LTC Bullet:  A New Cannon in Our Health Policy Arsenal 

Thursday, September 22, 2005 


LTC Comment:  Michael F. Cannon, director of Health Policy Studies at the Cato Institute, has just published a book (with Michael Tanner) and started an e-letter, both of which deserve our attention.  More after the ***news.*** 

*** QUESTION OF THE MONTH:  McKnight's Long-Term Care News has queried the LTC profession thus:  Who are the five most influential individuals in long-term care today?  McKnight's says "Please share your answer with us.  E-mail your response to  Your answer to this important question will be gathered with others' and may appear in an upcoming issue of McKnight's Long-Term Care News."  We're interested in your answers too.  If you reply to McKnight's query, please cc us at and let us know whom you've nominated. ***



LTC Comment:  Following is information from the Cato Institute's website at and a sample op-ed by Mr. Cannon.  We encourage LTC Bullets readers who have an interest in general health policy to subscribe to buy Cannon's book and subscribe to his "Healthy Competition" newsletter. 

Regarding the newsletter, Cato says "This periodic newsletter will feature health policy news, commentary, and resources from a free-market perspective.  The dominant view in health policy is that greater government involvement is required to make high-quality medical care more accessible.  This newsletter will present the view that individual choice and free markets do the best job of making products of ever-increasing quality available to ever-increasing numbers of people.  We aim to make this newsletter useful to those who make, influence, and report on health policy."  Subscribe at  


Michael F. Cannon is the Cato Institute's director of health policy studies.  Previously, he served as a domestic policy analyst at the U.S. Senate Republican Policy Committee under Senator Larry E. Craig (R-ID), where he advised the Senate leadership on health, education, labor, welfare, and Second Amendment policy.  In addition, Cannon has worked as a health care policy analyst for Citizens for a Sound Economy Foundation in Washington, D.C. Cannon has appeared on CNN, CNBC, C-SPAN, Fox News Channel, and NPR.  His articles have been featured in USA Today, the New York Post, the Chicago Tribune, the Chicago Sun-Times, and the San Francisco Chronicle.  Most recently, Cannon coauthored the book Healthy Competition:  What's Holding Back Health Care and How to Free It


Introducing Healthy Competition, the Book 

America's health care sector has no shortage of vexing problems, including rising costs, uneven quality, a lack of information for patients, and underuse of information technologies.  In addition, the system places a large and growing burden on taxpayers.  

In a new book released by the Cato Institute, authors Michael F. Cannon and Michael D. Tanner write:  "We do not claim to know any particular solution to these problems. We do, however, propose a method of discovering them."  Cannon and Tanner then show how market competition provides the solutions. 

Many people believe that health care is a special case, where market competition does not work.  However, the authors give numerous examples of market competition making even acute medical care (such as heart surgery) more accessible.  Unfortunately, in the health care market, government tax, spending, and regulatory policies have created a dense thicket of rules and restrictions that disable the competitive market process. 

Health savings accounts (HSAs) are an important step toward restoring the necessary conditions for market competition.  Cannon and Tanner offer proposals that would further restore market competition and make quality health care available to an ever-increasing number of consumers.  Their proposals include the following: 

* Expanding HSAs to allow workers to control all their health care dollars and decisions;  

* Injecting choice, competition, and ownership into Medicare, and prefunding Medicare through personal accounts;  

* Reforming Medicaid along the lines of the successful 1996 welfare reform law;  

* Deregulating health insurance by allowing people to purchase coverage from any state;  

* Creating a competitive certification process for new medical technologies;  

* Eliminating waiting lists for transplantable organs by allowing payments to organ providers;  

* Making care more accessible by reducing barriers to entry for providers, clinics, and hospitals; and  

* Allowing individual patients to choose the level of malpractice protection they desire.  

In a foreword, former secretary of state George P. Shultz writes:  "Cannon and Tanner offer proposals that would further tap the power of markets to make health care more valuable and more affordable.  That makes Healthy Competition essential reading." 

