Over to Congress

The administration's health care proposals, which the president outlined last week in his State of the Union address, have received an enthusiastic welcome among free-market legislators on Capitol Hill, with members anxious to sponsor legislation covering all or parts of the package (if they haven't already).

There clearly was a hunger for the president to make health care a top priority; members want to show they can offer relief from high health insurance costs and new options to their constituents before elections this November.

One of the key people in the debate this year will be Ways and Means Chairman Bill Thomas, whose committee had jurisdiction over much of the Medicare Modernization Act, including the part that created Health Savings Accounts. Chairman Thomas' six-year term as chairman of the powerful tax-writing committee ends this year, and my guess is that he will work hard to get health care legislation to the floor this year.

The trick will be getting the Senate to go along, but as we report below in a floor statement by Sen. Orrin Hatch of the counterpart Senate Finance Committee, there is hope. Also, key committee chairmen on the Senate side, such as Chairman Mike Enzi of the Senate Health, Education, Labor, and Pensions committee, have been working hard to negotiate compromises that can pass the Senate's tricky legislative hurdles.

Presidential leadership may allow the pieces to come together this year in powerboosting HSAs with more tax incentives, providing new health insurance purchasing options, and even taking the next steps in bringing consumer choice into Medicare.

Roy Ramthun, who is President Bush's chief health policy advisor, is everywhere explaining the new health policy ideas. He gave a wonderfully detailed presentation and took questions during a joint conference call last Friday with members of Galen's Consumer Choice Community, the State Policy Network, and the Council for Affordable Health Insurance.

If you aren't a member of our Consumer Choice Community, please do join us. It's a great way to get first-alerts on important health policy news, participate in conference calls with the movers and shakers on health care, and network with colleagues at our annual spring conference. Click here to learn more.

**********

Everything in Washington ultimately gets down to spending tax money, and we were pleased that the long-delayed spending restraint bill, developed last year, finally passed the House and was signed into law this week. The new law would save $40 billion over the next five years, primarily by changes that put a check on some entitlement spending, including the Medicaid program.

We've written in the past about cries that the changes are "an attack on America's children, America's families, and America's middle class," as House Minority Leader Nancy Pelosi charged. But they are none of that and in fact are a small step forward in getting control over programs that threaten to swallow up the federal budget.

And we were pleased that many of the recommendations of our Medicaid Commission were included in the final law, including giving states more flexibility in structuring Medicaid benefits and copayments, and tightening restrictions for seniors with means before they can qualify for long-term Medicaid coverage. This was a hard-fought battle, but an important start.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

• Strengthening the free market in the health sector
• An analysis of the recommendations of the President's Advisory Panel on Federal Tax Reform
• Senator Hatch on health savings accounts
• Will competition return to Medicare?
• Innovative drug development in the context of FDA regulation
• Is technological change in medicine always worth it?

STRENGTHENING THE FREE MARKET IN THE HEALTH SECTOR
Author: Grace-Marie Turner
Source: Manhattan Institute's Medical Progress Today, 02/08/06
Grace-Marie Turner featured the new White House proposals on health care in an article published by the Manhattan Institute as part of a series of commentaries on the president's State of the Union address. She highlights key initiatives that are designed "to strengthen and energize the private health sector to give people more control and choice in a competitive system." The goal is to "level the playing field between job-based and individually-purchased health insurance" through a series of tax incentives and new health insurance purchasing options.
Full text: www.medicalprogresstoday.com

AN ANALYSIS OF THE RECOMMENDATIONS OF THE PRESIDENT'S ADVISORY PANEL ON FEDERAL TAX REFORM
Source: America's Health Insurance Plans, 01/31/06
America's Health Insurance Plans responds to the health and tax policy recommendations of the President's Tax Reform Panel, issued last fall, by concluding that the panel's recommendation for capping the tax exclusion would be bad for employment-based health insurance. The panel had recommended allowing no more than $11,500 in annual compensation to be exempt from taxes when it is received in the form of health insurance. AHIP says: "Our analysis suggests? that the Panel's proposed solutions would be counterproductive. The proposed cap, for example, would impact approximately 50 percent of workers now and quickly extend to 90 percent of workers, effectively having unintended consequences for the middle class that are similar to those of the AMT."
Full text: www.ahipresearch.org

For the statement to the Tax Reform Panel by the tax and health policy communities regarding the tax treatment of health insurance, please see: www.galen.org

