Stalled

The political debate in Washington provides an abundance of contradictions:

? Federal Reserve Chairman Alan Greenspan warns of dire consequences for the federal deficit and economic growth unless the country gets a handle on its entitlement programs, especially Medicare and Social Security. “I fear that we may have already committed more fiscal resources to the baby boom generation in its retirement years than our economy has the capacity to deliver,” he told Congress this week.

“If existing promises need to be changed, those changes should be made sooner rather than later.” Mr. Greenspan repeated his strong support for President Bush’s plan to create a system of private savings accounts for Social Security.

? At the same time, support for Social Security reform is stumbling. Members of Congress returned this week to Washington after holding hundreds of town hall meetings during recess week, only to be seared by challenges, many organized by the AARP, to the president’s reform proposals.

? The real issue is wealth building. Art Linkletter and Charlie Jarvis of USANext say that if private accounts had been allowed 20 years ago, American families would now own more than $6 trillion in personal financial assets – rather than holding a handful of government IOUs.

? The chief financial officers of major companies have told pollsters, not surprisingly, that health costs are a bigger concern to them than Social Security reform. Surprise. Surprise. Health costs affect their bottom line right now. Like politicians, and Scarlett O’Hara, they’ll worry about entitlement reform tomorrow.

? Efforts to reform one of the most dysfunctional entitlement programs, Medicaid, also are faltering. Mr. Bush, members of Congress, and the nation’s governors held meetings this week but failed to agree on ways to cull savings from the joint federal-state health-care program for the poor. House Budget Chairman Jim Nussle said he would put off until at least September any decisions about cutting expenditures in Medicaid.

As entitlement reform seems to be stalling on all fronts, a new strategy is needed. We’re clearly ready for the “tipping point” described by New Yorker writer Malcolm Gladwell in his important best seller.

The best way to evoke major change is through change that percolates through the system until it reaches critical mass.

While much work remains in the health sector, seeds have been planted through changes to the Medicare program that introduce competition and choice, through Health Savings Accounts for working Americans, and through creative Medicaid reform proposals being considered in states like Florida and South Carolina.

But retirement security remains a challenge: 401(k)s provide ownership options to more affluent working Americans. But somehow, the seed needs to be planted to offer the chance for lower-income workers to begin to accumulate wealth for their retirement. All we need is a start. Once people get a taste of ownership, the changes will be transformative for them and for the economy.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

? Transform it, don’t reform it

? Voters and health care in the 2004 election

? The FDA and drugmakers should think small

? The myth of absolute safety

? Medical miscalculation creates doctor shortage

? For some, HSAs can be attractive wealth builders

TRANSFORM IT, DON’T REFORM IT

Author: Newt Gingrich

Source: The Washington Post, 03/02/05

Medicaid “is fundamentally broken, ensnaring the most vulnerable in our society in a cycle of dependence and poverty while failing to realize the benefits of emerging technologies and new capabilities in health and long-term care,” writes Newt Gingrich, former speaker of the House and founder of the Center for Health Transformation, in a Washington Post commentary. He argues that the basic problem with Medicaid “is that its beneficiaries are distinct and separate groups of individuals with radically different needs and characteristics: people with disabilities, the poor and the elderly poor.” He recommends passing legislation that would transform the system in three ways: 1) Create a “Capabilities Program” that would give the disabled and other injured Americans incentives to be productive; 2) Offer vouchers for HSAs to the relatively healthy poor; and 3) Establish a program for the elderly that brings their families back into their care and incorporates modern information technology systems.

Full text: www.washingtonpost.com/wp-dyn/articles/A64393-2005Mar1.html

Dr. Lawrence Huntoon also writes about the failings of the Medicaid system in the latest edition of the Journal of American Physicians and Surgeons. He describes the financial struggles of Erie County, New York, and quotes County Executive Joel Giambra as saying, “The cost of one single state-mandated program – Medicaid – is greater this year than the entire Erie County property tax levy?In fact, in every budget year since 2001, the cost of Medicaid was greater than the entire Erie County property tax.”

Full text: www.jpands.org/vol10no1/huntoon.pdf

VOTERS AND HEALTH CARE IN THE 2004 ELECTION

Authors: Robert J. Blendon, Mollyann Brodie, Drew E. Altman, John M. Benson, Elizabeth C. Hamel

Source: Health Affairs Web Exclusive, 03/01/05

An examination of 14 national surveys and exit polls shows that “health care was a second-tier issue in the 2004 presidential race,” according to Harvard’s Robert Blendon and fellow political opinion researchers from Harvard and the Henry J. Kaiser Family Foundation. This marks a departure from earlier in 2004, when health care and Medicare were ranked second as voter concerns. “In the end, most voters did not make their presidential voting decision based on health care issues,” Blendon says. Exit polls showed health care ranking no higher than fifth place as a voter priority. He predicts that, as a result, “no new health care initiatives are likely to emerge in Bush’s second term. If anything, the federal government is likely to approach health care as a budget issue, seeking to constrain spending in government programs.”

