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Health Policy Activities Report January - June 2008


Contents President’s Message. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Progress at a Glance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Publications. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Media Mentions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Health Policy Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56 Interviews. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 Speeches and Events. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109

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President’s Message The debate is engaged. While gas prices, home foreclosures, and Iraq are dominating the political debate today, health care is certain to move up the agenda in the presidential campaigns, and voters will have a very clear choice this fall. Sen. Obama sees a much bigger role for government in trying to solve the problems in the health sector while Sen. McCain believes in unleashing incentives to create more competition in the private health sector that will give people more choices of more affordable care and coverage. Whoever is elected on November 4 will be determined to do something on health care and will be directed by a vision that will have a great impact on the direction Congress takes in shaping legislation. The stakes are enormous for the future of this one-sixth of our economy represented by the health sector. So what are we doing to prepare? You see our weekly newsletters and monthly highlights regularly so you can tell we have been incredibly busy this year, with an accelerated pace of speeches, media interviews, and commentaries. I’ve traveled to state capitols to talk with legislators, participated in countless meetings in Washington to shape federal policy ideas, and I continue my endless efforts to help Europeans gain a clearer and more accurate picture of the U.S. health sector. They really do believe that we have a permanent underclass of 47 million people who have no access to health insurance or health care and that people basically are left bleeding in the streets. A professor at a prestigious university in Milan told me when I was there to speak in June that she was very surprised to hear what a large and expensive safety net we have in place. While many opinion leaders are looking to Europe for answers to the problems we face in our health sector, we know that we must develop a uniquely American solution to lead the way with reforms that build on the genius of the American system. What is at stake here is the most basic of our freedoms — the freedom to make decisions about health care for ourselves and our families that truly could have life or death consequences. The next round of the health care debate will be more complicated than it was 15 years ago: We all know physicians are ready to give up and sign on to a government system with the misguided assumption that it can’t get any worse. As the cost of health insurance rises, consumers are more and more worried about their ability to afford coverage on their own. And with nearly half of all health bills paid by government, politicians have more and more power to impose political control over the health care economy. We need to rely on the basic wisdom of the American people to make the right decision, but it is vital that we reach them with analysis, ideas, and information about what is at stake. We do get very positive feedback for the work we do. I thought I’d share a few examples from the letters and messages we receive: • “Your presentation was excellent. My members rated your segment of the program as one

of the highlights of our meeting,” an official of the National Association of Manufacturers wrote after a speech I gave to his members.

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• “Grace-Marie is terrific. I don’t share her political views, but she does an excellent job of

boiling down complex information and issues,” one participant in a Seattle conference wrote. “Grace [sic] is an exceptional wealth of information/analysis and an excellent presenter,” another said.

• “You were WONDERFUL! Thank you so much for coming on my show,” Francene

Cucinello, host of The Francene Show, wrote us regarding a radio interview I did with her. “You have the special ability to take complicated medical policy and discuss it in an understandable, relatable, conversational way. Your intelligence is obvious and sharing it with my listeners is the way that any real, positive change will be embraced by the public.”

• “I just wanted to let you know that I really appreciate your Health Policy Matters emails,”

a newsletter subscriber wrote. “As more and more Americans grow concerned about healthcare and how to ensure access to services, the Galen Institute provides a voice of reason above the hubbub of calls to provide everything ‘free’.”

We continue to use every communications vehicle we can muster to get the word out about the importance of markets, individual choice, and freedom. This book contains samples of our writings, speeches, papers, and descriptions of our conferences, media interviews, and consensus-building activities to continue our push to build support for free-market ideas. You provide us with the encouragement, the real-life examples, and the generous support to allow us to do our work at the Galen Institute. We are most grateful to you for all you do. Thank you, and we look forward to continuing to work with you in the crucial months ahead.

Sincerely,

P.S. You will notice that the newspaper clippings of my commentaries have a crisper format. That’s because our clipping service now sends virtually all of our newspaper articles published in papers and magazines across the country in electronic format. And what we have included here is, of course, just a sampling of what is published. Many thanks to Jena Persico for her creative work in assembling this book for you to highlight our work over the last six months.

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PROGRESS AT A GLANCE

Executive Summary of Galen Institute Activities January – June 2008 25+ million readers reached Our commentaries on the health care plans of the presidential candidates, prescription drug importation, patent reform, state reform efforts, consumer-driven health care, and other health policy topics appeared in more than 50 publications across the country over the last six months, including The Wall Street Journal, Omaha World-Herald, The Detroit News, New York Post, and the Seattle Post-Intelligencer. Several of our commentaries were also posted online by The Buffalo News, The Philadelphia Inquirer, The Wall Street Journal, and the South Florida Sun-Sentinel, among others. Galen scholars were quoted in more than 40 publications and websites including the Milwaukee Journal Sentinel, Kiplinger.com, Orange County Register, and National Journal.

23 editions of our weekly newsletter produced and distributed Health Policy Matters newsletters were researched, written, and e-mailed to more than 6,300 subscribers each week, reaching federal and state policymakers, journalists, business leaders, consumers, medical professionals, and others interested in health policy.

35 major speeches delivered and events hosted Grace-Marie Turner delivered speeches on Medicaid, SCHIP, prescription drug marketing and price controls, state reform efforts, consumer-driven health care, and other health policy topics to the National Association of Manufacturers, Medicaid Managed Care Summit, Consumer Health World, and chambers of commerce and universities across the country. Grace-Marie testified before the House Energy and Commerce Committee, Subcommittee on Health, and the New York State Assembly Committee on Health. The Galen Institute hosted a very successful Medicare Forum featuring HHS Secretary Michael Leavitt and several policy experts about the looming threat that Medicare presents to taxpayers and our economy.

100+ meetings hosted and attended to represent our ideas Grace-Marie participated in several meetings with administration officials, members of Congress, doctors, and industry executives. And the Galen Institute facilitated several coalition meetings for our Health Policy Consensus Group and the Values-Based Alliance on Health Policy.

115+ radio, television, and print interviews given to promote our ideas Grace-Marie gave interviews to more than 60 radio stations in more than 30 states across the country, and to hosts of several nationally syndicated programs. Our scholars were interviewed by reporters from the Los Angeles Times, Milwaukee Journal Sentinel, Congressional Quarterly, the Associated Press, and many others.

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Monthly Highlights January

February

March

While the country has been intensely focused on the presidential primary contests, we are continuing our efforts to facilitate a more informed debate over health policy. For example, Grace-Marie wrote a commentary last month for The Wall Street Journal detailing the consensus among the Republican presidential candidates around free-market ideas for health reform. We also had a number of other commentaries published in major newspapers, including one in Investor’s Business Daily explaining how the high cost of job-based health insurance is chewing up the raises of American workers.

We have been swept into the debate over key health policy issues that are dominating the presidential election campaigns, and spent much of February educating lawmakers, industry leaders, and fellow citizens about the decisions voters are facing this year. Through commentaries, speeches, and radio interviews across the country, Grace-Marie explained there are two contrasting visions: either a much bigger role for government, including an individual mandate for health insurance, or redesigned incentives that would lead to a properly functioning market offering more affordable care and coverage through competition and choice.

We welcomed Brian Lee Crowley to the Galen Institute team this month. As our newest senior fellow and a leader in the Canadian public policy arena, Brian will join senior fellow Joel White to help us in educating the debate over the importance of bringing market-based solutions to problems in the health sector. And interest is intensifying about the health policy positions of the three remaining presidential candidates, and we have given dozens of radio and newspaper interviews this month comparing and contrasting the candidates’ health reform proposals, summarized in the report on our latest conference call with the Friends of the Galen Institute.

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April

May

June

We continue to provide insights in our commentaries and interviews to the health policy proposals of the presidential candidates, but we also focused this month on trying to bring some sanity to spending on health care entitlement programs. April began with Grace-Marie testifying before the House Energy and Commerce Health Subcommittee in support of efforts to curb fraud and abuse in the Medicaid program. And we closed the month co-hosting a major forum on Medicare featuring HHS Secretary Michael Leavitt, who issued dire warnings about the threat that Medicare’s insolvency presents to taxpayers, to our economy, and to other functions of government.

The health care plans of the presidential candidates are still a hot topic, and we are continuing our efforts to educate the debate about the role of government in health care. Grace-Marie gave several speeches and interviews this month which examined the different visions being offered by the leading candidates. Interest in the Massachusetts health reform plan also remains high, as evidenced by the wellattended Alliance for Health Reform briefing which featured Grace-Marie and the architects of the plan. The briefing was broadcast by C-SPAN, and is also available online.

From Italy to Grand Rapids, Detroit, and Baltimore, June was, as usual, a busy month for speeches, covering issues as diverse as values-based health reform, Medicaid, and the health reform plans of the presidential candidates. We also continue our efforts to educate members of Congress, the media, and the public about the importance of market-based solutions that reward innovation. Sometimes it seems that European audiences are more receptive to our free-market ideas than some political leaders in the U.S. Experts abroad are beginning to realize the value of consumerism and competition, unlike some U.S. political leaders who have not yet seen and experienced the problems with centralized control over health care.

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Publications Total circulation: 13,058,818 Our commentaries on the health care plans of the presidential candidates, prescription drug importation, patent reform, state reform efforts, consumer-driven health care, and other health policy topics appeared in more than 50 publications across the country over the last six months, including The Wall Street Journal, Omaha World-Herald, The Detroit News, New York Post, and the Seattle Post-Intelligencer. Several of our commentaries were also posted online by The Buffalo News, The Philadelphia Inquirer, The Wall Street Journal, and the South Florida Sun-Sentinel, among others.

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H.R. 5613. Protecting the Medicaid Safety Net Act of 2008 Testimony by Grace-Marie Turner before the House Energy and Commerce Committee Subcommittee on Health, The Honorable Frank Pallone, Jr., ChairmanApril 3, 2008 Mr. Chairman and members of the committee, thank you for inviting me to testify before your committee today about the important issue of Medicaid integrity. To introduce myself, I am Grace-Marie Turner, president and founder of the Galen Institute. Galen is a non-profit research organization devoted to developing and furthering public understanding of solutions to problems in our health sector. I recently completed a three-year term as a member of the Advisory Council to the Agency for Healthcare Research and Quality in the Department of Health and Human Services, and I served as a member of the Medicaid Commission from 2005 to 2006.

programs to better meet the needs of their citizens. But we also heard about many of the problems with Medicaid: • Medicaid offers a rich benefits package, but recipients often have trouble finding private physicians who will see them. Patients are often relegated to crowded hospital emergency rooms to receive medical care. • The care of Medicaid recipients is often uncoordinated among the physicians, clinics, and hospitals where they receive treatment. • The focus often is how much money Medicaid is spending rather than on whether the money is being spent wisely to produce the best outcomes.

One issue on which there is little or no disagreement is the importance of the Medicaid program to the millions of people it serves. It is vital to recipients as well as to taxpayers that Medicaid funds are spent wisely to provide the best care to this vulnerable population, especially as demands increase. Medicaid expenditures and enrollment are projected to grow significantly, with enrollment projected to increase from about 54 million today to 65 million by 2015, a 21 percent increase. In 2015, the program will be spending $685 billion a year, a 145 percent increase over today.

• And while the federal-state partnership provides Medicaid with some limited benefits of federalism, states’ flexibility is constrained by extensive rules and regulations which force them to go through long, complex, and time-consuming appeals to request program changes to better meet the needs of their citizens.

Our Medicaid Commission held numerous hearings in Washington and around the country to gather testimony from experts and citizens about the program.

One of the most important lessons I learned from our work on the Medicaid Commission is that changes are needed so the program will have the resources to meet its mission in the future.

We heard a great deal about the strengths of Medicaid:

Medicaid is the biggest item in many state budgets. Governors from both parties told us they don’t see how they will pay for Medicaid’s escalating costs and also pay for roads, schools, and public safety, and they pleaded for more flexibility and control. Changes need to be made to the program so it can be more responsive to our 21st century health sector, but even small steps toward injecting some spending discipline create a great deal of fear and opposition.

• Medicaid truly is the safety net for our health care system and can be a lifeline for millions of people with low incomes and disabilities. • Medicaid fills gaps in our private health sector that is dominated by employmentbased health insurance, covering millions of people for whom job-based coverage is not an option.

The proposals addressed by the legislation being considered by the committee today were intended to bring more fiscal stability to the Medicaid program. These changes would result in an estimated $13 billion reduction in federal Medicaid spending over the next five years, out of the $1.2 trillion in federal dollars that Medicaid will

• Because Medicaid is a joint federal-state program, it benefits to some extent from the principles of federalism, allowing Medicaid to be more flexible than Medicare. States have used this flexibility to experiment with

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spend over that time. So these changes represent only about 1 percent of spending, but they could demonstrate a federal will to bring greater integrity into the program.

with large schemes used the federal funds they generated, GAO found that one state used the funds to help finance its education programs, and others deposited the funds into state general funds or other special state accounts that could be used for non-Medicaid purposes or to supplant the states’ share of other Medicaid expenditures.

One example is the proposal to limit states’ ability to use intergovernmental transfers, or IGTs. The Government Accountability Office wrote in a study entitled “Intergovernmental transfers have 1 facilitated state financing schemes” about problems that persist:

• The schemes enable states to pay a few public providers amounts that well exceed the costs of services provided, which is inconsistent with the statutory requirement that states ensure economical and efficient Medicaid payments. In one state, GAO found that the state’s proposed scheme increased the daily federal payment per Medicaid resident from $53 to $670 in six local-government-operated nursing homes.

For many years states have used varied financing schemes, sometimes involving IGTs, to inappropriately increase federal Medicaid matching payments. Some states, for example, receive federal matching funds on the basis of large Medicaid payments to certain providers, such as nursing homes operated by local governments, which greatly exceed established Medicaid rates. In reality, the large payments are often temporary, since states can require the local-government providers to return all or most of the money to the states. States can use these funds—which essentially make a round-trip from the states to providers and back to the states—at their own discretion.

Although Congress and the Centers for Medicare & Medicaid Services have acted to curtail financing schemes when detected, problems persist. States can still claim excessive federal matching funds for payments exceeding public facilities’ actual costs. GAO suggests that Congress consider a recommendation open from prior work, that is, to prohibit Medicaid payments that exceed actual costs for any government-owned facility.

States’ financing schemes undermine the federal-state Medicaid partnership, as well as the program’s fiscal integrity, in at least three ways.

A CMS rule that would address this problem has been delayed since the final rule was published on May 29, 2007, and would be further delayed by H.R. 5613. Regarding other provisions, such as limiting payments through Medicaid for graduate medical education (GME), CMS is saying that the federal government should exercise its role to make sure that Medicaid funds are being used for Medicaid services. GME is not an allowed Medicaid service. If there are additional services that Congress believes are the responsibility of the federal government, this should be done through an explicit appropriation.

• The schemes effectively increase the federal matching rate established under federal law by increasing federal expenditures while state contributions remain unchanged or even decrease. GAO estimated that one state effectively increased the federal matching share of its total Medicaid expenditures from 59 percent to 68 percent in state fiscal year 2001, by obtaining excessive federal funds and using these as the state’s share of other Medicaid expenditures. • There is no assurance that these increased federal matching payments are used for Medicaid services, since states use funds returned to them via these schemes at their own discretion. In examining how six states

That is the case with many other provisions addressed by the legislation. The Office of the Inspector General for the Centers for Medicare and Medicaid Services (CMS) has reported in testimony before this committee that it is working

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to “ensure that Medicaid expenditures are in fact used for medical care to Medicaid beneficiaries… Our overarching concern is to ensure that Federal matching payments are in the proper proportion to States’ shares and that the funds are used to provide the intended health care services in the intended facility to the intended beneficiaries. Changes are still needed to enable the Congress and the Department to be responsible stewards of Federal funds and measure the true cost and 2 benefits of the Medicaid program.” These payments may draw down a disproportionate share of Federal matching funds but without providing any corresponding benefit to intended beneficiaries.

• The provider tax provides similar challenges. Health care providers need to be protected from states that are using these taxes to extract revenues from providers to fill state coffers. Again, regarding Medicaid payments for graduate medical education: The costs and payments associated with GME are not expenditures which are federally reimbursable under the Medicaid program. The core mission of the Medicaid program is to pay for medical and medically-related services for Medicaid enrollees. If Congress decides to provide additional funds for GME, the appropriation should be explicit and authorized by statute, which is not currently the case.

I would offer a few specific comments about the seven rules that H.R. 5613 would delay: • Many members of Congress have expressed concern about the CMS rule placing new and lower limits on federal financial participation for state Medicaid payments to government health care providers. However, the HHS Office of the Inspector General has documented numerous instances in which medical facilities, such as nursing homes, have been forced by the states to rebate tens of millions of dollars of these enhanced payments. These extra payments can, in many cases, cause the facilities to operate in the red and compromise patient care. The OIG reported one instance in which a nursing home did not retain enough Medicaid funding to fill all of its nursing positions. The nursing home was significantly understaffed considering the minimum number of nursing positions specified in its budget and recommended for similar-sized nursing homes. The OIG reported that this condition may have affected the quality of care provided to its 3 residents. The CMS rule would require that these providers receive and retain the total amount of the Medicaid payments they are due, without being forced to rebate a portion of the payments back to the states, payments that often are used to help the states offset their share of the Medicaid program or to pay for non-Medicaid services.

• The Office of the Inspector General has found numerous cases in which Medicaid claims were being filed that did not involve patient care or allowable rehabilitation services. It found, for example, cases in which the taxpayer was being billed for nonrehabilitative services such as transporting beneficiaries to the grocery store, 4 restaurants, or even bingo games. The government has a responsibility to assure that taxpayers’ dollars are being spent legally and for the appropriate and allowed care and 5 services. The same principle holds true for targeted case management and school-based administration and transportation. Many of these services may be needed but are not legal Medicaid expenditures. Unless a check is placed on these expenditures, states could undermine Medicaid’s ability to provide the needed and allowed medical services that millions of Medicaid recipients rely on. The GAO and the OIG have identified important areas where this waste and even misuse of Medicaid funds is taking place. The CMS rules may not be ideal, but rather than block the rules completely, a better strategy would be for the Congress to work with the administration and the states to produce policies to address this financial abuse.

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The great majority of providers serving Medicaid patients are working to provide the best care possible, often at considerable sacrifice, such as physicians who treat Medicaid patients even if the Medicaid payment means they are taking a financial loss. But there are people who are using the rules to game the system. And even the states, enabled by clever lawyers, have learned how to game the system by drawing as many federal dollars as possible and forcing providers to operate on tight or even non-existent margins. Patient care can suffer.

members of our society, those who have few if any other alternatives to support their needs for medical care. If states are allowed to continue to use Medicaid dollars to support other state services and to rob the providers of the resources they need to provide the best care for patients, the program and its recipients will be harmed. Additionally, while many of the functions that states have undertaken with Medicaid dollars may represent legitimate needs, it is important for the integrity of the program and for the legitimate expenditure of federal taxpayer dollars that Medicaid spending follow congressional directives.

Many of the abuses in the Medicaid program are rooted in FMAP, or Federal Medical Assistance Percentage, as my Medicaid Commission colleague Bob Helms of the American 6 Enterprise Institute has documented :

The president and CEO of the Mayo Clinic, Dr. Denis Cortese, spoke in Washington recently about health reform. Mayo is renowned worldwide for its expertise in medical diagnosis, and Dr. Cortese drew on these capabilities to help policymakers think more strategically about health reform. He said in medical care and in public policy, change must focus on putting the needs of the patient first. Patients want personal, high-value health care, and we need to provide better incentives for programs and providers to provide that care.

The FMAP procedure of Medicaid financing has been criticized by policy analysts 7 and government agencies for decades. This criticism comes from analysts representing a wide spectrum of policy-oriented and philosophical approaches to health policy, proving that this debate is not just a matter of government budgets. The perverse incentives created by this method of financing would be present at any level of spending. In addition to the AARP report, a recent report from the National Academy of State Health Plans refers to the Medicaid “tug of war” and calls for steps to improve the fiscal integrity 8 of federal financing. The authors of the report point out that the FMAP procedure creates strong incentives for states to engage in accounting schemes that enhance federal funding, and for the federal bureaucracy to attempt to control these schemes— hence the “tug of war.” Numerous analysts have pointed out that we have created a situation in which each governor and state Congressional delegation has a strong incentive to increase federal funding under the FMAP procedures rather than consider reforms that would be in the best interest of those Medicaid is intended to serve.

Micromanagement of the system through rules and regulations is not putting the patient first. Instead, we need to focus on new financial incentives to encourage patients, providers, program administrators, and the states to make sure they are getting the best value in health spending. Rethinking Medicaid’s financial structure, I believe, is needed. Our commission heard many, many witnesses testify that patients want a medical home. The worst place to get routine medical care is in a crowded hospital emergency room, but too many Medicaid recipients have no other choice. Having a medical home would mean that someone is working on their behalf to coordinate care. Medicaid doesn’t support the kind of coordination that would lead to better care and more efficient spending. After hearing hours and hours of testimony during my service on the Medicaid Commission, I believe we must begin the process of transforming this fragmented, procedure-oriented program to one

The most important goal, I believe, is to preserve the Medicaid program for the most vulnerable

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that is focused on coordinated care, results, and outcomes. Quality of care for Medicaid recipients will be improved when health care providers are responding to patients’ needs and not to bureaucratic program rules and regulations.

March 2005, at http://oig.hhs.gov/oas/reports/ region7/70303041.pdf. 5 “Audit of Medicaid Claims for Iowa Rehabilitation Treatment Services Family-Centered Program,” U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG), July 2004, at http:// oig.hhs.gov/oas/reports/region7/70203023.pdf.

For Medicaid to become more patientfocused and to more effectively meet the distinctive needs of populations with different needs, Medicaid programs must begin funding health care in a new way. Achieving better quality of care is integrally connected to creating new incentives to achieve better outcomes. This means that new funding mechanisms should be tied to the success of providers and health plans in coordinating patient care, gathering sharable information on the patient’s medical care, and giving patients more information and responsibility to be partners in managing their health.

6 Robert B. Helms, “The Medicaid Commission Report: A Dissent,” American Enterprise Institute, January 11, 2007, at http://www.aei.org/publications/pubID.25434/ pub_detail.asp. 7 Thomas W. Grannemann and Mark V. Pauly, Controlling Medicaid Costs. Vic Miller and Andy Schneider (“The Medicaid Matching Formula: Policy Considerations and Options for Modification”) list the following Government Accounting Office (GAO) studies: GAO, Changing Medicaid Formula Can Improve Distribution of Funds to States, GAO/ GGD-83-27, March 9, 1983; GAO, Medicaid Matching Formula’s Performance and Potential Modifications, GAO/T-HEHS-95-226, July 27, 1995; GAO, “Medicaid Formula: Effects of Proposed Formula on Federal Shares of State Spending,” memo to Senator Daniel Patrick Moynihan (D-N.Y.), GAO-HEHS-99-29R, February 19, 1999; and GAO, “Medicaid Formula: Differences in Funding Ability among States Often Are Widened,” GAO-03-620, July 2003. For more recent criticisms, see John R. Graham, “Taming the Medicaid Monster,” Health Policy Prescriptions 4, no. 8 (August 2006); Tommy G. Thompson, Medicaid Makeover:

Focusing on these goals and on putting patients first would assure taxpayers, states, and most importantly, patients, that the system is supporting quality care. Thank you for the opportunity to testify today and I welcome any questions.

ENDNOTES

Four Challenges and Potential Solutions on the Road to Reform, (Washington, DC: Medicaid Makeover,

1 Kathryn G. Allen, “Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes,” testimony before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives, March 18, 2004, at http://www.gao.gov/ new.items/d04574t.pdf.

2006), available at http://www.medicaidmakeover.org/ MedicaidMakeoverPlan.pdf (accessed December 29, 2006); and Pamela Villarreal, “Federal Medicaid Funding Reform” (brief analysis 566, National Center for Policy Analysis, Dallas, TX, July 31, 2006, available at http:// www.ncpa.org/pub/ba/ba566/ (accessed December 29, 2006).

2 George M. Reeb, testimony before the Subcommittee on Health, Committee on Energy and Commerce, U.S. House of Representatives, March 18, 2004, at http:// www.oig.hhs.gov/testimony/docs/2004/031804fin.pdf .

8 Sonya Schwartz, Shelly Gehshan, Alan Weil, and Alice Lam, Moving beyond the Tug of War: Improving Medicaid Fiscal Integrity (Portland, ME: National Academy for State Health Policy, 2006), available at http://www.nashp.org/Files/Medicaid_Fiscal_Integrity. pdf (accessed December 29, 2006). y

3 “Adequacy of Medicaid Payments to Albany County Nursing Home,” U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG), June 2004, at http://oig.hhs.gov/oas/reports/ region2/20201020.pdf. 4 “Audit of Iowa’s Adult Rehabilitation Services Program,” U.S. Department of Health and Human Services (HHS), Office of Inspector General (OIG),

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Healthcare: What Can Americans and Europeans Learn from Each Other, and What Changes Are Needed? By Grace-Marie Turner for the Istituto Bruno Leoni in Milan, June 6, 2008 1

The health care sector in the United States is unique among developed countries, and it is necessarily diverse to respond to the very different needs and demands of a country with 300 million people. It is a mix of public and private sector programs. But the health sector in the United States is often criticized, both at home and abroad, for the high number of people without insurance because we do not have a compulsory national system, as all other developed countries do.

or 53%, was through private spending. Both the public and private sectors are facing significant pressures for change. Tax revenues provide the largest share of funding for public programs. The great majority of those with private health insurance receive their coverage through the workplace, with a combination of employer and employee payment for premiums. Philanthropic organizations including churches and charitable organizations also fund some hospitals, clinics, and other sources of care.

However, what is little known is that we do have universal access to health care in the United States. Hospitals are required by federal law to treat anyone who presents needing care, regardless of their ability to pay. In addition, there are numerous other sources for care for the uninsured, including private physicians and clinics, governmentsupported community health centers, and charity clinics. The U.S. spends an average of $1,000 a year on medical care for every person without health insurance in our country.

PUBLIC SECTOR PROGRAMS Two taxpayer-supported health care programs are dominant in the United States: Medicare and Medicaid. Both were created by Congress in 1965. Medicare is the federal government’s health program serving Americans who are over age 65 and the disabled of any age. Medicaid is a joint federal-state program designed primarily to finance health care for the poor. Together, Medicare and Medicaid provide health services to more than 107 million Americans.

The large number of people without health insurance is indeed a problem that we must solve. But there is a strong sense in the United States that we want to create a solution that continues to allow choice and innovation to continue, both in health insurance and in new medical treatments.

The newest government health program is the State Children’s Health Insurance Program that provides health coverage to more than six million children in families whose parents earn too much to qualify for Medicaid but who can’t afford private 2 insurance. In addition, there are many other federal programs for specific populations, such as veterans and native Americans, plus many state and local health care programs, including more than one thousand community health centers providing free or low-cost care.

I would like to begin by presenting a profile of our health sector, including a brief overview of its complex mix of public and private financing, as well as a discussion about the uninsured. I would then like to address the strengths of our health sector, particularly its innovation and potential to lead the way in offering new solutions to provide quality medical care and protect personal control over health care decisions.

Medicare overview

A Profile of the Health Sector in the United States

In 2007, there were 44 million beneficiaries of the Medicare program, including more than 36.6 3 million elderly and 7.3 million disabled people. In 2007, the Medicare program was projected to cost $427.3 billion to be paid by a combination of taxes on today’s workers, premium contributions by 4 beneficiaries, and general revenue funds.

Health spending in the United States is nearly equally divided between the public and private health sectors. In 2006, U.S. health care expenditures totaled more than $2.1 trillion, representing 16% percent of the gross domestic product. Of the total, 46%, or more than $970 billion, was spent through public programs. More than $1.1 trillion,

In additional to virtually all elderly people, some disabled people also qualify for Medicare coverage.

