Carefully Bold on Medicaid

Our Medicaid Commission held its final meeting on Friday to vote on recommendations to reform what has become the largest health care program in the country, with 55 million recipients.

The recommendations we produced are carefully bold, respecting Medicaid’s role in serving low-income and disabled people but also recognizing the imperative to improve the program and align it with 21st century medicine.

Will the report be dead on arrival when HHS Secretary Leavitt submits it to Congress next month, as some already warn? I certainly hope not. While the commission was appointed by a Republican administration and the report will be submitted to a Democratic Congress, we spent 16 months gathering a huge amount of testimony and research to take the first broad and detailed look at this 41-year-old program.

The testimony was overwhelming that states need more flexibility to be creative in meeting the needs of their citizens without having to go through years of wrangling with Washington for permission. Patients also want more flexibility to get the care they need in the least restrictive settings. And governors say they must gain more control to keep Medicaid spending from swamping other state needs.

Our recommendation to create a new Medicaid Advantage program was approved to provide better coordinated care for those dually-eligible for Medicare and Medicaid who often are the most vulnerable and yet whose care is often the most fragmented.

Kudos to Commission Chairmen Don Sundquist and Angus King. Their skills as governors were abundantly evident in managing the process to get a very diverse group of commissioners to coalesce around a bold set of recommendations. We will put the final amended document on our website as soon as it is posted by the Commission staff.


Clearly, health care is moving to the front burner again and is becoming more mature, with two new reform initiatives released in the last week.

  • America’s Health Insurance Plans, which is composed of the nation’s major health insurers and health plans, has produced a new roadmap for universal access to health coverage. While I am concerned about the expansion of government programs in the proposal, I admire the creative incentives for private coverage.
    • AHIP would expand the State Children’s Health Insurance Program up to 200% of poverty and expand Medicaid to all adults under 100% of poverty.

    • But it also would create two new federal tax initiatives: 1) a new health credit for families, and 2) a new Universal Health Account that would provide tax benefits to encourage people to purchase insurance coverage.

    The plan, which took well over a year to develop, is very timely and will gain a special hearing by a closely divided Congress looking for bi-partisan ideas.

  • Gov. Mitch Daniels of Indiana will propose next year that the legislature create a new program to provide access to health coverage for uninsured Hoosiers. The governor would create new personal responsibility accounts for uninsured citizens that they could use to get preventive and routine care. The accounts would be funded by state funds and individual contributions.

    The plan would include help with routine and preventive costs with protection against major medical expenses, while giving those eligible more choice and control over their health spending.

    Now where have we heard that before?


      Sen. Ted Kennedy, the incoming chairman of the Health, Education, Labor, and Pensions committee released last week his plans for reform when the new Congress meets. Why does it not surprise us that the emphasis is heavily on expansion of government-run programs, starting with Medicare for All, a plan he has been promoting for a generation?

      The question we have is whether the American people will be more or less inclined to turn over more of their liberties in exchange for the perceived security of a government health care card. That will certainly be the focus of the debate over the next two years.


      And finally, we were absolutely blown away by your wonderful response to our survey last week. I can’t tell you how much it means to us to know how much you value the newsletter.

      Several hundred of you took the time to fill out the survey, for which we are most grateful, with comments such as these: “This is one of the best written news and analytical products that I receive. It is very user friendly, and the material is well selected and impressively presented…” “You have one of the best newsletters around. The content is well written and substantive?” “It’s a real treat to receive such a well-written and thoughtful newsletter on a weekly basis. Keep up the good work!”

      We will keep up our work, and also will carefully review your comments and suggestions, including your request that we work harder to link to articles that are more easily accessible online.

      And so you can see how your responses fit with the others, here is a link to the survey results so far. It’s not too late to send us your comments. The survey is still available online at

      Many thanks for your support of our work. We have so very much for which to be thankful this Thanksgiving. All best wishes to you and your family as you celebrate this special American holiday.

      Grace-Marie Turner


      • Wal-Mart’s the best Rx for Dems’ drug problem
      • Questionable cure for a questionable crisis: The Massachusetts health plan takes shape
      • A drug price path to avoid
      • Exploring the public’s views on the health care system: A national survey on the issues and options
      • Employer-sponsored, personal, and portable health insurance

      Author: Grace-Marie Turner
      Source: New York Daily News, 11/14/06

      “Those in Congress who want to help Americans save money by buying Canadian drugs need to open their eyes,” writes Grace-Marie Turner of the Galen Institute. She writes that “the real answer to high drug costs is competition, Wal-Mart style.” The retail giant’s $4 generic prescription drug program, which started as a pilot program in Florida Wal-Marts, has now been expanded to 26 states. Other stores, like Target and BJ’s, have started to lower their prices as well. “None of this could have been possible up north because Canada’s drug industry is swamped in red tape,” concludes Turner. “In fact, generics in Canada are actually more expensive than they are here because Canadians pay a surcharge to subsidize generic manufacturing. Anyone who stubbornly insists that U.S. health care needs a heavy dose of Canada apparently doesn’t shop at Wal-Mart.”
      Full text:

      Author: Sally C. Pipes
      Source: Pacific Research Institute, 11/06

      The Massachusetts health plan has been touted as an innovative way to achieve universal health insurance coverage at an affordable cost, but a close examination of the plan finds that it is unlikely to achieve this goal and will instead cost taxpayers double what was originally claimed, writes Sally Pipes of the Pacific Research Institute. The health plan was originally estimated to cost an additional $125 million, but a new bond filing by the state reveals that it would actually cost $276 million more. Further, “Given the burdensome nature of health insurance regulation in Massachusetts, and the fact that the legislature failed to offer much relief from expensive coverage mandates, offering low-cost plans will be a challenge,” concludes Pipes.
      Full text (pdf):

      Ed Haislmaier and Nina Owcharenko of The Heritage Foundation examine the policy implications of the Massachusetts health plan and find that, although it holds “promise for expanding coverage?the key lesson for policymakers may be the realization that the problem of the uninsured can never be adequately and effectively addressed without first tackling the issues of coverage and portability.”
      Full text (subscription required):

      Author: Alberto Mingardi
      Source: The Washington Post, 11/12/06

      House Speaker-elect Pelosi has pledged to introduce legislation that would allow the federal government to negotiate prices directly with pharmaceutical companies on behalf of Medicare beneficiaries. But the Italian government’s experience with pharmaceutical price controls could hold a valuable lesson for the United States, writes Alberto Mingardi, director of the Italian free-market think tank Instituto Bruno Leoni. Drug prices in Italy are among the lowest in Europe, due in large part to government price controls, he writes. The Italian government purchases almost 60% of the nation’s prescription drugs. “But since the Italian government controls such a disproportionate share of the market, it in effect dictates drug prices.” This has led to a number of problems, including distorting the laws of supply and demand, an increase in overall health care spending, and fewer choices in cutting-edge drugs. “So by attempting to hold down drug prices, the Italian government has deprived its citizens of the best care without reducing health-care spending,” concludes Mingardi. “In their rush to revamp Medicare, U.S. policy leaders should be careful not to make the same mistake.”
      Full text:

      Authors: Marc L. Berk, Daniel S. Gaylin, and Claudia L. Schur
      Source: Health Affairs Web Exclusive, 11/14/06

      A new survey finds that “four-fifths of Americans are dissatisfied with the U.S. health care system and think that it needs to be improved,” according to this Health Affairs Web Exclusive. The study also suggests “that the public is more supportive of solutions that give individuals, rather than the government or employers, the right to make decisions about what coverage is available.” The majority of respondents (80%) say the current employer-based system is not working well and needs to be improved. Additionally, “Americans are relatively evenly divided regarding mandatory health insurance, with the exception of the uninsured who are largely against it,” conclude the authors. “Americans want a system that expands coverage and maintains choice and yet does not increase individuals’ out-of-pocket costs.”
      Full text:

      Author: John C. Goodman
      Source: Health Affairs, November/December 2006

      “Personal and portable health insurance is an idea whose time has come,” writes John Goodman of the National Center for Policy Analysis (NCPA). Goodman describes the concept of portability and the legal obstacles to achieving it. For example, both federal tax laws and the Health Insurance Portability and Accountability Act (HIPAA) strongly discourage health insurance that is individually owned and portable. The study also examines three reform models which could help transition the current employer-based system into one that promotes personal and portable health insurance: the Massachusetts health plan, the NCPA-Texas Blue Cross Blue Shield proposal, and a health reimbursement arrangement approach. “With defined-benefit contributions, employers could get out of the health insurance business and specialize instead on those activities where they have a comparative advantage,” concludes Goodman. “People could seek employment based on their talents and job opportunities, rather than on the basis of health insurance benefits.”
      Full text (pdf):


      Uninsured/Access to Care Health Policy Forum
      Texas Health Institute Event
      Friday, December 1, 2006, 8:30 a.m. – Noon
      Austin, TX

      For additional details and registration information, go to:

      Grace-Marie Turner speaking on the Morning Drive Show
      KBEQ 104 FM Radio Broadcast
      Tuesday, November 20, 2006, 11:00 a.m.
      Kansas City, MO

      For additional details, go to:

      Health Care Forum
      Edison Electric Institute Event
      Thursday, November 30, 2006, 9:00 a.m. – 4:00 p.m.
      Washington, DC

      Grace-Marie Turner will participate in a panel discussion about the impact of the new Congress on health care reform. For additional details and registration information, go to:

      Consumer Directed Health Care Conference
      Consumer Health World Event
      December 11 – 13, 2006
      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.