Fun Times

While Democrats were celebrating and partying until dawn this week in Boston, Republicans were busy in Washington issuing more than a thousand pages of new regulations governing Health Savings Accounts and Medicare.

(A recent opinion poll found that Republicans in general say they have more fun than Democrats say they do, but I guess that all depends upon how you define ?fun.?)

The new HSA guidelines met and exceeded expectations. Greg Scandlen devoted his entire newsletter this week to his review of the new regs, highlighting the most important guidelines.

Special kudos to Treasury and to the IRS for preserving the integrity of HSAs, validating that the money in the account is owned by the employee. Some employers had warned that they would be reluctant to offer the HSA option unless they could maintain some control over spending from the accounts. But for HSAs to build a new incentive structure, all HSA holders need to have their ownership validated. The regs conform to our understanding of legislative intentions.

A few days later, the Centers for Medicare and Medicaid Services released more than 1,300 pages of proposed regulations for implementation of the permanent Part D Medicare drug benefit that begins in 2006.

Lawyers and policy analysts ? including this one ? are still pouring over the details. The proposed rules have received high-level attention in the administration, and CMS says it is eager to receive comments to fine-tune them, including holding forums around the country to get feedback from the public.


Meanwhile, I made an overnight trip to Seattle this week to speak to the American Legislative Exchange Council?s annual meeting. Jim Frogue, director of ALEC?s Health and Human Services Task Force, invited Joe Antos of AEI and me to describe the new drug discount card program to a standing-room-only audience of several hundred state legislators.

It?s almost impossible to get the straight story on the program from the news media, and the legislators seemed eager to learn how the private discounts, public subsidies, and drug company senior assistance programs work together to supercharge the benefit. Joe described his research about the value of the cards. You know the bottom line: Seniors without drug coverage and especially those with low incomes are potentially leaving thousands of dollars on the table if they don?t sign up.

Jan Faiks of PhRMA roused the audience with her description of the upcoming Part D benefit, its potential value to the states, and what legislators need to do to conform their laws to the new benefit.

All of our slide presentations are available here.


And while we?re handing out kudos, new legislation to provide refundable tax credits to the uninsured was introduced in Congress last week by Reps. J.D. Hayworth (R-AZ), Collin Peterson (D-MN), and Ron Lewis (R-KY).

While the Galen Institute does not endorse legislation, we do believe that the ideas and principles it represents will benefit millions of people who are shut out of the current system: They make too much to qualify for public programs and don?t have the good, higher paying jobs that offer health insurance.

Individuals would get $1,000 and families up to $3,000 to help them purchase health insurance in the individual or group market. The credit is advanceable, which means people don?t have to wait until they file their tax returns to get the credit. And it is refundable, so even those who don?t owe federal income taxes can receive the credit.

It?s highly unlikely that any legislation is going to move in the remaining days of the current session of Congress. But both President Bush and Democratic presidential nominee John Kerry have offered tax credit proposals to help the uninsured, so this issue surely will be on the docket early next year.


Health Policy Matters will take a break next week and return August 13. (Whatever happened to the summer doldrums?)

Grace-Marie Turner


? The tax break that corporate execs don?t need

? Improving health care: A dose of competition

? Medicare drug discount cards: A work in progress

? Getting older, staying healthier: The demographics of health care

? Questioning the evidence in evidence-based guidelines


Author: John O. Fox

Source: The Washington Post, 07/25/04

Tax policy expert John Fox provides a strong case in this Washington Post commentary for rethinking the tax break for employer-sponsored health insurance. Fox writes that plans offered by both Mr. Bush and Mr. Kerry to help the uninsured could be at least partially financed if ?Congress could eliminate a tax break that for the last 50 years has irresponsibly subsidized deluxe health insurance policies, mostly for corporate management.? He argues if the tax exemption were limited to basic policies, the added tax revenues of $15 billion in 2004 alone could be a great help to the uninsured. ?Moreover, tax breaks for deluxe policies excessively drive up the cost of health insurance, and health care, for everyone,? writes Fox. ?So curtailing this tax break is a winner for the great majority of Americans.?

