Massachusetts to San Francisco

Massachusetts has won another round in its effort to get U.S. taxpayers to help fund its experiment in universal coverage.

Gov. Deval Patrick announced Tuesday that the federal government has approved an extension of its waiver, allowing the state to continue to provide Medicaid subsidies to people making as much as $63,600 a year. Federal taxpayers will be paying nearly $11 billion to help the Bay State fund its $21-billion health reform plan over the next three years.

Gov. Patrick has been boasting that 439,000 more people in the Bay State have health insurance since the reform law was passed in 2006. But at least 56% of them are getting free or heavily-subsidized coverage, jointly funded by the state and by federal matching Medicaid dollars.

The jury is still out on how the state will juggle growing opposition to the individual mandate and soaring health costs, but U.S. taxpayers apparently will continue to fund the plan to see if it works. While the federal government would have been funding part of Massachusetts’s Medicaid program in any case, the big open question is how the government can now deny similar requests from other states that want to follow suit and also increase Medicaid eligibility to 300% of poverty — $63,600.

Before that happens, it might be wise to have a national debate on whether or not Medicaid should be the vehicle to expand taxpayer-funded health coverage to millions more middle-class Americans.



Commonwealth, once again: The liberal-leaning Commonwealth Fund is at it again, offering a new headline-grabbing study that puts the Obama health plan in the best possible light and the McCain plan in the worst. We don't mind think tanks taking a point of view of course since that is what most of us do, but when a study with a clear point of view is presented as an objective analysis, that crosses the line.

The Fund concludes that the McCain health plan would reduce the number of people who are uninsured by only two million and would cost $1.3 trillion over 10 years, while the Obama plan would reduce the number of uninsured by 34 million and cost $1.6 trillion.


  • The study defies logic in its conclusion that a $5,000 refundable tax credit to American families would add so few people to the insurance rolls. More than 46 million people without health insurance today would receive meaningful subsidies to help them purchase health insurance. Is $5,000 worthless to them?


  • A survey by Forrester Research found that families purchasing health insurance in the individual market pay between $3,300 and $4,550 a year for health insurance. Yes, many of these are high-deductible plans. But for most of these families, the credit would pay for the full cost of the policy and even provide extra money to pay costs toward the deductible.


  • And the Commonwealth study concludes that 20 million people would lose their employer coverage. But that also defies logic.


    • The value of the credit under the McCain plan would be worth more to the average family than the value of the current invisible tax break for employer-provided insurance ($4,200). The great majority of families would come out ahead under the McCain plan.


    • The McCain plan doesn't touch the employer deduction, so the incentives for the employer to offer coverage would be the same as today. Whether employers offer compensation in the form of health benefits or direct compensation, businesses still receive a tax deduction for the amount they spend on health coverage. In addition, the payroll taxes they pay continue to be protected from corporate income taxes under the McCain plan.


  • The study estimates that the McCain high-risk pool would add "another $1 trillion to the cost of his plan over 10 years." This is really stretching analytic assumptions. Sen. McCain plans to offer help to states to better fund their high-risk pools, but it is part of a multi-tiered plan also including new incentives for people to obtain private health insurance through his Guaranteed Access Plan and working with the states to help those with high health costs and lower incomes. Commonwealth's $1 trillion number is one reason for the extraordinarily high cost estimates of the McCain plan.


  • There is no mention in the study of the important research from the University of Minnesota by Steve Parente, Roger Feldman, Jean Abraham et al showing that opening up competition among the states for health insurance would mean an additional 12 million people could get health insurance, without any new spending by the federal government.


  • And to claim that people would be thrown into a vast unregulated market is inaccurate, as Merrill Matthews' piece in Wednesday's Wall Street Journal explains.



Unfortunately, so far in the debates neither Sen. McCain nor Gov. Palin has given a clear rebuttal to the charges that the McCain plan would "tax your health benefits."

The new refundable tax credit replaces the current invisible, regressive, inflationary tax exclusion for job-based health insurance. Substituting the credit for the exclusion would be merely a bookkeeping change, with most workers coming out ahead.

The non-cash wages that workers receive in the form of health insurance would be visible to them in the form of higher wages. Combining the health credit, the added pay, and the amount that workers are paying now for their share of the health insurance premium can put as much or more money on the table as today.

The Commonwealth study relies heavily on research published recently in Health Affairs by Tom Buchmueller, Sherry Glied, Anne Royalty, and Katherine Swartz, which we responded to earlier.



Calling the Supremes: The Ninth Circuit Court of Appeals, already notorious for having the highest reversal rate by the U.S. Supreme Court, is poised for another test after ruling this week that San Francisco's play-or-pay mandate for employers is legal.

