Bold Plans

Congratulations to Gov. Jeb Bush of Florida for putting forward a bold plan to bring consumer choice and competition into the state’s struggling Medicaid program.

The plan he announced this week would give Medicaid recipients a choice of private plans that will offer basic care, catastrophic coverage, and an option for funded flexible spending accounts that can be used by the recipient to buy additional health services or pay for future health insurance.

Several of us met with Gov. Bush in Tallahassee this summer when he was putting together this plan. Work was delayed as the state was hit with four hurricanes last fall, but it’s clear he is determined to move forward to address the impossible future costs of Medicaid.

Gov. Mark Sanford of South Carolina is another leader working to integrate consumer choice and particularly Health Savings Accounts into Medicaid. And the incoming secretary of HHS, former Utah Gov. Mike Leavitt, is expected to be very supportive of creative Medicaid initiatives.


Nearby Montgomery County, Maryland, decided last year to set up an (illegal) program to import prescription drugs from Canada for county employees. But the program has hit a snag: According to the Washington Post, they’re finding it may actually be cheaper to buy drugs in the U.S.

There are several reasons: The decline of the dollar makes it more expensive for Americans to purchase Canadian drugs with U.S. currency. County officials also failed to consider the cost of shipping drugs from Canada, which can add about $15 to a bill, not to mention added dispensing fees from Canadian Internet pharmacies.

The county also found that the “U.S.-based prescription benefit provider, Caremark, is offering discounts that may make Canadian prices less tempting.”

The county’s conclusion: “In many cases, purchasing medications from Canada would prove to be more costly.”


Several recent book reviews point out the flaws in the writings of critics of the pharmaceutical industry, with some suggesting that pharmaceutical bashing may be on the wane. For example, Judith Wagner, writing in the latest issues of Health Affairs, says that a 2004 book by Marcia Angell, The Truth About the Drug Companies, “offers a bizarre interpretation of drug R&D economics.”

Wagner says that Angell “misunderstands or ignores economics” in assuming that the drug companies will continue their big investment in R&D even under price and utilization controls; Angell believes they won’t have a choice since that’s the business they are in. Wagner mocks Angell’s assumptions and concludes that her cures would harm patients and increase prices.


Our good friend and a founding trustee of the Galen Institute, John Hoff, will soon be leaving for Paris as the newly appointed HHS Health Attache to the U.S. Mission there.

John has been at HHS as the Deputy Assistant Secretary for Disability, Aging, and Long-Term Care Policy since 2001 and has been a key force in the Bush Administration in advancing the free-market health policy agenda.

Now he will literally take on the world! He will be working with the OECD (the Organisation for Economic Co-operation and Development) and UNESCO (the United Nations Educational, Scientific and Cultural Organization).

We send our very best wishes to John and his wonderful wife, Laura, and can’t wait to visit them in Paris.


I’m often so busy with the daily and even hourly demands of meetings, conferences, speeches, interviews, and newsletter deadlines that I have difficulty finding time for serious writing projects. So I am going to step back from the craziness and get out of Washington for a few weeks to work on a paper/monograph that I have wanted to write for more than a year.

As a result, newsletters will be intermittent, but you can certainly stay current by subscribing, if you don’t already, to my colleague Greg Scandlen’s excellent newsletter, Consumer Choice Matters. He follows the latest developments in the world of consumer-driven care and will alert you to important papers, news articles, and commentaries. Simply click here to subscribe. Au revoir!

Grace-Marie Turner



  • Tsunami aid: Was the American response sufficiently generous?
  • Health insurance mandates in the states (updated)
  • Access to conventional medical care and the use of complementary and alternative medicine
  • Tale of two docs: Why dentists are earning more
  • Health spending growth slows in 2003
  • Health care agenda for the new Congress


Author: Grace-Marie Turner

Source: Galen Institute, 01/12/05

“The $350 million pledge by the U.S. government to aid the victims of the tsunami catastrophe in Southeast Asia represents only the beginning of American generosity,” writes Grace-Marie Turner. The total aid will likely be in the billions of dollars with companies like Pfizer and Fed-Ex donating cash, supplies, and resources to the effort. “GlaxoSmithKline donated not only millions of dollars in cash but millions of doses of antibiotics and vaccines for typhoid and hepatitis,” writes Grace-Marie. “It’s important to remember, the next time political leaders start to beat up on big business, how important their products and resources are when catastrophe hits.”

Full text:


Authors: Victoria C. Bunce and J.P. Wieske

Source: Council for Affordable Health Insurance, January 2005

The Council for Affordable Health Insurance has released an updated version of its detailed list of health insurance mandates in each state, now including for the first time an actuarial estimate of how much each mandate adds to the cost of a health insurance policy. “Even though most mandates increase prices by less than 1%, once all the mandates in a state are totaled – about 40 for most states, but Minnesota has 62 – they can quickly increase the price of a policy and make it too expensive for people to afford coverage,” write the authors. The report contains a chart of the mandates with information broken down by state into three categories: types of mandated benefits, providers, and covered populations.

