The Value of Innovation in Health Care

During much of this decade, the climate in the health sector has been largely favorable to market-based policies, supporting innovation, competition, market pricing, and consumer choice. 

But the United States is at a crossroads in the policy debate where most of the proposals being offered by political leaders in Washington would exert much more government control over our health sector, forcing the private health sector to operate under the same rule-driven, price-fixed, benefit-restricted dictates as the public sector.

Before we embark on this course, it would be wise to review what innovation has brought us and to assess whether we are ready to cast it aside to put much more control in the hands of government.

Market-friendly changes in public policy and countless innovations from the private sector have helped to moderate the rise in health insurance cost, create new models for care delivery and financing, and support the movement toward patient-centered health care.

Health Savings Accounts and the competitive Medicare drug benefit are the changes that made the headlines during the Bush administration, but innovations in care delivery, creative benefit offerings by health plans and employers, reduced prescription drug spending, and innovations in other public programs are all part of the story.

These changes have helped to keep the increase in U.S. health spending at 6.1 percent in 2007. Employers who were early adopters of consumer-directed plans have seen their premiums increase at an even lower rate of 2.6 percent.

While many problems await the Obama administration and many changes still must be made in public policy, it is vital to respect the genius of a market in responding to the demands of consumers for better quality care at more affordable prices through efficiency and innovation.

As the decade of 2000 proves, competition works, even in health care.

One of the untold stories of the Bush presidency is the progress that has been made over the last eight years on health reform. Though many other domestic and foreign policy issues have grabbed the headlines and many problems remain in our health sector, the administration and the Republican Congress have made notable progress.

In addition to several important policy changes, perhaps the most important accomplishment has been to create a climate friendly to innovation. Instead of offering promises of a sweeping, centralized overhaul of our health sector, President Bush took a step-by-step approach organized around his belief in individual freedom, free markets, competition, and choice. This has resulted in countless innovations from the private sector that have helped to moderate the rise in health insurance cost, create new models for care delivery and financing, and support the movement toward patient-centered health care.

Consider the progress that has been made in moderating costs over the last several years:

•    In 2007, U.S. health spending grew at its slowest rate since 1998, increasing just 6.1 percent, with year-over-year increases of 6.7 percent and 6.8 percent in 2006 and 2005.¹ These increases are still higher than the general inflation rate, but not the double-digit spikes seen over the last several decades.

•    Premiums for private health insurance also rose by only 6 percent in 2007, the same rate as in 2006, but much lower than the peak of nearly 11 percent in 2002.²

•    Premiums for new consumer-directed health insurance plans introduced in this decade increased by much smaller amounts – 2.8 percent in 2005 and 2.6 percent in 2006 – helping to moderate costs overall.³ 

Change is indeed needed

There is a serious problem in our health sector: Health insurance and health care still cost too much. As a result, tens of millions of Americans don’t have health insurance, and many more are worried they are one pink slip away from losing their coverage. The costs of Medicare and Medicaid are swallowing up a growing share of federal and state revenues, compromising other functions of government and threatening huge tax increases just to pay for current entitlement commitments. These and other challenges await the Obama administration.

But based upon the experience of this decade, the new president would be well advised to work for solutions that will offer greater choice of private health insurance in a market that continues to deliver innovation and quality of care. Because Americans consistently tell public opinion pollsters they do not want a larger role for government in the health sector, those policies that build on the private sector are much more likely to gain public acceptance.

A climate friendly to innovation

Continued innovation is vital in health care and health care delivery. The medical profession is moving toward patient-centered medicine, with micro-targeting of treatments tailored to the individual genetic code of individual patients. Advances in medical science demand that progress continue without being suffocated by the regulatory obstacles and restrictive payment systems now being considered in Washington. Instead, the government should continue to encourage more private-sector advances.

President Bush has consistently offered policy proposals based upon his belief that Americans should be empowered to make their own decisions about their health needs and that those needs will best be met if they have access to private health coverage that offers choice, flexibility, and incentives for quality health care. “In all we do, we must remember that the best health care decisions are made not by government and insurance companies, but by patients and their doctors,” he said in his 2007 State of the Union address.⁴

A crossroads in the debate

The private sector is much more adept at innovation and evolutionary change than command-and-control public programs. But we are at a crossroads in the policy debate in this country where most of the proposals being offered by political leaders would exert much more centralized government control so that the private health sector would be forced to operate under largely the same rules as the public sector.⁵ 

Before we embark on that course, it would be wise to review what innovation has brought us and to assess whether we are ready to cast that aside to put much more control in the hands of public officials.

While the U.S. health sector continues to face many problems, this paper will do what few others have done and focus on the successes during a decade largely friendly to consumer choice and respectful of innovation. It is not possible to begin to describe all of the countless creative ideas, programs, and care delivery innovations in our $2.2-trillion health economy, but this paper will highlight some of the success in the private and public health sectors in this decade.

Two segments of the health sector

The U.S. health economy has two distinct segments – the public and private sectors – and each operates under different sets of rules. About 46 percent of the U.S. health sector is largely financed with tax revenues through government-operated programs, such as Medicare, Medicaid, the State Children’s Health Insurance Program, the Veterans Health Administration, community health centers, and others. The rest of health care is financed privately, largely through businesses’ contributions to support employment-based health insurance but also through direct purchase of insurance and out-of-pocket payments by patients.

Many analysts refer to our public and private health sectors as a health care system, but we do not have anything approaching a health system in the U.S. Rather, it is made up of conjoined twins, with one run by various government agencies and the other more reliant upon market forces. As health policy analysts attempt to achieve consensus on reforms for our health sector, it is becoming increasingly clear that this operational divide is one reason compromise is so difficult.

The government sector works primarily on a model that provides people eligible for public programs with an entitlement to a government-determined set of benefits within government-determined payment structures. Some patients receive care from physicians employed by the government in government-owned facilities, but most obtain care through private hospitals and physicians paid government-determined rates.

Within the public sector, private health plans also are involved. For example, many states have contracted with private managed care companies to offer care through their Medicaid and SCHIP programs, and Medicare allows participation by private plans in Medicare Advantage and the Part D prescription drug benefit program. But the majority of publicly-financed health care is delivered through the fee-for-service (FFS) model that the private sector largely left behind in the 1980s as unacceptably expensive and inefficient. The response of the public sector to these problems has been to place restrictions on benefits and payments to providers in an effort to restrain costs, which often result in patients having difficulty accessing services and providers.

The private health sector is much more diverse in its range of options and payment systems, representing an alphabet soup of program options from PPOs, POSs, MCOs, and HMOs to HSAs, HRAs, FSAs and even FFS.⁶  Private health plans, employers, and countless other companies in the health sector are continually innovating to provide options for care and coverage. But they are often constrained by regulation and also by tax policy that is better suited to the last century than to this one. This policy ties private health insurance to the workplace, restricting the market’s responsiveness to consumer demands. This gives individual consumers less choice than they would have in a more competitive and open marketplace, as we have written in numerous papers, articles, and our book, Empowering Health Care Consumers through Tax Reform. (For more information see www.galen.org.)

