SCHIP Redux

Despite threats of a presidential veto, the Senate Finance Committee, with the support of a majority of its Republican members and all the Democrats, sent to the floor yesterday a five-year expansion of the State Children’s Health Insurance Program with a $60 billion price tag.

Only Sens. Trent Lott (MS), John Ensign (NV), Jim Bunning (KY), and John Kyl (AZ) voted ?no? on the bill that HHS Secretary Mike Leavitt warned would lead to a ?gradual government takeover of health care.?

The federal government would encourage states to put children on this taxpayer-financed program if their families earn as much as $60,000 a year, paying states an average of 70 cents on the dollar of their SCHIP costs. This is, by the way, more than the average of 57 cents it pays in Medicaid matching funds for children in much poorer families.

That means that the federal government will continue to pay a higher percentage of the costs for wealthier SCHIP kids than for poorer Medicaid kids. This is bad policy.

And exactly when did we have that major national debate about expanding this taxpayer-financed health program to middle-income Americans?

The better alternative is to focus on the 689,000 children who the Urban Institute estimates are uninsured for a full year and who would be eligible for SCHIP at 200% of poverty. Let’s protect the kids who likely don’t have other options rather than expanding the program well into the middle class, where private coverage will likely be dropped so taxpayers can pick up the bill.

The Wall Street Journal carried a front-page article on Thursday about how difficult it is for people on Medicaid to find a physician or a dentist because payment rates are so low, often below costs. SCHIP seldom pays providers much more than Medicaid, so where on earth are these millions of children going to go for care?

The House Ways and Means Committee plans to mark up its version of the SCHIP bill next week, which could go all the way to 400% of poverty. If passed, that would mean that 71% of America’s children would be on taxpayer-supported health insurance.

Congress should focus instead on reauthorizing SCHIP for its core purpose, and then let’s work on solving the problems in the rest of the health sector that make health insurance so expensive and that lock health insurance to the workplace. Senator Enzi (WY) introduced a Ten Point plan that we describe below that pulls together many good market-based ideas and would be a giant leap in the right direction.

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We sponsored a luncheon on Monday featuring Indiana Gov. Mitch Daniels, who described to senior journalists and health policy experts his novel plan to increase access to health insurance for the uninsured through a program modeled on Health Savings Accounts.

His plan is designed to help up to 132,000 uninsured Hoosiers earning less than about $20,000 a year with health insurance, preventive care, and a funded health spending account.

The plan starts with a POWER account. The uninsured person would make a contribution, on a sliding income scale, to his or her account, with the contribution ranging from about $200 a year for those making $10,000 to about $900 a year for those earning $20,000. The state would top-off the account to bring it up to $1,100.

People would spend this money first on health care, then private health insurance, paid by the state, triggers in. There are added incentives for people to use preventive care, which, like HSAs, doesn’t come out of the account.

And like HSAs, people would be able to rollover any money left in their account at the end of the year. This is indeed a consumer-friendly public program.

Gov. Daniels has taken the heat to raise the state’s cigarette tax by 44 cents to pay for the plan. And now he is having to fight the Washington bureaucracy to get approval to implement it.

The reasons get into the arcane nature of Washington budgeting over the Medicaid money he needs to partially fund the program. Gov. Daniels expressed his frustrations about trying to do the right thing: Balance his state’s budget (which he has done two years in a row), keep Medicaid spending in check, and pass ground-breaking legislation with bi-partisan support to provide a consumer-friendly option for the uninsured.

And now he is being penalized by the Office of Management and Budget — the very agency he ran before being elected governor of Indiana in 2004 — for keeping his Medicaid spending down.

States have incentives to spend as much as possible on Medicaid to draw down the maximum number of federal dollars. But here we have a responsible governor who didn’t do that and who comes up with a creative plan that is fiscally responsible, yet the OMB could block him from trying something new. OMB says that Indiana’s spending rate was too low in the past to approve the new program.

