Advancing the Conversation

There is a flurry of news this week in the evolving conversation over health policy:

  • The Medicaid Commission held another in our series of meetings, this time in Atlanta, to focus on long-term care. The presentations from the three-day hearing will be available on the commission’s new website soon.

    But first, we heard from Medicaid Director Dennis Smith who gave us a detailed look at the changes enacted as part of the Deficit Reduction Act this year to begin to move Medicaid into the 21st century. It’s impossible to summarize his two-hour presentation, but suffice it to say that we are on our way with changes that give more flexibility to states to manage the program and make it more responsive to today’s health care economy.

  • Sen. Mike Enzi succeeded this week in getting his bill approved by the Health, Education, Labor, and Pensions Committee, which he chairs, to create new Small Business Health Plans (the next generation of Association Health Plans).

    Sen. Enzi has met with dozens of groups to address concerns, and many, but not all, have been satisfied. The bill now must go to the full Senate before the House can try again, after eight attempts, to enact legislation that will make it easier for small businesses and trade associations to join together to offer health insurance to their members on a national basis. The bill will, of course, be further massaged along the way.

    Having a new place to purchase health insurance goes hand in hand with President Bush’s proposals to allow individuals to deduct the cost of health insurance they buy on their own. They are both part of the move toward portability and greater individual control over health insurance.

  • Chrysler is taking a bold step to get its $2.3 billion health care bill under control. The automaker is introducing a new plan for salaried workers starting next year that ties employees’ contributions to their health insurance directly to their rank and salary.

    Chrysler pays about $11,000 a year per employee in health costs, far higher than the national average. “For 2007? the top of the executive ranks will be responsible for up to 100 percent of their health care premium?while the average executive will additionally contribute around $1,500,” Chrysler says. “Future incremental pre-tax premium increases will follow this pattern of ‘the more you make, the more you will be asked to contribute.'”

    Employees already are paying the full costs of their health insurance, usually through lower cash wages, and Chrysler’s move will make that price more visible.

    The company also is creating a new defined contribution account for retirees over age 65. Called the Health Care Retirement Account (HRA), Chrysler will contribute $1,750 annually for a retiree and an additional $1,750 for a spouse to provide funds to supplement their Medicare coverage.

  • America’s Health Insurance Plans (AHIP) released details of its latest survey on uptake of Health Savings Accounts:

    Of the 3.2 million people with qualifying high-deductible health insurance as of January, about a third were previously uninsured, at least 44% were over age 40, and 90% have PPO-type coverage, giving them access to negotiated prices.

  • President Bush held several events this week to encourage seniors to sign up for the Medicare drug benefit before the May 15 deadline (even as the Senate passed a non-binding amendment that would allow HHS Secretary Leavitt to extend the sign-up time). And Mr. Bush acknowledged there have been problems in launching the new benefit, but said they are mostly ironed out.

    As we recall, most of the early problems were with more than six million seniors who were eligible for both Medicare and Medicaid (“dual-eligibles”) and were automatically enrolled in one of the new prescription drug plans. But a survey by AHIP showed that 90% of dual-eligibles said they didn’t have any problems using their benefit, and 80% said the plans they were assigned do cover the drugs they need (and, of course, seniors have the option to change).

    Noteworthy: 35% of these dual-eligible seniors surveyed said that “politicians’ criticisms of the Medicare drug plan are motivated by a desire to score political points” and only 14% believed the critics had “a sincere interest in fixing the program.”

  • In a possibly related move, the U.S. Senate voted 54-44 on Wednesday in support of a bill sponsored by Sens. Wyden and Snowe to authorize the HHS Secretary to negotiate prescription drug prices. The bill has a number of qualifiers, but it flies in the face of the experience with the new competitive drug benefit.

    Monthly premium prices for seniors are coming down, from the $37 originally estimated to an average of $25, with many plans much less expensive, largely because of fierce competition among the plans and even fiercer price negotiations with drug companies. How on earth would this ever have been possible in a government price-setting regime?

  • Finally, the quote of the week comes from Sen. Sam Brownback of Kansas. Speaking at a Heritage Foundation meeting of faith-based groups about the value of competition and choice in health reform he said:

    “If you don’t want to make your own choices, you will have to live with someone else’s decisions.”

    That’s true for the Medicare drug benefit, health insurance, and life in general.

Grace-Marie Turner


  • Private health insurance in developing countries
  • Health insurance mandates in the states (2006)
  • Prices U.S. pays to hospitals, doctors to be publicized
  • LASIK lessons
  • Personal and portable health insurance
  • Survival of the fittest?
  • For the birds or sleeping with the fishes?

