Meetings Galore

The California Medical Association devoted its annual Leadership Academy in La Quinta November 19-21 to exploring Access, Quality and Cost in the Era of Consumerism.” Greg Scandlen and I were among the speakers addressing consumer-directed health care, and Greg did a splendid job of setting the stage with his historical overview of how the market in the health sector has become so distorted. Click here to see our PowerPoint presentations.

The focus on consumerism is a favorite theme of CMA President Robert Hertzka. The conference presentations explored all sides of consumerism in health care and showed the passions surrounding this issue.

Our e-mails are filled with the continuing dialogue about whether, as Princeton University Professor Uwe Reinhardt warned, Americans have enough of a social conscience to get this right or, as Edward Hughes of Northwestern University and John Goodman of the National Center for Policy Analysis argued, economic principles will prevail and make consumer empowerment inevitable.


The Galen Institute and the Council for Affordable Health Insurance jointly sponsored another in our series of media luncheons on Tuesday, this one entitled, “What’s Next for Medicare.” Merrill Mathews and I hosted, and about 20 national reporters attended.

? Medicare Administrator Dr. Mark McClellan was our featured speaker, outlining the steps his agency is taking to implement the new Medicare law and to educate doctors and beneficiaries about its benefits, including preventive services, coordinated care, and incentives for companies to maintain retiree coverage.

(Tommy Thompson today submitted his resignation as HHS Secretary, and Mark McClellan is reported to be the top candidate to replace him, continuing Mark’s incredible ascent through the top health policy jobs in Washington.)

? Chuck Hallberg, president of MemberHealth, which offers Medicare-approved drug discount cards, said discounts average 30% off retail prices to seniors participating in his company’s program, but lower-income seniors who qualify for additional wrap-around savings through drug company programs can save as much as 90% on their drug bills – savings similar to most other card plans.

? Jack Rodgers of PricewaterhouseCoopers reviewed the findings of his latest study that shows seniors who participate in the upcoming Part D benefit program can expect to save an average of more than $400 a year on their drugs.

? And, finally, Paul Fronstin of the Employee Benefit Research Institute said that he does not expect many employers to drop retiree coverage, but that he is not optimistic that companies will continue to offer these benefits in the future for today’s workers.


I’m now in New Orleans, speaking on drug importation to the International Foundation’s Annual Employee Benefits Conference. (We do spend a lot of time preparing PowerPoint presentations. Here’s my talk for this conference.)

Importation remains a hot political issue and will be stirred up further when the HHS task force releases its report this month following months of hearings. Mark McClellan said during our Tuesday Medicare briefing that we should expect a comprehensive report addressing safety, where the drugs are coming from, and the impact on drug costs and innovation.

At this huge New Orleans conference, attended largely by benefit managers for public and private labor union pension plans, the audience started out largely supportive of legislation legalizing drug importation. But as they learned more about the risks, cost, and complexity of implementing importation, enthusiasm dampened. When I said that we are basically talking about putting price controls on drugs and why not have that debate directly, they erupted into applause.

Let’s do have that real debate, not masked in the fiction that there is a cheap political fix to this very complex problem.

Grace-Marie Turner



? Go directly to jail: The criminalization of almost everything

? Medicaid coverage for poor adults: A potential building block for bipartisan health reform

? Ownership society still needs rules

? Strong medicine needed for health care

? Pills don?t grow on trees

? Top ten things people believe about Canadian health care, but shouldn?t


Editor: Gene Healy

Source: The Cato Institute, November 2004

Six chapters in this book, edited by the Cato Institute’s Gene Healy, examine the “alarming trends” in federal criminal code that make it “frighteningly easy for American citizens to be hauled off to jail for actions that no reasonable person would regard as crimes.” In her chapter, Grace-Marie Turner describes measures enacted in the Health Insurance Portability and Accountability Act (HIPAA) of 1996. The legislation created the national health care fraud and abuse control program and created numerous new federal health care crimes. Turner concludes that “the big dragnet for ‘health care criminals’ is threatening and intimidating innocent doctors as well as creating an unhealthy climate of fear and defensiveness that is having an adverse impact on the medical profession.”

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Author: Stan Dorn

Source: Economic and Social Research Institute, November 2004

Stan Dorn, a senior policy analyst at the Economic and Social Research Institute, examines “whether giving state Medicaid programs increased flexibility to cover uninsured, poor adults could be one element of a broader, bipartisan expansion in health coverage.” Medicaid reform is sure to be a major issue in the health policy debate in the next Congress, and Dorn focuses on uninsured, working-age poor adults and how Medicaid could be restructured to cover them. “Federal policymakers could give states a simple, new eligibility option that would cover adults (or households) with incomes up to a level chosen by the state,” writes Dorn. “If national policymakers are willing to invest additional resources to encourage state implementation of need-based Medicaid, the federal matching percentage could be raised above standard Medicaid levels, in either of two ways.” First, policymakers could provide significantly enhanced funding that is limited to the new, need-based group. Second, policymakers could instead provide slight increases in federal funding for all Medicaid costs in states that implement the new coverage option. Dorn concludes, “A number of options are available for federal policymakers to define the terms under which states could cover poor adults while taking into account federal fiscal constraints, fairness among states, and administrative feasibility.” [Enhancing match rates for new populations will likely disadvantage existing eligibles, and new federal money for such programs will be scarce. – Grace-Marie Turner]