San Francisco passed a law in 2006 that requires most employers to provide health insurance to their workers or pay into a government fund. The Ninth Circuit ruled on Tuesday that the law does not violate the Employee Retirement Income Security Act (ERISA), a 1974 law that
pre-empts state laws governing private employer-based health plans.

"This decision opens the floodgates to every state and locality seeking to develop its own version of health reform, creating an impossible environment for major employers — and the millions of American workers who value their employer-sponsored health plans," American Benefits Council president James. A. Klein said in a statement.

Maryland passed legislation in 2006 that became known as the Wal-Mart bill that would have required all employers with more than 10,000 workers in the state to pay at least 8% of their payroll for health insurance. The Fourth Circuit said the law was invalid because it violated ERISA.

Clearly, the Supremes will need to resolve this. And they might take a look at Massachusetts' play-or-pay mandate while they are at it.

Grace-Marie Turner

Recent News Articles and Studies

Regulatory Lessons from Europe
McCain is Right on Interstate Health Insurance
Paying Workers to Go Abroad for Health Care
The Hidden Costs of Single Payer Health Insurance: A Comparison of the United States and Canada
How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?
Headed for a Crunch: An Update on Medicaid Spending, Coverage and Policy Heading into an Economic Downturn
Celebs, Stop Taking Poisonous Shots at Vaccines


Regulatory Lessons from Europe
Grace-Marie Turner, Galen Institute
The American, 10/02/08

Europeans have created a regulatory policy that provides the proper incentives to promote innovation and investment in today's most revolutionary medicines, biologic drugs, writes Turner. The European Medicines Agency (EMEA) recognizes the complexity of biologics and generic versions, known as "follow-on biologics," and regulates accordingly. The EMEA requires that follow-on biologics go through separate safety trials before they're approved, and it monitors them after they've entered the market. The EMEA also grants biologic innovators a 12-year period of "data exclusivity" for their drug, which is equivalent to patent protection — essential to creating the financial incentives needed for investment in the next generation of biologics, writes Turner.


McCain is Right on Interstate Health Insurance
Merrill Matthews, Council for Affordable Health Insurance and Institute for Policy Innovation
The Wall Street Journal, 10/01/08

Matthews answers charges that allowing people to purchase health insurance across state lines would create an "unsafe, unregulated health-insurance market." The choice isn't between a regulated or unregulated health insurance market, writes Matthews. The choice is between an overregulated market favored by Sen. Obama and a regulated market favored by Sen. McCain that provides more options to help individuals afford health coverage.

AEI's Tom Miller and Joe Antos discuss American health care reform and the differences between the health plans of Senators John McCain and Barack Obama in these interviews with the Center for Medicine in the Public Interest.


Paying Workers to Go Abroad for Health Care
M.P. McQueen
The Wall Street Journal, 09/30/08

Insured Americans are starting to see some unusual options in their health provider networks: doctors and hospitals in Singapore, Costa Rica and other foreign destinations, writes The Wall Street Journal. Until recently, most Americans who traveled abroad for medical care were uninsured or were seeking procedures not covered by insurance, such as cosmetic dentistry or aesthetic surgery. Now, a handful of plans are beginning to cover treatment overseas for heart surgery, hip and knee replacements and other major surgical procedures. While medical tourism isn't expected to be a solution to the country's soaring health care costs, the practice is intended to produce savings for insurers, employers and workers. Open-heart surgery, which can cost roughly $100,000 in the U.S., can be done at an internationally accredited hospital in India for just $8,500, for instance. To make travel abroad more attractive, plans that offer medical-tourism programs often throw in a bonus for employees if they agree to undergo elective surgeries abroad, or they offer to split the cost savings between the employer and worker. Travel and accommodation costs also are sometimes reimbursed.


The Hidden Costs of Single Payer Health Insurance: A Comparison of the United States and Canada
Brett J. Skinner, Mark Rovere, Marisha Warrington
Fraser Institute, 09/30/08

Canada's government monopoly, single-payer health care system is one of the worst ways to achieve universal health insurance coverage — and Americans should avoid adopting a similar system, concludes this new study from the Vancouver-based Fraser Institute. The study shows that health care in Canada appears to cost less because Canada does not cover many advanced medical treatments and technologies, common medical resources are in short supply, and access to health care is often severely delayed. Even on health insurance coverage, the Canadian system does not perform much better than the U.S. when it comes to actually delivering insured access. The study concludes that both Canada and the U.S. should look to countries such as Switzerland or the Netherlands, where the government is not in the business of providing health or drug insurance at all. Instead, individuals in those nations are required by law to purchase comprehensive health insurance in a regulated, pluralistic private-sector market.