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Private health insurance

If a person is under age 65 but is disabled and has been receiving disability benefits under Social Security for two years, he or she also is eligible for Medicare.

More than sixty-seven percent of Americans, or almost 201 million people, were covered by private 8 health insurance in the year 2006. The majority of Americans with private health insurance received their coverage through the workplace—60 9 percent, or 177 million. An additional 27 million purchase health insurance on their own in the private market.

Medicare beneficiaries are entitled to receive health care services through the same public and private hospitals that serve the general public, but doctors, hospitals, and other providers are paid at government-determined rates based upon a complex, government-set fee schedule.

There are a wide variety of private insurance coverage options, including different networks of doctors and hospitals, and many financing options. Employers generally negotiate which health plans will be offered to their employees, and sometimes, but not always, employees have a choice of plans. Some insurance policies may cover virtually all health care bills, but the monthly premiums are quite high. The average annual health insurance premium for a job-based policy for a family is more than $12,000. Others may choose a higher-deductible policy with lower premiums and then pay for routine care on their own.

Medicaid overview Medicaid is the program designed to provide health care to the poor and is jointly funded by the federal and state governments. States have some flexibility in designing their Medicaid programs. In 2005, more than 45 million persons received 5 Medicaid benefits, with projected costs reaching $313 billion in combined federal and state pay6 ments. The costs of the program are financed almost exclusively through federal, state, and local general revenue funds.

One of the newest options is Health Savings Accounts which were created by Congress in 2003 to give people a different way of financing their health care. HSA holders can put tax-free money aside to pay for routine health expenses as long as they purchase a high-deductible health insurance to cover major medical bills. A large percentage of those with HSAs were previously uninsured. They find the premiums for the high-deductible coverage generally to be lower, making the coverage more affordable.

Medicaid beneficiaries also are entitled to receive health care services through the same public and private hospitals that serve the general public. However, access to private physicians often may be functionally limited by Medicaid’s often very low payment rates. Political leaders regularly vote to expand the number of people who can participate in Medicaid. But to keep budgets from running out of control, states have put tighter and tighter limits on Medicaid’s payments to doctors and hospitals. For example, the average reimbursement from Medicaid for a physician office visit in one state 7 is $20 while a typical private plan may pay $50 to $70 for the same visit.

In addition to new financing options, employers are creating a number of innovative programs to engage consumers as partners in managing their health care. Health information technologies, prevention and wellness incentives, price transparency, quality improvements, and chronic care management all are being advanced by private companies in efforts to get prices down, keep quality up, and get more value for their health spending.

The functional result of this system of underpayment is that Medicaid patients often cannot find private physicians willing to see them and are forced to get their health care in hospital emergency rooms, which are required by law to treat them.

Americans value the greater access to physicians and other providers that private health insurance allows, but many would like to have more choices in their insurance coverage and to have health

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THE SAFETY NET

insurance that is more portable. Changes in federal tax policy have been recommended by a number of political leaders to make this possible.

While the U.S. is often criticized for the large number of uninsured citizens, the full story is rarely told. While millions of Americans do not have health insurance, it is a violation of federal law for the ill or injured to be denied care in times of medical need.

THE UNINSURED In 2006, an estimated 47 million Americans did 10 not have health insurance. While the numbers change, the profile of the uninsured remains quite constant.

The Emergency Medical Treatment and Active Labor Act requires that any hospital in the United States that accepts Medicare or Medicaid patients—i.e., virtually all of them—is legally bound to provide medical treatment to any patient who presents with a medical problem whether or not that patient can pay the bill. Billions of dollars in federal subsidies go to hospitals to compensate them for the free care they provide.

According to U.S. Census Bureau data, the uninsured are primarily: 1) minorities, especially Hispanics, 2) lower and lower-middle income Americans; and 3) young adults between ages 11 18 and 24. The Census Bureau also finds that the uninsured are most likely to be in families 12 with annual incomes of less than $25,000 and to be employees of small businesses and their dependents.

Therefore, the uninsured are protected by an official and unofficial safety net and receive medical care through:

The likelihood of someone having health insurance is closely tied to income, to employment status (i.e., full or part-time), and to whether the worker’s job provides health insurance.

• Hospital emergency rooms and other hospital admissions. • Joint private-public sector health programs, including community health centers.

Some of the uninsured are moving between jobs, and with health insurance so closely tied to the workplace in the United States, these job transitions often mean that workers and their families will have periods without health coverage. The United States is a particularly mobile society. Fifty-five million workers changed their employ13 ment status in 2005.

• Free clinics operated by churches and other philanthropic organizations • Private payments to doctors and hospitals. • Care at private clinics operated in pharmacies and other retail establishments and at the workplace. Being uninsured by no means indicates that people are barred from receiving medical care. Virtually anyone can receive care at a hospital or can pay bills directly to receive medical care at a doctor’s office or medical institution, even though they may not have health insurance. But the uninsured often do wait until later stages of illnesses to get the care they need. And they also live in fear that they or their family members will get sick or have an accident and that the bills could bankrupt the family. Clearly, policy changes are needed to fix the problem, and debate over solutions will play an important role in the upcoming presidential elections.

Forty-five percent of uninsured citizens were 14 without insurance for six months or less, an indication that many are uninsured due to coverage lost during job transitions. A 21st century solution would allow individuals to own and control their own health insurance and take it with them from job to job. A number of public policy initiatives are being considered in Washington and among the states that would allow greater portability of health insurance and direct subsidies for health insurance for those who need assistance in purchasing coverage. These measures will go a long way toward solving the problem of so many Americans being uninsured.

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Many experts in the health policy community believe that modernizing the financing system of health care is the crucial first step to developing a more equitable system that provides access to health insurance to millions more Americans. The Health Policy Consensus Group, composed of experts from many market-based think tanks and academic institutions, has developed a vision statement outlining a new approach to solving this 18 problem.

Challenges to the U.S. health care system Four main problems in the health sector include: 1) the large number of uninsured Americans, discussed above, 2) the rising cost of insurance and medical care, 3) balancing the demand for new and better medical technologies with cost, and 4) crushing paperwork and regulatory burdens. 1) The large number of uninsured is not only a problem for these individuals and families without health coverage, but also for society as a whole. Those who do not have predictable access to medical treatment often wait until an illness becomes acute before seeking treatment. Not only is the cost of treatment then generally higher, but also the cost is more likely to be borne by the taxpayer through any of the various channels hospitals and doctors are compensated. Most importantly, the person may suffer long-term consequences of going without needed medical treatment.

They believe that: Every American should be able to obtain needed medical care. Reforming the tax treatment of health insurance is central to achieving this goal. Congress could begin by providing a new set of incentives for people who do not have health insurance. These incentives should be properly structured to create an opportunity for everyone to purchase his or her own health coverage in an open and competitive market.

2) Pressures are intense in both private and public sector health plans to manage costs. Costs in private health plans were expected to increase an 15 average of seven percent in 2006. Costs of public programs, especially Medicaid, are consuming 16 nearly half of state government budgets, threatening higher taxes or reduced spending on other programs.

We recommend providing credits or other comparable fixed incentives, explicitly determined by legislation, to assist people in obtaining private health insurance. Millions of Americans not eligible for the current tax subsidy would receive help in purchasing health insurance, and this assistance can be targeted to those who most need help in purchasing insurance in a reformed marketplace.

3) Demands for new technologies and the latest pharmaceutical treatments are growing, and consumers may face bureaucratic and financial barriers to the medical care they want and need for themselves and their families. As new diagnostic and surgical technologies and more miracle drugs are discovered, developed, and introduced, the pressures will become even more intense.

OPTIONS AND INITIATIVES FOR CHANGE

4) Nurses, physicians, hospitals and other medical providers are burdened by significant paperwork and regulatory requirements for both private and 17 public sector health programs.

It is essential that the United States lead the way into a new era to finance health coverage, not only to solve its own problems and bring millions of people into the system but also to demonstrate how free-market solutions can create a health care system that can respond to the pressures and demands of the 21st century, including access to life-saving technologies.

The search for solutions to the problem of millions of uninsured The search for solutions to the problems in the health care system in the United States has generated decades of national debate.

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The United States is recognized around the world for the quality of the medical care it offers, including development of and widespread access to the latest technologies. One of the major reasons for the continued progress in medicine here is the system of rewards and incentives for innovation, including competitive pricing and strong patentprotection laws.

Pope Benedict XVI wrote in his recent encyclical Deus Caritas Est, “We do not need a State which regulates and controls everything, but a State which, in accordance with the principles of subsidiarity, generously acknowledges and supports initiatives arising from the different social forces and combines spontaneity with closeness to those in need.” …We now have unsustainable consumption of medical resources, with third party responsibility for health care expenses. A socialized system would increase state dependency and diminish motivation for charity. Greater government bureaucracy would increase inefficiency and waste compared to doctor-patient “two-party” interaction. Socialized medicine violates the social justice principle of subsidiarity by interfering with the family, churches, charitable clinics, and other intermediate organizations attending to those who are most in need.

The competitive marketplace dictates that health care providers and health insurers continue to keep pace with medical innovation in order to stay in business. For example, private health insurance companies must provide access to new technologies to keep their customers. But they also must attend to their bottom line, lest they lose business to lower-cost competitors. When a new surgical technique, such arthroscopic surgery, is introduced, it is quickly adopted. While the equipment and the surgery may be more expensive, it almost always can be done in an outpatient surgical center, making the surgical procedure much easier on the patient and also saving hospitalization costs—a win/win scenario for payers and patients.

The common good would be better served with medical insurance purchased, like other insurance, outside the workplace. Tax law changes could help improve insurance portability and affordability. Insurance industry reform, including measures increasing inter-state competition, could decrease premium cost. Greater competition from patients directly paying premiums would lead to stronger demands for quality and less egregious denials of care. With improved alignment of responsibility for personal health choices and medical care consumption, scarce health care resource allocation would improve. There is significant opportunity for recovery. Market oriented reforms, with compassionate consideration for those without means, deserve far greater consideration.

These incentives fuel innovation and change in the private health sector and also have contributed to the growth of pharmaceutical innovation. Ninetyeight percent of all private health care plans provide some coverage for outpatient pharmaceuticals because the health plans see the value 19 in these medicines. If a patient can be spared a $28,000 surgery for ulcers by taking a $500 medicine, why wouldn’t the health plan want to pay for that? Virtually all do. The question for the future is, Who will pay for tomorrow’s medical miracles with costs far beyond the average worker’s ability to pay? Challenges for 2008 and beyond The issue that will be at the center of the 2008 presidential debate in the U.S. is whether reforms to our health sector will be controlled by government or by consumers in a free and competitive marketplace.

By relying on market forces, the expensive and demoralizing burden of excessive regulation and paperwork can be lifted. The challenge is to create a climate that will provide incentives to promote good health and to embrace the changes that will lead to a wiser use of technologies. Innovation and competition, rather than bureaucracy, can drive change, and the children of the 21st century

Dr. Donald P. Condit wrote in a commentary for 20 the Acton Institute in August,

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who are yet to be born will be the beneficiaries of medical miracles we can only imagine today.

health/h01_001.htm. 11 U.S. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2006,” at http:// www.census.gov/prod/2007pubs/p60-233.pdf. 12 U.S. Census Bureau, Health Insurance Coverage: 2006, Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2006 (All Races), at http://pubdb3.census.gov/macro/032007/ health/h01_001.htm. 13 U.S. Department of Labor, Bureau of Labor Statistics, “2006 Job Openings and Labor Turnover.” December 2006, at: http://www.bls.gov/schedule/archives/jolts_ nr.htm#2006. The numbers in this report were analyzed in The Washington Post by Robert M. Kimmitt, “Why Job Churn is Good,” January 23, 2007 at http://www. washington post.com/wp-dyn/content/article/2007/01/22/ AR2007012201089_pf.htm. 14 The Council for Affordable Health Insurance, “Understanding the Uninsured and What to Do About Them,” March 2007, at http://www.cahi.org/cahi_contents/resources/pdf/UnderstandingTheUninsured0307. pdf. 15 The Kaiser Family Foundation and the Health Research and Educational Trust. “Employer Health Benefits 2006 Annual Survey,” September 26, 2006, at http:// www.kff.org/insurance/7527/index.cfm. 16 Courtney Burke, “Medicaid and State Budgets: Clearing Storm, Foggy Forecast,” National Health Policy Forum, August 17, 2007, at http://www.nhpf.org/pdfs_ib/ IB824_Medicaid&StateBudgets_08-17-07.pdf. 17 Robert Waller, M.D., in testimony to the National Bipartisan Commission on the Future of Medicare, August 10, 1998. Transcript available online at http://medicare. commission.gov/medicare/trans81098.html. 18 Health Policy Consensus Group, “A Vision for Consumer-Driven Health Care Reform,” Galen Institute, 1999, at http://www.galen.org/fileuploads/vision.pdf. 19 The Kaiser Family Foundation and the Health Research and Educational Trust. “Employer Health Benefits 2006 Annual Survey,” September 26, 2006, at http:// www.kff.org/insurance/7527/index.cfm. 20 Dr. Donald P. Condit, “What’s Wacko about Sicko,” Acton Commentary, Acton Institute, August 29, 2007, at http://www.acton.org/commentary/commentary400. php. y

ENDNOTES 1 Aaron Catlin, Cathy Cowan, Micah Hartman, Stephen Heffler, and the National Health Expenditure Accounts Team, “National Health Spending in 2006: A Year of Change for Prescription Drugs,” Health Affairs, January/ February 2008, at http://content.healthaffairs.org/cgi/ reprint/27/1/14. 2 The Kaiser Commission on Medicaid and the Uninsured, “State Children’s Health Insurance Program (SCHIP) at a Glance,” January, 2007, at http://www.kff. org/medicaid/upload/7610.pdf. 3 Centers for Medicare and Medicaid Services, Medicare Enrollment: National Trends 1966 - 2007, at http://www. cms.hhs.gov/MedicareEnRpts/Downloads/HISMI07.pdf. 4 Sean Keehan, Andrea Sisko, Christopher Truffer, Sheila Smith, Cathy Cowan, John oisal, M. Kent Clemens, and the National Health Expenditure Accounts Projections Team, “Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming to Medicare,” Health Affairs, February 26, 2008, at http://content.healthaffairs.org/cgi/reprint/hlthaff.27.2.w145v1. 5 Centers for Medicare and Medicaid Services, 2005 Medicaid Managed Care Enrollment Report Summary Statistics as of June 30, 2005, at http://www.cms.hhs.gov/ MedicaidDataSourcesGenInfo/Downloads/mmcer05. pdf. 6 Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Expenditure Projections, 2006-2016, at: http://www.cms.hhs.gov/NationalHealthExpendData/downloads/proj2006.pdf. 7 Annette B. Ramirez de Arellano, DrPH and Sidney M. Wolfe, MD, “Unsettling Scores: A Ranking of State Medicaid Programs,” Public Citizen Health Research Group, April 2007, at http://www2.citizen.org/hrg/medicaid/assets/reports/2007UnsettlingScores.pdf. 8 Numbers may not add up because some people are covered by more than one program, such as retirees who have public Medicare coverage but also have supplementary private insurance through previous employers, or people who may be covered by more than one policy. 9 U.S. Census Bureau, Health Insurance Coverage: 2006, Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2006 (All Races), at http://pubdb3.census.gov/macro/032007/ health/h01_001.htm. 10 U.S. Census Bureau, Health Insurance Coverage: 2006, Table HI01. Health Insurance Coverage Status and Type of Coverage by Selected Characteristics: 2006 (All Races), at http://pubdb3.census.gov/macro/032007/

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Winning the fight against AIDS By Grace-Marie Turner; This article appeared in The Atlanta Inquirer on March 22, 2008

The past decade has seen remarkable progress in the fight against AIDS with many new treatments discovered and more in development. Some people in the public health community now say that AIDS could be reclassified as a chronic disease that is manageable like diabetes or hypertension. Until recently, such thoughts were unimaginable.

efforts to copy other antiretroviral drugs developed by pharmaceutical companies. In addition to this awful death toll, patent violations could lead to a decline in the number of new vaccines in the future, since drug companies would have no assurance of a return on their investments. On average, it takes more than ten years and $800 million to bring a new drug to market. No company could afford that cost if international patent theft made it impossible to recoup the investment. It’s a simple concept—as patent protection wanes, so does the incentive to produce vital new drugs.

Despite this progress in treatment, 2.5 million people will be infected with HIV this year and more than two million will die of AIDS. As long as weak infrastructure and disastrous political interference plague poor countries where the disease hits hardest, AIDS will persist. Frustrated global activists are now demanding that developing countries be allowed to revoke the patents on AIDS medications to make them more available. Already, the pharmaceutical industry funds many philanthropic programs to make medicines available in these countries at little or no cost. But activists want to impose “compulsory licensing,” a practice endorsed by the World Trade Organization, to allow governments to break patents during public health emergencies to produce copies of branded drugs.

Most activists who support compulsory licensing actually recognize this. But their solution is highly flawed. They want to replace the patent system with “prizes” for drug discoveries and “patent pools” that subsidize investments and projected returns. But could government experts really determine an accurate value for such a prize that would incentivize continued research? Very unlikely. Neither drug companies nor AIDS patients can afford a slowdown in the market-driven innovation process that has characterized past AIDS research. Market incentives have brought about 90 HIV/ AIDS drugs to patients in the past two decades, with more in development. An artificial market managed by bureaucrats and one-dimensional activists will retard this trend, if not end it.

This may sound like an effective way to get antiretroviral drugs to the world’s poor, but it isn’t. In fact, it could have deadly consequences. The immediate danger would come from the proliferation of low-quality counterfeits. Most local industries in sub-Saharan Africa and Southeast Asia lack the technological and regulatory incentives to produce high-quality pharmaceuticals. When a drug is manufactured in a facility that doesn’t meet international safety standards, the drug may contain the wrong dosage of medication. If an AIDS patient takes medicine that isn’t strong enough to kill the disease, the virus becomes drug-resistant. Exposing HIV/AIDS patients to substandard products worsens the epidemic and increases treatment costs.

Stopping the spread of AIDS is difficult. But the solution is not to demonize those private companies trying to find cures or remove their incentive to develop new treatments. Rather, activists, politicians, and business leaders must work together to address institutional problems— such as dysfunctional public health systems and bad governance—that have made the AIDS crisis difficult to combat. y

In 2005, for example, many AIDS patients in Thailand suffered and died after treatment with an untested antiretroviral cocktail called GPO-vir, produced by Thailand’s Government Pharmaceutical Organization. Despite this failure, many activists support the Thai government’s

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Insurance mandates create unintended consequences By Grace-Marie Turner; This article appeared in The Buffalo News on January 30, 2008

Things are not going well in the Bay State, despite government claims that 300,000 more residents have insurance now. Nearly 80 percent of those are either in Medicaid or subsidized plans and pay little or nothing for the coverage.

As the presidential campaigns reach high gear, one of the sharpest debates among Democratic contenders is over how to deliver “universal coverage.” In essence, the question is: Should people be forced to purchase health insurance? Hillary Clinton and John Edwards say they would achieve universal coverage by imposing an “individual mandate.” In other words, they would pass a law that required every American to obtain health insurance.

Soon, companies would be forced to pay for health benefits dictated by government, and their freedom to control what benefits they offer would disappear.

Barack Obama would require that all children be insured, but not adults. Obama accurately observes that “the reason Americans don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it.”

Meanwhile, those people are having trouble finding doctors. Insurers have announced rate increases of twice the national average. And a $147 million budget shortfall is projected because of heavy demand for the subsidized plans.

The toughest question facing Clinton and Edwards is how to enforce the mandate. Back when she was first lady, Sen. Clinton recognized this problem, describing the individual mandate as “extremely complicated and bureaucratic.” Although she now supports an individual mandate, she doesn’t say how she would enforce it.

Massachusetts imposed its mandate without cutting the red tape that made health insurance so expensive to begin with. There and elsewhere, government needs to move aside so people can buy insurance that meets their needs and fits their budgets.

But Edwards does. He would require proof of insurance when people paid income taxes or received treatment. Those who didn’t have coverage would be assigned a plan and forced to pay the premiums. People deemed unable to afford coverage could receive subsidies.

The Democratic presidential candidates are rightly concerned about families who cannot afford health care. But forcing every American to purchase insurance isn’t the solution.

This leads to a slippery slope in which the government gradually takes over the insurance market—controlling which policies are acceptable, how much they cost, who must pay and what it costs taxpayers.

Instead, a rational system of deductions and credits should be developed to expand access to private health insurance. Meanwhile, regulations that impede competition should be lifted to make the coverage more affordable.

An individual mandate would be a tax on individuals and businesses. Soon, companies would be forced to pay for health benefits dictated by government, and their freedom to control what benefits they offer would disappear.

For Democratic voters, the question is simple: To mandate, or not to mandate. y

Mandates don’t have a good track record. In the 1980s, Massachusetts tried to force all employers to provide health insurance. That failed, and now the state is trying to enforce the individual mandate enacted in 2006.

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What became of your New Year’s raise? By Grace-Marie Turner; This article appeared in Investor’s Business Daily on January 24, 2008

January is the time we pay our bills after the holidays, and Americans, it seems, are not feeling very merry. Consumer confidence is plummeting, and a recent ABC News/Washington Post poll shows that only one in five Americans feel they are getting ahead financially.

savings accounts and other consumer-directed health care options. What saved workers from actually going in the hole in the first half of this decade were the Bush tax cuts enacted in 2001 and 2003. Despite all the political smoke screens and fingerpointing, the tax cuts were actually a boon for middle-class households. As Burtless 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.”

But consider this: The average American worker’s wages rose by $2,975 from 2000 to 2005 (the most recent period for which data are available). And that’s after inflation. With such a significant wage bump, why the pessimism? The primary reason that workers don’t feel richer is they see just a fraction of that wage increase in their take-home pay.

In other words, it was only the direct action of Congress to cut federal income-tax rates that let workers see any of their pay increases at all.

Of that $2,975, the average worker received just $879—29%—of their pay increase in actual cash wages over the five-year period, according to Gary Burtless of the Brookings Institute.

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.

Where did the rest of it go, if not into workers’ pockets? Most of it was snapped up in paycheck deductions before it ever reached their bank accounts or wallets. Most of the money went to higher payments for job-based health insurance and pension contributions, both of which are deducted directly from workers’ paychecks. 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.

Lawmakers should keep this in mind, particularly as many of them enthusiastically endorse tax hikes proposed by some of the 2008 presidential candidates. It’s doubtful middle-class Americans will take kindly to Washington increasing tax levies to the point that their real take-home pay drops and the bottom falls out of the economy from the burden of higher tax rates.

With this in mind, it’s easy to see why many Americans may feel cash poor, even though they’re benefit rich. In fact, a CBS News poll taken last year found that more than half of middle-class people—those with household incomes of $30,000 to $75,000 a year—thought that “life for the middle class” had gotten worse the last 10 years.

Economic issues, including taxes and health costs, are and should be first-tier issues in the 2008 election campaigns. It’s important for lawmakers to look at the real impact their decisions will have. Tax increases designed for the rich have a ripple effect through the economy and, history shows, will backfire by slowing the economy, increasing unemployment and putting American workers further behind.

Rising health insurance premiums have been behind much of this financial unease. Health costs are the fastest-growing business expense for employers. Health insurance premiums increased by more than 50% in real terms from 2000 to 2005.

If we think consumer confidence is low now, just wait until the federal government takes all of workers’ extra pay—and then some. That would be for those lucky enough to still have jobs. y

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

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The GOP’s prescription for health care By Grace-Marie Turner; This article appeared in The Wall Street Journal on January 29, 2008

services. We can make health care more affordable by making health insurance more portable from one job to another, and making health insurance tax deductible for individuals and families as it now is for businesses.”

Health care has been a sleeper issue in the Republican presidential primaries. But as we heard in President Bush’s State of the Union address last night, the GOP does have ideas—big and transformative ideas designed to energize the free market to target many of the problems that plague our health sector.

• John McCain: “It is good tax policy to take away the bias toward giving workers benefits instead of wages. It is good health policy to reward having insurance no matter where your policy comes from. To use their money effectively, Americans need more choices.”

The leading Republican candidates all have announced plans that would give more power and control to individuals over their health care and health insurance, breaking the employment-based coverage lock. That’s a far cry from the proposals of the Democratic presidential candidates. While they talk about patient choice and private insurance options, their remedies rely on a much bigger dose of government.

• Even Mitt Romney, who led the enactment of a universal health plan for Massachusetts that expanded the role of government in the health sector, now says: “The federal government needs to loosen regulations on the nation’s health-insurance providers, increasing competition and thereby lowering patient costs. The right answer is less government, less regulation, more individual responsibility, and more of the market dynamics that propel the rest of our economy.”

The GOP candidates want to boost options for individually-owned health insurance, and they would change federal tax policy to create new deductions and/or tax credits for health insurance. Lower income people, especially the uninsured, would get new subsidies to purchase private insurance. The candidates would allow people to purchase health insurance across state lines, and they would give states new incentives to fix problems, especially regulations and mandates, that have helped make health insurance so expensive in the first place. They believe that bringing millions of new buyers into the health care marketplace will expand competition and force insurers and providers to offer more affordable options.

Further, because the full cost of job-based health insurance is invisible to most workers, they have incentives to over-consume health services and to demand more expensive health insurance, driving up costs for those trying to buy coverage on their own.

The similarity among Republican candidates’ health-care principles is such that they often sound like they have the same speechwriter: • Rudy Giuliani: “I believe we can reduce costs, expand access to, and improve the quality of health care by increasing competition. We can do it by increasing health-care choices and affordability, and by empowering patients and their doctors, not government bureaucrats.”

While there are differences in implementation, Messrs. Giuliani, Huckabee, McCain and Romney all start with proposals to reform the generous but invisible tax provision that ties health insurance to the workplace. The U.S. offers a generous tax break worth more than $200 billion a year to those who get health insurance through the workplace. Any amount of income that workers receive in the form

• Mike Huckabee: “I advocate policies that will encourage the private sector to seek innovative ways to bring down costs and improve the free market for health-care

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of health insurance is excluded from federal and state income and payroll taxes.

health insurance isn’t because they don’t want it, it’s because they can’t afford it,” Sen. Obama says.

This provision, which dates back to World War II, has cascaded through the economy for 65 years to create a system in which more than 160 million people get health insurance through the workplace.

Sen. Clinton says that the key vision of the Democrats is to achieve universal health coverage. But that takes her down a rocky road of mandates on individuals, employers and insurers that squeeze genuine competition out of the health sector.

But today, when four in 10 workers change jobs every year, tying health insurance to the workplace isn’t working for tens of millions of Americans. Further, because the full cost of job-based health insurance is invisible to most workers, they have incentives to over-consume health services and to demand more expensive health insurance, driving up costs for those trying to buy coverage on their own.

Is there any agreement about the future direction of health reform? Yes. Major candidates on both sides of the aisle support greater efforts toward prevention, use of electronic health records, more information for consumers on choices and prices, better chronic-care management, and most even call for medical malpractice reform. There also is general agreement that people need more options to purchase health insurance through groups outside the workplace, that tax credits can help lower income people buy coverage, and that people should have more choice and control over their health insurance.

While the Republican presidential candidates don’t want to blow up the employment-based system, they all want to give people the same tax benefit when they purchase a policy on their own as when they get it at work. This was also central to the health-reform proposals President Bush outlined last night.

But beyond that, the contrast between the Republican and Democratic candidates is stark. Ultimately they break down over whether individuals or government will be in control of health care in the future. The choice this election year is real. y

The Democratic candidates would lock in the employment-based system with requirements for most employers to pay for coverage. In addition, Hillary Clinton and John Edwards would impose an “individual mandate” in which the federal government would require everyone to have health insurance.

