Originally published by Real Clear Health.

By Vance Ginn & Deane Waldman
August 27, 2024

Affordability of health care in the U.S. has been declining, reaching its lowest point since 2022, with no signs of improvement. This stark reality underscores the urgent need for a healthcare system that prioritizes timely access to affordable, high-quality care. To achieve this goal, the government needs to step aside and empower We the Patients.

In fact, Americans need exactly the opposite of what Candidate Harris intends to do if she gains the oval office. She plans to expand Washington’s role in Americans’ health (medical) care.

The U.S. spends an astonishing $4.8 trillion annually on healthcare. But here's the truly shocking part: more than half of that huge expense produces NO patient care! It does not pay for essential services like doctor visits, hospital stays, medications, mental health care, and home health care!

Two point four trillion “healthcare” dollars are wasted on administrative costs and regulatory compliance. This useless spending not only inflates costs but also diverts resources away from patients, contributing to delays in care and, tragically, to what is known as "death-by-queue," where Americans die while waiting for care they desperately need.

Many healthcare providers find themselves trapped in a system driven by perverse incentives. The third-party payment structure rewards dollar efficiency over medical effectiveness, and volume over value. This misalignment leads to unnecessary tests and procedures, over-treatment, and a general focus on quantity rather than quality of care.

We need a shift to value-based care, where the definition of value is determined by patients and providers—not by an externally imposed financial metric. When patients have control over what is considered valuable, providers are incentivized to focus on their patients rather than following federal rules. The result is better health outcomes at lower costs. This approach aligns patient well-being with financial rewards, promoting preventative care and chronic disease management, which can reduce hospitalizations and improve overall health.

However, a significant obstacle to achieving this vision is the heavy hand of government regulation. The regulatory environment in healthcare dramatically increases costs and restricts access to care by siphoning money away from patients to fund bureaucratic overhead. Streamlining and eliminating unnecessary regulations could foster a more competitive market, driving efficiency, effectiveness, and innovation.

Restoring financial control to patients is crucial. While price transparency is often touted as a solution, it won't lead to real savings unless patients—not third parties—control their health care spending. Currently, third-party payers make most of the medical decisions, stripping patients of their autonomy and resulting in frustration and poor outcomes. Eliminating restrictions on Health Savings Accounts (HSAs) and other consumer-directed health options can empower patients with financial control, incentivizing them to seek cost-effective care.

The employer-supported health insurance model is another area ripe for reform. This system, a relic from World War II when wage freezes forced companies to offer health insurance as a benefit, is outdated, limits patient choice, and increases costs. Today, the average cost of employer-provided health insurance is $18,328 per employee. This money would be better spent if given directly to employees, still tax-advantaged, and made available for deposit into an unlimited Family HSA. With these funds, Americans would have the financial freedom to shop for direct-pay care, creating competition among providers and driving prices down.

Technology also holds great promise for revolutionizing healthcare delivery. Telemedicine, for example, was a critical lifeline during the COVID-19 pandemic, providing access to care while reducing the strain on traditional healthcare facilities. It has also proven invaluable in reaching rural and underserved urban areas, where access to healthcare is often limited or non-existent. By fostering technological innovation, we can further increase the effectiveness and efficiency of healthcare delivery, lower costs, and expand access to those who need it most.

The U.S. healthcare system is plagued by a "cancer" of ever-expanding bureaucracy and a third-party payment system with misaligned incentives. To cure this, we must reduce government over-regulation and return financial as well as medical control to We the Patients. This shift will instantly align incentives, reduce wasteful government spending on bureaucracy, and deliver timely, affordable care to many more Americans.

The path forward is clear: give control back to the patients and doctors. Let them decide what care they need and how they want to pay for and provide it. For the medically vulnerable, state-created and -run, not federal one-size-fits-all, safety nets. By doing so, we can finally achieve the goal of delivering high-quality, affordable care to everyone.

Vance Ginn, Ph.D., is president of Ginn Economic Consulting, host of the Let People Prosper Show, and previously chief economist of the Trump White House's OMB. Follow him on X.com at @VanceGinn.

Deane Waldman, M.D., MBA is Professor Emeritus of Pediatrics, Pathology, and Decision Science; former Director of New Mexico Health Insurance Exchange; and author of 12 books, including multi-award winning, Curing the Cancer in U.S. Healthcare: StatesCare and Market-Based Medicine. ​

​Join me for Episode 108 of the Let People Prosper Show to learn how removing government obstacles in the healthcare system can improve patient care with Deane Waldman, MD, MBA, author of Curing the Cancer in U.S. Healthcare and other books, as well as more than 250 articles and monographs. Subscribe, share, and rate the Let People Prosper Show, and visit vanceginn.com for more insights from me, my research, and ways to invite me on your show, give a speech or other opportunities.

​Watch this interview that I did with Dr. Deane Waldman on the costs and benefits of mandating price transparency by hospitals and whether it will result in anything productive at the Third National Health Care Transparency & No Surprise Act Summit, This interview was aired at https://www.hctransparencysummit.com/.

