When Medicare was being debated a decade ago, nobody in Congress took the time to study what effect there might be on the nation's health care providers when millions of patients began to be subsidized by the federal government. We now know the result: explosive demand for medical care which led to sharply increased costs and distortions of the system. Plans providing for full-coverage national health insurance would have the same kind of result, according to a two-year HEW-sponsored study by the Rand Corporation. The report projects "doctors' offices swamped by patients and…physicians charging more but giving each patient less time." The study also throws cold water on the "health care crisis" hysteria promulgated by government-insurance advocates, by pointing out that investment in additional health care services will do little to reduce mortality rates. This is because such services will not affect the major causes of death: auto accidents, smoking, alcoholism, heart disease, and cancer.

As opposed to full-coverage plans (i.e., "free" care for everybody), the researchers also examined plans calling for large and small deductibles (coinsurance), and plans covering only catastrophic occurrences. Such plans would do far less to stimulate demand, because they provide an incentive not to over-use medical facilities, as would happen if they were "free." Without such features, national health insurance would add a minimum of $8 to 16 billion to the nation's present health care costs each year—assuming prices do not rise as a result of the increased demand. If prices do rise, as seems highly likely, the cost increase would be considerably greater.

The research firm of Arthur D. Little has also completed a study in health care for HEW. In devising strategy for implementing Professional Standards Review Organizations (PSROs), the firm made a particular point of stressing: "We cannot envision successful PSROs without the support of a large majority of physicians, and it is difficult to anticipate such support without AMA endorsement." Thus, those doctors who argue that the medical profession must cooperate with PSROs, because they are an inevitable fact of life, are wrong, by the government's own admission. If enough physicians refuse to cooperate with PSROs and make their reasons public, the government will have to back down from this scheme to regulate the practice of medicine.

• "U.S. Medical Insurance Plan Called No Panacea," Ed Meagher, Los Angeles Times, June 13, 1974.
• "The Medical 'Gatekeepers'," Llewellyn H. Rockwell, Jr., Private Practice, April 1974, p. 49.


As Dr. Thomas Szasz points out in this month's REASON interview, making people criminals because of the drugs they use is both immoral and impractical. During the past year of continued enforcement of the nation's "new prohibition," there have been a few rays of hope. One of the most important has been the policy statement on drug addiction of the National Council on Crime and Delinquency, one of the country's leading criminal justice research organizations. NCCD recently reissued and reaffirmed its 1964 policy statement asserting that addicts should not be made criminals, but should have (voluntary) access to medical help, including maintenance doses of heroin or methadone. The statement points out that current drug laws prevent the physician from doing his ethical duty, by preventing him from administering a needed drug. NCCD also urges repeal of civil commitment statutes, which are nothing more than euphemisms for jailing. (So far, only Florida has done so, in 1970.)

Maintenance of addicts on methadone is gaining increasing acceptance, and a federal district court recently struck down the FDA's attempt to rigidly control the distribution of this drug. (The suit was brought by the American Pharmaceutical Association, on grounds that the FDA's rules wrongfully interfered with the rights of pharmacists to dispense methadone as an analgesic, its other main use.) Heroin maintenance itself has been endorsed by the San Francisco Committee on Crime, the New York City Narcotics Control Council, and the Vera Institute of Justice. In addition, the Drug Abuse Council has published a 21-page report on the subject, proposing that heroin maintenance be tried experimentally. (Physicians did just that—successfully—for the first ten years of the Harrison Act, until the Federal Narcotics Bureau started arresting them in the 1920's; some 25,000 doctors were arraigned between 1924 and 1938.)

Another encouraging development is the U.S. Senate's recent vote to repeal the "no-knock" provision of the 1970 drug control law, which authorizes the police-state tactic of breaking into buildings without warning. The law has resulted in many tragic raids against innocent families.

Marijuana law reform has recently picked up steam, following Oregon's 1973 decriminalization statute. Outgoing director of the Law Enforcement Assistance Administration Donald Santarelli called for removal of all criminal penalties for marijuana possession last May, and Washington D.C. Superior Court judge David Norman has concurred. The judge ruled in May that D.C. marijuana penalties are "cruel and unusual," then proceeded to free 52 consecutive pot defendants. Since then, under pressure from the appeals court, Judge Norman has been "postponing" sentencing in all pot cases. In Michigan, meanwhile, voters in Ann Arbor voted to reinstate the city's $5 marijuana fine that had been repealed last year by the city council in favor of the state's tough penalties. A similar lenient law was passed in Ypsilanti. Reform has gone furthest of all in Amsterdam, Holland, where a company that sells marijuana plants and seeds (legally) recently celebrated its fifth anniversary.

