What's Working

The good news is back:

  • HSA enrollment has tripled in the last 10 months, according to a study released yesterday by America’s Health Insurance Plans (AHIP).

    “At least three million consumers currently receive health coverage through high-deductible health insurance plans offered in conjunction with health savings accounts,” AHIP announced after surveying its member companies. The last survey showed just over 1 million people had signed up for HSAs as of last March.

    “HSAs are a remarkable success story and they are proving to be especially attractive to many who might not otherwise be able to afford coverage,” AHIP president Karen Ignagni said.

  • The cost of consumer-driven plans is falling, according to the latest survey of cost trends by Deloitte’s Center for Health Solutions. The costs of these plans increased by only 2.8 percent last year, about a third the rate of increase for traditional plans, according to the 152 major employers Deloitte surveyed. We have more details in our articles section below.

    These are dramatic numbers that show positive trends in getting our private health sector onto a stronger track.


But the drumbeat of bad news continues with the Medicare drug benefit. The danger is that people will see the problems as a reflection of the failure of the competitive, market-based approach to delivering the benefit. In fact, most of the problems with the launch of the benefit have stemmed from government computers not being able to communicate.

What’s right: Private companies truly are competing to offer the best deals and the most appealing benefit structures to attract members because “Basically 42 million people have been put in the marketplace, and that won’t happen again,” Steve Brueckner, Humana’s vice president of senior products, told The Wall Street Journal. The private plans have designed benefit structures that are better, simpler, and cheaper than the one created by Congress.

What’s wrong: The federal and state governments ran out of time in trying to match lists of low-income seniors who were moved out of Medicaid and automatically signed up for new the Medicare drug plans. Information had to go back and forth between state governments and Washington, computer programs weren’t compatible, people lost or never received letters telling them about their new plans, and phone lines were jammed because everything launched on one day – January 1.

Plus, the technology to access information about the benefit is very 21st century for a population that is solidly 20th century. The private sector never would have launched a new program with a potential market of 42 million people, all at once with such a mismatch of marketing tools and target audiences. There’s certainly plenty of blame to go around, including understaffing of help lines at the drug plans, but it’s important that we learn the right lessons about what’s working and what’s not.


The Medicaid Commission concluded a two-day meeting yesterday, the first of six sessions we will hold this year leading up to the release of our final recommendations in December.

We heard about the innovative Medicaid initiatives of four governors who are trying to modernize the program, make taxpayers’ dollars go farther, and encourage more individual responsibility:

  • Gov. Dirk Kempthorne of Idaho said the philosophy of his 1115 waivers request is to “turn our focus away from an antiquated, regulation-based system and toward one that focuses on results.” For example, Idaho is collapsing from 50 to 3 the number of categories people must fit into to be eligible for Medicaid, and it is tailoring services to patients rather than forcing patients to match their needs to bureaucratic rules.

  • Gov. Mitt Romney of Massachusetts described his plan that is nearing state legislative approval to get everyone covered by health insurance. The plan uses a mixture of new private insurance pools and premium assistance for moderate income residents and a mandate to make higher income citizens purchase coverage.

  • Gov. Jeb Bush of Florida, who is a member of the Commission, described briefly his plan that gives more power and authority to Medicaid recipients to select from competing health plans and obtain “individual enhanced benefit accounts,” and to give people the flexibility to apply their Medicaid subsidy to employer-sponsored health insurance.

  • Gov. Joe Manchin of West Virginia, also a Commission member, is taking a more moderate approach, holding the line on Medicaid expansion, fine-tuning benefits to meet patients’ needs, and providing new incentives to promote personal responsibility and encourage people to better manage their health.

All of the governors pleaded for more flexibility in managing Medicaid. “Washington doesn’t trust us, but we are much closer to our citizens and can much more quickly make adjustments to make the program better,” Gov. Kempthorne said.

There also was surprising agreement among other witnesses from several think tanks about the value of a “dollars follow the patient” concept and advancing refundable tax credits or other direct subsidies to help people get or keep private coverage so they don’t default into Medicaid. There is hope.

