#258: Thoughts on Ronald Reagan’s Legacy

Published February 7, 2011

The anniversary of the birthday of Ronald Reagan led to a glut of “what would Reagan think” columns concerning all sorts of topic areas. Most of this sort of writing is pointless, since the very fact such pieces are written denotes that Reagan obviously would think the same as the author on any and all matters. But a more reflective piece by Avik Roy, now of Forbes, on what Reagan advised on health care policy is quite interesting. Based on Reagan’s famous remarks against socialized medicine, Roy suggests the Kerr-Mills Act – the Eisenhower-era block grant program – could’ve turned into a realistic solution had the political establishment of the time heeded Reagan’s views and avoided the creation of Medicaid and Medicare. Roy writes in part:

You don’t hear much about the Kerr-Mills Act anymore, for a reason. After the enormously consequential election of 1964, which returned Lyndon Johnson to the White House and swept large liberal majorities into Congress, the Kerr-Mills Act was rendered obsolete by the passage of Medicare and Medicaid in 1965 …

Whether or not Medicare and Medicaid are politically popular, the fact remains that these programs are disastrously inefficient, offering the elderly and the poor worse care than they could receive under a less socialized system, and putting the country’s financial stability under significant risk.

The bottom line is that Kerr-Mills would have likely evolved into a much better and more sustainable system than the one we have now. The more we can move in that direction, the better. In that way, we would have done well to heed the Gipper’s advice.

While it wasn’t a comprehensive solution, Kerr-Mills was a fundamentally more federalist solution to the problem of providing a safety net. It certainly would’ve had its own failings, but we’ve learned over the years the danger of centralized one-size-fits-all solutions confined to the cubicles of Washington bureaucrats. Could a block-grant based program cause the same kind of trendlines? As Roy notes, we’ll never know. Yet there’s little question that the United States would’ve been better served had Reagan’s initial instincts – that the states could themselves serve as competing laboratories of innovation on health policy – been applied via policy.

In any case, Reagan’s legacy as a leader is not primarily concerned with health policy. ATR’s Grover Norquist has made a mission to name schools, buildings, and other places after Ronald Reagan, which is itself a laudable goal. But I have always opposed the idea of placing a monument to Reagan on Mount Rushmore or elsewhere. Reagan’s most fitting monument, after all, is a wall that isn’t there.

— Benjamin Domenech



The Oklahoman runs a quality story regarding the challenge of implementing a health care law you disagree with in profiling Oklahoma Insurance Commissioner John Doak.

“I truly believe many parts of it are unconstitutional,” he said. “It’s going to continue to be dismantled piece by piece.”

Doak has pledged to work with the state’s congressional delegation and the National Association of Insurance Commissioners to express those concerns.

In the meantime, Doak is trying to get situated in his new job while implementing the law’s requirements.

Assistant Insurance Commissioner Rick Farmer said Doak remains resolute in his opposition.

“But he also recognizes the reality that it is the law,” Farmer said. “If we don’t take certain steps, the federal government will impose those steps upon us. He wants to make certain that Oklahomans can control their own health care plan.”

It’s a process taking place in many states that, like Oklahoma, have challenged the legality of the law and yet are working to implement it.

The argument about implementation is mostly a media-driven sideshow, simply because the key decisions aren’t going to happen prior to a Supreme Court decision given the current timeline. Georgia Gov. Nathan Deal has said he will continue to implement the law, while Alaska Gov. Sean Parnell has asked for a ruling on whether this implementation would violate his oath of office. That said, it seems at this juncture the only governors to be mounting serious opposition are Gov. Bobby Jindal in Louisiana and Gov. Rick Scott of Florida–both of whom told Health Care News they do not plan to set up exchanges in their states. Scott has actually done the rare thing of returning the federal government’s grant designed as a carrot to urge states to set up exchanges–whenever a politician sends money back, you know he or she is serious.



Writing in the Manhattan Institute’s City Journal, Douglas Holtz-Eakin and Paul Howard discuss a brewing Medicaid rebellion within the states, following on the heels of the New York Times report we noted last issue. They propose several ideas states could employ, but all require greater flexibility from the federal government–flexibility I personally think is unlikely.

