A High Note

What a year it has been! The year began and ended with Medicare and prescription drugs and seemed to consume virtually every minute in between. Since passage of the most significant new health care legislation in a generation, we?ve been wading through the legislative language and conference report to catalogue the challenges and opportunities ahead.

Even though the price of the legislation was extraordinarily high, it provides important new tools to empower consumers in the health care marketplace. For the first time, Americans now have a chance to gain control over health spending ? and saving ? decisions. The decade of consumer-driven health care is underway. The transition will not be easy and it won?t be smooth. Much work remains, but we are optimistic that we?re finally on the right road.

We closed out the year on a high note with our final event of 2003. The Galen Institute and the Council for Affordable Health Insurance jointly sponsored a briefing for about 15 top journalists, primarily health reporters but also columnists with an interest in health policy. Bob Helms of AEI, Len Nichols of the Center for Studying Health Systems Change, and Greg Scandlen of Galen joined Merrill Matthews of CAHI and me in making brief presentations.

All of us braved a snow, sleet, and rain storm to get to Tortilla Coast on Capitol Hill (the bubbling cheese enchiladas were the favorite) to discuss with reporters the ever-rising costs of health care and how engaging consumers in becoming smarter shoppers for health insurance can help to rationalize the system.

The discussion also previewed the challenges ahead in 2004 over providing help for the uninsured. Senate Majority Leader Bill Frist has said this will be his top priority in health legislation, as have Chairmen Thomas and Tauzin. And we expect the uninsured to be a priority for the White House as well. We?ll be very engaged in the push.

So we bid you farewell for the year and look forward to our continuing conversations with you in 2004. So many of you write with ideas, comments, praise, and sometimes criticism after each newsletter, and we appreciate more than you can know being part of this dialogue with you. Creating a viable free-market in the health sector is central to preserving freedom in this country, and we are privileged to be part of this vital effort.

And please join me in thanking the wonderful team at the Galen Institute ? Greg Scandlen, Liz Lamirand, and Tara Persico. There is no way that the Galen Institute could have the impact it does without their intellect, skills, hard work, creativity, and commitment. And we are most grateful to our loyal donors for your support so that Galen can be engaged in this battle of ideas.

We are indeed thankful for wonderful friends and colleagues, loving family, and the blessings of liberty. Merry Christmas, and we will see you in the New Year.

Grace-Marie Turner


? How the tax exclusion shaped today?s private health insurance market

? Analysis and recommendations for the temporary drug discount card program

? The cost of Medicare: What the future holds

? Hospitals will give price breaks to uninsured, if Medicare agrees

? Crossing lines to prescribe online

? Health care reform returns to the national agenda: The 2004 presidential candidates? proposals


Author: Tom Miller

Source: Joint Economic Committee, 12/17/03

The 60-year-old tax benefit for employer-based health insurance ?helped foster rapid growth of employer-sponsored group health insurance in the United States, but it also created unintended consequence for the structure, cost, and availability of both private health insurance and health care that continue today,? writes Tom Miller, senior health economist of the Joint Economic Committee in this new paper. Miller says that federal tax benefits for private health spending equaled $137 billion in 2002. He argues that federal tax policy actually raises the overall cost of health insurance and health care. ?Employer-provided health insurance also hides the full costs of health care decisions and fosters the illusion that ?someone else? is paying for one?s care,? Miller writes. Further, the structure results in employers and their insurers making important health care decisions for workers. ?We can?t preserve the status quo for another 60 years. We must give greater consideration to alternatives to employer-paid group health plans and expand the use of Consumer-Driven Health Care options such as Health Savings Accounts,? says Robert F. Bennett, chairman of the JEC. ?This change is sorely needed to reacquaint individuals with the cost and quality of the health care choices they can manage on their own.?

Full text: http://jec.senate.gov/_files/HealthTaxExclusion.pdf



Author: Grace-Marie Turner

Source: Galen Institute, 12/18/03

The recently-enacted Medicare legislation establishes a temporary program of Medicare-approved prescription drug discount cards. Seniors who participate in this voluntary program, due to begin next Spring, are to receive access to discounts on their prescription drug purchases negotiated by private card sponsors. The program also provides a cash subsidy of up to $600 for transitional assistance for lower-income seniors. Turner describes how the program works and says that it provides an excellent model for future programs. ?The $600 subsidy for lower-income seniors is a defined contribution that gives government certainty over its program costs and gives seniors control over drug purchase decisions and an incentive to make the dollars go as far as possible?Because the legislation gives the new Medicare Advantage plans leeway in how they structure the drug benefit, they may consider building a benefit structure on this model,? she writes. ?They could provide an up-front cash subsidy that seniors could use for their initial prescription drug purchases. The plan would then require cost sharing for drugs in the next tier of expenditures. The plan could provide umbrella insurance coverage for large prescription drug expenses, with an even lower co-payment required.?