Originally published at Daily Caller. ​

Soaring health care spending continues to spiral up, tightening the financial noose on households and government coffers. Families are forced to make difficult choices between paying for essential medical care and meeting basic needs while the federal government struggles to rein in spending amid mounting debt.

These soaring health care costs must be addressed with market-based approaches before it’s too late.


When the Affordable Care Act (ACA) was passed in 2010, it was heralded as the panacea for reining in healthcare costs. However, the law’s complex regulations and mandates have contributed to administrative bloat and increased overhead costs, ultimately driving up premiums and out-of-pocket patient expenses.

Unfortunately, since then, subsequent politicians have failed to correct course. In 2024, federal spending on Medicare, Medicaid, and ACA subsidies will likely exceed the discretionary budget, posing a significant threat to long-term fiscal sustainability.

Compulsory spending on health coverage in the private sector infringes upon household earnings. This exacerbates economic challenges for families whose purchasing power is already reduced, as inflation-adjusted average weekly earnings are down 3.1 percent since Jan. 2021. 


Moreover, the growing burden of health care spending poses a significant threat to long-term fiscal sustainability, as rising debt levels raise concerns about future economic prosperity.

The Congressional Budget Office (CBO) recently released its annual Budget and Economic Update, painting a grim budget picture. The trajectory is alarming, with expenditures expected to be $6.4 trillion this fiscal year before soaring to a staggering $10.1 trillion by 2034. Also, net interest spending is poised to balloon from $1 trillion to $1.6 trillion by 2034. 

These projections underscore the urgent need for meaningful reforms to rein in healthcare costs and put the federal budget on a more sustainable path.


To address these challenges, policymakers must prioritize fiscal responsibility and adopt measures to remove government as much as possible from healthcare. This would help to quickly get healthcare back to a relationship between a doctor and patient. Today, too many middle layers rob time between the doctor and patient and raise healthcare prices. 

Policymakers should make market-based reforms. It won’t be done overnight, so there will need to be some steps to get there. 

It would be great if just making healthcare prices transparent would solve the problem. But the healthcare system is much more dysfunctional than that, unfortunately. 


Many reimbursement rates are set between doctors and private insurance companies or government programs like Medicaid and Medicare. Those reimbursement rates are so different depending on which entity is negotiating that the prices won’t tell us much, other than how screwed up the system is, but we already know that. 

A market-based approach should remove obstacles on the demand and supply sides of the market. 

This should include ending the tax exclusion for employer-sponsored health insurance. There’s a long history of this exclusion, which started during WWII. But while it had good intentions, the result has been a major distortion to the healthcare market. There should also be consideration of a voucher program for Medicare and block grants to states for Medicaid with limited growth each year. These would help reduce the moral hazard and over-subsidization on the demand side. 

On the supply side, the federal and state governments should remove rules that restrict the supply of doctor offices by removing certificate of need laws. They can also boost the supply of physicians by reducing or eliminating occupational licenses.

Unleashing supply and imposing market forces on demand will result in more innovative, affordable, and accessible care for everyone. 

The resulting reduction in government spending and improved timely access to quality care can help support more prosperity. This would reduce the need for people on government safety net programs. It would also help mitigate higher prices, alleviate strain on household budget burdens, and safeguard the nation’s economic future. 

These steps will require difficult choices and bipartisan cooperation at the federal and state levels, but the stakes are too high to ignore the issue any longer.

​Today, we discuss:
1) How U.S. health care evolved away from a free-market system and the importance of restoring consumer control;
2) How to reduce health care costs and improve quality by reducing regulations and subsidies; and
3) The importance of reining in health care costs of Medicare and Medicaid to reduce government spending and balance the federal budget.

​Naomi and I discuss:
1) Pros and cons of taxpayer-funded health care and whether it is a human right;
2) Problems with Medicaid and how it is putting doctors and patients at a disadvantage; and
3) The crucial roles of free market competition and technology in quality, affordable health care.
​
Naomi’s bio:

• Naomi Lopez is the founder of Nexus Policy Consulting, a Senior Fellow at the Goldwater Institute, and a public advisor to Paragon Health Institute.
• Her work focuses on a broad range of healthcare issues, including the Right to Try, off-label communications, pharmaceutical drug pricing, supply-side healthcare reforms, the Affordable Care Act, Medicaid, and 21st-century healthcare innovation.
• Naomi has 25 years of experience in policy and has previously served at organizations including the Illinois Policy Institute, the Pacific Research Institute, the Institute for Socioeconomic Studies, and the Cato Institute. She previously served as Vice President for Healthcare Policy at the Goldwater Institute, leading the Institute’s efforts to implement federal and state healthcare reforms that benefit all Americans.
• A frequent media guest and public speaker, Naomi has authored hundreds of studies, opinion articles and commentaries. She holds a B.A. in economics from Trinity University in Texas and an M.A. in government from Johns Hopkins University.

You can watch this episode and others along with my Let People Prosper Show on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share, subscribe, like, and leave a 5-star rating!

For show notes, thoughtful insights, media interviews, speeches, blog posts, research, and more, check out my website (www.vanceginn.com) and please subscribe to my newsletter (www.vanceginn.substack.com), share this post, and leave a comment.