Full text:


Source: The Federal Trade Commission and Department of Justice, 07/23/04

The Federal Trade Commission and the Department of Justice have issued a joint report based upon two years of hearings into healthcare competition. The report ?provides significant recommendations and observations on a variety of topics, including the availability of information regarding the price and quality of health-care services; cross-subsidies; physician collective bargaining; insurance mandates? and others. Among its recommendations: States should consider abolishing certificate-of-need (CON) laws, which require health care facilities to obtain permission from the state before adding new services or purchasing new equipment. CON laws are intended to control the cost of health care services, but often result in too many bureaucratic decisions about what kind of medical technologies are needed. ?CON programs are not successful in containing health care costs,? the FTC concludes, adding ?there is considerable evidence that CON programs can actually increase prices by fostering anticompetitive barriers to entry. Other means of cost control appear to be more effective and pose less significant competitive concerns.?

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Author: Health Policy Alternatives, Inc.

Source: Kaiser Family Foundation, 07/04

Yet another study finds significant savings to seniors through the Medicare Drug Discount Card Program. This study, prepared by Health Policy Alternatives, assumed that the drug card has ?obvious benefit? to low-income seniors eligible for the $600 subsidy program and, somewhat surprisingly, did not include this aspect of the program in its study. Instead, it focused on savings available to higher-income seniors eligible only for price discounts through the new drug cards. Researchers conducted a pricing analysis based upon 10 commonly prescribed drugs and used the Maryland Attorney General?s ?Prescription Drug Price Finder? as its basis of price comparison. The researchers found that a ?Medicare beneficiary purchasing at retail one of the 10 drugs sampled would save between 8% and 61% for a drug? and using mail order could reap savings of 23% to 89%.

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Source: Joint Economic Committee Hearing, 07/22/04

?Americans are now living longer and they are spending these years in better health overall, with chronic disability rates among the elderly declining,? said JEC Chairman Robert F. Bennett at a recent hearing on long-term trends in the health of the elderly. Hearing witness Kenneth Manton of Duke University testified that the National Long-Term Care Survey found that ?chronic disability above age 65 has consistently declined in the U.S. population from 1982 to 1999.? Dr. James Fries of Stanford University testified that ?[w]e already know how to improve health and save money, it requires postponement of the onset of illness in the individual.? Dr. Fries recommends that programs to improve health and save money must include components of risk reduction, self-efficacy, self management, high risk, chronic disease, and end-of-life components.

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Author: Michael Weber, M.D.

Source: Medical Progress Today, 07/22/04

A recent article in the Journal of the American Medical Association (JAMA) is based on a flawed study which does not recognize the limits of methodology, writes Michael Weber, M.D., of the University of New York. The JAMA article suggests that the nation could save up to $1.2 billion in treating hypertension if physicians strictly adhered to recently published guidelines from the ALLHAT study, which concluded that patients on older diuretic drugs have fewer incidents of hypertension than patients on newer medications, including calcium channel blockers and ACE inhibitors. ?It is disappointing ? that [the authors] accepted so uncritically the output of ALLHAT,? writes Weber, who cautions that blind adherence to random clinical trials will not necessarily result in the best patient care. ?Data concerning the probability that people with high blood pressure will continue to refill their prescriptions show that for newer drugs there is a better than 60% likelihood that patients will still remain on their treatment after one year. For diuretics, the number is only about 20% ? It would be a shame if debatable cost considerations were allowed to drive people into using medicines they don?t like and even worse, into giving up their treatment altogether,? concludes Weber.

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Release of New Report on Individual Health Insurance Premiums and Purchaser Demographics

The Kaiser Family Foundation and eHealthInsurance

Monday, August 2, 2004, 9:30 a.m.

Barbara Jordan Conference Center

Washington, DC

The Kaiser Family Foundation and eHealthInsurance will release a new report on the individual health insurance market. The report will include demographic data about who is buying individual health insurance, as well as information about the actual premiums people are paying and the cost-sharing mechanisms for those products. RSVP to Tiffany Ford at (202) 347-5270, or email

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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