Michael F. Cannon

Large Health Savings Accounts: A Step Toward Tax Neutrality for Health Care

The creation of tax-free health savings accounts presents a new opportunity to reduce the distortions created by federal tax preferences for health-related expenditures that ultimately could help eliminate those distortions. This paper proposes changes to current law that would allow most workers to receive the full amount that they and their employer spend on their health benefits as a tax-free cash contribution to the workers health savings account. Restructuring the exclusion for employer-sponsored health benefits in this way would enable more individuals to obtain health insurance that matches their preferences, would increase efficiency in the health care sector, and could reduce inequities created by the exclusion. These changes also offer a means of limiting the currently unlimited tax exclusion for employer-sponsored health benefits that may be more politically feasible than past proposals.

Medicaid's Unseen Costs

Medicaid occupies a special place among government programs for the poor. Public support for Medicaid is broader and deeper than for other safety net programs because the consequences of inadequate medical care can be much more immediate and severe than those of a lack of money or even food. Medicaid is now larger than Medicare (the federal health program for the elderly and disabled) and is the single largest item in state budgets, even larger than elementary and secondary education. Yet Medicaid imposes additional hidden costs. Like all means-tested government programs, Medicaid discourages work and charitable effort among the taxpayers who fund it, while discouraging self-sufficiency and encouraging dependence among beneficiaries. Medicaid also imposes costs that stem from overuse of medical care, increasing costs for private payers, and giving patients poorer quality care than they could obtain with private coverage. As it did with federal cash assistance, Congress should: (1) cap federal Medicaid spending, (2) block grant federal funds to the states, and (3) allow states full flexibility to define eligibility and benefits under their Medicaid programs. States should use that flexibility to target Medicaid assistance to the truly needy, reduce dependence, reduce crowd-out of private effort, and promote competitive private markets for medical care and insurance. That means withdrawing assistance from those who are most able to obtain coverage elsewhere and deregulating health care and health insurance markets so they can meet that need.

Ascertaining Costs and Benefits of Colonoscopy More Difficult Than the Procedure Itself

