World Trade Policy is not Free Trade
Darren Hinze
2007 

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This paper although a draft it has references listed so you can do additional research if you feel the need. NOTE: If you are ripping this information for a particular class in school be sure to add my web site as a reference. I only note this because some of the plagarism checkers have found my posting (before I put them here). I would not want you getting kicked out of school for copying my questionable work.
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World Trade Policy is not Free Trade

This paper will summarize some of the views of Daniel Ikenson, Associate Director of the CATO Institute’s Center for Trade Policy Studies and his views on free trade policy in, How U.S. Trade Policy Can Overcome Doha’s Failings (June, 2006). Daniel maintains a consistent view throughout the paper that the United States is a key contributor and likely the force that has caused the Doha Development Agenda to be ineffective and essentially a failure in the world market. His opinion holds that the United States has little respect in matters of world trade and  has a history of exploiting underdeveloped nations and imposing hardship on low-income family’s in the United States. Daniel Ikenson proposes that by opening the United States borders to fully-open free trade it will help the greater world economy, bring prosperity to the poorest of families and farmers in underdeveloped nations and strengthen American low-income families against poverty. I understand many of the points that Ikenson is making in his paper, however, it is not the place of the American family and the United States in general to save underdeveloped countries from their poverty. Determining trade standards and using tariffs to maintain profitable operations for our homeland farmers and industries is the duty or the US Government policy makers. Keeping the best interest of your home country is not only right it is proper. If other countries wish to trade in a level playing field they must have an economy of scale in the area they are seeking trade relations or take the best deal you can get based on your economic size.Ikenson begins by noting that “the relationship between openness to trade and economic growth is well documented”, when a country opens its ports to foreign trade it can be expected to prosper and the more open the trade agreement the faster the growth can be experienced. The negotiators at the Doah Development Agenda spoke well about opening trade but are slow in acting on those words. “The problem is that negotiators have forgotten, or just fail to recognize, how economies realize the benefits of trade”, says Ikenson. Reciprocal agreements that “induce multilateral liberalization are arguably preferable to unilateral liberalization…” could be considered a fact. It is better to agree and build relations faster and receive mutual benefit at a higher rate. Ikenson, appears to believe that only one party agreeing to open their ports is better than no one, this too I think we can agree on. However, he continues in his discussion to assert that the negotiator with the stronger hand should yield because of the greater good toward all parties. Definitely an altruistic view but not a very capitalistic one. Ikenson discusses that to yield your position may cause some economic difficulties; however, because of the stronger parties position they can weather the pain of the trade imbalance better than the weaker opponent. I believe he should be writing a paper focused on how to explain to the 7^th generation farmer that he will be out of a job. It is better for the farmer to lose his farm, possessions, and file for bankruptcy because it is easier for the United States farmer to take the economic hit than for the poor farmer in an underdeveloped country to live another year on the same dirt floor he calls home. Ikenson believes that “the ‘all or nothing’ ethos that dominates trade negotiations is simply fallacious”. The characterization should have been stated, “all play or no one plays”.  Ikenson holds that the United States can create world change by itself by removing or reducing the restrictive tariffs that are already in place. A trade agreement is not necessary for the US to receive some benefit from a relaxed trade atmosphere. The belief is that the US can show support for it’s citizens and businesses by “pursuing a policy of unilateral trade liberalization”, and that the tariffs that are considered assets to use as bargaining chips are actually liabilities and would serve a better use if they were removed resulting in a reduction of material costs coming into the US. The cost of US production is too high and the removal of tariffs on raw materials and components would alleviate some of this overhead.Mercantilist MisconceptionIkenson cites David Dollar and Aart Kraay of the World Bank referring to Nobel Prize winners on both sides of the argument agreeing that openness to international trade accelerates development. He does not, however, define “openness”. The article continues, questioning why there is a level of resistance to the various trade agreements if being “open” is beneficial. The problem is a misconception. Economist mostly agree on the problem and the benefits of a resolution, however, the politicians who have the task of garnering support and orchestrating approvals have a different perspective. The politicians generally believe that “exports are good and imports are the price we pay for them”. The belief that exporting is superior to importing and that the way to determine who is in the superior position is by viewing the trade balance as the score, has led many negotiators to minimize their concessions and use tariff rates as bargaining chips.  Ikenson identifies this misconception and the political ideal that free trade for my exports and not my imports, as a key problem in all the preceding negotiations. This view gives strength to protectionist lobbies. To quote the article, “Advocacy of self-serving preservation of the status quo by domestic interests can be portrayed as consistent with the national interest when policymakers keep score that way” (Ikenson, 2006). To protect your country’s infrastructure and to be a protectionist when you are an elected official is reasonable. Perhaps the wrong individuals are being educated on the potential upside to open trade. Ikenson cites another article titled “Free Trade Agreement Are Working for America” where the document presents 18 bullet points promoting the Central America Free Trade Agreement (CAFTA). The sample is listed here:• U.S. exports to Chile grew 33.5 percent in 2004, making the United States Chile’s leading trade partner.• The U.S. trade surplus with Singapore tripled after the first year of the U.S.- Singapore FTA, reaching $4.3 billion.• In the first quarter after the U.S.-Australia FTA went into effect, the U.S. trade surplus with Australia grew 31.7 percent to $2.13 billion.• Together, U.S. exports to Chile and Singapore grew $4 billion in the first year of our FTAs with those countries. (Cafta Facts, May 2005)“Seventeen of the 18 bullet points in that document touted the export benefits or export potential” to Central America and other countries, Ikenson takes considerable issue with the United States focus on export as a part of Free Trade Agreements. As a result of CAFTA, Chile has entered the United States as a major Avocado fruit grower (Thacher, 2007). They grow and export to the United States a Californian variety and a local Chilean (smaller) variety of Avocado. Their production dwarfs the production of both California and Florida crops, however, their primary barrier is transportation and preservation of the product. The result of their entry into the market was to cause the prices of Avocados to stabilize at a high price. Chile can produce crops during the winter months and have allowed the California and Florida crops to stay on the trees longer resulting in fresher produce being delivered to a domestic market.  If you are an Avocado fan you will enjoy this open trade because of the longer growing season in South America, the Chilean crops will be filling the void created by the 2006 and 2007 freeze that destroyed much of the California crop. But the greater availability of product will do nothing to lower the prices at the produce counter. You may wonder what has prevented Chile from destroying our own production sources in the market. That protection is handled by the fruit packers who refuse to purchase and pack foreign fruit when domestic fruit is in season. As you may have noticed this is not a fully-open system. There must be controls and someone must be in charge of domestic protection, in this case it is a packing house.   Alternately a product that does not have the same issues and sensitivity to growing cycles and plant investments is the sugar industry. Sugar was handled very carefully under CAFTA. The product can be produced and stored almost indefinitely giving it the potential to flood the US market. As a result sugar imports were increased by such a small amount they are almost insignificant. The article estimates the increase being approximately 1.5 teaspoons of sugar per US citizen per week. Ikenson, makes no mention of the increase and benefits of the fruit growers but apparently believes that US sugar growers should have to compete with foreign sugar. I believe it is unlikely that the foreign product could be priced much lower than domestic product because of the current costs in transportation. However, barring the transportation expense the impact to our sugar industry, including sugar beet farmers, cane growers, and refineries could be devastating based on the ability to ship greater quantities and the extended storage life. The report by Ikenson does acknowledge that the United States Trade Representative “affirmed some significant benefits of import liberalization” quoted in a section of the 2006 report to Congress regarding the president’s trade policy. “In terms of imports, the United States is among the most open markets in the world. Although we have experienced a healthy increase in our exports, imports have grown even more rapidly. These imports have lowered costs and increased choices for American consumers. Free trade [imports] enhances competition, contributes to price stability, and helps support high rates of non-inflationary growth. This helps keep interest rates low so more Americans can afford to buy homes and small businesses can have greater access to capital. The World Trade Organization Uruguay Round and the North American Free Trade Agreement (NAFTA) lowered U.S. tariffs and provided an average savings of $1,300 to $2,000 a year for a family of four. That means parents can more easily afford clothes, shoes, and toys for their children, and all Americans have more choices— from tropical fruits to consumer electronics. Accordingly, American companies can produce higher-valued goods more efficiently and price these goods more competitively when they are able to purchase parts and components from overseas. Reducing trade [import] barriers also encourages higher productivity and higher incomes. Partially because of trade [imports], Americans have average real incomes 40 percent greater than the nearly 700 million people living in other countries classified as “high income” by the World Bank” (US Trade Policy Agenda, 2006). 

