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 Our newsletter features a commentary by Grace-Marie Turner on the major developments and issues of the week as well as summaries of writings by participants in the Health Policy Consensus Group and other articles of interest from the health policy world, plus announcements of coming events. It is emailed in an HTML format from the galen@galen.org email address, via Constant Contact, and you may have to adjust your email settings and junk mailbox to ensure that you don’t miss an issue.Newsletters< Prev 1 2 3 4 5 6 7 Next >February, 8 2008
Moving ForwardAll of the attention over President Bush's health care proposals this week has focused on his proposed "cuts" in Medicare spending. But what the media defines as cuts are in fact reductions in the increase in spending. Medicare spending would still grow by 5%, which is faster than inflation but slower than the projections that are rapidly propelling the program toward insolvency."Americans must wake up to the fact that Medicare outlays constitute an 'emergency' that must be acted upon," Health and Human Services Secretary Michael Leavitt said in defending the administration's proposal to lower Medicare spending by $183 billion over five years. We have to start somewhere, and the consternation over slowing spending increases shows how incredibly difficult that is. What's not getting a lot of attention is the president's proposal for a dramatic modernization of the tax treatment of health insurance, first introduced in last year's budget. Mr. Bush again proposes exchanging the current tax exclusion for employment-based health insurance for a direct deduction. While it is failing to get any traction in Congress, the idea has been incorporated into the health reform proposals of the major Republican presidential candidates and will get a hearing in the public domain this year. And the president also is proposing six changes to make Health Savings Accounts more flexible and give individuals and employers more options in structuring coverage:
All of these proposals are responding to requests to make HSAs more attractive to employers and individuals. The administration's Fiscal 2009 Budget outlines these proposals and rationale on pages 19-26. *********** I had a terrific opportunity to speak to 700 health insurance agents and brokers on Tuesday morning, here for the Capitol Conference of the National Association of Health Underwriters, most ably led by CEO Janet Trautwein. These people are entrepreneurs who are on the front lines of saving the private market for health insurance in this country, and they are my heroes. My job initially was to present an overview of the platforms of the Republican presidential candidates, with another speaker slated to review the Democratic candidates' proposals. But there wasn't another speaker, so I gave an overview of both, doing my best to call on my journalistic skills of objectivity. I talked about the fact that both parties' candidates propose expanding choice and individual control. But just describing Sens. Clinton and Obama's plans seems to me critical -- employer play or pay, restructuring and strictly regulating the prices and benefits of private insurance, allowing buy-in to public plans, expanding Medicaid, SCHIP and Medicare, and mandates on purchasing coverage that would lead down a slippery slope of government controlling the market and actually limiting choices. I asked them for their thoughts about proposals that would allow people to buy in to a plan like the Federal Employees Health Benefits Program. The bottom line: This is a very bad idea, as is allowing buy-in to Medicare. Here are a few of the reasons that they explained:
I got two standing ovations and told them how important it is for their voices to be heard as the debate over health reform proceeds. *********** Yesterday, I was in Tallahassee to speak at a day-long health conference for state legislators sponsored by the James Madison Institute, the preeminent state-based think tank in Florida. And today, I will speak at the Conservative Political Action Committee conference back here in Washington, where Sen. McCain and former Gov. Romney made headlines yesterday. Now, it gets interesting. Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES:
How Not to Win the Fight Against AIDS Many global activists are demanding that developing countries be allowed to revoke the patents on AIDS medications by imposing "compulsory licensing," a World Trade Organization-sanctioned practice which allows governments to break patents during public health emergencies and produce copies of branded drugs. This may sound like an effective way to get antiretroviral drugs to the world's poorest people, but it isn't, writes Grace-Marie Turner. The immediate danger would come from the proliferation of low-quality counterfeits, with patients suffering and even dying from untested and even fake chemicals. Over the long term, patent violations can lead to a decline in the number of new medicines. Market incentives have brought around 90 HIV/AIDS drugs to patients in the past two decades; even more are under development. An artificial market managed by bureaucrats and one-dimensional activists will retard this trend, if not bring it to a complete halt. Equity and Health Care If Democrats and Republicans really want the tax code to be more "progressive," they should address the way the government subsidizes health insurance, writes The Wall Street Journal. The core problem is that people who get insurance through their employers pay no income or payroll taxes on the value of the benefit. President Bush has suggested severing the link between insurance and employment and shifting the deduction to individuals and capping it at $15,000 a year for a typical family. Not only would this be a relatively cost-effective way to increase coverage, it would also address the major market distortions that the employer-exclusive deduction causes. If Republican candidates came to their senses, they'd recognize an opportunity to address middle-class anxiety. But the big questions are for Democrats, who claim to believe that health-care reform is as much a moral as an economic issue. Whatever their other ambitions, how can they stand by a system that offers the least assistance to the working class and nothing at all to the uninsured? The Wages of HillaryCare Sen. Hillary Clinton's individual mandate for the purchase of health insurance is an attempt to force everyone to buy into a highly regulated and price-controlled system where government redistributes income and dictates coverage, writes The Wall Street Journal. In other words, HillaryCare II isn't all about "choice," but would require financial penalties, including garnishing wages. To put it more accurately, the individual mandate is really a government mandate that requires brute force plus huge subsidies to get anywhere near its goal of universal coverage. The news here is that all of this is being exposed now by a fellow Democrat, Sen. Obama. Many Americans are uncomfortable with the coercion of the mandate. The California health-care overhaul was recently done in by liberals concerned about its consequences for the working poor. Aetna Research Identifies Four Keys to Success for Consumer-Directed Health Plans Aetna continues to follow the health care claims and utilization of 1.6 million members of its Aetna HealthFund consumer-directed plans, and four years of evidence continues to 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. In addition, 52% of HRA members and 95% of HSA members carried over some or all of their fund savings into the next year. Aetna also studied six employers that experienced extraordinary results and whose health care cost trends were 50% lower than the HealthFund average. The combined employer and employee savings was $15 million per 10,000 employees enrolled. These employers were actively engaged in educating their employees and offering wellness programs and incentives for healthy behaviors. Florida Medicaid Reform Under Seige Former Florida Gov. Jeb Bush led the most ambitious and significant reform to Medicaid in the country, writes Jim Frogue. Today, there are more than 200,000 people enrolled in 16 private sector plans in Broward County, seven in Duval, and two each in Clay, Nassau, and Baker counties. There were zero formal grievances reported by HMOs in the most recent reporting quarter, but a confluence of unscientific studies and sclerotic state bureaucracies is combining to overwhelm the reform. Officials in Florida's new administration have announced that they will not be recommending expansion of the pilot and have not indicated any plan to meet the statutory requirement to expand statewide by 2011. Sadly, the consequences may be that the great strides made during Bush's tenure will disappear, along with the promise of better health at lower cost for the people of Florida. Health Insurance Mandates in the States 2008 The number of state mandated health benefits continues to grow -- to 1,961 nationwide, up from 1,901 last year, according to CAHI's annual list of health insurance mandates in each state. The report contains a chart of the mandates with information broken down by state into three categories: types of mandated benefits, providers, and covered populations. Mandated benefits currently increase the cost of coverage from a little less than 20% to more than 50%, depending on the state and the specific legislative language. Minnesota leads the states with 64 mandates, while Idaho has the lowest at 15. Fortunately, there is evidence that some legislators are getting CAHI's message. At least 30 states now require that a mandate's costs be assessed before it is implemented, and at least 10 states provide for mandate-light policies, which allow some individuals to purchase a policy with fewer mandates more tailored to their needs and financial situation. Bunce and Wieske further describe the study in a commentary in today's Wall Street Journal. Reform Lessons for the United States Successful reform lessons in other countries could encourage U.S. politicians to provide solutions to hot issues like taxes, health care, immigration, schools and social security, writes Johnny Munkhammar from his base in Stockholm. Every industrialized country in the world has launched free-market reforms during the past two to three decades, and the economic and social results from the reforms have often far exceeded expectations. Some 16 countries have introduced flat tax systems, making taxation simple and education beneficial. The Netherlands launched a thorough health care reform, providing all citizens with private health care insurance -- and care from providers in free competition. Other countries have also opened up health care for competition, noticing increases in productivity. UPCOMING EVENTS: Forward for Freedom: The Power of Principle The Good News About OHP: Lessons From Managed Care Human Organs for Sale? Third National Pay for Performance Summit 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://rs6.net/tn.jsp?t=64ummjcab.0.0.xkzt75bab.0&ts=S0317&p=http%3A%2F%2Fwww.galen.org%2F. 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. January, 25 2008