Full text: content.healthaffairs.org

THE FDA AND DRUGMAKERS SHOULD THINK SMALL

Author: Robert Goldberg

Source: USA Today, 02/28/05

“[T]he solution to better drugs is not more bureaucrats or bigger studies, but better science,” Robert Goldberg of the Manhattan Institute writes in a commentary for USA Today. He argues that the large clinical trials currently required by the FDA assume that all people respond to a drug in the same way. He calls on Acting FDA Commissioner Lester Crawford to continue to implement the Critical Path program started by his predecessor. Critical Path would “focus drug development on genetic information about diseases and drug responses” and create “a pathway to personalized medicine that will bring the right drug to the right person at the right time,” writes Goldberg. He points out that drug and biotech companies have already responded to the program by developing cancer medicines that target smaller populations. An IBM study of the Critical Path approach estimates that it “will cut drug development times from 15 years to five, saving nearly $500 billion in drug development costs.”

Full text: www.usatoday.com/news/opinion/editorials/2005-02-28-edit-fda_x.htm

THE MYTH OF ABSOLUTE SAFETY

Author: Gilbert Ross

Source: National Review Online, 03/03/05

“When it comes to choosing to take a risk by prescribing or taking a drug, the doctor and his or her patient should make the decision, not the FDA or activist groups,” writes Gilbert Ross, executive and medical director of the American Council on Science and Health. FDA Commissioner Crawford and HHS Secretary Mike Leavitt have announced the formation of a drug-safety board and a new website to release the results of early-stage clinical drug trials. “The new drug-safety board may be helpful in clarifying the real risks of adverse drug reactions post-marketing, but I am not optimistic,” writes Ross. “Giving excessive information to a public untrained in scientific analysis is at least as bad as withholding it.” Ross concludes, “There is no such thing as ‘absolute safety’?I’ve seen many lives lost and much needless suffering faced as a result of excess caution in the quest for ‘total safety.'”

Full text: www.nationalreview.com/comment/ross200503030742.asp

MEDICAL MISCALCULATION CREATES DOCTOR SHORTAGE

Author: Dennis Cauchon

Source: USA Today, 03/02/05

Several studies indicate that the U.S. will face a shortage of 85,000 to 200,000 physicians in 2020, contradicting earlier predictions by the American Medical Association and other groups that have long estimated a surplus of doctors, writes Dennis Cauchon, reporter for USA Today. The U.S., which spends about $110,000 a year per medical resident, must train 3,000 to 10,000 more physicians annually to meet the growing health care needs of aging baby boomers. And in about ten years, as doctors from the baby boom generation retire in large numbers, the supply of physicians will further shrink. “We face at least a decade of severe physician shortages because a bunch of people cooked numbers to support a position that was obviously wrong,” says Richard Cooper, director of the Health Policy Institute at the Medical College of Wisconsin. “This is a desperate situation. And we need to act now because it takes a long time to train a doctor.”

Full text: www.usatoday.com/news/health/2005-03-02-doctor-shortage_x.htm

FOR SOME, HSAS CAN BE ATTRACTIVE WEALTH BUILDERS

Author: Sarah Rubenstein

Source: The Wall Street Journal, 03/02/05

Health Savings Accounts (HSAs) “can under certain circumstances be attractive wealth builders, even considering pitfalls like fees and an often narrow array of investment options,” writes Sarah Rubenstein, reporter for The Wall Street Journal. HSAs, which must be coupled with a high-deductible health insurance policy, “combine the best features” of Roth IRAs and 401(k)s by allowing anyone under age 65 to put aside money tax free for health care expenses. Interest earned on HSA funds also is tax-free, and funds for qualified medical expenses can be withdrawn tax-free. Other “wealth-building strengths” of HSAs are that “you can contribute to them regardless of your income, and you never hit an age when you’re required to start taking some of your money out.”

Full text (subscription required): online.wsj.com

UPCOMING EVENTS:

The Search for Safe Drugs: How Personalized Medicine Can

Build a 21st Century FDA

Event Hosted by the Center for Medical Progress at the Manhattan Institute

Thursday, March 10, 2005, 8:30 am – 11:00 am

Rayburn House Office Building, Room 2218

Washington, DC

RSVP by calling 212-599-7000 Ext. 413 or sending an e-mail to events@manhattan-institute.org.

Drug Formularies and Medicare

Kaiser Family Foundation Policy Workshop

Monday, March 14, 2005, 9:30 – 11 a.m. (registration and breakfast at 9 a.m.)

Washington, D.C.

The workshop will be open to policymakers and the media. RSVP to Tiffany Ford at (202) 347-5270, or email tford@kff.org.

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 http://www.galen.org/.

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Elizabeth Lamirand, editor

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