Gov. Daniels could be a leader in showing the other states a new way to cover the uninsured rather than using onerous individual mandates, massive new regulatory bureaucracies, and big tax hikes. But he won’t have the chance if Washington puts on the brakes.

And we wonder why nothing ever changes here.

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Finally, I will be in Switzerland next week, traveling to Sierre for a symposium sponsored by the Liberty Fund and organized by Dr. Alphonse Crespo of the Institut Constant de Rebecque. The timing could be better because I likely will be missing the heat of the SCHIP debate here. But I committed to the conference months ago, and it will be a wonderful opportunity to explore ?Von Mises and Hayek on Liberty, Man, and Utopia.?

Policy experts from all over the world will be gathering at the conference, and I am sure to return with renewed devotion to our struggle to protect freedom and liberty. I will report back after I return July 29.

Grace-Marie Turner

RECENT NEWS ARTICLES AND STUDIES:

  • Ten steps to transform health care in America
  • Where are the innovators in health care?
  • Firm basing deductibles on health tests sees costs fall
  • State approaches to consumer direction in Medicaid
  • Private supply, public benefit
  • Are citizens of the world satisfied with their health?

TEN STEPS TO TRANSFORM HEALTH CARE IN AMERICA
Source: Senator Michael B. Enzi, 07/12/07

Senator Mike Enzi, the ranking member of the Senate Health, Education, Labor and Pensions Committee, this week unveiled ?Ten Steps to Transform Health Care in America,? a comprehensive set of proposals to advance market-based reform. The bill ?eliminates the unfair tax treatment of health insurance?increases affordable options for working families to purchase health insurance through a standard deduction?[and] ensures affordable health insurance to low-income individuals through a refundable, advanceable, assignable tax-based subsidy.? The bill draws on a number of bills offered in this and previous congresses. On a day when the Senate Finance Committee voted to expand government-provision of health insurance, Sen. Enzi offered a vision that would revitalize the private market. ?We must begin a national debate to examine the whole health care system,? he said. ?That’s what the Ten Steps does — it is a comprehensive solution to a very big problem.?
Full text: enzi.senate.gov

WHERE ARE THE INNOVATORS IN HEALTH CARE?
Author: Regina E. Herzlinger
Source: The Wall Street Journal, 07/19/07

?No sector of our economy is more in need of innovation than health care, yet its many regulations handcuff entrepreneurs,? writes Harvard Professor and Manhattan Institute senior fellow Regina Herzlinger. ?Entrepreneurs avoid health-care delivery because status quo providers, abetted by legislators and insurance companies, have made it virtually impossible for them to succeed?Lately, payers are even telling doctors how to practice medicine.? She cites Duke University Medical Center’s successful efforts to improve the health of cardiovascular patients, ?yielding the kind of do-good returns that would normally earn kudos from Wall Street and Main Street.? But Duke was penalized financially because ?third parties pay providers only for treating sick people.? Many more examples of barriers to innovation are detailed in her latest book, ?Who Killed Health Care?? which concludes that putting patients back in charge of the health care system is the only answer.
Full text (subscribers only): online.wsj.com

FIRM BASING DEDUCTIBLES ON HEALTH TESTS SEES COSTS FALL
Author: Julie Appleby
Source: USA Today, 07/11/07

USA Today reports on the ?growing effort by employers to both shift additional medical costs to workers and provide incentives for workers to pay more attention to their own health.? For example, the Swiss Village Retirement Community, a non-profit organization in Indiana, raised the annual deductible for its employees’ health insurance three years ago from $500 to $2,500. To help offset the higher deductible, workers were offered a supplemental policy that would give them credits worth up to $2,000 if they didn’t smoke, watched their weight, and met standards for cholesterol and blood pressure. ?The cost of providing health care dropped from 11.5% of wages before the program to 9.1% in the first year and have fallen to 7.5% since?Because of that, the amount workers pay in premiums has not increased in three years,? reports USA Today. UnitedHealthcare this month plans to offer similar policies ?to midsize employers in Rhode Island, Pennsylvania, Ohio and Colorado and may go nationwide next year.?
Full text: www.usatoday.com

