Justin P. Hauke
Justin P. Hauke is a graduate student at Washington University's Olin Business School. He recently worked as a senior research associate for the St. Louis Federal Reserve, and has an undergraduate degree in economics and math from the University of Texas at Austin.
Monday, June 23, 2008Enforce the Existing Laws FirstBy Justin P. HaukeCategories: MissouriA letter in the Springfield News-Leader urges Missouri's Congressional representatives to vote for the adoption of the Fairness in Nursing Home Arbitration Act, which would allow the families of nursing home residents to litigate disputes. This law would invalidate many of Missouri’s existing nursing home contracts which require families to sign a mandatory arbitration clause in order to insure them against a lawsuit in the case of an injury or death. I’ve written an oped about nursing home regulations before. In that article, I argued that nursing home abuses are very much a reality, but that additional regulation will only make long-term care coverage worse. Saint Louis currently enjoys having the second-lowest nursing home costs in the country, averaging $42,877 annually. Nationally, the average annual figure is $65,200, with costs as high as $191,385 in some states. This is a tremendous bill to foot for 10 or 15 years of potential care. It’s very obvious why nursing homes require an arbitration clause. They are charged with ensuring the safety of residents who often are suffering from dementia or Alzheimer’s and may be largely a danger to themselves. The costs of litigating every potential event (whether due to the home’s negligence or not) would be prohibitive, and would force many nursing homes out of business, only driving up the costs of long-term care.
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Monday, May 12, 2008More on the Missouri Health Transformation ActBy Justin P. HaukeCategories: MissouriI wrote about the Missouri Health Transformation Act (MHTA) when it passed the Missouri Senate last week, so I thought I would revisit the bill now that it has reached a stalemate in the House. The primary point of contention in the bill (and the reason it has grown to the behemoth size I lambasted before) is how to insure uninsured low-income Missourians. The House wants to control costs. The Senate doesn’t. Essentially, House leaders believe that low income Missourians should receive “vouchers” to shop for coverage that meet their needs, rather than receive generic broad coverage by the state. I whole-heartedly agree. If consumers shop around for the best deal, prices will be lower for everyone. This is the real problem with the existing health insurance model. Do you have any idea how much a doctor visit costs? How much does it cost to get your teeth cleaned or to get your appendix out? Honestly, I couldn’t even ballpark these things. All anyone focuses on is their insurance deductible. So if it costs you $100 out of pocket to get your appendix out, do you even care what the true cost is? The lack of medical price transparency has two negative effects. One, we overuse our insurance because we have no idea what the true costs are and the costs don’t accrue to us individually. And two, medical providers have no incentive to keep costs down if costs can’t be compared. Would you have any idea whether or not your doctor charges a “fair” price? Prices of various procedures could vary widely from doctor to doctor but we would have no idea because our copay would be the same regardless. The House wants to cover the uninsured in a way that keeps costs lower. It wants insurance providers to encourage competition and to publicly disclose medical costs. But, as the Saint Louis Post-Dispatch covers in an article in this morning's paper, hospitals, doctors, and other groups are balking at the request. I’d probably be upset too if I knew that doing so would reveal that I’m charging three times as much as the next doctor to perform the same procedure. That would suck for me too.
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Thursday, May 8, 2008Georgia on my MindBy Justin P. HaukeCategories: Georgia, MissouriYesterday, Georgia Governor Sonny Perdue signed a comprehensive health care reform bill similar to Missouri's landmark HB 818 legislation, which passed last year. The Show-Me Institute has praised HB 818 on our blog over and over (and elsewhere), but it seems Georgia has one-upped even that innovative piece of legislation (extensive coverage can be found here). The most significant improvement in Georgia’s health insurance reform bill is a provision which allows insurers to provide incentives for healthy behavior. For example, health insurance companies will be able to reward individuals for adopting “healthy behavior” such as quitting smoking or losing weight. This provision will go a long way in reducing long-term costs. In addition, the law mimics HB 818 in making the premiums paid on Health Savings Account-eligible insurance plans 100 percent deductible against personal state income taxes. To encourage employers to participate (particularly small businesses), the bill also allows a $250 tax credit per employee for employers that offer HSAs. The bill also improves upon earlier legislation in that it allows health insurance to be sold across state lines, rather than through the monopolistic cartels that currently exist. So Georgians now have the opportunity to purchase HSA plans provided by Missouri companies. The increase in competition will help improve quality while lowering premium costs. It’s really refreshing to see positive health care legislation being passed around the country. Makes me less of a cynic.
