1. Source: Health Care Financing Administration. Statistics are for personal health expenditures.

2. The Rand Corporation, in a study conducted from 1974 to 1982, found that people who had access to free care spent about 50 percent more than those who had to pay 95 percent of the bills out-of-pocket up to a maximum of $1,000. A $1,000 deductible over that period would be equivalent to a deductible between $1,380 and $2,482 today. See Robert Brook et al., The Effect of Coinsurance on the Health of Adults (Santa Monica, CA: Rand Corporation, 1984); and Willard Manning et al., "Health Insurance and the Demand for Health Care: Evidence from a Randomized Experiment," American Economic Review, June 1987. For the most recent survey, see Michael A. Morrisey, Price Sensitivity in Health Care: Implications for Health Care Policy (Washington, DC: The NFIB Foundation, 1992). For a survey of economic studies of the demand for medical care, see Paul Feldstein, Healthcare Economics (New York: Wiley, 1988).

3. This estimate assumes a $33 billion decrease in administrative costs and a $147 billion decrease in direct expenses. Total health care costs for 1991 were estimated at $707 billion. See the analysis in John C. Goodman and Gerald L. Musgrave, "Controlling Health Care Costs with Medical Savings Accounts," National Center for Policy Analysis, NCPA Policy Report No. 168, January 1992.

4. The Rand study found no significant differences in the health status of people who had high and low deductibles. The one exception was vision care, which is not surprising - since eyeglasses are often viewed as a marginal health care expenditure. See Joseph Newhouse et al., "Some Interim Results from a Controlled Trial of Cost Sharing in Health Insurance," New England Journal of Medicine, Vol. 305, No. 25, December 17, 1981, pp. 1501-7; and Robert Brook et al., "Does Free Care Improve Adults' Health?" New England Journal of Medicine, Vol. 309, No. 23, December 8, 1983, pp. 1426-34.

5. Source: Golden Rule Insurance Company. Figures are for two adults and two children.

6. For deductibles less than $2,500, policyholders face a 20 percent copayment up to, $1,000. Thus, the forgone coverage is 80 percent x ($1,000 - $250) = $600. The savings from a higher deductible are even greater considering that more than one family member can incur expenses. Under the low-deductible policy, the deductible is $250 per person, with a $500 maximum for the entire family. Under the high-deductible policy, the deductible indicated is for the entire family.

7. The forgone coverage is 80 percent x ($2,500 - $250) = $1,800.

8. See Goodman and Musgrave, "Controlling Health Care Costs with Medical Savings Accounts."

9. Acting on a proposal made by the National Center for Policy Analysis, the state of Colorado has established medical IRAs - tax-favored savings for postretirement health care. Yet because these accounts are subject to the federal income tax - there is no federal income tax deduction for the deposit, and interest earnings are subject to tax - the incentives to take advantage of them are weak.

10. Estimate of the Health Care Financing Administration, Office of the Actuary, Fall 1991.

11. The primary tax subsidy is the exclusion of employer-provided health insurance from employees' taxable income.

12. Calculated from data in the National Health Accounts, Health Care Financing Administration.

13. Source: NCPA/Fiscal Associates health care model. Data derived from the Health Care Financing Administration, Office of the Actuary, National Health Expenditures estimates, augmented with the estimates of the values of tax subsidies.

14. Source: Health Care Financing Administration. See Gary Robbins, "Insurance as the Source of Medical Inflation," paper presented to the Cato Institute conference, "The Regulation of Medical Care," Washington, DC, April 30, 1992.

15. Source: NCPA/Fiscal Associates health care model.

16. See John C. Goodman, "How the Federal Government Is Causing Our Nation's Health Care Crisis," National Center for Policy Analysis, NCPA Policy Backgrounder No. 119, June 22, 1992.

17. See the discussion in Lucy Johns and Gerald S. Adler, "Evaluation of Recent Changes in Medicaid," Health Affairs, Spring 1989, p. 179.

18. Federal regulations relating to nursing homes are in National Fire Protection Agency (NFPA) 101 Life Safety Codes, 1985 edition.

19. Under the provisions of the Consolidated Budget Reconciliation Act (COBRA), employees are entitled to continue coverage for a limited time after they leave an employer if they pay the full premium.

