The Hopes of Spring

Every Spring, Congress sets aside Health Care Week to try to pass health care legislation, and this year, all eyes are on the Senate. It is working toward a floor debate, possibly as early as next week, on a bill that Sen. Mike Enzi of Wyoming has been working feverishly to complete.

Sen. Enzi’s Small Business Health Plans bill (S.1955) is the new version of the Association Health Plans legislation that has passed the House numerous times, but always stalled in the Senate.

The Enzi bill would allow small businesses to band together to purchase health insurance through “trade, industry, or professional groups, chambers of commerce or similar business associations.” The plans could operate nationally, rather than being subject to the very different rules of each of the 50 states, and the plans could carry a lighter burden of expensive mandates and regulations.

Sen. Enzi is meeting non-stop with key constituencies who are anxious to get the bill passed, such as the National Federation of Independent Business, the U.S. Chamber of Commerce, and the National Association of Realtors. And he’s offering concessions to groups voicing serious concerns, such as Blue Cross/Blue Shield, and even outright opposition, such as state insurance commissioners who don’t want to see disruptions in the status quo.

It would be one thing if the status quo were acceptable, but it is not. Some portion of the 46 million people who are uninsured in this country would find a new option for purchasing health insurance if new group alliances were created.

The details of the Enzi bill are still in flux, and some of our colleagues have concerns. But we are never going to get a perfect bill, and it’s important to get started with new purchasing options more attuned to a 21st century economy. We are hopeful that Chairman Enzi will craft a bill that can pass the Senate and be signed by President Bush to help people purchase more affordable, portable health insurance.


The Massachusetts health law continues to dominate the policy debate, and 2008 presidential candidates from both parties believe they must come up with a plan that can compete. As you know, we have serious concerns about how this new law will actually take shape. (We have a short new paper detailing some of our concerns.)

Newt Gingrich in his newsletter on Thursday for the Center for Health Transformation talks about the unrealistic cost estimates of the Massachusetts plan: He points out that Massachusetts residents earning more than 300% of the federal poverty level (approximately $30,000 for an individual) will be required to purchase health insurance but will not be eligible for the new subsidies.

“State House officials had originally promised that there would be new plans available at about $200 a month, but industry experts are now predicting that the cheapest plan will likely cost at least $325 a month. This estimate totals about $4,000 per year, or about 1/5 of a $30,000 annual take-home* income.”

“?In our estimation, Massachusetts residents earning little more than $30,000 a year are in jeopardy of being priced out of the system,” Newt concludes.

But the individual mandate is nonetheless in place, scheduled to take effect July 1, 2007.

Every health policy conversation ultimately gets down to costs, and Massachusetts will be no different. Will Massachusetts residents ignore the mandate and face the financial penalties at tax time? Will there be a political backlash that forces the legislature to take further action?

A first step could be to acknowledge that the problem was too many mandates and regulations in the first place that drove health insurance costs out of reach of many of its 550,000 uninsured residents.

The Galen Institute published a watershed paper in 1998 entitled “Uninsured Rates Rise Dramatically in States with Strictest Health Insurance Regulations.” It’s worth reminding state legislators again that their efforts to fix the health insurance market through rules and regulations will backfire.

Rather than piling on more rules, Massachusetts needs to allow the market to work to bring in competing companies offering many different types of policies that people want and can afford. We can only hope.

Grace-Marie Turner

(*Actually, it’s $30,000 in gross income, not take home pay.)


  • Cash and Counseling moves into the mainstream
  • Medicaid capitation expansion’s potential cost savings
  • Makers get limited approval of free-drug plans
  • Gaps in health insurance: An All-American problem
  • An exploratory analysis of pharmaceutical price disparities and their implications among six developed nations
  • Health care and small business: Proposals that will help lower costs and cover the uninsured

Source: Alliance for Health Reform, 04/06

This report explores recent policy developments in the successful Medicaid demonstration program called Cash and Counseling that allows certain elderly and disabled beneficiaries to choose and purchase personal care services from the caregivers of their choice. Findings from the program show increased consumer satisfaction and better access to personal care services. Introduced in Arkansas, Florida, and New Jersey, similar programs are now being implemented in 12 additional states to “ease long-term care costs while providing appropriate support for frail elders and persons with disabilities.” The Centers for Medicare and Medicaid Services also is looking for ways to move Cash and Counseling into mainstream Medicaid. “One thing is certain: The strong interest in Cash and Counseling is a sign that Medicaid’s powerful role in financing long-term care services for millions of frail elders and persons with disabilities is headed for change,” concludes the report.
Full text:

Source: The Lewin Group, April, 2006

A new study by The Lewin Group says there is “tremendous room for expansion of capitation contracting in the Medicaid program, and that optimal use of this model could yield savings of $83 billion across ten years.” About 16% of national Medicaid funds in 2003 were spent on a fixed “capitated” basis, usually to Medicaid managed care organizations responsible for providing a full-range of medical services for the beneficiary. “While different models of coordinated or managed care exist in the Medicaid arena, many studies have indicated that capitation contracting with Medicaid health plans achieves the most savings, provides the strongest array of outreach, education, and access initiatives, and creates the greatest opportunity to measure quality.”
Full text:

Author: Robert Pear
Source: The New York Times, 04/19/06

A favorable advisory opinion issued last week by HHS’ Office of Inspector General (OIG) will allow pharmaceutical companies to continue to offer patient assistance programs which provide free drugs to financially needy Medicare beneficiaries, reports The New York Times. “Many drug companies had notified Medicare patients in recent months that such programs would no longer be available,” the Times reported, after the OIG had earlier warned the programs risked “steering beneficiaries to the manufacturer’s products even when cheaper, equally effective alternatives were available.”