My grandfather died of colorectal cancer when my mother was 13 years old, a catastrophic event that tore his family apart.1 When I was a child and even a young adult, his death seemed to me more an abstraction than a tragedy that unfolded slowly, devastating people I love. Things change. In my 20s, I saw up close what this illness does to its middle-aged victims and their families. In my 30s, I watched my father-in-law suffer in much the same way before saying good-bye to his daughters and grandchildren. And after decades of watching young faces turn slowly into old ones, I started to see, in my mother, a girl who lost the most important man in her life just as she was about to enter high school, a girl who was then uprooted and sent to live 200 miles from home. Now in my 40s, I am the most important man in another girl’s life. If I want to be around for fatherdaughter dances, graduations, and grandkids, I need to be smart about this inheritable disease. My wife—a girl who lost her father before his time—insists. Being smart is harder than it needs to be. The US Preventive Services Task Force (USPSTF) recommends that adults receive periodic colorectal cancer screening beginning at age 50 years.2 If you are still in your 40s but have a family history of colon cancer, well, good luck finding expert guidance. The USPSTF says, in essence, that it sure would be nice to have more data. The American College of Physicians (ACP) likewise counsels, “Clinicians should not screen for colorectal cancer in average-risk adults younger than 50 years.”3(p721) Sounds reasonable enough. Screening carries risks that could swamp the potential benefits for averageor lowrisk patients. But what about people younger than 50 years whose family history leaves them with an aboveaverage risk? The ACP recommends “individualized risk assessment.”3 Translation: they don’t know either. How can it be that no one has measured this? The N is more than adequate. Why isn’t the n? Daunted, I take what might be the next logical step: I meet with a gastroenterologist. He considers colonoscopy a reasonable option. We set a date that leaves me several weeks to complete the second-most-unpleasant part of colonoscopy preparation: ascertaining how much I will pay for it. The Affordable Care Act requires health insurers to cover all preventive services that receive an “A” or “B” rating from the USPSTF—but again, the agency has issued recommendations only for patients older than 50 years. My health insurer’s web site and (thick) benefits book stop being helpful right where the official recommendations do: where the recommendations are unclear, so is my coverage. I consult human resources. I call my health plan. My human resources department calls and emails our health insurance company. Coverage depends, we discover, on the codes the gastroenterologist submits for reimbursement. A clerk at the gastroenterology group snail-mails me several billing codes they like to use, with instructions to run them by my health insurer. On the phone with my health insurer again, I rattle off numbers, hoping one of them will crack the safe. Eventually, I learn that my plan will cover my colonoscopy at 100%—not because the government mandates it, nor because it is medically necessary or recommended care, but because my family will have hit our (high) deductible by then. Of course, “covered at 100%” does not really mean covered at 100%. I now must ascertain whether everyone in the supply chain will accept what my health insurer pays as payment in full. The gastroenterology group and endoscopy clinic are in-network, so there should not be any surprises there. The anesthesiology group is not. My insurer will pay them the in-network rate. Will they accept that or come after me for more? Multiple calls and messages generate no reply. The day of reckoning comes. I arrive at the endoscopy clinic, feeling as colonoscopy patients do. I complete and sign the forms I already completed and signed at least once before. I ask to speak to the anesthesiologist. She is very busy, but I will have a chance to speak to her before the procedure. Eventually, they summon me. I undress. Then comes the gown. The socks. I climb on the table. Then the cuff. The nasal cannula. The intravenous (IV) port. The IV, take 2. The oximeter. I am cold. Finally, the anesthesiologist enters. She greets me with a warm smile, a brief explanation of what to expect, and more forms. One final form asks me to attest that “I have received answers to all my questions.” Actually... I ask the anesthesiologist whether her group, like everyone else in the room, will accept my plan’s innetwork rate. I note how strange it is that my first opportunity even to pose the question comes only once I am in a gown, on a table, with a cuff on my arm, an oximeter on my finger, tubes in my nostrils, a tube in my vein—and a room full of people who now are staring at me, waiting for me to sign that last form. The anesthesiologist’s eyes widen. She shakes her head. Whether or what her group will bill me, she has no idea. Our eyes lock for what seems like an eternity. PERSPECTIVE

King v. Burwell: Desperately Seeking Ambiguity in Clear Statutory Text

Does the Patient Protection and Affordable Care Act (ACA) of 2010 authorize tax credits within the thirty-six states that failed to establish health insurance exchanges? That is the question presented in Pruitt v. Burwell, Halbig v. Burwell, King v. Burwell, and Indiana v. IRS. The plaintiffs argue that the statute is clear and forecloses any possibility of tax credits in federal exchanges. The government argues that the statute plainly authorizes tax credits in federal exchanges, or is at least ambiguous on the question. Mere disagreement is not evidence of ambiguity. Reaching the truth requires wading deep into each sides arguments. Whether the relevant text is viewed in isolation or in its full statutory context, the ACA authorizes tax credits only in exchanges established by the states.

Reforming Medical Malpractice Liability Through Contract

This paper discusses the medical malpractice “crisis” and the potential of contract liability to reduce overall malpractice costs as well as improve the quality of and access to care. First, the paper describes the current medical malpractice liability “system” and some of the more common reforms offered. It then discusses the economic rationale of allowing patients and providers to agree in advance of treatment on how the patient will be compensated in the event of simple negligence on the part of providers, explaining how contract liability may offer improvements in the areas of costs, patient preferences, the pursuit of more efficient liability rules, and quality of care. The paper then critiques select objections to contract liability – those based on the superior bargaining power of providers, the lack of information available to patients, and possible reductions in quality – and forwards possible limitations on the right to contract that may allay such concerns.