While we do not have a properly functioning private market for health care in the United States, innovative ideas for improvements in the delivery and financing of health care nonetheless come largely from the private sector.

Health care traditionally is not an issue that Republicans have embraced. It is not clear if the issue would have received greater focus from the administration and Congress had the terror threat and the Iraq war not dominated the time and resources of the White House and the country. But the energy, investment, creativity, and responsiveness of the private sector we highlight below show that its engagement will be key to advancing positive change going forward.

Private sector innovation

Entrepreneurs and private investors have been making significant investment in new health care solutions: MinuteClinics, TelaDoc, specialty hospitals, innovative medical practices, and employer plans that empower consumers to engage in their health care and spending decisions are just a few examples in the innovation-friendly climate of this decade.

Here is a summary of some of the other countless private sector initiatives in care, financing, and delivery:

Employer innovations

Employers have taken giant steps to begin to get better value for spending on health care and health insurance for their employees. Some offer employees a variety of health plan options, allowing workers to decide whether they want to pay higher premiums for lower-deductible policies, for example, or agree to more restrictive panels of doctors and/or higher-deductible policies to save on premiums.

The new products also give employers flexibility in shaping their health insurance offerings to fit their resources and workforces. A few examples:

•    Safeway chief executive Steve Burd has become an evangelist for consumer-directed health insurance arrangements. In the first year after the plans were introduced, the company’s health costs went down 11 percent. “If you design a health care plan that rewards good behavior, you will drive costs down,” he said.⁷  The company shared its cost savings disproportionately with employees, cutting their costs by 25 percent or more. Safeway also introduced a program called Healthy Measures that encourages employees to get health assessments and provides support and incentives for responsible health behaviors. Safeway also covers the full cost of recommended preventive care.⁸ 

•    Target offers its employees a range of health insurance choices. One Health Savings Account option costs them as little as $20 a month, and Target contributes $400 a year to health spending accounts for individuals and $800 for families.⁹  “We’ve seen, and national research supports, that team members make more cost-conscious decisions when they participate in a consumer-based plan,” according to John Mulligan, Target’s vice president for pay and benefits. “These plans engage our team members in a decision-making process that gives them greater ownership and control of their health care dollars.” The company offers its 360,000 employees Decision Guides to help them compare price and quality and estimate their costs, plus access to wellness programs, a nurse hotline, and other support tools.¹⁰ 

•    Wal-Mart offers dozens of health plan options to its employees, one with premiums as low as $5 a month. For this, employees receive a $100 health care credit, more than 2,400 generic drugs available for $4 a month, and major medical coverage with no lifetime maximum that starts at $2,000 – basically the moment they step into a hospital. Employees can choose to pay higher premiums for lower deductibles and more comprehensive coverage.¹¹  For $62 a month, employees can choose a $500 deductible policy with a $100 health care credit and no lifetime maximum on their insurance coverage.

•    Whole Foods’ CEO John Mackey toured the country talking to employees about health benefits options. Afterward, employees voted to switch to new account-based health plans with higher-deductible insurance coverage. Whole Foods puts up to $1,800 a year into a spending account for each employee, with Mackey pointing out that this is not charity but part of the employee’s compensation package. If they don’t spend the money on medical care, it rolls over and the company adds more the next year. Some workers have as much as $8,000 in their accounts.¹²  Whole Foods saves money and still covers 100 percent of its employees’ health insurance premiums.

These companies and many others have worked extraordinarily hard to find the delicate balance between getting health benefit costs under control and continuing to provide coverage that satisfies their workers. There simply is no way that a benefit or cost structure dictated by Washington could achieve these same results. Maintaining ERISA protection is crucial to allowing companies to continue to innovate.

^{Source: Mercer's National Survey of Employer-Sponsored Health Plans; Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April) 1988-2008; Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey (April to April) 1988-2008.}

New health care financing options

Several new private sector health coverage options are available to companies and individuals as a result of changes promoted by the Bush administration and by free-market supporters in Congress. For example, the Medicare Modernization Act authorized the creation of Health Savings Accounts (HSAs)¹³  in 2004, with further enhancements enacted in 2006. The Bush administration also has used its regulatory powers to create new financing options called Health Reimbursement Arrangements (HRAs).
 
HSAs permit individuals to combine health insurance with a tax-free health spending and saving account. The account is used to pay for routine health care expenses, such as doctor’s visits, for services not covered by insurance, and to create a cushion to pay premiums in lean economic times. The high-deductible insurance policy covers larger medical expenses such as hospitalization and surgeries. Federal law also allows the insurance contract to cover preventive care, such as cancer screenings.

More than 6.1 million Americans had health insurance that qualifies holders to open HSAs as of 2007.¹⁴ 

The older sisters of HSAs, Health Reimbursement Arrangements, were created via a regulatory interpretation in 2002 to give employers more flexibility in structuring health coverage for their workers. HRAs operate much like HSAs but can be offered only through the workplace. They are generally account-based plans accompanied by health insurance. While the money in HSAs is truly portable to the employee or individual holder, access to HRA funds is generally restricted after an employee leaves a company. But HRAs give employers more flexibility in shaping their benefit packages, including providing incentives for prevention and wellness activities.

Both products are helping to make health insurance more affordable and are helping companies lower their health costs. Health insurance premiums generally are lower than average because deductibles are higher, and the savings on premiums can help fund the HSA or HRA.

Companies that have introduced health plans with new incentives for consumers to be engaged as partners in managing health costs generally have seen lower-than-average health cost increases. Annual premium increases for employment-based coverage averaged about six percent for the last three years, down from double digits earlier in the decade.¹⁵  The most impressive results have come from consumer-directed plans such as HSAs and HRAs.

Deloitte’s Center for Health Solutions found that cost of consumer-directed health plans (CDHPs) increased by only 2.6 percent in 2006 among the 152 major companies it surveyed. This is about a third the rate of increase for traditional plans.¹⁶

Source: "Reducing Corporate Health Care Costs: 2006 Survey," Human Capital Practice of Deloitte Consulting LLP and the Deloitte Center for Health Solutions, 2006.

Lower costs of insurance coverage

Consumer-directed health products have helped to moderate health cost increases overall.

