California Dreamin'

California grabbed the spotlight this week with a report by the state’s insurance commissioner, John Garamendi, blasting Health Savings Accounts and consumer-directed care and stressing his demand for a universal, government-run health care system.

But he has a small problem with actual facts:

  • Consumer directed plans “put the entire health system at risk” because they attract the young and healthy into leaner plans, leaving the older and sicker in traditional plans.

    In fact, Assurant Health found that 29% of its HSA policyholders had incomes of less than $50,000, 57% were over age 40, and 73% were families with children. Importantly, America’s Health Insurance Plans found that 37% of those purchasing HSAs were previously uninsured.

    Further, eHealthInsurance found that most people with HSAs opt for more comprehensive plans that cover 100% of hospitalization, doctors’ visits, lab tests, emergency room visits, and prescription drugs after the deductible. Not so “lean.”

  • “[F]inancial disincentives are likely to cause many to forgo necessary treatment at early stages.”

    In fact, McKinsey & Co. found that those in consumer-directed plans are more attentive to wellness and prevention and were 30% more likely to get an annual physical. Why? “If I catch an issue early, I will save money in the long run,” was the reply. And BTW, HSAs have a built-in incentive to encourage preventive care by allowing it to be part of the insurance contract.

  • “Instead of bringing health care services to more people, we are pricing more people out.”

    In fact, Garamendi should check out the latest eHealthInsurance data that shows that nearly two-thirds of HSA purchasers paid $100 a month or less for their plans. And seven of the least expensive cities for health insurance for 30-year-olds (who we want in the insurance pool) were in?.California.

The Garamendi report is laden with other outrages, but we will leave it to our colleague Dr. Jim Knight, a mover and shaker in California’s consumer-directed health care marketplace, to explain Garamendi’s outrage at CDHC: “Once a significant number of Americans with health savings accounts are not only saving money on their health insurance, but fully vested in and in control of their own health care future, it will be an almost impossible sell politically to push these voters into government run health care.

“So, Mr. Garamendi and others who share his vision, quite rightly see the fast approaching tipping point for HSAs as a near and present danger to their plans for the future of healthcare in California and the United States,” Dr. Knight explains.

The last word.

Grace-Marie Turner



  • Medicine for Medicaid
  • Welfare reform opens Medicaid to millions
  • Heart pills taken by millions recalled as fakes are found
  • Parallel truths and the great drug shuffle
  • Mexicans at home abroad
  • A victory for freedom: The Canadian Supreme Court’s ruling on private health care

Authors: Regina Herzlinger and Tom Nerney
Source: The Wall Street Journal, 08/02/05

“The best cure for Medicaid’s budget woes — and the best medicine for its beneficiaries — are market-based innovations by prescient governors,” write Harvard Business School Professor Regina Herzlinger and Tom Nerney, director of the Center for Self-Determination at Ann Arbor. The authors praise plans from the governors of Florida, South Carolina, and Vermont, which are injecting more consumer-driven programs into Medicaid. Herzlinger and Nerney write that three characteristics are key to these new programs: “(1) liberating enrollees to manage their own health care purchases; (2) freeing providers to design innovative care programs, tailored for the unique needs of the recipients; and (3) enabling intelligent choice with new information and support.”
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Author: Dennis Cauchon
Source: USA Today, 08/02/05

“The expansion of Medicaid to cover the working poor has fundamentally broadened the nation’s safety net,” but also has “made taxpayers the health insurance provider for millions of workers at Wal-Mart, McDonald’s and other low-wage employers,” USA Today reports. In Ohio’s Washington County, for example, the number of families receiving welfare assistance has shrunk from 427 in 1997 to just three today. At the same time, the number of people on Medicaid increased from 4,020 to 7,316. States are largely responsible for decisions to expand Medicaid: A family of four in Minnesota, for example, can qualify for Medicaid with a yearly income up to $54,000. “The success of welfare reform in moving people off of cash assistance and into low-paying jobs has, for better or worse, moved the nation a step closer to a government-run national health care system,” reports USA Today.
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Author: Sam Lister
Source: The Times, 07/29/05

Prescription drug importation, or parallel trade as it is known in Europe, has caused a breach in Britain’s pharmaceutical supply chain, forcing the government to recall thousands of packages of Lipitor, an anti-cholesterol drug taken by millions of Britons, reports The Times. The Medicines and Healthcare products Regulatory Agency immediately recalled the remainder of a 120,000-packet batch after 73 fake packets of the drug were traced to two wholesalers in England and found to contain another statin not marketed in Britain. “The rapid action by the agency is part of a new offensive against fake medication production, which is attracting a growing number of criminals and is regarded as one of the greatest threats to public health,” reports The Times. Each year, about 140 million parallel-traded drugs make their way into Britain and “thousands of patients in the developing world are thought to have died as a direct result of medicine counterfeiting in recent years, with vital drugs such as anti-malaria treatments and insulin found to be fakes.”
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Author: Peter Pitts
Source: Pacific Research Institute, 08/05

Those looking to import prescription drugs from Europe should keep in mind that “profiteers masquerading as pharmacists are selling unsafe, unregulated, mislabeled, repacked, and co-mingled drugs to unsuspecting consumers,” writes Peter Pitts of the Pacific Research Institute. Proponents of prescription drug importation “don’t seem to understand? that you can’t cherry-pick drugs from just one or two of the 25 European Union nations,” writes Pitts. Drugs purchased from a British pharmacy may actually come from EU nations such as Latvia, Poland, or Estonia and may contain incorrect dosages or out of date materials. “The parallel trade in medication is damaging people’s health and, at worse, putting lives at risk,” says Sue Mitchell, editor of the British journal Epilepsy Today. “Strong words, but when the discussion of the parallel importing of medication seems to revolve primarily around money, the reality of patient experience goes unheard all too often.”
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Authors: Eduardo Porter and Elisabeth Malkin
Source: The New York Times, 08/04/05

While political leaders debate how and whether to slow the influx of illegal workers into the U.S., The New York Times investigates a new question that “is beginning to worry some analysts and policy makers on both sides of the border: What will happen when the 10 million Mexicans living in the United States become too old to work? Will they retire in the United States or will they return to Mexico?” Demographers believe that aging immigrants could “fray the social fabric on both sides of the border. Mexico is not prepared to receive them back. With a rapidly aging population living in Mexico and virtually no public system of social security or health insurance, Mexico could hardly cope with millions of returning immigrants who spent their working lives in the United States?But the United States is also unprepared to deal with millions of poor, aging immigrants, eking out a living without recourse to Social Security, Medicare, Medicaid or most other forms of federal assistance.”
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Author: Jacques Chaoulli, M.D.
Source: The Heritage Foundation, July 2005

The official transcript of the media briefing and policy discussion featuring Dr. Jacques Chaoulli has been published by The Heritage Foundation. At this event, co-hosted by Galen and Heritage in June, Dr. Chaoulli discussed his successful challenge to Canada’s ban on private health insurance coverage for services covered under medicare, the country’s socialized health care system. “I suggest the time has come to take advantage of this historic judgment in order to inform people in Canada, in the United States, and elsewhere about the consequences in terms of human suffering from letting legislators adopt, or maintain, single-payer health care systems,” said Chaoulli.
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