Audacity, Indeed!

Highlights

Spending Spree: “Surreal Spending” was the title of one of our recent newsletters, but that doesn’t begin to capture the unbelievable trillions of dollars that Congress and the Obama administration announced this week.

It started out, first, with $33 billion more to expand SCHIP, then another $350 billion for the bank bailout, then $800 billion for the stimulus package, $410 billion to fund parts of the government for the rest of this fiscal year, and now a $3.6 trillion budget for 2010, with a $1.75 trillion deficit and a $634 billion “down payment” on health reform.

And the Obama administration calls its 2010 budget “A New Era of Responsibility.” This is insane! And it’s just the first month of this administration.

This is real money that is being borrowed and spent, and somehow, some day, it has to be paid back by someone.

Just to put $1 trillion in perspective: If you earned $1 a second, 24 hours a day, 365 days a year, it would be 32,000 YEARS before you would have $1 trillion!

Taxing Growth: President Obama previewed plans for his administration during his address to Congress on Tuesday night, focusing on health care, energy, and education. He equated the investment in these initiatives to the creation of the railroad and interstate highway systems and putting a man on the moon.

Those temporary transportation and technology initiatives created a platform for tremendous growth in the private sector.

But what he is proposing now is much different.

He wants to create tens of millions of jobs, many, if not most, of which would depend in perpetuity by tax dollars — with big new taxes on the very people who we need to create the next generation of private sector jobs.

Forming millions of taxpayer-funded jobs is a very different vision for America than creating a climate that rewards and encourages private sector initiative. This will take our economy in a very different direction — toward one in which the government plays the central role.

Tax increases will further undermine the reward for risk and initiative in the private sector. This is not a formula for economic growth.

Turner Testimony: Amidst all this, I was asked to testify before the Senate Health, Education, Labor, and Pensions Committee on Tuesday at a hearing on the “underinsured.”

Sen. Jeff Bingaman of New Mexico chaired the hearing and defined underinsurance as “an insured individual whose family medical expenditures total 10% or more of their income or whose health plan includes deductibles greater than 5% of their income.”

I argued that this would mean that if a family with an income of $60,000 a year had purchased a health insurance policy with a $3,000 deductible, they would be considered underinsured, even if they chose that option — as they very well might do in order to save on insurance premiums and make sure they are protected against major medical expenses — and even if they had $3,000 set aside to cover costs under the deductible.

If the government were to require all Americans to have comprehensive insurance that protects them against all but routine medical expenditures, as seems to be the goal, the requirement would lead to higher costs for health insurance.

The full cost of employment-based health insurance is often hidden from workers, but the consequences are not.

Economists have demonstrated that an increase in health insurance premiums results in lower wages and lost jobs for workers and increases the ranks of the uninsured.

I argued that creative benefit design is essential to allowing employers to continue providing coverage that balances the needs and resources of the company and employees. Maintaining and expanding this flexibility is vital to keeping health insurance affordable.

In my testimony, I described the positive experiences of several companies in increasing access to health insurance for their workers while containing cost. Deloitte’s Center for Health Solutions found, for example, that the cost of consumer-directed health plans increased by only 2.6 percent in 2006, about a third of the rate of increase for traditional plans.

I also argued that expanding access to public plans such as Medicare and Medicaid is not a solution since they also fail to meet the test of providing comprehensive coverage and access to care.

 

  • Medicare has limits on hospital care and other gaps in coverage that force seniors to seek additional insurance through retiree health plans, private Medigap plans, or by selecting Medicare Advantage plans to get more comprehensive coverage. 
  • Medicaid pays physicians so little that recipients are often forced to wait in hospital emergency rooms for hours to get routine care.

Bottom line: Requiring only comprehensive health insurance would mean that the ranks of the uninsured will grow in an effort to make health insurance more generous for a dwindling few.

Grace-Marie Turner

Recent News Articles and Studies

This Plan Will Stifle Medical Progress
Slowing the Growth of Health Care Costs — Lessons from Regional Variation
The Effect of the Economic Crisis on Health Care Programs
Health Spending Projections Through 2018: Recession Effects Add Uncertainty to the Outlook
Massachusetts’ Plan: A Failed Model for Health Care Reform
America’s Uninsured Crisis: Consequences for Health and Health Care
New Point Man on Health Reform Also Goes By the Name Emanuel
Empowering Individuals in the Health Care System
Court Verdict Could Give Generic Drug Makers an Unfair Advantage

GALEN IN THE NEWS

This Plan Will Stifle Medical Progress
Grace-Marie Turner, Galen Institute
San Diego Union-Tribune, 02/27/09

President Obama’s speech to Congress on Tuesday made it clear that he sees a much larger role for government in our $2.2 trillion health sector. But this approach will stifle competition in the health sector and leave doctors and hospitals more beholden to the demands of politicians and government bureaucrats than to the needs of patients, writes Turner. This decade has seen impressive advances in making care and coverage more affordable, including convenient and affordable walk-in retail health clinics, TelaDoc phone access to physicians, and innovative health insurance offerings coupled with wellness and prevention plans. We need more of this innovation, and we need fewer bureaucratic programs that are slow, rigid, unresponsive, and rule-driven. But if Congress and the Obama administration have their way and continue down the path toward greater centralized control over our he
alth sector, we will lose the dynamic creativity of the marketplace that can respond to the needs and demands of consumers and get us to faster-better-cheaper medical care and coverage.