•    UnitedHealthcare found that employer health benefit costs were more than 15 percent lower in 2007 for its HRAs than for traditional PPO plans. Importantly, 85 percent of the cost savings were attributable to lower utilization costs, such as avoiding hospitalizations and greater use of generic drugs – and not from cost shifting to employees.¹⁷ 

•    A Mercer study found that consumer-directed health plans delivered substantially lower cost per employee than either PPOs or HMOs in 2008. CDHP medical plans averaged $6,207 per employee, compared to $7,768 for HMOs and $7,815 for PPOs.¹⁸ 

•    In addition, health insurance that people purchase in the individual market is often more affordable than employment-based coverage. eHealthInsurance, the largest online broker for individually-purchased and small-group health insurance, found that the average yearly health insurance premium in 2007 was $1,896 for individuals and $4,392 for a family.¹⁹ 

President Bush also prodded private health insurers to find ways to improve the individual market, particularly to help those who are denied insurance to obtain coverage. In response, both America’s Health Insurance Plans and the National Association of Health Underwriters developed detailed proposals that could actually work in the market rather than trying to wrestle into inappropriate and often unworkable government regulations.²⁰ 

Other benefits

In addition to moderating cost increases, HSAs also are providing new options for the uninsured. Up to 43 percent of those enrolling in HSA-qualifying health insurance were previously uninsured, showing that uninsured Americans in particular have been looking for an affordable alternative to traditional health insurance, according to Assurant Health.²¹  Assurant Health's most recent data show that they have broad appeal:

• 66% of HSA purchasers are families with children
• 63% of HSA purchasers are over age 40
• 52% of all HSA purchasers have high school or technical school training as their highest level of education
• 30% of HSA purchasers have family incomes of less than $50,000

UnitedHealthcare found, based upon a survey of 300,000 HSA owners, that the average account holder had household income of $55,500, and 25 percent of those with an HSA had income of less than $39,000.²²  Changes in federal law in 2006 allowing employers to make larger deposits for lower-income workers also are apparently succeeding, since UnitedHealthcare found that they were more likely to have employer contributions in their HSAs than higher-income HSA holders.

Financial sector engagement

The Financial Research Corporation estimates HSA assets will grow from $4 billion in 2007 to $15 billion by 2010.²³  

The Employee Benefit Research Institute reports that the amount that individuals are accumulating in their accounts is growing. The percentage of individuals reporting an account balance of at least $1,000 increased from 25 percent in 2006 to 44 percent in 2007, remaining steady at 43 percent in 2008.²⁴

Health insurers are getting into the banking business, and banks are offering accounts for HSA insurance. Some health insurance companies have established their own banks for HSA deposits, such as UnitedHealthcare's OptumHealth Financial Services. Several other new banks have been created to serve this new market, such as HSA Bank. And many other established financial institutions have entered the HSA market, including Wells Fargo, JPMorgan Chase, and Mellon.²⁵  Visa and MasterCard also are partnering with health plans to facilitate claims transactions.

Private companies also are trying to solve problems that plague both the private and public sectors, including streamlining health care administration to reduce costs. Athena Health, for example, helps doctors collect, facilitate, and streamline getting paid by insurance companies – a cumbersome task that can involve a dozen or more different companies. Athena codifies insurance company rules into a software program that allows providers to file claims quickly and accurately, cutting collection time nearly in half.²⁶

Other private insurance options

Health plans and insurers compete in a number of ways on insurance product design, including tailored options for employers to offer their workers.

For example, Assurant Health focuses on offering a variety of insurance products to individuals, families, and small businesses. It has created an easy-to-use web tool that allows employees of even the smallest companies to customize their health plans. Assurant also provides same-day responses on insurance applications.

UnitedHealthcare announced recently that it would offer a product tailored for people who currently have insurance but who want to hedge against losing their policy if they lose their job or retire early. It is a guarantee that a buyer will be able to obtain health insurance in the future without re-applying – even if he or she becomes sick. For a low, up-front premium, consumers can guard against a loss of coverage down the road. Essentially, it's insurance for insurance.

Employers have taken a leading role in offering innovative programs to help their employees get and stay healthier and spend health care dollars wisely. They are offering incentive programs to encourage employees to get health assessments to detect problems early and health coaching to help those with chronic illnesses better manage their care. These companies generally work in partnership with health plans to design the consumer-based products, manage the finances, educate employees about using them, and provide wellness programs and support for employees with chronic conditions.

This is an important market for new as well as established health insurers. A new Virginia company, nHealth, provides innovative financial incentives for patients to take care of themselves and to make informed spending decisions.
 
Aetna has distinguished itself in developing innovative, consumer-friendly information products. In 2005, it launched a program that offers a range of consumer-support tools to help patients find physicians, compare costs and quality, and get personalized information about medical conditions and treatment. Its personalized search engine, SmartSource, provides easy-to-understand health information tailored to patients’ individual needs.²⁷ 

The results show this patient engagement works. Aetna is following health care claims and utilization of 1.6 million members of its Aetna HealthFund consumer-directed plans. Four years of evidence show sustained savings, more patient engagement in managing health, and greater utilization of preventive services. Employers who offered an Aetna HealthFund plan lowered their health care spending trend and saved money through all four years with the plan, across all Aetna products they offered.²⁸ 

Aetna studied its members to identify the keys to successful implementation of a consumer-directed health benefits strategy. It identified six employers who had cost trends 50 percent lower than average, with savings of $15 million per 10,000 employees over four years. The keys to their success included greater spending on preventive care, including wellness programs; focusing on employee communication and education; and carefully structuring benefits packages with appropriate levels of employee responsibility.²⁹ 

Many companies are offering turnkey solutions to health plans and employers. U.S. Preventive Medicine, for example, offers employers packages of services they can tailor to fit the needs of their workforces for preventive care services.³⁰ 

In addition, a galaxy of websites has evolved to offer everything from treatment information to diet advice. EverydayHealth has just surpassed WebMD as the most-visited site for medical information, and new sites appear every day to help patients find the best doctors, the lowest cost medicines, and the most cost-effective diagnostics.

Lower drug costs

Competition has also driven down prescription drug spending. Prescription drug spending increased only 1.6 percent in 2007, the slowest rate since 1974.³¹   Part of the reason is increased use of lower-cost generic drugs, but private competition over drug pricing in the Medicare Part D program also contributed. And retail establishments also have engaged in private price wars. In 2006, Wal-Mart began offering 30-day supplies of several hundred generic drugs for just $4. Competitors quickly followed suit, with some even offering to fill prescriptions for antibiotics for free. It’s impossible to imagine this happening in a price-controlled, government-regulated environment.

There also has been active engagement by pharmaceutical companies in creating programs for low-income and uninsured people to obtain their products at little or no cost. Pharmaceutical companies have made significant investments to develop, expand, and promote patient assistance programs like Together Rx Access, Pfizer Helpful Answers, Partnership for Prescription Assistance, and many others. New private partnerships, like the Asheville Project and the Ten Cities Challenge, also have been created to help patients with chronic illnesses, including diabetes, get the medicines and counseling they need to manage their diseases.³² 

The private sector also has demonstrated its responsiveness to crisis. After Hurricane Katrina, more than a million people were displaced. They not only lost their homes, but also their support communities, including their physicians whose offices were literally washed away in the storm. Many were on important medications but the records of their prescriptions were lost.