20. Unemployed people and employees of firms that do not provide health insurance receive no tax subsidy for the health insurance they purchase. Self-employed individuals are allowed to deduct 25 percent of their health insurance premiums, but this provision has an uncertain future. The deduction must be periodically renewed by Congress and is not a permanent feature of the tax code.

21. See Employee Benefit Research Institute, "A Profile of the Nonelderly Population Without Health Insurance," EBRI Issue Brief, No. 66, May 1987, Table 2, p. 3.

22. See Task Force Report, "An Agenda for Solving America's Health Care Crisis," National Center for Policy Analysis, NCPA Policy Report No. 151, May 1990.

23. Kenneth H. Bacon, "Business and Labor Reach a Consensus on Need to Reduce Health Care Costs," Wall Street Journal, November 1, 1989.

24. Employee Benefit Research Institute, "A Profile of the Nonelderly Population Without Health Insurance," p. 7.

25. Aldona Robbins and Gary Robbins, "Taxing the Savings of Elderly Americans," National Center for Policy Analysis, NCPA Policy Report No. 141, September 1989.

26. Jonathan C. Dopkeen, "Postretirement Health Benefits," in The Sourcebook on Retirement Health Care Benefits, Robert D. Paul, ed. (Greenvale, NY: Panel Publishers, 1988), p. 566.

27. See John C. Goodman and Gerald L. Musgrave, "Health Care After Retirement: Who Will Pay the Cost?" National Center for Policy Analysis, NCPA Policy Report No. 139, July 1989.

28. Mark J. Warshawsky, "Retiree Health Benefits: Promises Uncertain," The American Enterprise, July/August 1991, Figure 2, p. 63.

29. Source: Health Care Financing Administration. Dollar amounts are for 1991.

30. See Goodman and Musgrave, "Health Care After Retirement: Who Will Pay the Cost?"

31. These companies are exempt from state regulations under the provisions of the Employee Retirement Income Security Act (ERISA), 1974.

32. Jon Gabel and Gail Jensen, "The Price of State-Mandated Benefits," Inquiry, Vol. 26, No. 4, Winter 1989, pp. 419-31.

33. Milt Freudenheim, "States Seek Aid for the Uninsured," New York Times, June 23, 1992.

34. Joseph F. Sullivan, "New Jersey Surcharge for Poor Patients Is Voided," New York Times, May 28, 1992.

35. See John C. Goodman and Gerald L. Musgrave, Patient Power: Solving America's Health Care Crisis (Washington, DC: Cato Institute, 1992).

36. If employees pay any part of the premium, the price tends to be the same for all - regardless of expected health care costs.

37. Polls show that about 30 percent of employees experience "job lock" - a condition under which they fear switching jobs because of a loss of health insurance benefits. Eric Echolm, "Health Benefits Found to Deter Job Switching," New York Times, September 26, 1991.

38. See the American Legislative Exchange Council's (ALEC) model legislation, "The Health Insurance Reform Act for Small Business Coverage."

39. See the discussion in Edmund F. Haislmaier, "Health Care," in Making Government Work: A Conservative Agenda for the States, Tex Lezar, ed. (San Antonio: Texas Public Policy Foundation, 1992), pp. 201-206.

40. In a recent and highly publicized case, H & H Music Company of Houston, TX, reduced its lifetime benefits limit from $1 million to $5,000 after learning that one of its employees had tested positive for the AIDS virus. The employee sued the company but lost the suit because the employer was self-insured and therefore not subject to federal regulations. The case is currently before the Supreme Court. See Jerry Giesel, "Self-Insurers Can Limit AIDS Benefits: Court," Business Insurance, August 6, 1990, pp. 1, 27-28.

41. See the ALEC model legislation.

42. John C. Goodman, "Should Healthy People Pay More for Health Insurance?" National Center for Policy Analysis, NCPA Policy Backgrounder No. 115, April 1992.

43. For small group health insurance reform (which does not include individual and family policies), here are other estimates of the likely increase in premiums:

• The Health Insurance Association of America (HIAA) estimates that its proposed small group reform would raise premiums by 2.5 percent to 4.0 percent, but this estimate makes unrealistically low assumptions about the numbers of sick people who would buy health insurance and the numbers of healthy people who would drop their coverage. See HIAA memo dated August 29, 1991.

