Two Choices

It hardly seemed like breaking news to us, but Families USA made the front pages this week with a new report that health insurance premiums are consuming a growing share of Americans’ paychecks and that the number of uninsured Americans is rising.

This may come as a surprise, but the mission of Families USA and the Galen Institute are not far apart: To achieve high-quality, affordable health care for all Americans, with a particular focus on those with low incomes who are shut out of the system.

And we also largely agree on the diagnosis of the problem: The system of providing health insurance through the workplace isn’t working for millions of Americans who simply can’t afford to buy health insurance.

It is in the solution that we diverge – whether to shore up the job-based system and expand government programs or create a vibrant and functional market in the health sector.

These different visions also are at the core of the presidential debate over health initiatives. The 2004 campaign is refreshing in that it does provide voters a clear choice.


President Bush and Senator Kerry have offered their proposals, which we have described in earlier reports. Both would create a new set of policies and both would require a significant new commitment of taxpayer dollars.

It’s important to point out that these new expenditures will add to existing spending for government programs — $810 billion in 2004.

Some spending is visible, like the $295 billion federal cost of Medicare this year and $292 billion spending on Medicaid. But, as Greg Scandlen points out in his new paper, there are HUGE invisible expenditures as well that already are cooked into the federal budget without a single vote of Congress.

The tax subsidy for job-based health insurance is the biggest. Most people don’t even know that they get a big tax break by not having the value of their employer-provided health insurance counted in their taxable income.

The most recent calculations from the congressional Joint Committee on Taxation show that over five years, the tax subsidy for job-based health insurance will be $603 billion. In anybody’s book, this is big money.

But it doesn’t help the uninsured one bit. Our vision would be to create a visible new tax subsidy so the uninsured could get some of the same help as those with job-based coverage to buy private insurance. We believe that, given the choice, people would prefer private insurance over being enrolled in Medicaid.

And visible subsidies would help to engage consumers in seeking the best value and forcing the health sector to respond with better products and services at lower prices.

Finally, I was trapped in Florida over the weekend by Hurricane Jeanne. I was speaking at the Catholic Medical Association conference in Orlando, across the street from Sea World. Dr. Steve White was installed as the new president of the group and has led a task force to develop a set of policy proposals for the organization, which I described to the group.

The proposals are organized around principles that will allow doctors to practice medicine in accord with their beliefs and allow patients to have more flexibility in how they obtain health coverage, with new subsidies for the uninsured to obtain private insurance. The board unanimously adopted the proposals.

The airport closed soon after our presentations ended. The hurricane actually went right over Orlando Saturday night and Sunday. The hotel has a huge atrium and at least one of the big ceiling window panes was shattered. The storm faced the entrance lobby and rain and wind were pouring in all day. And the guests at a hotel down the street were evacuated here because the whole side of their 8th floor blew off and it was threatening to take the roof off!

These storms are serious, but Florida will recover.

Grace-Marie Turner



? CAHI/Zogby poll reveals Americans willing to cross state lines for access to affordable health insurance

? How eight states destroyed their individual insurance markets

? Does importation save money and lives? Not in Europe.

? Effects of generic-only drug coverage in a Medicare HMO

? Lives at risk


Source: Council for Affordable Health Insurance, 09/30/04

A nationwide opinion poll commissioned by the Council for Affordable Health Insurance shows “Americans strongly support the idea of allowing people to cross state lines to find cheaper health insurance coverage.” According to the Zogby International poll of 1,001 respondents, 72% supported allowing someone living in one state to purchase health insurance from another state if the insurance is state-regulated and approved. Also, 82% said they would be likely to purchase a policy across state lines if they were paying very high rates and needed access to more affordable health insurance policies. CAHI director Merrill Matthews said support was particularly strong among minorities who are disproportionately affected by expensive state health insurance mandates and regulations. The poll found that 86% of Hispanics and 85% of African Americans would support purchasing policies from other states.