Pharmacy chains, pharmaceutical companies, pharmacy benefit managers, physicians, technical experts, and philanthropic groups came together to create KatrinaHealth.org, a website that compiled pharmacy records and allowed physicians anywhere to access through a secure website the medical records of displaced patients who came to them for help. It was a remarkable achievement that showed the power of private enterprise in a crisis.

Innovation in medical treatment

The lists of medical innovations could consume a library. From pharmaceuticals to biologics and new medical devices, diagnostics, and surgeries, the list is endless.

Proton beam therapy can vaporize tumors with no damage to nearby tissue, and DNA mapping already is allowing doctors to determine before chemotherapy is begun which cancer patients will respond to which treatments. Telemedicine is extending the reach of medical skills to rural areas, into people’s homes, and even to other countries.

Modern pharmaceuticals are dramatically expanding life expectancy and quality of life. Pharmaceutical research continues to be one of the most costly – and risky – investments in the health sector. In 2007, the pharmaceutical industry spent nearly $59 billion on research and development. Yet only 24 new drugs were approved last year.³³  For every 5,000 to 10,000 compounds tested, just five will make it to clinical trials. And only one of those will receive FDA approval. And then, only two out of every 10 drugs that reach the market will recoup the costs invested in creating and developing the drug.

Yet innovation in this sector is particularly important to overall cost savings as every additional dollar spent on newer drugs in the United States saves $7 in other costs.³⁴

The U.S. continues to lead the world in medical research. In 2007, more than 2,700 compounds were in development in the United States, compared to 1,700 in the rest of the world, 1,400 of which were under development in Europe.³⁵  The U.S. is indeed the medicine chest for the world.

The most important role for government is to support this innovation in life-saving and life-enhancing medicines.

Care delivery

Private health care firms have responded to consumer demand for more convenient, accessible medical care. For example:

•    TelaDoc offers its customers telephone consultations with physicians from wherever they are, anytime of day, 365 days a year. The average patient gets a call returned by a doctor in less than 40 minutes, and the cost is just $35. TelaDoc physicians also use electronic prescribing to minimize errors and keep a record of patients’ medications.³⁶

•    Also witness the rise of low-cost walk-in medical clinics like RediClinic, Take Care, and MinuteClinic. There are now more than 1,175 retail clinics nationwide, a net increase of 274 new clinics opening in 2008.³⁷  They are usually located in malls or chain stores and are typically staffed by nurse practitioners working in conjunction with local doctors and hospitals to diagnose and treat common illnesses. They are open seven days a week, before and after work, and prices are a fraction of emergency room charges.

These clinics use Mayo Clinic and Cleveland Clinic protocols to diagnose and treat a range of routine health problems, from allergies and bronchitis to poison ivy, ear and bladder infections, and strep throat, usually for a fraction of the cost of hospital emergency rooms. Wal-Mart found that about half of the people visiting its in-store clinics were uninsured and did not have other sources of care. Wal-Mart partners with local hospitals and doctors’ groups to create the clinics in many areas, but it insists that all of them create electronic health records for every patient that are accessible at any other clinic in the chain.

•    Specialty hospitals owned by physicians are showing the value of focused care in delivering high-quality, efficient care with greater patient satisfaction and better health outcomes.

•    Physician practices also are innovating to become more consumer-friendly. Some are opening an hour or more a day for same-day appointments. Others are working with employers to staff on-site clinics so employees can see a doctor without taking time off work.

•    Hospitals are experimenting with new ways to ease crowding in their emergency rooms, visited by an estimated 119 million patients in 2006. There are more than 8,000 walk-in urgent care facilities nationwide staffed by practicing physicians. Inova Health System and Shady Grove Adventist in the Washington, D.C., area and dozens of other hospitals nationwide are opening free-standing emergency facilities to treat everything from lacerations to heart attacks and gunshot wounds. Patients are seen faster, and if they need to be admitted, they are transported by ambulance to nearby hospitals.³⁸ 

•    A growing number of physicians are experimenting with innovative medical practice design,³⁹  including direct medical practices. Physicians, generally internists or family practitioners, contract directly with their patients to offer a medical home, providing medical care, consultation, and coordination with specialists for a fixed fee. The fees range from $60 to $15,000 in some practices, but generally cost about $1,500 a year.⁴⁰  Other physicians are bypassing insurance and simply posting prices for medical services. They find they can charge patients much less because they save on the administrative overhead of insurance billing.

•    Health Advocate, a Pennsylvania-based company, helps consumers find the right doctor for their ailments, work with insurance companies on coverage, and manage other administrative headaches. This service helps consumers, via call centers, who are being given more responsibility to navigate the world of health care and health coverage.⁴¹ 

Innovation in public programs

Medicare Modernization Act

One of the biggest and most visible health policy debates of the Bush presidency involved adding a prescription drug benefit to Medicare. The president, along with the Republican leadership of Congress, worked hard for passage, even though many conservative members of their party opposed legislation that would add a major new benefit to a program already trillions of dollars in the red. But the president and Congress were determined to act because there was so much political pressure on both sides of the aisle to add prescription drug coverage to Medicare.

The structure of the drug benefit created by the Medicare Modernization Act of 2003 (MMA) has been an unusual success, with costs coming in significantly under estimates and with strong approval among Medicare beneficiaries.⁴² 

The MMA created a market-based delivery system for the drug benefit. Many opponents wanted the drug benefit to be delivered like other Medicare benefits, with government deciding what products would be available and how much suppliers and providers would be paid.

Instead, Congress created a new, private sector model for delivery of this largely publicly-funded benefit. Private drug plans compete for the business of seniors, vying to offer the most generous benefit packages for the lowest costs. The result has surprised even the most optimistic observers: Average premium costs are $28 a month this year, down from the $44 expected this year when the legislation was originally passed.⁴³ 

The competitive model is saving taxpayers hundreds of billions of dollars. The 10-year cost of the prescription drug program, originally estimated at $634 billion, has been revised to about $395 billion. The Centers for Medicare and Medicaid Services (CMS) credits competition among plan providers and consumers selecting lower-priced drugs. Health and Human Services Secretary Michael Leavitt also credits the slowing of drug cost trends and higher rebates from drug manufacturers.

In addition, more seniors are benefiting from the program. CMS estimates that the total number of Medicare beneficiaries with drug coverage now is approximately 39.5 million.⁴⁴

This experience shows that the forces that work in the private sector to drive down costs and increase choice also can be integrated into public programs.

Satisfaction

News reports were highly critical after the launch of the drug benefit in January of 2006, particularly in switching those dually-eligible for Medicare and Medicaid to MMA drug plans. But much of the confusion was attributable to the difficulties in synchronizing Medicare and Medicaid databases to track each of the seniors.