Just as it appears the tide of the article is about to turn and Ikenson may recognize that our trade negotiators understand the benefits of open trade he comments; “That ringing endorsement of the benefits of imports is then spoiled with the concluding non sequitur”, from the Trade Policy Agenda, “These are among the many reasons why President Bush has pledged to continue to open up the U.S. market so long as our trade partners open up their markets” (US Trade Policy Agenda, 2006).  Again, Ikenson makes the point that any protectionist approach will completely kill the deal. However, because we have been trading in the open market and making foreign products available in our marketplace we have been able to grow and develop a stronger economy. Ikenson admits to this one point, “the United States is better off than the rest of the developed world because our markets are more open” but he spins the statement concluding, “we will open them further only on condition that others do too! It seems that there is no political space for speaking the truth unconditionally”. Where is the fallacy here? The USTR and the president acknowledged that open trade has many benefits but unless other nations recognize this fact and open their ports we have no cause to open further.  It was already agreed that the US is the most open trading partner in the world and we have benefited greatly. So should we just swing the doors open wide without any assurances that others will be receiving our goods also? I think not. Ikenson even agrees to this point stating that “the economic benefits can be much greater if the liberalization is mutual”, so he should accept that some levels of protection for our most fragile industries or industries that are employing many of our citizens is not only necessary but ethical. Open Market BenefitsA conclusion of the International Monetary Fund cited in the paper states, “Although there are benefits from improved access to other countries’ markets, countries benefit most from liberalizing their own markets” (IMF, 2001). “Most of the Unites States political rhetoric equates the benefits of trade with the benefits of exports and treats openness at home as the cost of those export benefits.” It is true that the presidents trade policy seeks to find export avenues for American products in order to bolster our own production and to help employ our citizens. As we read earlier there is a clear understanding that openness is a profitable proposition, but the United States can not exclusively be a consumer society. We need to keep the money moving here at home. “In late 2002 the United States offered a proposal in the WTO negotiations that would eliminate all tariffs on nonagricultural trade by 2015” making our country totally open to the worlds manufactured products. The proposal went on to say that the “elimination of U.S. tariffs would significantly benefit U.S. families and consumers through lower import taxes and a more competitive economy.” Ikenson, believes that this kind of “advocacy … remains rare [and] convincing members of Congress of the merits of an agreement still seems to require evidence that the export potential will more than make up for the “disruption” caused by imports.” There would be some disruption in domestic production of competing items, and a concern regarding whether domestic products could compete would impact employment rates across the country.  Currently it is happening in the furniture market where the imported prefab furniture is cost effective for a consumer market that is interested in short term value. These are the products we find readily available in discount department stores and warehouse outlets. However, the true value of an item is found in its longevity of service life. For example, an inexpensive computer desk (of prefabricated design from some country that can not print accurate assembly instructions in English) that is in my child’s bedroom has possibly two more years of life remaining from its total five year life. Compared to the solid oak desk I sit at now, the prefab model is a poor choice for longevity. The cost differential of the two desks is, in my opinion, completely outweighed by the undetermined life expectancy of the sturdier desk, which is now over 15 years old. Although we can and should be more open, bear in mind that we can not be a purely consumer society otherwise we will fall prey to low standards of cheap labor. This in turn would likely force the price of quality products out of the reach of the middle class income family.  According to Ikenson, “Research shows that people living in countries that are more open to trade attain higher incomes and  achieve higher living standards than citizens of countries that are relatively closed” and the United States has done a fine job of maintaining trade openness and growing prosperous. Ikenson, however, believes the most compelling reason for removing protectionist barriers is because it is “good for the U.S. economy” regardless of the actions of other countries. Nowhere has Ikenson discussed the benefits of United States exports and the value of sharing the burden or consumerism. His assumption is that opening the gates to the U.S. economy will promote others to buy U.S. made products. The assurances of fair trade should not be left to promises at the negotiating table, this is a weak position for sure. The Council of Economic Advisors compared the trend in overall consumer prices to the trend in import prices. The findings showed that overall consumer prices rose much more than the prices of imports. Between 1990 and 2004 the average annual increase in import prices was just 0.6 percent, while the rate was 2.2 percent for overall consumer prices. (CEA, 2006) The CEA  also found that “between 1997 and 2004, real prices fell for an array of highly traded goods, such as audio equipment (-26%), TV sets (-51%), toys (-34%), and clothing (-9%). In contrast, real prices rose for largely non-traded products, such as whole milk (+28%), butter (+23%), ice cream (+18%), peanut butter (+9%), and sugar and sweeteners (+9%)” (CEA, 2006) Ikenson  further cites that “an earlier study by the Federal Reserve Bank of Dallas produced similar findings but went further to demonstrate that consumer price inflation was most pronounced for services that cannot be traded” the study included inpatient hospital services, admission to sporting events, cable television, college tuition, dental services, and funeral expenses. (W. Michael Cox and Richard Alm, 2002). The CEA claims that “welfare gains from variety growth alone have been estimated to be a remarkable 2.8 percent of GDP, which translates into gains of over $4,000 for the average American family of four.” Ikenson makes an assumption that imports allow consumers to benefit from a wider variety and better quality of products, services and prices. A wider and diverse variety of products is a benefit; however, because a family has saved $4,000 per year because of reduced costs it does not mean they are receiving a higher quality product. Perhaps Ikenson has not shopped at his local Wal-Mart or Kmart and experienced the quality of low cost. It is possible that he believes that having the discounted products readily available will boost the economy by adding jobs, investors, and production