But today, when four in 10 workers change jobs every year, tying health insurance to the workplace isn’t working for tens of millions of Americans. None of the Republican candidates supports an individual mandate. Barack Obama is the outlier among the Democrats—a major point of contention among them—because he supports a mandate for children to get health insurance but not everyone. “The reason Americans don’t have

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The Rx is free choice By Grace-Marie Turner; This article appeared in The Philadelphia Inquirer on February 25, 2008

Imagine if the government passed a law requiring that any automobile sold in the United States had to be outfitted with a GPS navigation system, satellite radio, heated leather seats, and a hybrid engine. Such a scenario would mean, of course, that only the wealthy would be able to afford cars.

Scaling down these mandates would lower the price of insurance and give millions more people the option to purchase coverage. The rules fall hardest on those least able to afford them, particularly small businesses and individuals buying health insurance in the open market. Big companies and other firms that have the resources to “self-insure” can escape these state mandates.

Sound far-fetched? In the lunatic world of America’s health insurance market, though, this kind of political micromanagement is a troubling reality. And it is a primary reason many people can’t afford health insurance.

In addition, firms that can’t self-insure are subject to many other regulations that overeager state legislators have passed that drive up costs, particularly rules that tell insurers they must sell policies to people even if they wait until they are sick to buy coverage.

Across the country, every state requires insurers to cover certain medical services and providers. They vary from the essential—such as emergency room visits—to the relatively less so—such as acupuncture, massage therapy and pastoral counseling. And the number of these mandates runs from a low of 14 in Idaho to a whopping 63 in Minnesota.

In the 10 states with the greatest number of mandates, it costs a family about $2,100 more a year to purchase insurance than it does in the 10 states with the fewest.

When a state government requires all insurance policies to cover nonessential services such as “chiropodists” and “naturopaths,” it drives up the costs for everyone—by as much as 50 percent, according to some estimates. In the 10 states with the greatest number of mandates, it costs a family about $2,100 more a year to purchase insurance than it does in the 10 states with the fewest. Consequently, low-income Americans get priced out of the market, just as they would if the government required everyone to buy high-end cars.

One way to escape all of these expensive mandates and regulations would be for Americans to be allowed to purchase health insurance policies from insurers in states that have more sensible health-policy regulation. For years, U.S. Rep. John Shadegg (R., Ariz.) has been promoting legislation that would allow Americans to do just that, but his proposal hasn’t generated much support so far.

Forcibly expanding the scope of basic insurance plans might be a great deal for special interest medical professionals, but it does so at the cost of forcing millions of people to pay for procedures they wouldn’t otherwise use.

That’s a shame. With Shadegg’s bill, Americans would have the freedom to shop around for the plan best suited to their specific health needs—as opposed to being stuck with an expensive, onesize-fits-all policy dictated by local lawmakers.

In Massachusetts, for example, a pre-retiree struggling to buy coverage must nonetheless insure against the need for a bone-marrow transplant, even though the medical value of this highly expensive treatment is disputed. In California, men are required to carry insurance that covers breast reconstruction, mammograms and maternity stays.

Plus, creating a national insurance market would increase competition among insurers for customers. That could mean better policies for lower prices. Allowing individuals to purchase insurance across state lines would also enhance competition among states. All states regulate health insurance, so consumers would still have protections. But states

25


PUBLICATIONS

would have a greater incentive to balance their regulatory regimes against costs.

With Shadegg’s bill, Americans would have the freedom to shop around for the plan best suited to their specific health needs—as opposed to being stuck with an expensive, one-size-fits-all policy dictated by local lawmakers.

Calling for a reduction in the number of health insurance mandates will never grab quite as many headlines as a promise to deliver “universal coverage.” That’s why presidential contenders avoid this commonsense proposal. But as Democratic presidential candidate and Illinois Sen. Barack Obama recently explained, “The reason Americans don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it.” In other words, the way to get people to buy insurance is to lower costs. It’s the same way with cars. Lawmakers know that not everyone can afford a Lexus or a Prius, but state legislators have locked them into buying high-end health insurance—or going without. When they look for solutions to the rising number of uninsured in their states, lawmakers might first consider undoing the damage they have done to make health insurance so expensive in the first place. y

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PUBLICATIONS

Loose political lips can sink our economy By Grace-Marie Turner; This article appeared in The Wall Street Journal on March 28, 2008

Your March 17 editorial “The Buck Stops Where?” about the dangers of a weak dollar was right on point, emphasizing the need for the Fed to restore its credibility. But a weak dollar alone would not be putting us on the verge of a world-wide financial crisis. It would take much more than a weak dollar and the sub-prime mortgage collapse to shake confidence in an economy as strong as the United States is. Unfortunately, other forces are at play that could lead to just such a crisis, including: 1) Continual talk by Sens. Hillary Clinton and Barack Obama about huge future tax increases, including the expiration of President Bush’s income and capital gains tax cuts; 2) The anti-immigration sentiment that could severely constrain the future labor pool; and 3) The erosion of our leadership in the investment world because of the insidious impact of Sarbanes-Oxley. Investors do look to the future, and taken together, these and other bad policy decisions could indeed undermine even the strongest economy in the world. It’s time for political leaders to wake up and understand the damage caused by these anti-growth policies. y

It would take much more than a weak dollar and the sub-prime mortgage collapse to shake confidence in an economy as strong as the United States is.

27


PUBLICATIONS

Little-guy patent peril By Grace-Marie Turner; This article appeared in the New York Post on April 2, 2008

This month the Senate plans to take up legislation to update our nation’s intellectual-property laws to better deal with the challenges of new technologies and the complexities of the 21st century economy. But the measure poses a threat to independent entrepreneurs.

Inventors now can file for temporary patent protection for a modest $100 fee, with the assumption that they’ll petition for permanent protection within a year. Scrapping that introductory rate would force all applicants to run the gamut of the normal application process—which costs $10,000 to $15,000 up front. This cost could be prohibitive to small-scale or independent inventors, many of whom depend on the provisional patent to buy time while they secure funds for a formal application.

The Patent Reform Act passed the House late last year; it would change how patents are assessed and enforced. It’s designed to rein in two problems— dubious patents, which can undermine the integrity of the entire system, and the hoarding of patents solely to sue companies for violating them.

The bill also would make all new patent applications available to the public online after just 18 months—eliminating the provision in current law that lets applicants request an extension. That would make it much easier for patent thieves to steal ideas, because they’d have unlimited access to a bevy of potentially lucrative inventions that haven’t yet received legal protections.

The act’s chief supporter is the technology industry, whose large firms often incorporate components that have been patented by others into their products. In recent years, they’ve faced a scourge of lawsuits from patent hoarders.

The Patent Reform Act passed the House late last year; it would change how patents are assessed and enforced.

Large companies are inherently better positioned to file for patents, to have the resources to accelerate development of the product within the 18-month window and to hire the army of lawyers necessary to navigate the approval maze. Smalltime entrepreneurs would clearly be disadvantaged, as they’d be least equipped to defend themselves in court.

The tech titans have valid grievances, but this bill tries to solve their problems at the cost of small-business owners and independent inventors—who’d be forced to watch helplessly as others reap the rewards of their work.

Finally, the bill actually makes it easier for those who hoard patents (known colloquially as “trolls”) to file junk lawsuits against patent holders. It would grant plaintiffs unlimited legal challenges for a year after a patent is granted, rather than the one challenge they’re allowed now.

Take, for instance, a provision in the bill that would change the patent-approval process from a “first-to-invent” to a “first-to-file” system. Theoretically, this makes it much easier to resolve patent disputes. Finding out who filed the paperwork first is far simpler than determining who had an idea first.

Trolls big and small could overwhelm small businesses with lawsuits—escalating legal fees to the point where an unjust settlement is the least-costly option for the inventor. The small-business community can’t afford to ignore the Patent Reform Act. It threatens the strong legal protection of intellectual property that’s the lifeblood of entrepreneurs. If the measure passes, thieves and veterans of the patent bureaucracy will have a substantial—and unfair— leg up on rookie innovators. y

But the switch would put small-time inventors at a big-time disadvantage by making it much more difficult and expensive to file a patent application. For example, the bill would eliminate the provisional-patent application process, which has been a boon to start-up companies and garage-style inventors.

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PUBLICATIONS

Clinton and Obama agree — and they’re both wrong By Grace-Marie Turner; This article appeared in The Buffalo News on April 21, 2008

With the final Democratic primaries just weeks away, Sens. Hillary Clinton and Barack Obama are locked in a desperate battle for the nomination, and to highlight their differences, they are exchanging blows over health reform almost daily.

Both want to give the government the power to dictate drug prices for medicines covered under the Medicare drug benefit. And they would both lift the ban on drug importation—effectively importing foreign price controls and surely decimating research to create tomorrow’s new medicines.

Their principal debate? Whether the government should require everyone to have health insurance. Clinton wants an individual mandate, creating legal penalties and even garnishing wages for those who don’t have health insurance. Obama doesn’t.

Over-regulation is the main cause of the country’s health care woes.

Clinton claims “universal” coverage is impossible if people are given the freedom to go uninsured. Obama argues that health insurance is still too expensive to force people to pay for it.

The list goes on. But the overriding principle for Obama and Clinton is clear—toward a much bigger role for the government over health care decisions. But that thinking is what caused many of the problems in our health sector today. Overregulation is the main cause of the country’s health care woes.

This debate has obscured the fact that—in almost every other area—the candidates have nearly identical visions and plans for health reform. Both want to require insurers to accept all applicants. In addition, they would essentially force insurers to charge the same premium for everyone, regardless of age, gender, occupation, or preexisting conditions.

What the insurance market actually needs is more competition—not more regulation. y

Both candidates want a national “pay or play” mandate, forcing employers to cover a preset percentage of their workers’ health insurance or pay a fine. Businesses with especially high insurance costs would be partially subsidized and small businesses would be offered new subsidies, at least at the beginning of the new program. Both would massively expand Medicaid and the State Children’s Health Insurance Program. And they want to allow younger people to buy into Medicare, forcing private health plans to compete with this taxpayer-supported public insurance program that has federal policing authority and the ability to impose price controls—hardly a level playing field. Both want to create a federal “comparative effectiveness” agency in which federal officials, not doctors and patients, would decide whether newer, more expensive medical technologies and pharmaceuticals would be more effective than their older and cheaper counterparts. The results of these clinical trials would inform what health plans will pay for.

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MEDIA MENTIONS

Prescription drug importation could be destructive By Grace-Marie Turner; This article appeared in the South Florida Sun-Sentinel on April 29, 2008

As the presidential primary campaigns grind on, Sens. Hillary Clinton and Barack Obama always find something to exchange blows over. And even though he’s enjoying the Democrats’ intra-party fight, Sen. John McCain manages to disagree with both of them almost daily.

sets the price and terms, the transaction is no longer “free.” No individual would accede to these sorts of stipulations when selling a home or a car, and no business should have to either. Forced sale undermines the most basic principles of our economy.

But on drug importation, all the candidates agree. Democratic presidential contenders Hillary Clinton and Barack Obama and presumptive Republican nominee John McCain have promised that if elected they would allow the importation of prescription drugs from an array of foreign countries that use price controls to keep costs down.

And the savings would be negligible, since an army of middle-men would enter the picture. A London School of Economics study shows that similar systems already in place in Europe have resulted in almost no consumer savings. Instead, it’s the middlemen who derive most of the benefit, buying low and selling back to consumers at a high price.

With support like that, drug importation must be a good idea—right?

Should Congress really be fighting to make foreign middlemen richer?

Not really. When you look at the details, it becomes clear that the plan would impose price controls on the U.S. drug market through the back door—with all the destructive consequences that come with such policies.

Further, a report by the nonpartisan Congressional Budget Office estimated that drug importation would reduce costs by a mere 1 percent.

Fortunately, under our current system, American companies aren’t required to do business with foreign governments that impose price controls on drugs. If France suddenly demanded 10 million Viagra tablets at a bargain-basement price, Pfizer could tell Monsieur Sarkozy to take un hike.

Meanwhile, the long-term costs of importation would be devastating. John Vernon of the AEIBrookings Joint Center recently warned that, over time, importation would cost approximately 79 million life years, one million lives, or about $8 trillion.

But under the latest piece of drug importation legislation that’s snaking its way through Congress, U.S. companies couldn’t walk away. The bill contains a “forced-sale” provision that would require U.S. drug manufacturers to sell their wares to foreign distributors in whatever quantity the firm demands and at whatever price the foreign government imposes, even if the distributor plans to export them back to America.

That’s a terrible price to pay for a 1 percent drop in drug prices. At the same time, U.S. pharmaceutical research—the source of most medical innovation worldwide—would be decimated. One study concluded that importation would decrease investments into research and development by as much as 35 percent. By forcing drug manufacturers to sell at artificially low prices, importation would hobble the capacity of America’s peerless pharmaceutical researchers to create the next life-saving miracle cure.

In other words, foreign governments and firms would be allowed to tell U.S. businesses what to sell, how much to sell, and at what price. If a U.S. company balked, it would face punishment in U.S. courts.

Supporters of the idea disingenuously claim that it promotes “competition.” It’s instead a battle that U.S. businesses cannot win, and in which the American people—all of whom rely on the benefits of the medicines created in this country—most surely lose. y

The bill’s supporters claim that the forced-sale provision simply assures “free trade” in drugs, but it’s nothing of the sort. Free trade can exist only between willing buyers and sellers. If a government

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PUBLICATIONS

Candidates and health care reform By Grace-Marie Turner; This article appeared in the Seattle Post-Intelligencer on May 13, 2008

Sens. Barack Obama and John McCain are gearing up for a general election battle—barring a surprise surge by Sen. Hillary Clinton—in which they will offer very different visions for health care reform.

health care marketplace will expand competition and force insurers and providers to offer more affordable options.

Obama—like Clinton—sees a much larger role for government in the one-sixth of our economy represented by the health sector. Obama would mandate that all children have health insurance, would require employers to pay for insurance for their workers, would impose significant new federal regulation over health insurance and would expand government programs such as Medicaid.

Obama and McCain agree the key to health reform is getting costs under control. Obama believes government should require insurers to accept all applicants and would force insurers to charge basically the same premium for everyone, regardless of age, gender, occupation or pre-existing conditions. A healthy young person would pay about the same as a 62-year-old with heart disease and diabetes.

McCain has a very different vision. “The key to real reform is to restore control over our health care system to the patients themselves,” he said recently. He would focus on new financing tools to help people buy health insurance that would be portable from job to job, new mechanisms for those with pre-existing conditions to get coverage, and he would emphasize prevention and better care coordination, especially for people with chronic illnesses.

Obama wants a national “pay or play” mandate, forcing employers to cover a preset percentage of their workers’ health insurance or pay a fine. Some businesses would be partially subsidized, but that would mean significant federal oversight of all employer health spending.

Obama and McCain agree the key to health reform is getting costs under control. “The reason Americans don’t have health insurance isn’t because they don’t want it, it’s because they can’t afford it,” Obama says. As a result, neither candidate supports a universal mandate for health insurance.

He would expand Medicaid and the State Children’s Health Insurance Program and would create a new program modeled on Medicare. That would force private health plans to compete with a taxpayer-supported public insurance program, which has federal policing authority and the ability to impose price controls—hardly a level playing field.

But Obama would lock in the employment-based system with new mandates on employers.

Congress will wrestle with the intricacies of reform, but in this election year, the vision is the key, and the contrast between the visions that Obama and McCain offer is stark. The bottom line question will be whether individuals or government will be in control of health care in the future. y

McCain sees a world in which, “Americans (have) new choices beyond those offered in employmentbased coverage.” He believes that “Americans want a system built so wherever you go and wherever you work, your health plan goes with you.” McCain would boost options for individually owned health insurance by making everyone eligible for a refundable tax credit to help them buy health insurance. He would allow people to purchase health insurance across state lines and would give states new incentives and resources to make sure everyone has access to coverage. He says that bringing millions of new buyers into the

31


PUBLICATIONS

It’s hard to see doctors favoring less pay, care, more paperwork By Grace-Marie Turner; This article appeared in the Omaha World-Herald on May 20, 2008

Nearly six in 10 U.S. doctors say they favor legislation to establish national health insurance, according to a new survey. But doctors might be less enthusiastic if they knew more about the consequences of such a system.

with bureaucracy. Over the last decade, nearly 10 percent of Canadian-trained physicians have come to the United States to practice. Even in America’s government-run health programs, cost-cutting is rampant. This spring, Medicare will cut payments to doctors by 10 percent. Never mind the fact that physicians’ expenses—thanks partially to medical malpractice premiums—continue to rise.

Touted as the “largest survey ever conducted among doctors on the issue of health care financing reform,” the results of this Indiana University School of Medicine survey were published in the Annals of Internal Medicine and have garnered a great deal of press attention.

The next step is for government to decide which drugs, procedures and other treatments will be available. That’s why the survey should have asked physicians if they would support national health insurance if it also meant rationing of care for their patients.

Those who support a bigger government role in our health sector cited the findings as proof that the nation is ready for the kind of overhaul that U.S. Sens. Barack Obama and Hillary Clinton are promising.

Take prescription drugs, for example. Governments with national health insurance programs generally pay less than the market price for pharmaceuticals. This lessens the financial incentive for companies to develop new treatments. Europe’s pharmaceutical industry is a shadow of its past vibrancy, largely because price controls leave little to pay for research.

Doctors traditionally have been critics of government-dominated health insurance, fearing that the bureaucracy would damage the doctor-patient relationship. Could this be a genuine change of heart among doctors? Not so fast. The survey doesn’t tell the whole story. For starters, it didn’t ask doctors whether they would support national health insurance if it meant a massive pay cut for them, which is a stark reality in government health insurance plans elsewhere.

Access to new drugs suffers as well. While 85 new drugs were introduced in the United States between 1998 and 2002, just 48 new drugs were marketed in Europe during that time.

In the United States, the average physician makes between $200,000 and $300,000 a year. In France, the average physician makes $116,077. In Italy, the average doc takes home $81,414; in Germany, just $56,455.

The British government has been particularly heavy-handed in its restrictions on life-saving medications. For example, it has drastically limited access to Herceptin, a breakthrough cancer drug, and Aricept, an Alzheimer’s treatment popular in the United States.

That is, U.S. doctors would face a huge pay cut if government controlled as much of the health sector as it does in Europe.

Government-run anything also entails plenty of paperwork. Most nationalized health insurance plans saddle physicians with the bulk of the administrative tasks.

Why the pay discrepancy between the United States and Europe? Because in these other systems, government—not the market—determines how much doctors get paid.

Case in point: In 1975, the average Swedish doctor consulted nine patients per day. Now, it’s just four, largely because doctors spend an estimated 80 percent of their workdays handling paperwork.

That has implications for doctors and patients. Every year, the British government cancels up to 100,000 operations, largely because of a shortage of doctors, nurses and operating rooms.

American physicians are no strangers to government-imposed logistical nightmares. Many doctors have begun to refuse patients with public health insurance because the process is so time-

In Canada, doctors are leaving en masse, complaining about their low pay and high frustration levels

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PUBLICATIONS

consuming and costly. A national health insurance system would leave doctors with nowhere else to go. So when we hear that nearly six in 10 doctors support national health insurance, this development most likely means the other four know enough to be concerned. Physicians should take a closer look at the issue before buying into a bargain that could be very costly to them, to our health sector and to the quality of patient care in the future. y

So when we hear that nearly six in 10 doctors support national health insurance, this development most likely means the other four know enough to be concerned.

33


PUBLICATIONS

Publication Date

Publication

Circulation

Oregon voters reject cigarette tax for health care expansion 1/1/2008

Health Care News (IL)

24,000

1/1/2008

Health Care News (IL)

44,957

Is your Medicare drug plan naughty or nice? 1/1/2008

San Diego Downtown News (CA)

18,000

1/3/2008

Bullhead City Bee (AZ)

4,558

Health insurance outlook for 2008 1/1/2008

Agent’s Sales Journal (FL)

n/a

An individual mandate is not the right choice for health insurance reform 1/1/2008

National Association of Realtors’ Public Policy Debate Book (IL)

n/a

Government: Keep hands-off drug pricing 1/16/2008

The Islander (AL)

6,000

What became of your New Year’s raise? 1/24/2008

Investor’s Business Daily (CA)

215,788

Insurance mandates create unintended consequences 1/27/2008

The Oklahoman (OK)

n/a

1/28/2008

The Oklahoman (OK)

216,441

1/30/2008

The Buffalo News (NY)

181,540

1/30/2008

The Buffalo News (NY)

323,390

The GOP’s prescription for health care 1/29/2008

The Wall Street Journal (NY)

780,959

Democratic presidential hopefuls disagree on health care policy 2/1/2008

Health Care News (IL)

= Print publication

24,000

= Web publication 34


PUBLICATIONS

Publication Date

Publication

Circulation

Patents must be protected 2/5/2008

Leader Newspapers (NJ)

39,507

2/7/2008

News Leader (NJ)

n/a

2/27/2008

El Aguila del Hudson Valley (NY)

n/a

Winning the fight against AIDS 2/6/2008

The American (IA)

20,896

2/20/2008

Galesburg Zephyr (IL)

n/a

2/21/2008

Santa Ynez Valley Journal (CA)

n/a

2/27/2008

Colville Statesman-Examiner (WA)

6,424

2/28/2008

Prince George’s Sentinel (MD)

3,747

2/29/2008

Litchfield County Times (CT)

16,400

3/6/2008

Greensboro Herald-Journal (GA)

5,000

3/8/2008

Hawley News Eagle (PA)

7,500

3/13/2008

Oviedo Voice (FL)

4,000

3/19/2008

Hudson Valley Press (NY)

42,500

3/19/2008

Hudson Valley Press (NY)

n/a

3/22/2008

Atlanta Inquirer (GA)

64,000

3/26/2008

Boonville Daily News (MO)

2,650

4/10/2008

Gulf Breeze News (FL)

n/a

4/11/2008

News India-Times (NY)

n/a

5/8/2008

Terre Vuilleraine (Switzerland)

n/a

5/22/2008

La Voix (Luxembourg)

n/a

The Rx is free choice 2/14/2008

The Detroit News (MI)

202,029

2/14/2008

The Detroit News (MI)

915,423

2/25/2008

The Philadelphia Inquirer (PA)

1,152,401

35


PUBLICATIONS

Publication Date

Publication

Circulation

Federal action on health care unlikely this year 3/1/2008

Health Care News (IL)

24,000

3/1/2008

Health Care News (IL)

25,730

How do we expand access to affordable health care? 3/1/2008

U.S. Chamber Magazine (DC)

n/a

3/1/2008

U.S. Chamber Magazine (DC)

n/a

Massachusetts struggles 3/14/2008

NCPA’s Daily Policy Digest (TX)

35,706

6/1/2008

Health Care News (IL)

24,000

The true story 3/21/2008

AHIP HI-WIRE (DC)

n/a

Brian Lee Crowley joins Galen Institute as senior fellow 3/26/2008

The New Brunswick Telegraph-Journal (Canada)

n/a

3/26/2008

The New Brunswick Telegraph-Journal (Canada)

n/a

3/30/2008

Insurance Newscast (OH)

350,000

5/8/2008

New Brunswick Business Journal (Canada)

n/a

Loose political lips can sink our economy 3/28/2008

The Wall Street Journal (NY)

780,959

3/28/2008

The Wall Street Journal (NY)

2,062,271

Thwarting sanity in Medicaid Spring/ Summer 2008

Government Waste Watch (DC)

n/a

Federal patent reforms would hurt small business 4/2/2008

New York Post (NY)

= Print publication

667,118

= Web publication 36


PUBLICATIONS

Publication Date

Publication

Circulation

4/2/2008

New York Post (NY)

n/a

4/14/2008

Cherry Creek News (CO)

n/a

4/14/2008

Dalton Daily Citizen (GA)

n/a

4/16/2008

Edgefield Citizen News (SC)

367

4/23/2008

Asbury Park Press (NJ)

n/a

4/23/2008

Beach Haven Times (NJ)

7,500

4/24/2008

Tuckerton Beacon (NJ)

4,300

5/2/2008

Stockhouse.com (NY)

8,865

5/4/2008

Hagerstown Picket News (MD)

n/a

5/28/2008

Downingtown Ledger (PA)

n/a

6/4/2008

Oxford Tribune (PA)

n/a

6/11/2008

Oxford Tribune (PA)

4,500

Clinton and Obama agree — and they’re both wrong 4/21/2008

The Buffalo News (NY)

181,805

4/21/2008

The Buffalo News (NY)

323,390

Prescription drug importation could be destructive 4/29/2008

South Florida Sun-Sentinel (FL)

226,591

4/29/2008

South Florida Sun-Sentinel (FL)

1,070,829

Very strange bedfellows 5/1/2008

Health Care News (IL)

24,000

6/17/2008

The American Spectator (VA)

49,530

A profile of the U.S. health sector 5/1/2008

Gesundheit! (United Kingdom)

n/a

Roundtable discussion: Telephone-based medical consultations 5/1/2008

Telemedicine and e-Health (VA)

n/a

37


PUBLICATIONS

Publication Date

Publication

Circulation

Candidates and health care reform 5/13/2008

Seattle Post-Intelligencer (WA)

128,012

5/13/2008

Seattle Post-Intelligencer (WA)

1,099,013

5/13/2008

AHIP HI-WIRE (DC)

n/a

It’s hard to see doctors favoring less pay, care, more paperwork 5/20/2008

Omaha World-Herald (NE)

174,020

Indiana uses market-based plan to help uninsured 6/1/2008

Health Care News (IL)

24,000

Don’t let legislators smother health savings accounts 6/28/2008

Munster Times (IN)

83,118

How good is our health care system? 6/30/2008

San Diego Union-Tribune (CA)

296,331

6/30/2008

San Diego Union-Tribune (CA)

1,152,268

To mandate, or not? Submitted to Consumer Health World Newsletter (VA) Business leaders’ Faustian bargain on health care reform Submitted to various publications Letter to the editor in response to “Even the insured feel the strain of health costs” Submitted to The New York Times (NY) Going back to the future with primary care medicine Submitted to The Wall Street Journal (NY) Total Circulation 13,058,818

= Print publication

= Web publication 38


Media Mentions Total circulation: 12,671,367 Galen scholars were quoted in more than 40 publications and websites including the Milwaukee Journal Sentinel, Kiplinger.com, Orange County Register, and National Journal.

39


MEDIA MENTIONS

Survey: Dem ‘08 candidates savvy on elements of health care overhaul By Sara Lubbes; This article appeared in CQ HealthBeat on January 15, 2008 Democratic presidential candidates are more in step than their Republican counterparts on what Americans want in a health care system overhaul, said authors of a new voter survey.

Meanwhile, policy experts at conservative think tanks criticized the findings as unrealistic. They said the survey questions were biased because the they did not ask voters whether they would support a health care overhaul if those changes led to a tax increase or some people to lose their jobs, two possible consequences critics of the health overhaul predict.

The survey, put together by the Commonwealth Fund—a nonprofit group that promotes better public access to health care—shows that more than 80 percent of those surveyed, regardless of their political party, supported the idea that all employers should be required to provide health care to their workers or pay into a government-run fund to provide the care.

“When you ask people ‘do you want everything for nothing,’ they’re going to say ‘yes,’” Grace-Marie Turner, president of the Galen Institute, which promotes free-marketbased economic policies, said.

The survey, taken of a sample of adults 19 or older from June 2007 to October 2007, also showed the majority of those polled, including 52 percent of Republican voters, say government should require every American to have health insurance, just as all drivers are required to have car insurance.

“If you asked people ‘do you think you want to be able to have insurance you can take from job to job’” as Republican candidates such as Giuliani are arguing, “people will say ‘yes’ to that, too,” Turner said. “It’s totally how you frame the question.”

Study author Sara R. Collins, assistant vice president of the Commonwealth Fund, said the results show that voters agree most with the proposals being pushed by the three leading Democratic candidates for president: former North Carolina Sen. John Edwards, Illinois Sen. Barack Obama and New York Sen. Hillary Rodham Clinton.

The survey also found that support for the individual mandate that would require everyone to carry insurance “was far strong than I might have expected,” Collins said. About two-thirds of those polled, regardless of their political party, said the government, individuals and employers should share the health insurance cost burden in America.