What happened to your pay raise?Investor’s Business Daily yesterday published an article Grace-Marie wrote for them about how rising health costs are gobbling up the take-home pay of workers who have job-based health insurance. This helps explain why people feel they are working harder and harder and just can’t seem to get ahead. A recent ABC News/Washington Post poll found that only one in five Americans feels they are getting ahead financially. Investor’s Business Daily yesterday published an article I wrote for them about how rising health costs are gobbling up the take-home pay of workers who have job-based health insurance. This helps explain why people feel they are working harder and harder and just can’t seem to get ahead. A recent ABC News/Washington Post poll found that only one in five Americans feels they are getting ahead financially. Of the nearly $3,000 in pay increases that workers received between 2000 and 2005, they have taken home less than $900 of the money. The rest went to benefit costs that are subtracted from their paychecks before they ever see the money. More than one-third of the average wage increase went to pay for higher health insurance premiums and a fourth of it went to retirement contributions. Workers are increasingly benefit-rich but cash-poor. Maybe it’s time for a rebalancing. Visibility of the full costs of these benefits, not just their health insurance copayments and pension contributions, would be a big help. What saved workers from actually going in the hole in the first half of this decade were the Bush tax cuts of 2001 and 2003. Despite all the political smoke screens and finger-pointing, the tax cuts were tremendously important for middle-class households. As Gary Burtless of The Brookings Institution said in testimony before the Senate Finance Committee last year, "For many middle-class families the [tax] cuts have made the difference between suffering a loss and experiencing a gain in spendable income." In other words, it was only the direct action of Congress to cut federal income-tax rates which allowed workers to see any of their pay increases at all. This is particularly relevant as Congress and the White House consider ways to stimulate the economy. How about lower taxes and more options for more flexible health benefits as a stimulus package? Premiums are rising at a slower rate now as some employers and workers are finding new ways to help control their health costs, including health savings accounts and other consumer-directed health care options. But if Congress does not act soon, millions of taxpayers will see their tax bills rise after 2010 as key provisions of the 2001 and 2003 tax acts expire. Worse still, millions more Americans will experience a slower economy and slimmer job prospects as the economy adjusts to the higher tax burden on labor and capital income. If we think consumer confidence is low now, just wait until the federal government takes all of workers' extra pay, and then some…for those lucky enough to still have jobs. ************ And speaking of job-based health insurance, USA Today carried an article this week about employers who are moving away from offering health insurance and giving them cash instead. In the 1980s, major companies began switching from defined benefit pension programs to 401-k plans that offer workers portability and ownership of their retirement savings. Health insurance could operate the same way, but tax policy has to catch up to allow people to get the same tax benefit if they buy their coverage on their own as they do when they get it at work. There is nothing in the USA Today article to suggest that employers understand that the money they’ve been paying all along in health premiums is actually part of their workers’ compensation packages. Workers need to be made whole by allowing the full value of these premium contributions to be added to their wages. ********** Congress has failed, for a second time, to override President Bush’s veto of legislation that would have expanded the State Children’s Health Insurance Program. SCHIP has already been reauthorized until March of 2009, so the program will continue. But the president prevailed, against all odds, in explaining to the American people that replacing private coverage with public coverage for millions of children in middle-income families made no sense. Covering poor kids first should continue to be the goal. The next step in reform is making it easier for parents of eligible children to use SCHIP money to put their children on family policies. Wal-Mart announced this week that the percentage of associates who now have health care coverage for 2008 has significantly increased from 90.4% to 92.7%, and the number of uninsured associates decreased by more than 20 percent compared to a year ago. With some policies costing just a few dollars per paycheck, this could be an economical way for parents to put their children on private insurance that offers much better access to physicians than the public coverage of standard SCHIP and Medicaid. Wal-Mart, by the way, says that 1.9% if its associates are on Medicaid and 1.2% of them are on state programs other than Medicaid, predominately SCHIP. They would be good candidates for these premium assistance programs. Grace-Marie Turner
RECENT NEWS ARTICLES AND STUDIES:
Waiting for Straight Talk In the New Hampshire debate, Sen. John McCain said: "Why shouldn't we be able to reimport drugs from Canada?" A conservative's answer is: That amounts to importing Canada's price controls, a large step toward a system in which some medicines would be inexpensive but many others -- new pain-relieving, life-extending pharmaceuticals -- would be unavailable. Setting drug prices by government fiat rather than market forces results in huge reductions of funding for research and development of new drugs. McCain's evident aim is to reduce pharmaceutical companies' profits. But if all those profits were subtracted from the nation's health care bill, the pharmaceutical component of that bill would be reduced only from 10 percent to 8 percent -- and innovation would stop, taking a terrible toll in unnecessary suffering and premature death. When McCain explains that trade-off to voters, he will actually have engaged in straight talk. New Generation Begins at Zarephath For four years, New Jersey’s Zarephath Health Center has helped churches meet the health care needs of the poor, uninsured, and under-insured, writes the Courier News. “We believe it is very difficult for the government to provide cost-effective, high-quality health care,” said Dr. Alieta Eck, an internist who founded the clinic with her husband, John, a family practitioner. The clinic, which sees 100 to 150 patients each month, is located on the campus of the Zarephath Christian Church. The clinic is not charged rent by the church and patients donate what they can afford in a box in the waiting room. Members of Zarephath Christian Church and other churches also regularly make tax-deductible donations. Since opening in September 2003, the clinic’s donations have risen from $15,000 to $50,000. “We believe that ours is a better way,” said Eck, “paying a fair price for services rendered, yet not having to pay the extraordinary premiums expected by health insurance companies in New Jersey, and not expecting overtaxed New Jerseyans to foot the bill for all the uninsured. Everyone wins.” Democratic Hopefuls Agree on Medicare as Healthcare Model Hillary Clinton, Barack Obama, and John Edwards all have proposals that would allow Americans of all ages to be able to buy into a government-run health plan modeled on Medicare, writes Ricardo Alonso-Zaldivar. The idea, which would set up competition between a new or expanded government plan and private insurance programs, is one of the most far-reaching and controversial proposals for making health insurance more affordable and more widely available, he writes. Participation in the government plan would be voluntary, but the approach sparks widely differing reactions. Mark McClellan, the former Medicare administrator in the Bush administration, called it a risky departure from the state-based changes that the Democratic candidates have cited as their models. "Of all the states that are considering [reforms], none have set up a public plan to compete with private plans," McClellan, now with the Brookings Institution public-policy center, noted. "It could end up being a back door to single-payer," he added. California Health Care Deforminator: Model ABX1 1 Governor Arnold Schwarzenegger’s proposed $14 billion health care plan would likely cost $36 billion in 2010 or two and a half times more than budgeted, according to PRI. The governor proposes increasing health care spending by 7% over current levels with new taxes and revenues from uncertain sources, including the federal government, tobacco, workers’ incomes, and possibly the lottery. If enacted as anticipated, the legislation’s increased taxes will kill between 50,000 and 100,000 jobs in California for each year it is enforced. Graham proposes six alternative reforms to private insurance that will make health care more affordable and accessible to ordinary Californians, including repealing the California “Sick Tax” that taxes Californians for their health savings account contributions. Euro-Canada Health Consumer Index 2008 Canada ranks 23rd for consumer friendliness in health care in the Euro-Canada Health Consumer Index 2008 report. This is the first time that Canada is included in the comprehensive benchmarking among 29 national European health care systems published by the Swedish Health Consumer Powerhouse and the Canadian Frontier Centre for Public Policy. With respect to clinical outcomes, Canada compares well with the best performing health care systems. In terms of generosity, with the exception of the provision of sight restoration surgery, Canada performs poorly, and in the areas of patients’ rights and information, waiting times and accessibility, and the provision of pharmaceuticals, Canada’s performance is in the bottom tier. These factors, combined with a very high level of spending on health care, contribute to putting Canada at the bottom of the Bang-for-the-Buck scale.