workers. My concern is that giants such as Wal-Mart, regularly put the small mom and pop stores and startup businesses that sell these imported products out of business. If imported products are sold at a price level that is lower than production costs permit in the United States are we then required to reduce our minimum wage requirements in order to compete as a producer? Where is the producer’s benefit? The imported products would need to be unfinished or component parts for assembly in the U.S. for them to be of value. Alternately, the U.S could ship semi-complete parts and raw textiles overseas, boosting our production and aiding production and employment in underdeveloped countries. Actually, this is not an “alternate” because this is what we are currently doing, but apparently this is not fair in the opinion of Ikenson because we are forcing an export in order to receive the benefit of lower finished production costs. The U.S. International Trade Commission reported for 2002-2005 that U.S. exports increased the most to countries that increased the most in imports to the United States, and exports increased the least where imports to the U.S. increased the least. This could easily account for the textile trading or raw products such as cotton cloth to countries that are doing finish work on clothing and other apparel. The more materials we produce and ship contribute to more items we receive in return to place in our stores. Ikenson’s method would open the doors to the solicitors and take all they could provide without regard to the effects on our domestic economy. A New Tariff Method To prevent trade disparities it is necessary to have a new solution, or at the least a different paradigm. I advocate for the protection of our markets and the development of our natural resource, ingenuity. The United States has a history of being myopic in new industrial arenas. We have given away technology such as the VHS format for recorded media, the U.S was forced to buy the technology back as finished products from overseas and the format was pushed into the market overtaking the Beta (a superior) tape format. We have given away production technology used to produce everything from denim jeans to microchips, for the prospect of purchasing cheaply made finished products in order to save on the high wages required to produce the items domestically. Protection of new markets is a necessity in a global economy. If a new or underdeveloped product or process is not provided appropriate protections from being undermined by foreign influence we will loose our position as a provider in the growing free trade economy. A new spin on an old 18^th century theory emerged as “New Trade Theory.” The theory was initially associated with Paul Krugman in the early 1970s, however others have contributed to this theory and the list includes James Brander, Avinash Dixit, Gene Grossman, and Elhanan Helpman among others. (Maneschi, 2000).  The new spin added a current focus to using carefully applied tariffs in order to protect industries in their infancy. The theory depended on complex mathematics and careful tracking to determine economies of scale. The theory is held as being overly burdensome to prove its effectiveness, however, the theory’s premise of protecting infant industry is its strong point. The protected industry is fostered to grow, hopefully, into an international super-industry. This growing industry is typically seen as being monopolistic domestically. The expectation is that the resulting strength of the new industry is such that they can compete in an arena where there are significant barriers to entry for competitors; the goal is Monopolistic Competition. Alternately, the new company could make such a forceful entry into an existing market that they would conceivably take over an existing niche and push out the competition and be a world wide Monopoly. The Japanese automotive industry prior to its opening to foreign export is typically cited as being protected by a policy similar to the New Trade Theory. “The new trade theory is primarily meant to explain trade in manufactures subject to increasing returns” (Maneschi, 2000). In essence the theory is a method to protect specific industries that can not compete in a larger market effectively enough to grow or survive its infancy. The policy of using a limited tariff can also be implemented to protect foreign workers against unfair and sweatshop type labor conditions. Instead of imposing a tariff discount based on specific origin or specific industry, it could be used to reinforce appropriate human rights. For example this excerpt of an article posted in the Washington Post in 2004 referring to working conditions in a factory in Shenzhen, China. “Inside the factory, amid clattering machinery and clouds of sawdust, men without earplugs or protective goggles feed wood into screaming electric saws, making cabinets for stereo speakers. Women hunch over worktables, many hands bandaged and few covered by gloves, pressing transistors into circuit boards. Most of the 2,100 workers here are poor migrants from the countryside who have come to this industrial hub in southern China for jobs that pay about $120 a month. A sign on the wall reminds them of their expendability in a nation with hundreds of millions of surplus workers: If you don’t work hard today, tomorrow you’ll have to try hard to look for a job.” (Washington Post, 2004) The company mentioned here is providing products for sale at your local Wal-Mart. The reduced tariffs make these items available at a low cost to you the consumer. Keep in mind the better life you are providing to the poor farmers in rural areas around Beijing. The article concludes with a brief description of the cost of this trade arrangement. “Domestic manufacturers, labor groups and some politicians point to China’s record trade surplus with the United States, estimated to have totaled $120 billion last year (2003), and accuse Beijing of manipulating its currency, condoning the exploitation of its workers and competing unfairly, resulting in the loss of U.S. manufacturing jobs.” (Washington Post, 2004) The United States continues to have these same issues with China and its trade policies. Locating a store in China that is selling American products at a fair price is a difficult chore. American products are rare, but there is a Kentucky Fried Chicken very near the Summer Palace in Beijing. What are we actually trading? Logos and Icons?Americans can accept their toys and coffee in pretty packaging labeled “Made in China”, and “Product of Vietnam” and benefit as consumers in a world economy but the hidden costs will rise to a point where they will be undeniable. Free trade is not really free, there are costs on both sides some trade inexpensive labor for human rights, others will trade abundance for unemployment. Henry George stated the balance nicely as he concluded his book, Protection or Free Trade, copyright 1886, “By thus harmonizing the truths which free traders perceive with the facts that to protectionists make their own theory plausible, … seemingly irreconcilable differences of opinion may unite for that full application of the free-trade principle which would, secure both the largest production and the fairest distribution of wealth.” (George, 1886) 