Full text: http://www.galen.org/pdrugs.asp?docID=577


Authors: Douglas Holtz-Eakin and Jeff Lemieux

Source: The Heritage Foundation, 12/15/03

Douglas Holtz-Eakin, director of the Congressional Budget Office, and Jeff Lemieux, the executive director of Centrists.Org, spoke at a recent Heritage Foundation event on the future effects of the Medicare bill. Holtz-Eakin focused on the costs of the prescription drug legislation and said the bill ?is the Rorschach test for the future of health care policy in the United States. Listen to any group talk about this law and you hear widely divergent opinions about the benefits that will be embodied in it as we go forward.? The CBO estimated the bill to cost $395 billion in the first decade, but Holtz-Eakin noted that policy risks and the relative pace in the growth of prescription drug costs are two wild cards that could impact their projections. He said that the costs in the second decade of the drug benefit could approach $2 trillion.

Lemieux also focused on CBO’s cost estimates and used its baseline to calculate total Medicare spending, assuming the doughnut hole is not filled in. Lemieux found that spending would account for one percent of GDP once baby-boomers are fully retired or mostly retired by 2030. Lemieux also warned that too much analysis from the CBO could hurt the legislative prospects of the Medicare bill, and recommended they focus instead ?on whether or not this bill will work as drafted, if there are additional technical changes that need to be made in the law, [and] if there are particular regulatory approaches that should be taken to make the thing work.?

Full text: http://www.heritage.org/Research/HealthCare/HL815.cfm



Author: Lucette Lagnado

Source: The Wall Street Journal, 12/17/03

?Under pressure from lawmakers and consumer advocates, the hospital industry said it would consider making broad price cuts for the uninsured — provided the federal government approves,? Lucette Lagnado reports in The Wall Street Journal. In a letter sent to the Department of Health and Human Services this week, the American Hospital Association said that ?Medicare regulations ?make it far too difficult and frustrating? for hospitals to reduce prices for people who can’t afford health care,? writes Lagnado. The group also ?blamed Medicare for some of their collections practices, claiming the program’s rules ?create a very strong presumption that hospitals must use aggressive efforts to collect from all patients,? including sending collection letters, making telephone and personal contacts, and initiating court action,? writes Lagnado.

Full text (subscription required): http://online.wsj.com/article/0,,SB107161334888831700,00.html?mod=health%5Fhs%5Fhealth%5Fproviders%5Finsurance



Author: Gilbert M. Gaul

Source: The Washington Post, 12/18/03

?From his suburban home in nearby Lee’s Summit [Missouri], Miles J. Jones has written tens of thousands of prescriptions for online customers seeking Viagra, Levitra, Xenical and a handful of other drugs,? writes reporter Gilbert Gaul for The Washington Post. Jones, a pathologist, has had his license for prescribing drugs online revoked or suspended in 13 states, including Missouri. According to the Post, Jones continues to write thousands of prescriptions for the on-line pharmacy netdr.com because the company?s server is located in Pennsylvania, a state where Jones still is licensed. ?Jones said he has never met the owners of netdr.com and does not know who they are,? writes Gaul. ??One of the owners is in Brazil,? [Jones] said. ?As far as I know, the papers of incorporation are in the Bahamas. I know they are somewhere down in the Caribbean.?”

Full text: www.washingtonpost.com/wp-dyn/articles/A9870-2003Dec17.html




Authors: Sara R. Collins, Karen Davis, and Jeanne M. Lambrew

Source: The Commonwealth Fund, 11/17/03

The Commonwealth Fund has published a comparative analysis that examines the health care reform proposals of the 2004 presidential candidates. The plans, offered by President George W. Bush and seven Democratic candidates, vary in features and design, but all propose ways to expand health insurance coverage to uninsured Americans. The report explains each candidate?s overall approach and specific focus as well as cost and coverage estimates for their plans.

Full text:




Border Wars: The Prescription Drug Battle with Canada

Pacific Research Institute Event

Tuesday, January 27, 2004, 10:30 am ? 12:00 pm

San Francisco, CA

This panel debate will feature Dr. Milton Friedman, Congressman Gil Gutknecht, Sally C. Pipes, and Don McCanne, M.D. For additional details and registration information, go to: www.pacificresearch.org/events/index.html.


Health Policy Matters is a weekly newsletter containing commentary on health policy developments, summaries of timely and informative studies and articles on free-market health reform, and notices of upcoming events. It features research and writings by participants in the Health Policy Consensus Group. 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 this newsletter and our organization, please visit our website at http://www.galen.org/.

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

Elizabeth Lamirand

Editor, Health Policy Matters