Single-Payer Redux


Problems in Canada and the UK: There is mounting evidence that centrally-controlled, government-dominated, taxpayer-financed, rule-driven health care systems are failing. We found a surprising number of articles this week about problems in paradise — aka, British and Canadian single-payer health care systems. We’ve written summaries of them in the articles round up below.

Even the godfather of the Canadian system, Claude Castonguay, now acknowledges that it is in crisis, as the Manhattan Institute’s David Gratzer reports. "We thought we could resolve the system's problems by rationing services or injecting massive amounts of new money into it," Castonguay said. But he now believes the solution is to bring private sector forces into play, with greater freedom of choice for patients.

Now if only we could get American political leaders to see the light BEFORE they go down this futile road.



The Center for Medicine in the Public Interest held a reception at the National Press Club on Monday evening to preview a new film that counters, with actual patient stories, the SiCKO fiction. And they launched a new website called to provide easy access to articles, videos, and testimonials about the costs and consequences of centralized government control over health care.

President Peter Pitts invited Canadian Shona Holmes to the reception to tell her story: She was diagnosed with a fast-growing brain tumor that was causing her to go blind; the expected survival time without treatment was less than the expected waiting time to begin treatment in Canada. So she decided to go to the Mayo Clinic for care. It was successful, and she credits Mayo with saving her vision and her life.

Her husband is working a second job to pay the bills — as well as the taxes to pay for the Canadian universal health care system. But she is alive three years after the surgery. “Please don’t do to your health care system what we have done to ours,” she pleaded. “Otherwise, where would we go?”

The Chairman of CMPI, noted cardiologist Michael A. Weber, told the audience that he spent part of his childhood in England and, as a young boy, was told that he needed to have his tonsils removed. The physician said: “Go home, and you will receive a letter from the government telling you when and where to show up for your surgery,” he recounted. “Every day, I look at my mail for that letter to arrive,” he said. “I’m still waiting.”



Physician payments: Meanwhile, the Congress has itself tied in knots trying to reverse an automatic 10% Medicare pay cut for physicians, scheduled to go into effect July 1. Members on both sides of the aisle overwhelmingly agree they want to stop the physician pay cut from kicking in, but a number of other issues are attached — including cuts to the popular Medicare Advantage program and competitive bidding for durable medical equipment. Barring a last minute miracle, it now appears that Congress will leave town for the July 4 recess without passing a bill.

With the health sector now representing one-sixth of our economy and almost half of that run through government programs, politicians have enormous power over health care decisions. Do we really want to give them even more with health care reform proposals that give government a much bigger role in our health sector? Now how long would we wait for decisions?

That’s a good question to ponder this Independence Day.



I did a radio interview this morning with the hosts of Money Matters Radio in Massachusetts. One was espousing the typical liberal line about health care systems in other countries being so much better at taking care of patients. I responded with actual facts about the growing difficulty of many Canadians to find a primary care doctor still accepting patients, long waiting times to see specialists and begin treatment, and lower survival rates in Canada and Europe for diseases like cancer.

The hosts didn’t hang up quite quickly enough: After they said goodbye, one said I was knowledgeable and a great guest. The other said: “I thought she was annoying.”

The facts are so difficult to swallow!



The uninsured: The American Medical Association approved at its annual meeting earlier this month detailed recommendations offered by the Council on Medical Service to standardize its policies on the tax treatment of health insurance, as I reported last week.

The AMA was one of the first major organizations, under the leadership of then-president Dr. Stormy Johnson, to see the wisdom of refundable tax credits to help the uninsured purchase health insurance. Over time, the AMA passed a number of follow-on recommendations to support the policy, some of which are now overtaken by events and others of which contradict other policies.

The new report standardizes the AMA policy and clarifies its position, which is quite bold.

The long-standing AMA policy supports replacing the tax exclusion for employment-based health insurance with refundable, advanceable tax credits or vouchers. Further, the AMA would income-adjust the credits to provide more generous assistance to those with lower incomes.

While the AMA does not specify dollar amounts for the credits or cut-off points, the policy could mean that their own members could face higher tax bills because they would lose their current tax break for health insurance but their incomes likely would be too high to qualify for a credit. Some members are distressed over this.

(Sen. John McCain also would replace the tax exclusion with a credit, but the credit would be a fixed amount of $2,500 for individuals or $5,000 for families and it would be universally available.)

There is much more to the AMA policy, which also involves integration with HSAs and payroll taxes. Here is a link to the AMA documents.



HSA update: HSAs seem so simple. But even with these straightforward accounts — a savings account coupled with health insurance — there seems to be an endless number of questions about them.

The Treasury Department provided this week 28 pages of guidance governing everything from how HSAs interact with Health Reimbursement Arrangements and Flexible Spending Accounts, to whether people can qualify for an HSA if they receive preventive care through the VA, to nuances about employer contributions to the accounts.

This shows that any program authorized by government requires rules and complexity, but Treasury i
s to be congratulated for these clarifications. And hopefully more will be forthcoming about other unsettled issues before the change in administrations next January.