ResourcesAngel Gurría, Secretary-General of the OECD, Doha: the low hanging fruit, , published: 21 August 2006 Summary of SFAS No. 123 (December 2004 Version), http://www.oecd.org/document/4/0,2340,en_2649_37431_37295108_1_1_1_37431,00.html    

Office of the United States Trade Representative, “Free Trade Agreements Are Working for America,” Cafta Facts, May 26, 2005, www.ustr.gov/assets/Document_Library/Fact_Sheets/2005/asset_upload_file204_7872.pdf    

Greg Thacher, CalFlavor Packinghouse manager, California Avocado buying and packing house. Interview 2/20/2007.    

Office of the United States Trade Representative, “2006 Trade Policy Agenda and 2005Annual Report,” March 2006, p. 2. International Monetary Fund (IMF), “Global Trade Liberalization and the Developing Countries,” November 2001. 

Council of Economic Advisers, Economic Report of the President (Washington: Government, Printing Office, 2006), p. 155-156. 

W. Michael Cox and Richard Alm, “The Fruits of Free Trade,” Federal Reserve Bank of Dallas, 2002 Annual Report, p. 12. 

Andrea Maneschi, How New is the “New Trade Theory” of the Past Two Decades?, Paper No. 00-W27, Department of Economics, Vanderbilt University, July 2000. http://www.vanderbilt.edu/Econ/wparchive/workpaper/vu00-w27.pdf 

Peter S. Goodman and Philip P. Pan, Chinese Workers Pay for Wal-Mart’s Low Prices, Washington Post, Sunday 8 February 2004;
http://www.hartford-hwp.com/archives/55/696.html  

Henry George, Protection or Free Trade, copyright 1886, republished by Robert Schalkenbach Foundation, 50 East 69^th Street, New York, 1949.

Methods used in the UK and US
Technology and the Socialization of Healthcare
Darren Hinze
2007

This is an overview (draft) of methods used in the United States and in the United Kingdom in their efforts to socialize health care. The US has fevently resisted the socalization of their healthcare system, but at the same time they have done exactly what they are attesting to be against. Medicare is socalized medicine, The major Health Maintenance Organizations (HMO) are also involved in a limited social medicine structure. This paper although a draft it has references listed so you can do additional research if you feel the need. NOTE: If you are ripping this information for a particular class in school be sure to add my web site as a reference. I only note this because some of the plagarism checkers have found my posting (before I put them here). I would not want you gettign kicked out of school for copying my questionable work.

