Awaiting the Numbers

The U.S. Census Bureau is expected to announce this coming Thursday its estimates of the number of people who didn?t have health insurance in 2003. The number almost certainly will be higher than the 43.8 million estimate for 2002, and it will equally be certain to add more fuel on the political debate over how to reduce the numbers.

Dan Crippen, former director of the Congressional Budget Office, reminds us that the “uninsured” are not a homogeneous group. Many are chronically uninsured, but the majority are between coverage, with the average duration of uninsurance lasting seven months. ?Portability (of which HSA’s can play a part), and new insurance products to cover these ?gaps? would do more for the ?uninsured? than any federal program spending $100’s of billions,? Crippen writes. ?The flexible nature of our labor market and the inflexibility of many public and private insurance plans result in gaps in coverage that suggest a much different public policy than currently being contemplated,? he says. Current CBO director Doug Holtz-Eakin also stressed the need for a multi-faceted approach to helping the uninsured in testimony he gave earlier this year.

We?ll give you an analysis in this space next week when we have the actual numbers. But it?s already clear what?s happening.

The number of people with job-based coverage is declining because our economy is changing from an Industrial base to the Information Age. Tying health insurance to the workplace just isn?t stable when there is so much job-mobility. The vast majority of new jobs created are by new, small businesses. Yet our system gives the biggest incentives for health insurance to big companies with stable workforces.

The big question for voters this fall is whether or not they choose a new way, with health insurance that people can own and take with them from job to job. Stay tuned for more next week?.


Criticism continues of the new Medicare law. Unfortunately, many members of Congress are spending the August recess in Town Hall meetings with their constituents telling them there?s little or nothing good in it for seniors. And the events get a lot of coverage by local papers.

We can?t answer every one of the articles, but I did take my own congressman, Rep. Jim Moran (D-VA), to task in a letter to the editor of his local paper with facts and figures showing that the new Medicare drug discount card program could provide serious help. The Business Roundtable (BRT) did a state-by-state analysis and found that 2,168 seniors in Rep. Moran’s 8th congressional district are eligible for a $600 cash subsidy this year and next, and another 63,921 could benefit from drug discount card savings. The BRT estimates that the total benefit to seniors in Mr. Moran’s district in 2004 and 2005 could be $8.3 million.


Finally, the drug importation debate appears to be heating up again. Illinois Gov. Rod Blagojevich announced on Tuesday a sweeping new effort that would allow any Illinois resident to import drugs from Canada, the U.K., or Ireland. This would be, of course, a violation of U.S. law. But Blagojevich forgot one thing: Checking with Irish authorities ? who were not pleased.

Crack reporters at the Chicago Tribune called a representative of the Irish Pharmaceutical Healthcare Association who called the Illinois program ?totally unworkable and impractical? and raised concerns about the effect of the proposal on the Irish prescription drug supply. ?It might have been better if [Blagojevich] had spoken to us first,” the official said.

And a Tribune editorial also gets it right: Illinois “should not be in the business of helping people break the law, even if its elected officials disagree with that law.” Unfortunately, it goes on to say that the editors are sure that Congress will soon pass a law making importation legal.

Here is a link to a summary of the coverage:

Grace-Marie Turner


? Bringing rational payment structures to cancer treatment under Medicare

? How consumer-driven health care evolves in a dynamic market

? Senator Dorgan?s breathtaking drug bill

? Update on individual health insurance

? Health insurance mandates in the states 2004

? A tax-code cure for ailing health care


Author: Grace-Marie Turner

Source: Galen Institute, 8/19/04

?The new Medicare legislation enacted in December, 2003, continues to draw fire for its cost and structure, but the blanket criticism misses many of the important and necessary improvements it contains,? Turner writes. ?One such change involves the way Medicare Part B pays doctors for administering prescription drug therapy in their offices, including chemotherapy.? Doctors have often been vastly overpaid for oncology drugs while being significantly underpaid for their costs in administering the therapies. In one example, doctors were paid $382 for a drug that cost them $5 to buy. The new Medicare law provides a more rational formula based upon the Average Sales Price of the drugs and new mechanisms to more fairly compensate doctors for practice expenses.

