Lessons from Abroad

"So many lessons, so little time." That was how Brian Lee Crowley of Canada led off his remarks at our major conference, "Lessons from abroad for health reform in the U.S." on Monday, co-sponsored by the Galen Institute and the International Policy Network in London.

The presentations by noted experts from Canada, the U.K., and Europe were splendid and offered a sober warning to U.S. policymakers about embarking on a path toward giving government more power and control over health care and health coverage.

The full package of conference materials is available on our website at www.galen.org/content/LessonsFromAbroad. You can view the webcast, read summaries of our speakers' remarks, and see their PowerPoint presentations. Here is a quick overview:

Noted health policy expert Dr. Ken Thorpe of Emory University led the conference with a keynote speech highlighting the challenges and policy proposals under serious consideration in Washington.

He said it is essential that we refocus our health care delivery and financing on primary care and prevention and modernize our delivery infrastructure to address the chronic illnesses that are consuming an ever greater share of health care resources, especially obesity-related illnesses such as diabetes and hypertension. The third crucial challenge is to cover the uninsured, and he explored options to pay the added costs above the $634 billion set aside in the president's budget.

The first panel offered an overview of government involvement in the health sectors of their four countries:

Speaker after speaker said, in different ways, that when government controls health care, medical decisions inevitably are made based upon costs, because politicians over-promise on benefits and are unwilling to raise taxes to the levels necessary to finance their commitments.

Practicing physician Dr. Alphonse Crespo said that Switzerland's imposition of an individual mandate for insurance in 1994 has caused a domino effect toward centralized power over the health sector. "First in the line of fire were public hospitals, which reduced bed numbers by 6% between 1998 and 2000 via forced mergers, closure of acute care units, centralization of more complex technology and rationing of nursing care.

"This downgrading of local hospitals inadvertently created inequities in access to specialized units and sophisticated technology." More complex surgeries are harder to get, and medical errors, hospital infections, and other complications have soared. The government also has put a lid on new private medical offices, even while there are physician shortages in some areas "because they figured out that if you have fewer physicians, you have fewer billings."

Dr. Brian Crowley of the Atlantic Institute for Market Studies, and a Galen Institute senior fellow, warned Americans against believing that all of their problems could be solved by emulating the Canadian system. "The administrators of the Canadian health care system enjoy monopolist immunity from dissatisfied customers. The only options for unhappy patients are individual complaints to politicians, letters to the editor, and calls to open-line shows. The old public-sector monopoly model also confers huge power on ever-bigger hospitals and trade unions who, together, exercise a stranglehold on the production of medical services." He said that the level of political involvement in the Canadian health care system appears to know no bounds, with even the quality of the toast served in Manitoba hospitals becoming a hot political issue.

Dr. Valentin Petkantchin, of the Institut économique Molinari in France, said that France tops many world health care rankings but misplaced efforts at cost containment are leading to an erosion of quality, choice, and access. The French have had access to a pluralistic system of public or private clinics, hospitals, and physicians, but "the government is undermining these pillars of choice and competition. In doing so, France risks making the same mistakes as other countries that are now saddled with waiting lists and other forms of rationing."

Prof. Wim Groot of Maastricht University in The Netherlands, offered an overview of his country's major reforms "in order to better use the principle of competition." The Netherlands replaced its system in which "all residents below a certain income had to enroll in one of the government's 30 'sickness funds'," because he said it became highly costly and inefficient. The government now defines a benefits package offered by competing plans with a "risk equalization fund" for the insurers; plans compete on quality and price, with efforts to increase transparency of both.

The second panel focused on comparative effectiveness programs:

Dr. John Bridges of Johns Hopkins Bloomberg School of Public Health: "My biggest problem with comparative effectiveness and other health technology assessment systems is that they delay access to life-saving drugs and radically distort the innovation pathways by de facto shortening the lives of patents."

Prof. Michael Schlander of the University of Applied Economic Sciences and Institute for Innovation & Valuation in Health Care in Germany offered a critique of the British system of comparative effectiveness reviews, NICE. He said that health spending may actually increase when these systems are put in place, that the formulaic approaches to decision making often violate social value judgments about the relative value of human life, and that important clinical evidence is often neglected in government decisions. "Comparative effectiveness reviews will be about cost containment," he warned.

