New Interest

There was a quickening of interest this week in our work on consumer-directed care, with medical associations, investment groups, and others who may have been taking a wait-and-see approach to the election results suddenly wanting to learn more.

The election was consequential in determining whether this new approach to engaging consumers as partners in managing health costs will indeed be tested.

While the political climate is friendly, much needs to happen before it can succeed, including educating businesses and consumers about the new opportunities and providing more and better information about pricing and quality measures. The law firm, McDermott Will & Emery has produced a valuable guide to help in making responsible decisions about consumer-directed care options. We offer a brief summary in the articles section below.

While the market is becoming more engaged, it’s unclear right now where health care will be on next year’s legislative priority list.

President Bush says that Social Security and tax reform are his top domestic priorities, but health care and entitlement spending are woven into those issues. The president does want quick action on medical liability reform. And Speaker Hastert and Senate Majority Leader Frist have said that they know the electorate is focused on health care, and they are putting it high on their priority list. The jockeying will continue.

To gauge public opinion, America’s Health Insurance Plans released a post-election survey on health attitudes last week. Of particular interest:

? 93% think that the public has a right to know performance measures for hospitals, physicians, and nursing homes

? 54% favor having the option of choosing more basic coverage at a lower cost rather than increasing costs with government mandates

? 93% think that seniors should have the same choices of health coverage plans in Medicare that are available to the rest of the population.

That means people want more information about quality, they want lower-cost options, and they want choice. Surprise, surprise.


I’m off to Seattle today to speak at a conference sponsored by the Washington Policy Center on Evidence Based Medicine. Then Greg Scandlen and I go to California next week for speeches on consumer-directed care before the Leadership Academy of the California Medical Association.

Leadership on market-oriented health reform is coming from a thousand places and we’re delighted to be part of this exciting conversation.

Grace-Marie Turner


  • Encouraging a responsible approach to consumer-driven health care
  • A sick business: Counterfeit medicines and organised crime
  • Why Canadians cannot afford to be complacent about American drug re-importation
  • A cost-benefit analysis of drug price controls in the U.S.
  • Welfare reform reduced public coverage, increased employer coverage among immigrants
  • Book review: Driver’s ed for backseat drivers



Source: McDermott Will & Emery, 10/04

The international law firm McDermott Will & Emery has released a white paper that “outlines recommendations to promote consumer driven health care (CDHC) programs’ goals of reducing costs while improving the health status of consumers.” The paper is based on a colloquium held last May with thought leaders from many sectors of the health care industry, including Greg Scandlen of the Galen Institute. A few of their many recommendations include: CDHC plans should be structured to require the highest cost sharing for services where the member’s decisions can make a difference; full replacement by one insurer should be encouraged where feasible, thus allowing premium contribution and benefit designs to reflect actuarial characteristics of the benefit plans within a single risk pool; and CDHC plans should include disease management programs or the use of a personal health coach to encourage the chronically ill to take the proper steps to control their illness.

Full text:


Author: Graham Satchwell

Source: Stockholm Network, 11/04

An investigation into the trade in fake medicines shows that “criminals and underground organisations are increasingly turning to counterfeit medicines as a means of funding their activities,” according to a report conducted for the Stockholm Network by Graham Satchwell, a former detective superintendent for the British Police Service. The report finds that there is no effective method within the UK of identifying counterfeited pharmaceuticals before they are dispensed and that the “rapid, legal growth in the movement of medicines around the world via parallel trade in Europe and re-importation into the United States provides more opportunities for counterfeit and sub-standard medicines to enter the legitimate distribution chain.” Satchwell concludes that “a three-pronged strategy of education, enforcement and engineering is needed on the part of regulators, law enforcement agencies, the health service and manufacturers to stamp out an illegal trade in medicines that is now becoming life-threatening.”