Today, the highest satisfaction rates with Part D are among dual-eligible patients. These beneficiaries previously received their drug coverage through Medicaid, and therefore have the most experience with traditional government-run drug coverage. More than 9 out of 10 dual-eligible enrollees say they are satisfied with their new and less-restrictive Part D coverage, and 95 percent say the coverage is working well for them, according to a study by KRC Research.⁴⁵
 
But the success of the program has not stopped congressional leaders from calling for the government to “negotiate” drug prices with the plans. Yet independent experts at both the Office of the Actuary at HHS⁴⁶  and the Congressional Budget Office⁴⁷  have said that government involvement in price negotiation would not lead to lower costs for taxpayers. In fact, it could lead to significant restrictions in access to drugs for seniors. Further, the private plans offering Medicare drug coverage are companies with decades of experience in negotiating prices – experience the government does not have.⁴⁸ 

Private plan competition in Medicare Advantage

Another success of the MMA was keeping private plans in Medicare through the Medicare Advantage Program.

Medicare Advantage gives seniors the option of receiving their health coverage through private plans, including health maintenance organizations (HMOs), preferred provider organizations (PPOs), Medicare medical savings accounts (MSAs), and private fee-for-service (PFFS) plans. In addition, private special needs plans (SNPs) provide comprehensive coordinated care for beneficiaries with severe and chronic illnesses.

Because Medicare Advantage plans offer more comprehensive benefits, most MA enrollees pay less for full medical coverage than they would under traditional Medicare supplemented with individual Medigap coverage. MA plans are particularly attractive to those who do not have other sources of supplemental coverage and are more sensitive to price.⁴⁹  As a result, seniors with the most limited resources have been most attracted to the broader coverage and more predictable costs of MA plans.

In 2008, Medicare Advantage enrollees received basic prescription drug coverage at a lower cost than stand-alone Part D plans. For basic coverage, MA plan drug premiums were, on average, about $6 less than average prescription drug plan premiums for basic coverage.⁵⁰  Many Medicare beneficiaries have the option of enrolling in MA plans that provide a drug benefit at no extra cost.

While MMA boosted payments for MA plans, it also provides more than $1,000 a year in added health services to the average beneficiary enrolled, or an average of $96 a month over standard Medicare coverage.⁵¹ 

The MMA also offers new incentives for private plans to provide health care to Medicare beneficiaries with serious and chronic illnesses through Special Needs Plans. Special Needs Plans provide specialized care for patients with severe and chronic illnesses, including diabetes, mental disorders, congestive heart failure, and HIV/AIDS.⁵²  Many SNP patients are eligible for both Medicare and Medicaid, and some are institutionalized. Similar to other types of plans, SNPs receive risk-adjusted payments to ensure that the greater health needs of these patients are met.

Enrollment in all private Medicare health plans has now reached an all-time high of more than 10 million beneficiaries, up from 5.3 million in 2003,⁵³ and the percentage of beneficiaries who have chosen Medicare Advantage has grown from 12.1 percent of all Medicare beneficiaries in 2004 to 20 percent in 2008.⁵⁴ 

Now, seniors who rely on these plans once again risk losing their source of more comprehensive medical and drug coverage as Congress threatens to cut payments to Medicare Advantage.⁵⁵ 

Medicaid and SCHIP

The administration has encouraged states to be innovative with public programs, especially Medicaid. The Deficit Reduction Act, enacted in early 2006, provided new flexibility to the states in designing their Medicaid program. HHS Secretary Leavitt, a former governor of Utah, subsequently met with nearly all governors to talk with them about ways the federal government could work with them to help better match the resources of the state with the needs of their citizens.

As a result, governors have been policy entrepreneurs. In Florida, under the leadership of former Gov. Jeb Bush, private companies now are competing to offer coverage to Medicaid patients, and patients have new incentives to spend that money wisely. In Indiana, Gov. Mitch Daniels has created a new program that allows the uninsured to obtain coverage in a model that looks like an HSA.⁵⁶ In Oklahoma, Gov. Brad Henry has helped the uninsured and low-income workers to purchase private health coverage with Medicaid dollars.

The administration also has worked to protect the focus of public programs. The president and Congress waged a major battle in 2007 over expansion of SCHIP to cover higher-income children.

The debate was not over whether to give poor kids health care or whether this program should continue. The president and Democratic leaders in the Congress agreed that it should. The debate was over who should be covered and whether to extend benefits to middle-income children. Mr. Bush believed the bill expanded taxpayer-funded health coverage too far up the income ladder. Two-thirds of children who do not have health insurance are eligible for federal help through either SCHIP or Medicaid. The president insisted that Congress's first priority should be to make sure those poorer, uninsured children are taken care of first. He said states should first enroll 95 percent of the children now eligible for public coverage (those in families living on wages that are under 200 percent of poverty) before states open the program to children in higher-income families.⁵⁷ 

The president’s veto of the major expansion of SCHIP was upheld. He was convinced that putting millions more children on taxpayer-supported coverage, including many who have private insurance, was not the right choice or the right expenditure of taxpayer dollars.

One of the quiet accomplishments of the Bush administration has been to double federal financing for community health centers. As a result, 1,297 clinics have been created or expanded in medically underserved areas over the last eight years.⁵⁸  These clinics are often the only dependable source of basic medical care for people in poor urban neighborhoods and in isolated rural areas for people needing prenatal care, childhood immunizations, asthma treatment, cancer screenings, etc. The clinics are a vital part of the nation’s health care safety net and serve one of every three people who live in poverty and one of every eight without insurance.

International efforts

The president was celebrated during his trip to Africa in 2008 for his work helping to raise awareness and provide new treatment opportunities for AIDS.

According to The Washington Post:⁵⁹ 

The Africa trip provides a rare opportunity to showcase a part of his record that draws wide praise from across the ideological spectrum. By all accounts, Bush has done more to combat the AIDS pandemic that has devastated Africa than any other president, and even his harshest critics usually credit him for paying attention to a region often neglected by Washington. Much of the world has soured on the United States, but surveys by the Pew Global Attitudes Project show that Africa is one place where it is held in high regard.

Many liberals who disagree with Bush on other issues said he has reason to highlight his Africa record. “There have really been several achievements he can be proud of,” said Rep. Donald M. Payne (D-N.J.), chairman of the Congressional Black Caucus. “This is a legacy. It's real, and it's recognized.” And yet, because of the Iraq war, Payne noted, “it will be overshadowed at the end of the day.”

White House officials reject the notion that the trip is about legacy, but they do characterize it as an attempt to focus attention on what Bush has done in Africa. “The trip will highlight how the United States has partnered closely with the people of Africa to address the challenges of disease, poverty and security and how, together, we've really made remarkable progress,” said national security adviser Stephen J. Hadley.

Bush overcame resistance within his own White House in his first term to launch a five-year, $15 billion war on HIV in Africa and elsewhere known as the President's Emergency Plan for AIDS Relief, or PEPFAR. About 1.3 million people in Africa have received life-saving anti-retroviral medication as part of what experts call the largest international health initiative dedicated to one disease in history.