Thank you for listening to the Let People Prosper Show podcast and for reading the newsletter for show notes and key economic insights.

​Click below to watch the episode and read on for show notes:

​We discuss:
​
1) How Medicaid evolved from its origins and throughout the pandemic, and need for reform;
2) How Obamacare continues to affect the health care industry, distort prices, and influence how employers provide health care coverage; and
3) How government intervention in health care alters the flow of supply and demand and what changes should be made to improve the system.

Brian’s bio:

• Brian Blase, Ph.D., is the President of Paragon Health Institute. Brian was Special Assistant to the President for Economic Policy at the White House’s National Economic Council (NEC) from 2017-2019, where he coordinated the development and execution of numerous health policies and advised the President, NEC director, and senior officials. After leaving the White House, Brian founded Blase Policy Strategies and serves as its CEO.
• Brian guided the House Committee on Oversight and Government Reform’s health care and entitlement program oversight and investigation efforts from 2011 to 2014, and then served as the Senate Republican Policy Committee’s health policy analyst from 2014 to 2015.
• Brian serves as a policy advisor to Hoosiers for Affordable Health Care and as a visiting fellow at the Foundation for Government Accountability. He has also worked at the Mercatus Center at George Mason University and at the Heritage Foundation.
• Brian is a prolific researcher and writer, authoring scores of research studies and policy analyses and regularly writing commentaries for The Wall Street Journal, New York Post, The Hill, National Review Online, and Forbes.
• Brian received his PhD in Economics from George Mason University. He lives in Florida with his wife and five children.

You can watch this episode and others along with my Let People Prosper Show on YouTube or listen to it on Apple Podcast, Spotify, Google Podcast, or Anchor. Please share, subscribe, like, and leave a 5-star rating!

For show notes, thoughtful insights, media interviews, speeches, blog posts, research, and more, please check out my website (www.vanceginn.com) and subscribe to my newsletter (www.vanceginn.substack.com), share this post, and leave a comment.

In March 2020, during the early part of the COVID-19 pandemic, the U.S. Congress passed the Families First Coronavirus Response Act and then the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The “maintenance of effort” (MOE) provisions authorized in the Families First Act and then enhanced by the CARES Act were to provide a 6.2 percentage point increase in the normal share of Medicaid payments provided to states through the Federal Medical Assistance Percentage (FMAP).

These provisions require that those eligible for Medicaid must be kept on the program up to 90 days after the declaration of a public health emergency for COVID-19 ends whether they age out of an eligibility group, have an increase in income, or other reasons noted by the Kaiser Family Foundation (more info at Medicaid.gov). The Health and Human Services declaration, which is set to expire on January 20, 2021, should not be renewed by the secretary as this enhanced MOE could represent an increased cost to taxpayers to fund more people on Medicaid along with an increased dependence on the program for people not meant to be on it.

https://www.texaspolicy.com/ending-medicaids-enhanced-maintenance-of-effort-provisions/

In this Let People Prosper episode, let's discuss the recent decision to strike down the Affordable Care Act, AKA "ObamaCare," by a federal district judge in Fort Worth, Texas and note that this is a historic moment along with the economics of it (more here and the YouTube videos below).

Here is the press release by the Texas Public Policy Foundation, which led this lawsuit with the stellar work by General Counsel Rob Henneke and 20 states, to note this historic win towards economic freedom, prosperity, and access to affordable quality care for many more people than today.

Ultimately, this will likely be a long process until the U.S. Supreme Court hears the case and possibly overturns ObamaCare, allowing for the opportunity to devolve power to the states and ultimately to the people exchanging in a freer market.

In the meantime, we should expect no changes to insurance coverage, including pre-existing conditions. Long term, we must move to a healthcare system based on markets that allow prices to work with families, charities, and state governments helping the neediest among us and the disabled. 

This is a historic time for America! #LetPeopleProsper

In this episode, I explore the following questions: What are claimed market failures? Do they exist? Can government intervention correct them? Is there such thing as government failure? It's important to ask these questions to determine whether or not market failure or government failure are the bigger problem in society. Much of this has do with the differences between Mainline Economics (my preference) and Mainstream Economics. 

This enters controversial territory in economics and politics by discussing the myths of "market failure." Supposed market failures usually include problems with markets because of asymmetric information (occupational licensing and healthcare), monopolies (utilities and EpiPen), and externalities (pollutants) that can theoretically be corrected by government intervention.  

However, I make the case that these issues in markets are generated by government intervention, not unhampered markets, and the introduction of government intrusion to attempt to correct these potential issues only expand government and make the problem worse.

Moreover, there are no free-market government solutions, which is why toxic pollutants should be dealt with by letting markets sufficiently price them or alternatively, though not recommended, by regulation. Policy solutions such as a carbon tax indirectly price externalities and the price will always be wrong because of the "knowledge problem" taught by economist Friedrich Hayek and the poor modeling that's done by so-called experts (see William Easterly's book The Tyranny of Experts). In general, the institutional structure of an economy should be supported by the government through upholding contracts, protecting people, and providing very few public goods. 

Instead of resorting to government intervention to solve supposed market failures, we should first understand that the government is likely the problem and Let People Prosper by promoting institutions with strong private property rights and fewer barriers to entry and exit markets. 

