SCHIP Overreach

The State Children’s Health Insurance Program is on the front burner in Congress, with the Senate Finance Committee expected to send a bill reauthorizing the program to the floor as early as next week. SCHIP will expire at the end of September unless Congress acts.

The battle lines are being drawn:

  • Republicans and Democrats on the Senate Finance Committee announced this week a deal that would increase spending for SCHIP by $35 billion over President Bush’s budget request of $25 billion — for total spending of $60 billion over five years. The added costs would be financed primarily by a 61-cents-a-pack increase in the federal cigarette tax.

  • But President Bush warned that, ?The program is going beyond the initial intent of helping poor children. It’s now aiming at encouraging more people to get on government health care.” He added, “I’ll resist Congress’ attempt to federalize medicine.” A White House official said that, “If the Democrats insist on this massive expansion of government-run health care, the president’s senior advisers would recommend a veto.”

While details of the Senate bill have not been released, earlier proposals would allow states to expand SCHIP to 400% of poverty — nearly $83,000 a year for a family of four — or even higher, resulting in a massive crowd-out of private coverage. And they would redefine a ?child? as someone up to age 25.

The CBO points out that 77% of children above 200% of poverty — about $40,000 a year for a family of four — have private health insurance now, as do 89% of children between 300 and 400% of poverty. An expansion of SCHIP would largely replace this private insurance with taxpayer-paid coverage.

The expansion is a blatant attempt to put millions of children onto this public program and dry up the market for private insurance for children. A generation of children will grow up thinking that the place you get your health insurance is through the government.

Some other things wrong with this legislative overreach:

  • Claims that there are nine million children needing coverage are highly exaggerated. The Urban Institute estimates that there are in fact 689,000 uninsured children in families under 200% of poverty. States should do a better job of reaching these children rather than expanding into upper-middle-income levels.

  • The proposed SCHIP expansion to 400% of poverty would mean that nearly three-fourths of children would be eligible for taxpayer-supported health insurance.

  • Some proposals would disregard income levels entirely so states can boost SCHIP spending to even higher income categories.

  • Adding so many more children to SCHIP will mean that doctors and hospitals who are currently being paid higher-private plan rates to care for children would instead receive Medicaid-level reimbursement.

  • SCHIP divides families, with children on a government program and parents on a separate policy, if covered at all.

  • A tobacco tax is the most regressive way to finance the program, as Steve Entin of the Institute for Research on the Economics of Taxation reports, because it hits lower-income people the hardest.

  • States are abusing the program, with 14 states overspending their allotments this year and several enrolling more adults than children. A total of 670,000 adults were enrolled in this children’s program last year.

The House intends to add $50 billion to the program and is looking at both cigarette taxes and cuts to the Medicare Advantage program — an especially bad idea because this popular Medicare program gives seniors, especially those with modest incomes, the option of more affordable, more comprehensive private health coverage.

The goal should be to cover more children at a lower cost rather than to create a heavily-subsidized expansion which would crowd-out private coverage and cover fewer children at a much higher cost.

Covering children is a worthy goal. Those who oppose this massive expansion of SCHIP are drafting alternatives that would offer more children — and families — the option of private insurance, at a lower cost to the taxpayer. Watch this space for more details?

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Rhode Island did the right thing this week in enacting legislation that allows insurers to offer mandate-light health plans to small employers.

Reporter Elizabeth Gudrais of the Providence Journal writes that the bill, which was signed by the governor last week, enables small businesses with 50 or fewer employees ?to sign up for the new, bare-bones plans if they have not offered insurance to their employees in the previous 12 months.?

This will not be the ?Rolls-Royce of health insurance,? she writes, but the Democratic sponsor of the bill and chairman of the House Finance Committee, Rep. Steven M. Costantino, said, ?Something is better than nothing, in my opinion.?

The legislature cut some, but not all, of the strings to Rhode Island’s 43 mandates: Policies must have coverage for mental health and substance abuse treatment equal to other medical care, and deductibles can be no more than $2,000 for individuals and $4,000 for families.

The bill challenges insurers to come up with a plan that costs just $240 a month for an individual, roughly half the cost of a typical employer-sponsored plan.

The law went into effect July 1. We will be looking to see if there is enough competition in the insurance market in Rhode Island to make this new, potentially more economical, health insurance an option for small employers before the pilot program expires in 2010.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

  • Medicare Advantage and the federal budget
  • Response to SiCKO
  • Why has longevity increased more in some states than in others? The role of medical innovation and other factors
  • A modest proposal: Let consumers know medical costs
  • The making of the next president’s health plan: Will it be d?j? vu of 1992?
  • Medicaid reform in Kentucky
  • Opening door to imported drugs is not without risks

MEDICARE ADVANTAGE AND THE FEDERAL BUDGET
Author: Mark B. McClellan, M.D., Ph.D.
Source: American Enterprise Institute, 06/28/07