UPCOMING EVENTS:
Medicaid Managed Care Summit Primary Health Care: A Discussion on Presidential Candidates' Health Care Positions Hayek and the Economics of Capitalism Examining HealthCare Vouchers National Medicare Education Program Coordinating Committee Meeting Ask the Experts: Individual Mandates 2008 Capitol Conference Health Care Forum
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. 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. January, 18 2008
Bad IdeasAmong the bad ideas floating around Washington to stimulate the lagging economy is a proposal that would boost the federal government's matching payments to the states for Medicaid. Our colleague Bob Helms of the American Enterprise Institute has done excellent original research on the flaws with "the FMAP" -- Federal Medical Assistance Percentage. The Federal government provides money to the states to "match" their Medicaid expenditures. But it has become mostly a way for rich states to game the system at the expense of poor states. How this is supposed to help the economy is beyond me.Among the bad ideas floating around Washington to stimulate the lagging economy is a proposal that would boost the federal government's matching payments to the states for Medicaid. Our colleague Bob Helms of the American Enterprise Institute has done excellent original research on the flaws with "the FMAP" -- Federal Medical Assistance Percentage. The Federal government provides money to the states to "match" their Medicaid expenditures. But it has become mostly a way for rich states to game the system at the expense of poor states. How this is supposed to help the economy is beyond me. Richer states, like New York, get a lower federal match -- 50% -- and poorer states, like Mississippi, get a much higher federal matching payment -- 76%. Sounds fair. But when all is said and done, the great majority of federal money actually goes to the richer states. Nine states, led by New York and California, got half of all federal Medicaid money in 2005, Helms finds. The reason: They can afford to boost their Medicaid spending to "buy" the federal matching dollars. Poorer states can't. Further, raising the FMAP is just a back-door way of boosting entitlement spending, doing little to contribute to real economic growth or create new private-sector jobs. This is a bad idea that should be scratched off the list of options for the economic stimulus package. To put my tax hat on for the moment, there is a lot of evidence that the economy is suffering from poor monetary policy and from crushing regulation of the financial services sector, especially Sarbanes-Oxley. Most importantly, anticipation that the Bush tax cuts will expire in 2010 would result in one of the biggest tax hikes in American history and already is cooling economic activity. Instead of fixing these problems, Congress is contemplating throwing money at artificial plans, including a $500 one-time rebate check to consumers. As The Wall Street Journal says, "We are supposed to believe it is 'stimulating' to take money from one pocket and hand it to another." The impact of marginal tax rates that change incentives for people to work, save, and invest is the driving force in our economy and should be the focus of Congress. Members should cut marginal income tax rates, reduce corporate tax rates, eliminate the alternative minimum tax, and make the Bush tax cuts permanent. The economy would soar in anticipation of this real economic growth package. *********** The latest Commonwealth study purports to show that the great majority of Americans are in lockstep with the health reform proposals of the Democratic presidential candidates. The survey finds that 4 out of 5 Americans think that employers should be responsible for health coverage. Oddly, though, it showed that only 8% thought that employers should bear most of the cost for health insurance. Two-thirds support an individual mandate for purchasing health coverage. But only 6% think individuals should pay most of the costs. Only 15% said government should be the primary payor. There was strong support for shared responsibility by individuals, employers, and the government -- which is closer to the system we have today. And the Commonwealth press release reveals an unfortunate bias, saying "Only Democratic candidates support universal coverage as a goal." Oh really? Republican presidential candidates certainly support the goal of universal coverage, but not a government-run, mandatory system that fails to first address costs and fundamental distortions in both private- and public-sector subsidies. *********** And finally, what on earth does the Employee Benefit Research Institute have against consumer-directed health care? EBRI just issued the latest in a series of studies critical of CDHC, with a news release that says "New consumer-driven health plans may contain fatal flaw." The fatal flaw is that people need to be educated about these plans and how they work. Good grief. There are actually a number of helpful directives for employers in the study itself, including the need to educate consumers about their options and responsibilities with new financing arrangements. But you would never know that from the press release. The release equates CDHC with managed care which failed because "it violated the personal and social values of American consumers -- for autonomy and control of their health care." But giving people more control over health care and spending decisions is exactly what CDHC does! EBRI concludes: "Should health education initiatives prove ineffective, the 'consumer-driven health movement' could well be doomed, especially if it relies upon fully educated health consumers taking self-initiated actions." New companies and consultancies are working feverishly to provide new information resources to consumers, and companies have learned that if they actively engage their employees by educating them about new health care financing arrangements, they are much more likely to be successful. EBRI's gloom and doom prediction is off the mark and is unnecessarily scaring employers away from new health care financing arrangements that could actually help their bottom line and allow them to continue to offer health coverage to their workers. Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES:
A Medicare Reform Proposal Everyone Can Love: Finding Common Ground among Medicare Reformers Medicare Trustee Tom Saving and colleague Andrew Rettenmaier offer a comprehensive proposal to reform Medicare's funding and spending to avert the otherwise certain crisis in unfunded future obligations. They would create Health Insurance Retirement Accounts (HIRAs) to allow workers to partially prepay their future medical costs and thereby reduce the projected tax burden on future workers. Under this plan, workers age 64 and younger in 2007 would contribute 4% of their total earnings into the accounts, in addition to the taxes needed to pay benefits for current retirees. After age 65, beneficiaries would use their HIRA balances to purchase an annuity. Under reasonable assumptions, average-income workers entering the labor market today will have annuities that would pay an amount equal to 29% to 59% of their projected spending on Medicare covered services at the midpoint of their retirement years. This reform proposal should appeal to reformers across the political spectrum because it reduces the tax burden on future workers, puts Medicare on a sounder footing, retains the progressivity of the current program's funding, and produces cost sharing incentives that rise with lifetime income. An Examination of State Non-Group and Small-Group Health Insurance Regulations This study provides a compelling portrait of the predictable distortions that can result from regulations aimed at ameliorating perceived deficiencies in the non-group and small group health insurance markets. Lo Sasso reviews the existing health policy literature regarding guaranteed issue requirements and health insurance rating restrictions and provides some empirical observations using data from multiple sources. The predictions from economic theory are unambiguous: the bulk of the scholarly literature consistently points to decreases in coverage for the young and healthy individuals and with less regularity, increases in coverage for older and unhealthier individuals. A common sense look at the premiums for non-group health insurance policies in regulated markets suggests that regulating markets offers only limited options for the healthy and still quite expensive options for the unhealthy. Health Care Costs and