A New Community

Our health care system is evolving from a top-down centrally-managed Industrial-Age machine into an innovative Information Age network in which millions of consumers will be empowered to reshape the sector around their choices and needs.

To facilitate this transformation, the Galen Institute soon will be creating a new Consumer Choice Community.

This new service will offer an opportunity for enthusiasts of freedom and choice to get real-time information and participate in conversations with colleagues from around the country who are leading the way in consumer-directed health care.

If you?d like to learn more, please click here, and we?ll send you information about how you can join.


The new Temporary Drug Discount Cards will be activated June 1, and early reports are that enrollment is lagging. Political leaders who are discouraging people from signing up should be ashamed of themselves. They are urging people to stay away from the program because they say it?s just too complicated or because they?re likely to get cheated by the private drug plans.

But a new government study now shows that low-income seniors ? those who need the help the most ? can save up to 93% on their drugs if they join the program. It is reckless to discourage seniors from signing up for a new program that could save them hundreds or even thousands of dollars.

Joe Antos of AEI and I also had an opportunity to set the record straight at a briefing yesterday sponsored by The Heritage Foundation. Presentations are available at http://www.heritage.org/Press/Events/ev052704b.cfm. Joe described the analysis he did just after the new drug pricing information was posted at www.medicare.gov, demonstrating that a low-income patient taking four medications could reduce his drug bill for the rest of this year from $1,824 down to $592.

The combination of the drug discounts, the $600 subsidy, and private pharmaceutical company savings combine to supercharge the drug benefit. Political leaders and journalists should get with the program.


Drug pricing was a big deal this week, with two new studies, one from Families USA and another from AARP, saying that price increases for brand-name prescription drugs are outpacing the overall rate of inflation, “eroding possible savings” under the new Medicare prescription drug discount cards.

But the studies are counteracted by Bureau of Labor Statistics data showing that from January 2003 through March 2004, pharmaceutical prices increased at a compound annual growth rate of 2.9%. In contrast, overall medical prices increased at a compound annual growth rate of 4.8%. Other major categories of health services increased at a rate of 4.3% to 7.1% during this period.

So whom do we believe, organizations with an agenda, or objective government data?


Finally: Believe it or not, I?m taking a real vacation and will be out of the office June 1- 11. Health Policy Matters will return the following week. My husband and I are flying to London to board a cruise down the Thames River and will be in Normandy on the 60th anniversary of the invasion to liberate France. The Stephen Ambrose Museum is organizing the tour, so we will return steeped in World War II history.

Like many of my colleagues, I wish that my father ? a B-17 pilot who flew 50 missions out of England and North Africa ? had lived to see the opening this weekend of the new memorial on the Mall. This is a fitting time to remember and recall the value of heroism and sacrifice.

Grace-Marie Turner


? Consumer-driven health care: Implications for providers, payers, and policymakers

? Less is more

? Some doctors have second thoughts on SB 2’s effects

? The truth about the Medicare drug discount card

? Compromising quality: The high cost of government drug purchasing

? The Asheville Project

? The free market mirage of reimportation




Author: Regina E. Herzlinger

Source: Jossey-Bass Press, 2004

Harvard Business School Professor Regina Herzlinger has compiled the Bible for the consumer-driven health care movement, an 828-page book that she wrote and edited as a guide for those leading the way in the new era of health sector changes. Prof. Herzlinger documents how the consumer-driven health care movement is being implemented and its impact on insurers, providers, new intermediaries, governments, and consumers. She wrote a book of her own within this volume, in addition to editing 72 other manuscripts and case-studies by health care leaders from the U.S. and abroad. Consumer-Driven Health Care is an important contribution to guide sensible decision-making by the army of people who are making this revolution happen.

Description and order form: http://www.josseybass.com/WileyCDA/WileyTitle/productCd-0787952583.html


Author: David Gratzer

Source: National Review Online, 05/27/04

While sensible proposals to help the uninsured stall in Congress because of partisan division, states like Maryland ?may soon prove a model for the nation ? doing more by doing less,? writes David Gratzer of the Manhattan Institute. Maryland, with one of the most heavily regulated health-insurance markets in the country, currently has nearly 700,000 uninsured citizens. Last month, the legislature took steps to change this by passing a bill that will cut regulations and allow no-frills insurance to be sold in the state. ?There remains much to be done: Maryland’s health-care system remains hopelessly over-regulated in other ways, from the pricing of insurance to the reimbursement of hospitals,? writes Gratzer. ?Still, it’s refreshing to see that some now recognize that one way of helping the uninsured is through less government hyper-activity.?

Full text: http://www.nationalreview.com/comment/gratzer200405270842.asp


Author: Daniel Weintraub

Source: Sacramento Bee, 05/25/04

Columnist Daniel Weintraub writes about Los Angeles area physician Marcy Zwelling-Aamot?s decision to stop accepting health insurance plans in her practice and the effect that California?s SB 2 could have on her ?dream of bureaucracy-free medical care.? SB 2 would require all employers in California with more than 50 employees to provide health insurance to their workers or pay a fee into a state fund that would buy the insurance for the employees. The measure was enacted last year, but opponents have gathered enough signatures to refer it directly to the voters on a ballot initiative this fall. ?The politicians say that people are uninsured and we need to cover them, but coverage doesn’t mean care,? says Zwelling-Aamot. She feels that the measure will put even more distance between doctors and patients. ?It?s going to be the worst kind of insurance out there,? according to Dr. Thomas LaGrelius, a leader in the independent physician movement.