?Medicare Advantage (MA) health plans play a critical role in bringing greater value to our overall health care system, in terms of enabling beneficiaries to get more up-to-date, higher-quality care at a lower cost,? said former CMS Administrator Mark McClellan in his recent testimony before the House Budget Committee. ?MA plans overall will have relatively modest payment increases in 2008 and possibly in subsequent years,? noted McClellan. ?The best solution to Medicare’s financing problems isn’t to take away innovative coverage options and shift costs to beneficiaries — particularly those with limited means who are struggling with out-of-pocket costs today,? he said. ?Increasingly, efficient health care is about prevention, personalization, and coordination of services around the needs of each individual patient,? concluded McClellan. ?To achieve a high-value health care system — the most important kind of ‘efficiency’ in health care — Congress should continue to support the Medicare Advantage program, which is our best, proven avenue for improving prevention and chronic disease management in Medicare. ?
Full text: www.aei.org

RESPONSE TO SICKO

As Michael Moore’s film SiCKO continues to attract attention, those with first-hand experience with government-run health care offer some reality testing. Helen Evans, director of the London-based Nurses for Reform and one of the speakers at Galen’s June 14th symposium, writes that Moore ignored Britain’s ?waiting lists, substandard care and increased outsourcing, ?[and] outright rationing to control costs.? Brett Skinner of the Vancouver-based Fraser Institute says, ?Canada’s single-payer system does not cover many of the advanced medical treatments and technologies that are commonplace in America.? Sally Pipes of the Pacific Research Institute, a native Canadian, describes her personal experience in battling for medical care for her mother. Pipes writes that her uncle lost his battle with non-Hodgkin’s lymphoma after he was denied access to the miracle drug Rituxan that wasn’t approved for use in Canada. And Canadian physician Dr. David Gratzer of the Manhattan Institute writes that the factual errors in Moore’s film are plentiful, adding that he simplifies arguments ?to the point of absurdity,? creating ?a fantasy world reshaped by leftist ideas.?

Grace-Marie Turner’s recent commentary about SiCKO, which appeared in the Baltimore Sun, provoked a strong response from readers.
Letters to the editor: www.baltimoresun.com

WHY HAS LONGEVITY INCREASED MORE IN SOME STATES THAN IN OTHERS? THE ROLE OF MEDICAL INNOVATION AND OTHER FACTORS
Author: Frank R. Lichtenberg
Source: Center for Medical Progress at the Manhattan Institute, 07/07

Columbia University economist Frank Lichtenberg examines variations in life-expectancy among the fifty states from 1991-2004 and concludes that medical innovation plays an important role in recent gains in the health and longevity of Americans. Lichtenberg finds that longevity increased the most in those states with the greatest access to newer drugs, as measured through Medicaid, Medicare, and other programs. Lichtenberg also finds ?that states that use newer drugs did not experience above-average increases in overall medical expenditure, which contradicts the common perception that advances in medical technology inevitably result in increased health-care spending.?
Full text: www.manhattan-institute.org

A MODEST PROPOSAL: LET CONSUMERS KNOW MEDICAL COSTS
Author: Raj Bal
Source: Milwaukee Journal Sentinel, 06/30/07

Doctors’ and hospitals’ fees for frequently used services should be made available to consumers, writes Raj Bal of Assurant Health, one of the leading health insurers to individuals and small groups. ?Each day, 8 million [consumers] are doing their own research on medical conditions, treatment options and, in some areas, the performance of hospitals and doctors,? writes Bal. ?Yet as we enter the enlightened age of consumer-directed health care, no one can get an answer to what would seem to be simple questions? about physician and hospital charges. For example, base charges for an office visit for a child’s ear infection can range from $50 to $150, and laparoscopic appendectomies can range from $10,000 to $25,000. Consumers should be given ?information that is easy to access, understand and use?they should have access to the full-price charges that will appear on their bills or be deducted from the health savings accounts,? he concludes. ?Whenever possible, we should eliminate the barriers that will allow market-based forces to determine fair, value-based pricing.?
Full text: www.jsonline.com

THE MAKING OF THE NEXT PRESIDENT’S HEALTH PLAN: WILL IT BE D?J? VU OF 1992?
Author: Thomas P. Miller
Source: American Enterprise Institute, 07/02/07

?Parallels between U.S. health-care politics in 1992 — the last time health issues played a highly significant role for presidential contenders — and today’s early campaigns have been overstated,? writes AEI’s Tom Miller. ?The common element that 1992 and 2007 share is the electorate’s unease, if not discontent, with the workings of the existing health-care system?but convergence on substantive solutions remains elusive,? he writes. ?The gravitational pull of universal coverage nostrums and stylized bipolar disputes between national health insurance and free market medicine tends to distract our national political debate from confronting more serious matters that need greater attention,? argues Miller. We should ?acknowledge that it is time to reconcile better the limits of public resources with needs, not wants,? concludes Miller. ?Defining better choices in the gray zone between ‘you get what you pay for’ and ‘you will get what we decide to pay for’ might not fit within a sixty second campaign spot or the paragraph of a stump speech, but it could begin to move us past the dead end of 1992 and beyond the initial teases of 2008.?
Full text: www.aei.org

MEDICAID REFORM IN KENTUCKY

Kentucky newspapers are reporting that the Medicaid program reforms initiated by Gov. Ernie Fletcher are saving money for state taxpayers without threatening services to poor and disabled citizens. Two years ago, legislators predicted the program would lose between $125 million and $675 million a year. Instead, the program has ended the fiscal year in the black. The Ashland Daily Independent reported that, ?Having inherited a program?that was gushing red ink to the tune of more than $100 million a year and climbing, the task seemed impossible without denying health care benefits to thousands of poor and disabled Kentuckians,? write the editors. ?But the numbers show that [Secretary of Health and Family Services Mark] Birdwhistell — the most competent administrator brought to Frankfort by Gov. Ernie Fletcher? has brought soaring Medicaid costs under control ?while still assuring the poor and disabled receive the medical care they need.?