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Author: Greg Scandlen

Source: Health Services Research, 08/04

Greg Scandlen of the Galen Institute offers his commentary on a collection of research papers documenting early experiences with consumer-driven health care. Scandlen emphasizes that ?consumerism in health care is in its infancy? and the market is ?in a period of experimentation and trial and error.? He notes that it?s just as important to study mistakes and missteps as successes ?as a welcome opportunity to improve the product offerings.? He says that early adopters in a new market differ in predictable ways from later adopters in a mature market, with the former willing ?to accept risking the unknown?If the product is successful at this stage, word gets out and the new idea attracts a wider market segment.? One of the greatest values of the consumer movement, Scandlen notes, is that ?[v]endors and employers are free to refine their products in accordance with changing conditions and growing knowledge.?

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Author: Stephen J. Entin

Source: Institute for Research on the Economics of Taxation, 08/05/04

Economist Steve Entin analyzes legislation being proposed by Senator Byron Dorgan (D-ND) to allow Americans to import prescription drugs. Entin criticizes the bill?s provisions that he says defy constitutional protections of private property rights. The Dorgan bill ?would effectively give foreign exporters and domestic importers the right to demand that manufacturers produce and sell proprietary products to them at prices determined by foreign laws and regulations.? The Dorgan bill also would prohibit pharmaceutical companies from limiting sales to foreign countries. ?This is forced production and forced sale,? Entin writes. His assessment: ?The Dorgan bill is a breathtaking assault on patient protection and property rights,? and is an ?audacious effort to wish away a basic law of economics and markets.?

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Source: Kaiser Family Foundation/eHealthInsurance, 08/04

Using data from eHealthInsurance, this Kaiser Family Foundation report provides a valuable portrait of the individual insurance market, including who is buying these policies and how much they are paying in premiums by age group and geographic region. According to the report, ?Single purchasers tend to be young ? only 36% are age 35 or older, although 12% are age 55-64. Family coverage purchasers are older ? 64% are age 35 or older.? Premiums vary throughout the country, but older purchasers generally pay higher premiums than younger purchasers, ?reflecting the relatively higher health care costs that people incur as they get older.? Older policyholders keep their policies longer than younger policyholders, and nearly half of individual policies are retained for two years or longer. The report also finds that recent proposals to create tax credits or deductions for individual health insurance could ?markedly increase? the number of people receiving coverage through the individual market.

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Author: Victoria Craig Bunce and JP Wieske

Source: Council for Affordable Health Insurance, July 2004

The Council for Affordable Health Insurance has tabulated the total number of health insurance mandates enacted by all 50 states and finds that in 2004, there are 1,823 mandates. The report includes a chart with information broken down by state into three categories: types of mandated benefits, providers, and covered populations. ?While mandates make health insurance more comprehensive, they also make it more expensive,? write the authors. ?In some markets, mandated benefits increase the cost of health insurance by as much as 45%.?

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Author: Susan Lee

Source: The Wall Street Journal, 08/09/04

Anyone who gives thought to our current health care system can identify the root cause of its problems as ?the widespread existence of a third-party payer system? and ?the benighted tax system that favors it,? writes Susan Lee of The Wall Street Journal?s editorial board. Lee cites the idea of economists John Cogan, Glenn Hubbard and Daniel Kessler to expand tax deductibility to out-of-pocket expenses and individually purchased insurance. Lee writes that the expansion of tax deductibility would have two main effects: first to increase consumption and costs by an estimated $6 billion dollars as lower overall health care prices would increase consumer demand; second to decrease health care spending by an estimated $69 billion as consumers shift to higher deductible, higher coinsurance policies.

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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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