The Wages of Depending on Sin Taxes … is Disappointment

In their zeal to be the guardian of the public’s health, and fund an ever-expanding role for government in health care, politicians of all stripes have been eager to raise taxes on cigarettes. Not only does that discourage smoking (a good thing), it also raises money to fund Medicaid and other programs.

Except when it doesn’t work out as planned. Wisconsin raised its tax rate, but “the 75-cent a pack tax that took effect in September will generate $92 million less revenue for the state than originally projected.”

Looking to a sin tax to fund revenue shortfalls is poor policy, and Wisconsin is the latest state to demonstrate so. A 75-cent excises tax increase took effect in September. Now, the state has cut its revenue estimates to $92 million less than it originally projected the tax hike would bring. Source: Wisconsin Radio

Wisconsin Governor Redoubles Effort

It appears Gov. Doyle (D-Wisc.) is unwilling to accept that his prior expansion of the state’s insurance program for the poor may have been a fiscal mistake. With the state running a likely $200 million shortfall in the current budget (fixed just last year), and budget problems projected for next year, Gov. Doyle cut off enrollment in the Badger Care Plus Core program.

The new program targets childless adults and those with higher incomes — but enrollment was quickly closed because the state ran out of money for the program. Despite that planning failure, the governor is now proposing that a new program, Badger Care Plus Basic, can serve the same needs without government funding.

The new program, if approved by the legislature, would offer coverage to the same population as the Badger Care Plus Core program, but instead of comprehensive coverage would offer either a limited benefit or a high deductible plan. In his announcement, the governor claimed it would be a self-sufficient program. We’re not sure we believe him.

BadgerCare Ambition Outstrips Budgetary Resources

Like most states Wisconsin has budget problems. In fact, it was named one of 10 states in the worst financial position. The state is carrying significant structural deficits and is likely to be facing billions of dollars of additional deficits next year. As a result, the state is not in a position to keep its promise for expanded coverage under Badger Care Plus.

Badger Care Plus was intended to expand coverage for those without insurance and under 200% of the federal poverty level. For a $60 enrollment fee, qualifying individuals receive a comprehensive medical plan. However, the budget issues have resulted in a waiting list of over 7,000 — which is expected to grow to over 20,000.

Now, the state’s Medicaid director is proposing several new limited-benefit plan options to provide coverage for those on the waiting list. One option would be to eliminate all coverage for inpatient or outpatient hospital treatment. Another plan would include a $7,500 deductible. Unfortunately, there has been no discussion about altering the terms of the poorly conceived original plan by requiring some premium payments or more limited benefits.

Waiting Lists in Wisconsin’s Public Option

More evidence that “universal” health care means waiting comes from Wisconsin, where roughly “7,000 people are on a waiting list for the state’s health care program for childless adults, and that list could grow to 20,000 or more by March.”

U.S. Index of Health Ownership 2nd Edition Is Here

Pacific Research Institute has published the 2nd edition of the U.S. Index of Health Ownership, the only ranking of health care in the states that uses criteria of individual choice.

Americans lack the basic freedom to make their own health care decisions. The Index measures the degree to which individuals, be they patients, health professionals, entrepreneurs, or taxpayers, “own” the health care in their states.

The lack of health ownership is a real problem. Almost half of the country’s health care spending is in the hands of the government, instead of patients themselves. The other half is governed by regulations inflicted upon doctors, health plans and patients.

The Index uses 24 variables to quantify how state laws and regulations affect the liberty of citizens involved in state government health plans (primarily Medicaid), the private health-insurance market, and the provision of medical services. It also assesses the effect of medical tort on people’s freedom to engage health services.

Alabama, Montana, Nebraska, North Dakota, and New Hampshire finished in the top five, as the states that allow their citizens the highest degree of health ownership. Alabama leads the pack primarily because of a lightly regulated private insurance market, and good control of state government programs. Also, the state performs well on medical tort indicators. Alabama’s regulatory environment for providers favors competition, and government health programs run more effectively than in most states.

New York, Massachusetts, Rhode Island, Vermont, and North Carolina rounded out the bottom five, as the states in which the government has taken the most undue control of health care from its citizens. This is the second year that New York was in last place. The state suffers from government health-care programs that are out of control, a grossly overregulated private-insurance market, and almost completely uncompetitive provider markets.

A full listing of all 50 states and their rankings is contained in the Index.

The Index will give concerned citizens a good basis to demand reforms from their state politicians that will put American families in charge of American health care, instead of government and special interests.

States, U.S. Hike Rx Prices

I’d bet that Avis, Hertz and other car-rental businesses pay a lot less per car than I do.  After all, they buy entire fleets and I buy only one car every few years.  Imagine if I could get a law passed that made it illegal for cars to be sold to different customers for different prices.   Would I be able to buy cars cheaper?

Probably not: Depending on how many cars were sold to corporate fleets versus how many to individuals, the price of cars to corporate fleets would rise.  Renters would pay a higher price.

So, governments generally allow different prices to prevail in markets – but not when the government competes against private customers.  For example, it is illegal for a private patient or organization to pay less than the government for prescriptions.  We’ve known for years of evidence that this increases prices to private buyers of medicines (which I discussed in a 2003 report, pp. 10-12, 25-26).

This has not stopped states and the federal government from acting aggressively to artificially increase Rx prices for American patients.  The latest is a multi-state and federal lawsuit against Wyeth Pharmaceuticals, in which 16 states and the U.S. are colluding on a lawsuit charging that private hospitals got lower prices for Protonix Oral and Protonix IV acid-reflux medicines than state Medicaid programs were able to negotiate.