OPENING DOOR TO IMPORTED DRUGS IS NOT WITHOUT RISKS
Author: Peter Pitts
Source: Chicago Tribune, 07/08/07

Legislation that would allow the importation of pharmaceuticals from abroad ?is a dangerous response to high drug prices,? writes Peter Pitts of the Center for Medicine in the Public Interest and former associate commissioner of the Food and Drug Administration. According to the World Health Organization, up to 10% of globally traded drugs are counterfeit, with counterfeiters becoming increasingly adept at ?producing phony source codes and sophisticated graphic labeling to mimic brand-name products.? Pitts concludes that, ?Contrary to what advocates of importation declare, simply mandating safety by legislative fiat will not make imported drugs safer?Congress has a responsibility to protect Americans from overseas threats, not expose them to those hazards.?
Full text: www.chicagotribune.com

Henry Miller of the Hoover Institution, also a former FDA official, outlines several steps necessary ?to protect the integrity of pharmaceuticals dispensed in the United States.? He recommends that Congress increase the penalties for drug counterfeiting and that new track-and-trace technologies be applied to help protect drugs in the supply chain. Miller also writes that ?the FDA must more aggressively enforce regulations that require documentation of the ‘pedigree,’ or history, of a drug as it moves through distribution channels? and ?new authentication technologies must be developed to make it more difficult for counterfeiters to imitate legitimate drugs.? Additionally, ?consumers should patronize only pharmacies on the National Board of Pharmacy’s recommended list?[and] should be vigilant for anything amiss in any prescription drug obtained anywhere.?
Full text: www.signonsandiego.com

UPCOMING EVENTS:

SCHIP Expansion: Bad for Kids, Families, and Taxpayers
American Legislative Exchange Council and The Heritage Foundation Luncheon
Friday, July 13, 2007, Noon
Washington, DC
For additional details and registration information, contact Alec Aramanda at alec.aramanda@heritage.org or 202-608-6198.

Grace-Marie Turner speaking on Leadership Radio
WORD-FM Radio Broadcast
Friday, July 13, 2007, 1:00 p.m.
Pittsburgh, PA
For additional details, go to: www.wordfm.com.

Medicare Advantage: Whose Cost, Whose Benefit?
Alliance for Health Reform Briefing
Monday, July 16, 2007, 12:30 p.m. – 2:15 p.m. (Lunch available at noon)
Washington, DC
For additional details and registration information, go to: www.allhealth.org.

Who’s Got the Cure? Four Options for Achieving Universal Coverage
A Brookings Institution/Hamilton Project Forum
Tuesday, July 17, 2007, 9:00 a.m. – 12:30 p.m.
Washington, DC
For additional details and registration information, go to: www.brook.edu.

I Pay, You Pay, Variable Co-Pay: The Next Generation of Health Insurance Design
American Enterprise Institute Event
Tuesday, July 17, 2007, 9:30 a.m. – 12:00 p.m.
Washington, DC
For additional details and registration information, go to: www.aei.org.

The Value of New Cancer Drugs
Center for Medicine in the Public Interest
Tuesday, July 17, 2007, 5:00 p.m. – 6:00 p.m.
Washington, DC
For additional details and registration information, contact Nicholas Terzulli at nterzulli@capitalhq.com or 212-588-9148.

Medicaid’s Soaring Costs: Time to Step on the Brakes
Cato Institute Capitol Hill Briefing
Thursday, July 19, 2007, 8:30 a.m. (Breakfast Included)
Washington, DC
For additional details and registration information, go to: www.cato.org.

In the Quest for Global Health, What Puts Cuba on the Map?
The Atlantic Philanthropies and The Rockefeller Foundation Event
Monday, July 23, 2007, Noon – 2:00 p.m.
Washington, DC
For additional details and registration information, contact Erin Kerr at ekerr@burnesscommunications.com or 301-652-1558.

The Role of Chronic and Catastrophic-Care Management: Lessons for Health Care Reform
Council for Affordable Health Insurance Briefing
Monday, July 23, 2007, 1:00 p.m. – 4:00 p.m.
Washington, DC
For additional details and registration information, contact Larry Siedlick at larry@cahi.org, or 703-836-6200, x389.

Common Ground: Leadership Commitments to Improve Value in Healthcare
National Academy of Sciences Workshop
July 23-24, 2007
Washington, DC
For additional details and registration information, go to: www.iom.edu.

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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