Targeting Health Care

Despite the media’s obsession this week with Vice President Cheney’s quail hunting accident in Texas, President Bush devoted his week to an intense focus on his new health care proposals.

  • Mr. Bush traveled on Wednesday to Wendy’s International in Dublin, Ohio, to praise the chain for being among the first major companies to offer HSAs to its workers. This was the president’s first major speech to explain his proposals in detail and he concluded, “The heart of the reform is that you got to trust the people of the United States of America. And I do?[W]hen you trust the American people to make wise decisions about their health care, positive things happen. Free markets and competition transform our world. They have the power to transform our health care system.” What a novel approach to health reform!

  • Also this week, the White House, in an unusual move, responded directly to a column by Sebastian Mallaby in Monday’s Washington Post to answer his litany of complaints against HSAs. In “Setting the Record Straight,” the White House lays out the facts that HSAs have broad appeal and are not for the healthy and wealthy. I put in my two-cents worth in a letter to the editor of the Post.

  • Then the National Economic Council at the White House put out an excellent booklet with an item-by-item description of the president’s proposals.

  • And finally, the president hosted a panel discussion on Thursday in Washington focusing on the importance of getting information to consumers about the prices of health care. CMS director Mark McClellan, Robin Downey of Aetna, and Gail Wilensky of Project Hope were joined by providers and patients to explain that this is key to the success of consumer-directed health care.


But the battles continue: Jonathan Gruber, an MIT economist, has produced yet another in his series of studies about the damaging effects of policy initiatives that give more power to consumers and markets.

Gruber concludes that the president’s health reform proposals will cost $12 billion a year and increase the number of people who are uninsured by 600,000. He says that by equalizing the tax treatment of health insurance, more companies will drop coverage. And he says only about half of the employees who are dropped from coverage will buy it on their own and therefore will remain uninsured.

This is a static model that assumes people will not do the right thing given a different set of incentives. We already know that about 3 million people have bought the health insurance that qualifies them to open an HSA and that about a third of them were previously uninsured. So how do you answer that, Dr. Gruber? Given a new options and new incentives to get coverage that they can afford, people are responding by getting themselves insured.


As part of my still-busy speaking schedule, I was invited to give a keynote speech to about 300 people in Atlanta yesterday sponsored by the Atlanta Association of Health Underwriters, at the invitation of Georgia mover and shaker Russ Childers of Americus. The forum was called “Evolve or Dissolve.”

These agents and brokers are excited about the opportunities provided by HSAs and HRAs and are thankful to have these new options to offer their customers, especially small and medium-sized businesses. They clearly understand that they must evolve with the times to new, more affordable health insurance arrangements, or their client base will dissolve.

Asked how many of them expect small businesses to start dropping health coverage big time if costs don’t begin to moderate over the next several years, virtually everyone in the ballroom raised their hand.

The biggest complaint in the room: While HSA tax incentives are valuable, insurance companies are not giving much, if any, of a price break over traditional insurance to people who buy higher-deductible health policies. This is especially a problem in states like Georgia with far too little competition among insurers. It’s the other big challenge and must change.


The Senate’s Health, Education, Labor, and Pensions Committee is working hard under the direction of Chairman Mike Enzi to provide new options for people to get more affordable insurance through an updated version of his Association Health Plans bill.

If the Senate can come up with a version of the legislation which insurers, small business, and insurance commissioners can live with, which it is on track to do, this bill could pass the House and be signed into law by the president this year.

Some relief from expensive health insurance coverage mandates and insurance regulations will go a long way toward helping to give people more affordable policies. Watch this space for progress reports?

Grace-Marie Turner


  • Cigna Choice Fund study provides new insights on consumer decision-making in consumer-driven health plans
  • Turning Medicaid beneficiaries into purchasers of health care
  • Price controls, patents, and cross-border internet pharmacies: Risks to Canada’s drug supply and international trading relations
  • Selected findings on seniors’ views of the Medicare prescription drug benefit