• Community Mutual Insurance Company (a Blue Cross/Blue Shield company) estimates that the HIAA plan would increase premiums by 20 to 25 percent. See "Perspective on Small Group Market Reform," a study conducted by Community Mutual Insurance Company, September 1991.

• Tillinghast estimates that a similar plan in the state of Ohio would increase premiums by 11 to 47 percent. See Ted A. Lyle and Janet M. Carstens, "Actuarial Review of Proposed Small Group Reform Legislation in Ohio," a study conducted for Community Mutual Insurance Company, November 29, 1991.

• Golden Rule Insurance Company's actual experience was that "guaranteed issue" policies led to an increase in claims costs of over 50 percent in the second year and 30 to 35 percent thereafter. Golden Rule offered no-questions-asked health insurance policies to employers with 10 to 25 employees. There was a surcharge for the no-questions-asked groups that ranged from 15 to 20 percent above what the same group could get if they provided health information in their application. There were also some restrictions.

44. Stephen D. Brink, James C. Modaff and Steven J. Sherman (Milliman & Robertson, Inc.), "Variation by Duration in Small Group Medical Insurance Claims," Society of Actuaries Research Report, September 5, 1991.

45. These are results for groups of size 1 to 25. For smaller groups, say 2 to 9, the cost of guaranteed-issue insurance was twice as high.

46. This cost is adjusted for the drop-off in the number of policyholders over time.

47. A standard industry assumption is that the elasticity of demand for health insurance is 0.5. The NCPA/Fiscal Associates Health Care model estimates the elasticity at 0.65.

48. Karen M. Beauregard, "Persons Denied Private Health Insurance Due to Poor Health," Agency for Health Care Policy and Research, Public Health Service, AHCPR Report No. 92-0016, December 1991.

49. Sarah Lyall, "Albany Will Pass Bill to Overhaul Health Insurance," New York Times, July 2, 1992.

50. In New York, Guardian Insurance (a commercial insurer) charges a monthly premium of $149 to single people under age 30 and $349 to single people age 60 to 64. By contrast, Blue Cross - which must community rate - charges $184, regardless of age. See Peter Passell, "What Hidden Cost In Spreading the Health Risk?" New York Times, July 12, 1992. In states where insurers can rate based on sex, the premium difference for males of different ages is greater than for females.

51. See Gina Kolata, "An Old Health Insurance Idea Returns: Sharing the Risk," New York Times, June 28, 1992.

52. Other members of the group include Paul Ellwood (who is credited with coining the term "Health Maintenance Organization" and who has actively promoted the concept) and Lynn Etheredge. The original principles of this approach were laid out in Alain C. Enthoven, Health Plan: The Only Practical Solution to the Soaring Cost of Medical Care (Reading, MA: Addison-Wesley, 1980). For a more recent statement see Paul Ellwood et al., "The 21st Century American Health System: A Proposal for Reform," September 3-4, 1991. Unpublished manuscript.

53. Premiums would vary by age - not because the Jackson Hole Group finds the practice fair or desirable, but because they judge it necessary in order to induce young people to buy insurance.

54. What has traditionally been called "managed care" is now frequently referred to as "coordinated care."

55. The HMO would be receiving premiums only from people who were about to undergo expensive medical procedures. Thus the average premium would have to equal the average cost of the procedures. It is precisely because most people cannot easily bear such a financial burden that health insurance is desirable in the first place.

56. In the absence of a competitive market, people living in countries with national health insurance perversely may find it in their rational self-interest to vote for a policy of increased primary care services funded by a reduction in acute care services. See the analysis in John C. Goodman and Gerald L. Musgrave, "Twenty Myths About National Health Insurance," National Center for Policy Analysis, NCPA Policy Report No. 128, December 1991.

57. Note that this problem arises only because of price controls. Insurers have no reason to avoid applicants if each person who enters an insurance pool pays a premium that reflects the expected cost and risk the person adds to the pool.

58. See Robert E. Moffit, "Why the Maryland Consumer Choice Health Plan Could Be a Model for Health Care Reform," Heritage Foundation, Backgrounder No. 902, June 17, 1992; see also Stuart M. Butler, "A Policy Maker's Guide to the Health Care Crisis; Part II: The Heritage Consumer Choice Health Plan," Heritage Foundation, March 5, 1992.

