New Benefits

The furor over Medicare cost estimates has blessedly subsided during the congressional recess while focus is sharpening over the first benefits available through the new law:

? Next up: Pricing transparency for prescription drugs. The Centers for Medicare and Medicaid Services expects to begin posting the prices of drugs in 209 “therapeutic categories” on its website on April 29 so seniors can compare for themselves who is offering the best discounts.

? A few days later, seniors will be able to start signing up for drug discount cards offered by the 71 plans that received Medicare’s seal of approval (and which are negotiating the drug discounts).

? And beginning in June, low-income seniors will get a $600 deposit to their drug card account to help them in purchasing their drugs.

In addition, two other key benefits of the law are already available:

1) Added funding for Medicare Advantage (HMO and PPO) plans, which are being passed on to seniors in the form of lower premiums, richer benefits, or both, and

2) The new Health Savings Accounts, which are the talk of CEOs and benefit administrators in corporate America.

But since the Medicare law has received so much negative attention this year, it’s not surprising that few people know about all of these benefits.

For example, a new Kaiser Family Foundation survey found that most people don’t know that the drug discount cards were part of the new Medicare law and only 18% of seniors are aware of the $600 assistance.

Clearly, the biggest job now is to educate the public about what’s available.

Customer focus: Adam Smith’s invisible hand is hard at work in the consumer-driven health care movement.

Greg Scandlen and I visited Lumenos this week and saw first hand its strong customer-support commitment. Lumenos is a leading vendor in the consumer-driven health care movement.

Critics of Health Savings Accounts and Health Reimbursement Arrangements will be surprised to learn that Lumenos actually seeks out employees with chronic conditions and high risk profiles. So much for critics’ “healthy and wealthy” claims.

Why are they doing this? Because Lumenos wants to show employers savings with their consumer-directed plans. Healthy people don’t use many medical services so there are few savings to be gained from them.

But there are big savings to be garnered by helping sick people navigate the health care system more sensibly and efficiently – people with heart disease, diabetes, asthma, etc.

If they get the care they need early on and learn how to manage their illnesses better, they will have fewer hospital visits and invasive treatments, keeping them healthier and saving the system money. Lumenos assigns a “health coach” to these patients and shows both improvements in health outcomes and in health expenditures.

This proper alignment of incentives is what we have been trying to achieve in health policy for decades. Health Savings Accounts, HRAs, and the creative menu of consumer-friendly products are finally making it happen, with the leadership of motivated companies like Lumenos, Aetna, Assurant, Destiny, Definity, Vivius, and Caregain.

The biggest job we have before us now is setting the record straight about what is happening in the marketplace, making sure people know about these new consumer-friendly options — and encouraging states to relax the mandates and regulations that are crippling real competition in their insurance markets.

It’s a big agenda, but we are on the road to success.

Grace-Marie Turner

RECENT NEWS, ARTICLES, AND STUDIES FROM THE HEALTH POLICY WORLD:

? The facts about drug importation

? Savings from drug discount cards: Relief for Medicare beneficiaries?

? Let seniors get off the sinking Medicare ship

? Medicare Math

? DOL Guidelines on HSAs

? NAHU consumer guide to HSAs

THE FACTS ABOUT DRUG IMPORTATION: RISKS TO CONSUMERS, STATES, AND RETIREES

Authors: Grace-Marie Turner and Conrad Meier

Source: Illinois Leader, 4/14/04

As the debate over prescription drug reimportation continues on a federal and state level, Conrad Meier of the Heartland Institute and Grace-Marie Turner offer facts about the safety, liability, impact on investors, and cost savings of reimportation. “Canada makes only a very small percentage of prescription medicines for internal use and gets the rest of its supply from around the world,” write Turner and Meier. “Shipments into Canada are increasing from countries with a history of counterfeit and unsafe drug production.”

Turner and Meier also write that because there is no realistic way to verify the safety of imported drugs, liability is a major issue. “Borderless drug stores, including those in Canada, require people to sign waivers that hold harmless the seller from any legal responsibility for the quality or effectiveness of the drugs sold,” write the authors. “And states that promote illegal drug importation programs, such as Minnesota and Wisconsin, say on their websites that they expressly disclaim ‘any and all liability from such importation or re-importation or the use of any products so acquired.'”

Full text: www.illinoisleader.com/news/newsview.asp?c=13812

SAVINGS FROM DRUG DISCOUNT CARDS: RELIEF FOR MEDICARE BENEFICIARIES?

