Wake-Up Calls



A Federal Health Board? Key members of Congress got another wake-up call this week about the serious threat that rising government health spending poses to the future of our health sector — and our economy.

During a summit sponsored on Monday at the Library of Congress by the Senate Finance Committee, Federal Reserve Chairman Ben Bernanke told members "The decisions we make about health care reform will affect many aspects of our economy, including the pace of economic growth, wages and living standards, and government budgets, to name a few."

The numbers are, in fact, frightening.

Bernanke said that "higher government spending on health care spending will, of necessity, require reductions in other government programs, higher taxes, or larger budget deficits."

So what was the solution offered by the chairman of the Finance Committee? Sen. Max Baucus said he wants to create an "independent federal health board" to make controversial health policy decisions involving payments through Medicare and other health programs.

Which would mean that Congress would delegate to an unelected board the authority to make decisions over hundreds of billions of taxpayer dollars to provide medical care for tens of millions of Americans. What kind of democracy is that?

Federal health boards are common in single-payer and other government-dominated health systems. The Clinton plan in the 1990s had a federal health board.

This is a very bad idea that needs to be put to rest immediately. Tackling difficult decisions is the responsibility of Congress.

The good news is that members may be paying attention to the critical importance of this issue. But sound decisions need to be made in the open political arena about spending and benefits. Congress can't punt on this one, and it needs to get serious about reform while it still has options.



Single-Payer Health Care? And speaking of bad ideas, advocates of single-payer health care continue their push, especially on the Left Coast.

California State Senator Sheila Kuehl, chairman of the state's powerful Health Committee, continues to press for her bill to enact a health plan in which the state would collect taxes to pay the health care bills for all Californians, and the state would pay doctors, hospitals, and other providers directly — hence the name "single payer."

But she, too, got a wake-up call from a new study by the state's highly respected and nonpartisan Legislative Analyst's Office: It concluded, basically, that the single-payer health reform plan would be a fiscal train wreck.

Sen. Kuehl's single-payer plan would be more than $42 billion in the red in the first year! The state would collect $167 billion with a new 12% payroll tax and similar levies on small business and even on investments but would be faced with an estimated $210 billion in health care bills in the first year of operation (2010). And the red ink would continue to flow, year after year.

To close the shortfall, these taxes would have to be raised to at least 16%, and then higher every year after that.

Has anyone told Silicon Valley about this?

Talk about a jobs and economic killer! That familiar song would have to be changed to "Nevada, here we come!"



Market Innovations: Meanwhile, in the real world, common sense and market innovations are continuing: Assurant Health announced this week that it has partnered with TelaDoc Medical Services to provide its customers with access to a network of board-certified, licensed primary care physicians on demand, over the telephone, 24/7.

Fast. Convenient. And cost effective. Isn't that what consumers are looking for in health care? And it also helps people living in rural and other medically underserved areas and those with transportation challenges — including $4-a-gallon gas.

Assurant Health focuses on individual and small group health insurance and is a major player in the HSA marketplace. The company always is looking for ways to distinguish itself from bigger competitors — such as offering same-day decisions to people who apply for health insurance.

Now it is taking innovation another step further by partnering with TelaDoc.

TelaDoc, with one million subscribers, offers quick and convenient access to a physician consultation anytime of the day or night, 365 days a year. It helps people avoid the time and expense — and delay — of an office visit or a trip to the emergency room.

And last year, Assurant announced that MinuteClinics would be covered as an in-network provider of health care services for policyholders.

Can you possibly imagine these kinds of market innovations taking root in California under a single-payer system?



Medical Tourism: And finally, the American Medical Association, in its annual meeting in Chicago this week, issued its first-ever guidance for patients considering traveling abroad for medical care.

The fledgling medical tourism industry is gaining interest and attention as hospitals around the world — in India, Thailand, Guatemala, and elsewhere — are marketing their new facilities and services. An estimated 150,000 Americans are expected to receive care overseas this year.

The AMA acknowledges that people with limited resources and even companies searching for lower-cost medical care for their employees are turning to medical tourism.