59. The proposal, now being drafted, was developed by Charles Stenholm (D-TX), Jim Cooper (D-TN) and Michael Andrews (D-TX).

60. The California proposal has been introduced by the state's insurance commissioner, John Garamendi. See Lou Cannon, "California Official Offers Health Plan," Washington Post, February 13, 1992; and "Good Health - and Good Politics," New York Times, June 27, 1992. On the connection of the California plan to Alain Enthoven, see Ken McDonnel, Michael Anzick and William Custer, "State Initiatives in Health Care Reform," Employee Benefit Research Institute, EBRI Issue Brief, No. 127, June/July 1992.

61. A bill proposed by Maryland state legislator Casper R. Taylor, Jr. (H.R.376) was based on a proposal developed by Jack A. Meyer and Sharon Silow-Carroll of New Directions for Policy and Carl J. Sardegna of Maryland Blue Cross/Blue Shield. This proposal, in turn, was heavily influenced by the ideas of Alain Enthoven. See Meyer, Silow-Carroll and Sardegna, "Universal Access to Health Care: A Comprehensive Tax-Based Approach," Archives of Internal Medicine, Vol. 151, 1991, pp. 917-22.

62. "The President's Comprehensive Health Reform Program," February 6, 1992. During an initial transition period, premium "bands" would allow some variation in premiums for individuals of the same age and sex. Ultimately, however, through a reinsurance mechanism, "insurers would be able to provide coverage at a near uniform premium for the sick and the healthy." (p. 23)

63. "In cases where a hospital emergency room is an individual's first point of contact with the system, rotating assignment would be used to enroll an uninsured credit-eligible individual to a specific health plan if the individual were unable to make a choice. So, for example, a homeless person entering the hospital and having no preference for any carrier would be assigned to an insurer by rotation and the credit would automatically flow to the insurer." "The President's Comprehensive Health Reform Program," p. 22. Technically, a "credit-eligible" person is one whose annual income does not exceed $50,000 for an individual or $80,000 for a family. However, since the hospital will almost certainly not know the emergency-room patient's income until several days after treatment, and since there is no waiting period, the proposal apparently envisions a mechanism that will insure any uninsured patient entering the hospital.

64. Bill Clinton, "Putting People First: A National Economic Strategy," Bill Clinton for President Committee, June 21, 1992.

65. See "Democratic Ticket Holds Back on Health Care Reform Details," American Medical News, August 3, 1992.

66. "Putting People First" implies that there will be (probably for small businesses) short-term but not long-term tax relief.

67. Although Clinton does not use the word "rationing," he promises that the money providers will have to spend will grow no faster than after-tax personal income, regardless of the cost of health care resources.

68. Cited in Janet P. Lundy, "The Federal Employees Health Benefits Program," Congressional Research Service, CRS Issue Brief, updated June 11, 1992.

69. See the summary in Enthoven, Health Plan, pp. 114-15.

70. Ibid., pp. 82-84 and p. 119.

71. The Blue Cross high-option and standard-option fee-for-service plans are available to all federal employees. Seven additional "open" fee-for-service plans sponsored by unions or employee organizations also are available to all federal employees. Health Maintenance Organizations (HMOs), which are geographically based and thus available only to those living in specific areas, make up the remaining FEHBP options.

72. "Statement of the Consultants of the Committee on Post Office and Civil Service before the Subcommittee on Compensation and Employee Benefits," May 20, 1992. Testimony before the House Subcommittee. [Hereinafter referred to as "Consultants' Statement."]

73. Lundy, "The Federal Employees Health Benefits Program," p. 7.

74. The Heritage Foundation has called the FEHBP a "prototype" for national health care reform and recommended the Taylor plan in Maryland as a "model" for the states. See Robert E. Moffit, "Consumer Choice in Health: Learning from the Federal Employees Health Benefits Program," Heritage Foundation, Backgrounder No. 878, February 6, 1992. See also Robert E. Moffit, "Surprise! A Government Health Plan That Works," Wall Street Journal, April 2, 1992; and Carl J. Sardegna, "How the Maryland Health Plan Is a Model for the Nation," Heritage Foundation, Heritage Lectures No. 392, May 27, 1992.