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Methods used in the

UK and US for the Socialization of Healthcare

The attempt in the paper is to give a through background on the approach to cost effective health care processes and technology used in the United Kingdom and the

United States. The assumption in the paper is that both countries share the same goals and values in achieving appropriate health care for their citizens. The arguments insinuated throughout the article is that the US can implement the UK system of managed health care and bring medical technology advances to the marketplace faster in the U.S., according to the article these are simply two methods that are equally valid.
Value-Based Coverage Policy in the United States and the

Overview of Health Plan Policies

Irrelevant of the health plan, private or public services are defined in terms or benefit categories; physician and clinic service, outpatient, inpatient, and rehabilitative or physical therapies. Plans will limit benefits based on visits per period, number of days of inpatient services (hospital stays), and types of services provided. Many plans will limit coverage to institutionally recognized therapies, denying payment for modalities that are deemed experimental. When private medical insurance was still young, services were generally approved or denied based on the provider not the modality. As the list of services grew and new technologies were introduced to the industry listing categories for inclusion did not provide the controls necessary for insurance agencies. The insurance agencies added exclusions to the list of covered and non-covered services.  Policies set by the insurers determine how the services they pay for are used and to what extent they are made available to the insured. Through their funding they can determine the quality or care, procedures used, and the outcome of the health care process.

In 1965 Medicare was enacted in theUnited States. Medicare took policy verbiage from the private insurance industry and since its inception it has changed little. Medicare still makes service determination based on “reasonable and necessary” treatments. The paper cites that “medical care has become too complex and too expensive to rely on professional consensus” and therefore professional judgment is not enough to adequately determine what is “reasonable and necessary.”  The authors calculations based on information from Centers for Medicare and Medicaid Services showed, “In 2004, health care accounted for 16 percent of the U.S. gross domestic product (GDP) or $6,280, on average, for every man, woman, and child. In 1970, the corresponding figures were about 7 percent of GDP and $480 per capita (in today’s dollars).”

The author postulates that the increase could be from inflation, additional use of services by an aging population, and a greater number of people making use of the system. It is not clear in the paper if technological advances have pushed the cost higher through greater use of necessary infrastructure, the cost of implementing the technology or reimbursement of research through higher costs for the technology. It is possible that the advanced technology has created a longer lived population that is now adding to the cost burden. If this is the case then we should see a continued climb in expenses as services are expanded and the general health of the population increases. The challenge in determining the cause of a patient’s beneficial outcome involves scientifically tracking the patient and his or her response to specific therapies; however, there is little time and even fewer resources available for a physician to track their patients at this level. The busy schedules and workloads of practicing physicians preclude many of them from investigating new treatments and applying them in their practice; this means that even though the technological advancement exists it is not used. 

The paper notes that the trend in increased costs is not limited to theUnited States. Other developed nations with different financing structures are similarly affected with rising costs and increased service use. Based on the authors calculations, using information from the, “Organisation for Economic Co-operation and Development”, OCED Health Data 2006, “Between 1999 and 2004, for example, the annual rate of growth in per capita health expenditures (in real terms) was 4.0 percent for Canada, 4.5 percent for New Zealand, 3.9 percent for Sweden, 5.4 percent for the United Kingdom, and 4.8 percent in the United States.”

Other nations are seeking advancements in medical technology and are challenged in distributing this information to their clinical professionals. As advances are discovered they are shared through various channels both public and private. At some point the procedure may be accepted by insurance companies and it will then be included in their policy as a covered service. It can take years for a new procedure, treatment or research information to make its way through all the insurance companies and be openly accepted in theUS healthcare model. TheUnited Kingdom has a much more centralized system to distribute new techniques and as a result they have a much shorter time from testing to implementation. A newly accepted technique is socialized throughout their health network rapidly because it was tested inside the same network. The National Health Services (NHS) is a centrally financed service that manages health care policies. The NHS works in conjunction with the National Institute for Health and Clinical Excellence (NICE). NICE provides guidance on the use of new technologies within the NHS. 

Combining the technology research sector with the policy making and provider sectors allows the United Kingdom’s health care system to rapidly deploy new treatment methods much faster than theUnited States system of disconnected public and private insurers.

A Paradigm Change

The twentieth century was an age of examination, experimentation, and research in the medical industry. The number of clinical trials grew exponentially, “more than half of the clinical trials conducted between 1954, when the first trial was conducted, and 1995 were completed in the last five years” of that period (NHPF, 2006).  According to the NHPF there were “over 10,000 new trials reported in 1995”. This intensive research gave rise to a change in the approach of healthcare management called Evidenced-Based Medicine (EBM). Evidence-Based Medicine relies on the reviews and journals that contain testing results and methods to conduct the treatments outlined in the journals. Several standards were adopted for evaluating the results and accuracy of the documentation. In addition to verifying the accuracy, standards were adopted so that physicians could understand and make use of the information presented. The Physicians Desk Reference may come to mind as an example of some of these collected resources. MEDLINE is a bibliographic online database that is managed by the United States National Library of Medicine. MEDLINE warehoused over 13 million references in 2004, and over 500,000 of those were added in 2004.

