Clinton Redux

Bottom line: The plan is carefully focus-group tested, without the hubris of 14 years ago when the White House dropped 1342 pages of legislation on the desks of members of Congress. The language now stresses choice, allowing people to keep the private plans they are in, and promising no new government bureaucracy.

The lightening rod in the proposal is the federal mandate that everyone would be required to have health insurance and that employers would, for the first time, be required to pay. Government unavoidably would get into the business of defining what an acceptable policy would be, determining how much people and companies would have to pay for this government-defined coverage, and setting enforcement provisions for those who don't comply. There is every indication that the insurance required would be the Cadillac coverage that members of Congress have.

Drug companies would be required to offer "fair prices" (read, price controls), insurers would play by a much more stringent set of rules, and competition in the Medicare program would be a thing of the past.

So she offers an individual mandate and a defacto employer mandate, plus expansion of existing government programs such as Medicaid and SCHIP, creation of a new Medicare-like program, steps toward price controls, new federal subsidies, and much more stringent regulation of one-sixth of the economy. And all of this would be accomplished without new government bureaucracies.

There are several ideas in the plan that the free-market policy community supports, including refundable tax credits for lower-income people to help them buy coverage, the beginnings of a cap on the exclusion that exempts job-based health insurance from income taxes for employees, and an insurance buying pool that looks like the Federal Employees Health Benefits Program. There?s something for everyone.

We should be very glad that the voters have more than a year to decide what they think about the plan.

****************

SCHIP: Congressional negotiators are closing in on a deal on the State Children's Health Insurance Program, with the House reportedly grudgingly agreeing to go along with most of the provisions in the Senate bill. But either version moves SCHIP beyond its mission. The reauthorization and expansion legislation still threatens to become a Christmas tree of government health insurance expansion well into the middle class.

I was on a panel on Wednesday morning at the Urban Institute opposite my friend, health policy expert Stan Dorn, to discuss reauthorization and expansion of SCHIP. I argued that we need to focus the program on the many children under 200% of poverty who aren't enrolled, arguing that it would be a disservice to them to give states strong incentives to focus on expanding coverage to kids from higher-income families and crowd out the private coverage they already have. Why would we do that?

While I argued for preserving the focus of the program for poor children, Stan argued on behalf of federalism, saying that states need the flexibility to expand coverage to higher-income populations. I agreed and said they can do that now as long as they use their own money to pay for it.

We had a good debate and actually revealed many places where two people from the right and from the left can agree. Urban Institute President Bob Reischauer did an excellent job of introducing the subject and moderating our discussion. Kaiser has a webcast which you can view at: www.kaisernetwork.org.

Some quick items:

• Thank you for your many kind messages about my appearance last Friday evening on John Stossel's "20/20" special on ABC News, "Whose Body Is It Anyway? Sick in America." I thought John did a terrific job in making what many people believe is a boring and complex issue come alive with rich visuals and great examples. It's impossible to forget watching him load package after package of steaks into a shopping cart, explaining that is what he would do if he had grocery insurance that paid all the bills. He built the program into a compelling story about the value of competition and free markets. What a refreshing change after months and months of Michael Moore's "SiCKO!" In case you missed Stossel, here is a link to the ABC site to order a copy of the DVD.

   

• Wal-Mart released this week details of its impressive new health insurance offerings for its 1.3 million (!) "associates."

  Workers can customize their health plans with many choices of deductibles, premiums, and credits that are deposited to personal accounts for routine health spending. One plan carries a premium of as little as $9 a month, with access to 2,400 generic drugs for $4 each, a $100 credit, and no lifetime maximum. Yes, the plan has a $1,000 deductible, which is high for someone earning near the minimum wage, but this is real insurance protection against the risk of major hospital and doctor bills. And for $9 a month! Another plan is a lot like the coverage that members of Congress have -- and it costs workers only $62 a month.

  Wal-Mart is a tough negotiator, it has a huge pool of workers to spread the risk, and it operates under ERISA so it isn?t confronted with the plethora of state rules and regulations that drive up prices and drive out competition.

  More choices at a lower cost? Who said it couldn?t be done?

   

• Correction: I hate it when I have to do this, but in my rush to catch a plane to give a speech, I botched the lead in last week's newsletter. It should have said: "Premiums for job-based health insurance increased by 6.1% this year, the lowest rate of increase since 1999..." For some reason, I said that premiums had fallen. Not so. Would that were the case! We pride ourselves on speed and accuracy, but that time, I missed the mark.

