IN THIS ISSUE:
? Galen Publishes Open Letter to Congress
? Distortions From Academia
? Krugman “Pooh-Poohs” President’s Report
? President’s Report Provides Compelling Analysis
? Joint Economic Committee Hearing on CD Health
This is going to be an ugly election, full of lies and distortions. A couple of weeks ago we reported on the e-mails the National Association of Retired Federal Employees (NARFE) was sending to members of Congress. The e-mails claimed several studies support the idea that allowing federal workers to have HSAs would “siphon off healthy enrollees” and double FEHBP premiums for everybody else. I got a number of calls from reporters and Congressional offices asking about these charges, so I decided a comprehensive reply was in order. We sent out an open letter to Congress this week showing how NARFE has misrepresented the studies it cites, and how the studies were mostly written before the MSA law was enacted, so are speculative in any case. By all means let’s have critical discussion of HSAs, and every other reform proposal, but let’s base that discussion on honest evaluation instead of distortions and misrepresentations.
Distortions From Academia
Another example of distortions and misrepresentations is an article in the “Philadelphia Inquirer” written by Yogesh Rajkotia, a research fellow at the Johns Hopkins School of Public Health. The article purports to compare the health care proposals of John Kerry and George W. Bush. Problem is he describes only one element of the president’s proposal, ignores the rest, and then declares that it is inadequate. The only piece he mentions is the tax-deductibility of individually purchased high-deductible health plans. He completely forgets to mention the refundable tax credit of $3,000 for lower-income families and then concludes that “the Bush health plan would leave a whopping 91 percent of the uninsured without insurance, while giving the wealthy an $89 billion tax break.” This is the output of an academic research fellow at a prestigious university? He could have legitimately criticized Bush’s proposal for the amount of the tax credit, for relying too much on the individual market, for pegging deductibility solely to high-deductible insurance policies. These, and more, are important questions and worth discussing. It’s a pity that academia would prefer knocking down straw men to engaging in real issues.
Krugman Pooh-Poohs President’s Report
Paul Krugman had an op-ed in “The New York Times” that similarly misstates the President’s views. He says the Economic Report of the President includes a section on health care that “shows a remarkable indifference to the concerns of ordinary Americans? The report pooh-poohs the problem [of the uninsured].” He goes on to say, “Having brushed off the plight of those who, for economic or health reasons, cannot get insurance, the report turns to a criticism of health insurance in general, which it blames for excessive health care spending.” He says the administration can’t offer answers “because of its ideological blinders and because of its special interest ties.” He wraps up, the report’s “main concrete policy suggestion is a plan for tax-deductible health savings accounts, which would be worth little or nothing to a vast majority of the uninsured.”
(there may be a cost to access this, but the same article was picked up by a number of other papers)
President’s Report Provides Compelling Analysis
Perhaps Mr. Krugman hasn’t been paying attention, but “tax-deductible health savings accounts” are no longer a “policy suggestion;” they are the law. In fact, the Economic Report of the President includes five “concrete policy suggestions” that Mr. Krugman finds convenient to ignore in his attack. The proposals include establishing Association Health Plans, allowing deductibility of the premiums of a high deductible health plan, providing tax credits to help lower-income Americans buy coverage, reforming the medical liability system, and funding improvements in health information systems. Rather than “pooh-poohing the problem of the uninsured,” the report analyzes the problem and its causes. The chapter contains a very thorough, yet brief, description of the health insurance market, including discussions of issues like moral hazard and adverse selection in terms a layperson can understand. It explains the consequences of our system, particularly how the generous tax advantages provided to employer-based coverage leads to coverage of predictable and low-cost services that are not suitable for insurance coverage. It summarizes by saying “health insurance markets can be improved in at least three ways. The first is to encourage contracts that focus on large expenditures that are truly the result of unforeseen circumstances. The second is to strengthen health insurance markets outside the traditional employer-based group markets. The third is to provide a more standardized tax treatment of all health expenditures.” It is hard to see how “special interest ties” could be driving this set of recommendations, but Mr. Krugman prefers to use his political hatchet over rational analysis.
Joint Economic Committee Hearing on CD Health
The Joint Economic Committee, chaired by Sen. Robert Bennett (R-UT), held a hearing on “The Performance and Potential of Consumer Driven Health Care” this week. The witnesses were Arnie Milstein (Mercer Consulting), John Bertko (Humana), Howard Leach (Logan Aluminum), and Gail Shearer (Consumers Union). Some highlights:
? I didn’t get Dr. Milstein’s written testimony, but he told the committee he is doing a study of consumer driven plans and his preliminary information shows the potential gain is large in using this approach, both in terms of improving care and in “process re-engineering,” which I take to mean improving management systems for more accountability and efficiency in health care delivery. He also said the early efforts are already slowing health insurance costs, saving some 10%, and that enrollment in 2004 should double to 4 million.
? Mr. Bertko said Humana’s enrollment has gone from 40,000 a year ago to 200,000 today, and he expects it to double by next year. He said the cost trends “have been significantly reduced,” citing a first-year increase of 4.9%, and second year of 1.4% for new enrollees and 2.7% for previous enrollees, compared to double-digits in the traditional market. He also said there was “significant favorable selection by the early movers” into Humana’s plan with enrollees having roughly half the prior claims of the average employee. Still, even this healthier population had significant utilization changes, including less hospitalization and greater use of office visits.
? Mr. Leach reported that his company had long been committed to wellness programs with its 1,000 employees, but they still showed a reduction of 18.7% in total medical costs by switching to an Aetna HealthFund product, even while employees continue to get needed care. He said the use of hospital days actually increased 4.4%, while emergency room and office visits dropped.
? Ms. Shearer was the skeptic on the panel. Like Mr. Krugman (above), she thinks the President’s Economic Report is off-track because it emphasizes the consequences of over-insurance instead of the problems of the uninsured. She said consumer driven health care favors “the healthy and the wealthy” (yes, she actually used that cliche) and “shifts more costs to those who are sick.”
SOURCE: The testimony is available on the committee’s web site at http://jec.senate.gov
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