​#LetPeopleProsper

This commentary was originally featured in RealClear Health on June 14, 2017. 

Progressives and conservatives actually agree on health care: A crazy idea? Perhaps not.  

California, the West Coast bastion of progressivism, is pushing to create a single-payer health care system for its 39 million citizens. State Sens. Toni Atkins and Ricardo Lara have introduced Senate Bill 562 called the Healthy California Act, or HCA, which seeks to “establish a comprehensive universal single-payer health care coverage program and a health care cost control system for the benefit of all residents of the state.” After the California Senate passed the HCA on June 1, the state Assembly and Gov. Jerry Brown are the only barriers from realizing this progressive dream.

The HCA would provide all needed medical services from prenatal to nursing homes for all residents of the Golden State regardless of immigration status or financial condition. It would establish a California government insurance monopoly, as it would prohibit competition from private insurance carriers.

Among a host of contentious issues about such a bill, one immediately stands out: cost.
Clearly, such a cradle-to-grave, soup-to-nuts health care-giveaway to everyone would be very expensive. Even Gov. Brown was skeptical, musing, “Where do you get the extra money?”

In California’s proposed FY 2018 budget that begins July 1, the combined general fund and special funds amount is $180 billion. The Senate Committee on Appropriations’ cost estimate of the HCA is roughly double that part of the budget at $400 billion per year, which they note could be offset by $200 billion in existing state, local, and federal funds. 

It is highly doubtful that California could squeeze any more money out of Washington.

Therefore, unless major cost savings are found elsewhere, California’s government would have to rely on taxpayers to fund an additional $200 billion per year.

Given that California legislators must balance their budget every year, Californians would bear the full brunt of this cost via dramatic increases in their tax burden. This inevitable higher tax burden would be detrimental to an already over-taxed, excessively regulated economy.

These facts detract from any initial enthusiasm for single-payer in California. It may well reduce economic activity with no assurance of improved patient care, which is (or should be) the primary focus of any health care plan. And yet, California should be allowed to try.

At a rally in support of the HCA, Sen. Lara said, “Given this picture of increasing costs, health care inefficiencies, and the uncertainty created by Congress, it is critical that California chart our own path.”

Texas, on the other hand, could be viewed as a stronghold of conservatism, in many ways the polar opposite of California on the political spectrum. Although 30 percent of 28 million Texans are insured through Medicare or Medicaid, many Texans want to replace federally empowered Obamacare with something else. Considering the ample evidence that patients on Medicaid have poorer outcomes than those without insurance, government-provided insurance often fails to achieve the goal of improved patient care.

Texans have reason to be suspicious of California’s path when choosing a health care system. However, neither state, nor any state, can choose.

One might quickly conclude that conservative Texans vehemently disagree with progressive Californians about health care. Not necessarily.

Conservatives believe first and foremost in states’ rights and that decisions made closer to the people are better for the people. If California wants single payer, and Texas wants free market, and Oregonians want their idea of universal health care, each should be allowed to determine their own health care system. Conservatives would say, “we all have a constitutional right.”

Those who strongly oppose the Affordable Care Act but believe in state rights should support another state’s choice to have Obamacare within its state borders.

Apparently, conservatives and progressives agree on health care. They concur that Washington should not force federal choices on California, Texas, Oregon, or any of the other 47 member states of our republic. What Senator Lara advised California—let us “chart our own path”—applies with equal force to every other state. 

https://www.texaspolicy.com/blog/detail/california-and-texas-agree-on-health-care

Originally published at Real Clear Health.

​By Deane Waldman & Vance Ginn
February 20, 2017

Most people have heard the aphorism, “if it sounds too good to be true, it probably is.” Referring to the GOP’s cure for Medicaid, “If it sounds too good to be true, it might be true; but guaranteed, it won’t be good.”

A Feb. 6, 2017 report on Medicaid makes this point perfectly. The GOP commissioned a study by Avalere Health, a health care consulting group, to assess the fiscal impact of federal block grants to state Medicaid programs. They evaluated two funding approaches: a lump sum to be negotiated and a per capita, i.e., per enrollee, formula.

Their study showed that block grants could save Washington between $110 billion and $150 billion over five years depending on which formula was used. Roughly half the states would get a small increase in their federal contribution and half would get less, sometimes a lot less. The biggest loser, Arizona Medicaid, would receive 62 percent less than it is currently receiving from Washington.

With the present Medicaid state-federal matching scheme, the more a state spends, the more money it gets from Washington. This produces a classic perverse incentive: rewarding the outcome you don’t want. We want states to reduce spending, yet Washington rewards them—with federal dollars—when they spend more! With a block grant, this perverse incentive goes away. This is a good thing.

Medicaid block grants could save $110-150 billion and would eliminate the perverse incentive. Sounds like a great idea. It makes wonderful sound bytes, and the GOP seems to want to run with it.

There is just one teeny, tiny problem with block grants as proposed: no health care.

The federal government can, and in recent years does, spend more than it takes in as tax revenue. The federal government is able to do this because Washington has the option to issue debt and finance it by printing dollars through the Federal Reserve’s open market operations. States cannot, print money that is. Because states must live within their means, Medicaid programs will have to cut services to patients in order to balance their budgets.