People in other health care systems often pay more than Americans do, once taxes are taken into account, writes CMPI's Peter Pitts. Add in the high non-monetary costs of rationed or denied care and waiting lists, and suddenly the vaunted European systems commonly touted as models for the U.S. don't seem like a good deal at all.


How Does the Benefit Value of Medicare Compare to the Benefit Value of Typical Large Employer Plans?
Dale Yamamoto, Hewitt Associates and Tricia Neuman and Michelle Kitchmen Strollo, Kaiser Family Foundation
Kaiser Family Foundation, 09/08

Medicare on average provides less generous benefits to seniors than they would receive under a typical large-employer health plan or t
he most popular plan available to federal employees — even with the program's new drug benefit, according to a new Kaiser analysis. The study finds that seniors on average would expect to receive Medicare benefits valued at $10,610 in 2007. In comparison, they would expect to receive benefits valued at $12,160 in the typical large-employer PPO plan and $11,780 in the federal workers' plan.


Headed for a Crunch: An Update on Medicaid Spending, Coverage and Policy Heading into an Economic Downturn
Vernon Smith, Ph.D., Kathleen Gifford and Eileen Ellis, Health Management Associates and Robin Rudowitz, Molly O'Malley and Caryn Marks, Kaiser Commission on Medicaid and the Uninsured, Kaiser Family Foundation
Kaiser Commission on Medicaid and the Uninsured, 09/29/08

After hitting low points in 2006 and 2007, Medicaid spending and enrollment growth increased in 2008 and is projected to grow faster in 2009, according to this new 50-state survey. The survey finds that Medicaid enrollment across the country grew 2.1% in fiscal year 2008, more than erasing a slight decline in enrollment experienced the previous year. States also experienced spending growth of 5.3%, up significantly from the previous two years. For fiscal year 2009, states expect to see even larger increases in Medicaid enrollment (3.5%) and spending (5.8%). In both FY 2008 and FY 2009, states made more Medicaid restorations, enhancements and expansions than cuts despite the change in the economy. Looking ahead, two-thirds of state Medicaid directors say that there is at least a 50-50 chance that they will face a shortfall in their Medicaid budgets during the current year.

A separate report from America's Health Insurance Plans finds that state Medicaid programs will spend $1.6 trillion on long-term care expenses over the next 20 years. Medicaid spending for long-term care will grow at a faster rate than overall health care spending, faster than Medicare, and faster than the national Gross Domestic Product.


Celebs, Stop Taking Poisonous Shots at Vaccines
Sally C. Pipes, Pacific Research Institute
New York Daily News, 09/24/08

Many prominent activists and celebrities continue to perpetuate the myth linking autism and vaccination, writes Pipes. This campaign of misinformation has led many confused parents to keep their kids from being inoculated, posing an enormous threat to the health of both their children and the public at large. For example, before the measles vaccine was introduced in 1963, between three and four million people were stricken with the disease annually. Between 400 and 500 of those afflicted died each year. Today, we're seeing similar effects as a result of fewer vaccinations. In the first seven months of this year, 131 cases of measles were reported — the highest total in over a decade. Ninety-five of those 131 cases were in children who were eligible for vaccination but did not receive a shot. Vaccination stands out as one of the most effective medical advances in human history, writes Pipes. Parents should ignore the junk science peddled by anti-vaccine activists and make sure that their kids are inoculated.

Upcoming Events

Developing a National Framework for Supporting Delivery System Reform at the State Level
The Brookings Institution Event
Wednesday, October 8, 2008, 8:30 a.m. – 3:00 p.m.
Washington, DC

McCain and Obama Health Policies: Costs and Coverage Compared
The Lewin Group Event
Wednesday, October 8, 2008, 8:30 a.m. – 10:00 a.m.
Washington, DC

Health Care Solutions for Americans
Society for the Education of Physicians and Patients Conference
Wednesday, October 8, 2008, 6:30 p.m. – 9:30 p.m.
Pittsburgh, PA

Physician Disempowerment: A Transatlantic Malaise
Center for Medicine in the Public Interest Event
Tuesday, October 14, 2008, 9:00 a.m. – 1:00 p.m.
Washington, DC

Differing Approaches to a National Crisis: Presidential Candidates' Health Care Plans Debated
Oregon Health Forum Events
October 14-15, 2008
Medford, OR and Eugene, OR

Eighth Annual International Conference
Institute for Health and Productivity Management Event
October 15-17, 2008
Scottsdale, AZ
Grace-Marie will speak about "Prospects for Health Care Reform Post Election" on Wednesday, October 15.

National Consumer Driven Healthcare Summit
October 19-21, 2008
Washington, DC


Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features a commentary by Grace-Marie Turner on the major developments and issues of the week as well as summaries of writings by participants in the Health Policy Consensus Group and other articles of interest from the health policy world, plus 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

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