   

• Finally, we will skip next week's issue of Health Policy Matters because I will be in Rome, speaking at the Vatican at a conference at the Pontifical Gregorian University on "Health, Technology, and the Common Good." I also will give a presentation at a forum sponsored by the free-market Italian think tank, Istituto Bruno Leoni run by its tireless director Alberto Mingardi. I'll report back to you. Arrivederci!

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

Market Forces in Health Care

The Market Is the Answer
Grace-Marie Turner, Galen Institute
USA Today, 09/19/07

Sen. Hillary Clinton's new health reform proposal promises more choice, lower costs and no new government bureaucracies?but it also provides countless opportunities for government micromanagement of the health sector. The centerpiece of her plan to achieve universal health coverage is an individual mandate. This inevitably means that government would decide what kind of health insurance we must have, what must be covered and what penalties we will face if we don't comply. Although the plan offers refundable tax credits to help those with lower-incomes afford coverage, she misses an opportunity to allow health insurance to become portable by freeing up the tax subsidy that ties health insurance to the workplace for 175 million Americans.

Dr. Hillary Will See You Now
National Review Online, 09/18/07

National Review Online asked several healthcare experts to comment on Sen. Hillary Clinton's health care plan:

• Michael Cannon, Cato Institute: Clinton would require that all employers offer coverage, that all residents buy it, and that Washington dictate its price and content.
• James Capretta, Ethics and Public Policy Center: Does anyone doubt a Clinton administration would eventually choose to impose limits on premiums to spare consumers and the government the added cost? That's when her plan becomes government-run health care.
• John Goodman, NCPA: The right response to Hillary is to reject her love affair with bureaucratic institutions and focus instead on the value of empowering patients and doctors and creating a real market for medical care.
• Dr. David Gratzer, Manhattan Institute: The end result is a Washington that insures more people and dictates the terms of the insurance of everybody else, and costs too much.
• Robert Moffit, The Heritage Foundation: Insurance markets differ radically in the states, and innovative state leaders are experimenting with different insurance rules for expanding both consumer choice and competition. Washington did not know best in 1993, and it still doesn't.
• Sally Pipes, Pacific Research Institute: Like the 1993 fiasco, Hillary's current scheme would explode government spending, bolster bureaucratic regulation, and push people into government-run insurance.
• Grace-Marie Turner, Galen Institute: The plan would regulate health insurers until they become little more than government-managed utilities, quashing competition and innovation.

The Impact of Recent Republican Health Insurance Reform Proposals
Stephen T. Parente, Ph.D. and Roger Feldman, Ph.D., University of Minnesota
Presented at the American Enterprise Institute, 09/20/07

Parente and Feldman find that combining the most recent models of consumer-driven health plans with a reform of the tax treatment of health insurance would substantially increase overall health insurance coverage. They estimate that adopting President Bush's plan for a standard health deduction -- which levels the playing field between employer-purchased insurance and individual insurance -- could reduce the ranks of the uninsured by more than 20 million people as early as 2009. A different universal tax credit proposal by Senator Tom Coburn (R-Okla.) and several Senate colleagues would have similarly powerful effects in reducing the ranks of the uninsured and be more cost-effective. Coverage growth under both policy scenarios would diminish over time if health care premium growth continues to significantly exceed real economic growth, but changes in the tax treatment of health insurance would provide substantial improvement over the status quo.

Republicans Can Win on Health Care
Karl Rove
The Wall Street Journal, 09/18/07

Conservatives must put forward reforms aimed at putting the patient in charge. Government can help poorer and older Americans get quality health care by leveling the tax playing field, providing tax-free savings for health costs, increased portability, greater transparency, and building on the progress already made by putting patients in charge and letting competition work.

Health Care Spending

U.S. Health Care Spending: Comparison with Other OECD Countries
Chris L. Peterson and Rachel Burton
Congressional Research Service, 09/17/07

In 2004, the U.S. spent more than twice as much on health care as the average country in the Organization for Economic Cooperation and Development (OECD), at $6,102 per person. The U.S. has nearly twice as many CT scanners per capita as the OECD average and three times as many MRI machines. The U.S. also performs far more heart procedures per population than the average OECD country, an above-average amount of organ transplants per capita, and is one of eight countries in which wait times for elective surgery are reported to be low.

