Year-End Thoughts

As the year comes to a close, we clearly see progress toward greater freedom in the health sector – not in leaps but in small steps. As we have learned all too well, health care is far too important for people to tolerate bold change. The best way to make progress is through new incentives that allow people to choose change gradually rather than to have it forced upon them all at once.

A good lesson: Health Savings Accounts and consumer directed health care are crossing the threshold of market acceptance. But I expect that when the numbers come out about enrollment in many of the big company plans for next year, we will see a relatively small uptake from a few bold employees. Others will watch them test the waters and, in a year or two, may follow. We are likely to see bigger enrollment in companies that have provided extra incentives and good education to encourage employees to enroll.

But I don’t expect a stampede. This is an example of how to do things right: Offer something new, give people a choice, and give the market time to figure out how to make the choices attractive.

This year also has taught us how not to do things: One of the reasons people are having so much trouble with the new Medicare drug benefit is that it is being offered on a huge scale to 40 million seniors – people who are among the most resistant to change – and they are being given a relatively short time to figure it out. On top of that, the program has the Byzantine complexities of a benefit designed not to please customers, but rather green-eye-shade budget analysts.

But the saving grace has been that private plans were allowed to reshape the drug benefit to make it more attractive. And they have done a remarkable job – with low premiums, no deductibles, more drug choices, and even options that close the dreaded donut hole. Competition works.

Once the benefit gets settled in, people will start to realize that there is no way it could have been offered in the typical Medicare mold. Either the benefit would have bankrupted the government (even faster) or seniors would have been forced into a one-size-fits-all program.

But seniors’ needs are too specific for that to work: They would have found that the only thing worse than too much choice would be no choice.

I have been doing a number of radio interviews over the last six weeks about the new drug benefit. The interviews almost always start out with the host wringing his or her hands about its overwhelming complexity.

We talk through the reasons why there are choices, why this is a good thing, and how people can work their way through the decision tree. And almost always, by the end of the program they have calmed down. We also get very good questions from the callers, showing that they are smart and are getting informed about the drug benefit and their specific needs. But it’s taking time.

Our efforts on the health care front will of course continue next year (and the next and the next), with Medicaid set to take a much more prominent role in the policy debate. It’s the next piece of the puzzle in trying to give millions of people choice among competing private plans that actually want their business.

Consumers, physicians, health plans, and government have much to learn about entering this new world of consumerism. But I believe that economic forces are propelling us in this direction. As people have access to more information, they demand more choice. And the only way they can get that is to have more control over their health spending. Fortunately, political forces have converged to provide them new options.

Given a chance, the health sector can be transformed to operate much like the rest of the economy. We will find new ways to get to faster-better-cheaper, there will be more resources to protect the most vulnerable, and more people will have affordable options of buying health insurance that they own to protect them against future uncertainties.

Many challenges remain and there are no guarantees, but I believe we have begun to turn this battleship around. Thanks to all of you who are part of this important transformation.

All best wishes from all of us at the Galen Institute to you and your family for a blessed Christmas, Hanukkah, and New Year.

Grace-Marie Turner


  • Health care for all, just a (big) step away
  • Federal Employees Health Benefits Program: Early experience with a consumer-directed health plan
  • FDA operation reveals many drugs promoted as “Canadian” products really originate from other countries
  • Vaccine liability: Congress should give vaccines a shot in the arm
  • Prescription for trouble

Author: Eduardo Porter
Source: The New York Times, 12/18/05
The Times looks at the $130 billion in tax subsidies to Americans who get their health insurance at work and sees an opportunity to redistribute this money to move toward universal health coverage. But columnist Eduardo Porter recognizes the political shoals: A family making $100,000 a year with a health insurance policy costing $11,500 a year will save some $4,000 in taxes. “Those families would surely hate to lose the subsidy.” But Porter quotes the Tax Reform Panel as saying the subsidy is “going to the wrong people, [it] promotes wasteful medical spending…encourages the wealthy to buy more insurance and to use more health services than they need?And it may bolster premiums across the board.” Porter says if the goal is to expand access to health insurance, “a bolder option is available: focusing the bulk of the money on the bottom end of the income distribution.”
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Source: Government Accountability Office, 11/05

The GAO looked at early experience with a Health Reimbursement Arrangement (HRA) offered to federal employees since 2003 and found that enrollee satisfaction was comparable to those in other plans. “For four of five specific plan performance measures – access to health care, timeliness of health care, provider communications, and claims processing,” those in the Postal Worker’s HRA, run by Definity Health, were basically as happy with their health plan as those enrolled in other plans. HRA enrollees were more satisfied with customer service than other new plan enrollees (but less than those in established national PPOs.) The biggest complaints from HRA enrollees involved confusion over tracking account expenditures and deductible balances and getting clear information about plan rules.
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Source: U.S. Food and Drug Administration, 12/16/05

An operation conducted by the Food and Drug Administration (FDA) in August examined nearly 4,000 mail parcels at airports in New York City, Los Angeles, and Miami and found that “about 43% had been ordered from ‘Canadian’ Internet pharmacies and were represented as being of Canadian origin.” However, 85% of these drugs were actually manufactured in 27 different countries around the globe, and 32 of the sampled drugs were found to be counterfeit.
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The U.S. Government Accountability Office also issued a report identifying “three factors that have complicated federal enforcement of laws prohibiting the personal importation of prescription drugs. First, the volume of imports has strained limited federal resources at mail facilities. Second, Internet pharmacies can operate outside the U.S. regulatory system and evade federal law enforcement actions. Third, current law requires FDA to give addressees of packages containing unapproved imported drugs notice and the opportunity to provide evidence of admissibility regarding their imported items.”
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Author: Randolph W. Pate, J.D., MPH
Source: The Heritage Foundation, 12/16/05

The U.S. is ill-prepared to face the coming avian influenza pandemic because “vaccine makers face too many legal obstacles and too much potential liability to make the investments needed to combat [the disease],” writes Randolph W. Pate, J.D., MPH of The Heritage Foundation. Pate recommends using the Vaccine Injury Compensation Program (VICP) as a model “to provide strong liability protections for vaccine makers while providing fair and prompt compensation to those injured by vaccines.” Congress can achieve this by expanding the VICP to cover most or all vaccines, making the program less adversarial, ensuring liability protection for the whole vaccine, and waiving the excise tax for low-income or high-priority patients. “Keeping in mind the dual objectives of promoting a robust vaccine industry and encouraging public confidence in vaccines, Congress should take the steps needed to bring about a second ‘golden age’ of vaccines that will benefit all Americans,” concludes Pate.
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Source: Medical Progress Today, 12/05

Recent articles by Consumer Reports, which claim that the Food and Drug Administration’s drug safety system “has extensive weaknesses,” are off base, according to the Manhattan Institute’s Medical Progress Today (MPT). Consumer Reports criticizes the FDA’s rush to approve drugs under tight deadlines, a lack of power within the agency to complete studies after a drug is approved, and a need for post-approval drug testing. MPT says companies already are disclosing a significant amount of clinical-trial data, but adds, “The best safety information, however, probably won’t be gleaned from clinical trials, but from better real-time monitoring?which can spot potential problems long before clinical trials would.”
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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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