All three candidates would require employers to make some kind of health care contribution or provide health insurance to their workers—the socalled pay or play mandate. Clinton and Edwards also would require all Americans to carry health insurance, while Obama would require families to carry the insurance for their children.

About 85 percent of those polled, across party, said the candidates’ positions on health care would be “somewhat” or “very” important in their voting decision. Joe Antos, a health policy expert with the conservative American Enterprise Institute, pointed to a survey finding that 66 to 70 percent of those polled said employers, government and individuals should share insurance costs—a finding which shows that the majority of Americans think the health care system should not change much, he said.

The Republican front-runners, Arkansas Gov. Mike Huckabee, former New York City Mayor Rudy Giuliani, former Massachusetts Gov. Mitt Romney and Arizona Sen. John McCain, have not called for such reforms yet. Most have backed the idea that people should be more free to buy their own insurance on the private market and carry that insurance with them from job to job.

“This is really a statement that says ‘we’d like things to stay about the same,’” Antos said.

“The survey findings are far more in line” with the proposals the Democratic candidates support, Collins said in a press briefing Monday.

He also argued that it’s too early in the campaign to know what kinds of health care reforms the eventual Republican nominee will end up supporting. Health care has not been a big issue in

40


MEDIA MENTIONS

“When you ask people ‘do you want everything for nothing,’ they’re going to say ‘yes,’” GraceMarie Turner, president of the Galen Institute, which promotes free-market-based economic policies, said.

the Republican primaries so far because it’s not an issue core Republican voters worry about as much as issues such as immigration, Antos said. “Come the general election, they’ll be changing their tune,” he said. Dan Mendelson, president of the public policy strategy Avalere Health and a former head of the Office of Management and Budget’s health division under President Bill Clinton, agreed, saying “It’s too early to judge the Republican health policy,” he said. “They’ve been silent on it, leaving them a lot of room.” New America Foundation’s Len Nichols said the survey’s findings confirm what he already believes: that most Americans want employers or the government to provide mandatory insurance. Nichols is director of the Health Policy Program at the foundation, a self-described “post-partisan” public policy think tank. “These ideas always tend to poll well,” and the Democratic plans are tailored to those ideas, Nichols said. y

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Universal health care costly, divides dems By Jed Graham; This article appeared in Investor’s Business Daily on February 11, 2008

The road toward mandated universal health care coverage has gotten bumpy in recent weeks.

Sen. Barack Obama, D-Ill., has stressed the downsides of mandatory coverage. His campaign sent out a mailer that reminded many of the 1994 ads that doomed the first version of HillaryCare.

In a possible preview of what’s to come in 2009 if a Democrat wins the White House, unfavorable budget projections and heated rhetoric have put fans of universal health care on the defensive.

“Hillary’s health care plan forces everyone to buy insurance, even if you can’t afford it . . . and you pay a penalty if you don’t,” the mailer reads.

First, Massachusetts, whose landmark 2006 deal between then-Republican Gov. Mitt Romney and Democratic lawmakers revived the push for universal care, said its plan was $400 million over budget.

Clinton said that’s right out of the GOP playbook, calling it “reminiscent of old ‘Harry and Louise’ talking about how, ‘Oh, the sky will fall if we try to have universal health care.’ “

Then in California, support evaporated for a similar deal by GOP Gov. Arnold Schwarzenegger and Democratic leaders. A state Senate panel rejected the plan last month amid a growing budget crisis. A nonpartisan analysis had predicted cost overruns of up to $1.5 billion within five years.

John Edwards and Clinton both backed plans that would have mandated insurance. Obama stopped short, while still trying to make insurance affordable for all. Obama’s plan could leave 15 million uninsured, experts say. While his stance didn’t initially attract much attention, it has become the Democrats’ central policy dispute.

But perhaps the most jarring development has come on the presidential campaign trail. Sen. Hillary Clinton, D-N.Y., who would require individuals to buy health insurance much as drivers have to buy auto insurance, has blasted her rival’s refusal to make sure everyone is covered.

The fact that insurance mandates are being attacked from the left, not the right, could be key, supporters and opponents agree. “I thought this was going to be a big issue in the general election,” said Grace-Marie Turner, free-market health advocate and president of the Galen Institute. “Instead,

“My opponent will not commit to universal health care,” she said, calling it “a core Democratic value and a moral principle.”

“Hillary’s health care plan forces everyone to buy insurance, even if you can’t afford it . . . and you pay a penalty if you don’t,” the mailer reads.

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about a dozen sponsors across the political spectrum. The bill would pay for mandated universal coverage by ending the tax break on employerprovided coverage and using those savings to help those with incomes of less than 400% of the poverty level pay insurance premiums.

it’s a big issue in the Democratic primary. There is a lot of consternation on the left.” Obama’s demonization of health insurance mandates could sabotage hopes for universal coverage, wrote liberal New York Times columnist Paul Krugman.

“The main reason I’m optimistic is precisely because we have that conversation going on,” Nichols said.

“If Mr. Obama gets to the White House and tries to achieve universal coverage, he’ll find that it can’t be done without mandates,” he wrote.

Both Obama and Clinton would force insurers to offer affordable and generous coverage to all, regardless of health status. They would end Bush tax cuts for families making over $250,000 to help subsidize premiums. y

While experts say some people will find a way to avoid a punitive mandate, many more are likely to opt out if they have a choice.

A state Senate panel rejected the plan last month amid a growing budget crisis. A nonpartisan analysis had predicted cost overruns of up to $1.5 billion within five years. “Voluntary measures would tend to enroll disproportionate numbers of individuals with higher-cost health problems,” driving up premiums or the cost of government subsidies, wrote Urban Institute scholars Linda Blumberg and John Holahan. Many young and healthy adults, who don’t have big medical expenses, choose not to get coverage. So do millions of well-off Americans. Forcing people to get health coverage would let the government insure more people for the same cost, the study concludes. Government health care costs typically far exceed initial projections. Universal health care advocates attribute the cost overruns in Massachusetts to a positive outcome — more uninsured are signing up. Len Nichols, director of health policy at the center-left New America Foundation, remains upbeat about health care reform in 2009. Away from the campaign trail, Nichols notes that a bill from Sen. Ron Wyden, D-Ore., has attracted

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Health care market ripe for innovation Editorial; This article appeared in the Tyler Morning Telegraph on February 20, 2008

Presidential campaigning this year likely will see the political debate heat up even more over the future direction of our health care sector in coming months.

All major candidates recognize the difficulty of enacting sweeping reform, Aliquist notes in his report, “Consumer and Physician Readiness for a Retail Healthcare Market.”

Citizens and potential voters in particular shouldn’t be leaving everything up to the political candidates when it comes to assessing and proposing policy changes.

It is important for people to be well informed, and skeptical of utopian campaign promises that promise an easy path to universal health care.

It is important for people to be well informed, and skeptical of utopian campaign promises that promise an easy path to universal health care. Policy reform is needed, but what most likely would come out of the current climate would only make things worse, Grace-Marie Turner, president of The Galen Institute, cautions. Fortunately, she added, “the signs suggest federal action is unlikely to happen soon.”

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 significant change won’t occur, it just will not happen in 2008 or even 2009.”

As candidates jockey to press their versions of reform, Turner recommends widespread public consideration of the year-end analysis of the health sector situation by Gary Ahiquist of Boos Allen Hamilton who sees 2008 as “the calm before the storm.”

Several positive developments in health care can be expected in 2008, Ahiquist and co-authors Gerald Adolph and David Knott indicate in the report. Continued development of consumer-directed health plans is indicated, along with joint ventures among payers, providers and pharmaceutical companies to provide better care and better service for major medical problems such as cardiac conditions, joint replacement, cancer, asthma and diabetes. Also anticipated are new opportunities to aggregate catastrophic risk in the individual market and create new “virtual” groups of policyholders; and political debates that begin to chart the multiyear process of future reform. One of the biggest improvements anticipated this year will be in bedside care and in coordinating care and services through a patient’s health care episode, the authors indicate. “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,” the Booz Allen report concludes.

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Moderating health spending and increasing market innovation may temper the urgency for political action on health reform, Turner said.

These experts believe the market will continue to be ripe for innovation, at least in the near and intermediate terms, and Turner is in agreement. New studies are cited showing national health spending increased by 6.7 percent in 2006, to $2.1 trillion. One of every six dollars spent in the national economy goes to health care.

Policy changes that would encourage the market to continue to innovate and provide consumers new incentives to seek value in their health spending are needed.

While those numbers are high, the growth rate of spending on most major health services was down from previous years. Medicare spending accounted for the biggest spending increase, largely because of the new drug benefit.

Some positive movement has been made toward righting the ship in the nation’s health sector. This could continue if politicians don’t impose damaging new regulations for a few more years. Providing new opportunities for the market to provide new options for more affordable and widely available health coverage, and more consumer-friendly health services is the best path. y

An important factor is out-of-pocket spending by consumers and that continued to fall as a percentage of overall national health expenditure. In 2007, out-of-pocket spending dropped to 12 percent of total expenditures, the lowest level ever. In 1960, the figure was 47 percent. When out-of-pocket costs and consumers’ shares of premiums are included, the direct household share of health spending has remained relatively flat as a percentage of personal income since 2003.

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After the election: A reality check Editorial; This article appeared on Kiplinger.com on February 22, 2008

Talk of change dominates the presidential campaign. But, as this week’s Kiplinger Letter shows, the realities of governing will descend quickly on the next president and Congress once the confetti hits the ground.

central issue in the presidential campaign. But using market forces in one way or another is a crucial element of every major health care proposal. Turner uses a question and answer format to explain how the market can bring order and fairness to the health system that she believes regulation has failed to deliver. She explains concepts such as consumer−driven health care and high−deductible insurance plans and sizes up one of the leading reform proposals that requires all Americans to have health insurance. “When political leaders pass a law requiring everyone to have health insurance, government authorities must decide what qualifies as acceptable coverage,” she writes. “The insurance market quickly morphs into a government−regulated utility.” y

Despite reluctance and confusion by employees, consumer−driven health care is widely regarded as the best option employers have for reining in health care costs for both themselves and their workers. Would that approach, along with other free market solutions, work on a national scale and create a system that could provide universal coverage at an affordable price? Certainly, argues Grace−Marie Turner, president of the Galen Institute, a public policy research organization that advocates for a market−based health care system. By marrying tax breaks and subsidies to competition and the marketplace, the government can ensure coverage to all in a way that gives more choice and more control to consumers. Whether a health system opened to market forces is the ultimate solution to health care is a matter of huge debate and will be a

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Once uninsured, she’s happy to be consumer By Patrick McIlheran; This article appeared in the Milwaukee Journal Sentinel on March 11, 2008

Swimming in the icy sea of high-deductible health care hasn’t been as chilling as you’d think, according to Shelley Ross, who now sees with both eyes.

with state money to which patients add up to 5% of their incomes. Anything left over in the account rolls over to next year, reducing how much the patient must pay. Patients’ own money is on the line, and they benefit if they’re thrifty. Preventive care is free, and the money rolls over only if a patient gets an annual checkup.

“It’s gone without a hitch,” says Ross, 40, a community college instructor, divorced mother of two and by chance the test driver of Indiana’s new stab at helping the uninsured. She signed up in December, had a cataract excised soon after, had the mammogram she was putting off.

It’s a creative way to get the incentives right, says Grace-Marie Turner, president of the Galen Institute, a free-market health policy think tank. It makes patients think like customers, as health savings accounts do. This should stretch the state’s money. While traditional Medicaid’s low reimbursements make it hard to find a doctor, Indiana gives patients real money and real power.

“It has taken a huge weight off me,” says Ross. She was the first of about 28,000 people who have signed up so far for the Healthy Indiana Plan, meant to subsidize coverage for adults who have no insurance. Demand has been three times what officials expected, says Mitch Roob, the state’s secretary of social services.

Supposedly, this will never work. The Indiana plan aroused criticism from the right because it’s funded by a cigarette tax and from the left because of its consumer-driven parts. The knock on highdeductible plans has been that poor people can’t afford to set aside money, but “that doesn’t seem to be a major barrier,” says David Roos of Covering Kids and Families, a group that’s pushed for more government coverage. As with many private HSAs, patients don’t have to fill it on their own. “From the applicant’s point of view,” he says, “it’s a really nice program.” This deal to which people are flocking looks strangely like a health savings account. That’s intentional, says Roob. It’s meant to be consumerdriven care.

The price is OK with Ross, who makes about $25,000 a year. At $91 a month, “I’m smiling when I write that check,” she says. “It’s not like I wanted a free ride.”

Indiana is running opposite the way Wisconsin seems poised to go. One of the least uninsured states, we would further approach perfection via Healthy Wisconsin, a “universal” plan retooled yet again this month. It has lost any early semblance of treating us like customers, signing everyone up for identical low-deductible, state-designed coverage paid for almost entirely by a tax on jobs.

What she wanted was to see. Her sight in one eye had been worsening until she could make out only shadows. Uninsured, she didn’t visit a doctor, not because of the cost directly but “because I thought, ‘I don’t know what I’d do if I had a brain tumor.’ “ Now, she says, she has a “bionic eye,” an implanted lens. The program worked the way high-deductible insurance is supposed to, shielding Ross from a truly ruinous, one-time expense. Next year, if her routine expenses are lower and she gets a checkup, she’ll come out ahead.

Indiana, by contrast, saves its money for those lowincome people who don’t earn insurance at work. The state covers catastrophic care: when bills exceed $1,100 a year. For routine care under that, the patient pays out of an account filled mainly

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If you have to tap the taxpayers, this seems a sensible way to do it. Ross isn’t getting a free ride, though it’s a subsidized one. The way Indiana subsidizes her is compatible with restoring the fouled market for health care, says Turner.

Anything left over in the account rolls over to next year, reducing how much the patient must pay. Patients’ own money is on the line, and they benefit if they’re thrifty. Preventive care is free, and the money rolls over only if a patient gets an annual checkup.

The other knock on health savings accounts is that ordinary schmoes are in no condition to shop around. “I’d view that as a bit pejorative,” says Roob. People rich and poor who know nothing of engineering buy cars all the time. Amateurs of all incomes raise children. “People can figure out how the health care market works,” he says, particularly if the state uses its programs to make the market functional rather than opaque, as Medicaid has done. Wisconsin could take a lesson. Consumer-driven coverage is already big among private employers here. Indiana shows how it could help in the public sector, in a way that puts patients in charge. y

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A healthy direction on health insurance Editorial; This article appeared on the Orange County Register website on April 30, 2008

Well, at least the presidential campaign will offer something of a debate on the issue of health care. On the Democratic side, Hillary Clinton and Barack Obama disagree only over whether buying standardized government−approved health insurance will be mandatory for all Americans (Hillary’s plan) or only for children (Mr. Obama’s approach). Both anticipate even more government involvement in health care, which accounts for about one−sixth of the national economy, than already exists.

taxpayer money—some $7 billion—to subsidize the programs. Critics charge that tax credits for individuals would undermine the system of health insurance provided by employers. Perhaps that’s true, but some employers would still offer it to attract quality employees, and expanding competition in this way should put downward pressure on prices.

“Sen. McCain is interested in moving toward giving consumers more choices, encouraging innovation and making health care more individual patient-oriented,” she added.

While John McCain, the presumptive Republican nominee, is far from a consistent free−market advocate, his approach to health care, as outlined in a major speech Tuesday, takes some important steps in that direction. Whether he would actually be able to move policy in that direction should he be elected president, given solid Democratic majorities in both houses of Congress, is another question.

Whether Sen. McCain, who has been a fitful supporter of free markets, is sincere about this approach is a question worth considering. And whether he could get such reforms through a reluctant Congress or would be reduced to vetoing worse ideas is another. But at least he’s talking about changing in the direction of more patient choice and patient control. So there will be two sides to the discussion in the general election campaign, and that’s a healthy development. y

“The most important thing at this stage is direction,” Grace−Marie Turner told us. She heads the Galen Institute, a free−market−oriented health policy think tank and has done some advisory work for the McCain campaign. “Sen. McCain is interested in moving toward giving consumers more choices, encouraging innovation and making health care more individual patient−oriented,” she added. Specifically, the McCain plan would offer a tax credit of $2,500 for individuals and $5,000 for families to individual consumers for buying health insurance rather than having a tax deduction for employers only. He would permit competition across state lines for health insurance companies, encouraging competition, innovation and serving a variety of needs. His other major proposal is to work with state governors to set up “risk pools” for people who because of pre−existing conditions or other circumstances can find themselves denied insurance. As of now 33 states have such plans in effect; some of them work reasonably well, and some don’t. The McCain proposal is to work with states to devise a “best practices” model and offer federal

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CalPERS rate hikes shrink due to lower costs By Joanne Wojcik; This article appeared in Business Insurance on June 23, 2008

expected use of hospitals and doctors by plan members in 2007 and for the first half of 2008. In addition, CalPERS avoided more than $200 million in costs as a result of removing the highest cost hospitals for the Blue Shield network, adding a lower-cost health plan — NetValue — and extending the Blue Shield contract for one year through Dec. 31, 2010.

SACRAMENTO, Calif. — Employers that purchase health care coverage through the California Public Employees’ Retirement System will see their rates go up by an average of just 4.3% in 2009, the smallest increase in more than a decade. Helping to keep premiums down was a $333 million surplus in CalPERS’ self-insured preferred provider organization plan, according to a spokeswoman for the Sacramento-based system, who said that 18% of the surplus is being used to buy down premiums paid by member employers.

Priya Mathur, the CalPERS Health Benefits Committee chairwoman, said CalPERS was approving Kaiser’s premium increase “under protest.” She explained that Kaiser was not taking CalPERS’ size and claims experience into consideration when setting rates.

Also contributing to the low premium increase was greater use of generic prescriptions by plan members and more frequent use of less-expensive urgent care centers in lieu of hospital emergency rooms, the spokeswoman noted.

However, Kathleen McKenna, executive director for public policy at Oakland-based Kaiser, said that the rates the HMO was charging CalPERS were “reflective of the costs we incur to provide highquality care to CalPERS members.”

Although self-insured PPO rates will actually fall next year by as much as 3.0% for CalPERS members, the basic health maintenance organization premiums will climb by an average of 6.6%. Kaiser Permanente HMO premiums will see the greatest increases of 8.2%, while Blue Shield HMO rates will rise by between 3.7% and 5.3%.

Ms. Mathur said that CalPERS will aggressively pursue a new pricing model for Kaiser plans beginning in 2010. “We need to get to a new day, where Kaiser truly partners with us not only to deliver high-quality health care, but to keep costs reasonable,” she said in a CalPERS statement announcing the 2009 rate hikes.

The CalPERS spokeswoman explained that the Blue Shield rates came in relatively low compared with Kaiser’s because of a rollover credit from the San Francisco-based insurer for lower-than-

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“What is exciting about this is that it demonstrates that aggressive, thoughtful management can save real money, even in a very rich plan, and they probably also saved some lives and reduced harm to patients” through less emergency room use and fewer inpatient days, said Helen Darling, president of the National Business Group on Health in Washington. “We are seeing lower trend among many employers, and we can attribute that to more effective management and the use of many tools and tactics, including care management and ferreting out inappropriate care,” she said.

CalPERS’ 2009 rate increase, which was approved by the retirement system’s board last week, compares with a 6.3% average premium hike for 2008, which had been the smallest increase in a decade. It also falls well below the 10% national average increase in employer-sponsored health plan premiums for 2009 projected by New York-based benefit consultant PricewaterhouseCoopers L.L.P., CalPERS noted. Rate increases for CalPERS health care coverage peaked in 2003 at an average of 23.3%.

CalPERS is the nation’s third-largest purchaser of health care, with nearly 1.3 million state and public agency employees, retirees and their dependents. CalPERS’ spending on health care is surpassed only by that of the federal government and General Motors Corp. y

Employers that purchase health care coverage through the California Public Employees’ Retirement System will see their rates go up by an average of just 4.3% in 2009, the smallest increase in more than a decade. Industry experts were not surprised by the news, pointing to CalPERS’ recent successful track record at keeping health care costs in check. “This state is doing many of the right things to encourage people to use the system more sensibly and more responsibly, and now they are reaping the benefits,” said Grace-Marie Turner, president of the Galen Institute, a health benefits think tank based in Alexandria, Va.

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MEDIA MENTIONS

Publication Date

Topics and Publications

Circulation

Health care plans of the presidential candidates 1/15/2008

CQ HealthBeat News (DC)

109,922

1/29/2008

Kaiser Daily Health Policy Report (DC)

n/a

2/4/2008

The Wall Street Journal (NY)

780,959

4/2/2008

OneNewsNow.com (MS)

230,704

4/30/2008

Orange County Register (CA)

548,993

5/1/2008

Burlington Times-News (NC)

86,172

5/1/2008

Jacksonville Daily News (NC)

19,723

5/2/2008

Clovis News Journal (NM)

28,450

5/2/2008

Colusa County Sun-Herald (CA)

5,817

5/2/2008

Northwest Florida Daily News (FL)

36,673

5/2/2008

OneNewsNow.com (MS)

230,704

5/2/2008

Orland Press-Register (CA)

5,500

5/2/2008

Valley Morning Star (TX)

19,657

5/2/2008

Valley Morning Star (TX)

n/a

5/7/2008

Colorado Springs Gazette (CO)

95,011

5/13/2008

Kaiser Daily Health Policy Report (DC)

n/a

5/15/2008

Family Practice News (MD)

78,789

5/15/2008

Internal Medicine News (MD)

120,000

5/20/2008

OneNewsNow.com (MS)

230,704

6/1/2008

Clinical Neurology News (MD)

n/a

6/1/2008

Clinical Psychiatry News (MD)

33,000

6/1/2008

Skin & Allergy News (MD)

18,897

6/29/2008

Clinical Psychiatry News (MD)

4,006

Consumer-directed health care 1/1/2008

Doctor’s Digest (NY)

n/a

2/22/2008

Kiplinger.com (DC)

480,260

= Print publication

= Web publication 52


MEDIA MENTIONS

Publication Date

Topics and Publications

Circulation

Health savings accounts 3/24/2008

AIS’s Health Business Daily (DC)

4,829

4/15/2008

CQ HealthBeat News (DC)

109,922

Retail health clinics 5/1/2008

Hackettstown Weekly News (NJ)

600

5/8/2008

National Journal (DC)

79,859

5/10/2008

National Journal (DC)

n/a

Employers and health insurance 5/1/2008

Health Care News (IL)

24,000

5/1/2008

Health Care News (IL)

44,957

Government-run health care 6/6/2008

National Journal (DC)

79,859

Health insurance mandates 2/10/2008

Yahoo! Finance (CA)

5,330,085

2/11/2008

Investor’s Business Daily (CA)

n/a

2/12/2008

Investor’s Business Daily (CA)

215,788

State Children’s Health Insurance Program 1/1/2008

Health Care News (IL)

24,000

1/1/2008

Health Care News (IL)

44,957

Medicaid 4/3/2008

Drug Wonks Blog (NY)

n/a

4/6/2008

Anniston Star (AL)

91,385

Galen Institute Medicare Forum 4/29/2008

Aging News Alert (MD)

n/a

53


MEDIA MENTIONS

Publication Date

Topics and Publications

Circulation

4/29/2008

CQ HealthBeat News (DC)

109,922

4/29/2008

ModernHealthcare.com (IL)

n/a

4/30/2008

Kaiser Daily Health Policy Report (DC)

n/a

Health policy in 2008 2/20/2008

Tyler Morning Telegraph (TX)

44,009

2/20/2008

Tyler Morning Telegraph (TX)

112,611

Rep. Shadegg’s healthcare reform work 2/20/2008

Arizona Republic (AZ)

1,547,895

Grace-Marie’s participation in the Clare Boothe Luce Policy Institute 2008 Great American Conservative Women calendar 1/2/2008

Washington Examiner (DC)

83,989

Grace-Marie’s speech at the National Association of Health Underwriters 2008 National Convention 4/1/2008

Health Insurance Underwriter (DC)

30,000

Grace-Marie’s speech at the Washington Policy Center’s 6th Annual Health Care Conference 5/8/2008

Puget Sound Business Journal (WA)

16,961

California health plan 6/22/2008

Business Insurance (IL)

5,900

6/23/2008

Business Insurance (IL)

43,685

Healthy Indiana Plan 3/11/2008

Milwaukee Journal Sentinel (WI)

893,628

3/21/2008

The New York Sun (NY)

n/a

Massachusetts health plan 4/16/2008

OneNewsNow.com (MS)

= Print publication

230,704

= Web publication 54


MEDIA MENTIONS

Publication Date

Topics and Publications

Circulation

5/19/2008

Congressional Quarterly (DC)

n/a

5/20/2008

Kaiser Daily Health Policy Report (DC)

n/a

5/22/2008

EMaxHealth.com (NC)

183,642

6/20/2008

Psychiatric News (DC)

38,000

6/21/2008

Psychiatric News (DC)

21,552

Medical Choice for Arizona initiative 2/4/2008

Health Care News (IL)

25,730

Wisconsin health plan 1/1/2008

Health Care News (IL)

24,000

1/1/2008

Health Care News (IL)

44,957 Total Circulation 12,671,367

55


Health Policy Matters Health Policy Matters newsletters were researched, written, and e-mailed to more than 6,300 subscribers each week, reaching federal and state policymakers, journalists, business leaders, consumers, medical professionals, and others interested in health policy. Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It 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. 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.

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HEALTH POLICY MATTERS

The Year Ahead January 11, 2008 Commentary topics: Health reform outlook for 2008; health care spending and the economy

What Do Consumers Want? February 22, 2008 Commentary topics: Health care consumers; the uninsured; Rep. John Shadegg’s work on health reform

Bad Ideas January 18, 2008 Commentary topics: Federal Medical Assistance Percentage; the public’s health care reform views; consumer-directed health care

Massachusetts Struggles February 29, 2008 Commentary topics: Massachusetts health reform initiative; individual mandates; HSAs

What Happened to Your Pay Raise? January 25, 2008 Commentary topics: Job-based health insurance; State Children’s Health Insurance Program

What They Agree On March 7, 2008 Commentary topics: Health care plans of Sens. Hillary Clinton and Barack Obama

California Faces Reality February 1, 2008 Commentary topics: California health plan; Massachusetts health plan; pharmaceutical prices and spending

Gold Standard March 14, 2008 Commentary topics: The Asheville Project; Diabetes Ten City Challenge; Mayo Clinic health care symposium

Moving Forward February 8, 2008 Commentary topics: Medicare; tax treatment of health insurance; HSAs; Capitol Conference of the National Association of Health Underwriters

The True Story March 20, 2008 Commentary topics: Consumer-directed health care; George McGovern’s commentary on the value of liberty

Very Strange Bedfellows February 15, 2008 Commentary topics: Business groups, unions, and universal health care coverage; individual mandates

Healthy Insights March 28, 2008 Commentary topics: Mayo Clinic’s Dr. Denis Cortese’s recommendations for health care reform; health insurance mandates; public opinion of U.S. health care system Brawls on Capitol Hill April 4, 2008 Commentary topics: Medicaid fraud and abuse; HSA substantiation; Patent Reform Act Join Us! April 11, 2008 Commentary topics: Medicare Forum; HSA substantiation; Medicaid

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HEALTH POLICY MATTERS

Drumbeats June 13, 2008 Commentary topics: The underinsured; health care systems abroad Wake-Up Calls June 20, 2008 Commentary topics: Federal Health Board; singlepayer health care; market innovations; medical tourism Single-Payer Redux June 27, 2008 Commentary topics: Problems in Canada and the UK; physician payments; the uninsured; HSAs

Good News and Bad April 18, 2008 Commentary topics: HSAs; the uninsured; Medicaid Single Payer Utopia? April 25, 2008 Commentary topics: Single-payer systems; Medicaid White Water Threat May 1, 2008 Commentary topics: Medicare Forum; HSAs; Sen. John McCain’s health policy proposal Making Progress May 9, 2008 Commentary topics: Consumer Health World; Wyden-Bennett health reform bill; physicians’ open letter to Americans The Other Washington May 16, 2008 Commentary topics: Washington state health reforms; market competition and consumer choice Problems Are Brewing May 22, 2008 Commentary topics: Massachusetts health reform plan; World Health Organization rankings

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HEALTH POLICY MATTERS

Bad Ideas January 18, 2008

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.