HEALTH CARE COSTS

Slowing the Growth of Health Care Costs — Lessons from Regional Variation
Elliott S. Fisher, M.D., M.P.H., Julie P. Bynum, M.D., M.P.H., and Jonathan S. Skinner, Ph.D.
The New England Journal of Medicine, 02/26/09

The cost of providing health care to seniors is rising more than twice as fast in Dallas as in San Diego, and Medicare now spends nearly three times more to care for its enrollees in Miami than it does in Honolulu, according to a new analysis of Medicare spending by researchers at the Dartmouth Atlas Project. Many experts have blamed the growth in spending on advances in medical technology, but the differences in growth rates across regions show that advancing technology is only part of the explanation. The authors argue that the differences in growth are largely due to discretionary decisions by physicians that are influenced by the local availability of hospital beds, imaging centers and other resources — and a payment system that rewards growth and higher utilization. The authors call on physicians to lead an effort to reform how the U.S. delivers and pays for health care to bring spending under control.

The Effect of the Economic Crisis on Health Care Programs
Watson Wyatt and National Business Group on Health, 02/09

U.S. employers expect health care cost increases to hold steady at 6%, and more companies plan to adopt consumer-directed health plans in 2010 in an effort to control cost increases, according to a forthcoming survey by Watson Wyatt, a leading global consulting firm, and the National Business Group on Health, an association of more than 300 mostly large employers. Preliminary findings:

  • 51% of companies now offer workers a CDHP, up from 47% in 2008. Another 8% are expected to adopt a CDHP by 2010.
  • The cost of coverage for CDHPs is considerably lower than for either preferred provider organization/point of service plans (PPO/POS) or health maintenance organization (HMO) plans for 2009. Employee-only coverage for CDHPs is $852 lower than for other plan types. For family coverage, CDHP rates are $2,146 below the median PPO/POS plan rates and $2,350 lower than the average HMO plan costs.
  • For employers, the average health care expenditure per employee in 2008 was $7,173 and is expected to increase to nearly $7,400 in 2009.

Health Spending Projections Through 2018: Recession Effects Add Uncertainty to the Outlook
Andrea Sisko, Christopher Truffer, Sheila Smith, Sean Keehan, Jonathan Cylus, John A. Poisal, M. Kent Clemens, and Joseph Lizonitz
Health Affairs, 02/24/09

U.S. health care spending is estimated to have reached $2.4 trillion in 2008, and the largest single-year increase as a share of the economy is expected in 2009 as the effects of the recession ripple through the health care sector, according to actuaries from the Centers for Medicare and Medicaid Services. CMS estimates that Medicare spending in 2008 was $466 billion and Medicaid spending was $352 billion, with private health insurance spending at $817.4 billion. Private spending climbed at a slower pace — 5.5% — in 2008, compared to 6% in 2007. This slower spending growth is driven by slower projected price growth and higher unemployment rates that are expected to result in a reduction in the number of people with private health coverage.

A separate Health Affairs study provides annual estimates of national personal health spending by medical condition. The most costly conditions were mental disorders and heart conditions. Spending for mental health disorders reached $142.2 billion in 2005 and accounted for 9% of personal health spending. Spending for heart-related conditions accounted for 8% of personal health spending.

STATE ISSUES

Massachusetts’ Plan: A Failed Model for Health Care Reform
Dr. Rachel Nardin, Dr. David Himmelstein, and Dr. Steffie Woolhandler
Physicians for a National Health Program and Public Citizen, 02/18/09

The Massachusetts health care system, widely regarded as an example of how to provide universal coverage and keep costs low, is in fact faltering badly and should not be held up as a national model for reform, according to a study by Physicians for a National Health Program and Public Citizen. The study finds that the state’s 2006 reforms, instead of reducing costs, have been more expensive than expected. The budget overruns have forced the state to siphon about $150 million from safety-net providers such as public hospitals and community clinics. Many low-income residents, who used to receive completely free care, now face co-payments, premiums and deductibles under the new system — financial burdens that prevent many of them from receiving necessary medical treatment. Since the state’s reforms passed, premiums under the state insurance program have increased 9.4%. The study finds that if a middle-income person on the cheapest available state plan got sick, he or she could end up paying $9,872 in premiums, deductibles, and co-payments for the year.

HEALTH REFORM

America’s Uninsured Crisis: Consequences for Health and Health Care
Institute of Medicine, 02/24/09

Rising health care costs and a severely weakened economy threaten not only employer-sponsored insurance but also recent expansions in public coverage, according to a report from the Institute of Medicine. Overall, fewer workers, particularly those with lower wages, are offered employer-sponsored insurance, and fewer among the workers that are offered such insurance can afford the premiums. The states and federal government have increased substantially health insurance coverage among low-income children and, to a lesser degree, among adults in the last decade. While these coverage expansions have mitigated the overall numbers of uninsured, many states are now under extreme economic pressures to cut their recent expansions of public programs. New research also suggests that when local rates of uninsurance are relatively high, even people with insurance are more likely to have difficulty obtaining needed care and to be less satisfied with the care they receive.