According to Inspector General Daniel R. Levinson, patient assistance programs “would operate entirely outside the new Medicare drug benefit. No claim will be filed with the Medicare drug plan?and none of the drugs’ cost will count toward the $3,600 out-of-pocket threshold for catastrophic coverage.” Patients’ financial need, regardless of which Medicare plan they choose, will determine eligibility for the company’s free drug programs. “This advisory opinion illustrates that lawful avenues exist for pharmaceutical manufacturers to give assistance to financially needy patients, including Medicare beneficiaries enrolled [in Medicare Part D]”, said Levinson.
Full text of NY Times article:
OIG Advisory Opinion (pdf):

Authors: Sara Collins, Karen Davis, Michelle Doty, Jennifer Kriss, and Alyssa Holmgren
Source: The Commonwealth Fund, April 2006

In anticipation of Cover the Uninsured Week (May 1-7), the Commonwealth Fund has released findings from its Biennial Health Insurance Survey showing rising uninsured rates among moderate- and middle-income earners and their families. “Two of five (41%) working-age Americans with incomes between $20,000 and $40,000 a year were uninsured for at least part of the past year -a dramatic and rapid increase from 2001 when just over one-quarter (28%) of those with moderate incomes were uninsured,” write the authors. The survey also found that 53% of adults earning less than $20,000 were uninsured for some part of the past year and that of the 48 million adults who were uninsured in the past year, 67% belonged to families with at least one full-time worker [a figure lower than the 80% cited in numerous other studies].
Full text:

Authors: John E. Calfee, Mario Villarreal and Elizabeth DuPr?
Source: AEI-Brookings Joint Center for Regulatory Studies, 04/06

A study of 43 drugs from several wealthy nations finds price controls can lead to higher drug prices for unique drugs, according to the AEI-Brookings Joint Center for Regulatory Studies. While the study found that on average prices were lower abroad than in the U.S., the report finds that price disparities among prescription drugs depend largely on what kinds of drugs are being compared. For example, prices abroad for highly-unique drugs, including most biotech drugs, “tend to be too high rather than too low, while foreign revenues and usage are unexpectedly and even drastically low,” write the authors. “[T]he reluctance of the wealthiest nations outside the U.S. to make quicker use of biotech drugs reduces the expected payoffs from innovative new drugs and therefore retards research and development.”
Full text:

Source: Testimony before the House Subcommittee on Workforce, Empowerment and Government Programs, 04/27/06

The House Subcommittee on Workforce, Empowerment and Government Programs focused in a hearing yesterday on the Health Care Choice Act, introduced by Arizona Rep. John Shadegg to allow people living in one state to purchase health insurance from another. “Rather than going through 50 different regulatory processes,” Rep. Shadegg explains, “this bill will allow an insurance company to go through one process and sell to people in all 50 states. We can help people, not by setting up a massive new government bureaucracy, but by empowering individuals to make the best choice for themselves and their families.”

Merrill Matthews, director of the Council for Affordable Health Insurance, said that critics fear the Shadegg bill “would disrupt the current system, bypassing most state regulations and perhaps even agents.” But he argues that many people already are purchasing health insurance through “association group insurance” plans, one of the fastest growing sectors of the health insurance market. These state-based plans allow fewer restrictions and regulations than traditional policies, in turn keeping premiums low. Allowing a nationwide marketplace would open many more opportunities for more affordable policies, he argues.
Link to hearing details:


The 2006 Medicare Trustees Report
Cato Institute Policy Forum
Monday, May 1, 2006, 2:30 p.m.
Washington, DC

For additional details and registration information, go to:

Examining the 2006 Social Security and Medicare Trustees Reports
National Center for Policy Analysis Event
Monday, May 1, 2006, 4:30 p.m.
HC-6 or HC-8 in the U.S. Capitol
Washington, DC

For more information or to RSVP, please contact Jaran Brodhead at (202) 220-3082 or

Has the Drug Benefit Added to Medicare’s Financing Woes?
American Enterprise Institute Event
Tuesday, May 2, 2006, 9:00-11:30 a.m.
Washington, DC
For additional details and registration information, go to:

2006 Consumer Directed Health Care Conference
May 8th – May 10th, 2006
San Francisco, CA

More details and registration information are available at the conference website:

Kaiser Conversations on Health with Eli Lilly and Company CEO Sidney Taurel
Kaiser Family Foundation Event
Wednesday, May 10, 2006, 12:00 – 1:00 p.m. E.T.
Barbara Jordan Conference Center
Washington, DC

This event is open to the public; however, space is limited and registration is required. If you wish to attend, please RSVP To Tiffany Ford at or 202-347-5270.

When Tea & Sympathy are not enough: The catastrophic gap in prescription drug coverage in Atlantic Canada
Atlantic Institute for Market Studies Conference
Tuesday, May 16, 2006, 7:30 a.m. – 1:30 p.m.
Halifax, Nova Scotia

This event will feature Grace-Marie Turner as the luncheon speaker. 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.