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Author: Sebastian Mallaby

Source: The Washington Post, 11/22/04

“[C]orporations are clumsy anchors of health and retirement systems and are in any case withdrawing from this function,” writes Washington Post columnist Sebastian Mallaby. “Other options could work better, provided they are done right.” Mallaby argues that employer-sponsored health insurance with its tax-favored status is “unfair and wasteful.” “People at small companies and temporary or unskilled workers often get no coverage,” writes Mallaby. “Meanwhile, privileged workers get coverage that’s over-fancy because it is subsidized by taxpayers and doubly wasteful because it separates the decision to spend money from the responsibility for paying.” He concludes that individual health insurance would give consumers an incentive to become more efficient shoppers, but the individual market would need to be “firmly” regulated.

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Authors: Robert E. Hertzka and Carol Young

Source: San Diego Union-Tribune, 11/19/04

The board of the California Medical Association (CMA) has endorsed a plan to provide “significant health coverage to 25 million of the 45 million uninsured” in the U.S. The plan is outlined in this commentary article by Robert Hertzka, M.D., president of the California Medical Association, and Carol Young, M.D., president-elect of the San Diego County Medical Society. The CMA plan would “average down” the cost of insurance by requiring all individuals to have health insurance that covers catastrophic expenses and preventive care. Government programs would assist families earning less than 200% of the federal poverty level, and tax credits averaging $4,000 would help those currently uninsured who earn between 200% – 400% of the poverty level. The CMA proposes to make the plan revenue neutral by capping “the tax-free status of excessive health benefits, which, amazing as it sounds, will generate $40 billion to $50 billion in new money,” write Hertzka and Young.

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The libertarian Reason Magazine also carries an article in the current issue endorsing an individual mandate for health insurance, highlighting a brewing policy debate.



Author: Deroy Murdock

Source: National Review Online, 11/29/04

National Review Online Contributing Editor Deroy Murdock visited Merck’s West Point, Pennsylvania, research facility to get a close-up view of the pharmaceutical research and development process. The process, he says, illustrates the risks and costs of developing new drugs and helps explain why “some little capsule the size of a pencil eraser could cost $2.67 each.” Merck scientist Dr. Michael Bogusky “works in a $3 million lab, featuring $2.5 million in instruments and $500,000 in special construction.” In 2003, out of 300 to 400 molecules tested in Bogusky’s lab, only three continued towards clinical trials “with no guarantee of commercialization.” During Bogusky’s 15 years with Merck, only three compounds on which he worked reached consumers. “It’s a high-risk business and many things fail. But we also learn from the failures,” Bogusky says. Murdock concludes, “This is why new drugs cost what they do, and why price-controlled Canadian drugs? will make it harder for [Merck’s laboratories] to cover their costs. These factors boost the odds that the lights in these miracle factories will flicker, then fade to black.”

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Author: Brian Lee Crowley

Source: The Heritage Foundation, 11/10/04

“Now, like most Canadians, I believe that our system is superior in many respects to the U.S. system, but it is a system that staggers under the burden of serious design flaws,” according to Brian Lee Crowley, president of the Halifax-based Atlantic Institute for Market Studies. In a lecture he delivered earlier this year at The Heritage Foundation, now published in its Lecture series, Crowley presents the top ten myths that persist about Canada’s single-payer health care system (or “Medicare,” as it is called in Canada). Some of the myths: Canada has the best health care system in the world; the Canadian public loves Medicare; single-payer, Canadian-style coverage keeps costs under control; under Medicare, people get the health care services that they need; and Canadian Medicare is fairer because no one gets better care than anyone else.

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The Sickness of the U.S. Vaccine Market

American Enterprise Institute Event

Tuesday, December 7, 2004 2:00 – 4:00 p.m.

Washington, DC

For additional details and registration information, go to:

Medicaid: $28 Billion And Counting

Co-sponsored by the Texas Public Policy Foundation and Texas Conservative Coalition Research Institute

Friday, December 10th, 2004, 10:00 a.m. – 1:30 p.m.

Driskill Hotel, Austin, Texas

For additional details and registration information, go to:

Follow-on Drug Development: Wasteful Imitation or Productive Competition?

American Enterprise Institute Health Policy Discussion

Wednesday, December 15, 2004, 9:15-11:00 a.m.

Washington, DC

For additional details and registration information, go to:

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and announcements of coming events. 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 the newsletter and our organization, please visit our website at

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