Full text: http://www.sacbee.com/content/politics/columns/weintraub/story/9399275p-10323629c.html


Author: Derek Hunter

Source: The Heritage Foundation, 05/26/04

The Medicare Discount Drug Card (MDDC) program, which introduced pricing transparency for prescription drugs via the Centers for Medicare and Medicaid Services? cost-comparison website, is ?an historic achievement,? writes Derek Hunter of The Heritage Foundation. Hunter lists five ways in which the MDDC program specifically helps seniors: 1) It will provide significant help for low-income beneficiaries; 2) The program holds enormous promise for broad public-private partnership in assisting seniors; 3) If made permanent, the program could control Medicare drug costs; 4) The program?s transparency will mean lower prices through competition; and 5) The program expands seniors? personal freedom and control. Hunter also recommends improving the program by making it permanent and intensifying free-market competition. ?An effective and expanded Medicare drug discount card program would lessen the fiscal strain on Medicare and reduce the burden of present and future taxpayers, who are scheduled to pay trillions of dollars just for the drug entitlement,? writes Hunter.

Full text: http://www.heritage.org/Research/HealthCare/wm512.cfm


Author: Edmund F. Haislmaier

Source: The Heritage Foundation, 05/25/04

?Striking the right balance between drug price and availability is difficult,? writes Edmund Haislmaier in a paper for The Heritage Foundation. ?That is why the authors of the new Medicare law gave the job of striking the right balance to those with the most experience in doing it–private insurers and pharmacy benefit managers (PBMs).? Haislmaier argues that Medicare?s managers have no experience managing prescription drug benefits and that the government has less market clout than critics believe because each of the three largest PBMs have enrollments greater than Medicare. He also describes four potentially harmful strategies to extract discounts available to governments (but not to private companies) including: increasing substitution; restricting access to drugs; controlling intellectual property rights; and extracting price concessions by non-market means.

Full text: http://www.heritage.org/Research/HealthCare/bg1764.cfm


Author: Angela Spivey

Source: Endeavors, Winter 2004

The Asheville Project, a pharmaceutical care and disease management program in North Carolina, is saving lives and money by helping patients better manage their chronic diseases, according to this report. The project began in 1997 with a group of local pharmacists who wanted to do more than count pills. They went to the city of Asheville and offered to actively coach 46 city employees in managing their diabetes. The early success of the program prompted the city to expand the program to more patients and other diseases. The Asheville Project today includes 700 people with four chronic diseases and ?is now emulated around the country.? Savings per patient now range from $1,622 to $3,356 annually, with more money being invested in preventive medications and less on emergency-room and hospital care.

Full text: http://research.unc.edu/endeavors/win2004/asheville.html


Author: Doug Bandow

Source: Institute for Policy Innovation, May 2004

?The reimportation of prescription drugs is being pushed not only by big government regulators but also by misguided free market advocates,? writes Doug Bandow, a senior fellow at the Cato Institute, in this paper published by the Texas-based Institute for Policy Innovation. ?Well-intended friends of freedom mistakenly view reimportation as a question of free trade? when it actually is ?the effective imposition of foreign price controls on U.S. drug markets and the further erosion of genuine competition.? He says governments with nationalized health systems that exercise price controls in their health sector are incentivized to ?sacrifice their people?s health in order to save money?Incredibly, the more useful the medicine and the more people it would help, the smaller the likelihood that European government will quickly approve it?.[R]eimportation is merely the first step of more regulation, and if it happens, neither foreign nor American governments are likely to fight fair.?

Full text (pdf): http://www.ipi.org/ipi/IPIPublications.nsf/PublicationLookupFullTextPDF/8BBC3FB34690CD1886256E9F006F0BCE/$File/PR180-ReimportMirage.pdf?OpenElement

Reimportation of prescription drugs was also the topic of a hearing last week before the Senate Committee on Health, Education, Labor and Pensions featuring testimony from John A. Vernon, Ph.D., a professor in the Department of Finance and in the Center for Healthcare and Insurance Studies in the School of Business at the University of Connecticut. Vernon summarized new research which shows the legalization of importation ?will impose a cost of approximately 79 million life years, one million lives, or about $8 trillion.?

Full text: http://aei-brookings.org/publications/abstract.php?pid=777


Employer Decisions to Self-Insure: Does State Regulation Matter?

American Enterprise Institute Health Policy Discussion

Wednesday, June 2, 2004, 9:15 – 11:00 a.m.

Washington, D.C.

Additional information and registration information available at: http://www.aei.org/events/type.upcoming,eventID.835,filter./event_detail.asp

The Campaign to Fight AIDS: Ensuring Access to the Best Medicines

Manhattan Institute?s Center for Medical Progress

Thursday, June 10, 2004, 8:30 a.m. – 2:00 p.m.

Grand Hyatt Hotel, New York City

RSVP by sending an e-mail to at mi@manhattan-institute.org or by calling 212-599-7000 ext. 405.

Consumer Driven Health Care: Physicians Respond

Galen Institute Briefing

Friday, June 18, 2004, 2:00 – 4:00 p.m.

Barbara Jordan Conference Center

Washington, DC

RSVP to Jena Persico at jena@galen.org or call (703) 299-9204. For additional details go to: http://www.galen.org/eventrpts.asp?docID=643.


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