Source: CIGNA Press Release, 02/02/06

A new study from CIGNA HealthCare finds that consumers who switch from a traditional HMO or PPO to a consumer-driven health plan can achieve significant cost savings while making positive changes to their behavior, including increased use of medications to treat chronic conditions. “Total medical costs, excluding prescription drug expenses for those enrolled in a CIGNA [consumer-driven] plan declined by approximately 8% ? while costs for those enrolled in a traditional HMO or PPO plan increased by approximately 4%,” according to the study. A decline in both inpatient and outpatient facility costs drove the decline in health care spending, but “while overall costs decreased for these services, the actual number of admissions increased?showing that consumers received needed care in cost-effective ways.” Those enrolled in a consumer-driven health plan also “significantly increased their usage of medications to control diabetes, asthma, high cholesterol, and to prevent heart attacks.” Prescription drug costs for consumer-driven health plan participants were 5% less than the costs of those enrolled in a traditional plan, suggesting that they “did not skip medications but instead made more cost-effective decisions.”
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Authors: Charles Milligan, Cynthia H. Woodcock, and Alice Burton
Source: AcademyHealth, January 2006

“Many state policymakers are interested in applying the concepts of consumer-directed care to the Medicaid program,” write Charles Milligan and Cynthia Woodcock of the Center for Health Program Management and Development at the University of Maryland and Alice Burton of the State Coverage Initiative. This issue brief describes the approaches to consumer-directed health accounts being taken by Florida, South Carolina, and West Virginia and outlines factors any state should consider in developing similar programs. A successful program “is dependent on how well a state identifies and meets the critical success factors of protecting access to care; anticipating the behavioral changes of insurers, providers, and employers; reformulating the roles of multiple state agencies; and developing new approaches to state risk management,” conclude the authors.
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Dr. Michael Bond writes about the challenges facing Kansas’ Medicaid program and offers steps for improvement in a paper for the Flint Hills Center for Public Policy.
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Author: Brett J. Skinner
Source: The Fraser Institute, 02/06

Cross-border Internet drug trade between Canada and the United States violates the intellectual property rights of pharmaceutical companies and poses a threat to the Canadian drug supply, according to an analysis from the Vancouver-based Fraser Institute. There were 278 confirmed or suspected Internet pharmacies operating in Canada as of June 2005, and sales to the U.S. accounted for nearly 70% of their total business. Of the top-selling 500 cross-border Internet drugs, 60% were brand name products and 40% were generic products. Nearly half of the value of sales for generics was accounted for by drugs not yet offered as generics in the U.S., which means they are likely still under active patent protection. “The data suggest that Canadian-based Internet pharmacies are engaged in a massive theft of intellectual property by selling drugs to Americans in violation of active US patent rights,” according to the report. The potential for future growth also threatens Canadian access to prescription drugs. “When the estimated potential individual and bulk demand from the United States for cross-border drugs is totaled, the number of American consumers that might compete for access to the Canadian drug supply is nearly four times (approx. 119 million) the size of Canada’s entire population,” according the study.
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Source: Kaiser Family Foundation, 2/06

The Kaiser Family Foundation finds in its latest tracking poll that about half of seniors say they have enrolled or plan to enroll in a drug plan, nearly 30% say they do not intend to enroll in a drug plan, and about one quarter still are uncertain. The majority of the 30% who do not plan to enroll say they have another program or plan that helps pay for their prescriptions. “Though more seniors are enrolling in a drug plan each month, the tracking poll also shows that seniors have become less enthusiastic about the new Medicare drug benefit over the past six months,” clearly a result of the negative publicity it has received. “Seniors are now almost twice as likely to say they view the benefit unfavorably (45%) as favorably (23%). That reflects a shift since August, when seniors’ positive views peaked and they were as likely to view the benefit favorably (32%) as unfavorably (32%).”
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The Health Disparities Myth: Diagnosing the Treatment Gap
American Enterprise Institute Event
Wednesday, February 22, 2006, 10:00 a.m. – 12:00 p.m.
Washington, DC

For additional details and registration information, go to:

The Ticking Time Bomb?High Blood Pressure
Hill Lunch Briefing
Friday, February 24th, 2006, 12:00 – 1:00 p.m.
House Rayburn Room B-339
Washington, DC

Panelists will include: Milliman Actuaries, the National Medical Association, the Association of Black Cardiologists and the National Minority Health Month Foundation. Call 202-835-3434 to RSVP.

Kentucky’s Answer to Medicaid Reform
Heritage Foundation Event
Tuesday, February 28, 2006, 12:30 p.m.
Washington, DC

This event will feature Governor Ernie Fletcher of Kentucky. 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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