SENATOR HATCH ON HEALTH SAVINGS ACCOUNTS
Source: Senator Hatch, 02/06/06
In a Senate floor statement this week, a member of the influential Finance Committee, Sen. Orrin Hatch, expressed his support for the president's proposals to expand Health Savings Accounts. "The President has made it clear that we need to make these plans fairer and available to a larger number of Americans," adding that "[i]ndividuals that purchase HSAs on their own should have the same tax advantages as those with employer-sponsored insurance." Hatch highlighted several of the president's proposals, including allowing HSA-qualified insurance policies to be portable between employers and across state lines, providing extra help for those with chronic illnesses, and adding new HSA tax incentives. "The Senate should give serious consideration to all good ideas to make Health Savings Accounts work better," he concludes.
Full text: hatch.senate.gov

WILL COMPETITION RETURN TO MEDICARE?
Author: Joseph R. Antos
Source: American Enterprise Institute, 01/01/06
Lessons learned from the new prescription drug program can help policymakers move private competition in Medicare to the next level and inform the next major Medicare reform, writes Joe Antos of the American Enterprise Institute. Antos provides an historical description of attempts toward competition in Medicare and says that the Medicare Modernization Act offers "at best a transition to effective Medicare competition." He cautions: "If we expect to reap budgetary savings from competitive reform, policymakers will have to restructure some of the key elements in Medicare's current design." He identifies areas that policymakers should address, including enrollment and adverse selection in drug plans, bidding and cost containment, and the competitive environment facing Medicare Advantage plans.
Full text: www.aei.org

INNOVATIVE DRUG DEVELOPMENT IN THE CONTEXT OF FDA REGULATION
Author: John E. Calfee
Source: American Enterprise Institute, 02/07/06
Jack Calfee of the American Enterprise Institute examines the U.S. Food and Drug Administration's "regulation of the entire panoply of drug development and manufacturing" and questions whether the agency can keep up with new scientific innovations. "The FDA is probably unique in the expanse, depth, and obscurity of its regulation?These features greatly complicate any attempt to assess how good a job the agency is doing and what needs to be done to improve outcomes in an industry that is crucial to progress in health care," writes Calfee. "The central issues today lie?in the difficulty of exploiting DNA-based and other biotechnology-generated applications of new science." Although there have been great advances in recent years in basic and applied science, the FDA's "innate regulatory barriers" often hinder technological progress. "Thus the crisis in drug development is rooted in FDA regulation as much as in applied science itself," concludes Calfee.
Full text: www.aei.org

IS TECHNOLOGICAL CHANGE IN MEDICINE ALWAYS WORTH IT?
Authors: Jonathan S. Skinner, Douglas O. Staiger, and Elliott S. Fisher
Source: Health Affairs Web Exclusive, 02/07/06
Jonathan Skinner and colleagues at Dartmouth University examine Medicare spending and gains in survival of heart attack patients from 1986-2002 in an attempt to answer the question of whether increased spending achieves better medical outcomes. They refer to two earlier studies with seemingly contradictory findings: One by David Cutler and Mark McClellan, and the other by Elliott Fisher. Cutler and McClellan found that "technological innovations in the treatment of cardiac disease provided terrific value for the dollar; in this case, the rising costs were 'worth it,'" Skinner observes. However, another set of studies calls into question the assumption that spending more on medical care leads inexorably to improved outcomes with Elliott Fisher and colleagues finding that Medicare patients in regions with higher health care spending levels do not experience better health outcomes and may even be harmed.

In this new Health Affairs article, Skinner et al recommend a new approach to looking at the issue. They find that local "regional gains are not correlated with regional spending increases." The authors conclude that "efforts to develop measures of quality and efficiency that can encourage hospitals or provider groups to adopt low-cost, highly effective care, while discouraging incremental spending with no apparent benefits, might allow us to keep the golden goose of technological progress alive and well nourished."
Full text: content.healthaffairs.org

UPCOMING EVENTS:

The Health Disparities Myth: Diagnosing the Treatment Gap
American Enterprise Institute Event
Wednesday, February 22, 2006, 10:00 a.m. - 12:00 p.m.
Washington, DC
For additional details and registration information, go to: www.aei.org.

The Ticking Time Bomb?High Blood Pressure
Hill Lunch Briefing
Friday, February 24th, 2006, 12:00 - 1:00 p.m.
House Rayburn Room B-339
Washington, DC
Panelists will include: Milliman Actuaries, the National Medical Association, the Association of Black Cardiologists and the National Minority Health Month Foundation. Call 202-835-3434 to RSVP.

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 http://www.galen.org/.

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to galen@galen.org.

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.