Health Care Summit

The State Policy Network, under Tracie Sharp’s expert leadership, is holding its 12th annual meeting in Austin this week, with the first day featuring a health care summit (which I chaired).

Health care is a front-line issue for the leaders of state-based think tanks from around the country attending the meeting. They heard presentations on consumer-directed health care, Medicaid reform, medical malpractice, and evidence-based medicine, and took a visit to the Heart Hospital of Austin.

The highlight of the day was the luncheon speech by John Mackey, founder and CEO of Whole Foods Markets, which is based in Austin. Mackey described his company’s struggle with health care costs and the adoption of Health Reimbursement Arrangements for employees last year.

Mackey is a visionary CEO who saw HRAs as an opportunity to align incentives and make employees partners rather than adversaries in managing their health costs.

With 163 stores and 27,000 (non-unionized) employees, he worked hard to make the program work. He visited nearly every store to meet with employees and explain the new program and made some changes as a result, including submitting the program to a vote by the employees. It was approved by 83% of workers.

The bottom line: Whole Foods’ health costs have gone up only about 3% since the HRA was introduced as opposed to the double-digit increases most other companies have experienced. Employees love the new program, and he attributes the company’s high retention rates to its popularity.

Next, Mackey wants to transfer the money that his employees have saved in their HRA accounts to HSAs so they really own the money. It troubles him that the HRA money isn’t portable: The employees have earned it, and he feels they should be able to take it with them. But rather than make the decision himself, he plans to submit it for a vote to his workers.

He argues strongly for a full replacement plan, rather than offering HRAs or HSAs as one option, to avoid adverse selection: “You need young and healthy as well as older and sicker workers in the same plan to make the insurance work,” he said.

And he said he can’t stress enough the importance of an active employee education program. “This is very new and people are scared. Once the program is in place, they love it, but getting from here to there requires a lot of hard work.”


Site visit: Some of the Health Summit participants then boarded a bus for a field trip to the Heart Hospital of Austin, a pristine, 60-bed facility that focuses on all aspects of heart treatment, from diagnosis to cardiovascular surgery.

Sally Pipes, a Canadian who heads the Pacific Research Institute in California, said there couldn’t be a bigger contrast between the Austin heart facility and Canadian hospitals, which she said are dirty, often have wires hanging out of the ceiling, and patients on gurneys lining the hallways.

Physician-owned specialty hospitals like the Heart Hospital of Austin are embattled because the new Medicare law has placed an 18-month moratorium on building new facilities. It’s a bad policy. These facilities are performing procedures faster, better, and cheaper, and, by specializing in one thing that they do well, they are becoming centers of excellence. But they are a threat to big community hospitals, which are trying to shut them down.

We’ll be writing more about this in the future, but you can click here to read more about this issue.


Flu vaccine: Bob Goldberg of the Manhattan Institute writes in the Washington Times that Senator John Kerry is blaming President Bush for the flu vaccine shortage and for the long lines of elderly people hoping to get a flu shot. But, as Bob points out, “Mr. Kerry supported programs that created the crisis as he defines it. And his promise to impose price controls, bulk purchase and importation of medicines are exactly the policies that have pushed the vaccine industry to the brink of extinction?The creation of huge government purchase at below-market prices has led to many vaccine companies leaving the business and the shortages we now face.”

Grace-Marie Turner


? Waiting your turn: Hospital waiting lists in Canada

? A prescription for fear: Scaring seniors away from savings

? Small businesses are saving money today with HSAs

? Does America have a prescription drug problem?

? Importing less expensive drugs not seen as cure for U.S. woes


Authors: Nadeem Esmail and Michael Walker

Source: The Fraser Institute, 10/19/04

Vancouver’s Fraser Institute has released its 14th annual survey of hospital waiting times across Canada and reports that the total waiting time for patients between referral from a general practitioner and treatment rose to 17.9 weeks in 2004. Wait times varied among specialties, with the shortest total waits for medical oncology (5.6 weeks), radiation oncology (7.8 weeks), and general surgery (9.9 weeks). The longest waits are for orthopedic surgery (37.9 weeks), plastic surgery (35.8 weeks), and ophthalmology treatment (28.7 weeks). Patients across Canada also experienced significant waiting times for CT scans (5.2 weeks) and MRIs (12.6 weeks). “It is important to remember that these waiting times are the longest that Canadians have ever experienced and that they exist despite record levels of health spending,” said co-author Nadeem Esmail.

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Source: Frontiers for Freedom Foundation, October 2004

Frontiers for Freedom has compiled quotes from critics of the Medicare Modernization Act and the interim prescription drug discount card that “scare and confuse seniors, in an apparent effort to keep them from signing up for the discount drug cards – and ultimately, from taking advantage of the full benefit available in 2006.” Despite this, about 25,000 Medicare beneficiaries are enrolling in the new drug discount card program every day. The report also includes numerous news accounts of beneficiaries who are seeing savings from the discount cards first-hand, with one calling it “a dynamite deal.” The report concludes: “No matter how heated critics’ rhetoric becomes, the bottom line is that nationwide seniors are saving money.”

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Source: Center for Health Transformation, 10/15/04

The Center for Health Transformation has compiled 18 examples of small businesses that are saving an average of 48% on their health insurance premiums since they switched to Health Savings Accounts. Two examples presented are an Ohio small business with 66 employees that has saved $207,566 (or 37%) in its first year with an HSA plan and a Wisconsin doctor who has saved $8,400 (or 70%) on his family health insurance coverage by switching to an HSA plan. “With savings like these, thousands of previously uninsured individuals, families, small businesses, and family farms are finding affordable insurance either for the first time or the first time in a long time,” writes the Center for Health Transformation.

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Author: Richard A. Epstein

Source: Institute for Policy Innovation, 10/07/04

Richard Epstein of the Institute for Policy Innovation refutes recent studies by Public Citizen and Drs. Arnold Relman and Marcia Angell that claim the pharmaceutical industry is unique and should therefore be subject to distinctive forms of regulation, like price controls. Epstein writes that “these calls look simply like disguised efforts to reduce the levels of innovation in a highly successful industry, whose major problem lies in the regulatory cloud that hangs heavy over its head.” Epstein examines the charges leveled against the industry and the proposals for reform, including rates of drug utilization and the role of price discrimination, the place of “me-too” drugs, and the cost of research for new wonder drugs. Epstein concludes, “The mistake of Relman and Angell is that they are so suspicious of the motives and actions of the pharmaceutical industry that they have not bothered to acquire the intellectual and technical tools that would permit an intelligent appraisal of the strengths and weaknesses of their favorite whipping boy. The global critics need to start over, from scratch.”

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Author: Eduardo Porter

Source: The New York Times, 10/16/04

Correspondent Eduardo Porter of The New York Times argues against drug importation on economic grounds stating that “many economists and health care experts say that importing drugs from countries that control their prices would do little to solve the problem of expensive drugs in the United States.” Porter writes that allowing Canadian imports is “a rather clumsy tool” and “there are not enough Canadians, or drugs in Canada, to make much of a dent in the United States. There are 16 million American patients on Lipitor, for instance – more than half the entire Canadian population.” Furthermore, importation would lead to “Canadian-style price controls” which would never pass in Congress. Porter concludes that “efforts to force down American prices to Canadian or European levels could radically change the economics of the pharmaceutical industry – which effectively depends on United States profits for all of its activities, including a substantial portion of its spending on research and development.”

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A Post-Election Prescription for Health Care

Pacific Research Institute Event

Tuesday, November 9, 2004, 6:00 pm to 7:30 pm

The Huntington Hotel, San Francisco

For additional details and RSVP information, go to:

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