“His administration is really the first one to put the AIDS global pandemic on the policy map,” said Josh Ruxin, a Columbia University professor who runs health programs in Rwanda. “There was a lot of talk in the Clinton administration, but there wasn't so much doing. It was the Bush administration that got out of talking about millions for AIDS and instead talking about billions.”

Unfinished agendas

While the Bush administration has had successes on the health care front, other proposals that stayed on the drawing board could provide an important road map for the future.

President Bush offered proposals early in his administration to expand access to private health coverage for the uninsured through refundable tax credits. Later, in his 2007 State of the Union speech, he offered a bold plan for modernizing the tax treatment of health insurance with his transformative idea to move toward a system of deductions and credits designed to give individuals more control over their coverage.⁶⁰ It, too, stalled in Congress. A small program of refundable tax credits was enacted, directed at workers displaced by trade as part of the Trade Adjustment Assistance Act of 2002. This program shows the folly of overregulation and government micromanagement.

Other unfinished agendas involve putting Medicare on a sustainable path for the future by introducing a premium support model for private coverage. Medicare and Medicaid still are largely rule-driven programs, rife with fraud, waste, and inefficiency. And the Food and Drug Administration is in desperate need of modernization. The Critical Path Initiative, developed under the leadership of former FDA commissioner Mark McClellan, points the way. The White House and HHS also convened a Medicaid Commission in 2005 that proposed a number of reforms to modernize and sustain this program.⁶¹ But the proposals were not pursued after the change in party control of Congress in 2006, and significant problems remain. 

The path forward

No one in Washington, no matter how brilliant he or she may be, can possibly be smart enough to devise a centrally-controlled system that can meet the health care needs of 300 million Americans. Only the genius of a dynamic market can respond to the demands of consumers for better quality at more affordable prices through efficiency and innovation. As this paper demonstrates, there is ample opportunity in the health sector to continue this momentum.
 
Many problems will await the next president. CMS recently announced that health costs are expected to double by 2017.⁶³  The costs of public programs threaten to squeeze out other public services provided by federal and state governments. Millions of Baby Boomers are aging into Medicare, putting new pressures on the system. Millions of people continue to lose their health insurance when they lose or change jobs. There is a growing need for electronic medical records, better chronic care management, and more incentives for people to purchase long-term care coverage. These are all huge challenges for the next president to tackle.

But it is important to look at the successes of the Bush presidency in showing new ways to think about solutions. Competition can work in public programs. People will respond to new incentives and tools to seek more affordable health insurance. Competition works, even in health care.

Grace-Marie Turner is president of the Galen Institute, a non-profit research organization focusing on free market ideas for health reform. She can be reached at gracemarie@galen.org. She gratefully acknowledges the assistance of Research Director Tara Persico in preparing this report.

The hard work and leadership of the Bush administration’s health policy advisors, in the White House and at HHS and the Treasury Department, have been vital to the progress described in this report.

¹ Micah Hartman, Anne Martin, Patricia McDonnell, Aaron Catlin, and the National Health Expenditure Accounts Team, “National Health Spending in 2007: Slower Drug Spending Contributes to Lowest Rate of Overall Growth Since 1998,” Health Affairs, January/February 2009, at http://content.healthaffairs.org/cgi/content/abstract/28/1/246.

² Ibid.

³ "Reducing Corporate Health Care Costs: 2006 Survey," Human Capital Practice of Deloitte Consulting LLP and the Deloitte Center for Health Solutions, 2006, at http://www.deloitte.com/dtt/cda/doc/content/us_chs_red_cor_hea_costs_0106.pdf.

⁴ President George W. Bush, "State of the Union 2007," Office of the Press Secretary, The White House, January 23, 2007, at http://www.whitehouse.gov/news/releases/2007/01/20070123-2.html.

⁵ Grace-Marie Turner, “Follow the Money,” Health Policy Matters Newsletter, Galen Institute, December 19, 2008, at http://www.galen.org/component,8/action,show_content/id,14/blog_id,1136/category_id,0/type,33/.

Grace-Marie Turner, “Centralization,” Health Policy Matters Newsletter, Galen Institute, December 5, 2008, at http://www.galen.org/component,8/action,show_content/id,14/blog_id,1128/category_id,0/type,33/.

⁶ PPO: Preferred Provider Organization
   POS: Point of Service Organization
   MCO: Managed Care Organization
   HMO: Health Maintenance Organization
   HSA: Health Savings Account
   HRA: Health Reimbursement Account
   FSA: Flexible Spending Account
   FFS: Fee-For-Service

Benefits and Compensation Glossary, 11th Edition, Judith A. Sankey, Ed., International Foundation of Employee Benefit Plans, March 30, 2005, at http://www.ifebp.org/Resources/News/ResearchTools/Glossary/default.htm.
 
⁷ Victoria Colliver, "Preventive health plan may prevent cost increases," San Francisco Chronicle, February 11, 2007, at http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2007/02/11/BUG02O20R81.DTL&type=printable.  

Scott Shreeve, “Safeway uses incentives and transparency to improve employee health,” The Health Care Blog, October 29, 2008, at http://www.thehealthcareblog.com/the_health_care_blog/2008/10/safeway-uses-in.html .

⁸ Ibid.
 
⁹ "Target Offers Employees Health Savings, Reimbursement Accounts, Plans to Eliminate Traditional Health Plans, USA," Medical News Today, May 18, 2006, at http://www.medicalnewstoday.com/articles/43453.php.

¹⁰ "Thought Leaders: John Mulligan, Vice President, Pay & Benefits, Target Corporation," hub Magazine, Summer 2008, at http://www.hubmagazine.net/printer.php?ID=180.

¹¹ “Wal-Mart Announces Improvements to 2008 Health Benefits Package,” Wal-Mart Stores, Inc., September 18, 2007, at http://walmartstores.com/PrintContent.aspx?id=6731.

¹² John Stossel, “Control Your Own Health Care,” RealClearPolitics, October 3, 2007, at http://www.realclearpolitics.com/articles/2007/10/control_your_own_health_care.html.

“Whole Foods Market Benefits,” Whole Foods Market, at http://www.wholefoodsmarket.com/careers/benefits_us.php.

¹³ Introduced by Rep. Paul Ryan, R-WI.

¹⁴ “January 2008 Census Shows 6.1 Million People Covered by HSA/High-Deductible Health Plan,” America’s
Health Insurance Plans, April, 2008, at http://www.ahipresearch.org/pdfs/2008_HSA_Census.pdf.

¹⁵ Total U.S. health benefit cost rose by 6.1 percent in 2007. "Mercer National Survey of Employer-Sponsored Health Plans,” Mercer LLC, November 19, 2007, at http://www.mercer.com/summary.jhtml?idContent=1287790.  

