Hitting the Mark

Our goal was to educate congressional staffers about the importance of consumers being able to see up front the prices for medical services, which is key to engaging consumers in spending decisions.

Roy Ramthun, the president's senior health policy advisor, offered news that the federal government will lead the way, starting with the two huge programs it manages for its military and civilian employees. The White House will ask the insurance companies that contract to provide health coverage through TRICARE and the FEHBP to disclose their negotiated discount fees for medical services. And the federal government also will make information available about what Medicare would pay for these services. Those would be huge steps.

Jim Frogue, who was my co-host for the briefing, introduced his boss, Former Speaker Newt Gingrich, followed by Sen. Tom Coburn and Rep. Pete Sessions. All three leaders showed they are passionate and informed about the need to move our health sector into the mainstream by engaging market forces. Newt and Jim summed up many of the key points in an article they wrote for The Hill newspaper.

Next up was a panel of experts from the front lines of consumer-directed health care:

1) Family physician David MacDonald, one of the founders of SimpleCare, talked about the economies for both physicians and patients of cash payment for medical care, and how he shows other physicians ways to break the chains of insurance company price and practice dictates.

2) Merrit Quarum of Qmedtrix, also a physician, talked about his company's software solutions to get to the right price in medical reimbursement. He invited the audience to visit www.billchek.com where he will help consumers find out whether the price they are being quoted for medical services is in line with the competition.

3) Raj Bal of Assurant Health, the insurance company that sold the first HSA insurance policy, talked about the urgent need for consumers to get the information they need to make health care decisions. Once that happens, he says, ?free market forces will drive down costs? by injecting market discipline and providing new incentives for innovation.

60 Minutes had a segment on Sunday about the high prices that hospitals charge to the uninsured. Here's a link to the transcript. Our friend K.B. Forbes, who has become a vocal activist on this issue and was featured on the 60 Minutes piece, certainly has found the Achilles' Heel of the pricing issue.

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The Senate Finance Committee held its first hearing in 12 years today on tax and health policy, but the hearing was a disappointment for those of us who study and work hard to help people understand the importance of rethinking these issues.

The committee invited three very credible witnesses: former Treasury Secretary Paul O'Neill, Leonard Burman of the Urban Institute, and Robert Lane, chairman and CEO of Deere & Company (as in tractors).

But O'Neill spent most of his time talking about systemic problems in the health sector (including hospital infections and employee injuries), Burman talked around the tax issue (and took shots at HSAs), and Lane used his time to argue for improvements in HSAs and other new health care financing mechanisms.

The committee needs to be reminded about the central distortions caused in the private health sector by antiquated tax policy.

Why were economists Mark Pauly, Bob Helms, Stuart Butler, Martin Feldstein and others who have spent decades studying the tax treatment of employment-based health insurance not invited to testify?

This hearing missed the mark and deserves another try. Both Chairman Grassley and Ranking Member Baucus seemed eager to hear more about the largest single tax expenditure in the federal budget, which Sen. Baucus pointed out, at $177 billion a year, is about twice as large as the mortgage interest deduction.

?Too often here in Washington, people try to solve problems by throwing money at them,? Grassley said in his opening statement. But he urged instead that we ask the question, ?Are we getting our money's worth??

A very good question.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

• Economic Report of the President
• Medicare says it will pay, but patients say ?no thanks?
• Quick facts: Health savings account
• Health care won't heal itself
• Medical bankruptcy: Myth versus fact
• Canada's private clinics surge as public system falters

IMPROVING INCENTIVES IN HEALTH CARE SPENDING
Source: Economic Report of the President, 02/13/06
The Economic Report of the President offers a well-documented and cogent description of the roots of health care inflation and makes a clear case for injecting incentives for greater efficiency. The White House report examines increases in public and private health care spending in three key areas: changes in demand for health care services, changes in health care prices, and the impact of new technologies. The report stresses the inefficiencies of first-dollar ?insurance? coverage in pushing up costs, observing that ?in the long run most or all of the increases in health insurance costs are shifted to employees in the form of wages that are lower than they otherwise would have been.? The report makes the case for the president's health policy proposals to strengthen the role of health consumers. ?Informed consumers are better consumers,? according to the report, but it says more and better information is needed on provider prices, provider quality and value, practice guidelines, and cost-effective studies.
Full text (pdf): www.whitehouse.gov

