Ownership

President Bush expanded his health reform agenda last week with a series of new proposals, and Health Savings Accounts take center stage.

The president touts HSAs in virtually every speech as a way to give millions of Americans a chance to participate in his vision of an ?ownership society.? His new proposals focus on offering new subsidies and purchasing options for small businesses and the uninsured.

HIGHLIGHTS:

? Small businesses: Mr. Bush would give small businesses a boost in setting up HSAs for their employees by providing companies a rebate for deposits they make to their workers? HSAs ? up to $200 for individuals and $500 for families.

Creating an HSA also would allow employers to purchase health insurance with higher deductibles that would likely be less expensive so they could stretch their health insurance budgets further.

The credit to small employers is a brilliant mix of good politics and good public policy and gets around our usual opposition to giving health subsidies to employers. This one is visible to the employee, and it is portable since the money is put into the employee?s HSA. It has the added advantage of giving companies an incentive to set up HSAs for their workers.

? The uninsured: The president would build on his idea of providing refundable tax credits to the uninsured by giving them the option of splitting the subsidy, using part of it to purchase a high-deductible health insurance policy and depositing part into an HSA. Uninsured families could get a $1,000 contribution to their HSA, with a $2,000 refundable credit to help purchase a high-deductible health plan.

? Cross-state purchasing: People must buy a high-deductible health insurance policy to accompany their HSA, and that is a problem in many states that have driven up costs by over-regulating and over-mandating their health insurance markets. President Bush would set up competition by allowing people to buy health insurance across state lines. If you live in New York and can?t afford to buy insurance there, you could shop in Connecticut to try to get a better deal.

There also are plans that involve more government, including signing up ?millions more SCHIP and Medicaid-eligible children,? creating more community health centers, and giving grants to the states for state-run insurance pools ?to help low-income Americans get the most out of their credits.? But the vision of consumer choice, market competition, and individual ownership of health insurance clearly are bedrock principles. Here?s the link to the White House Fact Sheet for details.

With these and other new plans, the White House estimates that the president?s plan will mean 11 million and maybe up to 17.5 million more Americans would have health insurance.

These proposals contrast dramatically with Sen. Kerry?s and offer voters a clear choice between two visions of more individual or government control over health insurance.

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Be sure to check out the events section at the end of the newsletter for notice of an AEI briefing this coming Monday. Joe Antos has led a team of actuaries to conduct detailed cost estimates of Sen. Kerry?s and Mr. Bush?s health initiatives. This will make news and you won?t want to miss it.

Grace-Marie Turner

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

? Kerry, Bush, and the uninsured

? More on the uninsured

? Marcia Angell does a hatchet job on Big Pharma

? U.S. ? Australia agreement is step toward free trade in prescription drugs

? Fighting the Medicare budget battle again

KERRY, BUSH, AND THE UNINSURED

Author: Joseph Antos

Source: The American Enterprise Institute, September-October 2004

Joe Antos of the American Enterprise Institute examines the latest Census Bureau figures and offers a clear description and analysis of the different approaches offered by the presidential candidates to help the uninsured. ?Senator John Kerry proposes a massive expansion of government programs and large subsidies for private insurance,? writes Antos. ?This unprecedented commitment of taxpayer dollars would do little to slow the rapid rise of health care costs.? President Bush’s proposal instead focuses on tax credits to allow consumers to purchase their own health insurance. ?By giving individuals ownership of their health insurance, the Bush proposal begins to change the incentives toward prudent purchasing and better value for our health care dollars,? Antos concludes.

Full text: http://www.aei.org/publications/pubID.21137,filter.all/pub_detail.asp

MORE ON THE UNINSURED

Sources: The Wall Street Journal, The Los Angeles Times, and The Heritage Foundation

Other commentaries address the new uninsured numbers with a common theme: The writers recognize that millions of people have genuine difficulties affording health insurance, but they question whether the Census Bureau?s estimates of the number of uninsured provide an accurate guide for policy solutions. Editors of The Wall Street Journal observe, ?The actual number of uninsured may be a third less than the Census figures claim, while another third of the uninsured appear to be wealthy enough to afford coverage.? The true number may be closer to 15 million, the Journal concludes. David Gratzer of the Manhattan Institute points to findings of a report on Census Bureau data by the BlueCross BlueShield Association last year. ?The bottom line: About 8.2 million Americans, not 45 million, are chronically uninsured and low-income,? he writes in a Los Angeles Times commentary. Derek Hunter of The Heritage Foundation examines the discrepancies between Census Bureau estimates of the number of people covered by Medicaid and the actual number of those for whom the Medicaid agency pays benefits, with the Census Bureau underreporting Medicaid coverage by 18 million. Hunter urges Congress and the Administration to revise the methodology to develop a more accurate database to guide policymaking.

