Opportunities Unfold

It is wise for us to search for the opportunities amidst the challenges the new Congress will present. A few examples:

  • The uninsured. Incoming Democratic Health Subcommittee Chairman Pete Stark co-signed an op-ed in The Washington Post in 1999 with then Republican House Majority Leader Dick Armey — “the ultimate congressional odd couple” — offering bi-partisan consensus on help for the uninsured.

    The two called for “refundable tax credits to enable all Americans to buy decent health coverage.” They said that “such a credit could bring about near-universal coverage without new mandates or bureaucracy. It would eliminate barriers the uninsured face in today’s system, enabling them to shop for basic coverage that suits their individual needs and is portable from job to job.”

    While the price tag for the credits would be a lot higher today than it was seven years ago, this certainly should be a starting place for a conversation with the chairman of this powerful committee.

  • Medicaid. As I reported last week, our Medicaid Commission will be proposing a series of recommendations that give states even more flexibility in tailoring programs to match needs with resources. Congress would be wise to heed the evidence that the flexibility states already have is working.

    Medicaid spending declined by 1.4% in the first nine months of this year, marking the first decrease in spending since the program was created more than 40 years ago. Substantial savings resulted from many small cost-containment policies adopted by states over the past several years.

    Former HHS Secretary Tommy Thompson and current HHS Secretary Mike Leavitt have been forceful in approving and expediting states’ requests for waivers to gain this flexibility, and it clearly is paying off. Now we need legislation, as our commission has recommended, that would give states greater legal flexibility, without cumbersome waivers, to provide better targeted, more economical options for care.

  • Medicare and prescription drugs. Pollsters who have analyzed the Nov. 7 election results say that prescription drugs were a top issue for only a tiny minority of voters — 4% or less. And they were much more likely to vote for a candidate who had supported the new Medicare prescription drug benefit, by 75% to 25% margins.

    This comes on top of news reports that the drug benefit has cost $13 billion less than expected this year, “a rare federal program coming in under budget,” according to an Associated Press news story. (It’s about as rare for a federal program to come in under budget as it is to get positive press coverage about a market-based idea!)

    In any case, reporters and editorial writers both are writing that it is going to be very difficult for the Democratic Congress to fulfill its pledge to put de-facto price controls on drugs and use the “savings” to fill the doughnut hole in the drug benefit.

    Democrats “are struggling to keep that promise without wrecking a program that has proven cheaper and more popular than anyone imagined,” according to a rare and positive Sunday front page article in The Washington Post (see our articles section below for a summary and links).

  • Health costs. Health costs are moderating, and a number of studies by health plans and companies show that medical costs are level and even falling for those with consumer-directed plans. These data are going to be hard for CEOs to ignore as they continue to seek ways to control their health costs, whatever the political rhetoric from Washington. (See our articles section below for the latest from PricewaterhouseCoopers.)

So we have real data to back our convictions and belief in markets. Competition works. It is vital, in what is likely to be a flood of coming studies and congressional hearings next year that will try to discredit our ideas, that we not lose sight of our vision.

The movement toward consumerism is a growing global force, and we must continue to press forward with our ideas. People can make better decisions for themselves than government can, and the market will offer more creative, affordable options if given a chance.


Grace-Marie Turner


  • ‘Tis the season to switch
  • The human cost of federal price negotiations: The Medicare prescription drug benefit and pharmaceutical innovation
  • Democrats and the drug plan
  • Behind the numbers: Medical cost trends for 2007
  • The uninsured and the affordability of health insurance coverage

Author: Grace-Marie Turner
Source: The Madison County Herald, 11/30/06

Seniors who want to switch or sign up for prescription drug coverage should take advantage of Medicare’s open enrollment period through Dec. 31, writes Grace-Marie Turner of the Galen Institute. “This option to choose between a host of private insurers is what makes Medicare Part D so different from other government programs,” writes Turner. “Knowing that beneficiaries have the option to switch to a competitor means that insurers are always trying to come up with better plans — which results in lower prices and a broader array of choices.” Competition also results in coverage of many more drugs in Part D than the VA or other government-run programs. (Some seniors can enroll at any time. See www.cms.hhs.gov for details.)
Full text: www.mcherald.com

Author: Benjamin Zycher, Ph.D.
Source: Center for Medical Progress at the Manhattan Institute, 11/06

“Federal price negotiations for drugs under Medicare Part D would reduce costs for taxpayers and perhaps patients, but those effects can be achieved only at the cost of reduced pharmaceutical innovation,” writes Ben Zycher of the Manhattan Institute. Zycher uses a simulation analysis that projects the effect of federal price negotiations for prescription drugs on pharmaceutical research and development investment through 2025. The study “estimates that investment in new drug research and development would decline by approximately $10 billion per year?[and] will result in a loss of between 6 and 12 new medicines per year.” This would have a profound effect on American life expectancies, concludes Zycher. Federal price negotiations “would yield a loss of 5 million expected life-years annually, an adverse effect that can be valued conservatively at about $500 billion per year, an amount far in excess of total annual U.S. spending on pharmaceuticals.”
Full text: www.manhattan-institute.org


