Too Many Choices!

As you will recall, the Galen Institute worked hard, along with AEI and Heritage, several years ago to promote an idea for a Medicare prescription drug benefit that would be based upon a funded drug discount card coupled with insurance coverage for large drug expenses.

Our idea was adopted in part with the enactment of the temporary drug discount card. The Medicare Modernization Act created a program to allow private plans to offer Medicare-approved discount cards to all beneficiaries and also provided $600 a year to those with low-incomes to help with drug expenses. This was a transitional program designed to provide help in 2004 and 2005 until the permanent drug benefit could be implemented.

Opponents of the drug benefit did everything they could at the time to criticize the temporary assistance program, actively discouraging seniors from signing up – and disadvantaging their constituents in the progress.

So now, Rep. Henry Waxman asked the Government Accountability Office for a study of the program, and The New York Times reports that “Congressional investigators ?found serious, widespread problems.”

This is outrageous for a number of reasons:

  1. The GAO’s findings were overblown by Rep. Waxman and the Times. Medicare Administrator Mark McClellan told the Times and the GAO that the number of problems and complaints was relatively small, given the size of the program and how quickly it had to be up and running. “Millions of prescriptions have been filled, with only a tiny fraction of complaints and compliance issues,” McClellan said.

  2. Opponents of the drug benefit discouraged their constituents from signing up, and surprise, surprise, enrollment was much less than it could have been (6.4 million beneficiaries, including 1.9 million who received the $600 annual credit).

  3. The temporary program provided an important learning experience both for the Medicare agency and for private plans now enrolling beneficiaries in the permanent benefit plan. When administrators learned of problems, they acted to correct them.

  4. Reports like this feed the other side’s mantra that the permanent drug benefit is too complicated and offers too many choices, with the implication that seniors simply won’t be able to figure out how to pick a plan that provides them the drugs they need at the best prices for the lowest premiums.

This is frustrating, but perhaps these are the growing pains of implementing a new entitlement through a system of choice involving private plans. The unspoken alternative – a one-size-fits-all government plan – would simply have been unable to meet the complex and diverse needs of seniors. If there is howling now over choice, imaging the howling there would have been over no choice!

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An article by a British health economist in the latest Health Affairs has stirred a “conversation” among our colleagues for her criticisms of the “overwhelming” number of the choices offered among coffee, TV channels, and health care options in the United States.

Rhiannon Tudor Edwards spent a year in Seattle as a Commonwealth Fund fellow where she exposes some genuine flaws of the U.S. system, including the irritating insistence of receptionists in doctors’ offices to be much more interested in how you are paying your bill than who you are and what you need.

But the seduction of socialized medicine clearly has taken hold with her in being presented with a choice of health plans, doctors, and even medicines, whereas in the U.K., “we probably don’t even consider that we might have a choice in the matter.” She concludes that, “After a stay in the United States, I simply do not believe that more choice is better in health care.”

She also bemoans the overwhelming number of choices of ice cream at Baskin-Robbins, to which AEI’s Joe Antos responded: “Someone who is overwhelmed by ice cream flavors may not be much of a judge of consumer choice.”

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The State Policy Network and the Institute for Policy Innovation sponsored a whirlwind series of meeting and briefings in New York City this week, including a briefing on health care issues moderated by IPI’s Merrill Matthews.

I spoke on Medicaid and the importance of the Congress sticking with the House’s relatively minor changes that will give governors more flexibility in modernizing this program. Congress has not seriously tackled changes to Medicaid since it was created in 1965, and it’s vital to the states that they be given some new tools to keep this program from swallowing up funds needed for education, roads, and public safety.

Congress will return next week to tackle this issue again, with an army of self-interests lined up along with politicians in the Senate who would rather take a politically expedient solution and kill the changes.

Hold fast! It’s vital to take these small steps to give members the courage to tackle more meaningful Medicaid reforms in the future.

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The most important conference of the year addressing consumer-directed health care takes place in Washington next week. It’s the place to be to find out the latest developments and to learn what’s next in this growing field.

The “A” list of speakers includes Steve Case, Roy Ramthun of the White House, Regina Herzlinger of Harvard, and a long list of company executives on the front lines of CDHC.

It’s not too late to register so sign up now at www.cdhcc.com. Give them your Galen Institute code TGI30FL for a special discount on the registration fee. See you there!

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

  • Prescription for change
  • Reviving managed care with health savings accounts
  • Certificate-of-need laws: It’s time for repeal
  • How to present the business case for healthcare quality to employers
  • Florida and South Carolina: Two serious efforts to improve Medicaid

PRESCRIPTION FOR CHANGE
Authors: Gary Ahlquist, David Knott, and Philip Lathrop
Source: strategy+business, Fall 2005

Gary Ahlquist and colleagues at Booz Allen Hamilton explore potential new opportunities for consumer-directed health plans (CDHPs) that would give consumers “a fighting chance” to reshape the health sector and avoid a government-sponsored system. Potential innovations should concentrate on the fact that HSAs are triple tax advantaged and could include: “annuities that can be purchased within an HSA account; new financial models and advisory services; new high-deductible health plans; and innovations in information gathering, sharing, and transparency,” the authors argue. “The new HSAs should be viewed as products within a full range of consumer risk protection and wealth-building services, with several key interrelated components” including transaction convenience and flexibility, protection of assets, borrowing products and services, and accumulation products and services.
Full text: www.strategy-business.com