But the AMA lists nine principles to guide consumers venturing into medical tourism, including making sure the decision to seek care outside the U.S. is voluntary, that facilities are accredited, patients are well-informed about risks, and that there are provisions for follow-up care.

The AMA also reportedly has amended its long-standing position on tax credits and health insurance. We'll investigate that and report back next week.

Grace-Marie Turner

Recent News Articles and Studies

Medicare: Drifting Toward Disaster
Devilish Details
The Success of Medicare Advantage Plans: What Seniors Should Know
Behind the Numbers: Medical Cost Trends for 2009
Health Care 2008: A Political Primer
Canada's Drug Price Paradox 2008
The God Committee

Medicare: Drifting Toward Disaster

Health and Human Services Secretary Michael O. Leavitt
The Heritage Foundation, 06/11/08

HHS Secretary Michael Leavitt gave a visionary but chilling speech about the looming threat that Medicare presents to taxpayers, to our economy, and to other government responsibilities during a major forum jointly sponsored by the Galen Institute, The Heritage Foundation, and the American Enterprise Institute. "This is serious business involving trillions of dollars and the lives of hundreds of millions of people," he told a large audience assembled at the Newseum on April 29 in Washington, D.C. This is the full transcript of his important speech, with introductions by Grace-Marie Turner, Bob Moffit, and former Sen. John Breaux.

Tom Miller of AEI, a co-host and panel moderator at the event, has written a paper elaborating on the remarks he presented. He argues that presidential candidates, policymakers, and the public do not yet want to deal with Medicare's fundamental problems. Until they do, he says, we need incremental action on many fronts to get better results for the money we will continue to spend in the traditional Medicare program.

Devilish Details

Grace-Marie Turner, Galen Institute
The American Spectator, 06/17/08

The Service Employees International Union (SEIU), the AARP, the Business Roundtable, and the National Federation of Independent Business (NFIB) have joined together in a campaign called "Divided We Fail" to show that employers, employees, and labor unions all place a high priority on health and employee benefit reform. While the four groups may seem to have common problems and even goals, they will find it very difficult to reconcile their principles when they get down to the task of actually talking about solutions, writes Grace-Marie Turner. Regardless of the business community's wishes, legislators inevitably would require employers to contribute. Indeed, every recent push for universal coverage has included a "play or pay" mandate requiring businesses to either provide insurance to their employees or pay a fine or a fee toward a public insurance pool. It's understandable that businesses want urgent action on health issues, but bringing competition and choice into our health sector to get prices down would be a much more powerful force than more government control and expensive new mandates on employers, writes Turner. In its unorthodox attempt at unity, the business community could unwittingly provide political cover to special interests with a decidedly anti-business agenda.

The Success of Medicare Advantage Plans: What Seniors Should Know

Robert E. Moffit, Ph.D.
The Heritage Foundation, 06/13/08

Medicare Advantage, which enrolls 20% of all Medicare beneficiaries in private plans, is a success in giving seniors unprecedented choices with superior benefits at affordable prices offered by health plans competing to provide value. But Medicare Advantage is only the first stage of reform. Given Medicare's $36.3 trillion in unfunded liabilities, Congress must start the process of comprehensive reform that builds on the success of the competitive Medicare Advantage model. Congress will have to restructure the existing payment system to provide seniors a generous but fixed contribution that can be adjusted for such factors as age, income, and health condition. And it will have to learn to be a reliable business partner, with payments based upon real market conditions not arbitrary payment formulas.

In a separate paper, Moffit criticizes Congress for blocking efforts by the government to require competitive bidding for durable medical equipment and supplies in the Medicare program. If Members of Congress, Democrats and Republicans alike, cannot allow for competitive bidding to commence, it is hard to imagine how they will summon the fortitude when larger challenges inevitably arrive, Moffit writes.

Behind the Numbers: Medical Cost Trends for 2009

PricewaterhouseCoopers' Health Research Institute, 06/08

The growth in medical cost trends for the private sector is expected to level off in 2009 following five years of deceleration, according to a new report from PricewaterhouseCoopers' Health Research Institute. Costs are expected to grow 9.6% in 2009 compared with 9.9% in 2008. Other key findings from the report:

  • Decelerators of cost growth in 2009 include improved medical management of high-cost patients and substitution of lower-priced treatments.
  • Accelerators of costs include new technology, increased utilization, new construction, and cost-shifting from government payers and the uninsured.
  • Employers will rely on prevention and disease management programs to temper costs in 2009 rather than shifting higher levels of cost-sharing onto workers.