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Wednesday, May 7, 2008The Missouri Health Transformation Act of 2008: Everything and the Kitchen SinkBy Justin P. HaukeCategories: MissouriThe Missouri Health Transformation Act of 2008 (SB1283), which would implement several state health care reforms, has passed the Missouri Senate and is now headed toward House approval. This bill is a perfect example of bureaucracy at its finest. Considering the amount of administrative minutiae in this bill, I’d be surprised if anyone in the Senate other than the bill’s sponsor actually read it. So what exactly will be “transformed” under the new bill? I’ve spent the better part of the past hour trying to figure that out. Apparently one “transformation” would be the creation of a new “Department of Redundancy Department,” which would consist of the existing members of the current state health care agencies. Apparently this new body is supposed to “coordinate health policy collaboration” across the state by issuing “official state recognition” to employers that promote “healthy workplaces.” The new cabinet also hopes to express its approval of “telehealth”—health advice provided over the phone. But if that’s not enough, the bill would contain a litany of additional healthcare “fixes,” such as providing tax credits to private homeowners who modify their homes to be “accessible” (no description of what that means), providing a $400,000 grant to create a “website,” and a $350,000 grant “to be used for the establishment of a study to assess the feasibility of [health] pilot projects in the greater St. Charles area.” I just don’t understand who this bill is supposed to appeal to. The provisions it would implement are mostly superficial or redundant. The one bright spot is the creation of a state income tax deduction equal to the premium paid by taxpayers for high deductible health care plans purchased through a health savings account. But that benefit seems superfluous when the bill simultaneously expands the Missouri Consolidated Health Care Plan coverage to include benefits such as marriage counseling at the taxpayer’s expense. Considering the degree to which MCHCP is currently underfunded (stay tuned for the future release of our study on Missouri public pensions), this seems like shooting yourself in the foot. The only thing this bill might “transform” is a greater conviction that an expanded role for government management of health care would be a huge mistake.
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Wednesday, March 26, 2008FSA, HSA, HRA….AFT! LOL.By Justin P. HaukeCategories: HSAs, etc.We’ve been very proud at SMI to be at the forefront of HSA legislation in Missouri. The “new rules” of health care necessitate a more personal approach, one in which individuals manage their own health care needs directly.But it’s not just SMI that believes in the market approach to health insurance. An article on CNN Money this morning is waving the HSA banner too. And really when you think about it, how strange is it that the country has been so slow to embrace an open-market approach to health insurance in the first place? What continues to amaze me is that we as a nation continue to view health insurance premiums and coverage as “one-size fits all.” How alien that would seem to us for any other type of insurance policy. Just think how much consumers have benefited as insurance has been deregulated in other markets.The CNN Money article chronicles Jason Jeffords of Bedford, NH. Jason pays $240/month for a high deductible comprehensive health insurance plan for his entire family. His premium is determined by his own health risk and that of his family. The catch is that Jason’s deductible is $10,000, meaning that all costs below that level are paid out of pocket. But that’s where HSAs come in. Similar to a 401k, Jason opened an HSA account through his employee, allowing him to contribute tax-free earnings each month. His employer ups the ante by contributing $5,800 annually. These funds can be withdrawn at any time to cover medical expenses that fall below Jason’s annual deductible (again, tax free). And the earnings on Jason’s HSA earnings grow tax-free. And if funds remain when he retires,they can be withdrawn exactly like in a 401k. They're also portable, so Jason can change employers and still retain his benefits.HSAs are the model for the future of health care. Employers are much better off contributing funds to their employee’s plans indirectly than financing their employee’s health care costs directly. And the portability and choice aspects allow families to better manage their health care needs as new issues arise. This solves the problem of the nation’s current uninsured (who generally must live sans insurance if their employer doesn’t provide it) while keeping costs under control In other words, the nation’s current insured will no longer be able to abuse the system by having their costs subsidized through a diffusion of responsibility. It is this system that has priced so many people out of the insurance market to begin with. Anyway, the article is a great read and I’ve rambled on long enough. The point is that a health care revolution is coming and people who choose to manage their own health care today are poised to be much more financially secure than those who wait until change is thrust upon them. Which group do you want to be in?