¹⁶ "Reducing Corporate Health Care Costs: 2006 Survey," Human Capital Practice of Deloitte Consulting LLP and the Deloitte Center for Health Solutions, 2006, at http://www.deloitte.com/dtt/cda/doc/content/us_chs_red_cor_hea_costs_0106.pdf.

¹⁷ Meredith Baratz and Todd Berkley, “Consumerism in Health: A Conversation with Galen Institute and the Consensus Group,” UnitedHealthcare, January 7, 2009.

¹⁸ "Mercer National Survey of Employer-Sponsored Health Plans,” Mercer LLC, November 19, 2008, at http://www.mercer.com/summary.htm?idContent=1328445.   

¹⁹ “Costs and Benefits of Individual and Family Health Insurance Plans,” Forrester Research and eHealthInsurance, November, 2008, at http://www.ehealthinsurance.com/content/expertcenterNew/eHealthCBreport2008FINAL.pdf.

²⁰ Leading health insurance companies recommend a private-public partnership to guarantee access to health coverage in the individual market. Under the AHIP proposal, people with medical expenses expected to be up to twice the statewide average would be able to purchase policies for no more than 1½ times the standard market rate. For those with the highest medical costs, the states would serve as the safety net by creating new Guaranteed Access Plans. The plan enhances access to insurance for those who are insurable and provides options for those who likely would be denied coverage or whose costs would drive up premiums for everyone else. http://www.ahip.org

²¹ “Quick Facts: Health Savings Accounts,” Assurant Health, at http://www.assuranthealth.com/corp/ah/AboutAssurantHealth/HSAFactSheet.htm.

Maureen E. Sullivan, “Health Plan Initiatives, Trends and Research in Consumer-Driven Care,” BlueCross BlueShield Association, October 20, 2008, at http://www.bcbs.com/news/bluetvradio/consumerdriven2008/.

²² Meredith Baratz and Todd Berkley, “Consumerism in Health: A Conversation with Galen Institute and the Consensus Group,” UnitedHealthcare, January 7, 2009.

²³ “Health Savings Accounts (HSAs) Provide Important Retirement Savings Protection But Remain Too Low-Profile, According to FRC,” Financial Research Corporation, January 17, 2008, at http://www.frcnet.com/Press_Releases_07/Health-Savings-Accounts-Provide-Important-Retirement-Savings-Protection-But-Remain-Too-Low-Profile.pdf.

²⁴ "Employee Benefit Research Institute News," Employee Benefit Research Institute, December, 2008.  Vol. 29, No. 12. http://www.ebri.org

²⁵ "HSA Market News," Corporate Research Group, Volume 5, Number 6, June 2008, at http://www.buckconsultants.com/buckconsultants/portals/0/documents/PUBLICATIONS/HSA_Market_News_June2008.pdf.

²⁶ "Healing Health Care," Sramana Mitra, Forbes, November 21, 2008.  
http://www.forbes.com/2008/11/20/mitra-healthcare-innovation-tech-enter-cx_sm_1121mitra.html.

²⁷ “Aetna and Healthline Networks Announce First Ever Personalized Health and Health Benefits Search Engine – Aetna SmartSource,” Aetna Inc., March 12, 2008, at http://www.aetna.com/news/newsReleases/2008/0312.html.

²⁸ “Aetna Research Identifies Four Keys to Success for Consumer-Directed Health Plans,” Aetna Inc., January 31, 2008, at http://www.aetna.com/news/2008/0131.htm.

²⁹ Ibid.

³⁰ U.S. Preventive Medicine, http://www.uspreventivemedicine.com.

³¹ Murray Aitken, Ernst R. Berndt, and David M. Cutler, “Prescription Drug Spending Trends in the United States: Looking Beyond the Turning Point,” Health Affairs Web Exclusive, December 16, 2008, at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.1.w151.

³² Grace-Marie Turner, “Gold Standard,” Health Policy Matters Newsletter, Galen Institute, March 14, 2008, at http://www.galen.org/component,8/action,show_content/id,14/blog_id,1030/category_id,0/type,33/.

Carole W. Cranor, Barry A. Bunting, and Dale B. Christensen, “The Asheville Project: Long-Term Clinical and Economic Outcomes of a Community Pharmacy Diabetes Care Program,” Journal of the American Pharmaceutical Association, Vol. 43, No. 2, March/April 2003, at http://www.aphafoundation.org/searchable_files/filemanager/JAPhA_Long%20term.pdf.

Toni Fera, Benjamin M. Bluml, William M. Ellis, Cynthia W. Schaller, and Daniel G. Garrett, “The Diabetes Ten City Challenge: Interim Clinical and Humanistic Outcomes of a Multisite Community Pharmacy Diabetes Care Program,” Journal of the American Pharmaceutical Association, Vol. 28, No. 2, March/April 2008, at http://www.diabetestencitychallenge.com/pdf/DTCCInterimReport.pdf.

³³ Jared A. Favole and Jennifer Corbett Dooren, “FDA Approved More Drugs in 2008,” The Wall Street Journal, January 2, 2009, at http://online.wsj.com/article/SB123084693842347229.html.

³⁴ Frank Lichtenberg, "Benefits and costs of newer drugs: An update," National Bureau of Economic Research Working Paper #8996, June 2002, at http://papers.nber.org/papers/w8996.pdf.
 
³⁵ "Pharmaceutical Industry Profile 2008," Pharmaceutical Research and Manufacturers of America, March 2008, at http://www.phrma.org/files/2008%20Profile.pdf.

³⁶ http://www.teladoc.com www.teladoc.com

³⁷ “Merchant Medicine News: U.S. Retail Clinic Market Report,” Merchant Medicine, Volume 2, Number 1, January 1, 2009, at http://www.merchantmedicine.com/home.cfm.

³⁸ "ER Care, Stat!" by Sandra G. Boodman, The Washington Post, September 16, 2008, at http://www.washingtonpost.com/wp-dyn/content/article/2008/09/12/AR2008091203002.html.

³⁹ Society for Innovative Medical Practice Design at http://www.simpd.org.
 
⁴⁰ David Albenberg, MD, “Concierge Medicine: The Pitfalls and the Pendulum,” Fall 2008, at http://pri-med.com/DigitalAssets/Shared%20Files/Syllabus%20Files_Fall08/C&E/Mid-Atlantic/Practice%20Solutions/Session11-Concierge%20Medicine%20Part%201FNL.pdf.

⁴¹ Mike Stobbe, "Booming Business Helps Patients Navigate Medicine,"  Associated Press, July 25, 2008, at http://www.bcbs.com/news/national/booming-business-helps-patients-navigate-medicine.html.

⁴² The president also had to wisdom to appoint Mark McClellan, M.D., Ph.D., as administrator of the Centers for Medicare and Medicaid Services to implement the MMA.  His leadership and belief in the value of market-based policies were a transformative force in the success of the MMA.  Dr. McClellan convinced private plans to participate and one of the only criticisms is that he was too successful because seniors had so many choices of plans.  