Malpractice Reform A significant source of rising health care costs can be identified and tamed: the dysfunctional way we deal with medical malpractice, writes David Kendall. He recommends replacing the current malpractice legal system with specialized health courts. These specialized courts would be administrative in design, similar to other long-standing, effective alternatives to traditional courts, such as the procedures used in workers' compensation cases. Health court rulings would establish new standards of practice to cover medical circumstances for which common standards have not previously been settled. The health court system would thus yield an essential benefit that our current system of medical justice fails to provide: consistent, rational rulings that send clear signals to health care providers about what constitutes good medical practice. In so doing, it would help eliminate the legal uncertainty that encourages doctors to practice defensive medicine and the silence among practitioners and patients that very likely contributes to medical errors. State of the Living Dead Governor Arnold Schwarzenegger is moving ahead with his "universal" $14.4 billion a year health-care plan, despite a $14 billion budget deficit in the state, writes the Journal. He insists the health reform proposal requires no new spending after the start-up costs. But the numbers are flimsy, the Journal says, with legislators practically working off the back of an envelope. Like Massachusetts, California's program is built around the "individual mandate," which requires that everyone acquire insurance or pay penalties. In addition to providing new subsidies for the uninsured, California would impose severe insurance regulations, institute price controls and compel companies to offer policies to all participants without regard to age or health condition. Such mandates have all but devastated the insurance markets in every other state where they've been tried. None of this is what California's cooling economy needs -- to say nothing of the damage that such a plan would do to the insurance markets, or the national precedent it would set. 2008 State Legislators' Guide to Health Insurance Solutions and Glossary This guide explains the multiple health reform issues facing state policymakers. ALEC and CAHI summarize each issue, highlight actions taken by the states and then offer possible solutions. The guide also includes a glossary that explains a number of industry terms. Now, Wait a Minute! Menino Slams In-Store Health Clinic Plan Boston Mayor Thomas M. Menino has asked the city's public health commission to work with him to keep in-store health clinics out of the city, reports the Boston Herald. Menino's fighting words came one day after the state's Public Health Council approved a controversial plan to allow retailers such as CVS to run no-appointment-necessary, limited services medical clinics inside their stores. Menino wrote that limited-service clinics are "unsafe" and "ill-equipped to monitor community health needs." His anti-clinic stance baffled city residents. "It seems like a good way to get medical care, especially for little things," said hospital administrator Brooke Christian. At a meeting this week, Boston public health commissioners said they have no authority to change the state regulations, but that they could exercise their own authority to limit the clinics presence in the city. Because the commission decides which retailers may sell tobacco, it could prevent stores with clinics from selling tobacco, which could be a deal breaker for big pharmacy chains like CVS. Commissioners have opted to speak with public health officials in other cities with mini-clinics before making a final decision. What's the Matter with Socialized Medicine? Despite ostensibly compassionate intentions, expanding government control of medical care would result in greater disservice to the uninsured and precariously insured, writes Dr. Condit. Those advocating socialized medicine seem blind to the dysfunctional nature of third-party health care. The common good would be better served by market-oriented reforms for elective and extraordinary health care coupled with compassionate subsidies for the needy. Tax law changes could help improve insurance portability and affordability. Interstate competition for insurance could decrease premium cost, remove thousands from the uninsured roles, and lead to stronger demands for quality. Patients paying for health care at the point of service would be more prudent consumers than those perceiving health-care benefits as an entitlement. With improved alignment of responsibility for personal health choices and medical-care consumption, scarce health care resources could be better allocated. Health Care and the Presidential Race The Health Care Solutions Group, a non-partisan health policy institute affiliated with Vanderbilt University Medical Center, has launched a web site, PresidentialRX.com, to provide voters with information on the health care proposals of the 2008 presidential candidates, with a focus on how the health care proposals of the candidates will affect individuals, families, and employers across the country. The site summarizes the health care plans of the candidates, describes what they mean in user-friendly terminology, and includes additional resources and links to news items to allow voters to follow the candidates and their health care views throughout the campaign. UPCOMING EVENTS: Health Reform Lessons Learned: Veterans of 1993-94 Offer Advice to Today's Reformers Policies That Work for Working Families: Modern Families, Outdated Laws, and What is Needed to Fix the Problem Hayek and the Economics of Capitalism Examining HealthCare Vouchers National Medicare Education Program Coordinating Committee Meeting 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. 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. January, 15 2008
The Year AheadSo what will 2008 bring? We certainly can anticipate a hot political debate over the future direction of our health sector, and hopefully this time the candidates will be talking to a better informed and even more skeptical electorate. So what will 2008 bring? We certainly can anticipate a hot political debate over the future direction of our health sector, and hopefully this time the candidates will be talking to a better informed and even more skeptical electorate. Sixteen years ago, voters were swayed by utopian campaign promises that clashed with the hard reality of change and costs. This time, voters will ask tougher questions, and all of the campaigns will need to be prepared with detailed answers and analyses of their own and their opponents' plans. Getting the rhetoric right is easy. Following it up with the right policy is the hard part. We plan to be very actively involved in these policy conversations and invite you to join along. ********** What's ahead for the industry? Our friend Gary Ahlquist of Booz Allen Hamilton sees 2008 as "the calm before the storm" as candidates jockey to make a case for their version of reform. I commend to you his excellent year-end analysis of the health sector terrain. Ahlquist observes that all of the major candidates recognize the difficulty of sweeping reform. With some assurance, he concludes: "A monolithic new federal approach to the entire health system is not going to arrive on Congress' doorstep early in 2009, since the agenda will already be full with taxation, war funding, and entitlement issues. This is not to say that significant change won't occur; it just will not happen in 2008 or even 2009." Ahlquist and co-authors Gerald Adolph and David Knott see 2008 as bringing:
One of the biggest opportunities they see is improving bedside care, and coordinating care and services throughout a patient's healthcare episode. "Quite simply, the clinical variability and often nightmarish bureaucracy of today's system are problems waiting to be addressed, and those who develop the solutions can expect huge returns," they conclude. So these experts believe that the market will continue to be ripe for innovation, at least in the near and intermediate terms. ********** New studies (summarized below) show that national health spending increased in 2006 by 6.7% to $2.1 trillion. One out of every six dollars spent in our entire economy goes to health care. While the numbers are high, the good news is that this rate of growth of spending on most major health services is slower than in prior years. The biggest growth was in increased Medicare spending, largely attributable to the addition of the drug benefit. Drug prices grew only 3.5% over the previous year, even as spending on prescription drugs grew at a faster rate, largely because more people are getting their prescription drugs following enactment of Medicare Part D. And wasn't that the point? Studies below also show that seniors are more likely to fill prescriptions and are paying less for their medications. And for consumers as a whole, their out-of-pocket spending continues to fall as a percentage of overall national health spending, dropping to 12% of total expenditures, the lowest ever (and falling steadily from 47% in 1960). When out-of-pocket costs and consumers' share of premiums are included, the direct household share of health spending has remained fairly flat as a share of personal income since 2003. Moderating health spending coupled with market innovation could temper the urgency for political action on health reform. Policy changes are needed, of course, but if the market can continue to innovate, if consumers have new incentives to seek value in their health spending, and if politicians can keep heavy hands off the regulatory levers for a few more years, we may yet have time to right the ship in our health sector. This could open new opportunities for the market to provide new options for more affordable, more widely available, health coverage and more consumer-friendly health services. Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES:
National Health Spending in 2006: A Year of Change for Prescription Drugs In 2006, U.S. health care spending increased to $2.1 trillion, or $7,026 per person. The health care portion of the gross domestic product (GDP) was 16%, slightly higher than in 2005. The implementation of Medicare's prescription drug program caused a major shift in the sources of funds used to pay for drugs, resulting in large, one-time impacts in spending growth rates in 2006, including the fastest increase in Medicare spending since 1981 (18.7%), while Medicaid spending declined for the first time (.9%) as drug spending for dual-eligibles was shifted to Medicare. Total private health insurance premiums grew 5.5% in 2006, the slowest rate of growth since 1997. The slower growth was attributable in part to a decline in private health insurance spending for prescription drugs and slower growth in underlying benefits. The Effect of the Medicare Part D Prescription Benefit on Drug Utilization and Expenditures In this analysis of more than 6 million unique Medicare Part D enrollees and non-enrollees who were customers of a large national pharmacy chain, the authors found increases in prescription utilization and decreases in out-of-pocket expenditures for persons age 66 to 79 years in 2006 compared with 2005. These estimates of the overall effect of Part D -- an approximate 13.1% decrease in expenditures and an approximate 5.9% increase in prescription utilization -- are remarkably similar to other predictions of these estimates based on economic theory. The effects of Part D were modest on average but were substantially greater among persons who enrolled. In addition, persons who enrolled earliest had the highest expenditures and utilization before Part D was implemented. Given their demand for drugs, these persons may have been the most likely to gain from enrollment in more generous Part D plans. The data show that early enrollees experienced the largest decreases in expenditures and increases in utilization. The New Insurance Frontier For insurers, the greatest source of future growth is selling policies to individuals -- not corporations, write consultants Collier and Walsh. Insurers' core business -- selling group plans to large employers -- is stagnant. A Bain & Company analysis of the health-insurance sector shows that total commercial health-insurance enrollment has been flat around 174 million people since 2001. In response to rising costs, employers have steadily pared back benefits, and the percent of businesses offering health insurance has fallen to 60% last year from 66% in 1999. For insurers, this means that their greatest source of future growth is selling policies to individuals -- not corporations. In addition to developing new marketing strategies, new channels and new pricing, insurers also need to equip consumers with the tools necessary to make appropriate insurance and health-care decisions. For the insurance industry, the bottom line is simple. No matter what happens with insurance reform, a new market is emerging. The winners will be those who prepare now for a world where individuals matter. The Effect of Consumer-Directed Health Plans on the Use of Preventive and Chronic Illness Services Despite the exemption of preventive services from cost sharing in many consumer-directed health plans, critics have continued to predict underuse of preventive services, based on the fear that people in a high-deductible plan will reduce their use of all services and will not discriminate between those services that are subject to the deductible and those that are not. This study, which compares people continuously enrolled in Aetna's Health Fund-HRA product with those continuously enrolled in a preferred provider organization (PPO) plan, finds that these concerns are not valid. People enrolled in CDHPs do not underuse preventive services to any greater degree than do those in traditional PPOs. The results thus support the case for "smarter" cost sharing -- that is, varying the degree of cost sharing for many types of services according to the effect of the use of the service on future medical costs and future health. Insta-Americans: The Empowered (and Imperiled) Health Care Consumer in the Age of Internet Medicine CMPI investigated reports from physicians who indicated they were increasingly seeing patients who were fearful of medications based on information found online. Roughly eight million Americans search for health information online daily. To determine what patients typically see when searching for information on prescription medications, CMPI analyzed Google search results for Crestor, a cholesterol medication, and for Avandia, a type-2 diabetes drug. CMPI found that the information prominently displayed in search engine results was not only misleading and confusing, but dangerous for patients. The analysis of search results revealed that online real estate was dominated by Web sites paid for and sponsored by either class-action law firms or legal marketing sites searching for plaintiff referrals. Other sites were sponsored by groups or individuals selling "alternatives." Online information can add tremendous value for patients when used as a research tool for discussions with a doctor, but users should be aware of the sources of the information they find online and possible ulterior motives of site owners. 2008: Next Steps for Health Savings Accounts Ernst reviews studies of HSAs and consumer-directed health plans and finds rising adoption rates: A United Benefits Advisors survey, for example, recently reviewed more than 16,000 health plans sponsored by 12,000 employers nationwide. HSAs and HRAs now make up almost 9% of employer plans, versus 6% last year. The survey shows that consumer plan premiums grew less than 3% in 2006, compared with 7% increases for all other plans. Ernst also provides an overview of needed HSA legislation that would, for example, allow HSAs to incorporate FSA and HRA funds, increase the HSA contribution limit, permit the use of accounts to purchase health insurance, and allow veterans to establish an HSA. Edwards and Organ Transplants Campaigning in the primaries, former Sen. John Edwards is leveraging the tragic story of Nataline Sarkisyan -- the 17-year-old California woman who recently died awaiting a liver transplant -- to press his political attack on insurance companies and argue for European-style, single-payer health care. But the former trial lawyer is twisting the facts, Gottlieb says. Organ transplantation provides a poor basis to argue that a single-payer system offers a more equitable allocation of scarce resources or better clinical outcomes. The U.S. performs more transplants per capita, giving patients better odds of getting new organs. In 2002, U.S. doctors performed 18.5 liver transplants per one million Americans, significantly more than in the U.K. or France, which performed 4.6 per million citizens, or in Canada, which performed 10 per million. Our system in the U.S. for allocating scarce resources remains imperfect. But taken as a whole, statistics show that organ access, our willingness to transplant the sickest patients, and our medical outcomes are among the best in the world.