Health Care 2008: A Political Primer

James C. Capretta, Ethics and Public Policy Center
The New Atlantis, Spring 2008

Capretta provides an overview of the current health care reform movement, from its political origins in the 1990s to the forces driving today's debates. He describes how a 1991 Pennsylvania senator's campaign became a watershed moment in the health care debates, the Clinton health care plan, and Senator John McCain's dramatic proposal for reforming the tax preference for employment-based health insurance. It is crucial to see just how much progress has been made since the first iteration of the health care debate, and just how much better positioned Republicans now are to take the initiative, writes Capretta. Indeed, health care reform just might turn out to be what tax reform was in the 1980s and welfare reform was in the 1990s: a platform for a focused conservative effort to achieve through market forces and economic incentives what the left has failed to do through government.

Canada's Drug Price Paradox 2008

Brett J. Skinner and Mark Rovere
Fraser Institute, 06/16/08

Prices for generic drugs in Canada are more than twice as high as those in the United States because government policies in Canada distort the market for prescription medicines, according to a new study from the Vancouver-based Fraser Institute. The study found that Canadian prices for generic prescription drugs in 2007 were on average 112% higher than U.S. prices for identical drugs in 2007. Of the total prescriptions dispensed in Canada in 2007, 48% were for generic drugs and 52% were for brand name drugs. In the U.S., 67% of prescriptions were for generics with just 33% for brand name drugs. If Canada repealed policies that distort the market for prescription drugs, net savings for Canadians could reach between $2.9 billion and $7.5 billion (2007) annually for total retail pharmacy sales of generic and brand-name drugs.

The God Committee

Sally Satel, M.D., American Enterprise Institute
late, 06/17/08

Satel provides a compelling account of the questions raised recently when four members of the Japanese mafia received liver transplants at a UCLA medical center (two of whom later donated $100,000 to the center). When resources are scarce — transplantable organs being the classic example — should some institution pass judgment when facts about a patient's criminality are known? It's a perfect storm of ethical anxieties and calls to mind a time when character did determine access to scarce treatment, writes Satel. In 1962, Seattle's Swedish Hospital established the "God Committee," which considered nonmedical traits, including marital status, net worth, nature of occupation and church attendance, to decide which terminal patient would get access to dialysis machines. No one wants to return to the days of the character biopsy — judging a patient's social value — in deciding who gets access to rare treatments, but the UCLA story and others like it will continue to offend our sense of fairness as long as the nation's dire organ shortage persists. The only way to dispel the ethical quandaries that stem from rationing is to expand the pool of organs so that more people can receive lifesaving transplants, writes Satel. Repealing the ban on donor compensation would permit the federal or state governments to devise a safe, regulated system in which would-be donors are rewarded for giving an organ to the next stranger on the list.

Upcoming Events

A Health Care Debate: What is the Best Way to Control Costs, Improve Quality and Expand Access?
National Center for Policy Analysis Event
Friday, June 20, 2008, 11:30 a.m. (Lunch included)
Dallas, TX

Health Information Technology and Its Future: More than the Money
Alliance for Health Reform Event
Friday, June 20, 2008, 12:15 p.m. – 2:00 p.m. (Lunch included)
Washington, DC

BigGovHealth.org Premiere
Center for Medicine in the Public Interest Reception
Monday, June 23, 2008, 6:30 p.m. – 8:00 p.m.
Washington, DC

Health Insurance Reform Elements: A Look at Wellness, Adverse Selection and Consumer Based Health Plans
Co-hosted by The Heritage Foundation, EBRI, and Milliman
Tuesday, June 24, 2008, 10:00 a.m. – 12:00 p.m.
Washington, DC

New HSA Rules Webinar
HSAEd Event
Wednesday, June 25, 2008, Noon EDT

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 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 www.galen.org.

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