Also, two new reports are out this week with updated data on health savings accounts. Things we learned: Average account balances hit $1,400, up from $1,028 in December 2006, according to an HSA Benchmarking Survey from Celent, a research and advisory firm.

An HSA Market Report from Canopy Financial, a provider of financial technology and electronic payment systems, reports that the average health plan had a deductible of about $2,500, that the average account holder was 43 years old, and that the average employer contribution was $68 a month, $58 for employees.



Our system is far from perfect, but it's so important to value its strengths as we move forward with reforms.

Health Policy Matters will return after July 4. Celebrate freedom!

Grace-Marie Turner

Recent News Articles and Studies

The Truth About Drug Innovation: Thirty-Five Summary Case Histories on Private Sector Contributions to Pharmaceutical Science

Benjamin Zycher, Joseph A. DiMasi, Christopher-Paul Milne
Manhattan Institute Center for Medical Progress, 06/08

Ben Zycher and colleagues investigated whether new and improved medicines are the fruit of research financed or conducted by public agencies, the National Institutes of Health foremost among them, or by the pharmaceutical companies that produce and market the drugs. The authors investigated 35 important drugs currently being prescribed and found that the scientific contributions of the private sector were crucial for the discovery and/or development of virtually all of them. Private-sector research was responsible for central advances in basic science for seven, in applied science for 34, and in the development of drugs yielding improved clinical performance or manufacturing processes for 28. In short, all or almost all of the drugs and drug classes examined in this study would not have been developed — or their development would have been delayed significantly — in the absence of the scientific or technical contributions of the pharmaceutical firms, they found.

Financing the U.S. Health System: Issues and Options for Change

Joseph Antos, Jeanne M. Lambrew, Meena Seshamani
Bipartisan Policy Center, 06/01/08

Health reform proposals across the spectrum have included changes in how the U.S. health system is financed. The goals of such changes include using financing incentives to promote system goals, replacing insufficient financing mechanisms with more sustainable ones, and increasing federal subsidies for a reformed health system. Irrespective of their specific design and independent of the delivery system changes they support, these options have policy implications that have received little public attention. This paper examines the implications of different options for financing the health system. Specifically, it describes recently proposed policies including continuing current financing and redirecting health spending to more effective uses, rolling back high-income tax cuts, modifying the current tax exclusion for health benefits, a play-or-pay model, and a value-added tax. Their effects on individuals, employers, and the health system are explored.

What’s at Stake in the Medicare Showdown

Scott Gottlieb, M.D., American Enterprise Institute
The Wall Street Journal, 06/24/08

Congress is considering cuts to Medicare Advantage — a program that allows millions of seniors to use federal dollars to buy private health insurance — in order to avert cuts to physician pay. But the result of curtailing private plan participation in Medicare would be more bureaucratic control and less patient choice over health care decisions. Although private health insurance is imperfect, competition for beneficiaries means private plans need to provide better access for appeals, modern services and more personal considerations than what’s offered by Medicare, a monopoly supplier.

Dr. Gottlieb also has written a new paper on “Measuring Biomedical Progress: How Do We Align Use with Estimates of ‘Value’ in Clinical Medicine?


Trouble in Europe and Canada with health care:

Canadian Health Care We So Envy Lies In Ruins, Its Architect Admits

David Gratzer, Manhattan Institute for Policy Research
Investor’s Business Daily, 06/25/08

Canadian physician and Manhattan Institute scholar David Gratzer reports that the godfather of Canada’s health care system, Claude Castonguay, has concluded that four decades after it began, the system now is in crisis. "We thought we could resolve the system's problems by rationing services or injecting massive amounts of new money into it," says Castonguay. But now he prescribes a radical overhaul: "We are proposing to give a greater role to the private sector so that people can exercise freedom of choice." Castonguay advocates contracting out services to the private sector, going so far as suggesting that public hospitals rent space during off-hours to entrepreneurial doctors. He supports co-pays for patients who want to see physicians. Castonguay, the man who championed public health insurance in Canada, now urges for the legalization of private health insurance. In America, these ideas may not sound shocking. But in Canada, where the private sector has been shunned for decades, these are extraordinary views, especially coming from Castonguay.

Time to Bury Those Myths About the NHS

Gillian Bowditch
The Sunday Times, 06/01/08

Edinburgh is the first city in the UK to get a pioneering CT scanner as part of a £4m bequest from the Royal Bank of Scotland, which will pay for the maintenance and staffing of the machine for five years in return for access to the scanner 25% of the time for its employees, writes Sunday Times columnist and feature writer Gillian Bowditch. But the gift has led to claims that the bank is undermining the “founding principle” of the National Health Service (NHS) of equal treatment and access for all. But if ever there was a sacred cow that needed slaughtered it is the “founding principle” of the NHS, an unchallenged premise that has sheltered apathy, lethargy and mediocrity for decades, writes Bowditch. It is the “founding principle” of the NHS which leads to your routine operation being cancelled for the eighth time to make way for emergency surgery until you realize, with growing despair, that the only way you will be seen is when you become a
n emergency yourself. By elevating the “founding principle” of the NHS over all other considerations, we have failed to allow the NHS to develop into a service fit for the 21st century, she writes. In every other area of life, people are allowed to exercise real choice and decide their own priorities. Only in the NHS are they treated like the inhabitants of a communist state, expected to pay homage to an ideal which is constantly failing them. Far from condemning the Royal Bank of Scotland we should be encouraging more of these private/public partnerships, she concludes.