Health Reform Lessons Learned: Veterans of 1993-94 Offer Advice to Today's Reformers 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://rs6.net/tn.jsp?t=puallicab.0.0.xkzt75bab.0&ts=S0314&p=http%3A%2F%2Fwww.galen.org%2F. 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. December, 20 2007
A Sensible PlanEarlier this year, President Bush called the executives of major insurance companies to a meeting at the White House to urge them to focus on ways to improve the individual market for health insurance. Karen Ignagni of America's Health Insurance Plans assured the president that AHIP would take action, and yesterday, she delivered. It is a good example of the private sector taking the lead to develop a proposal that they believe can actually work in the market... Earlier this year, President Bush called the executives of major insurance companies to a meeting at the White House to urge them to focus on ways to improve the individual market for health insurance. Grace-Marie was invited to participate in a meeting with President Bush at the White House Karen Ignagni of America's Health Insurance Plans assured the president that AHIP would take action, and yesterday, she delivered. It is a good example of the private sector taking the lead to develop a proposal that they believe can actually work in the market. The leading insurance companies recommend a private-public partnership to guarantee access to health coverage in the individual market. People with medical expenses that are 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. New money would be required to fund the plan, but states can find creative ways to fund the Guaranteed Access Plans. This plan is a careful approach to reform that won't turn their entire health insurance markets into state-regulated utilities. Don Hamm, president and CEO of Assurant Health, chairs AHIP's Individual Market Access Subcommittee and he and the other hardworking members of the AHIP team from Aetna, United, and many other companies deserve kudos. ************* AHIP also released a survey yesterday of the individual health insurance market, showing that it is healthier than commonly believed. Yes, people can have trouble buying coverage, especially if they have pre-existing conditions, but fewer than the media would have us believe. And these more difficult cases are the ones that the new AHIP proposal is designed to help. But the survey shows that insurance generally is more affordable in the individual market than through the workplace: Nationwide, average annual premiums were $2,613 for singles and $5,799 for families, half the cost of the average job-based policy. Premiums varied greatly by state and were highly correlated with the rules set by the state governing premiums, coverage, and underwriting. The heavier the burden, the more costly the insurance. When will states figure out that their "solutions" have been a big part of the problem? Maybe it's time for a little cooperation with the insurance industry. ************* And a few more items:
************* This has been a big year for us here at the Galen Institute -- a speech at the Vatican, several meetings with the President including one in the Oval Office, an interview with John Stossel that appeared on ABC's 20/20, hundreds of radio interviews and commentaries in major newspapers including The Wall Street Journal, speeches, newsletters, testimonies before Congress, a major award from Consumer Health World, and participating in the effort to educate Congress about the right way to extend, and not expand, the SCHIP program.
We have a busy year ahead and welcome your participation in this very important conversation over the future of our health sector! Health Policy Matters will return after the new year. In the meantime, all of us at the Galen Institute wish you and your loved ones a very Merry Christmas. Grace-Marie Turner
RECENT NEWS ARTICLES AND STUDIES:
The Basic FAQs: Frequently Asked Questions on Health Policy and Responses from Our Pro-Market Perspective The health reform debate often can seem bewildering to citizens and political leaders alike. The health sector is vast, representing one-sixth of our nation's economy, and it is enormously complex. But fundamental principles of economics can help in understanding what is wrong with our health sector and what we need to do to begin to get it on the right track. At the Galen Institute, our work is informed by economic principles, especially the importance of understanding how people and systems can be expected to respond to incentives placed before them. This paper answers frequently asked questions about access to health insurance, consumer-directed health care, and prescription drug costs, with answers informed by our free-market perspective. Desperately Seeking a Kidney AEI's Sally Satel, who received a kidney transplant last year, documents the turmoil of finding a donor in a detailed article for The New York Times Magazine. At the beginning of 2005, when Satel put her name on the national organ donation list, there were about 60,000 people ahead of her; by the end of that year, only 1 in 9 had received a kidney from a relative, spouse or friend. Satel received offers from potential living donors, including one she met on the Web site MatchingDonors.com, but each backed out for various reasons. Finally a friend -- author and journalist Virginia Postrel -- turned out to be a match, and she donated a kidney to Satel in surgery that took place on March 4, 2006. The experience is a triumph of altruism, writes Satel. Thousands of people have no donor at all -- no relative who will do it out of love or obligation, no friend out of kindness, no stranger out of human impulse. Today, 74,000 people are waiting for kidneys. Satel writes that we must be bold and experiment with offering prospective donors other incentives for giving, not necessarily payment but material reward of some kind -- perhaps something as simple as offering donors lifelong Medicare coverage. Or maybe Congress should grant waivers so that states can implement their own creative ways of giving something to donors: tax credits, tuition vouchers or a contribution to a giver's retirement account. Unless we stop thinking of transplantable kidneys solely as gifts, we will never have enough of them. Research on the Comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role CBO reviews the current state of comparative effectiveness research in both the public and private sectors and considers the potential effects it could have on health care spending. CBO finds that making substantial changes in the delivery of health care could prove difficult and controversial for a number of reasons. The results of effectiveness studies would have to be sufficiently robust to minimize the risk of overlooking subgroups of patients who could benefit greatly from a treatment. Further, the precise impact on health care spending depends on several factors and is difficult to predict. Given the time necessary to conduct the research, to alter incentives in a manner reflecting the results, and to affect behavior through those changes, any potential for substantial cost savings from new research would probably take a decade or more to materialize. Although generating additional information comparing treatments would tend to reduce federal health spending somewhat in the near term, the effect may not be large enough to offset the full costs of conducting the research over that same time period. Medical Malpractice Reform The nation's medical malpractice system should be replaced by a system that automatically compensates patients for unexpected injuries or deaths, regardless of who is at fault, according to this NCPA report. The medical malpractice system is supposed to compensate victims of negligent medical practice for their injuries and discourage future errors, but the current system does both poorly, the report concludes. Fewer than 2% of patients who are negligently injured ever file a malpractice lawsuit, and of the lawsuits filed, fully one out of every three cases does not involve any medical error. And to protect against such lawsuits, doctors purchase malpractice insurance with high premiums, most of which are passed on to patients. To help stem this problem, the tort-law malpractice system should be replaced with a system in which liability would be determined by voluntary contracts that could include compensation without fault, adjustment for risk, full disclosure, and patient compliance. New Web Site Helps Consumers and Employers Make Smart Choices on Health Savings Accounts (HSAs) A new consumer website, www.HSAInsights.com, has been designed to help individuals, families, employers and retirees understand the basics of health savings accounts (HSAs) and to give them resources and tools for making smart choices. The website features detailed charts that show individuals and families how much they could save with an HSA compared to a typical plan. It also includes an interactive HSA calculator for users to determine the potential future value of their HSAs based on their expected contributions and expenses. Drug Price Control 'Snake Oil' As state and federal officials push for importation of American medicines from abroad to obtain cheaper drugs, they would do well to look at the experience of our nation's capital, writes Doug Bandow. The Washington D.C. City Council outlawed "excessive prices" for medicines in 2005, but shortly after its passage, a federal District Court of Appeals voided the law, concluding that it would undermine the federal government's granting of patents to enable companies to earn the revenue necessary to fund innovative research. The city tried to appeal the decision, and lost again. Unfortunately, what makes price controls attractive politically is that their impact is invisible. People will not suffer the worst consequences of price controls for years, given the long lead time in drug development. Moreover, no one knows what cures will not be developed. The trade-off is cheaper drugs for voters today versus unrecognized deaths and hardship for the unborn in the future. Increased access to affordable medicines is a worthy goal, but price controls are not a worthy means. If public officials really want to help the sick, they will keep their hands off of drug production. Stop the War on Drugs The travails of Eli Lilly & Company's estrogen-modulating drug Evista and Genentech's breast-cancer medicine Herceptin demonstrate the health consequences of prosecuting pharmaceutical companies for the practice of "off-label promotion" -- allegations that drug companies "encourage" doctors to use medicines for purposes not yet approved by the FDA, writes Scott Gottlieb. The Justice Department rarely alleges in these cases that scientific information is false or misleading, only that a firm can be "ahead of the science" in sharing with doctors information about emerging uses of medicines, even when those new uses quickly become the mainstay of care. These charges are applied even when the information drug firms are sharing is part of educational meetings, peer review journal articles, or treatment guidelines issued by medical-specialty societies and government researchers. "Off label" are now dirty words in conventional lexicon, made synonymous with lawbreaking as a result of these prosecutions, even though these words describe the way more than half of cancer medicine is practiced. Efforts to confine patients and doctors to FDA-approved uses have their own health consequences, raising the question: Just who is in the best position to make these hard choices? Politicians wage broad wars on medicine to claim thin strips of ideological terrain. This would be good political theater if there weren't so many human victims.