STATE APPROACHES TO CONSUMER DIRECTION IN MEDICAID
Author: Jessica Greene, Ph.D., University of Oregon
Source: Center for Health Care Strategies, 07/07

Consumer-directed approaches ?are increasingly being adopted and considered in Medicaid programs across the country,? according to a study published by the Center for Health Care Strategies. The study surveyed Medicaid agencies to identify which of 17 consumer-directed approaches, such as disease management, Cash and Counseling programs, and financial incentives to encourage healthy behaviors, are being implemented and considered by states. The study finds that Medicaid agencies in mid-2006 ?reported, on average, having four of the 17 consumer-directed approaches already in place.? The study also finds that five states planned to offer Health Opportunity Accounts (HOA) or similar account-based plans this year.? In addition, ?states are increasingly providing health plan quality data to Medicaid recipients?By the end of 2007, almost half of all states (24) will provide comparative health plan quality data to recipients and an additional 13 states are considering doing so in the future.?
Issue brief: www.chcs.org
Resource paper: www.chcs.org

PRIVATE SUPPLY, PUBLIC BENEFIT
Source: Canadian Health Care Consensus Group, 06/07

?Private specialty facilities?are the bogeyman of the moment in the Canadian health care policy debate,? according to a paper from the Canadian Health Policy Consensus Group. The Ontario Ministry of Health recently considered contracting with a private hospital to perform knee replacement surgery to reduce the waiting list, but pressure from those resistant to private care forced the province to back down. The Toronto Globe and Mail reported that had the contract been successful, ?Ontario would join other provincial governments that have learned that sometimes, the best way to reduce ballooning waiting times in the public health-care system is by going private.? Ontario Health Minister George Smitherman ?doesn’t seem willing to give Ontarians the chance to decide for themselves whether adhering to the ideology of non-profit provision is more important than reducing their own waiting times,? writes the Canadian Health Policy Consensus Group. ?The idea that private specialty hospitals would be a threat to the Canadian health care system simply doesn’t hold up when you go beyond ideology and look at the international evidence,? concludes the paper. Specialty hospitals are ?highly efficient?and while it’s often said that they’ll draw physicians and nurses away from general hospitals, they’ll also draw patients away, and, if they are permitted to take full advantage of the efficiencies which come from specialization, the increased productivity will amount to a more than proportional increase in surgical capacity.?
Full text: www.aims.ca

ARE CITIZENS OF THE WORLD SATISFIED WITH THEIR HEALTH?
Authors: Jim Clifton and Newt Gingrich
Source: Health Affairs Web Exclusive, 07/17/07

There is a remarkable consistency in individuals’ satisfaction with their personal health across regions of the world, according to Jim Clifton, chairman and CEO of the Gallup Organization and Newt Gingrich, former speaker of the House and founder of the Center for Health Transformation. The Gallup World Poll surveyed citizens in more than 130 countries and territories regarding their health, personal well-being, and living conditions. Gallup found that ?perceptions of personal health correlate strongly with respondents’ income level, both globally and regionally? In every region the wealthiest quartile of respondents are most likely to offer favorable responses and the bottom quartile, the least likely.? The study found that satisfaction rates in the population quartiles were generally consistent across regions, even in countries with vastly different average incomes. For example, 79% of U.S. residents were satisfied with their health as were 80% in Sub-Saharan Africa and 83% in Latin America.
Full text: www.healthaffairs.org

UPCOMING EVENTS:

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.

Can We Get It for You Retail? Moving Beyond Wholesale Markets for Health-Care Services
American Enterprise Institute Health Policy Discussion
Wednesday, July 25, 2007, 9:15 a.m. -11:30 a.m.
Washington, DC

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 www.galen.org.

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