Milton Friedman, Nobel Laureate in Economics, lauds:  "Surprisingly readable, extraordinarily comprehensive, highly persuasive.  Read how the key to improving health care in the United States is to convert the patient from a ward of the state to an independent, self-interested customer." 

Order copies of Healthy Competition:  What's Holding Back Health Care and How to Free It at  


"Medicaid is Behind the Decline in Private Health Coverage" 

Guest Commentary by Michael F. Cannon  

Around this time of year, the health policy world goes through a kind of ritual.  

Every August, the Census Bureau releases estimates of how many Americans have health insurance and where they obtain it.  Every August, some health policy wonks respond by bemoaning that the number of Americans without health coverage is increasing, "even though" government programs are expanding.  Next, they bemoan the decline in private coverage, and praise Medicaid - the government program to the poor - for "picking up the slack."  And every August, many reporters uncritically quote this storyline, sometimes even repeating it as fact.  

But the ritual is a con.  Wonks know full well that expanding Medicaid causes private coverage to decline, and can even increase the number of people counted as "uninsured."  But they also know that portraying Medicaid as the hero in this narrative may build support for expanding the program.  

A recent Census Bureau report showed the persistence of two simultaneous trends that spell trouble for America's already troubled health care system.  The first is that the share of Americans without insurance continues to rise slowly.  The second is a slow shift in sources of coverage from private to government insurance.  

And so began the ritual.  One trade publication, Modern Healthcare, ran the headline, "Uninsured total up, even as government rolls also grow."  A story in the Chicago Tribune noted the drop in private coverage and opined, "Government health programs have been picking up the slack."  A spokeswoman for the advocacy group Families USA told the Detroit Free Press, "We would have seen a lot more uninsured if we didn't have that Medicaid safety net out there," and credited Medicaid with having "cushioned the impact."  The president of the Kaiser Family Foundation made similar comments in The Washington Post, which, in an editorial, also opined, "Most of this slack has been taken up by Medicaid..."  

Like those articles, most coverage of the Census Bureau data treats the decline of private coverage and the growth of Medicaid as if they were separate phenomena.  But most analysts know that Medicaid expansions, of which there have been many, don't just "pick up the slack."  

Many studies have established that as Medicaid eligibility expands, it "crowds out" private coverage.  In essence, "crowd out" means that some employers stop providing health benefits when Medicaid becomes available to low-wage employees or their dependents.  

It also means that even if workers are offered private coverage, some choose Medicaid instead.  USA Today reports, "Many workers choose Medicaid over insurance offered by their employers because it is less expensive.  Wal-Mart workers pay $273 a month for the company's family medical coverage and get fewer benefits than Medicaid."  

Sometimes employers even encourage workers to enroll in Medicaid.  One survey by the Employee Benefit Research Institute found one in four employers give low-wage workers information on how to enroll in Medicaid.  

The Robert Wood Johnson Foundation, a strong supporter of Medicaid, examined 22 crowd-out studies.  More than half found evidence of crowding out, and some even found that enrollment growth in public programs was completely offset by reductions in private coverage.  The researchers concluded that crowding out "seems inevitable."  

Some might say, "Isn't private coverage declining because the cost is rising?"  Yes.  But here again, Medicaid contributes to the problem.  

Medicaid actually increases the cost of private care and coverage.  A study by the National Bureau of Economic Research found that Medicaid increases prescription drug prices for private payers by 13 percent.  And as private insurance pools shrink, insurers are less able to pool risk, which can increase the cost of private coverage even more.  

As private coverage erodes, some of those who lose it end up covered by Medicaid.  Others go uninsured.  

Many speak of Medicaid as if it merely catches people who fall off the economic ladder.  But it also shakes that ladder, which causes more people to fall.  

Health policy wonks need to come clean about the role Medicaid plays in eroding private health insurance, while reporters need to make sure they don't end up delivering someone's ideological spin.   

Only when the truth about the decline of private insurance comes to light will we be able to have a debate about what that means, and how to move forward.