75. Lundy, "The Federal Employees Health Benefits Program," p. 7.

76. The Blue Cross high-option plan carries a $200 calendar-year deductible versus a $250 deductible for the standard-option plan. The high-option plan generally requires a 20 percent copayment versus a 25 percent copayment for the standard option, and offers greater coverage for mental health care. For those small differences a family will pay $4,396 annually for the high-option plan versus $1,035 for a standard-option plan.

77. In many private employer plans, employees may deposit pretax dollars in a Flexible Spending Account (FSA), from which to purchase medical care not covered by the employer's health insurance policy. Federal employees do not have this right. See "Consultants' Statement," p. 21.

78. The 1990 Omnibus Budget Reconciliation Act (OBRA) requires all fee-for-service plans to include preadmission certification and large case management beginning in 1991. See Lundy, "The Federal Employees Health Benefits Program," p. 6.

79. For a review of the effects of HMOs, see John K. Inglehart, "The American Health Care System: Managed Care," New England Journal of Medicine, Vol. 327, No. 10, September 3, 1992, p. 742-47.

80. See the discussion in Goodman and Musgrave, Patient Power: Solving America's Health Care Crisis.

81. Jane Orient, "An Evaluation of Abdominal Pain: Clinicians' Performance Compared with Three Protocols," Southern Medical Journal, Vol. 79, No. 7, July 1986, pp. 793-9.

82. Robert H. Brook, "Practice Guidelines and Practicing Medicine: Are They Compatible?" Journal of the American Medical Association,Vol. 262, No. 21, December 1, 1989, p. 3027.

83. William B. Schwartz and Daniel N. Mendelson, "Why Managed Care Cannot Contain Hospital Costs," Health Affairs, Summer 1992.

84. Employee Benefit Research Institute, "Sources of Health Insurance and Characteristics of the Uninsured, Analysis of the March 1991 Current Population Survey," EBRI Issue Brief, No. 123, February 1992.

85. Katherine Swartz and Timothy D. McBride, "Spells Without Health Insurance: Distribution and Their Link to Point-in-Time Estimates of the Uninsured," Inquiry, Vol. 27, Fall 1990, pp. 281-88.

86. "Bare bones" policies are policies that are exempted from some or all mandated health insurance benefits.

87. John C. Goodman, "Regulation of Health Insurance by State Governments," in Tex Lazar, ed., Making Government Work: A Conservative Agenda for the States (San Antonio: Texas Public Policy Foundation, 1992), p. 237. See also "Bare Bones Health Insurance: An Emerging Consensus in the States," Health Benefits Letter, Vol. 1, No. 8, May 23, 1991; and "Small Group Market Reform Laws Enacted in 16 States," Health Benefits Letter, Vol. 1, No. 13, August 8, 1991.

88. Senator Edward Kennedy (D-MA), for example, has proposed such legislation. For an analysis, see John C. Goodman, Aldona Robbins and Gary Robbins, "Mandating Health Insurance," National Center for Policy Analysis, NCPA Policy Report No. 136, February 1989.

89. This type of proposal was first unveiled at the federal level in 1991 by Senators Mitchell (D-ME), Kennedy (D-MA), Rockefeller (D-WV) and Riegle (D-MI). Under the bill, employers would have a choice: pay a federal tax, tentatively set between 7 and 9 percent of payroll, or provide health insurance for their employees. If employers opted to pay the tax, the government would assume responsibility for providing health insurance.

90. This has been a consistent feature of all three Heritage reform plans. For example, the first element of the Heritage Foundation's original plan states, "Every resident of the U.S. must, by law, be enrolled in an adequate health care plan to cover major health care costs." Interestingly, the only penalty recommended for failure to comply is a fine. See Butler and Haislmaier, A National Health System for America, p. 51. See also Mark Pauly et al., "A Plan for 'Responsible National Health Affairs'," Health Affairs, Spring 1991, pp. 5-25.

91. Patricia Day and Rudolf Klein, "Britain's Health Care Experiment," Health Affairs, Fall 1991, pp. 43-44. Tax relief is available only for those 65 years of age or older.