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.

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 economy would soar in anticipation of this real economic growth package.

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.

yyy 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.

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.

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.

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.

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.

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.

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.

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.

yyy 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 consumerdriven health plans may contain fatal flaw.”

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 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

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• Health Care and the Presidential Race

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.

A Medicare Reform Proposal Everyone Can Love: Finding Common Ground among Medicare Reformers Andrew J. Rettenmaier and Thomas R. Saving National Center for Policy Analysis, 12/07

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!

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.

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

An Examination of State Non-Group and SmallGroup Health Insurance Regulations Anthony T. Lo Sasso, Ph.D., University of Illinois at Chicago American Enterprise Institute Working Paper, 01/03/08

• 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

• Health Care Costs and Malpractice Reform • State of the Living Dead • 2008 State Legislators’ Guide to Health Insurance Solutions and Glossary • Now, Wait a Minute! Menino Slams In-Store Health Clinic Plan • What’s the Matter with Socialized Medicine?

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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.

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.

Health Care Costs and Malpractice Reform David Kendall, Progressive Policy Institute The American Interest, 01/01/08 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.

2008 State Legislators’ Guide to Health Insurance Solutions and Glossary American Legislative Exchange Council and Council for Affordable Health Insurance, 01/08 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 Christine McConville Boston Herald, 01/11/08 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-appointmentnecessary, 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

State of the Living Dead The Wall Street Journal, 01/12/07 Governor Arnold Schwarzenegger is moving ahead with his “universal” $14.4 billion a year healthcare 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

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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.

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 Alliance for Health Reform Briefing Friday, January 18, 2008, 12:15 p.m. - 2:00 p.m. (Lunch included) Washington, DC

What’s the Matter with Socialized Medicine? Dr. Donald P. Condit Acton Institute, 01/09/08 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.

Policies That Work for Working Families: Modern Families, Outdated Laws, and What is Needed to Fix the Problem National Center for Policy Analysis Event Tuesday, January 22, 2008, Noon - 1:00 p.m. (Lunch included) Washington, DC For more information, contact Charlie Sauer at 202-220-3082 or charlie.sauer@ncpa.org. Hayek and the Economics of Capitalism Hayek Institut Lecture Tuesday, January 29, 2008, 6:00 p.m. Vienna, Austria For more information, contact the Hayek Institut at office@hayek-institut.at. Examining HealthCare Vouchers Oregon Health Forum Event Wednesday, January 30, 2008, 11:30 a.m. - 1:30 p.m. Portland, OR National Medicare Education Program Coordinating Committee Meeting Centers for Medicare and Medicaid Services Event Thursday, January 31, 2008, 8:30 a.m. - 12:45 p.m. Washington, DC y

Health Care and the Presidential Race The Health Care Solutions Group, 01/08 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

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Massachusetts Struggles February 29, 2008

Massachusetts Gov. Deval Patrick has been boasting that his state’s health reform initiative has reduced the number of uninsured by half, with nearly 300,000 more people added to the health insurance rolls. What he doesn’t say is that four out of five of them are relying heavily on taxpayer subsidies for their coverage.

• nd to show how hard it will be to get to a point that everyone will be able to get “coverage as good as members of Congress have,” in Massachusetts, a gold-plated Blue Cross Blue Shield plan in the Connector would cost a family of four about $23,000 a year. Further, the state is trying to figure out what to do with those businesses that already are offering coverage but whose policies don’t comply with the higher standards set by the government. Should they be exempted, forced to pay for more expensive coverage, or be fined?

Of the 293,000 people newly insured in Massachusetts: • 160,000 earn less than $63,600 (for a family of four) and are enrolled in taxpayersubsidized plans. More than half of them pay no premiums, and most others pay only a modest amount.

Gov. Patrick and other governors were in town this week pleading with Congress to reverse the administration’s Medicaid and SCHIP reform policies, saying they would threaten their ability to expand or even sustain coverage. That’s because Massachusetts and other states rely heavily on federal payments for their expansion plans. The president wants them to focus on covering poor children and needy citizens first.

• 70,000 people were added to the rolls through expansion of the state’s Medicaid program. • Only 63,000 — or about one in five — have purchased private insurance. Further, about 60,000 are being exempt from the mandate that all citizens must buy coverage, showing how elusive the goal of universal coverage will be, even for a state that had a relatively low uninsured population to begin with.

Since the Bay State’s initiative is being seen by many as a model for the nation, it’s important to pay attention. There is clearly no Massachusetts miracle here. Other states should certainly be cautious before proceeding.

And costs are still an issue:

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• Massachusetts now estimates that its spending on the new program for the uninsured may exceed its budget by nearly $150 million.

And today a new poll on health care finds that “a majority of Americans are backing key elements in the health reform proposals of Democratic presidential candidates Hillary Clinton and Barack Obama.”

• The penalty for not complying with the mandate is steep. Individuals who don’t get insurance this year — or don’t get an exemption — will face a fine of $912, four times last year’s penalty and scheduled to increase each year.

When asked whether they would support an individual mandate for health insurance, 59% said yes, as long as employers were required to provide coverage or pay a fee, and as long as there were subsidies for those with low incomes and insurance companies were required to take anyone who applies.

• The state “negotiated” with the health insurers participating in the Commonwealth Connector to keep premium increases to about 5% this year. But the insurers said in order to keep their prices down, they warned they have to increase copayments and/or deductibles and/or cut benefits. Many newlyinsured say they have trouble finding primary care physicians who will see them.

“But when the question was asked a different way — without emphasizing government subsidies, employer mandates and requirements on insurance companies — support dropped to 47 percent in favor and 44 percent against. That’s an even split,

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given the poll’s margin of error of plus or minus 3 percentage points.

and warm spirit and inspired all of us with his love of ideas and his indefatigable passion for liberty.

“The finding suggests that support for requiring everyone to buy insurance may be iffy,” according to the release issued by the poll’s sponsors, NPR, the Kaiser Family Foundation and the Harvard School of Public Health.

Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES: • WHO’s Fooling Who? The World Health Organization’s Problematic Ranking of Health Care Systems

yyy There are gremlins at TurboTax thwarting people trying to enter their tax deductible Health Savings Account contributions. A number of people have been frustrated in dealing with the software, including a top HHS official, who recounted this experience:

• Electronic Medical Records Really Do Work • Robert Wood Johnson Foundation Launches Commission to Look Beyond Medical Care System to Improve the Health of All Americans

In TurboTax’s on-line tax form, “their system logic doesn’t allow you to enter HSA contributions. With TurboTax, you go through items of income and then deductions, and it prompts you with every item on a 1040. But it does NOT prompt you to enter HSA contributions.

• Running for the Exits • The Need to Aggregate: What Should Come Next for Medicare Physician Payment? • A Helping Hand for Vets • Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare

“I had to call them, wait on hold for 15 minutes, and then talk to some person who didn’t even know what an HSA was. Finally, he figured out how to do it, but you have to search for the form and fill it out which, in total, took nearly an additional 15 minutes.

WHO’s Fooling Who? The World Health Organization’s Problematic Ranking of Health Care Systems Glen Whitman Cato Institute, 02/28/08

“In prior years, the system logic just defaulted me to the form where I have spent a grand total of 30 seconds entering my information. And when I asked him why they had changed their system logic, he told me that he didn’t know.

The World Health Organization rankings, widely cited by critics of the U.S. health system, are not an objective measure of the relative performance of national health care systems, writes Glen Whitman. Whitman writes that using the existing WHO rankings to justify more government involvement in health care is to engage in circular reasoning because the rankings are designed in a manner that favors greater government involvement. Additionally, the rankings are easily misinterpreted, or misrepresented, as simply measuring health outcomes irrespective of inputs. For example, when Costa Rica ranks higher than the U.S., that does not mean that Costa Ricans get better health care than Americans. Americans most likely get better health care — just not as much better as could be expected given how much more America spends.

“When I pointed out that entering my contributions had saved me $900, but that there were likely taxpayers who didn’t understand that they would need to look for the form and would wind up overpaying their taxes due to TurboTax’s negligence, I was greeted with silence.” Expect to hear more about this. In the meantime, here is the (equally bewildering) “Help” page on the TurboTax website.

yyy And farewell to Bill Buckley, truly a Renaissance man and transformative person of our time. He graced everyone he knew with his elegant

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Electronic Medical Records Really Do Work BMC Medical Informatics and Decision Making

the city hopes to have 1,000 doctors with one million patients using it by the end of the year.

Electronic Medical Records (EMRs) can improve care, reduce costs, and improve survival, according to a nine-year study of dialysis patients. U.S. dialysis patient mortality has remained at approximately 23-24% annually for many years. Using the EMR, however, the study found mortality dropped by almost 40% (to 15% annually) and has remained low through today. The study of patients treated at The Rogosin Institute, a non-profit treatment and research institute in New York City, shows that its results are now better than 99% of U.S. dialysis units. Further, clinical staffing was 25% lower per 100 patients than the national average, thereby lowering costs.

Robert Wood Johnson Foundation Launches Commission to Look Beyond Medical Care System to Improve the Health of All Americans Robert Wood Johnson Foundation, 02/28/08 The Brookings Institution’s Mark McClellan, former FDA commissioner and CMS administrator, and Alice Rivlin, former OMB director, will co-chair a new two-year Commission to Build a Healthier America. The national, independent and nonpartisan health commission will focus on factors outside the health care system and identify non-medical, evidence-based strategies — both short- and long-term — to improve the health of all Americans. The group will investigate how factors, such as education, environment, income and housing, shape and affect personal behavioral choices through an extensive inquiry that will include regional field hearings. “For reasons that don’t appear to have much to do with health care, there is a big gap between how healthy we are and how healthy we could be,” said McClellan. “The commission will investigate practical strategies being developed and implemented around the country, in the public and private sectors, to strengthen our health and close the gap.”

The New York Times reports that New York City is ready to equip doctors with computer software than can track patients’ medical records in order to provide better preventive care. Any doctor who has a practice where 30 percent of the patients are either uninsured or on Medicaid is eligible for the assistance, but the city is also asking that they provide their own computers, and contribute $4,000 to the Fund for Public Health in New York for continuing technical support. The new system, a software package developed with $30 million from the city and roughly $30 million from the state and federal governments, would let doctors do much more than is possible with paper charts by integrating a patient’s medical history, lab results and current medications into one electronic interface. Two hundred doctors with 200,000 patients have committed to use the system, and

Running for the Exits Regina Herzlinger, Harvard Business School and Manhattan Institute National Review Online, 02/22/08 Health care consumers — not their employers — should choose their insurance plans, writes Professor Herzlinger. The good news is that all the major presidential candidates that remain in the race — Senators Obama, Clinton, and McCain — are offering alternatives to our current employer-provided health-insurance system. But the structure of the Democrats’ proposals ensures that they will evolve into a government-provided, single-payer scheme, she writes. Although less detailed than the plans of his Democratic rivals, Senator McCain’s plan has the best long-term potential. His is the only one that would end the

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employer deduction entirely and give all individuals a $2,500 tax credit ($5,000 for families) to purchase health insurance. He would also allow consumers to shop out-of-state for affordable policies and require hospitals and physicians to publish information on treatment outcomes and cost of services, encouraging patients to become informed health-care shoppers. In short, he envisions a health-care market that closely resembles other sectors of the economy.

adhere to an individualized course of treatment; and he or she must agree to a pause in claims action for at least a year or until completion of treatment, whichever comes first. The great virtue of this legislation is that it offers an opportunity to receive payment as a condition of trying to get better. Imagine giving young men and women permission to surrender to their psychological wounds without first urging them to pursue recovery. For many young veterans, a “treatment first” approach could be their road to recovery and a rich civilian life.

The Need to Aggregate: What Should Come Next for Medicare Physician Payment? Gail R. Wilensky, Ph.D., Project HOPE Health Affairs Blog, 02/25/08

Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare Sean Keehan, Andrea Sisko, Christopher Truffer, Sheila Smith, Cathy Cowan, John Poisal, M. Kent Clemens, and the National Health Expenditure Accounts Projections Team Health Affairs, 02/26/08

Congress urgently needs to decide on the basic direction of a future Medicare reimbursement system for physicians, writes Dr. Wilensky. Developing a more aggressive payment strategy for physicians is the key to resolving both the frustrations and the perverse incentives associated with the current disaggregated system and its more than 6,000 codes. Developing a program that encourages the provision of high-quality, efficiently produced care and that rewards clinicians who can produce such care remain important goals of the Medicare program and need to be reflected in the physician reimbursement system.

Health care spending is expected to double by 2017, reaching $4.3 trillion and consuming nearly one-fifth of the economy, according to federal analysts from the Centers for Medicare and Medicaid Services. Health care spending is expected to hit $2.2 trillion in 2007, growing on average 6.7% through 2017 and outpacing economic growth by about 1.9% each year. Although the outlook for national health spending growth calls for continued stability for the next ten years, the authors note that they expect the leading edge of the babyboom generation to begin to affect the Medicare program. By 2017, Medicare spending is expected to account for $884 billion, or just over one-fifth of all national health spending. Medicaid spending is also expected to continue to rise at a faster rate than overall health spending in the coming decade, reaching $717.3 billion. The report also examines spending trends for hospitals, physicians, prescription drugs, and long-term care, as well as projected trends for various payers including consumer outof-pocket payments and private health insurance.

A Helping Hand for Vets Sally Satel, American Enterprise Institute The Wall Street Journal, 02/26/08 Satel writes about the serious consequences that can accompany a rush to judgment about a veteran’s rehabilitative potential. Under the current system, veterans can go straight to a claims examiner and be granted psychiatric benefits without ever being treated for their mental illness. But new legislation would induce new veterans to embark upon a path to recovery. Any veteran diagnosed with major depression, post-traumatic stress disorder or other anxiety disorder stemming from military activity would be eligible for a new program that provides a financial incentive of $11,000 distributed over the course of a year in exchange for two commitments: the veteran must

UPCOMING EVENTS: New Center Poll Highlights Importance of Acting Now to Protect the Public’s Health and Safety

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Life in Health Policy with Diane Rowland George Washington University Department of Health Policy Event Thursday, March 6, 2008, 6:15 p.m. - 7:45 p.m. Washington, DC

Burness Communications Event Tuesday, March 4, 2008, 12:00 p.m. - 2:00 p.m. (Lunch included) Washington, DC Market Reforms and Reelection: Are They Compatible? Cato Institute Policy Forum Tuesday, March 4, 2008, 4:00 p.m. (Reception to Follow) Washington, DC

Oncology Drug Development: Rethinking FDA Oversight American Enterprise Institute Event March 13-14, 2008 Washington, DC y

2008 Women Business Leaders Summit Women Business Leaders of the U.S. Health Care Industry Foundation Event March 5-7, 2008 Washington, DC Pulling the Trigger: How the Funding Warning Could Shape Medicare’s Future Kaiser Family Foundation Policy Workshop Thursday, March 6, 2008, 9:30 a.m. - 11:00 a.m. For more information please contact Tiffany Ford at tford@kff.org or 202-347-5270. The Shortcomings of Government-Managed Health Care Independence Institute Event Thursday, March 6, 2008 Washington, DC

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Gold Standard March 14, 2008

A gold standard in health policy is finding ways to improve care, save money, and enlist patients in better managing their chronic conditions. And we have new evidence of the success of a program that is doing just that.

and give them the tools they need to stay healthier longer. And, by the way, this is a private-sector initiative. No legislation required.

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The Asheville Project began several years ago, enlisting local pharmacists to monitor and help manage the health of diabetes patients and coach them about using their medicines properly. In exchange for these regular visits, patients’ co-payments are waived for their diabetes medicines.

I attended this week a health care symposium in Leesburg, VA, sponsored by the Mayo Clinic’s Health Policy Center and organized by Mayo’s visionary President and CEO Dr. Denis Cortese and exceptional Health Policy Director Bob Smoldt.

The results have been impressive: Patients’ health improved dramatically, and their employer — the City of Asheville, North Carolina — saved money. Direct medical costs fell up to $1,872 per patient per year, absences from sick time decreased, and productivity increased by up to $18,000 a year. The Asheville Project was expanded to help patients manage other chronic illnesses as well.

Hundreds of leading health policy thinkers from around the country and the world attended to try to advance the conversation over health reform. Mayo is a formidable force in setting the gold standard for delivery of quality health care, treating more than half a million patients a year. And it is the only major health organization I am aware of that is working to facilitate a policy conversation through this series of conferences designed to “put the patient first” on the policy agenda.

The American Pharmacists Association Foundation, which sponsored the program with support from GlaxoSmithKline, took the show on the road and began a Diabetes Ten City Challenge, enlisting employers and community pharmacists in cities from Honolulu to Milwaukee and Tampa Bay to participate. The results are similar: The health of patients improved across all key diabetes indicators, controlling blood sugar, cholesterol and blood pressure.

One of the best attended sessions featured spokespeople for the three leading presidential candidates talking about their candidates’ health proposals. • Katherine Hayes represented Sen. Hillary Clinton and said that health reform would be Mrs. Clinton’s top priority in the first 100 to 120 days if she were elected president. “What people have now in terms of cost and quality isn’t good, and we need urgent action,” she said.

Overall, patients rating their diabetes care as very good to excellent increased from 39% to 87%. “This shows that when patients are supported and empowered to make the lifestyle changes necessary to manage a chronic disease, significant improvements are possible,” according to Bill Ellis, CEO of the APhA Foundation. A report on cost savings will follow.

• Doug Holtz-Eakin, policy director for Senator John McCain, said that the new president must focus on health reform on “day one, day two, day three, day four” and every day of his presidency. Sen. McCain’s goal: To energize the innovative market to provide more affordable, tailored, portable care and coverage. “Any reform that doesn’t focus on costs is addressing the wrong problem,” he said, stressing the importance of paying for quality, better chronic care management, and preventive care.

Significant improvements in health and cost savings are possible by providing new resources and incentives to engage patients in managing their care. Something as simple as having a pharmacist talk to patients about their medicines, encouraging them to monitor their blood sugar regularly, and checking their feet for evidence of problems can keep patients out of the hospital

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• Kennedy staffer Dr. Kavita Patel spoke on behalf of Sen. Barack Obama and said health reform isn’t as much about insurance as about care, stressing the need for coordinated care, comparative effectiveness reviews, reducing defensive medicine, and reform of the payment system.

consequences for individuals, businesses, and the health insurance market. When political leaders require everyone to have health insurance, they must define what qualifies as acceptable coverage. The insurance market can quickly turn into a government-regulated utility as politicians, rather than the marketplace, determine the terms of the coverage and regulate how much people must pay for the policies. Further, an individual mandate almost immediately turns into an employer mandate as political leaders determine how much employers will be required to pay for their employees’ coverage.

Health care is complex, but it sounded less complex from this discussion, obscuring most of their major differences. Sharpening these differences will be important to help voters understand more about the details of the plans and the vision of the new president. Stay tuned.

Aetna Launches Health Info Search Site Associated Press, 3/12/08 Aetna has launched a web-based search site that allows customers to generate information about disease risks, medical costs, and local doctors using their electronic health records, reports the Associated Press. Aetna’s SmartSource crunches data such as gender, age, ZIP code, employer, health care plan and information from the customer’s personal health records. The search engine generates information tailored to individuals about diseases and medical conditions, treatments, health care costs, and local health care providers. Aetna will make the search engine available as a pilot program this year to between 20 and 25 employers with up to 1.5 million employees, and make the service available to more customers next year.

Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES: • Should Congress Mandate Health Insurance for Individuals? • Aetna Launches Health Info Search Site • A Threat to Innovation • The Cost’s the Thing • Testimony in Opposition to LD 2247 - An Act to Continue Maine’s Leadership in Covering the Uninsured • The Impact of Medicare’s Anemia Drug Coverage Decision on Cancer Patients: Comparative Effectiveness vs. Patient Centered-Care

A Threat to Innovation Sally C. Pipes, Pacific Research Institute Star Tribune, 03/06/08

Should Congress Mandate Health Insurance for Individuals? National Association of Realtors’ Public Policy Debate Book, Winter 2008 Grace-Marie Turner of the Galen Institute and Len Nichols of the New America Foundation debate the merits of an individual mandate for health insurance, with Nichols arguing that individual requirements to purchase health insurance are necessary to make the private health insurance market both efficient and fair. But Grace-Marie counters that an individual mandate has far-reaching

The Patent Reform Act pending before Congress could radically reduce innovation in the medical sciences, writes Sally Pipes. For example, the legislation would require the online publication of all patent applications 18 months after they are filed — even if no decision has been made on granting a patent. But it takes the Patent Office an average of 31 months to make a determination. That means that inventors big and small would see their precious creations exposed to the world, in all their scientific detail, with no certainty of ever

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something must be done to bring costs under control. But that doesn’t mean Obama and McCain agree on how to reduce costs. Sen. Obama’s plan, with its heavy reliance on government, leads to the same problems that bedevil universal healthcare systems all over the world: limited patient choices and rationed care, Tanner writes. In contrast, he says Sen. McCain’s proposal is much more consumer centered and taps into the best aspects of the free market. He would attempt to promote greater competition by allowing people to buy insurance plans across state lines. And he would shift toward a system where individuals purchase and own their own insurance plans using new refundable tax credits.

gaining patent protection. And copycats around the world would have more than a year to duplicate the invention and even claim it as their own. The proposed Patent Reform Act would weaken a system that has sparked innovation for two centuries. And it would alter the future of medical science for the worse. AEI’s Roger Bate writes that the high court in India is reviewing a case that could allow Indian drug companies to use “compulsory licensing” to break the patent held by two Western countries for two cancer drugs. If successful, the lawsuit could open a Pandora’s Box that would allow countries to override patents for all sorts of chronic conditions, including diabetes, hypertension and heart disease. Nothing less than the sanctity of the global patent system — and the future of drug innovation — are at stake.

Testimony in Opposition to LD 2247 - An Act to Continue Maine’s Leadership in Covering the Uninsured Tarren Bragdon, Maine Heritage Policy Center Maine Legislature’s Joint Standing Committee on Insurance and Financial Services, 03/13/08

The Cost’s the Thing Michael D. Tanner, Cato Institute National Review, 03/12/08

Maine’s effort to cover all of the uninsured in the state by 2009 through its Dirigo Health plan is a costly disappointment, Tarren Bragdon recently

John McCain and Barack Obama are reflecting a growing consensus that the continued growth of health spending is unsustainable and that

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testified. “Simply put, Dirigo Health was started in 2003 with the goal of covering 128,000 uninsured Maine people in a self-supporting health insurance program which would need no further taxes or state funds after the first year. Today, the program covers only 4,466 Mainers who were previously uninsured, which is less than 4% of the 2003 goal, in a program that costs over $45 million a year,” notes Bragdon. The insurance reforms proposed in this legislation, which would increase taxes for additional Dirigo Health funding, are costly, unproven and actuarially estimated to have a nominal impact on premiums. Maine’s insurance laws should be reformed with proven patient-centered regulations shown to reduce costs, increase choices and expand competition.

A Food and Drug Administration panel yesterday recommended that doctors continue to prescribe anemia drugs for patients with cancer, reports the Los Angeles Times. But the panel also suggested scaling back which patients should be treated based on their type of cancer and the severity of the disease. UPCOMING EVENTS: Health Policy “Checkup” with Sen. Ron Wyden Oregon Health Forum Event Wednesday, March 19, 2008, 7:00 a.m. - 9:00 a.m. Portland, OR The Explosion of Health Scares: Everything Is Dangerous! The Heartland Institute Event Wednesday, March 19, 2008, 11:30 a.m. - 1:30 p.m. Chicago, IL

The Impact of Medicare’s Anemia Drug Coverage Decision on Cancer Patients: Comparative Effectiveness vs. Patient Centered-Care Robert Goldberg, Ph.D. The Center for Medicine in the Public Interest, 03/08

Supporting Rural Family Caregivers U.S. Department of Health and Human Services Satellite Broadcast Wednesday, March 19, 2008, 1:00 p.m. - 3:30 p.m.

In this detailed paper, CMPI’s Bob Goldberg analyzes the decision by the Centers for Medicare and Medicaid Services (CMS) to limit the ability of doctors to prescribe anti-anemia drugs known as Erythropoiesis-Stimulating Agents (ESAs) to patients undergoing chemotherapy. The report finds that CMS ignored the benefits of these medicines and also ignored the risks of blood transfusions (a more aggressive anemia treatment). The study also reviewed a 1997 decision by CMS to limit payment for ESAs in the End Stage Renal Dialysis program. As a result of that decision, anemia levels soared and patients died. Only after CMS removed the cap did patient well-being improve. Additionally, the report found that many new cancer drugs and treatments shown to prolong life are dependent on the use of anemia drugs that permit patients to undergo arduous therapies. CMS failed to consider the impact of reducing access to anemia drugs on cancer survival as a result of treatment. The report recommends that CMS, private insurers, companies, and researchers develop more patient-centered approaches to determining what medicines and treatments to use.

Ask the Experts: Tax Subsidies and Health Insurance Kaiser Family Foundation Webcast Thursday, March 20, 2008, 12:30 p.m. EDT Healthcare Cost of Quality: The Relationship between Performance Metrics and Financial Results American Society for Quality Webinar Wednesday, March 26, 2008, 1:00 pm. - 2:00 p.m. Health Reform Forum: Are Individual Mandates the Answer? National Federation of Independent Business Event Wednesday, March 19, 2008, 3:00 p.m. - 5:00 p.m. Washington, DC For more information, please contact Christopher Dougherty at 202-326-1746 or christopher.dougherty@edelman.com. y

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Brawls on Capitol Hill April 4, 2008

Defending the taxpayer can be dangerous business, as I learned yesterday on Capitol Hill.

the facility. But the state forced the nursing home to give back all but $50 million, meaning that it operated at a $20 million loss. As a result, it was seriously understaffed and was at risk of losing its accreditation. It is difficult for me to see how this creative state financing was helping Medicaid patients.

I took arrows from members of the House Energy and Commerce Health Subcommittee about my testimony on legislation that would block seven new rules designed to curb fraud and abuse in Medicaid. I was a minority witness (in more ways than one) on the side of the beleaguered taxpayer. I explained that government agencies have for years detected fraudulent billing in Medicaid and that it is the administration’s responsibility to make sure that Medicaid is spending taxpayer dollars legally and appropriately. Hence, the new rules issued by the Centers for Medicare and Medicaid Services.

• Elsewhere, taxpayers were being billed for transporting Medicaid recipients to the grocery store, restaurants, or even bingo games, clearly not medical expenditures allowed under Medicaid. I was grilled by several members of the committee, but held my ground. Just because states are using these financing schemes to pad their budgets, as the GAO has documented, doesn’t make it right.

But I was at the witness table with a pediatrician, school superintendent, hospital manager, and a Medicaid director, among others, all of whom were arguing that these rules would devastate the program.

But it also shows how incredibly easy it is to demagogue anything that would change Medicaid — or Medicare or SCHIP, for that matter. This is just one more sign of the growing political control over our health care economy. People with a vested interest aggressively defend the status quo. The rest of us are left to pay the bills.

The changes would slow federal Medicaid spending by 1 percent over the next five years — or $13 billion out of the $1.2 trillion in federal Medicaid spending. But these new rules could demonstrate a much-needed willingness to bring greater integrity into the program.

Joe Antos of AEI, my ally on the panel, explained that “entitlement programs are on auto-pilot” and that “runaway health spending is contributing to a growing fiscal crisis” that is threatening other legitimate functions of government. His testimony is very much worth reading and could result in a follow-up hearing.

