Wages of Sin
Shlaes, Amity
"Wages of Sin" the total Medicaid population, up from coverage of 9 million beneficiaries in 1995. Medicaid HMOs such as Centene and Amerigroup have been some of the hottest stocks on Wall Street. The smart...
...But it is important to remember that the states' wager on inelasticity is born of a nasty dependence of their own: the dependence on ever-increasing state budgets...
...Health care economist Kleinke cites a little-noticed study published in 1998 in the Journal of theAmerican Medical Association, which found a direct relationship between physician scores on board exams and the intensity of resources they order for patients...
...Thankfully, these tools are at hand...
...Let me explain...
...I've never heard of a Medicaid "utilization review manager...
...Better-educated doctors are more cognizant of the spectrum of clinical problems potentially affecting a patient...
...Thus, as Salomon Smith Barney's Martin Feldman points out, citizens of Connecticut last fall were subjected to the spectacle of hearing their governor, John Rowland, intone on the virtues of fiscal solvency ("state government should strive to spend no more than it takes in"), even as he prepared to push for higher tobacco taxes and increased state revenues through the lottery...
...Allen also controls cable company Charter Communications...
...Both the E.U...
...For state finance types, watching those budgets go from surplus to deficit has been as painful as nicotine withdrawal...
...Kids in Kentucky and Virginia (with taxes less than 10 cents) will, by contrast, puff away...
...But, as the authors note, youngsters' access to autos is more limited than that of adults, so the elasticity is likely a real phenomenon...
...WAGES OF SIN BY AMITY SHLAES How elastic is sin...
...Download the peer-to-peer programs Limewire or Morpheus and watch the requests for bootlegged full-motion entertainment fly across your screen...
...And already, pioneering hobbyists are giving way to major media, entertainment and home-electronics companies...
...Rest assured, broadband media centers are the future of Microsoft's Xbox and Ultimate TV, and Sony's PlayStation 2. The convergence fun is just beginning—and it will be very hard to regulate...
...In the process, medical care is being transformed from a symptom-based art into an objective science, saving lives at reduced cost...
...Good care costs even more...
...The biggest is that young people are not "butt-legging"—cadging cigarettes in the black or grey markets or driving out of state for cigarettes...
...Diagnosis and treatment are moving from the visible sphere—a lump on the breast, a hacking cough—down into the biochemical microcosm of DNA...
...The ad industry's 1980s mega-mergers were premised in part on the idea that consumers were "integrated perception units," and that marketers would benefit from unified plans that crossed media silos...
...Convergence boxes able to hold terabytes of digitized music, video and still pictures are trickling onto the market...
...But the evidence here is at least a little smoky...
...Such physicians are precisely the ones that managed-care companies sought to drive out of their networks...
...Still, the most visible addiction in the saga of taxes and cigarettes is not smoking —it's public sector greed...
...I can even order home nurses and health aides...
...Not very, if you believe America's state governments.They are the ones wagering that citizens love a sin cigarette smoking so much that their desire for cigarettes will not change no matter the taxes levied on cigarettes...
...CAT scans and MRIs are no problem...
...In a world of convergence devices, how can regulating one medium ever make a difference...
...Or, to put the matter in economic terms, they think demand will be relatively inelastic...
...On the other, they are eager for revenue and morally committed to obtaining it, even if it means profiteering from bad behavior...
...Health care costs money...
...So, many are now pushing their governors and legislatures to get them a quick cash fix by hiking cigarette excise taxes...
...True, Medicaid is rife with waste...
...RESISTANCE IS FUTILE BY RANDALL ROTHENBERG The outcry over televised liquor advertising reminds me that banning the commercials will certainly make a difference...
...In the 1990s, Frank J. Chaloupka of the University of Illinois and Michael Grossman of the National Bureau of Economic Research looked at youth smoking following tobacco tax increases in a number of states.They found that "large increases in cigarette excise taxes would lead to sharp reductions in youth smoking...
...In other words, precisely what managed care promised, and failed, to deliver...
...On the plane of common wisdom, the story also makes sense: Addiction would not be addiction if you gave it up because it cost an extra dollar...
...Private insurers hound us at every turn...
...That's why trying to limit kids' access to TV liquor ads is so futile...
...Then there is Mike Bloomberg, New York's new mayor, who has proposed a tobacco tax increase of 1,700 per-cent, bringing the price of a pack of cigarettes to $7...
...But where does this leave the states...
...All this makes sense given that a $1 increase in the price of a pack of cigarettes represents a significant percentage of many a teenager's budget, especially during weak economic times...
...Cable companies generally are impatient to bring convergence devices to market they're an easy way to add Internet access revenues to their TV subscription fees and increase the allure of next-generation pay services...