92. Patricia Danzon and Susan Begg, Options for Health Care in New Zealand (Wellington: New Zealand Business Roundtable, 1991).

93. Goodman and Musgrave, "Twenty Myths About National Health Insurance."

94. Though unemployment in Massachusetts was only 2.9 percent in April 1988, it had risen to 8.6 percent in January 1991 - the highest of any industrial state at the time. Richard Kronick, "Can Massachusetts Pay for Health Care for All?" Health Affairs, Spring 1991, p. 27.

95. See "Universal Health Care Act of 1988: Chapter 23," Coopers & Lybrand, Boston, 1988. In an effort to address the rising costs and access problems, the Massachusetts legislature recently passed "Chapter 495," which is designed to radically restructure how hospitals are paid and implement small group reform. For an analysis see "An Act Improving Health Care Access and Financing: Chapter 495," Coopers & Lybrand, Boston, 1992.

96. Though Kronick supports pay-or-play legislation, he concedes that it would force some businesses to close down or decrease wages, while many other employers would cancel their coverage and pay the tax. "Can Massachusetts Pay for Health Care for All?" p. 36-41.

97. Attiat R. Ott and Wayne B. Gray, The Massachusetts Health Plan: The Right Prescription? (Boston: Pioneer Institute for Public Policy Research, 1988).

98. It is the only state that has such an exemption.

99. As of June 1992, 17,233 individuals of the approximately 50,000 people eligible for SHIP were covered. See McDonnell et al., "State Initiatives in Health Care Reform," p. 23.

100. Ibid. The estimate was made by a study sponsored by Blue Shield of Hawaii. However, a different study by Martin E. Segal Company places the number at 46,000.

101. See the discussion in Emily Friedman, "Health Insurance in Hawaii: Paradise Lost or Found?" Business and Health, June 1990, pp. 52-59.

102. Rita Ricardo-Campbell, "Business Health Care Costs and Competition," Working Papers in Economics, No. E-91-6, Hoover Institution, Stanford University, February 1991, p. 34.

103. For a state-by-state survey of risk pools, see Comprehensive Health Insurance for High-Risk Individuals, 6th ed. (Minneapolis: Communicating for Agriculture, 1992).

104. Ibid.

105. Health insurance risk pools are created and partially funded by state governments in order to make health insurance available to high-risk individuals, who might otherwise not be able to obtain health insurance. Though premiums are usually 50 percent higher than comparable policies sold in the market, most risk pools incur losses. See Comprehensive Health Insurance for High-Risk Individuals.

106. In 1990, pools paid out $77.6 million more than they took in. McDonnell et. al., "State Initiatives in Health Care Reform," p. 29.

107. Ibid.

108. Comprehensive Health Insurance for High-Risk Individuals.

109. "1,081 State Mandated Benefits Identified," Health Benefits Letter, Vol. 2, No. 2, July 31, 1992.

110. Gabel and Jensen, "The Price of State-Mandated Benefits."

111. John C. Goodman and Gerald L. Musgrave, "Freedom of Choice in Health Insurance," National Center for Policy Analysis, NCPA Policy Report No. 134, November 1988.

112. Greg Scandlen, "State Mandated Coverage: Mandate Evaluation Laws," Blue Cross/Blue Shield, Office of Government Relations, Washington, DC, November 1989.

113. See John C. Goodman, "Health Insurance: States Can Help," Wall Street Journal, December 17, 1991.

114. "Mandated Benefits: Mixed Signals From the States," Health Benefits Letter, Vol. l, No. 3, March 13, 1991.

115.116. These categories are not mutually exclusive; all three characteristics could be used to describe the same family.

117. U.S. Office of Technology Assessment, Health Care in Rural America (Washington, DC: September 1990).

118. See John C. Goodman and Gerald L. Musgrave, "National Health Insurance and Rural Health Care," National Center for Policy Analysis, NCPA Policy Report No. 107, Odwives: A Policy Analysis," Health Technology Case Study No. 37, December 1986. See also John C. Goodman, Regulation of Medical Care: Is the Price Too High? (Washington, DC: Cato Institute, 1980).

120. See Goodman and Musgrave, "National Health Insurance and Rural Health Care," and Goodman and Musgrave, Patient Power: Solving America's Health Care Crisis.