Evidence-based medicine has been promoted through the West and inEurope as a way to improve the “statistical lives” of the population. Clinical methods and treatments that appear to increase the general health of the population and extend life expectancy are considered to be appropriate to implement across the broad spectrum. The individual remains to be treated using diagnostic and therapeutic methods. Although the technology has advanced considerably and methods have improved, NHPF states in this paper, “The desire to do something rather than nothing for people presenting with illness or injury is strong. It can override the analytical and critical question of whether what can be done is actually effective or beneficial.” Several preventative services were not included in medical care coverage, such as immunizations, and other diagnostic tests that did nothing to treat the patient.

Preventative Services Task force

As the need grew for patient diagnosis in order to use the evidence-based medicine techniques it became apparent that insurers were going to need education on preventative treatments and their value. The United States Preventative Services Task Force (USPSTF) was first established in 1987. The USPSTF according to their web site is “An independent panel of experts in primary care and prevention that systematically reviews the evidence of effectiveness and develops recommendations for clinical preventive services” (Agency for Healthcare Research and Quality, 2007). The Task Force is a cooperative effort between experts in health care services, public and private enterprises and  several government agencies including, “Federal partners include the Centers for Disease Control and Prevention (CDC), Department of Defense (DOD), Centers for Medicare and Medicaid Services (CMS), Department of Veterans Affairs (VA), Health Resources and Services Administration (HRSA), National Institutes of Health (NIH), U.S. Army Center for Health Promotion and Preventive Medicine, and the U.S. Food and Drug Administration (FDA)” (AHRQ, 2007). Public Law Section 915 mandates that “AHRQ convene the USPSTF to conduct scientific evidence reviews of a broad array of clinical preventive services, develop recommendations for the health care community, and provide ongoing administrative, research, technical, and dissemination support” (AHRQ,2007). The information presented by the USPSTF has made significant impact in the adoption of EBM.  Health TechnologyHealth care technologies go hand in hand with evidence-based medicine. However, what technologies will be used and to what extent? Established in 1938 the FDA was concerned with the safety of new drugs and formulations before they were distributed to the public. As the focus in the medical industry shifted from expert consensus-based to evidence-based medicine the scope of the FDA’s charter was expanded in 1976 to include the application of drugs and, high-risk devices. FDA started requiring evidence for the suitability of medical devices for treatment. Manufacturers were required to show “valid scientific evidence” that their device was safe and effective. There was a provision in the 1976 amendment that exempts new devices that are “substantially equivalent” to existing devices (FDA, 2007). In addition to the approval process the FDA requires manufacturers to continually monitor the devices and formulations in order to determine additional side effects or contradictions that were not apparent in the initial test trials. If an issue arises the FDA can then call for the formulation or the device to be removed from use. A move to standardize services was enacted in 1989 when Congress authorized the Agency for Health Care Policy and Research (AHCPR) and charged them to develop, disseminate, and evaluate clinical practice guidelines. They were provided a $100 million, budget and two fifths of this budget was earmarked for development of clinical guidelines (Eisenberg and Zarin, “Health Technology Assessment”).  The agency, in 1992, was directed to include information regarding cost effectiveness of their proposed guidelines.  An Institute of Medicine (IOM) committee was formed to review and address the guidelines that were being created by the  AHCPR. They were tasked with the development of methodology standards. The IOM concluded that there was a lack of consistency in the guidelines and a lack of evaluative quality.  Two years later they recommended “using clinical practice guidelines as evaluative tools to improve the quality of care”, thus they included physicians in developing and testing applications of the guidelines. In addition to developing a road map for implementing the guidelines they also developed a strategy for research evaluation. (NHPF, note 21).  In 1999 the AHCPR was renamed, the new organization Agency for Healthcare Research and Quality (AHRQ) was provided and expanded their charter. The AHRQ’s Focus and Strategic Goals include:·         Safety and quality: Reduce the risk of harm by promoting delivery of the best possible health care. ·         Effectiveness: Improve health care outcomes by encouraging the use of evidence to make informed health care decisions. ·         Efficiency: Transform research into practice to facilitate wider access to effective health care services and reduce unnecessary costs. ·         Organizational excellence: Use efficient and responsive business processes to maximize the Agency’s resources and the effectiveness of its programs.
(AHRQ, 2007) The AHRQ relies on reports and evaluations from 13 Evidence-based Practice Centers (EPCs). EPCs are typically organizations associated with a university and generate scientific reports and assessments on specific areas. These reports then serve as the basis for future practice guidelines. The EPCs evaluate various proposals derived from professional societies, insurers, health providers and consumer groups to name a few. In addition to the EPCs the AHRQ also works with the Effective Health Program. Tis Health program was authorized by Section 1013 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA). The MMA directs the AHRQ to conduct research and evaluations to improve the quality and efficiency of Medicare, Medicaid, and the State Children’s Health Insurance Program. Their research is focused on health outcomes and clinical effectiveness. The research is made widely available to providers, insurers, and the public.

The Rise of National Health Care in the United States

Medicare, Medicaid, and the State Children’s Health Insurance Program are the most recognized US run medical insurance programs. Medicare has two layers of management for determining coverage; Local and National. The local level is made up of regional intermediaries that pay service providers, hospitals, clinics and physicians on behalf of the Medicare organization. The local level helps to ensure that payments are timely and accurate by managing a small region. They also make determinations on coverage and some locally allowed services. The Centers for Medicare and Medicaid Services (CMS) makes decision on a national level. CMS reported in 2005 that 90% of the decisions made regarding coverage were made at the local level (CMS Fact Sheet, 2005)

An analysis done in 2001, reported by Susan Foote in “Evolution of Medicare’s Local Coverage”, concluded that the local process was not necessarily quicker and a recommendation was made to move to greater standardization of coverage policies, at least for new technologies.