⁴³ “Lower Medicare Part D Costs Than Expected in 2009,” Centers for Medicare and Medicaid Services, August 14, 2008, at http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=3240&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date.

⁴⁴ “Medicare Prescription Drug Benefit’s Projected Costs Continue to Drop,” Centers for Medicare and Medicaid Services, January 31, 2008, at http://www.cms.hhs.gov/pf/printpage.asp?ref=http://www.cms.hhs.gov/apps/media/press/release.asp?Counter=2868&chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&intNumPerPage=10&srchOpt=0&checkDate=&checkKey=2&pYear=&srchType=2&numDays=0&showAll=1&srchData=part+d&keywordType=All&year=0&cboOrder=date&desc=.

⁴⁵ "Seniors’ Opinions About Medicare Rx: Third Year Update,” KRC Research and Medicare Today, October 2008, at http://www.medicaretoday.org/pdfs/2008Survey.pdf.

⁴⁶ Memo from Richard S. Foster, Chief Actuary, Centers for Medicare & Medicaid Services, to Mark B. McClellan, Administrator, Centers for Medicare & Medicaid Services, February 11, 2005.

⁴⁷ Letter from CBO Director Douglas Holtz-Eakin to Senate Majority Leader William H. Frist, January 23, 2004, at http://www.cbo.gov/showdoc.cfm?index=4986&sequence=0.

⁴⁸ “The Facts: Medicare Part D and Prescription Drug Prices,” This fact sheet was jointly prepared by health policy experts from the American Enterprise Institute, the Center for Medicine in the Public Interest, the Galen Institute, The Heritage Foundation, the Institute for Policy Innovation, the Institute for Research on the Economics of Taxation, the National Center for Policy Analysis, and the Pacific Research Institute, January 9, 2007, at http://www.galen.org/fileuploads/PartDandPrices.pdf.

⁴⁹ Marsha Gold, Sc.D., Maria Crupples Hudson, and Sarah Davis, “2006 Medicare Advantage Benefits and Premiums,” Mathematica Policy Research, Inc., November 2006, at http://assets.aarp.org/rgcenter/health/2006_23_medicare.pdf.

⁵⁰ The Hon. Kerry Weems, Acting Administrator, Centers for Medicare and Medicaid Services, testimony before the House Ways and Means Subcommittee on Health, February 28, 2008, at http://waysandmeans.house.gov/media/pdf/110/Weems.pdf.

⁵¹ Ibid.

⁵² “Special Needs Plans: Fact Sheet and Data Summary,” Centers for Medicare and Medicaid Services, at http://www.cms.hhs.gov/SpecialNeedsPlans/Downloads/finalSNPfactsheetsum2-14-06.pdf.

⁵³ “Medicare: A Primer 2009,” The Henry J. Kaiser Family Foundation, January 2009, at http://www.kff.org/medicare/upload/7615-02.pdf.

⁵⁴ The Hon. Kerry Weems, Acting Administrator, Centers for Medicare and Medicaid Services, testimony before the House Ways and Means Subcommittee on Health, February 28, 2008, at http://waysandmeans.house.gov/media/pdf/110/Weems.pdf.

Robert E. Moffit, Ph.D., “Medicare Advantage: The Case for Protecting Patient Choice,” Web Memo #1836, The Heritage Foundation, March 6, 2008, at http://www.heritage.org/Research/HealthCare/wm1836.cfm.

“Medicare Advantage: Increased Spending Relative to Medicare Fee-for-Service May Not Always Reduce Beneficiary Out-of-Pocket Costs,” Government Accountability Office, February 2008, at http://www.gao.gov/new.items/d08359.pdf.

⁵⁵ “The Facts: Medicare Advantage,” This fact sheet was jointly prepared by health policy experts from the American Enterprise Institute, the Center for Medicine in the Public Interest, the Galen Institute, The Heritage Foundation, the Institute for Policy Innovation, the Institute for Research on the Economics of Taxation, the National Center for Policy Analysis, the Pacific Research Institute, and Project Hope, March 21, 2007, at http://www.galen.org/fileuploads/MAFactSheet.pdf.

⁵⁶ Grace-Marie Turner, “Indiana’s Free-Market Idea to Help the Uninsured Get Coverage,” Galen Institute, December 31, 2008, at http://www.galen.org/component,8/action,show_content/id,13/category_id,8/blog_id,1139/type,33/.

⁵⁷ Grace-Marie Turner, “Reforming the State Children’s Health Insurance Program,” Galen Institute, December 8, 2008, at http://www.galen.org/component,8/action,show_content/id,13/category_id,8/blog_id,1135/type,33/.  

⁵⁸ "Expansion of Clinics Shapes Bush Legacy," Kevin Sack, The New York Times, December 26, 2008, at  http://www.nytimes.com/2008/12/26/health/policy/26clinics.html.

59 Peter Baker, "Bush Heads to Africa, Scene of Successes on Health Policy," The Washington Post, February 26, 2008, at http://www.washingtonpost.com/wp-dyn/content/story/2008/02/15/ST2008021503424.html.

⁶⁰ In President Bush’s State of the Union Address, January 23, 2007, he proposed a standard tax deduction for health insurance. Families with health insurance will pay no income or payroll taxes on $15,000 of their income. Single Americans with health insurance will pay no income or payroll taxes on $7,500 of their income.  In addition he proposed a payroll tax credit to provide additional assistance to those at the lower-end of the income scale.  For those without employer sponsored coverage, the proposal would have meant a substantial tax savings – $4,500 for a family of four making $60,000 a year.    http://www.whitehouse.gov/news/releases/2007/01/20070123-2.html.

Grace-Marie Turner, “Toward Free-Market Health Care,” Heritage Lecture #1019, Delivered on March 26, 2007 at a meeting of the Conservative Women’s Network held at The Heritage Foundation and co-sponsored by the Clare Booth Luce Policy Institute and The Heritage Foundation, at http://www.heritage.org/Research/HealthCare/hl1019.cfm.

⁶¹ The Honorable Don Sundquist and the Honorable Angus King, “Final Report and Recommendations,” Medicaid Commission, December 29, 2006, at http://aspe.hhs.gov/medicaid/122906rpt.pdf.  

⁶² Scott Gottlieb, “What Medicaid tells us about government health care,” The Wall Street Journal, January 8, 2009, at http://online.wsj.com/article/SB123137487987962873.html.

⁶³ Sean Keehan, Andrea Sisko, Christopher Truffer, Sheila Smith, Cathy Cowan, John Poisal, M. Kent Clemens the National Health Expenditure Accounts Projections Team, “Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming to Medicare,” Health Affairs, Vol. 27, No. 2, March/April 2008, at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.27.2.w145. /Shared%20F