The business case for these discounts was that the patients would be loyal to those medicines once discharged from the hospitals, and encourage their doctors to keep them on those meds as out-patients.

Horror of horrors! Competition between Wyeth and other drug-makers who make different therapies for acid-reflux disorder (such as a certain purple pill).  And the states were little more than ineffective bystanders.  Well, we just can’t have that.

The result of this lawsuit will not be lower Rx prices to state Medicaid programs: Rather, it will be higher drug prices for hospitals and out-patients, and a higher likelood of fewer patients having access to a broad choice of anti-reflux therapies.

Wisconsin’s Governor Loves the Drugs

On Tuesday, Wisconsin Governor Jim Doyle was jumping out of his trousers to announce that Pfizer, Inc. and WARF, the private, non-profit patenting and licensing organization for the University of Wisconsin-Madison, have signed a licensing agreement for human embryonic stem cell patents for the development of new drug therapies.

Naturally, Doyle has long been a proponent of embryonic stem cell research, as he sees it as a way for people to think of things other than cows when they think of Wisconsin.

But wait… Pfizer… haven't I heard of that company? Oh yeah! It's the giant, evil pharmaceutical company that Governor Jim Doyle spent years excoriating for charging too much for their prescription drugs:

Wisconsin Governor Jim Doyle asked for a similar waiver and accused major pharmaceutical companies of "a concerted and coordinated effort to impose severe restrictions on how and to whom the wholesale drugs they provide to Canadian distributors may be sold." In a news release he also castigated drug companies for being "willing to choke off the drug supply to an entire country [Canada] to force American citizens to keep paying exorbitant prices."

So Jim Doyle has figured out exactly the right balance that will allow Pfizer to make money. They are not allowed to profit if demagoguing them helps him politically, but they are allowed to profit if supporting them helps him politically. Apparently, drug company profits are evil until they allow Jim Doyle to issue a press release.

Always Get an Estimate

Wisconsin Assembly bill 872 (the health care price transparency act), will soon be translated into "model legislation" by ALEC. It was passed by the Assembly but not the Senate last session.

One representative gives the following brief description:

The bill, simply put, says that if a patient (consumer) is going to have a scheduled medical procedure that costs more than $500, and if they ask for the cost of the procedure, they must receive a "good faith estimate" of the anticipated costs.

Wisconsin Considers Restrictions on Pre-existing Conditions

Here's one of those stories that sounds great for consumers, but which has problems as well: A legislator in Wisconsin is proposing restrictions on the ability of insurance companies to deny claims for pre-existing conditions.

In the worst-case scenario, you could wait until you were diagnosed with a serious health problem before getting insurance. The theory: Save money on premiums until you actually need for someone to pay for your treatment.

That would result either in the death of insurance as a business, or "guaranteed issue" regulations. If an insurance company is required to issue policies to people who practice this behavior, what do you think it will do to the cost of insurance? Thus a piece of legislation with an allegedly humane rationale ends up making insurance unaffordable.

The Value in Saying ‘No’

Last week, the Wisconsin Policy Research Institute launched our new "WI Magazine," which includes investigative reporting and commentary relating to Wisconsin state government.  In the inaugural edition, I have a column that takes on the state's proposed single payer "Healthy Wisconsin" plan:

Wisconsin is in the midst of a health-care crisis. A health-care crisis so serious, in fact, that state government needs to swoop in and seize control of the health insurance system in a way no state has done in the history of our nation.

Luckily for us, this health-care crisis apparently exists nowhere else in the country, which means nobody in any other state would even be tempted to move to Wisconsin to take advantage of the "free" health care offered by Wisconsin's taxpayers.

Such is the logic of Senate Majority Leader Russ Decker, who has vowed to re-introduce the $15.2 billion government-run "Healthy Wisconsin" plan this session. In responding to a recent Wisconsin Policy Research Institute report that an estimated 142,000 sick people would indeed move to our state to take advantage of free health care, Decker took a shot at WPRI, saying the institute likes to criticize ideas, but they "never come up with any suggestions."

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Decker's point, however, is worth addressing, since it's a refrain heard often in politics: "Why so negative?"

To some, merely criticizing a damaging government program without offering a commensurate remedy makes you a "nattering nabob of negativity."

Yet for conservatives, stopping terrible new government actions is the whole point. We don't look at government in terms of what it can do for us – we see government in terms of what it does to us.

Thus, any proactive suggestion we have to reduce governmental interference in the market and our lives would be as welcome to Decker as a lap dance from Gov Jim Doyle. So Decker can complain all he wants about WPRI not making "suggestions," but it's clear he'd ignore them if he got around to reading them anyway.

One can look at improving government in two ways: urging it to do things that help us and convincing it to stop screwing up.

As it currently stands, our state government is doing neither. In fact, if the Legislature and governor went halfway and merely stopped screwing up, we wouldn't be staring at a $5.7 billion deficit.

Which brings us back to Healthy Wisconsin.

The state has budgeted about $28 billion in general fund spending for the next two years, but faces a $5.7 billion deficit.

For the sake of argument, concede the Democrats' talking point that the economic recession is to blame for the entire shortfall. Imagine what would have happened had the state had its hands on $30 billion of Healthy Wisconsin money in the next two years.

There would have been a disastrous $6 billion deficit in the Healthy Wisconsin fund, on top of the $5.7 billion general fund deficit. It would have been a complete catastrophe – even the Donner Party would have been saying, "Well, at least we're not from Wisconsin."

So we here at WPRI will sit patiently by our mailbox, waiting for a signed card from Russ Decker thanking us for arguing against Healthy Wisconsin and saving him from such a budget disaster.