Consumer Choice Care

The Galen Institute briefing on Wednesday dazzled the audience with ?Reports from the Field? about Consumer Choice Health Care. The hearing room in the Senate Dirksen building was packed, with standing room only.

Six companies presented evidence that dispelled myths about these plans. The facts:

? Enrollees are more likely to be older and sicker, not young and healthy.

? Despite this, consumer directed plans do lower costs.

? Utilization of preventive services increases by as much as 60%.

? Patients choose generic drugs up to 50% more often.

? Satisfaction and re-enrollment rates are high, up to 98%.

The briefing was organized and moderated by Greg Scandlen, Galen?s most able director of our Center for Consumer Driven Health Care, with an introduction by Sen. Larry Craig, chairman of the Senate Special Committee on Aging. ?Passage of Health Savings Accounts may be one of the most important accomplishments of this Congress,? Craig said.

There also was early good news about HSAs: Scott Krienke of Assurant Health (formerly Fortis Health) says that 30% of those who have signed up for HSA accounts since January 1 were previously uninsured.

The briefing, however, largely focused on experience so far with the more established Health Reimbursement Arrangements, authorized by regulatory action in 2002, that provide employers with an opportunity to allow employees to participate in cost-saving by making wiser use of health services.

Companies represented at the briefing were Aetna, Definity Health, Destiny Health, Assurant Health, Lumenos, and Destiny.

Some highlights:

? Aetna conducted a detailed study of enrollees in its consumer choice HealthFund and matched it to a similar population. The results: Eligible charges for the HealthFund group rose by only 1.5% while the control group rose 15.7%.

? Participants in the HealthFund programs had an average deposit of $940, with 69% of the money being spent on health services. And 51% of enrollees had money left to rollover in their account at the end of the year.

? People pay more attention to their health and use information resources, like nurse hotlines and on-line services, more often.

? Populations in Destiny?s program were equally mixed between blue and white collar workers, with ?lower-income workers more likely to see the value of this savings opportunity than higher-income employees,? according to Stuart Slutzky of Destiny.

Bottom line: Accusations that those selecting consumer-directed health plans are ?healthy and wealthy? just doesn?t hold up against the data. Workers who are older and more likely to need health services see greater value in the control they get over their health choices. And they aren?t skimping on preventive services but are making wiser choices on discretionary expenses, are reducing emergency room and outpatient visits, and are using generics more often.

Many participants wrote to us praising the conference. ?By far, this was the most informative and productive consumer choice healthcare seminar I have attended over the last two years,? one said.

Our website provides a link to all of the speaker materials that are available electronically. Click here for the agenda, contact information on companies, and speaker materials. We plan to produce a paper with more details, so stay tuned. Consumer choice in health care is the future.

Grace-Marie Turner


? The curious, counter-intuitive relationship between Medicare costs and HMO enrollment

? The costs of a Medicare prescription drug benefit

? Cadbury replaces cholera

? Health spending projections through 2013

? The problem with public health insurance

? CNE health bulletin


Author: Jeff Lemieux

Source:, 2/8/04

?A healthy rivalry between private health plans and Medicare’s traditional fee-for-service program is probably the best way to ensure that Medicare spending never goes back to an unsustainable, business-as-usual trend,? writes Jeff Lemieux of Lemieux argues that in ?a roundabout way? increased HMO enrollment in the mid-1990s caused Medicare spending to decline and then to rise when HMO enrollment decreased in the late-1990s. ?A viable private plan alternative in Medicare will force the fee-for-service program to shape up, even if the two sectors are not placed into direct competition,? writes Lemieux. ?On the other hand, a stronger, more efficient, fee-for-service program will prompt private plans to continue looking for ways to improve coverage and reduce costs.?