Health Spending by State of Residence, 1991 - 2004
Anne B. Martin, Lekha Whittle, Stephen Heffler, Mary Carol Barron, Andrea Sisko, and Benjamin Washington, Centers for Medicare and Medicaid Services, Office of the Actuary
Health Affairs Web Exclusive, 09/18/07

The study finds that the New England and Mideast regions claimed eight of the top ten states in per capita health spending in 2004, consuming an average of $6,345 per person. The states with the lowest per capita spending were typically located in the Southwest and Rocky Mountain regions, accounting for an average of $4,244 per person -- nearly 20% lower than the U.S. average. These states also tended to exhibit lower-than-average per enrollee Medicare and Medicaid spending.

State Issues

Shape Up SCHIP
Grace-Marie Turner, Galen Institute
National Review Online, 09/18/07

Congressional lawmakers will actually be harming needy children if they move to expand SCHIP to cover kids in higher-income families, as both houses have voted to do. If Congress were truly concerned about covering low-income children, then it would acknowledge that two-thirds of America's uninsured kids are already eligible for either Medicaid or SCHIP, but aren't enrolled. SCHIP funds would be better spent helping parents purchase the health coverage they believe is best for their children, including adding them to policies offered at their workplaces.

UPCOMING EVENTS:

Biotechnology and the Patent System: The Economic Implications of the Proposed Patent Reform Act of 2007
American Enterprise Institute Book Forum
Tuesday, September 25, 2007, 8:30 a.m. - 12:15 p.m.
Washington, DC

Should the Government Insert Itself between Dying Patients and Unproven Therapies?
Cato Institute Policy Forum
Tuesday, September 25, 2007, 12:00 p.m. (Lunch included)
Washington, DC

State Children's Health Insurance Program: It's Role in Covering Children and the Coverage Debate
RAND/GPPI's 4th Annual Fall/Winter Seminar Series
Tuesday, September 25, 2007, 12:00 p.m. - 1:20 p.m.
Washington, DC
For more information, contact Vicki Wunderle at 703-413-1100 ext 5257 or vicki@rand.org.

The Budget Deficit and the Soaring Costs of Health Care
The Brookings Institution Opportunity 08 Event
Wednesday, September 26, 2007, 9:30 a.m. - Noon
Manchester, NH

SiCKO and Its Malcontents: Health Care on Film
Pacific Research Institute Event
Thursday, September 27, 2007, 6:30 p.m. - 8:30 p.m.
West Hollywood, CA

How American Healthcare Really Works
Istituto Bruno Leoni Luncheon
Thursday, September 27, 2007, 12:30 p.m.
Rome, Italy
Grace-Marie Turner will speak about the realities of the American health care system.

Health, Technology, and the Common Good
Acton Institute Event
Friday, September 28, 2007, 9:00 a.m. - 6:00 p.m. (Lunch included)
Rome, Italy
Grace-Marie Turner will speak about innovation in the U.S. health care system during the afternoon session.

Community Forum on Colorado Health Care Reform
CSU Center for Public Deliberation and the League of Women Voters of Larimer County Event
Saturday, September 29, 2007, 9:00 a.m. - Noon
Fort Collins, CO

ABMA Manufacturers Conference & Trade Fair
American Boiler Manufacturers Association Event
October 1-3, 2007
Abilene, TX
Grace-Marie Turner will discuss post election changes to the U.S. health care system on Wednesday, October 3. For more information, contact Cheryl Jamall at cheryl@abma.com.

Benefits of Innovation for Public Health in Developing Countries: A Focus on Latin America
Institute for Policy Innovation and International Policy Network Briefing
Monday, October 1, 2007, 12:30 p.m. - 2:30 p.m.
Washington, DC
For more information, contact Erin Fitch at 972-874-5143 or erinfitch@ipi.org.

Universal Health Care Coverage in the United States
Global Health Initiative at the Woodrow Wilson Center Director's Forum
Wednesday, October 3, 2007, 10:00 a.m. - 11:30 a.m.
Washington, DC

Health Care Cost and Access Challenges Persist
Center for Studying Health System Change Event
Thursday, October 4, 2007, 8:00 a.m. - Noon (Breakfast included)
Washington, DC

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. Health Policy Matters is published by the Galen Institute, a not-for-profit public policy organization specializing in information and education on health policy. For more information about the newsletter and our organization, please visit our website at www.galen.org.

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The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.