Sixty Years On — Who Cares for the NHS?

Helen Evans, Nurses for Reform
Institute of Economic Affairs, 06/22/08

The consensus that lay behind the concept of a centrally planned, government-funded National Health Service is now broken, writes Dr. Helen Evans of Nurses for Reform and the Adam Smith Institute. The monograph, which marks the 60th anniversary of the NHS, finds that opinion formers now consider the problem of monopoly and lack of consumer information to be substantially greater problems in a government-provided healthcare system than they would be in a market-based system of healthcare.

Coming Soon: Not-So-NICE Health Care?

Sally Pipes, Pacific Research Institute
Investor’s Business Daily, 06/25/08

A British court just ruled that the U.K. government unfairly denied anti-dementia drugs to Alzheimer's patients. The government's reason for refusing to cover the drugs? Money. Sally Pipes of the Pacific Research Institute writes that government scrooges didn't want to foot the bill. She says this kind of penny-pinching happens all too often in Britain, thanks to the National Institute for Health and Clinical Effectiveness, or NICE, the agency that determines which treatments get covered by the British health care system. And if some congressional lawmakers get their way, the United States soon will have a similar agency to create a Comparative Effectiveness Research Institute under Medicare.

Big drugs companies shift trials from UK

Andrew Jack
Financial Times, 06/26/08

The Financial Times reports that several leading pharmaceutical companies are cutting back on clinical research in Britain, claiming insufficient commitment by the government and the National Health Service to support new drug development. These restrictive government policies mean that British patients will have fewer options to enroll in trials testing experimental medicines for life-threatening diseases such as cancer.

The ‘Uninsurable’

Merrill Matthews, Council for Affordable Health Insurance
The Washington Times, 06/16/08

While much of the health care reform debate centers on the 47 million uninsured Americans, there is an equally important subgroup that must be part of the solution — the uninsurable — i.e., those who have been denied health insurance coverage because of a pre-existing medical condition, or whose condition results in premiums much higher than the standard, writes Matthews. Democratic presidential candidate Barack Obama has said he would forbid insurers from denying anyone who applied. But seven states tried what Mr. Obama is proposing in the mid-1990s, and every one of them virtually destroyed their individual markets, writes Matthews. The best solution is to let the health insurance market work for the vast majority of Americans and create a safety net for those who can’t get coverage. That’s what Mr. McCain’s “Guaranteed Access Plan” tries to do. If we want a market-based health care system, and John McCain apparently does, high-risk pools are the most effective way to address the safety-net problem of the uninsurable, writes Matthews. The debate should be over how to make the pools better, because a heavy-handed government-run system is not a good or affordable alternative.

The Orphan Drug Act Has Been a Huge Success

Ed Rensi, Team Rensi Motorsports
The Wall Street Journal, 06/23/08

The Orphan Drug Act, signed into law by President Reagan 25 years ago, made it possible for companies to invest hundreds of millions of dollars in the development of potential treatments for rare diseases, writes Ed Rensi, former president and CEO of McDonald’s USA and current co-owner of Team Rensi Motorsports. By offering tax incentives for clinical trials of these treatments and granting seven years of patent exclusivity once the drug is approved — compared to an average of five years with most new drugs — the Orphan Drug Act gave hope to the collective millions of Americans living with these horrible diseases. One of its most notable achievements has been to make the capital markets less risky for biotechnology investors, writes Rensi. Prior to this legislation, it was prohibitively expensive for a company to develop a drug for a disease that affects so few. In the 25 years since, more than 1,100 new treatments for orphan diseases have entered the research pipeline, and over 300 new orphan drugs have been approved by the Food and Drug Administration.

Upcoming Events

Aging and Future Health Care Spending: Red Herrings, Time to Death, and Insurance Choices
American Enterprise Institute Event
Friday, June 27, 2008, 2:00 p.m. – 4:00 p.m.
Washington, DC

Health in India and China: Challenges, Solutions and Lessons For U.S. Health Care
Health Affairs Briefing
Tuesday, July 8, 2008, 9:30 a.m. – 12:30 p.m.
Washington, DC

The Future of Insurance Regulation
American Enterprise Institute Event
Wednesday, July 9, 2008, 8:30 a.m. – 4:00 p.m. (Lunch included)
Washington, DC

13th Annual Wall Street Comes to Washington Conference
Center for Studying Health System Change Event
Wednesday, July 9, 2008, 8:30 a.m. – 12:00 p.m. (Breakfast included)
Washington, DC

Long-Term Care Reform
The Brookings Institution’s Engelberg Center for Health Care Reform Event
Friday, July 11, 2008, 9:00 a.m. – 11:45 a.m.
Washington, DC

The Birth of Freedom
The Heritage Foundation Film Screening
Wednesday, July 16, 2008, 7:00 p.m. – 9:00 p.m.
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 h
ealth 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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