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Monday, March 3, 2008Should we push everyone into the health-insurance pool?By Justin P. HaukeMarketWatch tackles this question. The article mostly considers the dueling Clinton/Obama “mandate” requirement for a national health insurance plan for the nation’s uninsured:
National health care advocates argue that health insurance mandates should be required, the same way that automobile insurance is required for drivers. They recognize (correctly) that this is the only way to cover the high costs of the elderly and the sick (by forcing younger, healthier Americans to directly subsidize them through mandated enrollment). I have never understood this auto insurance analogy. Sure, states require that drivers have liability insurance, that is, that drivers have insurance which cover the costs inflicted upon the counterparty in an accident. But states don’t require drivers to enroll in comprehensive coverage for their own car, which would be a much more valid comparison. There’s no external cost to an individual’s illness. If I get sick, the cost is borne by me and me alone. We don’t purchase insurance to cover the costs of those we infect when we cough in a crowded elevator. Comprehensive auto insurance would run into the same problem as health care if it had a mandated requirement. Owners of old, beaten up cars would never enroll in comprehensive coverage by themselves. They would recognize that the perceived benefits from such insurance for them would never justify its costs. This is why it’s so much more expensive to insure a new car, because the insurance pool is overwhelmed by newer cars, which are more expensive to insure. A mandated comprehensive insurance policy would effectively subsidize new car owners at the expense of older, used car owners. It’s like the health insurance problem in reverse. How many drivers of a 1987 Ford POS would be willing to subsidize the insurance costs of a 2008 Ford Mustang?
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Monday, January 21, 2008The Battle of MidwiferyBy Justin P. HaukeThe Post-Dispatch ran a two-part article this this weekend (and this morning) on Missouri’s midwifery battle. The casual reader may find our preoccupation with this issue bizarre. But it’s not the midwife focus per se that we care about — it’s the Show-Me Institute’s staunch opposition to most occupational licensing regulations. Advocates of midwife-assisted deliveries argue that the experience is more natural, offering new mothers the opportunity to experience the miracle of childbirth in a relaxed, conscious setting. Dr. Laurel Walter-Baumstark, a family physician on the board of the National Association of Birthing Centers, argues that "there is just no better model of preventive maternity care than the midwifery model." But opponents counter that their opposition to legalized midwifery is focused on pre- and post-natal safety concerns, not money. For example, Dr. David Redfern, an obstetrician in Springfield, Mo., who testified against midwife legislation last year, argues, "[H]ow we [deliver babies] is very important, and we have to take patient safety into consideration." But the doctor’s opposition misses the point. Eliminating occupational licensing requirements doesn’t mean an end to medical safety. The state is free to continue to sanction doctors (and other professionals) who properly meet their standards. What’s more, the state should set medical standards, as a way for consumers to ensure the quality of their medical practitioners. But it is not the state’s role to tell people how to live their lives. If a new mother wants to use a midwife to assist in childbirth, that’s her decision — a decision that no one is better-equipped to make than her. And as the Post documents, doctor-assisted births aren’t necessarily qualitatively better than midwife deliveries (emphasis added):
Before you dismiss this issue (or dismiss consideration of the role of occupational licensing in general), think of it this way: Are you really comfortable with surrendering your freedom to make your own decisions about your body? We shouldn’t be afraid of this type of choice; we should embrace it.
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Wednesday, January 9, 2008Berkeley Bob on Health CareBy Justin P. HaukeThere is an Op-Ed in this morning’s Wall Street Journal by Robert Reich, President Clinton’s former Secretary of Labor and a current professor of public policy at UC-Berkeley, on the Democratic presidential candidates’ plans for national health care. The article amazed me, not for its blatant disregard of economic logic, but rather for its presupposition of controversial facts about what universal health care coverage would be like. Reich accepts (without justification) that national health care will be affordable, universal, and comprehensive, offering excellent service in which every American will be free to choose the doctor of his or her choice without an automatic opt-in mandate. Well by golly, if it isn’t Uncle Sam Santa. How crazy we’ve been to bicker about this. I’m surprised the Journal let this go to print, particularly so without a rebuttal. But for arguments sake, let’s accept what Reich imagines, and focus on what the article says instead. Reich argues that the Democrats should “think bigger” about national health care and ignore the petty issue of mandates (that is, whether or not uninsured Americans will be forced to participate). Reich recognizes correctly that mandates (and their big government connotations) are the most sensitive part of the health care debate, so he argues that they’re just a smoke screen. But mandates are the most important part of any universal health care plan. Ostensibly national health care would rely on younger, healthier participants’ contributions to subsidize the high