For a specific example, simple financial arithmetic shows that the GOP plan for block grants to Medicaid will reduce access to care.

Whether a lump sum or per capita contribution, the block grant approach gives a fixed amount to the state. That is the state’s Medicaid income from Washington. Federally mandated spending—the state’s Medicaid cost—is constantly increasing and exceeds available funds.

Between 2011 and 2015, spending on Texas Medicaid increased from $27.7 billion to $30.4 billion. That is a 13.5 percent increase in the state’s cost compared with only an 11.8 percent increase in population growth plus inflation. Texas, just like other states, cannot spend more money than it takes in. Unlike most other states, Texas has had a robust economy and was able to compensate for its yearly Medicaid shortfalls by routinely passing supplemental spending bills.

States such as Illinois, Connecticut, and Massachusetts that flirt with bankruptcy cannot do this. What occurred in New Mexico, another cash-strapped state, demonstrates the effect of Washington’s spending mandates on the state’s Medicaid program.

New Mexico expanded its Medicaid program and received an additional $3 billion from the federal government. However, the Land of Enchantment was required by federal law to spend $417 million more on insurance benefits and bureaucracy in 2017 than the state had in its bank account. Without the luxury of Texas’ exuberant economy, New Mexico had to cut spending somewhere while remaining compliant with federal regulations. Thus, they cut reimbursements to providers.

Now think about all those states—26 of them and the District of Columbia according to the Ayalere study—that will receive less money under the GOP block grant scheme. They will still have to spend according to federal mandates. And just like New Mexico, they will be forced to cut services in order to balance their budgets. Half of the nation will be filled with Medicaid-insured patients who expect to get the care they need but can’t get it, for lack of doctors.

Apparently, the GOP can’t do simple fiscal arithmetic. Enamored with their fundamentally flawed, one-size-fits-all block grant, they will cut costs, and cut care without fundamental health care reform to focus on improving patient care. 

There is a way to make this work. Along with block grants, repeal the federal Medicaid mandates. That would put control of spending where it belongs—at the state level, closer to patients. Administrative processes could be streamlined. Resources would be apportioned more closely in accordance with local needs. Healthcare dollars could actually be spent on health care.

We can fix Medicaid using block grants, but only by giving control of both income and spending to the states.

​This commentary originally appeared in the Washington Examiner on September 15, 2016.

Hidden amidst all the sanctimonious verbal attacks and political over-promises to save people from Big Pharma's greedy clutches is a simple but painful truth, confirmed by the Epipen debacle. Though Washington decries Mylan's monopoly power and price gouging, it is Washington that created and protects Mylan's monopoly.

Epinephrine (Epi) is our naturally occurring "Fight or Flight" hormone, intended to protect us in high stress situations. One of its manifold effects is to open the airways so more air can get in and out. This allows us to run away from an enemy (flight) or win a conflict we can't avoid (fight.) In patients with asthma and in those with allergies that suddenly close down the air tubes, called anaphylaxis, the immediate administration of Epi can be the difference between life and death.

Meridian Medical Technologies introduced the first autoinjectors of Epi for public use in 1997. Mylan acquired the patent for EpiPen in 2007, becoming the sole seller and marketer of this life-saving medication. In 2007, a two-pack of EpiPen autoinjectors was priced at less than $100. Today, Mylan charges $600, and gets it … or people must do without.

Epinephrine as a synthetic medication has been around since 1904. Therefore, it should be available in generic forms and subject to competitive market forces. It is Mylan's specific autoinjector technology, originally developed by the military, which they can sell exclusively because it is under patent protection. Mylan does not have a monopoly on the sale of the medicine epinephrine (adrenaline). Rather, they have a monopoly on the EpiPen autoinjection device, which is mechanically different from the various other autoinjectors available to the public such as for insulin.

Over the same period that Mylan increased the price of EpiPen 500 percent (2007-2016), the annual compensation of Mylan CEO, Heather Bresch, rose 670 percent.

Such increases in price and CEO paychecks meet anyone's definition of price gouging and exorbitant compensation. Isn't Mylan effectively holding asthmatics and people with allergies hostage to their corporate greed? One would think this is illegal. However, this extortion is perfectly legal.

Mylan has a government-created and government-protected monopoly, one that is maintained by "the federal government's own regulatory scheme," a scheme that actually encouraged "a billion-dollar market [to be] cornered by one supplier."

Adamis, Sanofi, and Teva are three pharmaceutical companies that want to compete with Mylan. They are prevented from entering the market by the federal government, specifically the FDA, which has repeatedly denied them approval to sell.

Another barrier to entry of market competitors is the fact that "the FDA maintains no clear and consistent principles for generic drug-delivery devices like auto injectors or asthma inhalers." How can anyone comply with the rules if there are no rules and the rules that do exist keep changing?

The government has another way of protecting Mylan's monopoly: cost. The average price for a company to get FDA approval is $2.56 billion (in 2013 dollars.) This cost of acquiring regulatory approval is, of course, reflected in the prices we must pay for drugs.

