Getting It Right

The bad news: Seniors learned this week that they will face their biggest Medicare premium increase in a decade ? to $66.60 a month, starting next year ? at the same time Medicare conference negotiators have plans to force higher income seniors to pay even bigger premiums.

This is dangerous politics and backwards policy.

The negotiators? goal is an admirable one ? to inject ?means testing? into Medicare. Done right, this would be a good thing. The Medicare benefit would be ?tested? according to the ?means? of the beneficiaries. Lower income seniors would get more assistance ? by paying less, receiving more benefits, or both.

But the Medicare negotiators have a different means test in mind. Instead, they would force higher income seniors to pay higher premiums. This is a tax increase, plain and simple.

Negotiators are desperately searching for new revenues to pay for the Christmas tree that the Medicare bill is becoming, and taxing the rich is an easy target.

Higher income beneficiaries could pay more, but they should be able to do that by buying services on their own outside of Medicare. This would put less stress on Medicare and would motivate beneficiaries to be smarter consumers of health care services. Forcing seniors with incomes of $60,000 or $100,000 a year to pay more into a government program that already is going bankrupt hardly is an innovative idea.

The proposed premium increase would be mandatory, not optional. This gets perilously close to the bright idea in 1988 to charge wealthier seniors more for a catastrophic Medicare benefit, and we know what happened to that.

Affluent Americans already pay more into the Medicare program in their working years since Congress eliminated the income ceiling for Medicare payroll taxes under former President Clinton. Does a Republican Congress want to take the next step in that march? Hopefully not.

Sen. Ted Kennedy (D-MA) threatened to filibuster the Medicare bill after a means testing amendment passed the Senate last summer. This would have broken Medicare?s promise of solidarity, Kennedy said, to treat all beneficiaries alike.

The amendment was quickly reversed after Kennedy pulled out a podium and threatened to set up shop to filibuster the whole Medicare bill.

It?s unclear if this will be an Achilles? Heel of the Medicare bill in the next round of debate, but it is certain to light fires of opposition on both sides of the aisle.

A dangerous strategy? The Medicare conference report still is taking shape, but we fear rumors may be true that a 60-218 strategy is emerging: Write a bill that can get 60 votes in the Senate and dare 218 members of the House to vote against it for passage. This is not a good omen for free-market ideas.

The good news: The Galen Institute has exciting news this week: After a lot of hard work, we have launched our new and improved website. Take a look at Tara Persico, our web master and chief researcher, has overseen the upgrade to create a new look and much greater functionality.

Best of all, we have a dedicated location for Greg Scandlen?s Center for Consumer Driven Health Care. This is one-stop shopping for everything you might want to know about the revolution that is taking place in the health sector to combine information technologies, consumer purchasing power, and innovative financing solutions.

We also have a calendar with listings of events sponsored by the Galen Institute as well as by our network of policy experts. We?re still working out a few bugs and moving content over from our old site, but I think you?ll really like what you see. Many thanks to Tara.

Big events:

? If you get this in time, please join us today (Friday) for a luncheon briefing in Washington in Room 106 of the Senate Dirksen Office Building. The briefing is entitled ?Exploring the controversy over importing prescription drugs from Canada.? Join us if you can.

? And finally, we had announced another briefing for this Monday (Oct. 20) to assess ?60 years of employment-based health insurance.? This was to have been a joint Galen Institute/Council for Affordable Health Insurance event. Unfortunately, we couldn?t get the speakers we wanted and have postponed the briefing until early December. Watch this space for details.

Grace-Marie Turner



? The pursuit of biohappiness

? Will the conferees? Medicare insurance provisions really work?