...Music got there first: digitized and Napstered, tunes landed by the thousands in our PCs, Nomad Jukeboxes and now our Apple iPods...
...In fact, the two vain struggles are linked...
...state budgets into which such increases would be written are static ones, which assume a certain rate of tax revenues...
...Only with better technology can the mission of managed care ever be achieved...
...But it is doubtful that managed-care plans can do any more for Medicaid's woes than they could for the private market...
...This, he says, comes on top of excise tax increases in five states last year...
...Moreover, higher prices for cigarettes not only reduced the purchase of cigarettes by smokers but also deterred young non-smokers from taking up smoking...
...in 22 states to raise tobacco taxes...
...On another planet...
...Ironically, HMOs have abandoned their prevention-is-cheaper business model just as the new biodigital medicine is making it possible...
...The flood's not far away, rendering moot not only the distinctions between broadcast and cable, but between TV and PC, game shows and brochureware, advertising and e-mail...
...They found that demand for the patch, nicotine cigarettes and similar alternatives to smoking was also elastic...
...Older smokers were less responsive, especially, it seems, women...
...This is troubling, especially when you consider that taxes on tobacco, like those on liquor, are regressive: they tend to weigh most heavily on the poorest and most vulnerable members of society.To make matters worse, the states not only tax, but actually encourage, another form of sin: gambling in government-sponsored lotteries...
...In February, Digeo, owned by Microsoft Corporation co-founder Paul Allen, announced plans to distribute such "broadband media centers...
...MARCH/APRIL 2002 • THE AMERICAN SPECTATOR 29...
...Media companies conglomerated after seeing opportunity in properties that could be synergistically exploited from one medium to another...
...For several Randall Rothenberg, the chief marketing officer at Booms Allen Hamilton, writes a column for Advertising Age, where this article first appeared...
...But technological logic has a way of defying financial logic...
...and U.S...
...When the mega-mergees failed to match the growth of the S&P 500—and when the dot-corn bust put the kibosh on so many media dreams—the convergence idea was discredited...
...But such efforts are futile if they are premised on the ability to single out one or two media from a rapidly converging pack...
...Lest the network chieftains applaud too loudly, I append another cautionary note: Regulating broadcast spots for Demon Rum is as pointless as the TV industry's quest to quash SonicBlue, the personal video recorder company...
...The smart money should be shorting them...
...years, we early adopters have been trying to put our integrated perceptions into a single box...
...Film-and-video is becoming a fast follower...
...Martin Feldman of Salomon Smith Barney found 45 bills proposed Amity Shlaes is a columnist for the Financial Times...
...They assume demand is inelastic...
...On the one hand, they say they abhor destructive behavior and have bitten a huge piece out of the side of the tobacco industry through anti-tobacco litigation...
...We can therefore expect steep reductions in youth smoking in Alaska, Hawaii and NewYork—states where the tax is $1 a pack or more...
...HMOs can bring short-terms savings by squeezing out some of the most obvious excess and changing habits of patients who overuse expensive services like the emergency room...
...It's also why TV's battle to kill SonicBlue—whose broadband media center provides an astounding 320 hours of multimedia storage and includes a built-in broadband port—is so inane...
...Some might applaud today's Carrie Nations, taking the regulatory ax to anything that might sully the innocence of children...
...Medicaid patients routinely get expensive tests and treatments that I know are not available to my patients carrying penny-wise private insurance...
...Of course such revenue hounds defend themselves by claiming they are achieving two goals: balanced budgets in the short run and reduced smoking in the long...
...All will be readily available on your big-screen, Dolby Digital home-theater system...
...A body of economic literature suggests cigarette demand can be elastic, at least among the young...
...Chaloupka and his colleague 28 THE AMERICAN SPECTATOR • MARCH/APRIL 2002 John Tauras also did some research on nicotine replacement therapy, presumably a "better" behavior than smoking...
...Still, even the most avaricious states have steered away from taxing nicotine replacement, which is regarded as medicine...
...Of course, some nicotine gum chewers use the product to feed their addiction, rather than to end it...
...Convergence was a controversial concept long before Wired magazine raised its profile in the Roaring '90s...
...They order more diagnostic tests to rule them out...
...And the trend to cigarette sin taxes is global: the European Union has proposed a tobacco tax increase worth more than a dollar per pack...
...Cigarettes are dirty, but not too dirty for states to make money from them...
...0 0 the total Medicaid population, up from coverage of 9 million beneficiaries in 1995...
...This hopeful finding—at least hopeful for those concerned about health, and not state coffers—is conditioned on a few assumptions...
Vol. 35 • March 2002 • No. 2