Wall Street Journal editorial: http://online.wsj.com/article/0,,SB109356338582602540,00.html

Gratzer in the LA Times: http://www.manhattan-institute.org/html/_latimes-what_health.htm

The Heritage Foundation: http://www.heritage.org/Research/HealthCare/wm555.cfm

MARCIA ANGELL DOES A HATCHET JOB ON BIG PHARMA

Author: Elizabeth M. Whelan

Source: National Review Online, 09/08/04

Dr. Elizabeth Whelan of the American Council on Science and Health reviews a new book by Marcia Angell, ?The Truth about the Drug Companies,? and concludes that addressing ?the distortions, misstatements, and the surprising naivete of some of Angell?s statements would take another book in itself.? Whelan says that Angell?s tirade against the drug industry is filled with inherent contradictions, such as claiming that ?essential life-saving medicines are withheld from needy people by greedy companies, while at the same time arguing that people are unnecessarily medicated, that drugs do not work, and that those drugs that do are just copies of the ones that have been around for years.? Whelan also challenges Angell?s use of data by Ralph Nader?s Public Citizen organization which claims that the cost of drug development is only a fraction of the estimated $800 million reported in respected peer review journals, ?an odd and shaky citation? from Angell, who herself is the former editor of the prestigious New England Journal of Medicine. Whelan says inaccurate books such as this have the potential to undermine support for pharmaceutical research, and the record must be corrected by explaining the incredible risk, difficulty, and expense of developing tomorrow?s lifesaving medicines.

Full text: http://www.nationalreview.com/comment/whelan200409080850.asp

U.S. ? AUSTRALIA AGREEMENT IS STEP TOWARD FREE TRADE IN PRESCRIPTION DRUGS

Authors: Devon Herrick and Russell Bennett

Source: National Center for Policy Analysis, 09/03/04

The recently passed U.S.-Australia Free Trade Agreement ?represents a giant step toward free trade,? write Devon Herrick and Russell Bennett of the National Center for Policy Analysis. The agreement increases intellectual property protection and allows U.S. drug companies to negotiate with the Australian government the conditions of the sale and resale of their products without the threat of compulsory licensing. ?Free trade in prescription drugs would narrow the gap between what Americans pay for prescription drugs and what consumers in other countries pay for those drugs,? the authors write. ?That, in turn, would cause other countries to help pay for some of the costs of researching and developing the prescription drugs their citizens use.?

Full text: http://teamncpa.org/new_news/hi.htm

FIGHTING THE MEDICARE BUDGET BATTLE AGAIN

Author: Doug Bandow

Source: The Cato Institute, 08/29/04

The new Medicare law would create a more rational reimbursement system for cancer drugs to bring payments into line with actual costs, but Congress must resist lobbying efforts ?to return to last year?s broken system,? writes Doug Bandow of the Cato Institute. Bandow refers to Grace-Marie Turner?s recent paper which shows that doctors have often been vastly overpaid for oncology drugs while being significantly underpaid for their costs in administering the therapies. The new Medicare law provides a more rational formula based upon the Average Sales Price of the drugs and creates new mechanisms to more fairly compensate doctors for practice expenses. But many oncologists ?denounce the reform scheme as providing inadequate returns,? writes Bandow. He offers four recommendations: 1) Congress shouldn?t retreat from its reliance on sales rather than list price; 2) the Centers for Medicare and Medicaid Services should increase reimbursements for administering drugs, where necessary; 3) Congress should revamp Medicare to integrate the new drug benefit into Medicare?s overall structure; 4) Congress should give Medicare beneficiaries a defined contribution to buy the health care plan which best suits their needs.

Full text: http://www.cato.org/dailys/08-29-04.html

Full text of Grace-Marie Turner?s paper: http://www.galen.org/medicare.asp?docID=674

UPCOMING EVENTS:

Election Year Health Proposals: What Would They Cost?

American Enterprise Institute Event

Monday, September 13, 2004, 9:00 ? 10:30 a.m.

Washington, DC

For additional details and registration information, go to: http://www.aei.org/events/type.upcoming,eventID.902,filter.all/event_detail.asp.

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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