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Author: Conrad F. Meier

Source: The Heartland Institute, 09/24/04

Over the past several months, Conrad Meier of The Heartland Institute has presented a series of case studies examining the effects of health insurance regulations in eight states – Kentucky, Maine, Massachusetts, New Hampshire, New Jersey, New York, Vermont, and Washington. He investigated the impact of state laws that set premiums — community rating — and that require companies to sell insurance to people even if they wait until they are sick to buy it — guaranteed issue. In the eight states that adopted community rating and guaranteed issue laws, the number of people covered by individual health insurance fell 19% compared to other states. Meier writes that the regulations have made “individual insurance less available and more expensive than it otherwise would be; hundreds of thousands of people have been shut out of the health insurance market in these states.”

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Author: Robert Goldberg, Ph.D.

Source: Medical Progress Today, 09/29/04

Proponents of prescription drug importation, or parallel trade as it is known in Europe, believe that it would save Americans money and perhaps lives, but the Manhattan Institute’s Bob Goldberg argues that Europe’s experience with the policy proves otherwise. A study by the London School of Economics on the effects of parallel trade in the European Union found that consumers in the UK’s National Health Service saved “no money at all since the retail price is essentially the same at the point of sale.” Europe’s parallel trade policy also failed to produce substantial savings: Health systems throughout the European Union “saved a total of 45 million euros?compared to parallel trade profits of about 650 million euros.” These results would be repeated in the U.S., concludes Goldberg, “since price differentials in foreign markets would be consumed by wholesalers and the onerous new safety regulations required to protect American consumers.”

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Authors: Jennifer Christian-Herman, Matthew Emons, and Dorothy George

Source: Health Affairs Web Exclusive, 09/29/04

A new study for Health Affairs analyzed data for members of a California Medicare HMO whose coverage switched to a generic-only prescription drug benefit and “found that the change was associated with reduced health plan pharmacy cost, increased out-of-pocket pharmacy costs for members, increased overall hospital admissions, changed drug-use patterns, and a negative impact on quality metrics for certain conditions.” The study found that overall hospital admission rates of members who changed to generic-only coverage increased by 3.02 admissions per 1,000 members, while the admission rates of those who did not switch plans decreased by .22. “The potential implications of these findings must be considered by health policy decision makers,” write the authors. “Given the mixed findings, it appears that a generic-only benefit may not be an optimal solution at this time.”

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Authors: John C. Goodman, Gerald L. Musgrave , Devon M. Herrick

Source: National Center for Policy Analysis, September 2004

John Goodman, Gerald Musgrave, and Devon Herrick of the National Center for Policy Analysis have written a new book detailing the failures of national health insurance programs around the world and identifying the problems common to all countries with national health insurance systems. They conclude that national single-payer health care systems in countries such as Great Britain, Canada, Australia, and New Zealand have not delivered on the promise of a right to health care primarily because they are driven by politics and not market forces. “This book will be an eye-opener for anyone who thinks a government-run system is the solution for our healthcare problem,” writes Newt Gingrich. The book is available for purchase online at

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Assessing the Cost of the Bush and Kerry Health Care Reform Proposals

Event co-sponsored by the American Enterprise Institute and The Heritage Foundation

Monday, October 4, 2004, 12:00 noon

Washington, DC

For additional details and registration information, go to:

The FDA and Price Controls: Core Function or Dangerous Distraction?

Federalist Society for Law and Public Policy Studies Event

Wednesday, October 6, 2004, 12:00- 3:30 p.m.

The National Press Club, Washington, D.C.

For additional details and registration information, go to:

What Happened to the European Pharmaceutical Industry?

American Enterprise Institute Event

Thursday, October 7, 2004, 2:00 – 3:30 p.m.

Washington, DC

For additional details and registration information, go to:,eventID.916,filter.all/event_detail.asp.

What Everyone Should Know about the Bush and Kerry Health Plans

American Enterprise Institute Briefing

Friday, October 8, 2004, 12:00 – 1:30 p.m.

608 Dirksen Senate Office Building

Washington, D.C.

For additional details and registration information, go to:,eventID.919,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

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