REVIVING MANAGED CARE WITH HEALTH SAVINGS ACCOUNTS
Authors: Mark A. Hall and Clark C. Havighurst
Source: Health Affairs, November/December 2005

Combining Health Savings Accounts (HSAs) with managed care could “benefit consumers and bring new cost-consciousness and discipline to the health care marketplace,” write Mark A. Hall of Wake Forest University Medical School and Clark C. Havighurst of Duke University School of Law. The authors argue that consumers “may finally appreciate that their health plan can help them in making difficult medical/economic choices.” They believe that “combining managed care with HSAs can help to relegitimize managed care in the public eye by clarifying the respective decision-making responsibilities” of health plans, patients, and premium payers. Other advantages of integration include administrative efficiencies, access to price information and discounts, and better administration of benefits. HSAs “should help the public – including the legal system, through which coverage limits must be enforced – come to view well-run corporate health plans more as agents than as enemies of their subscribers, helping them to bargain with providers and make difficult medical spending decisions,” conclude the authors.
Full text: content.healthaffairs.org

CERTIFICATE-OF-NEED LAWS: IT’S TIME FOR REPEAL
Author: Dr. Roy Cordato
Source: John Locke Foundation, November 2005

“North Carolina is one of 35 states, plus the District of Columbia, that continues with centralized planning of the healthcare-facilities market” through “Certificate of Need” (CON) laws, writes Dr. Roy Cordato of the John Locke Foundation. CON laws require health care facilities to obtain permission from the state before adding new services or purchasing new equipment, a tedious process that, even if successful, can take between 90 days and two years. Proponents of CON laws believe that these restrictions hold down health care costs, but studies have found that supply “restrictions lead to higher, not lower costs, and higher profits for existing providers,” writes Dr. Cordato. “Certificate-of-Need Laws in North Carolina and other states should be repealed,” concludes Dr. Cordato. “State governments should not be aiding and abetting monopolies or their formation, or acting as a cartel enforcement mechanism for established health care interests.”
Full text: www.johnlocke.org

HOW TO PRESENT THE BUSINESS CASE FOR HEALTHCARE QUALITY TO EMPLOYERS
Authors: Sean Nicholson, Mark V. Pauly, Daniel Polsky, Catherine M. Baase, Gary M. Billotti, Ronald J. Ozminkowski, Marc L. Berger, and Claire E. Sharda
Source: The Wharton School, November 2005

Strategies that shift health costs to workers may be “penny wise and pound foolish,” and companies should instead “carefully consider their approach to employee health benefits and health promotion as an investment in their ‘healthy human capital,'” write Sean Nicholson, Mark Pauly, and colleagues. “Short-term savings achieved in decreasing direct medical costs could be more than outstripped by the costs of lost productivity and worker dissatisfaction,” caution the authors. A better solution would be a more “practical method that employers can use to determine how much they should invest in the health of their workers and to identify the best benefit designs to encourage appropriate health care delivery and use.” Rather than focusing solely on direct medical costs, employers should embrace “a more intuitive and rigorous framework” that includes health promotion, disease management and case management programs, and that can reduce medical expenditures, reduce absences, improve on-the-job productivity, and reduce turnovers.
Full text: knowledge.wharton.upenn.edu

FLORIDA AND SOUTH CAROLINA: TWO SERIOUS EFFORTS TO IMPROVE MEDICAID
Author: Nina Owcharenko
Source: The Heritage Foundation, 11/18/05

The Medicaid reform plans of Florida and South Carolina both are based on the principles of competition, choice, and stability, according to Nina Owcharenko of The Heritage Foundation. Both states’ plans are designed to “establish a fair and equitable financing system, enhance and improve coverage options, and educate and engage enrollees,” writes Owcharenko. “Congress should provide broader flexibility to states while still ensuring that clear benchmarks and performance measure are met,” she concludes. “States, in turn, should build on the concepts in the Florida and South Carolina proposals and work to integrate market-based ideas into the Medicaid program.”
Full text: www.heritage.org

UPCOMING EVENTS:

The 21st Century Health System: The Impact of Hospital and Provider Tiering
Sponsored by the National Institute of Health Policy
Monday, December 5, 2005, 11:30 a.m. – 4:30 p.m.
University of St. Thomas, Minneapolis, MN
For additional details and registration information, go to: www.nihp.org.

Balancing the Equation: Ending Disparities in Health Care Delivery for Racial and Ethnic Minorities
Alliance For Health Reform Event
Friday, December 9, 12:15 p.m. to 2:00 p.m. (Lunch available at noon)
Washington, DC

For additional details and registration information, go to: www.allhealth.org.

The Medical Malpractice Myth?
American Enterprise Institute Event
Monday, December 19, 2005, 2:00-4:00 p.m.
Washington, D.C. 20036

For additional details and registration information, go to: www.aei.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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The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the views of the Galen Institute or its directors.

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