The Washington Post and the Los Angeles Times both report on the challenges that Democrats face in their attempt to lift the ban on government drug price negotiations with pharmaceutical companies. Democrats “are struggling to keep that promise without wrecking a program that has proven cheaper and more popular than anyone imagined,” writes the Post. And the Los Angeles Times writes that the Democrats’ proposal to adapt the Veterans Affairs model to Medicare “may prove difficult.” Officials with Veterans Affairs “can negotiate major price discounts because they restrict the number of drugs on their coverage list?In other words, the VA offers lower drug prices, but fewer choices.” Other possible options under consideration include creating a separate, Medicare-run program that would compete with the private plans.
Full text of L.A. Times article: www.latimes.com
Full text of The Washington Post article: www.washingtonpost.com

Source: PricewaterhouseCoopers’ Health Research Institute, 11/06

PricewaterhouseCoopers finds that consumer-directed health plans are estimated to have the slowest rate of increase in medical costs for the coming year. In 2007, average medical costs (not premiums) are expected to rise 11.9% for preferred provider organizations (PPOs), 11.8% for health maintenance organizations (HMOs), and 10.7% for consumer-directed health (CDH) plans. “While only 3 million Americans are in consumer-directed health plans ? greater acceptance of [CDH plans], especially those that incorporate patient education and information tools, could have a strong impact on future medical costs,” according to the survey of major health plans and insurance carriers. CDH plans “are viewed as offering a more flexible framework for employees to influence the steepness of the rise in medical costs.” The survey also identifies inflators and deflators that contribute to medical cost trends. Inflators include new prescription drugs, increased demand, and cost-shifting; deflators include price transparency, new medical technology such as electronic medical records, and health and wellness programs.
Full text: www.pwc.com

Health cost trends, including health premiums, remain stable at 7 to 8 percent, according to a study from America’s Health Insurance Plans. The study reviews new data from the Center for Studying Health System Change and finds it to be consistent with earlier surveys from Mercer, the Kaiser Family Foundation, and the Federal Employees Health Benefits program.
Full text (pdf): www.ahipresearch.org

Authors: Lisa Dubay, John Holahan, and Allison Cook
Source: Health Affairs Web Exclusive, 11/30/06

A new Health Affairs Web Exclusive divides the uninsured into three groups: 1) adults and children who are eligible for Medicaid and SCHIP but do not participate; 2) those with incomes above Medicaid and SCHIP eligibility but who cannot afford coverage; and 3) those who can afford coverage but remain uninsured. The study “found that 24.7 percent of the uninsured are eligible for public health insurance programs, 55.7 percent are in the ‘need assistance’ category, and 19.6 percent are likely to be able to afford coverage on their own.”
Full text: content.healthaffairs.org


Uninsured/Access to Care Health Policy Forum
Texas Health Institute Event
Friday, December 1, 2006, 8:30 a.m. – Noon
Austin, TX

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

Who Cares What Patients Think?
Alliance for Health Reform Briefing
Monday, December 4, 2006, 12:15 p.m. – 2:00 p.m. (Lunch available at noon)
Washington, DC
For additional details and registration information, go to: www.allhealth.org.

Should the Government Have a Role in Health Reinsurance?
Council for Affordable Health Insurance Briefing
Tuesday, December 5, 2006, 10:00 a.m. – 11:30 a.m.
Washington, DC
For additional details and registration information, contact Larry Siedlick at 703-836-6200 or larry@cahi.org.

“Coincidence or Crisis” Book Launch
Stockholm Network Event
Wednesday, December 6, 2006, 12:30 p.m. – 2:30 p.m.
Brussels, Belgium
For additional details and registration information, go to: www.stockholm-network.org.

2007 Consumer Driven Healthcare Playbook
Lighthouse1 Webcast
Wednesday, December 6, 2006, 2:00 p.m. – 3:30 p.m. ET
For additional details and registration information, go to: www.lighthouse1.com.

Prescription Drug Policy in the U.S.: Is It Time for a Change?
Institute for Policy Innovation Briefing
Thursday, December 7, 2006, 11:00 a.m. – 12:30 p.m.
Washington, DC
For additional details and registration information, contact Sonia Blumstein at 205-620-2087 or soniab@ipi.org.

2007 Health Care Agenda for Congress and the Administration
Kaiser Family Foundation Briefing
Friday, December 8, 2006, 9:15 a.m. – Noon
Washington, DC
For additional details and registration information, contact Tiffany Ford Fields at 202-347-5270 or tford@kff.org.

Is There a Constitutional Right to Medical Self-Defense?
American Enterprise Institute Event
Friday, December 8, 2006, 12:15 p.m. – 2:00 p.m.
Washington, DC
For additional details and registration information, go to: www.aei.org.

Consumer Directed Health Care Conference
Consumer Health World Event
December 11 – 13, 2006
Washington, DC
We have a limited number of 50% discount tickets for our subscribers; please contact Jena at jena@galen.org if you are interested. For additional conference details and registration information, go to: www.cdhcc.com.

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 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.