? Rx plan ?A? is still alive and twitching

? Woe, Canada

? Prescription drug means testing = Higher marginal tax rates



Author: Leon R. Kass

Source: The Washington Post, 10/16/03

?By all accounts, we are entering the golden age of biotechnology,? writes Leon Kass, chairman of the President’s Council on Bioethics in a Washington Post commentary. But Kass warns that we must be responsible keepers of this incredible knowledge lest our pursuit of perfection turns us into ?mere creatures of chemists.? The bioethics panel released a report 16 months in the making this week entitled Beyond Therapy: Biotechnology and the Pursuit of Happiness. ?We want longer lives — but not at the cost of living carelessly or shallowly with diminished aspiration for living well,? writes Kass. ?We want to be happy — but not because of a drug that gives us happy feelings without the real loves, attachments and achievements that are essential for true human flourishing.?

Full text of op-ed:

Full text of Bioethics report:


Author: Robert Laszewski

Source: The Heritage Foundation, 10/15/03

?Many insurance executives are very concerned about the viability of offering a first-dollar stand-alone private drug benefit,? said Robert Laszewski at a recent Heritage Foundation lecture. They fear the new plan ?will be fraught with anti-selection as seniors calculate their own personal break-even point.? Laszewski warns that ?Many seniors won?t see the new drug plan as a ?win? [because] 60 percent of seniors have drug costs less than the annual break event point?The anti-selection issue, compounded by insurer concerns about chronic government underpayment of health insurers and providers in Medicare, has everyone in the insurance industry wondering just who will show up for the new Medicare benefit?We need only look at the Federal Employees Health Benefits Program (FEHBP) as an example of how the private insurance market and the federal government can succeed together as partners without all the complexity and political product development contained in the Medicare proposals,? said Laszewski.

Full text:


Author: Jeff Lemieux

Source:, 10/15/03

?The Medicare drug benefit being prepared for final passage in Congress is over-promised,? writes Jeff Lemieux of Lemieux gives his predictions of a possible deal that will come out of the Medicare conference, including a look at the new (and unfunded) plan announced this week to provide tax credits to businesses as incentives to retain their retiree drug coverage. ?Of course, the simpler solution to the prescription drug problem is to promise seniors less in the first place,? writes Lemieux. ?In the longer run, the best first step toward a solution to Medicare?s cost problems and benefit limits is a premium-support system?that could?help liberate the government-run program from congressional micromanagement.?

Full text:


Author: Sally Pipes

Source: Pacific Research Institute, 10/14-10/17/03

In this four part series, Sally Pipes, president of the Pacific Research Institute, takes a critical look at the Canadian healthcare system, including its access to new technologies, waiting times for services, and availability of prescription drugs. ?Before making the United States more like Canada by adopting its method of price control and administration of care, reformers need to get a clear picture of what that would mean for American patients,? writes Pipes. ?The cure for what ails the American health system would prove far worse than the disease.?

Full text:


Author: Stephen J. Entin

Source: National Center for Policy Analysis, 10/16/03

Economist Steve Entin of the Institute for Research on the Economics of Taxation examines the impact of the drug benefit subsidies in Medicare bills pending in Congress. Even with the subsidies, ?many seniors will still face significant out-of-pocket costs for prescription drugs.? The bills would ?provide additional help for low-income seniors? but those subsidies would be withdrawn for those at slightly higher income levels. That could disadvantage seniors with very modest incomes. ?Seniors just above the poverty level face high implicit tax rates on any additional income,? he writes. ?The implicit tax penalty from loss of benefits could discourage them from working. It would certainly encourage them to spend down or hide assets.?

Full text:


What is True Medicare Reform? A Perspective from Senate Conferee Senator Jon Kyl

The Heritage Foundation Lecture

Monday, October 20, 2003, 1:00 p.m.

Washington, DC

For additional details and registration information, go to:

National Symposium on Drug Importation

Heartland Institute Event

Thursday, October 23, 2003, 9:00 a.m. – 1:00 p.m. CST

Chicago, IL

For additional details and registration information, go to:

Forty Years of Neglect: The Federal Role in Caring for the Severely Mentally Ill

American Enterprise Institute Event

Friday, October 31, 2003 – 9:30 a.m. ? 12 p.m.

Washington, DC

For additional details and registration information, go to:,eventID.649,filter./event_detail.asp


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

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Editor, Health Policy Matters


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