Federal patent laws add another barrier to potential competitors. Companies like Mylan can protect their monopoly position through extending nearly expired patents with very minor changes to existing products.

The Obama administration mandated that public schools must purchase EpiPens. With Mylan already having more than 90 percent market share for Epi, Washington actively facilitates Mylan's market dominance and control.

Like any good monopoly, Mylan can use its market control to gouge the public. This is not the fault of the free market—it is the fault of a federally controlled, "non-free" market.

If there were a free market, competitors would "keep Mylan honest." In a free market, Mylan could not simply dictate the price of a two-pack of EpiPen at $600 because market competition would create a bidding war that would drop the price closer to the cost of producing each one, which is certainly less than $20. This competition would create a situation where no one would buy Mylan's product at $600 if they could an effective alternative for, say, $25.

Condemnations of Mylan by Washington politicos are self-serving. The politicians want to distract the public from the government's complicity, through the FDA, in Mylan's price gouging.

Ironically, protection of commercial monopolies is actually not Washington's primary purpose. Nonetheless, monopoly is a predictable (and repeatedly predicted) consequence of the feds' real strategic goal: control. Most federal laws and executive orders, with their subsequent "necessary" rules and regulations, expand federal control and extend federal reach.

There are numerous examples of Washington's disdain for the free market in the Beltway's quest for control. Obamacare is a paradigm. As a result of Obama's namesake law, Washington mandates (controls) insurance benefits; dictates (controls) payment schedules; and even tells us (controls) what we must spend our money on: government-approved health insurance.

Hypocrisy is thick on the ground. Washington's authoritarianism gives Mylan a monopoly. Mylan uses its control of the market to gouge the public. What does the architect of Obamacare, Dr. Ezekiel Emmanuel, recommend to protect us from pharmaceutical monopolies and their market control? Tighter control of the market in the form of government monopoly, called price controls!

​Every good psychiatrist will tell you the first steps to cure are recognizing that there is a problem and accepting that you have it. If Americans want to regain the liberties penned by our Founding Fathers, we must start by recognizing why we lost them: A progressive federal drive to concentrate power in the hands of Washington, D.C.

​This commentary originally appeared in Forbes on September 14th, 2016

Aphorisms like “the pot calling the kettle black” persist because they keep being proven relevant. Such is the case with politicians’ outrage over Mylan Pharmaceuticals’ price gouging for its life-saving EpiPen: their price has risen from less than $100 for a two-pack in 2007 to $600 today.

The government (“pot”) is loudly and very publicly calling Mylan (“the kettle”) “black”—at fault—for something the government itself did.

Epinephrine (Epi) is a naturally occurring hormone our bodies use for Fight or Flight. Epi makes our hearts pump harder, it heightens the senses, strengthens our muscles, and opens up the airways. In patients with sudden constriction of the airways, such as in asthma or respiratory allergies with anaphylaxis, Epi can be lifesaving.

Meridian Medical Technologies introduced the first autoinjectors of Epi for sale to the public in 1997. Mylan Pharmaceuticals became the sole seller and marketer in 2007. After multiple denials by the FDA of competing Epi devices and President Obama’s 2013 legislation forcing public schools to purchase EpiPens, Mylan gained market share to reach its present level of 90 percent.

Why can Mylan get away with a 500% price increase? Because it has a monopoly, one that is maintained by “the federal government’s own regulatory scheme” which allowed, in fact encouraged, “a billion-dollar market [to be] cornered by one supplier.” Government officials decry Mylan’s behavior to distract the public from government complicity.

Sanofi , Teva, and Adamis are three pharmaceutical companies that would like to compete with Mylan; however, they cannot sell Epi because they do not have the FDA’s okay. The feds keep changing their administrative rules and regulations. In fact, “the FDA maintains no clear and consistent principles for generic drug-delivery devices like auto injectors or asthma inhalers.”

Another barrier to competition is a patent process that allows companies to make minor changes to products with nearly expired patents so they can restore patent protection and protect monopoly.

Finally, cost raises the barrier to market competitors to unscalable heights. The cost to obtain FDA approval is $2.56 billion (in 2013 dollars). This expense will be passed on to consumers.

Collectively, the federal regulatory apparatus has allowed Mylan to preserve its monopoly. Mylan can charge whatever it wants for its product and earn obscene profits at the expense of price-gouged consumers. At the same time that the price of EpiPen increased 500 percent, Mylan CEO Heather Bresch’s annual compensation rose from $2,453,456 to $18,931,068.The consumer doesn’t pay for pharmaceuticals—insurance does, usually the government. So where is the incentive to economize? Economists call this “moral hazard,” where the person who spends has no reason to save money or demand value because he or she is spending other people’s money. If you wonder why the spending curve for healthcare keeps rising, look no further than the moral hazard.

Dr. Ezekiel Emmanuel, one of the architects of Obamacare, admits that a free—“uncontrolled”—market would bring down prices. Yet, his solution is more government control, specifically price controls.

What does history teach us about price controls?