Medicare’s coverage overview is listed on the CMS web site as:

“…The law states that Medicare cannot pay for any items or services that are not “reasonable and necessary” for the diagnosis and treatment of illness or injury. For more than 30 years, the Medicare program has exercised this authority to determine whether specific services that meet one of the broadly defined benefit categories are covered under the program. Most Medicare coverage and policy decisions are made locally by HCFA contractors — the private companies that by law process and pay Medicare claims. HCFA also has authority to make coverage policies that apply nationwide. In the absence of national decisions for particular services, contractors have discretion to issue local coverage policies.”

This policy draft was dated May 01, 2000, there is a current discussion regarding the reigning in of local decision making authority and bringing that decision making body to a national level.  The primary authority on “reasonable and necessary” is the Medicare Coverage Advisory Committee (MCAC). In 1999 the MCAC was put into place to review technology and therapy modalities in order to advise the Secretary of Health on what services should or should not be included in the coverage policy. The MCAC is typically used to review new techniques and practices that are controversial, either because of the method employed or the cost-benefit associated with the procedure. The MCAC board is comprised of experts in their respective fields. The committee can consist of up to 100 persons, but the actual attendance at a meeting is limited to 15 members most of whom have experience in the field or the actual procedure being discussed. Transcripts of review meetings are posted on the CMS web site. The meetings are attended by voting and non-voting members and often involve guest speakers that are present to answer questions in an open forum.

The British National Institute for Health and Clinical Excellence (NICE)

The British National Health Service (NHS) was experiencing a “crisis of public confidence” in the late 1990s. To relate this crisis to theUnited States we would compare the effects of the general population mistrusting our leading medical institutions and having the general belief that our top medical schools were not training new doctors appropriately. For example, one day it is decided that the Mayo Clinic is not to be trusted regarding anything the clinic published on cancer research and immunology. For the British to lose confidence in their primary health care system, the NHS, is a major blow to their medical services infrastructure.

The public became aware of disparities in the availability of new technology and new pharmaceuticals across different regions. Because local authorities could determine health fund budgets it became apparent which areas did not have healthcare as a priority. The NHS, also, was not able to keep up with the expense of implementing new technology at the pace of development and maintain it financial solvency. As a result, in 1999, the British National Institute for Health and Clinical Excellence (NICE) was created.

The responsibilities of NICE are to function as a special authority within the NHS. There are four components to the NICE charter that include 1) producing clinical guidelines, 2) conducting technology appraisals, 3) interventional procedures, 4) public health guidance (NICE, 2007). The process to move a new technology through the approval process involves the production of a Technology Assessment Report (TAR), which is a detailed review of the device or procedure. The TAR typically took 6 months to 1 year to produce and at the speed with which technology was advancing by the time the technology had been implemented it was no longer current or a vast number of patients suffered as a result of the slow process. As a remedy NICE implemented a fast track process for single products (Single Technology Assessment, STA). This enabled the board to meet on a single product and expedite the deployment. When an STA is used the manufacturer’s submission of the efficacy of the devise is used as the source of evidence. A team then reviews the submission, critiquing it for accuracy, no independent test is required. The summary findings are sent for comment along with a “provisional determination”.

NICE did establish guidelines for manufacturer submissions and covered among other items effectiveness, cost-benefit analysis and funding impacts. NICE has been able to move technology and new drug formulations into the regional clinics at a very successful pace that has bolstered the public confidence in the NHS. Their process and effectiveness has earned them recognition from the World Health Organization, as noted by Suzanne Hill in A review by WHO, the NICE program over its first four years has led the field internationally in innovations in technology appraisals, also noted was that NICE had been operating in a fiscal and policy environment that supported the approval of new, cost-effective medicines and technologies. (World Health Organization, 2003).

Much like the United States Medicare system theUnited Kingdom uses a system to support their entire health care system as a single payer system. A similar system exists inCanada and there has been considerable discussion in implementing the same single payer methodology to the U.S. Health care system. This paper written by the National Health Policy Forum at nhpf.org, has identified several similarities in the implementation of technology in the healthcare industry. If we are to believe that the system in use in theUK is solid, economically viable, and their citizens enjoy that luxury then we should ask if we can use the same model here.

There are significant cultural differences between the UK and theUnited States. One very sensitive issue is the involvement of the federal government in a citizens personal life.

In the UK the citizens are more willing to have direct government involvement where as the citizens in theUS are not. Is it possible to have a single source of medical services and not have government involvement? Yes. Medicare took many of its policy provisions from private insurance providers.  If we look for a reasonably successful model in California our attention goes to Kaiser Permanente, a private Health Maintenance Organization (HMO) provider serving a vast area ofSouthern California. Adoption of services and technology is at the discretion of the HMO board. Their ability to use technological devices and drug formulations is still restricted by the FDA’s approval. Their system is not perfect by any means and for those o us that have spent any time in the military you are likely to feel right at home at a Kaiser facility. Because they are a private company they are more sensitive to dissatisfied clients because it affects their bottom line.  An alternative to the private HMO is demonstrated in a social experiment that has been dubbed Arnoldcare inCalifornia.  John Goodman expresses these concerns to socialized health care inCalifornia in his article, “Terminate This Plan.”