121. Medicaid grants two basic types of waivers: "demonstration projects" and program waivers. Demonstration projects such as the Arizona Health Care Cost Containment System (AHCCCS), which began in 1982, must submit comprehensive programs to the Secretary of Health and Human Services for approval. The state of Oregon recently had its Medicaid demonstration project rejected by HHS under this system. Program waivers usually take a less innovative approach to cost containment. For example, it might permit a state to disregard Medicaid's fee-for-service provision and enroll Medicaid recipients in Health Maintenance Organizations. See The House Wednesday Group, Congress of the United States, "Primer on Medicaid Waivers, ERISA and State Health Initiatives," Washington, DC, July 1992. See also the discussion in Haislmaier, "Health Care."

122. Statistical Abstract of the United States 1990, 110th ed., U.S. Department of Commerce, Bureau of the Census, p. 98.

123. John Holahan and Sheila Zedlewski, "Expanding Medicaid to Cover Uninsured Americans," Health Affairs, Spring 1991, p. 49.

124. Andrew J. Cowin, "How Washington Boosts State and Local Budget Deficits," Heritage Foundation, Backgrounder No. 908, July 31, 1992.

125. Under the federal medical assistance percentage (FMAP), a state can receive from 50 to 83 percent of its Medicaid budget from the federal government. The assistance range is based on the state's per capita income.

126. McDonnell et al., "State Initiatives in Health Care Reform."

127. Ibid., Table 5, p. 12.

128. Robert Pear, "Low Medicaid Fees Seen as Depriving the Poor of Care," New York Times, April 2, 1991. See also Don Terry, "As Medicaid Fees Push Doctors Out, Chicago Patients Find Fewer Choices," New York Times, April 12, 1991; and Elizabeth Kolbert, "Medicaid in New York: Costs Surge but Care for Poor Still Lags," New York Times, April 15, 1991.

129. Robert Pear, "Suits Force U.S. and States to Pay More for Medicaid," New York Times, October 29, 1991.

130. Ibid.

131. In 1989 and again in 1991, the state legislature modified and amended the Oregon Health Plan to extend Medicaid coverage to an additional 120,000 low-income people and to require employers to provide employer-based health insurance coverage for another 300,000 employees. If enacted, by 1994 employers will have to provide health insurance or pay a payroll tax. See McDonnell et al., "State Initiatives in Health Care Reform."

132. See Timothy Egan, "Oregon Shakes Up Pioneering Health Plan for the Poor," New York Times, February 22, 1991.

133. For a comparison of the highest and lowest ranked Medicaid conditions see Egan, "Oregon Shakes Up Pioneering Health Plan for the Poor."

134. "Oregon Rationing Plan to Apply to Private Sector Benefits," Health Benefits Letter, Vol. 1, No. 2, February 28, 1991.

135. "Oregon's Bid to Boost Coverage Gets Federal Red Light," Congressional Quarterly, August 8, 1992, p. 2362.

136. See Joseph A. Califano, America's Health Care Revolution: Who Lives, Who Dies, Who Pays? (New York: Random House, 1986).

137. Brook, "Practice Guidelines and Practicing Medicine: Are They Compatible?"

138. Haislmaier, "Health Care," pp. 210-212.

139. The Wyatt Co., "Cost Analysis of State Legislative Mandates on Six Managed Care Practices," produced by the Health Insurance Association of America, July 1991, and reported in Medical Benefits, Vol. 8, No. 17, September 15, 1991, pp. 9-10. See also, "Utilization Review Laws: 'Hassle Factor' Inspires Provider Push for Restrictions," Health Benefits Letter, Vol. 1, No. 14, August 22, 1991.

140. Milt Freudenheim, "Dealing in Myths on Malpractice," New York Times, October 13, 1992.

141. See Peter W. Huber, Liability: The Legal Revolution and Its Consequences (New York: Basic Books, 1988); and J. E. Moser and R. A. Musacchio, "The Costs of Medical Professional Liability in the 1980's," Medical Practice and Management, Summer 1991.

142. Socioeconomic Characteristics of Medical Practice (Chicago: American Medical Association, 1990-91).

143. Milt Freudenheim, "Costs of Medical Malpractice Drop After an 11-Year Climb," New York Times, June 11, 1989.

144. McDonnell et al., "State Initiatives in Health Care Reform," pp. 33-34.

145. Detractors call such protocals "cook book" medicine, and argue that they encourage physicians to consider the government first, the employer second and the patient last.