The U.S.S.R., Cuba, Korea, Spain, and Venezuela amongst others have all used strict government price controls. The results were: shortages of everything, viz., long lines of Russians standing in the snow waiting for government-issued shoes or toilet paper; poor worker productivity; very low standards of living; and no innovation. This is precisely what we don’t want.

The solution to the exorbitant price of EpiPen is not public shaming, such as claiming that Mylan is “just the latest troubling example of a company taking advantage of its consumers.” The solution is not Mylan’s proposed coupon program or its introduction of a “generic.” Most definitely, the solution is not more government controls through regulation.

The answer lies in releasing market forces from government suppression. If government bureaucratic barriers were eliminated, sellers could compete, and the supply of goods would increase. If the government were not the third party payer for health care, that is, if consumers controlled their healthcare dollars, spending would drop. Prices would plummet from these market forces.

​In a free market, Mylan might charge $600 for EpiPen but they would sell no units because people could buy a competitor’s medication for, say, $15. If politicians really want to help save Americans by making life-saving drugs readily available, they should get the government out of healthcare and unshackle the free market.

​Advocates of Medicaid expansion in Texas often highlight our state’s record of the largest uninsured population in the nation, according to a recent U.S. Census Bureau report. Though the uninsured rate is falling, advocates say, it would fall even faster if we expanded Medicaid.

However, expansion supporters overlook research showing that Medicaid patients have poor health outcomes, access to care is relative to private health coverage, and the growth of the program’s costs are unsustainable.

To address these concerns, for both Medicaid enrollees and taxpayers, it’s time to reform the Medicaid program to improve access to quality health care while saving taxpayers billions of dollars annually.

Skyrocketing Medicaid costs contributed to spending more on health care than on education for the first time in Texas history during the last budget cycle. Medicaid now accounts for 23 percent of general revenue appropriations in the current budget — up an unbelievable 42 percent as a share during the last decade.

If Texas expands Medicaid and receives dwindling federal funds to cover more enrollees, state costs will continue to soar. This has been the case in Ohio and elsewhere, where the actual expansion cost during the just first 18 months has exceeded the $2.56 billion projected amount by a staggering $1.5 billion.

With Medicaid already crowding out budget priorities, Texans might soon have to forgo other government services, even as Medicaid enrollees receive substandard quality care without substantial reform.

Fortunately, there is a solution: the Texas Medicaid Reform Model.

Instead of Texas receiving matching federal funds to pay for Medicaid, the state would receive a lump sum of federal funds, also known as a block grant. In exchange, the state would get more flexibility over the program.

For example, Texas could allocate federal and state funds to subsidize private health insurance for nondisabled children, pregnant women and adults approved to receive benefits from the Temporary Assistance for Needy Families program.

My colleague John Davidson and I calculated the savings this approach could achieve using coverage costs based on the federal exchange’s gold or silver Affordable Care Act (ACA) plans. Subsidies to pay for an enrollee’s monthly premium would be based on a sliding scale determined by the federal poverty level (FPLs) — with the amount decreasing as the enrollee’s income increases up to the nonexpanded Medicaid maximum FPL per risk group. An enrollee’s contribution would be no more than five percent of their income in most cases, which is substantially less than the eight percent maximum under the ACA.

For example, a pregnant woman enrolled in Medicaid today costs the state, on average, $718 per month. Since she’ll likely receive additional care throughout her pregnancy, making her health care costs higher, she could be offered a gold plan with a $435 monthly premium. Given her income of $920 per month is near 100 percent FPL, the state could subsidize 90 percent of the premium, lowering her monthly contribution to $44. This would be a cost-savings to taxpayers of $327 per month.


We used this approach to calculate the reform costs for all considered risk groups based on actual and projected enrollment data for 2013 to 2023 from the Texas Health and Services Commission (HHSC). Comparing HHSC’s cost estimates under the status quo to our reform model, cost-savings could be at least $4 billion dollars per year, increasing to as much as $6 billion per year by 2023.

Because the cost of private health coverage is artificially inflated due to government restrictions and mandates in Obamacare, health insurance deregulation could lower these costs. Choices made by enrollees who have more control of their health care could also increase savings through more efficient use of health care dollars. In addition, reforms to Medicaid long-term care could also help bend the cost curve.

By transforming a joint federal- and state-directed Medicaid program into one that allows some enrollees a path towards private, market-based, patient-centered coverage, those currently enrolled in Medicaid will receive higher quality health care and save taxpayers billions of dollars.

We owe it to all Texans to pursue such a reform.

Don't miss this video where I present the Foundation's Medicaid reforms that saves taxpayer dollars and provides better access to quality care and outcomes for recipients.

A supplemental spending bill passed by the 84th Legislature caused total state spending on health and human services (Article II) to exceed education spending (Article III) for the first time in Texas history. As the state’s Medicaid rolls continue to grow (even without the ACA Medicaid expansion), hospitals face looming federal funding cuts, and the state grapples with unprecedented healthcare costs, how can we stabilize the growth of state healthcare spending while improving access to and quality of care?