UPCOMING EVENTS:
How Might "Pay-for-Performance" Affect Health Care in America Can Consumer-Directed Health Care Improve the Quality of Health Care? Will an Optional Federal Charter for Insurers Increase International Insurance Competition?
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. 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. December, 14 2007
A Courageous StanceCongress is tied in knots trying to pass legislation that will keep the federal government operating for another year (no jokes, please), and the leadership now hopes to pass one big bill next week that will roll the budgets for nearly all departments, agencies, and programs into one huge package costing more than half a trillion dollars.Congress is tied in knots trying to pass legislation that will keep the federal government operating for another year (no jokes, please), and the leadership now hopes to pass one big bill next week that will roll the budgets for nearly all departments, agencies, and programs into one huge package costing more than half a trillion dollars.This is a dangerous time for the Republic because it is nearly impossible for anyone to know what's in a bill that big, especially one that is being so hurriedly drafted. A lot of midnight oil is being burned on the Hill and in the Administration to get this done and hopefully to get it done right. But beware of mischief and mistakes. One thing that Congress is not going to get done this year is a big expansion of the State Children's Health Insurance Program. President Bush this week vetoed the second, equally flawed, bill that Congress sent him, and Congressional leaders know they don't have the votes to override. The president's position was courageous and correct. SCHIP will be reauthorized, and the only question now is for how long -- a few months, until next fall, or into the administration of a new president? My vote would be for the latter to allow this to be part of the bigger health reform effort that the next president must undertake. The SCHIP bills that Congress passed would have expanded this government health benefits program well into the middle class, crowding out the private coverage that many children already have. Further, poor kids who most need the coverage would have been lost in the stampede, as legislators meeting here last week with the American Legislative Exchange Council confirmed to me. The American people need to decide if they want a much bigger role for government in the health sector, and the 2008 political campaigns are the proper venues for those conversations. ************ The next president will need to tackle health care. Not only is it threatening to gobble up the federal budget, as the director of the Congressional Budget Office warned again yesterday, but health care also is consuming more and more of the pay of average workers. A CBS News poll taken earlier this year found that Americans believe that the middle class is falling behind. But a study by Brookings Institution economist Gary Burtless shows that from 2000 to 2006, the pay for an average worker in the U.S. rose by $3,500 a year after inflation. What's going on? Burtless says that only $849 of that $3,500 pay increase went to take-home pay. The biggest share, $1,045, went to fund employee health expenses. Burtless writes that, "Since we do not see this consumption reflected in our money incomes and because workers seldom know how much their employers are paying for insurance premiums, most of the consumption and income gains arising from health care are invisible to most Americans." So Americans are getting pay increases, but more than two-thirds of the raise is going to pay for benefits, primarily health coverage. (The rest of the pay increase went to higher contributions to pension and profit-sharing plans.) One bright note: "Americans across the distribution have derived notable benefits from recent tax cuts. For many middle class families the cuts have made the difference between suffering a loss and experiencing a gain in spendable income," Burtless says. So if the Bush tax cuts are not extended, middle-class workers will fall even further behind. Health policy and tax policy will have to be on the agenda for the new president if American workers are to prosper. The Galen Institute is a health and tax policy research organization, and we will be actively involved in getting attention for these issues -- and offering solutions! ************ And thanks to all of you for your many, many wonderful comments and congratulations about the "2007 Outstanding Achievement Award for Promotion of Consumer-Driven Health Care" that I received last week from Consumer Health World. You are very kind. Mark your calendars now for the next conference in Las Vegas, May 5 to 7. It is the place to be for those of us who believe that there is a brighter future ahead for our health sector. Grace-Marie Turner November, 30 2007
Clinton vs. ObamaA heated debate is taking place in the Democratic presidential primary between Sens. Hillary Clinton and Barack Obama over whether the government should mandate health coverage. If the Democrats are having trouble agreeing on whether to impose a mandate... A heated debate is taking place in the Democratic presidential primary between Sens. Hillary Clinton and Barack Obama over whether the government should mandate health coverage.If the Democrats are having trouble agreeing on whether to impose a mandate requiring individuals to obtain health insurance, that strongly suggests this would be a very heavy lift for the next president. None of the Republican presidential candidates is advocating a mandate, so a bi-partisan deal would be difficult indeed. In arguing for her plan, Mrs. Clinton told an Iowa audience this week, "If we don't have universal healthcare, we will be betraying the Democratic Party's principles." Sen. Obama shot back before a different Iowa audience: "Until she clarifies what exactly she intends to do to enforce this mandate?this is more of a political point that she's trying to make than a real point." The Illinois senator would require that children be insured, but not adults because he says that costs are the real issue. "The reason Americans don't have health insurance isn't because they don't want it, it's because they can't afford it." Former Sen. John Edwards deserves credit for being up front about his plan: He would require proof of insurance when income taxes are paid and/or when medical treatment is provided, and he would assign families that don't have insurance to a coverage plan. The government would withhold tax refunds or use collection agencies and garnish wages to go after people who could afford to pay premiums but refused. At least he is honest. You know that this issue hits the jugular when liberal columnist Paul Krugman weighs in. He points out that under the Obama plan, ?healthy people could choose not to buy insurance -- then sign up for it if they developed health problems later. Insurance companies couldn?t turn them away, because Mr. Obama?s plan, like those of his rivals, requires that insurers offer the same policy to everyone.? Krugman accuses Obama of ?attacking his Democratic opponents from the right -- and in so doing giving aid and comfort to the enemies of reform.? ********* So how is the Massachusetts experiment with an individual mandate going? The New York Times carried a major article on Sunday that could be entitled "not so well." Not surprisingly, the free or nearly-free health insurance available to people making less than $30,000 a year ($60,000 for a family of four) is going like hot cakes. It is so popular, in fact, that the program may exceed its budget by $150 million. The Massachusetts website shows that 133,000 of the estimated 207,000 people eligible for the heavily subsidized coverage have enrolled so far. But it's not going so well for those who aren't eligible for the state subsidies. The great majority of them either remain uninsured or are asking for waivers that would exempt them from the mandate. So far, only about 10,000 of the more than 215,000 uninsured Massachusetts residents who aren't eligible for subsidies have signed up for coverage with the Commonwealth Connector. Further, insurers expect to raise rates 10% to 12% next year -- twice the national average. And people who have signed up for coverage are complaining that they are having trouble finding physicians who will see them. "The state's experience should be instructive to the presidential campaigns, and to officials in California, where Gov. Arnold Schwarzenegger, a Republican, has proposed a similar plan," the Times reports. We couldn't have said it better? ********* Gallup recently released results of its annual survey of Americans' opinion of health care. It reconfirms that "Americans are much more concerned about the healthcare problems 'out there' than about the healthcare issues they face in their personal lives," Gallup concludes. Some highlights:
The same conflict is true with costs:
Additionally, the vast majority of Americans are positive about the quality of the healthcare they receive. One-third say it is excellent, and an additional 50% rate it as good. Only 15% call their care "only fair" or "poor." So what's the bottom line: "[M]ost Americans believe the current system is providing good quality healthcare, and they are satisfied with their own healthcare situations," Gallup concludes. Americans appear to believe that the system is in crisis and needs to be fixed to help others. The result: Any attempt at major health reform that would disrupt the coverage that Americans have now will fail. That was the lesson of Harry and Louise 14 years ago, and it would be the lesson again today. One thing that Gallup did reveal, however, is the growing concern over the cost of health care, which leads to growing anxiety in the middle class about losing coverage. When Sen. Obama talks about cost, he shows that he recognizes that this is the key issue. ** Thanks to our good friend and economist par-excellence Jim Carter for alerting us to this Gallup survey. ********* The New York Times editorial page offered a thoughtful, reasoned perspective on the difficulties of controlling health costs. In a major editorial on Sunday entitled "The High Cost of Health Care," the paper acknowledges that the causes are "varied and deep-rooted." "If citizens of an extremely wealthy nation like the United States want to spend more on health care and less on a third car, a new computer or a vacation home, what's wrong with that? By some measures, Americans are getting good value," the paper says. Then the editors look at various solutions, and their complexities -- differences in regional spending and practice patterns, and the challenges of implementing information technologies, prevention, and disease management. The paper says it advocates allowing Medicare to "negotiate" with manufacturers on drug prices and allow price-controlled drug imports. But amazingly, the Times concludes, "The prospect for big savings is dubious." They take a predictable shot at "consumer-directed health care" and say that "deep in their hearts, many liberals yearn for a single-payer system, sometimes called Medicare-for-all?But a single-payer system is no panacea for the cost problem -- witness Medicare's own cost troubles -- and the approach has limited political support." The conclusion: "By now it should be clear that this is no silver bullet to restrain soaring health care costs." And there is no silver bullet reform for our health system, including an individual mandate. Grace-Marie Turner
RECENT NEWS ARTICLES AND STUDIES: Prescription Drugs Is Your Medicare Drug Plan Naughty or Nice? Seniors should seize the opportunity during Medicare's open enrollment period, which runs through the end of the year, to review their prescription drug coverage and choose the best plan for their needs, writes Grace-Marie Turner. Seniors may want to consider a Medicare Advantage program, offered by private insurance companies that often combine medical and drug coverage. Turner encourages seniors to take advantage of the choice and flexibility that comes from private plans competing to offer them the best value. The Media on Drugs Sidney Taurel, chairman and CEO of Eli Lilly and Company, takes the media to task for how it responded to Lilly's suspension of two clinical trials for the drug prasugrel, a possible new therapy for heart attack patients. Lilly halted the trials to more carefully analyze data, but the media speculated that prasugrel must have failed its major trial, driving Eli Lilly's market capitalization down by $6 billion. The speculation was unfounded and false, Taurel says. A major clinical trial for the drug showed a 19% reduction in relative risk for cardiovascular death, and Lilly is reassured that the FDA will rely on actual data rather than frenzied news reports in making approval decisions. Taurel warns the media: Don't trade in leaks and rumors where scientific data are concerned. Wait for real numbers, and take the time to explain statistics and benefit-risk analysis, which cannot be conveyed in sound bites alone. For the pharmaceutical industry, Taurel says that preserving the integrity of scientific data and protecting the safety of patients are always the right choices. For New Cancer Drugs, Finding the Right Patients May Work Better Than Finding the Right Prices Health Affairs interviews three oncologists to discuss the revolution in treating cancer. Genomic research has revolutionized understanding of cancer and has yielded promising new treatments targeted at molecules produced in particular tumors. These "targeted biologics" could extend lives while avoiding some of the debilitating side effects of chemotherapy and other traditional cancer drugs, but they also carry costs that are far higher than usual. The researchers suggest personalized approaches to care to reconcile innovation and affordability: Utilize and devise tests that can direct each new drug only to those patients whose tumors contain the specific molecules likely to make them amenable to the treatment and design carefully-tailored combinations of therapies that target specific tumors.
A Survey of Preventive Benefits in Health Savings Account (HSA) Plans, July 2007 An AHIP survey of health insurers finds that 84% of HSA-qualifying health plans offer first-dollar coverage for preventive care. Virtually all policies purchased in the large-group market (99%) and small-group market (96%) provide this coverage, which includes adult and child immunizations, well-baby and well-child care, mammograms, Pap tests, and annual physicals and screenings. About half of all HSA/HDHP policies that cover preventive benefits do not place any annual dollar limits on those services and three-quarters do not require any cost-sharing for such care. The survey suggests that more work needs to be done to allow health insurance plans offering HSA coverage to determine which prescription drugs would be appropriately preventive, clearing up regulatory ambiguity on this issue.
It's Official: Medicaid Managed Care Does Not Save Money The reform plan drawn up by Colorado's Blue Ribbon Commission on Health Care Reform plans, which would enroll 50% of Medicaid recipients in managed care, is a bad recommendation, writes Linda Gorman. After years of testing, the state has found that Medicaid HMO plans are at least as costly as traditional fee-for-service and may even cost more. Meanwhile, the Consumer Directed Attendant Support program, Colorado's innovative experiment with consumer directed care, frees clients from Medicaid centralization, giving them a budget and letting them keep 50% of any money they save. In turn, their ingenuity saves the state about 20% a year.
Foreign Health Affairs America, a nation prone to love at first sight with seductive health-care fixes, is now falling for the systems of the Netherlands and Switzerland, writes Regina Herzlinger. There are things to be learned from each, though neither presents a complete model the U.S. should emulate. The consumer-driven health care of these two nations is clearly the better model for implementing universal coverage. But their governments' micromanagement of the prices of insurers and providers should be avoided, not emulated. Instead, government should help lower-income people, enforce transparency, prosecute fraud and abuse -- but otherwise get out of the way. Cost Burden of Prescription Drug Spending in Canada and the United States Government policies around the pricing and reimbursement of prescription drugs in Canada do not produce lower costs for Canadians compared to Americans, according to a study from the Vancouver-based Fraser Institute. Key findings:
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