My time on the Medicaid Commission underscored two important lessons: That Medicaid is very important to millions and millions of people who often have no place else to go to support their needs for medical care. And that the financial sustainability of the program is threatened by payment structures that induce waste and fraud, as has been well-documented by the Government Accountability Office (GAO) and the Office of Inspector General (OIG) at the Department of Health and Human Services.

Here is the link to my testimony if you are remotely interested in this issue or want citations, plus the CliffsNotes 5-minute summary for speed reading. And both of us referred to the excellent work by Bob Helms of AEI showing how fundamentally flawed Medicaid’s financing system is.

I won’t bore you with the details of these rules, but I gave two examples in my testimony from the OIG that rose the rankles of the sponsors of the legislation:

yyy And another battle is brewing on Capitol Hill this week, this one involving Health Savings Accounts.

• A nursing home in Albany County, New York, had total operating costs over a three year period of $70 million. Creative state billing resulted in $132 million in payments to

One small company, Evolution Health, appears to see a market opportunity in getting Congress to pass legislation that would require outside “substantiation” of all purchases from a Health Savings

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The House already has passed its bill. The right of innovators to protect their creations has historically been a central driving force in the strength of our economy. Congress must act only with the utmost caution and respect for this constitutional protection!

Account. This will come as no surprise: Evolution has a business in electronic payment technologies and would offer its services as a substantiator. That may seem like an obscure, why-shouldanyone-care problem. But it could throw a monkey-wrench into HSA adoption by adding new costs and complexities for individuals and employers, and it would have a chilling effect on banks’ willingness to offer the accounts.

Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES:

And the legislation is totally unnecessary! Under current law, if people with HSAs use the money in their accounts for non-medical purposes, they have to pay taxes on the money, plus a 10% penalty — the same as if they had withdrawn the money directly.

• Should the United States Mandate Health Insurance…Or Not? • Little-Guy Patent Peril • Taking Back Our Fiscal Future

When people take a deduction for other kinds of medical expenses on their tax returns, they can claim anything they want, but if they are audited and can’t validate the expense, they are subject to penalties.

• Generics: Just as Good?

The “substantiation legislation” Congress is considering is another mother-may-I, nanny-state provision that assumes people are crooks and can’t be responsible with their own money. The vast majority of HSA expenditures are for legitimate and allowed medical expenses. This self-interested legislation would do considerable harm to the overall functioning and adoption of HSAs and is unnecessary at best.

• Health Care Financing, Efficiency, and Equity

• County Worried Over Decrease in Patient Load • America, Insure Thyself

Should the United States Mandate Health Insurance…Or Not? Grace-Marie Turner, Galen Institute The Medscape Journal of Medicine, 04/08 Grace-Marie Turner discusses whether the government should require everyone to have health insurance in a webcast video commentary presented by Dr. George Lundberg, editor-in-chief of The Medscape Journal of Medicine. While universal coverage is an important goal, an individual mandate for health insurance has far-reaching consequences for individuals, businesses, and the health sector overall, says Turner.

yyy The Senate is expected to take up legislation soon that would overhaul our patent laws. But beware. The Founding Fathers believed protection of intellectual property rights to be so important that they wrote it into the Constitution. The Congress is playing with fire here. I had an article in the New York Post this week explaining how the efforts of the tech titans to bring our patent laws into the 21st century could squash small time inventors. See below for the link.

Little-Guy Patent Peril Grace-Marie Turner, Galen Institute New York Post, 04/02/08

Any new patent laws must keep the playing field level for all inventors and entrepreneurs, from garage inventors to huge labs. The legislation that Congress is considering doesn’t do that.

The Patent Reform Act pending before Congress poses a threat to independent entrepreneurs, writes Grace-Marie Turner. The act’s chief supporter is the technology industry, whose large firms

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often incorporate components that have been patented by others into their products. In recent years, they’ve faced a scourge of lawsuits from patent hoarders. The tech titans have valid grievances, but this bill tries to solve their problems at the cost of small-business owners and independent inventors — who’d be forced to watch helplessly as others reap the rewards of their work. If the measure passes, thieves and veterans of the patent bureaucracy would have a substantial — and unfair — leg up on rookie innovators.

Generics: Just as Good? Melissa Healy Los Angeles Times, 03/17/08 There are about 9,000 generic drugs on the U.S. market, and 64% of all prescriptions filled in the U.S. are for generics, but a growing number of physicians and patients are reporting problems with generics that they say don’t work as well as the newer drugs or cause serious side effects, writes the Los Angeles Times. The article recounts stories of patients who were switched to generics to save money, either at their own direction or by their health plan, including a woman who suffered a relapse of her mental illness after she was switched to a generic version of the anti-depressant Wellbutrin XL. Patient groups are forming to share information and help others to see that their symptoms may be a result of taking the less effective, older drugs.

Taking Back Our Fiscal Future The Brookings Institution and The Heritage Foundation, 04/08 Longtime federal budget and policy experts, including AEI’s Joe Antos, Heritage’s Stuart Butler, and the Urban Institute’s Gene Steuerle, have joined together with scholars from The Brookings Institution and other groups to issue a warning about the importance of gaining control of our nation’s fiscal future. The group has been meeting for nearly two years to define the dimensions and consequences of the looming federal budget problem, examine alternative solutions, and reach agreement on what should be done. The group recommends:

County Worried Over Decrease in Patient Load Bill Murphy Houston Chronicle, 03/27/08 The Houston Chronicle reports that the rise of walk-in clinics at retail outlets and expanded government prescription drug coverage to seniors may be responsible for the shrinking number of patients at the Harris County Hospital District in Texas, which serves as the health care safety net for nearly a third of the county’s 3.8 million uninsured residents. District officials pointed to the increasing popularity of in-store clinics that have sprouted at Wal-Marts, CVS stores and retail outlets across the city and nation as a possible source of patient drain. The in-store clinics allow patients to get treated, without an appointment, by physician’s assistants and nurse practitioners for minor ailments. Patients who use the district’s community health clinics do not receive sameday service, often waiting two weeks to be seen. Another possible cause of the shrinking patient load may be the changes in Medicare prescription drug coverage that took effect two years ago. Before Medicare Part D began, senior citizens without prescription coverage could get medicines when they were treated at district facilities. Now, senior citizens who can get medications at any

• Congress and the president enact explicit long-term budgets for Medicare, Medicaid, and Social Security that are sustainable, set limits on automatic spending growth, and reduce the relatively favorable budgetary treatment of these programs compared with other types of expenditures. • The programs be reviewed on a regular schedule by the Social Security and Medicare Trustees or the Congressional Budget Office to determine whether they will remain within budgeted amounts. • Significant long-term deviations from budgeted amounts trigger automatic adjustments in benefits, premiums, provider payments, or other revenues. These adjustments could only be over-ridden by an explicit vote of Congress and acceptance by the president.

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drug store through Medicare Part D are choosing other health care providers over the district’s doctors.

containment. Using data on expenditures and life expectancy by income quintile from the Canadian health care system, she finds that universal, publicly-funded health insurance is modestly redistributive. Putting $1 of tax funds into the public health insurance system effectively channels between $0.23 and $0.26 toward the lowest income quintile people, and about $0.50 to the bottom two income quintiles. Finally, a review of the literature across the OECD suggests that the progressivity of financing of the health insurance system has limited implications for overall income inequality, particularly over time. UPCOMING EVENTS: Enhancing Quality Performance Measurement: A New Paradigm for Health Care Accountability Has Arrived ABQAURP and PHII Event Saturday, April 5, 2008, 7:45 a.m. - 5:00 p.m. Chicago, IL Grace-Marie Turner is the keynote speaker at this ABQAURP and PHII Event.

America, Insure Thyself Regina Herzlinger, Harvard Business School and Manhattan Institute The Washington Post, 03/29/08 Harvard Professor Regina Herzlinger weighs in on the debate between Sens. Hillary Clinton and Barack Obama over universal health coverage. In arguing about universal coverage and affordability, Clinton and Obama rightly focus on the critical pieces of the health-care puzzle, she writes. But unless they also address the question of consumer choice, their debate is much ado about nothing: We won’t have truly universal health care until we have a mechanism to bring everyone into the system, and it won’t be affordable until individuals and families can choose their own insurance coverage from competing insurers.

2008 Annual Public Affairs Conference National Association of Manufacturers Event April 6-8, 2008 Las Vegas, NV Grace-Marie Turner will participate in the session entitled, “Got Healthcare?” on Monday, April 7 at 9:15 a.m. APEE International Convention The Association of Private Enterprise Education Event April 6-8, 2008 Las Vegas, NV Grace-Marie will present “Medicare Reform: Responses to the ‘Excess General Revenue’ Funding Warning” at 8:00 a.m. on Tuesday, April 8.

Health Care Financing, Efficiency, and Equity Sherry Glied, Columbia University National Bureau of Economic Research, 03/08

Senator John McCain’s Tax and Economic Plans: A conversation with Douglas Holtz-Eakin, McCain Senior Economic Policy Advisor Urban-Brookings Tax Policy Center Event Monday, April 7, 2008, Noon - 1:30 p.m. (Lunch included) Washington, DC

Glied examines the efficiency and equity implications of alternative health care system financing strategies. Using data across the OECD, she finds that almost all financing choices are compatible with efficiency in the delivery of health care, and that there has been no consistent and systematic relationship between financing and cost

Health Care in Crisis: What’s Driving Health Reform in Canada and the United States?

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The Canada Institute and Global Health Initiative of the Woodrow Wilson International Center for Scholars Event Wednesday, April 9, 2008, 8:00 a.m. - 10:00 a.m. Toronto, Canada

SAVE THE DATE! Consumer Health World Conference May 4-7, 2008 Las Vegas, NV Email galen@galen.org for a registration discount code. y

Is Free Trade Good for Your Health? American Enterprise Institute Event Thursday, April 10, 2008, 10:00 a.m. - 12:00 p.m. Washington, DC Can We Repair What’s Wrong with our Health Care System through Christian Principles? Acton Institute Event Thursday, April 10, 2008, 12:00 p.m. - 1:30 p.m. Grand Rapids, MI Grace-Marie Turner will discuss how free-market solutions can create a health care system that supports individual freedom over health care decisions. Whose Healthcare is it Anyway? Understanding the Patient as a Consumer Yale University Healthcare 2008 Conference Friday, April 11, 2008, 8:00 a.m. - 6:30 p.m. (Breakfast and lunch included) New Haven, CT Private Financing and High-level Functioning: Some International Approaches to Health Reform Alliance for Health Reform Briefing Friday, April 11, 2008, 12:30 p.m. - 2:15 p.m. (Lunch included) Washington, DC Cracking Down on Killer Drugs: Dora Akunyili and the Nigerian Success Story American Enterprise Institute Event Monday, April 14, 2008, 9:30 a.m. - 11:00 a.m. Washington, DC The Impact of Health Insurance in Developing Countries: Experiences from China and Colombia The Brookings Institution Event Tuesday, April 15, 2008, 10:00a.m. - 12:45 p.m. Washington, DC Election Year 2008: Health Care Reform Debate George Washington University Event Thursday, April 17, 2008, 6:30 p.m. - 8:30 p.m. Washington, DC

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White Water Threat May 1, 2008

presentations, and several photos from the event. And you can join us by watching the webcast online, courtesy of the Kaiser Network.

Highlights • Medicare Forum • HSAs

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• McCain

HSAs: America’s Health Insurance Plans yesterday released its latest estimates of the number of people who have health insurance that would qualify them to have Health Savings Accounts. The number is up 35% over last year to 6.1 million, showing their growing appeal.

Medicare Forum: HHS Secretary Michael Leavitt gave a visionary but chilling speech about the looming threat that Medicare presents to taxpayers, to our economy, and to other functions of government during a major forum we co-sponsored in Washington on Tuesday with the American Enterprise Institute and The Heritage Foundation.

AHIP for the first time produced estimates of how many people in each state have HSA-qualifying insurance. California leads with 638,999 (even though the state legislature refuses to allow people to deduct their HSA deposits from their state income taxes). Minnesota had the highest percentage penetration of HSAs, representing 9.2% of the insurance market. Massachusetts and New Mexico need to get with the program: They came in next to last at .9%, followed only by Hawaii at .1%.

First, the setting: More than 250 people attended the first event we’ve held at the Newseum, Washington’s newest and most modern museum devoted to interactive media exhibits. The conference room atop the glass building had a panoramic view of the Mall, with the Capitol as the backdrop for Sec. Leavitt’s speech. It was a majestic setting for a visionary speech and an impassioned panel discussion about a powerfully important topic.

Two key findings: • HSAs clearly are an important health insurance option for small business. The fastest growing market for HSA-qualifying insurance was in the small group market, accounting for 31% of new policies.

Sec. Leavitt titled his speech “Drifting to Disaster” and used a vivid example of whitewater canoeing to give the audience a sense of the danger ahead:

• The average balance in an HSA account is $1,083, money that consumers have saved and can spend on future health care needs.

The river is “the growing obligation our nation has to pay for the health care of our senior and disabled citizens. Medicare’s liabilities have grown from a mere trickle 40 years ago” into Class 5 rapids today, he told the audience. “As new streamlets merge, it is becoming a raging torrent — more demanding and dangerous with each successive day.”

Roy Ramthun of HSA Consulting has produced an excellent and more detailed summary, which you can find here.

yyy Rep. Pete Stark of California, an avowed opponent of HSAs, would of course not miss an opportunity to bash HSAs. So on the same day that new figures were released, a Government Accountability Office study that he and Rep. Henry Waxman ordered was released, finding that people with HSAs were wealthier than people covered by other types of insurance.

Prophetically, the flag of the Canadian Embassy, which is next door, flew behind the Secretary during his speech. Sec. Leavitt worked until 2 a.m. the morning of our forum to personally finish crafting his speech, reflecting the weight of responsibility and panic he says he feels as a Medicare Trustee. I’ve written a more detailed report on the event, available on our website, with a link to Secretary Leavitt’s entire speech, excerpts from the panel

“HSAs clearly are attractive to higher-income people who are looking for tax shelters. But they aren’t the answer for providing adequate health-

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subsidize that coverage while often going without insurance themselves. Why wouldn’t we want to fix that?

insurance coverage for the average American,” Rep. Waxman said. “Instead, they are an effective tax shelter for people whose average incomes are nearly triple that of average tax filers,” Rep. Stark said.

Giving individuals more control over their health spending, as Sen. McCain would do through refundable tax credits, would give Americans new incentives to shop for value in their health coverage. Sen. McCain wants to create a level playing field in which everyone would have an equal opportunity to purchase good coverage.

The GAO used 2004 and 2005 IRS data — two years behind the AHIP numbers — which does not reflect the growing appeal of this insurance option in all age and income categories. Karen Ignagni, AHIP CEO, said that “newer data indicate that individuals are not storing assets in these accounts but using them for health-care services.”

The current tax code heavily subsidizes the highest income workers who are buying the most expensive coverage, while leaving millions with nothing. People would only face higher taxes if they continue to purchase expensive health coverage. They will continue to have that choice, but it doesn’t need to be subsidized by other hard-working Americans.

So here we have a new option in HSAs that gives people — including beleaguered small business owners and employees — a way to save money on health insurance and put money aside for future health care needs. And the big guns are loaded against it.

Grace-Marie Turner

First HSA substantiation, and now this. It just doesn’t end!

RECENT NEWS ARTICLES AND STUDIES:

yyy McCain: Sen. John McCain is spending the week focusing on health care, with speeches from Tampa, to Cleveland, to Denver. In his major speech on Tuesday, outlining additional details about his health policy proposal, he focused on his central theme of restoring power and control over health care decisions to doctors and patients. Our summary below provides additional details and a link to the speech.

• The Right Rx • Prescription Drug Importation Could Be Destructive • Medicare Coverage Policies for Biologics: The Broad Gray Line • Preliminary Analysis of a Proposal for Comprehensive Health Insurance • Indiana: Health Care Reform Amidst Colliding Values

But today, The New York Times carried an article headlined: “McCain health plan could mean higher tax.”

• Premiums in the Individual Health Insurance Market for Policyholders under Age 65: 2002 and 2005

The lead says that the fixed refundable tax credits Sen. McCain is proposing ($2,500 for individuals and $5,000 for families) would “have the effect of increasing tax payments for some workers, primarily those with high incomes and expensive health plans.”

• Medical Advances — Through Your iPhone? The Right Rx Senator John McCain National Review Online, 05/01/08

Good grief ! Since when is a regressive subsidy good policy? The current tax treatment of health insurance does provide generous subsidies for higher-income workers who have expensive policies, yet lower-income workers pay taxes to

Senator John McCain offered more details about his health reform plan this week, beginning as a good doctor would, with a proper diagnosis: “What exactly is the problem with the American

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health-care system?” he asks. “The problem is not that Americans don’t have fine doctors, medical technology, and treatments. American medicine is the envy of the world. The problem is not that most Americans lack adequate health insurance. The vast majority of Americans have private insurance, and our government spends many billions each year to provide even more. The biggest problem with the American health-care system is one of cost and access, and as a result tens of millions of individuals have no insurance.” He detailed his plans for refundable tax credits for health insurance and unveiled a new plan for guaranteed access to health insurance, pledging federal funding to help states create functional and funded insurance pools to help people with pre-existing conditions get coverage.

Tainted heparin in 11 countries has caused the deaths of 81 patients, highlighting the potential danger of cheaply produced — sometimes counterfeit — imported medicines, writes AEI’s Roger Bate. Substandard and counterfeit drugs proliferate in many countries in Africa, Asia, and elsewhere. Medicare Coverage Policies for Biologics: The Broad Gray Line Joseph Antos, Ph.D., American Enterprise Institute American Health & Drug Benefits, 04/24/08 AEI’s Joe Antos discusses the issue of comparative effectiveness analysis and the impact of the Centers for Medicare and Medicaid Services drug coverage on the future of biologic products. Many politicians are drawn to comparative effectiveness analysis, hoping that evidence-based medicine will allow painless spending cuts in government health programs, says Antos. However, patients rarely have only one medical condition, and the physician must weigh the likely efficacy of alternative treatments for a patient who often differs greatly from the subjects in a clinical trial or an observational study. New biotech drugs will pose a harder problem for CMS, says Antos. Given the high financial and political stakes, Medicare will be loath to rush into anything and will want the private insurers and the medical community at the local level to lead the way. Medicare will exert more pressure on manufacturers for supporting evidence, genetic testing or protein markers, or other ways of identifying the patient population who would most benefit from an expensive new biotech drug. The implication is that Medicare coverage and payment policy will have a very powerful impact on the pharmaceutical industry, more so than we have seen in the past, says Antos.

Prescription Drug Importation Could Be Destructive Grace-Marie Turner, Galen Institute South Florida Sun-Sentinel, 04/29/08 Plans that would allow the importation of prescription drugs from foreign countries would impose price controls on the U.S. drug market through the back door — with all the destructive consequences that come with such policies, writes Grace-Marie Turner. Legislation currently winding its way through Congress contains a “forced-sale” provision that would require U.S. drug manufacturers to sell their wares to foreign distributors in whatever quantity the firm demands and at whatever price the foreign government imposes, even if the distributor plans to export them back to America. A London School of Economics study shows that similar systems already in place in Europe have resulted in almost no consumer savings, writes Turner. Further, a report by the Congressional Budget Office estimated that drug importation would reduce costs by a mere 1 percent. Meanwhile, the long-term costs of importation would be devastating. By forcing drug manufacturers to sell at artificially low prices, importation would hobble the capacity of America’s pharmaceutical researchers to create the next life-saving miracle cure, concludes Turner.

Preliminary Analysis of a Proposal for Comprehensive Health Insurance Letter to the Honorable Ron Wyden and the Honorable Robert F. Bennett Congressional Budget Office and the Joint Committee on Taxation, 05/01/08 The CBO and Joint Committee on Taxation have released a preliminary analysis of the “Healthy

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Americans Act” co-sponsored by Senators Ron Wyden and Bob Bennett. The basic thrust of the proposal is to require individuals to purchase private health insurance and to establish staterun purchasing pools and a system of federal premium collections and subsidies to facilitate those purchases. The CBO and JCT focused their analysis on a single future year in which the proposed system would be fully implemented. For that purpose, they settled on 2014, the sixth year of the current 2009-2018 budget window. In that year, total federal outlays for health insurance premiums would be on the order of $1.3 trillion to $1.4 trillion, the report says. Those costs would be approximately offset by revenues and savings from: premium payments collected from individuals through their tax returns; revenue raised by replacing the current tax exclusion for health insurance with an income tax deduction; new tax payments by employers to the federal government; federal savings on Medicaid and SCHIP; and state payments to the federal government reflecting their savings on Medicaid and SCHIP.

Premiums in the Individual Health Insurance Market for Policyholders under Age 65: 2002 and 2005 Didem Bernard, Ph.D. and Jessica Banthin, Ph.D. Agency for Healthcare Research and Quality, 04/08

Indiana: Health Care Reform Amidst Colliding Values Mitchell Roob, Secretary of Indiana’s Family and Social Services Administration and Seema Verma, consultant Health Affairs, 05/01/08

Bioengineering professor Boris Rubinsky of the University of California has what he hopes is the perfect antidote to bulky, expensive medical machines: the mobile phone, writes BusinessWeek. Rubinsky says that by reducing a complex electromagnetic imaging machine to a portable electromagnetic scanner that can work in tandem with a regular cell phone and a computer, he has essentially replicated a $10,000 piece of equipment for just hundreds of dollars. Cell phones may also help reduce the frequency of medical errors and play an integral role in remote care for patients with chronic illnesses, the magazine reports. For example, San Francisco-based BeWell Mobile has created an application that lets asthma or diabetes sufferers enter their home test results into their cell phones and send them to their doctor daily. If a patient’s glucose levels spike, the software suggests the patient hold off on certain foods or try a different medication. A recent two year trial with BeWell at clinics in California has shown the software can drastically cut down on emergency room visits.

The average premium for a health insurance policy purchased in the individual market in 2005 was $3,664 for individuals and $5,568 for families, according to a new AHRQ study. In general, the study finds that older purchasers pay higher premiums than younger purchasers, reflecting the relatively higher health care costs that people incur as they get older. In 2005, average premiums for single coverage were $1,580 for purchasers aged less than 40, $3,325 for purchasers aged 40 to 54, and $4,288 for purchasers aged 55 to 64. Nationwide, the total number of policyholders with individual health insurance was 6 million in both 2002 and 2005, the report says. Medical Advances — Through Your iPhone? Olga Kharif BusinessWeek, 04/30/08

Roob and Verma describe the success of the Healthy Indiana Plan (HIP) in a blog posting for Health Affairs. HIP is the first Medicaid expansion in the nation to be modeled in the spirit of a high deductible health plan/health savings account, which promotes personal responsibility while providing subsidized health protection to those who can least afford it. The plan is a melting pot of philosophical approaches and compromises; a plan that has attracted liberals and conservatives; and a plan that has withstood the test of CMS scrutiny and Medicaid rules, write the authors. HIP brings recipients and the State together in a marketbased partnership to use resources judiciously and to promote provider competition resulting in improved transparency, quality and value for all Hoosiers, they write.

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Grace-Marie Turner speaking on The Rod Grams Show KLTF-AM Radio Broadcast Thursday, May 8, 2008, 10:05 a.m. ET Little Falls, MN

UPCOMING EVENTS: Consumer Health World Conference May 4-7, 2008 Las Vegas, NV Grace-Marie Turner will discuss “Challenging the Candidates: How Will the New President’s Policies Impact Consumers and Health Care?” at 1:15 p.m. on May 5. Email galen@galen.org for a registration discount code.

6th Annual Health Care Conference Washington Policy Center Event Tuesday, May 13, 2008, 7:30 a.m. - 4:00 p.m. SeaTac, WA Grace-Marie Turner will discuss the presidential candidates’ health care plans during her keynote address.

Is the Grass Really Greener? A Look at International Health Care Systems Cato Institute Capitol Hill Briefing Monday, May 5, 2008, 12:30 p.m. (Lunch Included) Washington, DC

Health Reform and the 2008 Election: Opportunities and Pitfalls Health Affairs Briefing Tuesday, May 13, 2008, 8:45 a.m. - Noon Washington, DC

Public Forum on Medicare & Medi-Cal California Medicare Coalition Event Thursday, May, 8, 2008, 9:30 a.m. - 12:00 p.m. Sacramento, CA

National Medicare Education Program (NMEP) Coordinating Committee Meeting Centers for Medicare & Medicaid Services Event Thursday, May 15, 2008, 8:30 a.m. - 12:45 p.m. Washington, DC

Building Blocks for Universal Health Care in New York: Bridging Coverage Gaps with Information Technology Hudson Center for Health Equity & Quality Event Thursday, May 8, 2008, 10:00 a.m. - 4:00 p.m. (Lunch included) New York, NY

Whatever Happened to Medicare Reform? Cato Institute Policy Forum Thursday, May 15, 2008, 12:00 p.m. (Lunch included) Washington, DC y

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Wake-Up Calls June 20, 2008

The good news is that members may be paying attention to the critical importance of this issue. But sound decisions need to be made in the open political arena about spending and benefits. Congress can’t punt on this one, and it needs to get serious about reform while it still has options.

Highlights • Federal Health Board • Single-Payer Health Care • Market Innovations • Medical Tourism

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A Federal Health Board? Key members of Congress got another wake-up call this week about the serious threat that rising government health spending poses to the future of our health sector — and our economy.

Single-Payer Health Care? And speaking of bad ideas, advocates of single-payer health care continue their push, especially on the Left Coast. California State Senator Sheila Kuehl, chairman of the state’s powerful Health Committee, continues to press for her bill to enact a health plan in which the state would collect taxes to pay the health care bills for all Californians, and the state would pay doctors, hospitals, and other providers directly — hence the name “single payer.”

During a summit sponsored on Monday at the Library of Congress by the Senate Finance Committee, Federal Reserve Chairman Ben Bernanke told members “The decisions we make about health care reform will affect many aspects of our economy, including the pace of economic growth, wages and living standards, and government budgets, to name a few.”

But she, too, got a wake-up call from a new study by the state’s highly respected and nonpartisan Legislative Analyst’s Office: It concluded, basically, that the single-payer health reform plan would be a fiscal train wreck.

The numbers are, in fact, frightening. Bernanke said that “higher government spending on health care spending will, of necessity, require reductions in other government programs, higher taxes, or larger budget deficits.”

Sen. Kuehl’s single-payer plan would be more than $42 billion in the red in the first year! The state would collect $167 billion with a new 12% payroll tax and similar levies on small business and even on investments but would be faced with an estimated $210 billion in health care bills in the first year of operation (2010). And the red ink would continue to flow, year after year.

So what was the solution offered by the chairman of the Finance Committee? Sen. Max Baucus said he wants to create an “independent federal health board” to make controversial health policy decisions involving payments through Medicare and other health programs.

To close the shortfall, these taxes would have to be raised to at least 16%, and then higher every year after that.

Which would mean that Congress would delegate to an unelected board the authority to make decisions over hundreds of billions of taxpayer dollars to provide medical care for tens of millions of Americans. What kind of democracy is that?

Has anyone told Silicon Valley about this? Talk about a jobs and economic killer! That familiar song would have to be changed to “Nevada, here we come!”

Federal health boards are common in single-payer and other government-dominated health systems. The Clinton plan in the 1990s had a federal health board.

yyy Market Innovations: Meanwhile, in the real world, common sense and market innovations are continuing: Assurant Health announced this week that it has partnered with TelaDoc Medical Services to provide its customers with access to a

This is a very bad idea that needs to be put to rest immediately. Tackling difficult decisions is the responsibility of Congress.

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HEALTH POLICY MATTERS

But the AMA lists nine principles to guide consumers venturing into medical tourism, including making sure the decision to seek care outside the U.S. is voluntary, that facilities are accredited, patients are well-informed about risks, and that there are provisions for follow-up care.

network of board-certified, licensed primary care physicians on demand, over the telephone, 24/7. Fast. Convenient. And cost effective. Isn’t that what consumers are looking for in health care? And it also helps people living in rural and other medically underserved areas and those with transportation challenges — including $4-a-gallon gas.

