Breaking the Mold

Political leaders, like House minority leader Nancy Pelosi, are doing seniors a great disservice by discouraging them from enrolling in the new Medicare drug discount card program.

Low-income seniors could save up to 70% off the cost of their medicines if they sign up for one of the new cards, as Joe Antos of the American Enterprise Institute and I report in a commentary published yesterday in The Wall Street Journal.

The new benefit helps seniors in three ways: First, the drug companies are giving significant price discounts to the private plans that are offering the new Medicare-approved drug cards, which will be activated June 1. Second, low-income seniors will get a $600 government subsidy this year and next to help with their drug expenses. And third, the drug companies are coupling their patient assistance programs with the cards to make it easier for seniors to take advantage of the savings they offer.

Joe and his able research assistant, Ximena Pinell, analyzed the prices that three typical seniors would pay if they bought their drugs through the new card plans. They compared this with data we collected about what the three patients would pay with the existing AARP retail card or through mail-order websites like Walgreen’s, Eckerd, or

The bottom line: Low-income seniors won’t be able to beat the $600 subsidy coupled with the drug company patient assistance programs, which offer their medicines for $15, $12, or less for low- and even moderate-income seniors. These public and private sector subsidies supercharge the new Medicare program. Here’s the link to the Journal article so you can read the full summary:

Liberals just can’t stand it that Republicans have created a benefit on a new model for the 21st century that breaks the mold of expensive and tired government entitlement programs: The new drug card program provides a fixed government subsidy (not an open entitlement to taxpayer dollars), an incentive for seniors to spend the money wisely (since unspent dollars roll over to next year), consumer choice (with dozens of card plans available), and market competition over price and drug options. And on top of that, you actually have the private sector participating in making the benefit more generous.

Oh my goodness, we can’t have this!

Grace-Marie Turner


? Healthy, wealthy and wise

? The official future of Medicare: An unofficial review

? Operating in a vacuum

? Real competition in U.S. can lower drug costs

? Destroying development

? Affordable health care



Authors: John F. Cogan, R. Glenn Hubbard and Daniel P. Kessler

Source: The Wall Street Journal, 05/04/04

This important article by three noted economists outlines the problems and offers solutions to improving the U.S. health care system. ?The starting point ? is recognizing that a handful of existing public policies prevent markets from working, and then changing them,? write John Cogan, Glenn Hubbard, and Daniel Kessler in a commentary in The Wall Street Journal. The authors recommend five policy changes: 1) Reforming the tax treatment of employer-provided health insurance, which they call a ?far-reaching and misguided government policy,? and replacing it with a tax deduction for catastrophic insurance and out-of-pocket health expenses; 2) Promoting portable, nationwide insurance that is free from state benefit mandates and regulations; 3) Addressing the costs of the chronically ill with low incomes by providing state and federal subsidies for insurance purchases; 4) Reducing barriers to entering the health profession; and 5) Allowing market forces to work and encourage innovation.

Full text (requires subscription):,,SB108362681322500884,00.html?mod=opinion


Author: Robert B. Helms

Source: American Enterprise Institute, 05/03/04

Bob Helms of the American Enterprise Institute takes a closer look at the Medicare Trustees? Report and finds that ?this year?s report is notable for the strength of its warnings and sense of urgency in its call for corrective action.? Helms finds one of the most ?alarming messages? to be that Medicare Part A expenditures will start exceeding revenues this year. ?The Medicare ship is not the Titanic,? he observes. ?Modern actuarial radar can allow us to plan ahead for real dangers, but the Medicare ship is large and may respond sluggishly to a change in course. The sooner we set a new course, the safer the passengers on the ship will be.?

Full text:,filter./pub_detail.asp


Authors: Newt Gingrich and Patrick Kennedy

Source: The New York Times, 05/03/04

In order to transform the American health care system, ?we should heed President Bush?s call last week for widespread adoption of electronic health records,? write Newt Gingrich and Rep. Patrick Kennedy in The New York Times. The antiquated information systems used by hospitals and clinics directly correlates to the quality of care we receive, with predictable results. ?For example, approximately 20% of medical tests are ordered a second time because previous results can?t be found ? 30 cents of every dollar spent on health care does nothing to make sick people better. That?s $7.4 trillion over the next decade for duplicate tests, preventable errors, unnecessary hospitalizations and other waste,? write the authors. Gingrich and Kennedy note that electronic health information networks, implemented through ?federally organized public-private partnerships,? would improve quality and efficiency and allow health care professionals to respond rapidly to a bioterrorism attack.

Full text:


Source: USA Today, 05/04/04

An editorial in USA Today argues against prescription drug importation, noting that ?taking advantage of foreign price controls amounts to putting a Band-Aid on a deep wound.? The editors write that what we need is real competition in drug prices and points to a new study by the Congressional Budget Office which shows that savings from drug importation would be negligible. Several proposals that would infuse more competition into the system are highlighted, including price comparisons and cost-saving guidelines. ?Letting the free market work is a better remedy for making prescription drugs more affordable for all Americans,? the editorial concludes.

Full text:


Author: Deroy Murdock

Source: National Review Online, 04/29/04

?The pharmaceutical sector deserves its own Lee Iacocca,? writes columnist Deroy Murdock. ?[D]rug makers need a top executive as their industry’s instantly identifiable human face.? Murdock recommends that in order to combat activists who call for price controls which will stifle innovation, pharmaceutical leaders should address TV audiences with candor and discuss the money spent on R&D for drugs that make it to market and those that never make it out of testing. ?If their industry is to remain vibrant, these miracle merchants must emerge from beneath their desks and defend their life-saving products from those who would hand them out like perfume samples,? concludes Murdock.

Full text:


Author: Michelle Andrews

Source: Fortune Small Business, 05/01/04

In an article for Fortune Small Business, writer Michelle Andrews relates one company?s positive experience with consumer driven health insurance. RD Systems, an Illinois-based manufacturing company with 40 employees, will save $49,000 this year in health costs ? a reduction of almost 30% from what the company would have paid under its old plan. The company?s health plan from Destiny Health ?seems to be changing the way people spend money on health care. The first year under the Destiny plan, four out of five employees used up all the money in their personal medical fund by the end of the year. The second year, however, three-quarters of employees had money left in their accounts to roll over into the following year,? writes Andrews.

Full text:,15114,614385,00.html


Moving Beyond Talk: Bipartisan Solutions for the Uninsured

Coalition for Affordable Health Coverage Briefing

Tuesday, May 11, 2004, Noon

385 Senate Russell Building

Washington, DC

To register, send an e-mail to Natalie Chodur at

The Real Obstacles to Treating AIDS, Malaria, and Tuberculosis in Developing Countries

American Enterprise Institute Event

Wednesday, May 12, 2004, 9:00 a.m.-noon

Washington, D.C.

For additional details and registration information, go to:,eventID.813,filter./event_detail.asp.

Joint Economic Committee Hearing on the Burden of Health Services Regulation

Thursday, May 13, 2004, 10:00 a.m.

Room 628, Dirksen Senate Office Building

Washington, DC

For additional details go to:

Is there Strength in Numbers? Will AHPs Work?

American Academy of Actuaries Luncheon Discussion

Friday, May 14, 2004, Noon ? 1 p.m.

106 Dirksen Senate Office Building

Washington, DC

To RSVP, please email, or call Phillip Hafler at (202) 785-7884.

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

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Elizabeth Lamirand

Editor, Health Policy Matters