Grace-Marie Turner


  • Consumer-driven health plan cost growth significantly slower than other plans
  • The fix-it myth
  • The high cost of low-priced drugs in California
  • Maine’s Dirigo health: A string of broken promises
  • State of the states

Source: Deloitte Center for Health Solutions, 01/24/06

“The cost of consumer-driven health plans – such as health savings accounts or health reimbursement arrangements – increased by an average of 2.8% from 2004 to 2005,” according to a survey of 152 major U.S. employers by the Deloitte Center for Health Solutions. “That compares to an 8% increase in total premiums for health maintenance organizations, an 8.5% increase for point-of-service plans and a 7.2% increase for preferred provider organizations.” Forty percent of the employers surveyed said they believe consumer-directed health plans offer “the most effective approach for managing costs and maintaining quality care.” The survey predicts similar price increases for 2006: “2.6% for consumer-driven health plans, 7.4% for health maintenance organizations, 7.3% for point-of-service plans, [and] 7.5% for preferred provider organizations.”
Full text: www.deloitte.com

Author: Robert J. Samuelson
Source: The Washington Post, 01/26/06

Americans may agree that we need to “fix” our health care system, but we also “demand the impossible,” writes Robert Samuelson, a Washington Post columnist. “Americans want more health care for less money, and when they don’t get it, they indict drug companies, insurers, trial lawyers and bureaucrats,” he writes. “Although these familiar scapegoats may not be blameless, the real problem is us.” He recommends political changes including curbing generous tax subsidies for employment-based insurance and requiring wealthier Medicare beneficiaries to pay more of their health care bills. “But these changes won’t happen because people don’t want to see the costs.” He concludes: “We don’t have the health care system we need, but we do have the one we deserve.”
Full text: www.washingtonpost.com

Author: Philip J. Romero
Source: Pacific Research Institute, 01/06

Importing prescription drugs from Canada through “parallel trade” would have a catastrophic effect on California’s economy, according to Philip J. Romero of the San Francisco-based Pacific Research Institute. “No state would lose more than California?because pharmaceutical and biotech research are heavily concentrated” in the state. Romero estimates that the income lost through “drug parallel trade would cost the state economy at least $670 million and 23,900 jobs,” and the toll could go as high as $3 billion and 105,600 lost jobs. The effects would be magnified roughly threefold if parallel trade were to spread nationally. “For California or the federal government to make it illegal to profit from medical innovation would be catastrophic not only to patients, but to the scientists and investors who have invested capital and commitment to one of the world’s most innovative industries,” he concludes.
Full text (pdf): www.pacificresearch.org

Authors: Adam Brackemyre and Tarren Bragdon
Source: Council for Affordable Health Insurance, 01/23/06

The new Dirigo Health program in Maine is not fulfilling its goals of lowering health costs and providing health coverage to the uninsured, write Adam Brackemyre of the Council for Affordable Health Insurance and Tarren Bragdon of the Maine Heritage Policy Center. The authors say Dirigo Health has fallen far short of its original projections of enrolling 57,000 Mainers in the first year. By the end of 2005, only 7,371 people had enrolled. Further, 78% of those purchasing coverage had private insurance before joining Dirigo. “Since most of the new enrollees dropped their private coverage for DirigoChoice, the program is exhausting its budget while doing little to help the uninsured,” write the authors.
Full text: www.cahi.org

Source: The State Coverage Initiative, January 2006

The State Coverage Initiative has released its annual State of the States report which provides a comprehensive analysis of state approaches to expanding health coverage in 2005. The report examines increasing costs, consumer-directed care, state budgets, implementation of Medicare Part D, and changes in federal programs. “Many state policymakers are working toward a clear goal of increasing insurance coverage,” writes the program’s director, Alice Burton. “However, they are going about it in many different ways – some focusing on public expansions and others looking at market-based strategies. While some states are working to strengthen the safety net, others are simply waiting for the policy window to open.”
Full text: www.statecoverage.net


A False Sense of Security: The Growing Threat of Counterfeit Pharmaceutical Products
A Centre for the New Europe/Pacific Research Institute Conference
February 15th, 2006 – 9 a.m. – 1 p.m.
Brussels, Belgium
RSVP to cecile.philippe@cne.org if you wish to attend.

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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