For starters, federal rules sharply limit states’ ability to control Medicaid costs without losing federal matching dollars. Governors could demand the same program flexibility that they received in welfare reform, which proved one of the most successful domestic-policy developments of the last 35 years, as states innovated and eventually came up with welfare-to-work programs that became models for national reform. In a grand Medicaid bargain with the states, Washington would remove all strings from the program, so states could try different approaches in covering the low-income uninsured, in return for a one-time increase in funding (funding would be capped thereafter). Congressman Paul Ryan and Clinton budget guru Alice Rivlin, members of the president’s current deficit commission, have proposed a plan along these lines.

A second change might be to let people eligible for Medicaid use their funding to purchase private health insurance. One of Medicaid’s biggest flaws is that it traps the poor in a government-price-controlled ghetto. As part of a 2009 proposal for the Manhattan Institute, we suggested that the low-income uninsured in each state receive a sliding-scale, income-based subsidy from the feds. Adding that subsidy to their current Medicaid funding, they could then purchase insurance coverage in whatever form their states chose to make it available–through either a government plan or a private marketplace. In either case, we proposed that states sign agreements that combined enhanced federal funding with targeted timelines for achieving universal coverage–say, over the next ten years. Senators Ron Wyden of Oregon and Scott Brown of Massachusetts recently proposed a similar program, which would funnel Obamacare spending through the states. Conservatives should take such proposals seriously, even though they mean increased federal spending–but only if states receive much wider latitude in designing insurance choice and competition than Obamacare currently allows.

SOURCE: City Journal


The Cato Institute’s Michael Cannon writes on the lessons to be gained from the 1099 reform that passed the Senate easily last week, and why it accelerates the timeline for the White House to find political support for their law:

The 1099 mandate is actually the second ObamaCare revenue-raiser to fall. Worried about the political fallout from private insurers exiting the Medicare program, the Obama administration rather transparently forestalled cuts to Medicare Advantage by granting $1.3 billion of “quality-based” bonuses to mediocre and low-performing MA plans.

This public-choice dynamic is why the Congressional Budget Office, the chief Medicare actuary, and even the International Monetary Fund have discredited the idea that ObamaCare will reduce the deficit. It is one of the principal reasons why, as Thomas Jefferson wrote, “The natural progress of things is for liberty to yield, and government to gain ground.” In other words, the game is rigged in favor of bigger government.

It also explains why the Obama administration is sprinting to implement ObamaCare in spite of a federal court having struck down the law as unconstitutional. The White House needs to get some concentrated interest groups hooked on ObamaCare’s subsidies – fast.

SOURCE: Kaiser Health News


Biotech entrepreneur Christoph Westphal writes in the Boston Globe on the challenges of drug production in the United States. An excerpt:

The development of important new drugs is most at risk at the late stage of the drugs pipeline. In an ever-shifting regulatory environment, it is hard for companies to understand exactly what might be needed to gain approval for their medicines. This increases the risk of drug discovery investments for companies, and reduces the attractiveness for public markets to invest in research-based drug companies.

One need only look at the FDA’s recent rejection of drugs to treat obesity on the grounds of unclear benefits measured against risk in order to see examples of such regulatory uncertainty. It would be helpful to patients suffering from poorly treated diseases, and to the investment required to bring such medicines to the market, to bring all the stakeholders to the table (the NIH, industry, and the FDA) in supporting the most innovative and promising new drugs in mid- and late-stage trials.

Despite vast increases in government and industry spending on research and drug discovery, fewer important new drugs are being approved now than before. From 1995 to 2004, roughly 30 new drugs were approved by the FDA every year. From 2005 to 2010, the average number of yearly approvals was down by about 33 percent. Only 20 new drugs a year are now approved by the FDA. What could we do to combat this trend?

Westphal’s answer is mostly based on creating a big pool of money – he recommends the establishment of a fund for taxpayer investment in research. This strikes me as a pointless endeavor that does not target in any way the existing problems with the FDA. Breaking this logjam will require a more ambitious, bold solution – perhaps along the lines of Bart Madden’s Free To Choose Medicine proposal – if it is to have any longterm impact.

SOURCE: Boston Globe


You’ve doubtless heard that the number of waivers from aspects of Obamacare now numbers more than 700, and that 40 percent cover union members. But what are those waivers actually focused on? John Vinci of Americans for Limited Government has done the due diligence of outlining the six different types of waivers handed out by Sec. Sebelius. They are:

1. MLR waiver for mini-med health insurance plans

2. Annual limit waiver

3. MLR waiver for states

4. State innovation waiver

5. ACO anti-trust waivers

6. Individual mandate waivers

Read Vinci’s piece to learn more details.

SOURCE: The Heartland Institute