ARNOLDCARE

Gov. Arnold Schwarzenegger has declared that every Californian should be required to have health insurance.  His effort, though, is unlikely to succeed and in some ways is likely to make matters worse, says John C. Goodman, president of theNationalCenter for Policy Analysis.

So what could go wrong?

·         The plan encourages people with unsubsidized insurance to get subsidized insurance instead; that is, a lot of employers of low-income workers will drop their coverage and pay a 4 percent fine once they realize their employees will be eligible for free coverage under an expanded Medicaid program or will qualify for income-based premium subsidies.

·         As employers drop their coverage, system costs will rise, and because of the new insurance regulations health insurance will cost more for everyone, encouraging healthy people to exit the system, leaving the sickest and most costly people behind, again driving up costs.

·         The plan also opens the door for future legislatures to convert the employee mandate into an employer mandate, thereby increasing employer costs and encouraging businesses to leave the state.

Socialized medicine creates a welfare state that can not be easily remedied. To maintain some level of privacy and restrict government involvement inU.S. citizens lives it is critical that as we move closer to the impending state of social medicine that we restrict government involvement. If you are of the opinion that an expansion of the Medicare plan or a state sponsored health care system is beneficial it is necessary to look at the current involvement government already has in your private health plan.

Sally C. Pipes, writes in a February 2007 article, “Eliminating government mandates would lower cost of health insurance,”

Enthusiasm for universal healthcare coverage has swept the nation, with governors in Massachusetts andCalifornia leading the way.  But the proposals under consideration do little to address the primary reason for the lack of coverage — very expensive insurance..

One major reason for the cost spiral is government meddling in the market for health insurance, particularly through the imposition of restrictive mandates and regulations:

·         The average state has 36 mandates on an individual health insurance policy.

·         With each mandate, the cost to the consumer goes up; these mandates often stand in the way of making health insurance more affordable in the first place.

Given that we all indirectly absorb those costs thanks to higher premiums, it should come as no surprise that the universal program placing mandates on employees is destined to fail because it’s prohibitively expensive, says Pipes :

·         InMassachusetts, estimates now show that the monthly costs for an individual will be $380, almost double what the designers predicted.

·         A movement to exempt those earning up to three times the federal poverty line or $60,000 per year for a family of four is already gaining momentum.

The process that theUnited States uses to research and approve new medical technology is long and protracted with many different steps and several communication disconnects. The flow of approvals through the FDA is slow and in many cases hampered by politics and lobbyist.  The FDA is often accused of being overly cautious.

RESOURCES 

Agency for Healthcare Research and Quality, USPSTF, 2007http://www.ahrq.gov/clinic/uspstfix.htm

Mark Chassin, “Is Health Care Ready for Six Sigma Quality?” Milbank Quarterly, 76

(1998), pp. 565–591.

National Library of Medicine, “Fact Sheet: Medline”; available at www.nlm.nih.gov/pubs/factsheets/medline.html.

National Health Policy Forum, Issue Brief No. 806, August 24, 2005; available at www.nhpf.org/pdfs_ib/IB806_ClinicalPrevServices_08-24-05.pdf.

Center for Devices and Radiological Health, “CDRH Annual Report, Fiscal Year 1997,”

U.S. Food and Drug Administration, October 14, 1997; www.fda.gov/cdrh/ annrep97.html.

AHRQ
Testimony on Technology, Innovation, and the Costs of Health Care. Testimony of Carolyn M. Clancy, M.D., before the Joint Economic Committee, July 9, 2003. Agency for Healthcare Research and Quality,Rockville, MD. http://www.ahrq.gov/news/test70903.htm

CMS, “Fact Sheet: CMS Responds to Stakeholder Feedback Regarding Coverage with

Evidence Development,” July 12, 2005; available at  http://www.cms.hhs.gov/coverage/download/guidfactsheet.pdf 

Susan Bartlett Foote, “Focus on Locus: Evolution of Medicare’s Local Coverage Policy,” Health Affairs, 22, no. 4 (2003), pp. 137–146; and Susan Bartlett Foote et al., “Resolving the

Tug-of-War Between Medicare’s National and Local Coverage,” Health Affairs, 23, no. 4 (2004), pp. 108–123.

CMS, MEDICARE’S PROCESS FOR MAKING COVERAGE DECISIONS, 2007

http://www.cms.hhs.gov/apps/media/press/factsheet.asp?Counter=381&intNumPerPage=10&checkDate=&checkKey=&srchType=&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=6&intPage=&showAll=&pYear=&year=&desc=true&cboOrder=date

NICE

“New Guide to NICE”, newguidetoniceApril2005.pdf, http://www.nice.org.uk Suzanne Hill et al., Technology appraisal programme of the national institute of clinical excellence: A review by WHO (Copenhagen: World Health Organization, 2003); available atwww.nice.org.uk/page.aspx?o=85797 John Goodman, Arnoldcare, “Terminate This Plan; The shortcomings of Schwarzenegger’s health care reform,” Weekly Standard, Volume 12, Issue 21, February 3, 2007.  http://www.ncpa.org/sub/dpd/index.php?page=article&Article_ID=14163  Sally C. Pipes, “Eliminating government mandates would lower cost of health insurance,” Indianapolis Star, February 9, 2007. http://www.ncpa.org/sub/dpd/index.php?page=article&Article_ID=14173