Dr. Karol Sikora, a noted oncologist with the Imperial College School of Medicine in London who also is director of CancerPartnersUK, said that "good cancer care should be the same in Washington as in Wimbledon," but that does not happen because British politicians ration access to the best cancer medicines. "The bottom line in government systems is their bottom line," i.e., costs. The only solution, he said, is "to give patients financial control over their destiny." But he said that in the U.K., patients aren't even allowed to know about new drugs. "Having seen firsthand over many years just how inhumane this system can be, it is remarkable that other countries would even consider emulating it."

Brett Skinner of the Fraser Institute in Canada: "Canada's federal government certifies both the safety and effectiveness of all new drugs before they can be legally sold. As a result of the various government approval regimes through which all new drugs must pass, Canadians have very low rates of access to innovative medicines via the public health system, with wide variations amongst different provinces. Canadians spend a higher proportion of their post-tax incomes on prescription drugs than Americans, and the Canadian government spends more on health care as a result of increased but avoidable hospitalizations."

Luncheon Keynotes:

Two physician members of Congress delivered our luncheon keynote addresses. Dr. Tom Price of Georgia, chairman of the Republican Study Committee focused on his five pillars of reform: access, affordability, quality, responsiveness, and innovation. He said he sees the threat of growing bureaucratization and politicization of our health system in the U.S. as compromising all five principles.

Dr. Michael Burgess, Republican of Texas, had the final word saying that "we must move toward a patient-centered system" and the only way to do that is to give patients control over resources so they can make their own decisions about their health care and coverage. That means making insurance financially feasible with tax equity through deductions and/or credits, pooling mechanisms and safety nets for coverage, and basing other reforms on "trusting people, rather than remote bureaucracies, to make the best decisions for themselves and their families."

(We invited a number of Democratic legislators to speak, but none was able to join us.)

Our international guests also participated in a number of other meetings with Hill staffers, policy experts, and patient group advocates to share their views. My take away from all of the sessions was how quickly control over life-and-death health care decisions can devolve toward political control when a few strategic policies are put in place and how extraordinarily difficult it is to recapture the diversity of choice, innovation, and quality that are sacrificed in the process.

Be warned.

Grace-Marie Turner

Recent News Articles and Studies

Audacious Health Care Goals
Aetna HealthFund Shows Sustained Savings Over Time for Employers, with Members Getting the Care They Need
Workers' Health Benefits Eyed for Taxation
Small Group Health Insurance in 2008
Obama's $80 Billion Exaggeration
R&D Spending by U.S. Biopharmaceutical Companies Reaches Record Levels in 2008 Despite Economic Challenges
Don't Blame Drugs for Health-Care Costs
Dems' Medicare Drug 'Fix' Will Curb Choices, Hike Costs


Audacious Health Care Goals
Grace-Marie Turner and Amy Menefee, Galen Institute
National Review Online: The Corner, 03/09/09

Last week's White House summit on health reform showed how much we need to bring reality and perspective to the debate, write Turner and Menefee. Politically, President Obama made a strategically important move in putting a $634-billion "down payment" on health reform in his 2010 budget, with only a broad outline of his goals and leaving it to Congress to actually write the legislation. Congress is much more likely to pass a bill that it writes than one shipped to them from the White House in a 1,342-page package, as happened during the Clinton era. The question will be whether Congress pushes health reform through in another major bill that few members will have a chance to read, imposing huge new costs on the economy and giving government much more control over health decisions without consulting the American people.