Full text:


Authors: Jos? A. Pag?n and Mark V. Pauly

Source: Health Affairs, January/February 2005

“[T]he number of visits to practitioners of alternative therapies is now higher than the number of visits to all U.S. primary care physicians,” write Mark Pauly and Jose Pagan of the University of Pennsylvania. The percentage of adults who indicated that they used complementary and alternative medicine (CAM) therapies in the previous year has dramatically increased from 33.8% in 1990 to 62.1% in 2002. Forms of CAM therapies include prayer, natural products, meditation, chiropractic care, yoga, and massage. “Recent increases in CAM use could be the result of not only the desire for individual empowerment and patient dissatisfaction with conventional medicine, as has been claimed, but also of increases in the relative cost of conventional health care,” write the authors.



Author: Mark Maremont

Source: The Wall Street Journal, 01/10/05

Mark Maremont, staff reporter of The Wall Street Journal, describes how differently “the managed-care steamroller” has impacted the practices of Randy Bryson, a dentist, and his brother-in-law Larry Fazioli, a family-practice physician, both in Pennsylvania. The managed-care reforms of the mid-1990s provided physicians like Dr. Fazioli with “easy access to new patients. But more patients meant more office visits at the cut-rate fees demanded by insurers.”

But in the past few years, dentists have started making more money than many physicians, earning an average $166,460 compared with $144,700 for family-practice physicians. Dentists are outpacing doctors because “most private dental insurance is still paid on a fee-for-service basis?leaving dentists free to charge whatever the market will bear,” the Journal writes. Dr. Bryson, for example, stopped accepting insurance and started advertising cosmetic procedures like veneers and whitening, moving “from needs-based dentistry to wants-based dentistry.” As a result, Dr. Bryson works 32 clinical hours a week and “the practice’s gross revenues are up about 60%.” Meanwhile, his brother-in-law physician sometimes works 80 hours a week and complains “my take home pay has definitely gone down.”

Full text (subscription required):


Authors: Cynthia Smith, Cathy Cowan, Art Sensenig, Aaron Catlin and the Health Accounts Team

Source: Health Affairs, January/February 2005

For the first time in seven years, the pace of health spending growth slowed in 2003, driven in part by “financial constraints on the Medicaid program and the expiration of supplemental funding provisions for Medicare services,” write Smith et al of the Centers for Medicare and Medicaid Services. U.S. health care spending rose 7.7% in 2003, reaching $1.7 trillion and representing 15.3% of the Gross Domestic Product. Medicaid spending in 2003 reached $267 billion as states tightened eligibility and restricted benefits, while Medicare spending reached $283.1 billion. “Prescription drug growth slowed more sharply than the growth of any service, increasing 10.7% in 2003, compared with 14.9% in 2002,” write Smith et al. Private-sector spending stabilized in 2003 and “the only major area with accelerated growth in 2003” was consumer out-of-pocket spending, due to an increase in employee cost sharing for health services. “Although growth in total health spending decelerated in 2003, this was faster than growth in both the aggregate economy and employee compensation, which suggests an increasing burden on sponsors and employers,” the authors conclude.

Full text of Health Affairs (subscription required):

Robert Pear’s New York Times article on the study:

Centers for Medicare & Medicaid Services press release:


Source: The Kaiser Family Foundation and the Harvard School of Public Health, 01/11/05

“[A]lmost two thirds (63%) of U.S. adults cite lowering the costs of health care and health insurance as a top priority for the President and Congress, followed by making Medicare more fiscally sound (58%) and increasing the number of Americans with health insurance (57%)” according to a post-election survey conducted by the Kaiser Family Foundation and the Harvard School of Public Health. The survey also shows the majority of Americans favors malpractice reform, with 63% of the public in favor of “legislation that would limit the amount of money that can be awarded as damages for pain and suffering to someone suing a doctor for malpractice.” Other key health topics covered in the survey include the uninsured, prescription drug importation, and consumer driven health care. Thirty percent of U.S. adults have heard the term “health savings account” and know what it means, and “4% of the public overall say they are currently enrolled in a health savings account.” But more than half (53%) say they have not heard of HSAs.

Full text:


APPA Private Practice Business Conference & Expo

American Private Physicians Association

January 19, 2005 , 5:30 – 9:00 p.m.

Santa Monica, CA

This event will feature Grace-Marie Turner. For additional details and registration information, go to:

Implications of the Medicare Rx Benefit for Dual Eligibles

Kaiser Family Foundation Briefing

Monday, January 24, 2005, 9:15 – 11:00 a.m.

Barbara Jordan Conference Center, Washington, DC

Space is limited, please RSVP to Tiffany Ford at (202) 347-5270 or e-mail:

Demonstration of Online Tools for Consumers Enrolled in Consumer-Directed Health Plans

Kaiser Family Foundation Event

Tuesday, Jan. 25, 2005, 9:30 to 11 a.m. (Registration and breakfast at 9 a.m.)

Barbara Jordan Conference Center, Washington, DC

RSVP to Tiffany Ford at (202) 347-5270 or

A Consumer Driven Health Fair

Medical Society of Johnson & Wyandotte Counties Event

Wednesday, January 26, 2005, 6:00 p.m.

Overland Park, KS

This event will feature Greg Scandlen of the Galen Institute. For additional details and registration information, go to:

America’s War On Carcinogens

Cato Institute Press Briefing and Book Forum

Wednesday, January 26, 2005, 12:00 noon luncheon, 1:00 p.m. panel discussion

Washington, DC

For additional details and registration information, go to:

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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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.