MEDICARE SAYS IT WILL PAY, BUT PATIENTS SAY ?NO THANKS?
Author: Gina Kolata
Source: The New York Times, 03/03/06
The New York Times examines what happened after the results of a Medicare clinical trial on lung volume reduction surgery were announced in 2003 and Medicare agreed to cover the cost of the procedure. In the 1990s, this surgery was becoming a popular option for patients with advanced emphysema. ?The operation and months of rehabilitation can cost more than $50,000 and, [health economists] predicted, tens of thousands of patients could end up having the procedure. It could cost Medicare as much as $15 billion,? reports the Times. But, ?after seeing the clinical trial's results - no lengthening of life for most patients and a nearly 10 percent mortality risk from the operation itself - many patients and the doctors who refer them to surgeons seemed to lose their enthusiasm.? The article states that between January 2004 and September 2005, claims for the procedure had only been filed by 458 Medicare patients at a cost of less than $10.5 million. ?[T]he outcome of the first and most extensive Medicare trial yet indicates that the public, armed with the data developed, may make surprisingly conservative decisions,? concludes the Times.
Full text: www.nytimes.com

QUICK FACTS: HEALTH SAVINGS ACCOUNTS
Source: Assurant Health, 03/06
Assurant Health, one of the leading individual and small-group health insurers, has updated its data on who is buying Health Savings Accounts, showing that HSAs continue to appeal to those who were previously shut out of the insurance market, to families, to older Americans, and to workers of all income levels. Since 2004, the first year the accounts were available, 37% of Assurant's new individual medical sales have been HSAs. By the end of last month, it had received 250,000 applications for individual HSAs. The data shows that 69% of HSA purchasers are families with children, 62% are over age 40, and 29% make less than $50,000 a year. In addition, HSAs also remain an attractive option for the uninsured: 43% of people applying for HSA-qualifying insurance with Assurant did not report having prior insurance coverage.
Full text: www.assuranthealth.com

HEALTH CARE WON'T HEAL ITSELF
Author: J. Edward Hill, MD
Source: Medical Progress Today, 03/03/06
Dr. J. Edward Hill, president of the American Medical Association, describes his organization's commitment to advocating reforms that will expand health insurance coverage through consumer-driven health care, improve quality and effectiveness of care, and replace Medicare's flawed physician payment formula. Dr. Hill says he sees ?looming revolution in health care in this country. It is a revolution in payment systems, in pricing systems, in the way care is delivered and the ways patients become decision-makers not passive consumers.? He suggests that health savings accounts could be the answer for many people. ?Once the majority see the advantages of HSAs coupled with low- or high-deductible insurance - the kinds we choose for our cars - the days of one-size-fits-all health care coverage will be numbered,? concludes Dr. Hill.
Full text: www.medicalprogresstoday.com

MEDICAL BANKRUPTCY: MYTH VERSUS FACT
Authors: David Dranove and Michael L. Millenson
Source: Health Affairs Web Exclusive, 02/28/06
David Dranove and Michael L. Millenson of Northwestern University refute many of the claims made by David Himmelstein and colleagues in their 2005 study on medical bankruptcy. Himmelstein et al contended in a Health Affairs article that medical debt contributes to 54% of all personal bankruptcies and warned that ?solidly middle-class Americans? could ?face impoverishment? in the wake of a major illness. ?A reexamination of their data suggests that medical bills are a contributing factor in just 17% of personal bankruptcies and that those affected tend to have incomes closer to poverty level than to middle class,? write Dranove and Millenson. The authors also examine Himmelstein's conclusion that a Canadian-style health care system is the answer to the problem of medical bankruptcy. Dranove and Millenson warn that ?weaving a medical-cost safety net that could protect virtually every person from bad behavior or bad luck might actually poke holes in the safety net for other vulnerable citizens.?
Full text: content.healthaffairs.org

CANADA'S PRIVATE CLINICS SURGE AS PUBLIC SYSTEM FALTERS Author: Clifford Krauss
Source: The New York Times, 02/28/06
The New York Times reports on the growing number of private clinics opening throughout Canada as the country's publicly financed health insurance system slowly breaks down. ?Canada remains the only industrialized country that outlaws privately financed purchases of core medical services?even though costs for the national and provincial governments are exploding and some cancer patients are waiting months for diagnostic tests and treatments,? the Times reports. But a pivotal ruling last year by the Canadian Supreme Court, which struck down a Quebec law that banned private medical insurance, has become a turning point. Although the ruling technically only applies to that province, private doctors across Canada ?are not waiting for changes in the law, figuring provincial governments will not try to stop them only to face more test cases in the Supreme Court.? Private clinics are now opening across Canada at a rate of about one a week, offering screening and preventive services like MRIs to patients who would normally wait months or years before receiving treatment.
Full text (subscription required): www.nytimes.com

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/.

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