Aetna HealthFund Shows Sustained Savings Over Time for Employers, with Members Getting the Care They Need
Aetna, 03/10/09

Aetna has announced the results of a six-year study of health care claims and utilizations for members in its Aetna HealthFund consumer-directed plans. The study of 2.6 million Aetna members (410,000 in an Aetna HealthFund plan) demonstrates that Aetna HealthFund shows sustained savings for employers over a five-year period, with members getting the care they need. Key findings:


  • For full replacement HRA and HSA plans, employers saved $21 million per 10,000 members over the five-year period.
  • Aetna HealthFund members seek preventive care more often than the control-matched PPO population. Furthermore, Aetna HealthFund members had 10% lower primary care physician utilization for non-routine services and 15% lower utilization of specialist care.
  • Aetna HealthFund members access the same or higher levels of screenings for diabetes and breast and cervical cancer compared to members in traditional PPO products.
  • Aetna HealthFund members utilize the prescription drugs necessary to treat chronic conditions such as diabetes, congestive heart failure, coronary artery disease and high cholesterol at similar or higher rates than PPO members.
  • Importantly, this year's results also show that Aetna HealthFund members had lower emergency room use than PPO members, suggesting that members are becoming better informed about where to access health care.



Workers' Health Benefits Eyed for Taxation
Lori Montgomery
The Washington Post, 03/12/09

With President Obama's plan to tax the rich to pay for health care facing deep skepticism on Capitol Hill, key lawmakers are pressing a different way to raise money: taxing the health benefits workers receive from their employers, reports The Washington Post. Since companies began offering group health insurance on a large scale during World War II, the value of that benefit has never been counted as income, reducing workers' taxable earnings by an average of $9,000 a year for family coverage. In recent weeks, however, Senator Max Baucus (D-Mont.) has repeatedly advocated changing tax laws to include employer benefits, arguing that it makes sense to fund the health care changes by sucking cash out of the existing system. Many economists and tax analysts have long argued for changing current tax law on health coverage, which disproportionately benefits wealthier workers. The law encourages people to enroll in the most comprehensive health plans on offer, the so-called Cadillac plans that provide vast coverage, mask the true cost of health care and contribute to skyrocketing costs.

Small Group Health Insurance in 2008
America's Health Insurance Plans, 03/09

In July 2008, AHIP conducted a comprehensive survey of member companies offering coverage in the small group health insurance market. Responses included premium and benefit data from more than 761,000 small groups (those with 50 or fewer employees), reflecting approximately 5 million workers and 3.9 million dependents with coverage as of January 2008. Key findings:


  • In 2008, the average premium for small group health insurance was $346 per month for single coverage and $913 for family coverage.
  • Among employees with small group coverage, 50% had a preferred provider organization (PPO) plan in 2008, 41% had health maintenance organization (HMO) coverage, often with a point-of-service (POS) option, and 7% had a health savings account (HSA) benefit, with a qualifying high-deductible health plan (HDHP).
  • Nine percent of small group enrollees had a choice of two or more benefit plans. Of workers offered an HSA plan, approximately one-third also had a choice of an alternative plan, usually a PPO or HMO/POS plan. Forty-two percent of enrollees in small groups chose HSA/HDHP plans when offered a choice among HSA plans and other types of health plans.



< font face="Georgia, Palatino, serif">Obama's $80 Billion Exaggeration
Drs. Jerome Groopman and Pamela Hartzband, Beth Israel Deaconess Medical Center and Harvard Medical School
The Wall Street Journal, 03/11/09

During last week's health care summit, President Obama said that national adoption of electronic medical records would save some $80 billion a year, safeguard against medical errors, reduce malpractice lawsuits, and greatly facilitate both preventive care and ongoing therapy of the chronically ill, write Drs. Groopman and Hartzband. But the basis for the president's proposal is a theoretical study published in 2005 by the RAND Corporation, in which the authors readily admit that there was no compelling evidence at the time to support their theoretical claims. Further, in the four years since the report, considerable data have been obtained that undermine their claims. Some have speculated that the patient data collected by the Obama administration in national electronic health records will be mined for research purposes to assess the cost effectiveness of different treatments. If this is part of the administration's agenda, then it needs to be frankly stated as such. And Americans should decide whether they want to participate in such a national experiment only after learning about the nature of the analysis of their records and who will apply the results to their health care, write Groopman and Hartzband.

With the enactment of the American Recovery and Reinvestment Act of 2009, the U.S. government is set to spend $19 billion to expand use of electronic health records and other forms of information technology in health care. A series of Health Affairs articles offers perspectives on how to spend those stimulus dollars wisely — and with a keen eye to improving health and health care worldwide.