Book summary:

Press release:


Author: Brian Ferguson

Source: Atlantic Institute for Market Studies, 11/01/04

Most of the attention in the debate over prescription drug reimportation has been from the American perspective, but there are “important implications for Canadians in this debate, and important reasons why we might want to take an active part in it,” writes Brian Ferguson of the Canadian-based Atlantic Institute for Market Studies. Ferguson examines the differences in prices of prescription drugs between Canada and the US and cautions that if re-importation becomes legal, the Canadian market “will be swallowed” by the U.S. market. This will result in one of two outcomes: “either Canadian drug prices will rise to US levels or, if the Canadian government manages to prevent that, American pharmaceutical companies will restrict their shipments to Canada.” Ferguson concludes, “In that case, each pill re-imported into the US will be a pill that is not available for Canadian consumers. In either case, we lose.”

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Authors: Rexford E. Santerre and John A. Vernon

Source: AEI-Brookings Joint Center for Regulatory Studies, 10/04

Critics of the pharmaceutical industry often charge that U.S. prescription drug prices are “too high,” but imposing price controls to make pharmaceuticals more affordable would “create shortages, reduce quality, lead to price discrimination, and can harm incentives for innovation,” write Rexford E. Santerre and John A. Vernon of the AEI-Brookings Joint Center for Regulatory Studies. Santerre and Vernon used national data from 1960 to 2000 to estimate the consumer surplus resulting from a hypothetical price control regime in the U.S. and found that price controls on pharmaceutical prices during that time “would have caused much more harm than good.” Over this same time period, “the price control regimen would have caused firms to reduce pharmaceutical R&D expenditures (in $2000) by between $264.5 and $293.1 billion?which would have led to approximately 38% fewer new drugs being brought to market in the global economy.”

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Source: Economic Research Initiative on the Uninsured, 10/04

Eight years after passage of the 1996 welfare reform act, researchers have found that Medicaid coverage for immigrants declined, but “as a group, immigrants experienced large increases in employer-sponsored insurance (ESI).” The study was conducted by Harvard University economist George Borjas and funded by the Economic Research Initiative on the Uninsured (ERIU) at the University of Michigan. One clue to the increase: “It’s really a very simple story,” Borjas said. “For immigrants who were potentially cut off from Medicaid, many of them went to work and were able to get health insurance coverage through their jobs.” The analysis “shows that ESI coverage expanded most for noncitizens in two-parent families-particularly families with children.”

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Author: Tom Miller

Source: Health Affairs, November/December 2004

Tom Miller, senior health economist for the Joint Economic Committee, writes that Regina Herzlinger “gets the big picture and broad themes right” in her new book Consumer-Driven Health Care: Implications for Providers, Payers, and Policy-makers. Miller also praises Herzlinger’s effort to “demystify the workings of information markets by explaining how the marginal consumer drives competition that delivers better value for the average, less-well-informed consumer.” However, Miller criticizes Herzlinger for relying too heavily on the current employer-based system to achieve her vision of a consumer-driven health care system. “Where are the assertive, empowered, and (presumably) risk-taking consumers, and what do they really want?” asks Miller.

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Miracle Cure: How to Solve America’s Health Care Crisis and Why Canada Isn’t the Answer

Sponsored by The Manhattan Institute’s Center for Medical Progress

Thursday, November 18, 2004 – 8:30 – 10:00 a.m.

Harvard Club, New York City

This breakfast event will feature Sally Pipes sharing insights from her new book. RSVP acceptances only to 212-599-7000 ext. 41.

Briefing to Release a New National Survey on Consumers’ Experiences with Patient Safety and Quality Information

Wednesday, November 17, 2004, 9:30 to 11 a.m., ET (Registration and breakfast at 9 a.m.)

Barbara Jordan Conference Center, Kaiser Family Foundation Public Affairs Center, Washington, D.C.

The Kaiser Family Foundation, the Agency for Health Care Research and Quality, and the Harvard School of Public Health will release the results of a new survey that assesses the public’s perceptions about the quality of health care, their awareness and reported usage of information in making their health care choices, and their experiences with their health care providers. To RSVP for this event, please contact Tiffany Ford at (202) 347-5270, or email

Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features research and writings by participants in the Health Policy Consensus Group, articles of interest from the health policy world, and 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

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