New Point Man on Health Reform Also Goes By the Name Emanuel
Benjamin E. Sasse
Investor’s Business Daily, 02/23/09

With all the focus on who will be the next secretary of Health and Human Services, few seem to be asking how much the job will really affect the already spinning wheels of health reform by the time he or she is confirmed, writes Sasse, former assistant secretary of Health and Human Services. Dr. Zeke Emanuel, head of the depart
ment of bioethics at the National Institutes of Health (and brother of the president’s chief of staff, Rahm), is newly detailed from NIH to the White House to advise the director of management and budget on health policy. On paper, lots of presidential aides have titles superior to Dr. Emanuel. Yet, in practice, one can already feel the center of gravity in the White House shifting his way. Why does all of this bureaucratic intrigue matter? Because in health care — as now in finance — more and more decisions look like they are going to be made in Washington. And personnel, like budgeting, ultimately determines policy.

Empowering Individuals in the Health Care System
Robert E. Moffit, The Heritage Foundation
Pathways, Winter 2009

Bob Moffit focuses on how the health care system may be improved in ways that will ameliorate disparities in health. Portability of health insurance policies — enabling individuals to keep their coverage when they change jobs or maintain coverage through life changes — is key to stabilizing health insurance markets and dramatically reducing the numbers of the uninsured, especially among blacks and Hispanics. If policymakers want to reduce ethnic and racial disparities in health care, they should get serious about empowering ethnic and racial minorities to secure superior private health insurance coverage and care and enabling them to escape the Medicaid ghetto. But it will take political imagination and a passion for serious innovation rather than merely filling “gaps” in conventional policies and old programs.

PRESCRIPTION DRUGS

Court Verdict Could Give Generic Drug Makers an Unfair Advantage
Peter Pitts, Center for Medicine in the Public Interest
The Examiner, 02/23/09

Generic drug companies are pressuring Congress to pass a bill that would profoundly alter how drugs are developed and sold, writes Pitts. The bill will outlaw authorized generics, paving the way for generic-only companies to move their versions to market more quickly. Proponents say this will lower prices for the generics, but the evidence suggests otherwise. Historical data demonstrate that authorized generics are usually introduced to the market at a 50% discount. Straight generics, on the other hand, are introduced at a 30% discount. In addition, once the six-month exclusivity period is up, the market is open to all generics, and the more there are, the lower the prices for consumers. Arbitrarily banning one of those generics is not only unfair to consumers, it also creates a disincentive for drug innovators to invent new cures. Generic drugs are widely trusted by Americans, as they should be. But however safe their products are, the policies the generic industry is pushing are anything but. They threaten to eliminate competition, drive up prices, and stifle innovation — all prescriptions for catastrophe.

Upcoming Events

CPAC 2009
The American Conservative Union Event
February 26-28, 2009
Washington, DC
Grace-Marie Turner will speak on a panel entitled “Health Care: The Train Wreck Ahead” at 11:30 a.m. on Friday, February 27.

Covering the Uninsured: Options for Reform
Alliance for Health Reform Briefing
Monday, March 2, 2009, 12:15 p.m. – 2:00 p.m.
Washington, DC

Reform and Retrenchment: The Russian Healthcare System under Putin
Woodrow Wilson International Center for Scholars Event
Monday, March 2, 2009, 12:00 p.m. – 1:00 p.m.
Washington, DC

Understanding Health Care and Taxes
Coalition for Affordable Health Coverage Capitol Hill Briefing
Monday, March 2, 2009, 2:00 p.m. – 3:00 p.m.
Washington, DC
For more information, please contact Rick Dudley at 202-266-2646 or rick.dudley@cahc.net.

New Health Insurance Marketplace: Who Should Represent You?
New America Foundation Event
Monday, March 2, 2009, 3:00 p.m. – 5:00 p.m.
Washington, DC

Should Government Deliver Comparative-Effectiveness Research — or Can It?
Cato Institute Policy Forum
Tuesday, March 3, 2009, 12:00 p.m.
Washington, DC

Lessons from abroad for health reform in the U.S.
Galen Institute and International Policy Network Event
Monday, March 9, 2009, 7:45 a.m. – 2:00 p.m.
Washington, DC
Registration for this event is filled, but a webcast and conference materials will be available online. Please check www.galen.org and www.policynetwork.net for more information.

Stimulating Health Information Technology
Health Affairs Briefing
Tuesday, March 10, 2009, 9:00 a.m. – 12:30 p.m.
Washington, DC

Roles for State Purchasers in Driving Cross-Payer Health Care Quality Improvement
Center for Health Care Strategies Webinar
Wednesday, March 11, 2009, 2:00 p.m. – 3:30 p.m. (EST)

 

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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.

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to galen@galen.org.

The views expressed in this newsletter are the opinions of the authors and do not necessarily reflect the view
s of the Galen Institute or its directors.

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