Authors: Juliette Cubanski, Richard G. Frank, and Arnold M. Epstein

Source: Health Affairs Web Exclusive, 4/14/04

In a new Health Affairs Web Exclusive, Juliette Cubanski, Richard G. Frank, and Arnold M. Epstein of Harvard University estimate that the Medicare Drug Discount Program, scheduled to begin in June, will save seniors without other drug coverage an average of 17.4% off current prices — for a total of as much as $1 billion a year in savings. Sicker beneficiaries will see slightly higher savings, and poorer beneficiaries will save somewhat more than wealthier beneficiaries, they predict. Low-income beneficiaries “will see the largest reductions in out-of-pocket drug spending relative to their income” and also will benefit from an annual $600 subsidy that isn’t included in the study’s savings estimates, the authors conclude.

Full text: content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.198

LET SENIORS GET OFF THE SINKING MEDICARE SHIP

Author: Sue Blevins

Source: Cato Institute, 4/7/04

“It’s time to allow seniors to get off the sinking Medicare ship and seek private sector alternatives for health insurance,” writes Sue Blevins of the Institute for Health Freedom. The latest report from the Medicare Trustees warning that the hospital fund (Medicare Part A) will go bankrupt much sooner than anticipated highlights the need for two major changes. Blevins recommends that Congress and the president reform the program by allowing seniors to pay privately for health insurance and by restoring the legal right for seniors to contract privately with physicians. Blevins points out that private contracting will be especially important to future seniors who build up funds in their Health Savings Accounts.

Full text: www.cato.org/dailys/04-07-04.html

MEDICARE MATH

Author: Jagadeesh Gokhale

Source: The Wall Street Journal, 04/15/04

By counting general revenue transfers as dedicated resources for Medicare Parts B and D, the recently released Medicare Trustees Report uses an accounting convention that underestimates Medicare’s true financial situation, writes Jagadeesh Gokhale of the Cato Institute. The Trustees’ Report estimates that Medicare Part A “faces a financial imbalance of just under $22 trillion,” but that figure reveals “only about a third of the truth,” Gokhale writes. Other economists estimate that Medicare’s total shortfall is closer to $62 trillion. Gokhale writes that a better approach would be to follow the methodology used by the Private Enterprise Research Center (PERC) run by Thomas Saving, one of the Medicare trustees. “[I]f the objective is to provide useful information to policymakers, the financial reports of individual programs should exclude general revenue funding – even if current practice or laws extend such funding to them,” he concludes.

Full text (subscription required): online.wsj.com/article/0,,SB108198618492283212,00.html

DEPARTMENT OF LABOR ISSUES NEW GUIDELINES ON HSAS

Source: U.S. Department of Labor, Employee Benefits Security Administration, 4/7/04

The Department of Labor has issued new guidelines addressing whether Health Savings Accounts (HSAs) will be considered “employee welfare benefit plans” and therefore will be governed by ERISA. According to the press release, “The guidance makes clear that while private-sector employer-sponsored high deductible health plans (HDHPs) are group health plans subject to ERISA’s reporting, disclosure, fiduciary responsibility and other requirements, HSAs generally will not constitute ERISA-covered employee benefit plans.” My colleague Greg Scandlen observes that this new guidance is positive and resolves “an important issue for financial institutions that are not interested in having to comply with all the ERISA reporting and disclosure regulations.”

Full text of press release: www.galen.org/fileuploads/DOL_HSA.pdf

Full text of bulletin: www.galen.org/fileuploads/DOL_HSA_FAB.pdf

NAHU CONSUMER GUIDE TO HSAS

Source: National Association of Health Underwriters

The National Association of Health Underwriters (NAHU) has created a consumer-friendly guide to Health Savings Accounts (HSAs). The guide includes a primer on HSAs and instructions on how to find an agent in your area, as well as a list of insurers that offer high deductible health plans that can be used with an HSA. NAHU also provides links to legislative resources on HSAs, including the latest Treasury guidance.

Full text: www.nahu.org/consumer/HSAguide.htm

UPCOMING EVENTS:

Is Consumer-Directed Health Care Reshaping the Health Care System?

National Center for Policy Analysis Briefing

Wednesday, April 21, 2004, 9a.m. – 11a.m.

Room B-318, Rayburn House Office Building

Washington, DC

For additional details and registration information, go to: www.ncpa.org/evn/washington/20040421wash.htm.

Consumer Driven Health Care

Co-Sponsored by The Heritage Foundation and the Manhattan Institute For Policy Research

Thursday, April 22, 2004, 12:00 p.m.

Russell Senate Office Building, Room 188

Washington, DC

For additional details and registration information, go to: www.heritage.org/Press/Events/ev042204a.cfm.

Health Care 2010: Defining the Vision

National Institute for Health Care Management Foundation Forum

Monday, April 26, 2004, 12:00 pm – 2:30 pm

Hart Senate Office Building, Room 902

Washington, DC

For additional details and registration information, go to: www.publicforuminstitute.org/activities/2004/dc/index.htm.

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 http://www.galen.org/.

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