The AMA also reportedly has amended its long-standing position on tax credits and health insurance. We’ll investigate that and report back next week.

Assurant Health focuses on individual and small group health insurance and is a major player in the HSA marketplace. The company always is looking for ways to distinguish itself from bigger competitors — such as offering same-day decisions to people who apply for health insurance.

Grace-Marie Turner RECENT NEWS ARTICLES AND STUDIES:

Now it is taking innovation another step further by partnering with TelaDoc.

• Medicare: Drifting Toward Disaster

TelaDoc, with one million subscribers, offers quick and convenient access to a physician consultation anytime of the day or night, 365 days a year. It helps people avoid the time and expense — and delay — of an office visit or a trip to the emergency room.

• Devilish Details

And last year, Assurant announced that MinuteClinics would be covered as an in-network provider of health care services for policyholders.

• Health Care 2008: A Political Primer

• The Success of Medicare Advantage Plans: What Seniors Should Know • Behind the Numbers: Medical Cost Trends for 2009 • Canada’s Drug Price Paradox 2008 • The God Committee

Can you possibly imagine these kinds of market innovations taking root in California under a single-payer system?

Medicare: Drifting Toward Disaster Health and Human Services Secretary Michael O. Leavitt The Heritage Foundation, 06/11/08

yyy Medical Tourism: And finally, the American Medical Association, in its annual meeting in Chicago this week, issued its first-ever guidance for patients considering traveling abroad for medical care.

HHS Secretary Michael Leavitt gave a visionary but chilling speech about the looming threat that Medicare presents to taxpayers, to our economy, and to other government responsibilities during a major forum jointly sponsored by the Galen Institute, The Heritage Foundation, and the American Enterprise Institute. “This is serious business involving trillions of dollars and the lives of hundreds of millions of people,” he told a large audience assembled at the Newseum on April 29 in Washington, D.C. This is the full transcript of his important speech, with introductions by GraceMarie Turner, Bob Moffit, and former Sen. John Breaux.

The fledgling medical tourism industry is gaining interest and attention as hospitals around the world — in India, Thailand, Guatemala, and elsewhere — are marketing their new facilities and services. An estimated 150,000 Americans are expected to receive care overseas this year. The AMA acknowledges that people with limited resources and even companies searching for lowercost medical care for their employees are turning to medical tourism.

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HEALTH POLICY MATTERS

Tom Miller of AEI, a co-host and panel moderator at the event, has written a paper elaborating on the remarks he presented. He argues that presidential candidates, policymakers, and the public do not yet want to deal with Medicare’s fundamental problems. Until they do, he says, we need incremental action on many fronts to get better results for the money we will continue to spend in the traditional Medicare program.

Medicare Advantage, which enrolls 20% of all Medicare beneficiaries in private plans, is a success in giving seniors unprecedented choices with superior benefits at affordable prices offered by health plans competing to provide value. But Medicare Advantage is only the first stage of reform. Given Medicare’s $36.3 trillion in unfunded liabilities, Congress must start the process of comprehensive reform that builds on the success of the competitive Medicare Advantage model. Congress will have to restructure the existing payment system to provide seniors a generous but fixed contribution that can be adjusted for such factors as age, income, and health condition. And it will have to learn to be a reliable business partner, with payments based upon real market conditions not arbitrary payment formulas.

Devilish Details Grace-Marie Turner, Galen Institute The American Spectator, 06/17/08 The Service Employees International Union (SEIU), the AARP, the Business Roundtable, and the National Federation of Independent Business (NFIB) have joined together in a campaign called “Divided We Fail” to show that employers, employees, and labor unions all place a high priority on health and employee benefit reform. While the four groups may seem to have common problems and even goals, they will find it very difficult to reconcile their principles when they get down to the task of actually talking about solutions, writes Grace-Marie Turner. Regardless of the business community’s wishes, legislators inevitably would require employers to contribute. Indeed, every recent push for universal coverage has included a “play or pay” mandate requiring businesses to either provide insurance to their employees or pay a fine or a fee toward a public insurance pool. It’s understandable that businesses want urgent action on health issues, but bringing competition and choice into our health sector to get prices down would be a much more powerful force than more government control and expensive new mandates on employers, writes Turner. In its unorthodox attempt at unity, the business community could unwittingly provide political cover to special interests with a decidedly anti-business agenda.

In a separate paper, Moffit criticizes Congress for blocking efforts by the government to require competitive bidding for durable medical equipment and supplies in the Medicare program. If Members of Congress, Democrats and Republicans alike, cannot allow for competitive bidding to commence, it is hard to imagine how they will summon the fortitude when larger challenges inevitably arrive, Moffit writes. Behind the Numbers: Medical Cost Trends for 2009 PricewaterhouseCoopers’ Health Research Institute, 06/08 The growth in medical cost trends for the private sector is expected to level off in 2009 following five years of deceleration, according to a new report from PricewaterhouseCoopers’ Health Research Institute. Costs are expected to grow 9.6% in 2009 compared with 9.9% in 2008. Other key findings from the report: • Decelerators of cost growth in 2009 include improved medical management of high-cost patients and substitution of lower-priced treatments.

The Success of Medicare Advantage Plans: What Seniors Should Know Robert E. Moffit, Ph.D. The Heritage Foundation, 06/13/08

• Accelerators of costs include new technology, increased utilization, new construction, and cost-shifting from government payers and the uninsured.

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HEALTH POLICY MATTERS

• Employers will rely on prevention and disease management programs to temper costs in 2009 rather than shifting higher levels of cost-sharing onto workers.

billion and $7.5 billion (2007) annually for total retail pharmacy sales of generic and brand-name drugs. The God Committee Sally Satel, M.D., American Enterprise Institute Slate, 06/17/08

Health Care 2008: A Political Primer James C. Capretta, Ethics and Public Policy Center The New Atlantis, Spring 2008

Satel provides a compelling account of the questions raised recently when four members of the Japanese mafia received liver transplants at a UCLA medical center (two of whom later donated $100,000 to the center). When resources are scarce — transplantable organs being the classic example — should some institution pass judgment when facts about a patient’s criminality are known? It’s a perfect storm of ethical anxieties and calls to mind a time when character did determine access to scarce treatment, writes Satel. In 1962, Seattle’s Swedish Hospital established the “God Committee,” which considered nonmedical traits, including marital status, net worth, nature of occupation and church attendance, to decide which terminal patient would get access to dialysis machines. No one wants to return to the days of the character biopsy — judging a patient’s social value — in deciding who gets access to rare treatments, but the UCLA story and others like it will continue to offend our sense of fairness as long as the nation’s dire organ shortage persists. The only way to dispel the ethical quandaries that stem from rationing is to expand the pool of organs so that more people can receive lifesaving transplants, writes Satel. Repealing the ban on donor compensation would permit the federal or state governments to devise a safe, regulated system in which would-be donors are rewarded for giving an organ to the next stranger on the list.

Capretta provides an overview of the current health care reform movement, from its political origins in the 1990s to the forces driving today’s debates. He describes how a 1991 Pennsylvania senator’s campaign became a watershed moment in the health care debates, the Clinton health care plan, and Senator John McCain’s dramatic proposal for reforming the tax preference for employmentbased health insurance. It is crucial to see just how much progress has been made since the first iteration of the health care debate, and just how much better positioned Republicans now are to take the initiative, writes Capretta. Indeed, health care reform just might turn out to be what tax reform was in the 1980s and welfare reform was in the 1990s: a platform for a focused conservative effort to achieve through market forces and economic incentives what the left has failed to do through government. Canada’s Drug Price Paradox 2008 Brett J. Skinner and Mark Rovere Fraser Institute, 06/16/08 Prices for generic drugs in Canada are more than twice as high as those in the United States because government policies in Canada distort the market for prescription medicines, according to a new study from the Vancouver-based Fraser Institute. The study found that Canadian prices for generic prescription drugs in 2007 were on average 112% higher than U.S. prices for identical drugs in 2007. Of the total prescriptions dispensed in Canada in 2007, 48% were for generic drugs and 52% were for brand name drugs. In the U.S., 67% of prescriptions were for generics with just 33% for brand name drugs. If Canada repealed policies that distort the market for prescription drugs, net savings for Canadians could reach between $2.9

UPCOMING EVENTS: A Health Care Debate: What is the Best Way to Control Costs, Improve Quality and Expand Access? National Center for Policy Analysis Event Friday, June 20, 2008, 11:30 a.m. (Lunch included) Dallas, TX

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HEALTH POLICY MATTERS

Health Information Technology and Its Future: More than the Money Alliance for Health Reform Event Friday, June 20, 2008, 12:15 p.m. - 2:00 p.m. (Lunch included) Washington, DC

New HSA Rules Webinar HSAEd Event Wednesday, June 25, 2008, Noon EDT Aging and Future Health Care Spending: Red Herrings, Time to Death, and Insurance Choices American Enterprise Institute Event Friday, June 27, 2008, 2:00 p.m. - 4:00 p.m. Washington, DC y

BigGovHealth.org Premiere Center for Medicine in the Public Interest Reception Monday, June 23, 2008, 6:30 p.m. - 8:00 p.m. Washington, DC Health Insurance Reform Elements: A Look at Wellness, Adverse Selection and Consumer Based Health Plans Co-hosted by The Heritage Foundation, EBRI, and Milliman Tuesday, June 24, 2008, 10:00 a.m. - 12:00 p.m. Washington, DC

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Interviews Grace-Marie gave interviews to more than 60 radio stations in more than 30 states across the country, and to hosts of several nationally syndicated programs. Our scholars were interviewed by reporters from the Los Angeles Times, Milwaukee Journal Sentinel, Congressional Quarterly, the Associated Press, and many others.

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INTERVIEWS

Radio Grace-Marie spoke about Medicare, Medicaid, individual mandates, prescription drug importation, the importance of innovation, SCHIP, the health care plans of the presidential candidates, state reform efforts, and free-market ideas for health reform on numerous radio stations around the country. January 3

WMEL-AM, Melbourne, FL

March 25

WNRP-AM, Pensacola, FL

January 11

Radio America, Nationally Syndicated

March 25

KUSA-AM, Yakima, WA

January 16

KLKC-AM, Parsons, KS

March 25

WTPL-AM, Concord, NH

January 29

Cook2 Communications, Nationally Syndicated

March 27

WTOP-FM, Washington, DC

March 27

WMOV-AM, Ravenswood, WV

February 12

Small Business Advocate, Nationally Syndicated

March 28

WGSO-AM, New Orleans, LA

March 31

WDUN-AM, Atlanta, GA

February 14

WRJN-AM, Racine, WI

March 31

February 19

WSRQ-AM, Sarasota, FL

American Family Radio, Nationally Syndicated

February 20

KLKC-AM, Parsons, KS

April 1

February 26

Accent Radio, Nationally Syndicated

Small Business Advocate, Nationally Syndicated

April 1

WGST-AM, Atlanta, GA

February 26

WDAY-AM, Fargo, ND

April 1

February 26

WGCV-AM, Columbia, SC

Accent Radio, Nationally Syndicated

February 26

Radio America, Nationally Syndicated

April 2

Talk Radio Network, Nationally Syndicated

March 4

WHAS-AM, Louisville, KY

April 2

WWTN-AM, Nashville, TN

March 11

WBNR-AM, Hudson Valley, NY

April 2

KLTF-AM, Little Falls, MN

March 12

KTSA-AM, San Antonio, TX

April 2

Project Health Radio, Nationally Syndicated

March 13

WVNJ-AM, Teaneck, NJ

April 3

March 13

KCMX-AM, Medford, OR

Prime Time America, Nationally Syndicated

March 13

WIBA-AM, Madison, WI

April 4

WTPL-AM, Concord, NH

March 14

WDUN-AM, Atlanta, GA

April 4

KAST-AM, Astoria, OR

March 14

Good News Broadcast, New York, NY

April 4

WVNJ-AM, Teaneck, NJ

April 7

KION-AM, Monterey, CA

March 14

WIBA-AM, Madison, WI

April 8

KION-AM, Monterey, CA

March 14

Radio America, Nationally Syndicated

April 14

WAPI-AM, Birmingham, AL

March 17

WFAW-AM, Fort Atkinson, WI

April 14

American Family Radio, Nationally Syndicated

March 18

Issues Today, Nationally Syndicated

April 15

Bott Radio, Regionally Syndicated

March 19

KMOX-AM, St. Louis, MO

April 16

WNRP-AM, Pensacola, FL

March 20

KMED-AM, Medford, OR

April 16

WSHO-AM, New Orleans, LA

March 21

KINF-AM, Lompoc, CA

April 18

KDKA-AM, Pittsburgh, PA

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INTERVIEWS

April 21

KFAB-AM, Omaha, NE

May 8

WHAS-AM, Louisville, KY

April 22

WMMB-AM, Orlando, FL

May 8

KLTF-AM, Little Falls, MN

April 22

WICC-AM, Bridgeport, CT

May 8

WSAU-AM, Wausau, WI

April 23

Small Business Advocate, Nationally Syndicated

May 12

KVI-AM, Seattle, WA

April 23

WBZT-AM, West Palm Beach, FL

May 13

KTTH-AM, Seattle, WA

May 14

April 24

WCHV-AM, Charlottesville, VA

American Family Radio, Nationally Syndicated

April 25

Money Matters Financial Network, Nationally Syndicated

May 19

WWCK-AM, Flint, MI

May 19

KMED-AM, Medford, OR

April 25

KARN-AM, Little Rock, AR

May 20

WDRC-AM, Bloomfield, CT

April 28

WOR 710 HD, New York, NY

May 21

WMOV-AM, Ravenswood, WV

April 29

American Family Radio, Nationally Syndicated

May 22

WAPI-AM, Birmingham, AL

June 16

WCBM-AM, Baltimore, MD

April 29

Radio America, Nationally Syndicated

June 16

WLPO-AM, Oglesby, IL

April 30

WHON-AM, Richmond, IN

June 16

Radio America, Nationally Syndicated

April 30

USA Radio, Nationally Syndicated

June 26

WERS-AM, Boston, MA

May 1

WDYT-AM, Charlotte, NC

June 27

WBNW-AM, Needham, MA

June 27

KCMX-AM, Medford, OR

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INTERVIEWS

Television and Internet

Grace-Marie was interviewed about the American health sector by colleagues at the Istituto Bruno Leoni in Italy on June 6 for a series of videos posted on the YouTube website.

Grace-Marie was interviewed about the health care plans of the presidential candidates by NBC News on March 5. Grace-Marie was interviewed for a webcast video editorial for The Medscape Journal of Medicine, with editor in chief George D. Lundberg, M.D., on March 12 about the challenges of an individual mandate for health insurance. Grace-Marie discussed free-market ideas for health reform on The Danny Fontana Show on the I-Life Television Network on April 24. Grace-Marie was interviewed about the Massachusetts health plan by CBS News on May 22.

Print In addition to being quoted in dozens of articles, we also gave special interviews to: Los Angeles Times

National Review

National Journal

Orange County Register

Congressional Quarterly

Tax Notes

Associated Press

Business Insurance

SmartMoney Magazine

BestWeek

Milwaukee Journal Sentinel

Internal Medicine News

Philadelphia Bulletin

Columbia University

Inside Consumer-Directed Care

The Buffalo News

Baltimore Business Journal

CQ HealthBeat

90


Speeches and Events Grace-Marie Turner delivered speeches on Medicaid, SCHIP, prescription drug marketing and price controls, state reform efforts, consumer-driven health care, and other health policy topics to the National Association of Manufacturers, Medicaid Managed Care Summit, Consumer Health World, and chambers of commerce and universities across the country. Grace-Marie testified before the House Energy and Commerce Committee, Subcommittee on Health, and the New York State Assembly Committee on Health. And the Galen Institute hosted a very successful Medicare Forum featuring HHS Secretary Michael Leavitt and several policy experts about the looming threat that Medicare presents to taxpayers and our economy.

91


SPEECHES AND EVENTS

Speeches

✒ Grace-Marie spoke about “A Fresh Approach to Health Care Reform” at the Colorado Springs Chamber of Commerce Health Care Summit in Washington, DC, on April 1.

✒ Grace-Marie Turner spoke about new ideas to coordinate care in the Medicaid program during an Executive Roundtable conference on Medicaid and Health Policy Reform at the Medicaid Managed Care Summit in Alexandria, Virginia on January 29.

✒ On April 2, Grace-Marie spoke about the health care plans of the presidential candidates at the monthly meeting of the Baltimore Association of Health Underwriters in Baltimore, Maryland.

✒ Grace-Marie spoke about controlling health care costs on Capitol Hill in Washington, DC on January 29.

✒ Grace-Marie testified about H.R. 5613, Protecting the Medicaid Safety Net Act of 2008, before the U.S. House of Representatives’ House Energy and Commerce Committee, Subcommittee on Health, on April 3 in Washington, DC.

✒ On January 31, Grace-Marie spoke about consumer-directed health care at several sessions in New York City. ✒ Grace-Marie testified before the New

York State Assembly Committee on Health on “Prescription Drug Marketing and Purchasing Reform: The Impact on Accessibility and Affordability” in New York City on February 1.

✒ On April 5 in Chicago, Illinois, Grace-Marie presented “The Free Market and the Importance of Transparency” at Enhancing Quality Performance Measurement: The New Health Care Accountability Paradigm Has Arrived, hosted by the American Board of Quality Assurance and Utilization Review Physicians, Inc. ✒ Grace-Marie was a presenter on the panel, “Got Healthcare?” at the 2008 Public Affairs Conference of the National Association of Manufacturers in Las Vegas, Nevada, on April 7. ✒ Grace-Marie spoke about “Medicare Reform: Responses to the ‘Excess General Revenue’ Funding Warning” at the Association of Private Enterprise Education conference in Las Vegas, Nevada, on April 8.

✒ Grace-Marie presented an overview of Republican and Democratic presidential candidates’ health care proposals at the 2008 Capitol Conference of the National Association for Health Underwriters in Washington, DC, on February 5.

✒ On April 10, Grace-Marie presented “Can We Repair What’s Wrong with our Health Care System through Christian Principles?” as part of the Acton Institute’s Lecture Series in Grand Rapids, Michigan.

✒ In Tallahassee, Florida, on February 7, Grace-Marie spoke on two panels, “Medicaid and SCHIP” and “Other State Plans and Presidential Candidate Proposals” at the James Madison Institute seminar for state legislators, The Right Rx for Florida: A Health Care Innovation Forum.

✒ Grace-Marie spoke at the Healthcare Roundtable Discussion of the National Association of Manufacturers in Washington, DC on April 11. ✒ Grace-Marie spoke about consumer-directed health care to MBA students and industry executives at the University of St. Thomas National Institute of Health Policy Seminar in Washington, DC on April 14.

✒ Grace-Marie presented a “Conservative

Approach to Health Care Reform” at the 2008 Conservative Political Action Conference in Washington, DC on February 8.

✒ Grace-Marie participated in a Roundtable Discussion on Telephone Medical Consultations, hosted by TelaDoc on March 13.

✒ On April 18, Grace-Marie spoke about individual health insurance mandates at the

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SPEECHES AND EVENTS

Employee Benefits Committee Meeting of the U.S. Chamber of Commerce in Washington, DC.

✒ Grace-Marie spoke to members of Congress about “Private Sector Solutions and Opportunities in Health Reform” on June 19 as part of a series of briefings on health reform hosted by Rep. Michael Burgess, a physician from Texas.

✒ On April 29, Grace-Marie talked about healthcare reform at the National Association of Manufacturers’ State Association Group Annual Meeting in Washington, DC.

✒ Grace-Marie presented a keynote speech outlining the views on health care of the presidential candidates at the Asset Health Knowledge Management and Engagement Roundtable Discussion hosted by Wilson Partners on June 24 in Detroit, Michigan.

✒ Grace-Marie presented “Challenging the

Candidates: How Will the New President’s Policies Impact Consumers and Health Care?” at the Consumer Health World conference in Las Vegas, on May 5. Grace-Marie also was a co-host and discussion leader of the Consumer Health World Summit Leadership Forum.

✒ On June 26, Grace-Marie presented “How Will Health Care Reform Impact Medicaid Managed Care in the Coming Years?” at the 16th Annual Medicaid Managed Care Congress in Baltimore, Maryland.

✒ Grace-Marie was a presenter at the Catholic Medical Association Board Meeting in Philadelphia on May 8. ✒ Senior Fellow Joel White gave a presentation on the benefits of health information technology to the National Governors’ Association State Alliance for e-Health in Washington, DC, on May 12. ✒ Grace-Marie spoke about the “Health Plan Proposals of the Presidential Candidates” and moderated the “Health Care Reform in Other States” Panel at the Washington Policy Center Sixth Annual Health Care Conference in Seattle on May 13. ✒ Grace-Marie was a panelist at “Massachusetts Health Reform: Bragging Rights and Growing Pains” hosted by the Alliance for Health Reform and broadcast by C-SPAN on May 19 in Washington, DC.

Events

✒ Grace-Marie spoke about “Bringing

Consumer Choice into Medicaid” at the Complete Conference on Medicaid Managed Care in Washington, DC, on May 20.

✒ We hosted a conference call for the Friends of the Galen Institute on February 21 to discuss the presidential race, the health care plans of the leading candidates, and what’s happening on the health policy front in Washington.

✒ Joel hosted the Coalition for Affordable Health Coverage briefing on legislative options for health insurance reform in Washington, DC, on May 28.

✒ On April 29, the Galen Institute co-hosted, with the American Enterprise Institute and The Heritage Foundation, a major Medicare Forum featuring HHS Sec. Michael Leavitt, former Sen. John Breaux, and a distinguished panel of Medicare experts.

✒ Grace-Marie provided an explanation of the U.S. health system at Healthcare: What can Europeans and Americans learn from each other? hosted by Alberto Mingardi of the Istituto Bruno Leoni in Milan on June 6. ✒ Grace-Marie spoke about a values- and market-based approach to health reform at the Acton Institute’s Healthcare and Markets seminar on June 13 in Grand Rapids, Michigan.

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SPEECHES AND EVENTS

Consumer-Directed Health Care Initiatives

Engaging consumers as partners in managing health spending

CDHC has no guarantee of success and is far from a silver bullet solution to the many problems in the health sector

NIHP Health Policy Seminar Grace-Marie Turner Galen Institute

…But some companies are finding it helps contain costs and boosts prevention and wellness

April 14, 2008

CDHC is many things…

Three goals:

A constellation of offerings that give consumers more power and control over health care decisions New tools include:

• Patient control: control: Consumers will have

more choices in health care and health insurance arrangements • Cost visibility: visibility: They will be more price conscious in shopping for insurance and medical services • Savings incentives: incentives: Consumers have more incentives to get the best product, service, and value for their money

– HSAs, HRAs – New prevention and chronic care management programs – Consumer-focused centers such as MinuteClinics and RediClinics – More decision-support tools

Two recent studies

The Vision:

CIGNA reports that first year medical costs trended 12% lower for its CDHC plans compared to HMOs and PPOs Use of preventive care increased and medication compliance improved

 Engaging consumers as

partners in managing health costs and getting the best value for health care dollars

HealthPartners in Minnesota reports 4.4% lower cost increases for CDHC compared to traditional plans “CIGNA Choice Fund Experience Study: Summary of Key Findings,” CIGNA, October 2007. http://cigna.tekgroup.com/images/56/CIGNA_CDHP_Study.pdf “New Study Shows Lower Costs, Increased Consumer Engagement in Account-Based Health Plans,” HealthPartners, October 22, 2007. http://www.healthpartners.com/portal/999.html

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SPEECHES AND EVENTS

HSAs for AFSCM in Manitowoc County, WI

Common themes Focus on:

Employees pay no premiums County deposits $3,000/yr into each HSA, which fully covers the deducible Insurance covers all expenses above that County will save $1.1 million in 2008 Employees save $685,000

Personal responsibility by recipients Incentives for patient participation Wellness and prevention services Better coordination of care Greater focus on disease management Data collection and outcomes reports

McIlheran, Patrick, “For Deputies Being in Charge Works,” Milwaukee Journal Sentinel, May 24, 2007. http://www.jsonline.com/story/index.aspx?id=610361

FSAs, HRAs, and HSAs Flexible Spending Accounts

Health Reimbursement Arrangements

– available since the mid ‘80s – “Use it or lose it” flaw

Health Reimbursement Arrangements

One option for employers …and employees

– Created in 2002

Health Savings Accounts – Available since 2004

Companies can give employees control over a portion of their salary

Health Reimbursement Arrangements

HRA

Enabled by Treasury and IRS guidance in 2002 Accounts can be funded only by the employer Very flexible – no limits on contributions, few dictates on coverage Unused balances can be carried forward to pay for health costs at discretion of employers

$4,000

Cash wages

95

$50,000 salary

Value of health insurance policy


SPEECHES AND EVENTS

Health Savings Accounts

One example of an HSA

Created by Congress as part of Medicare Modernization Act Effective January 1, 2004 The newest option in the consumer-choice tool kit

HSA

Catastrophic coverage + preventive care

High deductible insurance $500 deductible

Employer, employee, or individual makes deposit to HSA. Unspent funds rollover to next year.

Funds routine health spending. Preventive care exempt.

$1,000 deposit

BC/BS Assn. Survey – Age and Health Status

Health Savings Accounts:

HSA-eligible enrollees are of all ages and are of no different health status than people enrolled in traditional coverage

HSAs allow individuals, employers, or employees to deposit tax-free money into a special account to pay for current and future medical expenses Savings are owned by the HSA holder and roll over from year to year Individuals must have a “highdeductible health plan” to open an HSA

Self-Reported Health Status

Health Coverage by Age 7%

18-24

8%

HSA

11%

HRA 22% 20% 19%

25-34

NonCDHP

12% 10% 10%

Excellent

31%

Very Good

29% 31% 46%

26%

35-44

23%

Good

32% 37%

45-54

10% 11% 11%

Fair

22% 25%

1%

9%

55+

49% 46%

15%

Poor

24%

1% 1%

“Blue Cross and Blue Shield Association Survey Shows HSAs are Popular Among a Wide Cross Section of Americans,” BlueCross BlueShield Association, September 15, 2006. http://www.bcbs.com/news/bcbsa/bcbsa-hsas-popular.html

Engaging Consumers: Use of Health Information (BCBS)

Use of Healthcare Services

HSA enrollees show more interest in healthcare quality and cost information

BCBS data shows usage of healthcare services appear similar among CDHP and non-CDHP enrollees Cost-Driven Behavior Since Starting Healthcare Coverage

19%

25%

25%

HSA HRA Non-CDHP

6% 7% 7%

Taken Lower Recommended Dose

0%

5%

10%

15%

20%

25%

30%

35%

40%

53%

20%

96

32%

20% 10% 9%

6%

Nurse Hotline

11%

8%

Wellness Programs

w/ HSA Account

45%

42%

38%

40%

0%

18% 18% 18%

Delayed Filling or Did Not Fill Prescription

40%

23%

22% 20%

Delayed Going to Doctor or a Medical Procedure

Percent of Enrollees

Decided Not to Go to Doctor

60%

41%

29%

Asked For Generic

9% 10%

Provider Info Tools

w/o HSA Account

13%

19%

Rx Cost & Comparison Tool

Non-CDHP

15%

Website for Coverage Info


SPEECHES AND EVENTS

Success in Safeway Stores

Aetna’s study of 1.6 million members

11% drop in costs for employees who opted into the CDHC plan

Premiums have increased only 3% in total since 2002 for companies that moved to Health Reimbursement Arrangements for all of their employees

CDHC plan employee pays less than under the traditional plan and still have access to preventive care 100% covered by insurance

Companies that offered HRAs as an option had premium increases of only 6.7% over the last three years.