146. See John C. Goodman, National Health Care in Great Britain: Lessons for the USA (Dallas: Fisher Institute, 1980), pp. 121-22.

147. More precisely, the current system ignores contractual waivers of tort liability claims. What is needed is a legal change requiring the courts to honor certain types of contracts under which tort claims are waived in return for compensation.

148. For example, a national market is developing for expensive heart surgery in which "centers of excellence" bid for the opportunity to perform these operations for corporate, insurance and government buyers.

149. Medicare pays hospitals a predetermined reimbursement fee for 492 diagnosis-related groups. Medicare's DRG system for reimbursing hospitals is a price-fixing scheme in which the government is attempting to create an artificial market. DRG reimbursement prices do much more than limit the amount that government will pay. Since Medicare patients cannot add their own funds to the DRG rate and hospitals cannot give rebates to patients, Medicare literally fixes the prices of services rendered, independent of supply and demand.

150. The Health Care Financing Administration (HCFA) began on January 1, 1992, to phase in the Resource Based Relative Value Scale (RBRVS), a cost control and payment program that reimburses physicians who care for Medicare patients.

151. Nancy M. Kane and Paul D. Manoukian, "The Effect of the Medicare Prospective Payment System on the Adoption of New Technology," New England Journal of Medicine, Vol. 321, No. 21, November 16, 1989, pp. 1378-83.

152. Edward E. Berger and Edmund G. Lowrie, editorial, Journal of the American Medical Association, Vol. 265, No. 7, February 20, 1991, pp. 909-10. See also Phillip J. Held et al., "Mortality and Duration of Hemodialysis Treatment," Journal of the American Medical Association, Vol. 265, No. 7, February 20, 1991, pp. 871-75.

153. Kane and Manoukian, "The Effect of the Medicare Prospective Payment System on the Adoption of New Technology," p. 1379.

154. Eric Muņoz et al., "Race, DRGs, and the Consumption of Hospital Resources," Health Affairs, Spring 1989, p.187.

155. Patricia Day and Rudolf Klein, "Britain's Health Care Experiment," p. 43.

156. See Choices for Health Care: Report of the Health Benefits Review (Wellington, New Zealand: Health Benefits Review Committee, 1986), pp. 78-79; and John C. Goodman and Gerald L. Musgrave, "Twenty Myths About National Health Insurance."

157. Estimate of the Fraser Institute (Vancouver) based on sampling in five Canadian provinces. Michael A. Walker et al., "Waiting Your Turn: Hospital Waiting Lists in Canada," Fraser Institute, Critical Issues Bulletin, February 1992.

158. It is estimated that in the United States about 4 percent of the population accounts for about 50 percent of total health care costs. These are the patients who require access to expensive technology.

159. For New Zealand, estimate of the New Zealand Department of Health. OECD statistics show an occupancy rate of 74.8 percent for New Zealand in 1983 and 83.3 percent for Canada. See Organization for Economic Cooperation and Development, Financing and Delivering Health Care (Paris: OECD, 1987), Table 29, p. 67. The most recent OECD statistics are expected to show an occupancy rate of 80.3 percent for acute care hospitals and 82.7 percent for all hospitals in Canada for 1987. See George J. Schieber et al., "Health Care Systems in Twenty-four Countries," Exhibits 4 and 5, pp. 27, 29. In England, hospital occupancy rates are 74 percent for acute beds and 82 percent for all beds. See Office of Health Economics, Compendium of Health Statistics, 7th ed. (London: OHE, 1989), Section 3, p. 39.

160. Keith J. Halleland and S. Olivia Mastry, "HealthRight's Mandate for Change," Minnesota Medicine, Vol. 75, June 1992.

161. Wall Street Journal, September 2, 1992.

162. See Joseph F. Sullivan, "Judge Stays Ruling on Hospital Billing in New Jersey," New York Times, June 5, 1992.

163. Aldona Robbins and Gary Robbins, "Capital, Taxes and Growth," National Center for Policy Analysis, NCPA Policy Report No. 169, January 1992.

164. Ibid.