• "Drug Addiction: A Medical, Not a Law Enforcement, Problem," Crime and Delinquency, Jan. 1974, p. 4.
• "Methadone: Court Ruling Threatens FDA Regulations," Science, July 5, 1974, p. 46.
• "Heroin Maintenance: The Issues," The Drug Abuse Council, Inc., June 1973. (1828 L St., N.W., Washington, DC 20036)
• "De-Penalizing Pot," Santa Barbara News and Review, June 7, 1974.
• "Michigan Adopts Lenient Pot Laws," The Journal (of the Addiction Research Foundation), May 1, 1974.
• "Marijuana Retail Firm Doing Well in Holland," Reuters (Amsterdam), July 3, 1974.


One of the reasons transatlantic airlines Pan American and TWA have recently asked for government subsidies is that their European competitors fly subsidized planes. Subsidized by their governments? Guess again. The subsidies, in the form of low-interest government loans, come from the U.S. government, via the Export-Import Bank. Since 1967 Ex-Im has provided $4.2 billion in loans to finance the export sale of 1009 commercial jets, generally covering 45 percent of the purchase price. TWA estimates that if it had been able to purchase planes with Ex-Im's cheap money (now running about 7 percent versus the 12 percent that TWA must pay) it would be saving $11 million a year in finance charges.

Thus, it is with some pleasure that one observes the recent calls for Congress to refrain from renewing Ex-Im's authority to make loans when it expired on June 30. Among the most important critics was the Wall Street Journal, which pointed out the absurdity of subsidizing exports, especially when the end result is competition with U.S. firms, and called, in effect, for Ex-Im's abolition. The Journal also noted the deception involved in the 1971 law that takes Ex-Im's transactions out of the official U.S. government budget, so that its billion dollar a year impact on the federal deficit would be less visible.

The result of all this criticism was a temporary 30-day extension of the agency's authority, together with an amendment to the pending four-year extension bill, mandating that Ex-Im "should not authorize loans…which may have serious effects on the competitive position of the U.S." The amended bill will probably pass, but the new language will at least give the injured industries a basis for challenging some of Ex-Im's proposed loans.

• "Ex-Im Bank Funds Shortage May Cut Aircraft Exports," Harold D. Watkins, Los Angeles Times, June 10, 1974.
• "A Long Look at the Ex-Im Bank." Wall Street Journal, June 30, 1974.
• "Easy Money," Aviation Week, July 8, 1974, p. 11.


Taxes. For once a tax has been found unconstitutional! The U.S. Customs Court has ruled that former president Nixon exceeded his constitutional authority in 1971 when he imposed a 10 percent import surcharge, as part of his New Economic Policy. Not only that, the court has ordered that all $500 million collected under the tax be refunded to those who paid it. The three-judge ruling was unanimous, but will be appealed by the government. (Source: "Import Surcharge Held Illegal; Court Orders Big Refunds," UPI (New York), July 9, 1974.)

Sugar. A 40 year old sacred cow, the 1934 Sugar Act, was finally put out to pasture in June. Created by Congress during the Depression, the Act provided subsidies to U.S. sugar producers and set up an elaborate quota system for both domestic production and imports. For years the program has been so politically safe that it was renewed year after year without debate. Rising food prices finally made such an action politically unwise, and the bill to extend the program hit the House floor amidst a torrent of complaints about its cost to consumers. The final vote to defeat the bill, thereby ending the Sugar Act, was 209-145. (Source: "Sugar Looks Sweet in a Free Market," BUSINESS WEEK, June 15, 1974, p. 28.)

Welfare. Surprise! The nation's welfare system actually encourages unemployed and low income fathers to desert their families and avoid work. And the Aid to Families with Dependent Children (AFDC) program provides financial incentives for women to have children. These "astonishing" conclusions resulted from a study by Congress' joint fiscal policy subcommittee, based on 1972 data. The report provides detailed data on the dollar gains available—e.g., an unemployed, childless woman can double her welfare benefits, adding $1159 a year in cash and food, by having her first child. (Source: "Welfare Promotes Avoiding Work," UPI (Washington), July 22, 1974.)

Mail. The costly and inefficient government postal system is getting a new challenge from private enterprise. The private National Postal Service will deliver The Reader's Digest, McCalls, and Better Homes and Gardens to eight northern California zip code areas in a year-long test, begun at the end of July, in the cities of San Mateo, San Carlos, and Redwood City. The delivery system dispenses with address labels, relying instead on computer-printed delivery lists for each magazine. National Postal Service has 2000 carriers, delivers some 10 million pieces of mail per month, and grosses $2 million per year. (Source: "Three Magazines Test Private Mail Service," AP (San Francisco), Aug. 11, 1974.)