New Options

The Senate next week plans to debate federal funding for stem cell research. The science is evolving in a way that should make this controversy moot. One side argues that research on viable human embryos has the greatest medical potential and that destroying the embryo is a price worth paying. The other says that adult stem cells and umbilical cord cells already have demonstrated much more success than embryonic cells, actually producing treatments and cures.

Now new technology is emerging that would allow research on embryos without destroying them. The Heritage Foundation conducted the best forum I have attended on the stem cell debate and published the proceedings, explaining both the science and the politics of this issue.


As we reported last month, the House of Representatives is planning to hold a series of votes on health care legislation beginning July 25, although we hear that the schedule may slip to September.

Meanwhile, a new physician member of Congress, Rep. Tom Price of Georgia, is pushing an innovative resolution to put the House on record as supporting a defined contribution approach to problems in the health sector. H. Res. 215 “recommends that the United States Congress move the Nation’s current health care delivery system toward a defined contribution system so that individuals gain direct ownership of their health care insurance policies.”

While resolutions don’t have the force of law, they are important in showing support for ideas and initiatives. The resolution, which has 28 co-sponsors so far, points to the third-party payment system as preventing patients from having control over their health decisions and says that defined contributions would “provide patients greater power to select their health care provider and preferred treatment.”

Moving toward a defined contribution is the answer to so many problems in the health sector – employment-based health insurance, Medicare, SCHIP, and even Medicaid. We first met Rep. Price when he was a leader in the Georgia State Senate pushing free-market ideas. Good for him for taking the lead in pushing this idea forward in Congress.


As you see, our smart technical director, Tara Persico, has produced a new format for Health Policy Matters. We hope that you will find it more readable. If you have any trouble reading it, the newsletter is always available on our website at Because this new format contains some graphics, you may need to set your e-mail SPAM setting to accept the newsletter. If you use Microsoft Outlook: First, left click on your mouse, scroll down to Create Rule. Right click and check the boxes you’ll see on the screen. (BTW, this works for other messages that you may want to allow in – or keep out.)


Finally, thank you for the many, many well-wishes that you sent about my being named to the Medicaid Commission. I apologize for not being able to answer every one, but I do so appreciate your comments and ideas, which I have read. The commission’s first meeting is July 27 where the focus will need to be on beginning work toward our first deadline of a report, due Sept. 1 on short-term recommendations for savings. This is such a great opportunity to bring new ideas to the fore for this program.

Grace-Marie Turner


  • Inflated claims about drug prices
  • Job-sponsored health plans may be targeted for taxation
  • HSA’s more than a (tax) shelter, not quite a house
  • Case bets on business to heal health care system
  • A drug-ad ban is tough to swallow
  • Hospital-acquired infections in Pennsylvania

Authors: Joseph Antos and Thomas F. Wildsmith
Source: American Enterprise Institute, July – August 2005

Recent articles by AARP and Families USA about rising pharmaceutical prices “do not reflect the shift that consumers have made to lower-cost retail outlets and less expensive pharmaceuticals,” write Joe Antos of the American Enterprise Institute and Thomas F. Wildsmith of the Hay Group. The methodology used by AARP and Families USA has “serious limitations” because it is based on wholesale prices, which do not reflect the discounts offered by pharmaceutical companies, savings consumers can realize by careful shopping, or the value of health insurance coverage. A more accurate survey would capture prices actually paid by seniors at the pharmacy. Through comparison shopping, seniors could save 10 – 40% on brand-name prescriptions and, “in many cases, well over 100%” for generic drugs. “Americans are rapidly becoming savvy consumers, seeking out the best deals from the lowest-cost pharmaceutical retailers, secure in the knowledge that generic and brand-name versions have the same ingredients and the same potency,” conclude Antos and Wildsmith.
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Author: Kevin G. Hall
Source: Knight Ridder Newspapers, 07/13/05