Featuring

Rep. Garnet Coleman, Texas House of Representatives
Dr. Vance Ginn, Economist, Center for Fiscal Policy, Texas Public Policy Foundation | Presentation
Camille Miller, President & CEO, Texas Health Institute | Presentation 

Moderated by John Davidson, Director, Center for Health Care Policy, Texas Public Policy Foundation
​http://www.texaspolicy.com/multimedia/video/uncompensated-care-medicaid-and-solutions-to-texas-health-care-crisis-po2016

This commentary originally appreared in Forbes on October 15, 2015.


Most across the political spectrum agree that the government should provide some degree of access to healthcare for the poor and disabled. Disagreements tend to be over to what extent that access should be provided and whether people should be forced to purchase health insurance, as is the ongoing conversation at the heart of Obamacare.

To increase the number of insured people, Obamacare mandated that everyone have some form of health insurance or pay a $95 penalty the first year, increasing steeply thereafter. While this “individual mandate” clearly imposes costs on an individual’s budget and liberty, the U.S. Supreme Court did give states the option to expand Medicaid—the federal-state healthcare program for the poor and disabled.

Obamacare also introduced online federal insurance exchanges that include subsidies to help lower-income people purchase private health insurance and has drastically increased the eligibility criteria for those qualifying for Medicaid.

The Census Bureau recently reported that one year after Obamacare began the number of uninsured fell by 8.8 million to 33 million. This reduction seems rather minimal when individuals are forced to purchase health insurance or pay a penalty along with a decade cost of at least $1 trillion.

Critics blame the less than impressive decline on the 20 states that have not expanded Medicaid. However, these states are actually better equipped to care for those most in need because the states that have expanded Medicaid have seen much higher costs than projected. For example, Ohio’s expansion cost of $4 billion has been $1.5 billion greater than initially projected because per-member costs and enrollment were substantially higher than first thought.

The federal government has held a large carrot in front of states to pressure them to expand Medicaid by paying 100% of the increase in costs for the first three years through 2016. That share will gradually decline to 90% of the costs by 2020 and likely lower thereafter, leaving less of a stick to fall back on later.
 This carrot and stick approach gives critics ammunition to claim that states that haven’t expanded are costing them dollars. The Kansas Hospital Association, which is in favor of Medicaid expansion, has a ticker on its website showing that the state’s choice not to expand has cost Kansas almost $750 million since January 1, 2014. This completely overlooks the fact that the state will face a growing share of the long-term costs, putting many Kansans’ on the program at risk.

Federal payments for Medicaid are based on matching state dollars depending on the state’s average per capita income. These payments range from 50% of the cost in Wyoming, to 57.13% in Texas, to 74.17% in Mississippi. The National Association of State Budget Officers recently noted that for the first time Medicaid represented a majority of federal funds to states in 2014.

In general, healthcare spending under Medicaid is rising at an unsustainable pace. Unless other budget priorities are forfeited, taxpayers may soon have to pay higher taxes. This has been the case in Texas.

While Texas didn’t expand Medicaid, the costs continue to skyrocket and during the last budget cycle increased healthcare spending to more than education spending for the first time in Texas history. The states’ share of General Revenue appropriations to Medicaid has increased by 42% to 23% in just over a decade.

Texas is now faced with how to best meet the needs of those on Medicaid and patients on the program are not receiving adequate care. Research shows that Medicaid patients have poor access to care and poor health outcomes. On the other hand, patients with private health insurance top both categories.

Considering these costs, the Texas Public Policy Foundation devised the Texas Medicaid Reform Model that first requires a federal block grant for Medicaid instead of matching funds. This would allow the state to allocate federal and state funds to assist non-disabled risk groups (i.e. kids, pregnant women, and adults eligible for TANF) purchase private health insurance based on a sliding scale determined by the federal poverty level (FPL).

As an enrollee’s income falls into a lower FPL category, the subsidy amount for monthly private health insurance premiums would increase until the subsidy covered 100% of the premium for the zero to 50% FPL range. At higher income levels for each risk group up to their maximum FPL under the current Medicaid program, enrollees would be required to contribute to the cost of their private coverage.

We based the coverage cost on gold or silver plans under the federal exchange. Enrollee contributions would be no more than 5% of their income on healthcare in most cases, which is substantially lower than the 8% maximum under Obamacare.

Using data from the Texas Health and Human Services Commission (HHSC) from 2013 to 2023, our cost estimates from our reform model compared with HHSC’s data show that Texas could save at least $4 billion per year, increasing to around $6 billion by 2023. Cost-savings will likely be much higher as more competition in the private health insurance market bid down prices and patients have more control over their future healthcare needs.

This patient-centered, market-based model should be a path forward for other states to follow so patients will be in the driver’s seat when it comes to controlling their healthcare costs. For the poor and disabled insured through Medicaid but who receive fewer positive outcomes and limited access to care and all taxpayers who pay more for this program than private coverage under our proposal, the time for reform is now.

http://www.texaspolicy.com/blog/detail/choosing-not-to-expand-medicaid-was-the-right-call-but-we-still-need-reform 

Originally published at TPPF. 

​The Texas Medicaid program is on an unsustainable trajectory. Steadily rising healthcare costs and growing enrollment mean that Medicaid is consuming an ever-growing share of the state budget. If no reforms are put in place to control spending growth, the Medicaid program will eventually crowd out other state spending priorities.