Full text:


Authors: Sandra Christensen and Judith Wagner

Source: Health Affairs, March/April 2000

This Health Affairs article from the Spring of 2000, sent to us by Bob Goldberg of the Manhattan Institute, provides a reminder of the difficulty of producing accurate cost estimates for a prescription drug benefit. CBO estimated then that the Clinton drug plan “would increase net Medicare outlays by $136 billion between 2002 and 2009,” compared to the Clinton administration’s estimate of $109 billion – a 24% difference that was largely attributable to different assumptions about uptake and the impact on prices. The article also reminds us of how modest the Clinton proposal was compared to the new Medicare law: the Clinton drug benefit would have paid half of the costs of drugs up to a specified cap of $1000, rising to $2,500 by 2008, and there would have been no catastrophic coverage. The cap would have been indexed to changes in the consumer price index, not medical inflation. Enrollee premiums would have financed half of the costs of the benefit (compared to three-fourths in the new law). Employers would have received a 67% subsidy for retiree benefits.

Full text:


Author: David Gratzer

Source: National Review Online, 02/12/04

“The latest trend in public health is making your choices their business,” writes David Gratzer of the Manhattan Institute. Manitoba has appointed a minister of healthy living, the British Medical Association has endorsed a tax on Twinkies, and 17 U.S. states have a special tax on soda, candy, and snack foods. Health problems including rising smoking rates and obesity are significant, but we “don’t need ministers of healthy living or a tax on fatty foods,” writes Gratzer. “We as a society need to subscribe to alternatives too seldom promoted by government: self-reliance and common sense.”

Full text:


Authors: Stephen Heffler, Sheila Smith, Sean Keehan, M. Kent Clemens, Mark Zezza, and Christopher Truffer

Source: Health Affairs Web Exclusive, 02/11/04

?Health spending in the United States is projected to grow 7.8% in 2003, a marked slowdown from the 9.3% growth experienced in 2002,? according to Stephen Heffler et al of the Centers for Medicare and Medicaid Services. The slowdown follows six consecutive years of accelerating spending growth and ?marks a turning point for the growth path of national health spending.? Factors contributing to the slower pace include: reductions in Medicare spending (up 5.2% in 2003 compared to 9.5% in 2001 and 8.4% in 2002); Medicaid scalebacks in the states (limiting spending growth to 7.5%); and a modest decline in medical prices and use of medical services in the private sector. The authors also project that prescription drug spending growth will continue to decelerate in 2003.

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Author: Brett J. Skinner

Source: Fraser Institute, 02/04

The main problem with Canada?s health care system ?is that no one pays directly for the health care they consume – not even a portion of it,? writes Brett J. Skinner, a Ph.D. candidate at the University of Western Ontario. Full insurance plans, like those offered in Canada, often lead to overuse of health care services resulting in ?escalating costs within the system.? He quotes the famous Rand study that found that families who had full-insurance coverage used almost one third more health care than those who paid a portion of their health insurance, ?with health outcomes that were no better than those who shared the cost of health services.? Skinner concludes, ?Only by introducing market-based reforms, such as consumer co-payments, will consumer demand for health services be restrained or reduced.?

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In a related paper, Nadeem Esmail of the Fraser Institute writes that Canada should implement a patient cost-sharing program similar to that newly implemented in the 11-year-old Eastern European nation of Slovakia. The Slovakians moved away from making all health care free to requiring small fees for services. Esmail says that eliminating Canada?s prohibition on user fees would produce three results: 1) access to physicians and clinics would improve; 2) waiting times would decrease; and 3) resources would be freed to treat other health care problems.

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Source: Centre for the New Europe, 02/04

Belgium?s Centre for the New Europe has published its first Health Bulletin, which provides an overview of developments in European health care. Each issue, to be published monthly, will contain a feature article, summaries of news from around Europe, as well as comparative studies and journals. One example: CNE summarizes an article from Time Europe that says some ?400,000 European scientists and technology graduates now live in the U.S?discouraged by Europe?s high taxes, burdensome bureaucracy and lack of entrepreneurial drive?[making] a mockery of EU leaders recently vowing to make the union ?the most competitive and dynamic knowledge-based economy in the world.??

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Inside Scoop on HSAs

Council for Affordable Health Insurance Teleconference

March 4, 2004, 10:00 a.m. until 11:30 a.m. EST.

We all know that people are excited about the new Health Savings Accounts (HSAs) that were passed by Congress late last year. But now what? A panel of experts, including Merrill Matthews, Dan Perrin, Michael Berry, and Randy Suttles, will discuss the issues and answer your questions on a conference call. Visit or e-mail for more information.

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