“An odd coalition of groups from both the right and left” support changes to the favored tax treatment of job-based health benefits, writes correspondent Kevin Hall. “The tax break is regressive because people at the lower-income brackets get less benefit. It does just the opposite of what it should,” David Kendall of the Progressive Policy Institute tells Hall. “Advocates on left and right agree on this: Ending the tax exclusion should be accompanied by a new national tax-credit system for health care,” writes Hall. “The chairman of the tax-writing House Ways and Means Committee, California Republican Bill Thomas, has repeatedly criticized the exclusion of health plans from taxation.” Grace-Marie Turner stressed that any savings from capping or ending the tax exclusion “should stay within the health sector.”
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Author: Carla Y. Willis, PhD
Source: Virtual Mentor: Ethics Journal of the American Medical Association, July 2005

“While HSAs have generated a flurry of market activity and media interest since their establishment in 2004, they should not be seen as the centerpiece of a strategy to expand coverage to the uninsured, but rather as complementary to more fundamental reform,” writes Carla Willis, a senior economist at the AMA. Willis describes the upsides and downsides of HSAs. Their benefits include providing an affordable option for purchasing coverage, shifting the decision-making ability to patients and doctors, and providing safeguards against underutilization of care. She argues that HSAs’ most significant impact could be encouraging states to repeal mandates and creating calls for more price transparency. Willis also recommends that the “mammoth tax subsidy for [job-based] health insurance – hidden and indefensibly regressive – should be restructured to provide assistance to those who most need help obtaining coverage.”
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This edition of the journal also includes a commentary by Mila Kofman, JD arguing that HSAs could result in “a decline in health, financial ruin, and limited or eventually no comprehensive coverage for millions of Americans with medical needs.”
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Author: Julie Appleby
Source: USA Today, 07/06/05

“AOL co-founder Steve Case is gambling that the current buzz on how to fix the nation’s health system – more consumer choice and responsibility – is not a passing fad, but a long-term business opportunity,” reports USA Today. Case announced the formation of Revolution Health Group, whose other major investors include Colin Powell, former Secretary of State; Steve Wiggins, founder and former CEO of Oxford Health Plans; and Jim Barksdale, former CEO of Netscape. According to the company’s news release, Revolution Health Group will initially focus on: 1) bringing convenient nurse-provided care to retail locations; 2) providing consumers with the best health information; 3) providing tools to assist in managing health care finances; 4) offering secure, accessible personal health records; and 5) creating new choices in how to pay for health care.
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Author: Charles Stein
Source: The Boston Globe, 07/10/05

Senate Majority Leader Bill Frist wants pharmaceutical companies to voluntarily adopt a two-year moratorium on direct-to-consumer advertising for new drugs, an idea that is “distinctly paternalistic,” writes Charles Stein, columnist for The Boston Globe. Frist’s “call for a ban assumes that Americans are weak-minded and gullible – practically impotent in the face of slick and seductive advertising ?[but] The facts suggest Americans are actually capable of making judgments.” Stein argues that drug companies have a right to advertise their product and that informed consumers will make the right decision. “There is something vaguely Soviet about telling companies that make legal, and presumably, useful products that they can’t promote them,” concludes Stein.
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Source: Pennsylvania Health Care Cost Containment Council (PHC4), 07/13/05

In 2004, Pennsylvania hospitals reported nearly 12,000 hospital-acquired infections, which resulted in “1,510 additional deaths, 205,000 additional hospital days, and $2 billion in additional hospital charges,” according to a new study from the Pennsylvania Health Care Cost Containment Council (PHC4). In an effort to improve care and reduce costs, Pennsylvania hospitals were required to submit data to PHC4 on four types of hospital-acquired infections: urinary tract, surgical site, bloodstream, and pneumonia. “This seminal report demonstrates without question that the cost and quality implications of potentially preventable hospital infections are astounding… [it] should be a wake up call for all parties involved in the delivery and payment of hospital care” said Marc P. Volavka, executive director of PHC4. Pennsylvania is the first state to collect and report hospital-acquired infection data, but several states are considering similar measures. “Reducing hospital-acquired infections is imperative to reducing health care costs for consumers, payors, and hospitals themselves and to improving the quality of care and quality of life for patients,” the study concludes.
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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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