurance programs to cover mental health the same way they cover physical illnesses and conditions will result in more expensive health insurance. That means more businesses will increase their insurance premiums or drop their insurance altogether, resulting in an increase in the number of uninsured. Another route that businesses might pursue is simply dropping their mental illness coverage from their insurance policies, meaning that employees will have less access to mental health benefits.

A reading of the Mental Health Parity Act suggests that Domenici recognizes that it will lead to higher costs. The bill tries to shield small businesses from rising health insurance costs by exempting any business with fewer than fifty employees. It also exempts any business whose health insurance costs rise more than 2% due to the mental health parity mandate.

Attempts to ask any of the three Senators what they thought about the cost of the bill proved fruitless. All three Senate offices responded to our calls, made over a two-week period, by saying the staff members who could address our questions were out of the office.

Thus far, only four benefit mandates exist at federal level. Unfortunately, benefit mandates are extremely common among the states, as most states have dozens, mandating everything from hair prostheses to massage therapists.  New Mexico, for example, has 45 such mandates.

Health care mandates at the state level have become such a problem that one of the most promising – albeit unsuccessful – efforts to reform health care in recent years was led by then-House Speaker Dennis Hastert (R-IL) and Rep. John Shadegg (R-AZ), both of whom wanted to change federal law to allow individuals to purchase insurance across state lines. This effort essentially would have forced insurance companies to compete across state lines.  That, in turn, would have pressured states to tailor their health care regulations in order to compete against each other.

Aside from the inherent cost, what makes federal mental health parity legislation so troubling is that it could start a trend that shifts mandates from the state to the federal level, thus closing off a potential route to reform and future cost reductions. Instead of raising costs by creating new mandates, Domenici, Enzi, and Kennedy and others should be working to cut health care costs by allowing consumers to purchase health insurance –including mental health insurance – across state lines.

Paul Gessing is the president of the Rio Grande Foundation, a non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility.

David Hogberg is a Senior Policy Analyst for the National Center for Public Policy Research, a communications and research foundation supportive of a strong national defense and dedicated to providing free market solutions to today’s public policy problems.