costs of older sicker Americans. That’s a non-partisan fact, as it’s the same rationale for Social Security and Medicare too. How else can a system that offers universal coverage without distinguishing premiums remain solvent? Uninsured older Americans are the most expensive segment of the population to insure, yet we are supposed to believe that this wouldn’t pose a problem without a mandated influx of healthy Americans who contribute to the plan, yet don’t utilize its benefits? Reich ignores this fact and, presumably to appease the naysayers, argues instead that high-cost participants would be subsidized by the general revenue obtained from allowing the Bush tax cuts to expire. Please. Even if we were to assume that allowing the tax cuts to expire would increase revenues (it might not), address the alternative minimum tax problem (it won’t), and not push the country into recession (it probably would), there’s still the issue of how the additional revenue can even hope to offset the enormous cost of health care for millions of high-risk Americans, particularly so when fixed premiums encourage health care abuses. Ironically, Reich provides his own counter-argument to the importance of mandates when he cites Republican Mitt Romney’s Massachusetts health care plan (a plan which currently exempts about 20% of the state’s uninsured population and has left policymakers contemplating either universal coverage or insolvency). Oh, but "big government" mandates aren’t important. Reich’s article is purely propaganda, ignoring the real argument by dismissing the bureaucratic mess of “big government” mandated coverage as the “least important aspect of what [the Democrats] are offering,” in order to appease Americans who want to believe that universal health care can be achieved without cost or government intrusiveness. It’s not “The Road to Universal Coverage,” Mr. Reich is offering, but the “The Road to Serfdom.”
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Wednesday, January 2, 2008Tragedy of the SnifflesBy Justin P. HaukeThere is some interesting discussion on the Central Missouri Community Action (CMCA) blog regarding rising health insurance premiums. The irony here (to me) is that a non-profit focused on alleviating poverty seems to be far more preoccupied with maintaining their existing level of employee benefits, even it means cutting resources targeted for poverty assistance to do so. But maybe that’s just me and my cold Grinch heart (is it too late for Grinch references?). Anyway, not to get on a tirade here, but the author of the post seems to be completely oblivious as to why their health insurance premiums are rising in the first place. (He thinks it’s an unfortunate side-effect of employing a mostly female workforce . . . oh that cruel insurance agency and its bias against women). The reality is that health care costs are rising (for CMCA as well as everyone else) because we continue to view health care as a collective right. And in treating health care as a group decision, we are only guaranteeing continued abuse and rising costs. The problem is similar to that of the long-noted “Tragedy of the Commons," which argues that common resources without ownership or management will inevitably be over-exploited and abused. This occurs because the benefit of use accrues to individuals, while the cost is spread over the “commons.” In the healthcare case, individuals do not pay for the benefit of the free doctor visits and prescription drugs they receive; the cost is borne by all premium-payers. And because costs and benefits are out of whack, individuals have an incentive to overuse their care, since their individual “cost” of such care is negligible. Naturally, this leads to abuses of the system (on both the doctor and patient side). Health insurance abuse has been the trend at most places I have worked in the past. As long as somebody else is picking up the tab (the insurer/employer), employees have every incentive to visit the doctor for every ache, sniffle, or cramp they suffer. And then there’s “sick pay.” Most employers budget vacation and sick time separately. And since employees generally can’t trade unused sick days for vacation days (despite some rather vocal prodding on my part), it provides additional incentive for employees to skip work for doctor visits which will justify a paid-day off from work. Health care costs are never going to decrease (let alone stabilize) under our current model of “group health.” The only way we can guarantee “reasonable” health care costs in the future is if we put the budgeting decision in the hands of the individual consumer, not the “collective pot” as it were. The Show-Me Institute has been a strong advocate of health savings accounts (HSA), which allow for employer contributions to health care on an individual basis. HSAs allow employees to pick portable insurance plans that work for their individual needs, regardless of their employment status.Employers can contribute to their employees' HSA plans or help defray costs of individual insurancepremiums directly.These HSA contributions are also tax-free, which allow contributions to be invested and used for future medical payments. And SMI practices what we preach too. The CMCA’s post ends with the following question:"Any guesses as to what the most effective way to decrease our health insurance cost is?"I can think of a few…
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Tuesday, December 18, 2007A Better Solution to Missouri's Long-term Nursing Home CareBy Justin P. HaukeCategories: MissouriYesterday, representatives of the National Senior Citizens Law Center (NCSLC) hosted news conferences in Kansas City, Columbia, and St. Louis to bring attention to the dubious quality of many of Missouri's long-term care nursing home contracts.
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