R&D Spending by U.S. Biopharmaceutical Companies Reaches Record Levels in 2008 Despite Economic Challenges
PhRMA, 03/10/09

Despite the nation's economic slowdown, America's pharmaceutical research and biotechnology companies invested a record $65.2 billion last year in the research and development of new life-changing medicines and vaccines — an increase of roughly $2 billion from 2007, according to analyses by the Pharmaceutical Research and Manufacturers of America (PhRMA) and Burrill & Company. The sector's contribution to the nation's economy is further illustrated in a new study conducted by Archstone Consulting and Dr. Lawton R. Burns of The Wharton School, University of Pennsylvania. The study finds that domestic R&D spending by biopharmaceutical companies equaled roughly $65,000 per direct employee in 2006 — about eight times the published estimates of R&D spending per employee in all manufacturing industries between 2000 and 2004. Further, the sector's direct contribution to the U.S. GDP of $88.5 billion was triple the average contribution from sectors in the rest of the economy in 2006.

The U.S. is the last major pharmaceutical market without universal price controls, and as such has been the world's main financier of new drug discoveries, reports The Wall Street Journal. In a world of government-run and -priced health care, biotech innovation will also be as much at risk as traditional drug development. The biggest price we may pay for a health care system run from Washington is the therapies we never get as a result.

Don't Blame Drugs for Health-Care Costs
Sally C. Pipes, Pacific Research Institute
National Review Online, 03/11/09

In the pages of President Obama's recently released budget, he suggests that America spends too much on prescription drugs — implying that drug prices are responsible for our high health care costs. This is a popular misconception, and it will likely hinder Obama's plan to revamp the U.S. health system, writes Pipes. Among the biggest drivers of rising health care spending are chronic diseases. Caring for people with chronic diseases now accounts for about 85% of all U.S. health spending. Thus, one of the most effective ways to lower overall health care costs would be to control chronic diseases, and drugs have proven to be one of the most effective — and least expensive — ways to do that. A recent study found that every additional dollar spent on drugs for blood pressure, cholesterol, and diabetes reduces other health care spending by an average of $4 to $7. President Obama would be wise to keep this in mind as he moves forward on health care reform, writes Pipes. If he doesn't, he could end up hurting the industry that is most able to drive health care prices down.

Dems' Medicare Drug 'Fix' Will Curb Choices, Hike Costs
Merrill Matthews, Council for Affordable Health Insurance
Orlando Sentinel, 03/09/09

A bill recently introduced before Congress would overhaul Medicare Part D by allowing the federal government to "negotiate" its own prices with drug companies. But passage of this measure would mean fewer choices, fewer drugs and probably higher prices for America's seniors, writes Matthews. The bill would create one or more price-controlled, government-run alternatives to private Part D plans. Though these options might initially look like a better deal, that's only because the government hides and absorbs much of the administrative costs — just as it does in the current Medicare program. But Americans are still paying, either in the form of premiums or higher taxes. And seniors would eventually be stuck with a one-size-fits-all drug plan, much like the one offered by the VA. Medicare Part D is working much better than anyone expected by providing a wide range of choices at lower-than-expected prices. The last thing the government should do is "improve" this success story with price controls that will end the program as we know it.

Upcoming Events

Medicare 101
Alliance for Health Reform Briefing
Monday, March 16, 2009, 12:15 p.m. – 2:00 p.m.
Washington, DC

White House Regional Forum on Health Reform
Tuesday, March 17, 2009
Burlington, VT

Close Up on Evidence-based Care: Practicality and Implementation
Oregon Health Forum Event
Tuesday, March 17, 2009, 7:00 a.m. – 9:00 a.m.
Portland, O

Can Health IT Improve Medical Care?
American Enterprise Institute Event
Wednesday, March 18, 2009, 10:00 a.m. – 2:00 p.m.
Washington, DC

American Medical Innovation, Finding Cures for Cancer and Supporting the U.S. Economy
Council for American Medical Innovation Roundtable Discussion
Thursday, March 19, 2009, 10:00 a.m.- 12:00 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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