In 2006, about 44% of the company's 30,000 eligible employees were in the plan, and 70% enrolled this year

Use of preventive services is better for those with HSAs People with chronic conditions in HSAs and HRAs maintained or improved their level of care

“At a time when nothing else seems to be working to control health care costs, Safeway's experience is encouraging,” writes the Sacramento Bee. “It's an approach that needs to be explored further and allowed to develop so that we can see if it works over the long term, not smothered before it has a chance to take hold.”

“Aetna Releases Broadest Study to Date of Consumer-Directed Plans,” Aetna, October 2, 2006. http://www.aetna.com/news/2006/pr_20061001.htm

Weintraub, Daniel, “One Company Finds a Way to Control Health Costs, The Sacramento Bee, December 21, 2006.

Preventive care use is equal or better

New Incentives

Those with United/Definity CDHC plans received evidencebased & preventive care at the same or better rate as members of traditional plans:

McKinsey & Co. says CDHC plans increase consumer awareness of cost and value. Consumers are:

16% more likely to have a cervical cancer screening, 10% more likely to receive a cholesterol screening, and 16% more likely to receive a prostate cancer screening.

20% more likely to comply with treatments for chronic conditions 25% more likely to engage in healthy behaviors 30% more likely to get annual physicals 50% more likely to seek less expensive care

73% of CDH members with diabetes are much more likely to see a doctor for diabetes and 16% are more likely to receive testing to control the disease. 22% of CDH members with coronary artery disease are more likely to receive lipid tests and are as likely to visit a physician.

“If I catch an issue early, I’ll save money in the long run.”

“Consumer Directed Health Plan (CDH) Compared to Commercial Insurance Plans, 2004-2005,” UnitedHealth Group, April 23, 2007. http://www.unitedhealthgroup.com/news/rel2007/Quality_of_Care_Summary_0407.pdf

McKinsey & Company. “Consumer-Directed Health Plan Report – Early Evidence is Promising.” June 2005. http://mckinsey.com/clientservice/payorprovider/Health_Plan_Report.asp.

What will the future hold?

What will happen with CDHC?

Elections will determine the direction of change. But…

AHIP says there are were 4.5 million people with HSA insurance last year

The new president will definitely determine the direction of reform, toward a greater role for government in our health sector or a much more functional private and competitive market for health insurance and health care

More than half could be in some form of CDHC plan by 2010 as employers seek ways to engage workers in managing their health and health costs The economic slowdown could actually move more employers toward CDHC plans to save $$$

97


SPEECHES AND EVENTS

…and the rest of the story

Massachusetts Connector options

Massachusetts Health Reform

Four premium levels for similar coverage through the subsidized Commonwealth Care program

Alliance for Health Reform

Approved health insurance plans offer coverage through the unsubsidized Commonwealth Choice plan

Grace-Marie Turner Galen Institute May 19, 2008

Commonwealth Care Enrollment Nov ‘06 – Dec ‘07

Commonwealth Care Enrollment Sept ‘07 – May ‘08 Enrollment (thousands) as of the first of the month

Enrollment (thousands) as of the first of the month 160

200

Premium-paying

140

No premium

Premium-paying No premium

120

150

100

80

100

60

40

50

20 0

0 Sep '07

Nov '06 Dec '06 Jan '07 Feb '07 Mar '07 Apr '07 May '07 Jun '07 Jul '07 Aug '07 Sep '07 Oct '07Nov '07 Dec '07

Summary of Costs by Plan Type Plan 1

Monthly Premium

$0

Max OOP $36 / (Med/Rx) $200

Plan 2

Plan 3

$70$105

Depends upon plan choice

$250 / $250

$500 / $500

Phased out 7/1

Nov '07

Dec '07

Jan '08

Feb '08

Mar '08

Apr '08

May '08

Largest enrollment in no-cost plans Enrollment by Plan Type as of May 1st Total: 176,879 enrolled individuals

Plan 4

$0-$35

Oct '07

Type 2B (150200% FPL), 29,234, 17%

Type 2A (100150% FPL), 47,469, 27%

Type 3 (200300% FPL, low premium), 16,716, 9%

Type 1 (0-100% FPL), 79,039, 45%

98

Type 4 (200300% FPL, low copays), 4,421, 2%


SPEECHES AND EVENTS

Enrollment in Commonwealth Choice

Typical connector prices Coverage Young adult

Young family

Empty-nest couple

Annual premium

$2,000 deductible

$2,280

HMO/ no ded.

$6,096

$1,500/$3,000 ded.

$7,200

HMO/ low ded.

$18,300

$2,000/$4,000 ded.

$7,800

HMO/ no ded.

$21,804

Risks moving forward

Connector coverage through March 1, 2008

For consumers… consumers… – State approved a 12% insurance rate increase for next year – Fines to individuals continue to rise

Est.: 228,000 * Est.: 207,500 176,000

$219 in first year Up to $912 this year; $1,824 for uninsured couples – Shortage of doctors in some areas taking new patients

Est.: 89,000 87,000* 48,961

Rising costs for taxpayers Crowd-out of job-based insurance

17,000

}

Commonwealth Care

Concerns about crowd-out

Taxpayer costs are rising

Up to 40,000 workers are offered health insurance at work, but can’ can’t afford the premiums and earn under 300% of poverty.

State budget calls for $869 million in fiscal 2009, but the bill could be closer to $1.1 billion

Workers eligible for Commonwealth Care can switch from job-based coverage, under certain conditions

About 330,000 Massachusetts residents are newly enrolled in coverage, but at least 263,000 are in free or subsidized plans

The employee share of job-based coverage often costs more than subsidized Commonwealth Care. E.g. $70/mo vs. 39/mo. If only 10% of those eligible shift from job-based insurance to C-Care, the total cost next year alone could be an additional $90 billion, potentially reaching $550 billion by 2012 for this population.

99


SPEECHES AND EVENTS

Growing pains?

Minimum Coverage Standards -- 2009

Or are the costs and complexities of major changes to the health sector, even in a state that had a head start on the rest of the country, far greater than anticipated?

Prescription drug coverage. Visits to the doctor for preventive care, before a deductible. Deductibles that are capped at $2,000 for an individual or $4,000 for a family each year. An annual cap on out-of-pocket spending at $5,000 for an individual or $10,000 for a family (for plans with up-frontdeductibles or co-insurance). No cap on total benefits for a particular sickness or for a single year. No cap on payment toward a day in the hospital.

Example: Just one set of regulations by one of Massachusetts’ Massachusetts’ new health reform boards and commissions to deal with just one problem… problem…

Signing ceremony April 12, 2006

2008 Draft Affordability Schedule Proposed March 20th Individuals Annual Gross Income Range $0 - $15,612

(150%)

$15,613 - $20,808 (200%)

Couples 2008 Proposed

Annual Gross Income Range

Families 2008 Proposed

Annual Gross Income Range

2008 Proposed

$0

$0 - $21,012 (150%)

$0

$0 - $26,412 (150%)

$39

$21,013 - $28,008 (200%)

$78

$26,413 - $35,208 (200%)

$78

$0

$20,809 - $26,016 (250%)

$77

$28,009 - $35,016 (250%)

$154

$35,209 - $44,016 (250%)

$154

$26,017 - $31,212 (300%)

$116

$35,017 - $42,012 (300%)

$232

$44,017 - $52,812 (300%)

$232

$31,213 - $37,500 (360%)

$165

$42,013 - $52,500 (375%)

$297

$52,813 - $70,000 (398%)

$352

$37,501 - $42,500 (408%)

$220

$52,501 - $62,500

(446%)

$396

$70,001 - $90,000

$550

$42,501 - $52,500 (505%)

$330

$62,501 - $82,500 (589%)

$550

$90,001 - $110,000 (625%)

>$52,501

n/a

>$82,501

n/a

>$110,001

(511%)

$792 n/a

15

100


SPEECHES AND EVENTS

Medicaid Commission Goals

How Will Health Care Reform Impact Medicaid Managed Care in the Coming Years?

Medicaid’ Medicaid’s historic and most important job is to take care of the nation’ nation’ s most vulnerable and truly needy citizens. Changes are needed to modernize Medicaid in order to improve the quality of care to beneficiaries and to make the program financially sustainable for the future.

Grace-Marie Turner Galen Institute June 26, 2008

Long-term care

Commission recommendations:

Tax incentives for LTC insurance Tax breaks for those providing care Use of home equity to finance care Promote LTC Awareness Campaign Study alternative insurance Allow care in least-restrictive settings

Long-term care Benefit design Eligibility Health information technology Quality and care coordination

Benefit design

Eligibility Simplify eligibility and allow states to redefine categories New subsidies to help working families purchase private health insurance Study a “scaled match” match” funding formula

State flexibility Allow partnerships between states and beneficiaries Authority to replicate successful demos Enforce compliance with public notice and comment periods

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SPEECHES AND EVENTS

Quality and care coordination

Health information technologies EHRs by 2012 Allow 5-year savings window for budget States should include HIT specs in contracts HHS should promote HIT and interoperability

All beneficiaries should be in coordinated care with a medical home – – – –

State plan option Inclusive participation Streamline rules States share savings

HHS, Medicaid agencies and vendors must meet access standards

…Quality and coordination

Medicaid Advantage A new way to provide coordinated care for dual eligibles Federal funds for Medicare and Federal Medicaid share would flow to states to develop an integrated care management program States or the plans they select would provide care on the Medicare Advantage model

Establish National Health Care Innovation Program Disclose payments to providers Measure quality Purchase quality outcomes, not just services

Payment for Dual Eligibles: Current FFS Policy Go to Hospital or Nursing Home

Payment for Dual Eligibles: Seeking a Better Way

Stay at home. Go to Physician

Go to Hospital or Nursing Home

$

No Coordination of Care

$

Payment from: Medicare Part A

Medicaid State $

Medicare Part B

Medicare Part A

$ State or Private Health Plan

Provides Coordinated Care And Payment

$

$

Medicaid State $

Federal Match

102

Federal Match

Stay at Home Go to Physician

$ Medicare Part B


SPEECHES AND EVENTS

An innovative program: The Healthy Indiana Plan

What’ What’s next? Bringing better coordination to the patchwork design of Medicaid Using DRA tools to tailor programs to state needs Creating new momentum for Congress to give states more flexibility

A novel way of increasing access to health insurance for the uninsured A jointly-funded POWER account -- $1,100 Medicaid coverage for medical costs above that, including preventive care Unused POWER balances roll over to help fund next year’ year’s account

Contact: Grace-Marie Turner Galen Institute www.galen.org (703) 299-8900 gracemarie@galen.org

103


SPEECHES AND EVENTS

Health Plans of the Presidential Candidates Friends of the Galen Institute Conference Call Report, February 21, 2008

Grace-Marie welcomed everyone and gave an overview of the agenda for the call. She said she would offer an overview of the health policy proposals of the Democratic presidential candidates. Tom Miller of AEI would offer insights into the health reform plan for Senator John McCain, whom he advises, and then we would open the phones to questions from those on the call about these plans and an exchange of information about other health policy issues.

hensive coverage available to members of Congress • Requiring employers to contribute to the health coverage for their workers through a “pay or play” mandate, with small business getting added help to offset costs • Creating new government payments to businesses to reimburse them for some of the catastrophic costs of employees with large medical expenses—providing certain conditions are met. This was a proposal similar to one offered by Democratic presidential candidate John Kerry in 2004.

Grace-Marie: Now that it appears the Democratic presidential contest will keep going for some time, health care will continue to be a major topic of debate. While most of the disagreement between Sens. Hillary Clinton and Barack Obama has focused on universal coverage—and particularly an individual mandate—that dispute is actually overshadowing how many similarities there are between their two health policy proposals.

• Opening the Federal Employees Health Benefits Program to millions more workers and setting up other regulated health insurance purchasing exchanges • Expanding Medicaid and the State Children’s Health Insurance Program

The sooner that voters focus on the larger picture, the better informed their decisions can be.

• Allowing people to buy in to Medicare, thereby setting up competition between a taxpayer-subsidized program with federal pricing and policing authority and private health plans

There are a number of provisions in both the Clinton and Obama health plans which are not controversial, such as a greater emphasis on using health information technologies, offering a choice of health plans, better prevention and chronic care management, etc.

• Curtailing private competition in Medicare by scaling back payments for Medicare Advantage and allowing the government, rather than private companies, to negotiate prescription drug prices for the Medicare drug benefit

But here is a partial list of what Sen. Clinton and Sen. Obama are proposing that underscores their visions of a much larger role for government in our health sector. Both, for example, would create new health care purchasing arrangements that would heavily regulate the health insurance market. In addition, they both propose:

• Allowing prescription drug importation from abroad, which means importing other countries’ systems of price controls (as Sen. McCain also has proposed), and placing new controls on prescription drug prices

• Requiring insurers to charge basically the same premium to everyone regardless of age, gender, or occupation, called community rating

• Inserting greater government involvement in determining the comparative effectiveness of medical treatments and requiring doctors and hospitals to practice according to these evidence-based protocols.

• Requiring insurers to offer coverage to anyone who applies through guaranteed issue and prohibiting denials for pre-existing conditions

Sen. Clinton has criticized Sen. Obama for proposing a plan that does not have universal coverage as its central goal, even though he would begin with a mandate that all children be covered.

• Requiring insurers to offer health insurance that is at least as generous as the compre-

104


SPEECHES AND EVENTS

This dispute is important, but it should not obscure the many, many other provisions in their plans over which there is little debate but which would inject a much larger role for the federal government in health care financing and delivery. Tom Miller: Most of the Republican presidential candidates’ plans have been organized around the ideas of creating greater fairness in the way the tax code treats health insurance and making health insurance more portable. Sen. McCain would focus in particular on giving individuals and families greater control over their health care and health coverage decisions. Here are some highlights of his health policy proposal:

This dispute is important, but it should not obscure the many, many other provisions in their plans over which there is little debate but which would inject a much larger role for the federal government in health care financing and delivery.

• A refundable tax credit of $2,500 for individuals and $5,000 for families toward the purchase of health insurance and health care services • No mandates on either employers or individuals to purchase health insurance • Focus on lowering costs first • Better chronic care management • Paying for value • Personal health responsibility • Deregulation of health insurance to produce more competition in the health sector • Allowing people to purchase health insurance across state lines • Deregulation of care delivery by encouraging retail health clinics, national licensing of providers, etc. Questions and discussion from participants included conversations on how Sen. McCain’s tax credit would work, other state-based initiatives to protect individual rights in health care, intellectual property rights including the Patent Protection Act making its way through Congress, and the impact of having government plans, like Medicare and the FEHBP, compete with private plans as new health coverage options. Grace-Marie concluded that there will be much more time to analyze all of these provisions in the coming months, and we will continue to host these calls and discussions so we all can stay informed. y

105


SPEECHES AND EVENTS

Medicare Forum Sponsored by the Galen Institute, The Heritage Foundation, and the American Enterprise Institute April 29, 2008, Newseum, Washington, D.C. HHS Secretary Michael Leavitt gave a visionary but chilling speech about the looming threat that Medicare presents to taxpayers, to our economy, and to other government responsibilities during a major forum we co-sponsored in Washington on Tuesday with the American Enterprise Institute and The Heritage Foundation.

began to change while Argentina’s didn’t. Its productivity suffered. But the country kept on spending, content and confident it was betteroff than its neighbors,” he warned. Eventually, “Creditors told Argentina, ‘no more, unless you fix your entitlements.’” “It seems inconceivable that the United States of America, the strongest economic power in human history, the land of the free and the home of the brave, could ever be in a situation like the one Argentina faced a decade ago.

Nearly 250 people attended the forum held at the Newseum, Washington’s newest and most modern museum devoted to interactive media exhibits. The conference room atop the Newseum had a panoramic view of the Mall, with the Capitol as the backdrop for Sec. Leavitt’s speech. It was a majestic setting for a visionary speech and an impassioned panel discussion about a powerfully important topic.

“But, is it? “Is it really difficult to imagine world credit markets saying to the United States of America—as the world did to Argentina: ‘Given your lack of action in dealing with your deficit and the entitlements causing the problem, we are beginning to lack confidence in you?’”

Sec. Leavitt titled his speech “Drifting to Disaster” and used a vivid example of whitewater canoeing to give the audience a sense of the danger ahead:

“I hope I have made clear to you, just how alarmed I am and how alarmed we should all be. There is serious danger here.”

The river is “the growing obligation our nation has to pay for the health care of our senior and disabled citizens. Medicare’s liabilities have grown from a mere trickle 40 years ago,” he told the audience, into Class 5 Rapids today. “As new streamlets merge, it is becoming a raging torrent—more demanding and dangerous with each successive day.”

His recommendations: • Separate the commitment from the pain: Build trigger points into legislation so that members of Congress aren’t voting on specific measures “but rather laying contingent plans if things go beyond a predetermined point,” such as Medicare exceeding a certain percentage of Gross Domestic Product.

Sec. Leavitt worked on his speech until 2 a.m. the morning of our forum, personally crafting the speech, reflecting the weight of responsibility and even panic he said he feels as a Medicare Trustee.

• Pick the right moment: “…during windows of time when control of political power is sufficiently uncertain that both major parties feel at risk” and when a larger consensus involving both parties is possible.

“This is serious business involving trillions of dollars and the lives of hundreds of millions of people,” he said. He used a chilling example of Argentina, which was a world economic power at the turn of the last century, “wealthier even than the United States,” he said. But, “Over the next fifty years, successive governments constructed, and then expanded, an ever-generous system of social benefits, nationalized industries, and created a vast and bloated public administration,” he said.

• Modernize budget scoring conventions: “Many of the tools Congress will need to reform Medicare will involve significant behavioral changes and require investments that traditional scoring conventions would count solely as expenditures.” He envisions a Medicare system that would have three characteristics:

Argentina failed to invest in innovation and in its key industries and, as a result, “the world economy

106


SPEECHES AND EVENTS

• First, value of care would replace volume of care as Medicare’s best-rewarded virtue. • Second, Medicare parts A and B would operate like Part D. • Third, each generation would carry its share of the load. These are only highlights of the speech, which was extremely well received by the audience, including many veterans of health reform and experts in Medicare. Bob Moffit of The Heritage Foundation, a co-host of the conference, introduced former Sen. John Breaux of Louisiana, who Bob described accurately as a statesman who rises above partisan politics and puts the national interest first. Sen. Breaux worked heroically as chair of the National Bipartisan Commission on the Future of Medicare to seize the moment in 1999 when real reform might have been possible, but White House politics prevailed and that moment was lost. Sen. Breaux introduced Sec. Leavitt, who talked about the incredible burden we are putting on future generations, just as Sen. Breaux was waiting for word from the hospital that his son’s wife was delivering his newest grandchild. Our outstanding panel rose to the task in offering their own visionary “Solutions for Sustainability.” We cannot do them justice, but here are a few highlights: • Former CBO Director Alice Rivlin of Brookings: “We are actually rushing, not drifting, toward disaster…and there will come a point when the rest of the world will no longer lend us money. Entitlement spending is on auto pilot, but Congress must be forced to take a long-term view of the threat and implement triggers that require explicit decisions” to address the problem. • Stuart Butler of Heritage: “Sen. Breaux’s new grandchild will enter the world with a $175,000 entitlement spending obligation on day one…And Medicare threatens to squeeze out everything else that the left and the right want government to do…People say you have to fix the health care system before you fix Medicare, but that is like saying that we have to have world peace before tackling the latest crime wave…We must move away gradually from social-insurance-for-all and toward real

107


SPEECHES AND EVENTS

insurance, or we will never get out of this hole.”

• Tom Miller of AEI, a co-host and panel moderator: “The problem is not a shortage of good ideas, but a public that doesn’t want to deal with this problem.” He said that triggers are a good idea, “but they won’t be pulled.” Rather, he said we must focus on value. “We must tear down the silos in Medicare and begin paying for value.” y

• Former Medicare Administrator Gail Wilensky of Project HOPE: “Medicare must pay smarter for care…We need to know what works for whom and under what circumstances and turn this information into more useful clinical protocols, especially for chronic conditions where spending is high and variation is great. Better information needs to come from many sources. And we must change financial incentives with bundled payments, paying for episodes of care, not incidents of illness.”

“Medicare’s liabilities have grown from a mere trickle 40 years ago,” he told the audience, into Class 5 Rapids today. “As new streamlets merge, it is becoming a raging torrent—more demanding and dangerous with each successive day.”

• Robert Berenson of the Urban Institute: I agree we must focus on value rather than volume…but we need to deal with spending first and not change the fundamental benefits or commitment of Medicare.” In fact, he said, “we should expand the basic Medicare benefit by adding a catastrophic benefit so that people don’t have an incentive to over-insure by buying Medigap coverage that further insulates them from costs.”

108


Meetings Grace-Marie participated in several meetings with administration officials, members of Congress, doctors, and industry executives this year. And the Galen Institute facilitated several coalition meetings for our Health Policy Consensus Group and the ValuesBased Alliance on Health Policy. The following list provides a few examples.

109


MEETINGS

✒ Grace-Marie Turner attended the winter board meeting of the Council for Affordable Health Insurance in Washington, DC on January 8.

3 to talk with Johnny Munkhammar of Timbro about his new book, “The Guide to Reform.”

✒ Grace-Marie attended the Mayo Clinic’s 2008 National Symposium on Health Care Reform on March 9-11 in Leesburg, Virginia.

✒ We facilitated a meeting of the Health Policy Consensus Group on January 11 at The Heritage Foundation.

✒ Grace-Marie participated in a meeting in Washington on March 11 sponsored by the Progressive Policy Institute and The Heritage Foundation about Independent Health Record Trusts.

✒ We facilitated a meeting with OECD health representative John Hoff and health policy colleagues in Washington, DC on January 18. ✒ On January 22, Grace-Marie participated in a virtual meeting of the Quality Evaluation Process Standards Committee.

✒ Grace-Marie met with representatives of IMS Health on March 13 in Alexandria, Virginia. ✒ Grace-Marie met with staff members of the Senate Judiciary Committee in Washington, DC on March 17.

✒ Grace-Marie participated in a meeting with

House Budget Committee staff and members on January 23 in Washington, DC.

✒ Grace-Marie participated in a Consensus Group luncheon discussion with James C. Greenwood, president and CEO of the Biotechnology Industry Organization (BIO), on March 20.

✒ On January 24, Grace-Marie participated in

a conference call with Johnny Munkhammar of Timbro in Stockholm and Bob Moffit of The Heritage Foundation to discuss an upcoming event featuring Mr. Munkhammar and colleagues from Europe.

✒ Grace-Marie attended the speech given by Mayo Clinic President and CEO Denis Cortese at the National Press Club in Washington, DC on March 21, and reported on the speech in our newsletter.

✒ Grace-Marie attended a dinner meeting hosted by Bob Moffit to discuss upcoming health policy projects in Washington, DC on January 24. ✒ We were hosted by UnitedHealth Group on January 25 for another meeting of the Health Policy Consensus Group to exchange information on health policy developments and the evolution of consumer-directed health care.

✒ Grace-Marie attended the American Enterprise Institute event, “Another Warning for Medicare?” on March 26. ✒ Grace-Marie attended “Protecting Intellectual Property and Innovation: Does it Ultimately Help Patients?” hosted by Merrill Matthews, in Washington, DC on March 26.

✒ Grace-Marie attended a swearing in ceremony at the Department of Health and Human Services for the new Assistant Secretary for Planning and Evaluation, Benjamin Sasse, on January 29.

✒ Grace-Marie attended the Urban Institute event “Can Tax Credits Be a Linchpin for Health Reform? Lessons from the Factory Floor” on April 1 in Washington, DC.

✒ Grace-Marie attended the Clare Booth Luce Policy Institute Woman of the Year Luncheon honoring Heritage Foundation Vice President Becky Norton Dunlop on February 9 in Washington, DC.

✒ Grace-Marie met with Senator Robert Bennett and his staff on April 11 in Washington, DC. ✒ Grace-Marie participated in a 2-day visit to Indianapolis on April 16 and 17, for meetings and a factory tour with Eli Lilly and Company executives.

✒ Grace-Marie participated in a meeting with

Alegent Health CEO Wayne Sensor on February 13 in Washington, DC.

✒ Grace-Marie met with Senator Ron Wyden on March 3 in Washington, DC.

✒ Grace-Marie attended the Healthcare Policy Meeting of the Foundation for Health & Productivity on April 21 in Washington, DC.

✒ We facilitated a meeting of the Health Policy Consensus Group in Washington, DC on March

110


MEETINGS

✒ On April 24 Grace-Marie attended the Bipartisan Policy Center event on “Improving Quality and Value in the Delivery of Care” in Washington, DC.

✒ Grace-Marie attended a reception for the launch of BigGovHealth.org hosted by the Center for Medicine in the Public Interest on June 23 at the National Press Club in Washington, DC.

✒ Grace-Marie participated in a meeting of the Health Policy Consensus Group in Washington, DC on April 30, hosted by the Progressive Policy Institute.

✒ Grace-Marie participated in discussions with think tank health care experts about bipartisan ideas for health reform with colleagues from the Progressive Policy Institute, American Enterprise Institute, The Heritage Foundation, and others on June 25.

✒ Grace-Marie hosted a health policy dinner in Seattle on May 13. ✒ Senior Fellow Joel White participated in a briefing hosted by AARP on follow-on biologics and legislation to create a pathway for follow-on products on May 16.

✒ Grace-Marie met with officials of Physician Hospitals of America on June 25 in Washington, DC. ✒ Grace-Marie attended many additional meetings this year to discuss new initiatives and health policy ideas with administration officials, state officials, Congressional staffers, industry executives, and representatives from companies, member associations, and other think tanks.

✒ Joel participated in a conference hosted

by the Pharmaceutical Care Management Association on e-prescribing and health information technology in Washington, DC, on May 21.

✒ We facilitated a meeting of the Health Policy Consensus Group in Washington, DC, on May 21, hosted by The Heritage Foundation. ✒ Grace-Marie facilitated a meeting of a faith-based group on health reform at the Family Research Council headquarters on June 12. ✒ Grace-Marie participated in a conference call with HHS Secretary Michael Leavitt on June 12 to discuss the administration’s efforts to bring competitive bidding into Medicare’s purchases of medical devices and equipment. ✒ Grace-Marie participated in a discussion of entitlement reform with former Medicare Trustee Tom Saving and associate Andy Rettenmaier of Texas A&M University at The Heritage Foundation on June 18. ✒ Grace-Marie attended a preview screening of the film “Birth of Freedom,” produced by the Acton Institute, in Washington, DC on June 19. ✒ Grace-Marie attended a conference on Capitol Hill sponsored by the American Enterprise Institute on June 19 on “Responsible Health Reform: Competition, Innovation, and Individual Control.” ✒ Grace-Marie met with officials of the Blue Cross and Blue Shield Association on June 23 in Washington, DC. ✒ Grace-Marie met with John Michael O’Brien, Pharm.D. of Responsible Health on June 23 in Alexandria, Virginia.

111


Our Mission

Galen Institute Staff & Trustees

The Galen Institute is a non-profit research organization devoted exclusively to health policy. We work to promote a more informed public debate over ideas that advance individual freedom, consumer choice, and competition in the health sector.

Grace-Marie Turner President

The Galen Institute believes that: • Consumers and their physicians should have authority and responsibility over their own health care decisions. • A consumer-driven market will lower costs, promote innovation, expand choice, and increase access to better medical care. • The vibrant free market will encourage research and innovation and provide better access to new medical technologies. • Updating outmoded tax policy will facilitate greater access to more affordable health insurance.

Brian Lee Crowley Visiting Senior Fellow Joel White Visiting Senior Fellow Tara Persico Research Director Jena Persico Special Projects Director Cleta Mitchell, Esq. Vice Chairman, Board of Directors Sewell Hinton Dixon, M.D. Trustee, Board of Directors Thomas Campbell Jackson, MPH Secretary and Treasurer, Board of Directors

P.O. Box 320010 Alexandria, VA 22320 www.galen.org

Health Policy Activities Report: Jan-July 2008  

The Galen Institute Health Policy Activities Report highlights our health policy activities from January - July 2008.

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