Authors: Mark V. Pauly, Peter Zweifel, Richard M. Scheffler, Alexander S. Preker, and Mark Bassett
Source: Health Affairs, March/April 2006

Wharton Professor Mark Pauly et al analyze the high proportions of medical care spending paid out of pocket in most developing countries, try to understand why private insurance has failed to emerge, and consider options to encourage its development. While the “theoretical case for using insurance to spread the risk” is compelling, the authors write that inadequate demand, restrictions on supply, and high administrative costs are three possible causes of small or nonexistent markets for private insurance. They propose “various options for organizing ‘true’ medical insurance, for which real premiums are voluntarily paid for real benefits that are linked to those premiums,” including mutual or community insurance, nonprofit private insurance, and for-profit insurance.
Full text (subscription required):

Authors: Victoria Craig Bunce, JP Wieske, Vlasta Prikazsky
Source: Council for Affordable Health Insurance

The Council for Affordable Health Insurance has released the latest version of its annual list of health insurance mandates in each state, showing a modest increase over last year. The report contains a chart of the many state insurance- and provider-coverage mandates, and which states have adopted them. The number increased from 1,825 in January 2005 to 1,843 in March 2006. But the cumulative effect is onerous: “Based on our analysis?mandated benefits currently increase the cost of basic health coverage from a little less than 20% to more than 50%, depending on the state,” conclude the authors.
Full text:

Author: Sarah Lueck
Source: The Wall Street Journal, 03/14/06

In a move toward health price transparency, the Bush administration announced this week that it plans to make available to the public the prices that Medicare, other government programs, and private-sector employers and insurers pay hospitals and physicians for many common procedures, reports The Wall Street Journal. “In the next few weeks, Medicare will post on its Web site the amounts it pays to cover certain procedures?Then, the government will make more data available in several high-cost metropolitan areas,” reports the Journal. The government will aggregate price and quality data from Medicare, Medicaid, the Federal Employees Health Benefits Program, and the military.
Full text (subscription required):

There have been several other articles on price transparency published this week, including Newt Gingrich and David Merritt writing about Florida’s efforts to provide information on cost and quality measures for its hospitals and outpatient facilities ( and on retail pricing of many commonly used prescription drugs ( Rep. Michael Burgess (R-TX) also writes about the importance of giving patients control through price transparency in a Washington Times op-ed.
Full text Gingrich and Merritt:
Full text Rep. Burgess:

Source: The Wall Street Journal, 03/10/06

The history of LASIK eye surgery and other medical procedures not normally covered by insurance can provide a glimpse of what a “price-sensitive health-care market would look like,” The Wall Street Journal editorializes. When LASIK was first approved by the FDA in 1999, the cost of the procedure averaged $2,100 per eye. By late 2005, competition had driven the average price down 20% to $1,687 per eye. “In short, the existence of a real market for the LASIK procedure has produced rapid improvements in technology and stable-to-falling costs,” writes the Journal. “Between 1999 and 2004, by contrast, overall annual health expenditures per person in the U.S. increased to nearly $6,300 from $4,400,” arguing that the whole health sector could benefit from more market competition.
Full text (subscription required):

Author: John C. Goodman
Source: National Center for Policy Analysis, 03/14/06

President Bush’s proposal to create personal and portable health insurance “is an idea whose time has come,” writes John C. Goodman, president of the National Center for Policy Analysis. Goodman describes how federal laws and mandates have created perverse incentives for employers and employees, resulting in lack of continuity of insurance and care. “Portable health insurance promises a continuing relationship with an insurer and, therefore, a continuing relationship with doctors and health facilities,” concludes Goodman. “It also promises that if people like their health plan, they will be able to stay in it — without worrying about an employer’s decision or a change in employment.”
Full text:

Author: David Kendall
Source: Progressive Policy Institute, 03/06

David Kendall of the Progressive Policy Institute presents a critical analysis of President Bush’s health care agenda and offers a progressive approach to health reform. Instead of encouraging individual insurance, like Health Savings Accounts, Kendall writes that the federal government should promote regional efforts, like the Puget Sound Health Alliance, that pay doctors and hospitals for performance rather than volume of services provided. Additionally, states should universalize the approach taken by the Federal Employee Health Benefits program by enacting the Small Employers Health Benefits Program Act. Kendall also supports “a national network of specialized health courts”, modeled after the system that handles workers’ compensation claims, to deal with malpractice cases. “This progressive approach to health care reform rejects the false choices offered in the stultified left-right debate between those who seek a government takeover of health care and those whose veneration of free markets would leave individuals to fend for themselves,” concludes Kendall.
Full text:

Source: National Review Online, 03/14/06

National Review Online asked several healthcare and science experts to comment on the latest warnings from Secretary of Health and Human Services Michael Leavitt about the avian-flu threat. Respondents include Jack Calfee of the American Enterprise Institute, David Gratzer of the Manhattan Institute, Sally Pipes of the Pacific Research Institute, and Dr. Henry Miller of the Hoover Institution. “Vaccination to prevent viral and bacterial diseases is modern medicine’s most cost-effective intervention,” writes Dr. Miller. “We need a variety of incentives to revitalize the portion of the private sector that has been battered by policymakers and regulators – both to push forward good scientific ideas and to pull big drug makers into the field.”
Full text:


Citizens’ Health Care Working Group
The Public Forum Institute is holding dozens of meetings across the country as part of the Citizens’ Health Care Working Group. The public is invited to tell the policymakers in Washington what they like and don’t like about our nation’s health care system, and what tough choices our country should make to turn it into one that works for all Americans. You can find a list of meetings and registration information at:

2006 Consumer Directed Health Care Conference
May 8th – May 10th, 2006
San Francisco, CA
Friends of the Galen Institute can receive a 30% discount off the registration fee for this important and informative conference. Please send an e-mail to to receive the discount code. More details and registration information are available at the conference website:

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

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to

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.