Galen Institute

A Sensible Plan

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Earlier this year, President Bush called the executives of major insurance companies to a meeting at the White House to urge them to focus on ways to improve the individual market for health insurance.

Grace-Marie was invited to participate in a meeting with President Bush at the White House
earlier this year when he urged health insurance executives to improve access to coverage
in the individual market.

Karen Ignagni of America's Health Insurance Plans assured the president that AHIP would take action, and yesterday, she delivered. It is a good example of the private sector taking the lead to develop a proposal that they believe can actually work in the market.

The leading insurance companies recommend a private-public partnership to guarantee access to health coverage in the individual market. People with medical expenses that are expected to be up to twice the statewide average would be able to purchase policies for no more than 1½ times the standard market rate. For those with the highest medical costs, the states would serve as the safety net by creating new Guaranteed Access Plans.

The plan enhances access to insurance for those who are insurable and provides options for those who likely would be denied coverage or whose costs would drive up premiums for everyone else. New money would be required to fund the plan, but states can find creative ways to fund the Guaranteed Access Plans. This plan is a careful approach to reform that won't turn their entire health insurance markets into state-regulated utilities.

Don Hamm, president and CEO of Assurant Health, chairs AHIP's Individual Market Access Subcommittee and he and the other hardworking members of the AHIP team from Aetna, United, and many other companies deserve kudos.

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AHIP also released a survey yesterday of the individual health insurance market, showing that it is healthier than commonly believed. Yes, people can have trouble buying coverage, especially if they have pre-existing conditions, but fewer than the media would have us believe. And these more difficult cases are the ones that the new AHIP proposal is designed to help.

But the survey shows that insurance generally is more affordable in the individual market than through the workplace: Nationwide, average annual premiums were $2,613 for singles and $5,799 for families, half the cost of the average job-based policy.

Premiums varied greatly by state and were highly correlated with the rules set by the state governing premiums, coverage, and underwriting. The heavier the burden, the more costly the insurance. When will states figure out that their "solutions" have been a big part of the problem? Maybe it's time for a little cooperation with the insurance industry.

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And a few more items:

 

  • A new website was launched this week that offers one stop shopping for Health Savings Accounts.

    Produced by Assurant Health, www.HSAInsights.com provides consumers and employers with information about what HSAs are and how they work, with calculators that show how much people could save on taxes and premiums. The site also offers a portal to purchase insurance and compare the HSA policy with the costs and features of other plans.

     

  • Indiana got word this week that the Bush administration had approved its innovative plan to create an HSA-like product for lower- and moderate-income uninsured residents.

    Gov. Mitch Daniels' Healthy Indiana Plan merges Medicaid protection for large medical costs with a Power Account for routine expenses. The Power Account is jointly funded up to $1,100 a year through contributions by the state and by recipients on a sliding income scale.

    For example: A single adult whose annual income is $10,000 would only contribute $204 a year, or $17 a month, to the spending account, and the state would contribute $896. If he spends the full $1,100, Medicaid triggers in to cover medical expenses above that. But if any money remains in the Power Account at the end of the year, it rolls over to the next, offsetting the enrollee's future contributions.

    Let's hope other states take a look at this innovative plan as a way of expanding coverage to the uninsured rather than turning their health sectors inside out with over-reaching regulatory reforms.

     

  • The Congress has done the right thing in passing a simple reauthorization of SCHIP, extending it through March of 2009. This is the right decision. This was a difficult and time-consuming battle, and it's a shame that so much energy and so many resources were poured into legislation designed to dramatically expand this government health program.

    Congress could well have expanded access to health coverage for the uninsured if it would instead have focused on offering public subsidies for private coverage. A lesson for 2009.

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This has been a big year for us here at the Galen Institute — a speech at the Vatican, several meetings with the President including one in the Oval Office, an interview with John Stossel that appeared on ABC's 20/20, hundreds of radio interviews and commentaries in major newspapers including The Wall Street Journal, speeches, newsletters, testimonies before Congress, a major award from Consumer Health World, and participating in the effort to educate Congress about the right way to extend, and not expand, the SCHIP program.

We are grateful to each of you for the thousands of comments you have sent this year to educate and sometimes correct us. Thank you for your support and encouragement.

We have a busy year ahead and welcome your participation in this very important conversation over the future of our health sector!

Health Policy Matters will return after the new year. In the meantime, all of us at the Galen Institute wish you and your loved ones a very Merry Christmas.

Grace-Marie Turner

 

RECENT NEWS ARTICLES AND STUDIES:

 


Health Care Basics

The Basic FAQs: Frequently Asked Questions on Health Policy and Responses from Our Pro-Market Perspective
 Grace-Marie Turner
Galen Institute, 12/19/07

The health reform debate often can seem bewildering to citizens and political leaders alike. The health sector is vast, representing one-sixth of our nation's economy, and it is enormously complex. But fundamental principles of economics can help in understanding what is wrong with our health sector and what we need to do to begin to get it on the right track. At the Galen Institute, our work is informed by economic principles, especially the importance of understanding how people and systems can be expected to respond to incentives placed before them. This paper answers frequently asked questions about access to health insurance, consumer-directed health care, and prescription drug costs, with answers informed by our free-market perspective.

Desperately Seeking a Kidney
Sally Satel, M.D., American Enterprise Institute
The New York Times Magazine, 12/16/07

AEI's Sally Satel, who received a kidney transplant last year, documents the turmoil of finding a donor in a detailed article for The New York Times Magazine. At the beginning of 2005, when Satel put her name on the national organ donation list, there were about 60,000 people ahead of her; by the end of that year, only 1 in 9 had received a kidney from a relative, spouse or friend. Satel received offers from potential living donors, including one she met on the Web site MatchingDonors.com, but each backed out for various reasons. Finally a friend — author and journalist Virginia Postrel — turned out to be a match, and she donated a kidney to Satel in surgery that took place on March 4, 2006.

The experience is a triumph of altruism, writes Satel. Thousands of people have no donor at all — no relative who will do it out of love or obligation, no friend out of kindness, no stranger out of human impulse. Today, 74,000 people are waiting for kidneys. Satel writes that we must be bold and experiment with offering prospective donors other incentives for giving, not necessarily payment but material reward of some kind — perhaps something as simple as offering donors lifelong Medicare coverage. Or maybe Congress should grant waivers so that states can implement their own creative ways of giving something to donors: tax credits, tuition vouchers or a contribution to a giver's retirement account. Unless we stop thinking of transplantable kidneys solely as gifts, we will never have enough of them.

Research on the Comparative Effectiveness of Medical Treatments: Issues and Options for an Expanded Federal Role
Congressional Budget Office, 12/07

CBO reviews the current state of comparative effectiveness research in both the public and private sectors and considers the potential effects it could have on health care spending. CBO finds that making substantial changes in the delivery of health care could prove difficult and controversial for a number of reasons. The results of effectiveness studies would have to be sufficiently robust to minimize the risk of overlooking subgroups of patients who could benefit greatly from a treatment. Further, the precise impact on health care spending depends on several factors and is difficult to predict. Given the time necessary to conduct the research, to alter incentives in a manner reflecting the results, and to affect behavior through those changes, any potential for substantial cost savings from new research would probably take a decade or more to materialize. Although generating additional information comparing treatments would tend to reduce federal health spending somewhat in the near term, the effect may not be large enough to offset the full costs of conducting the research over that same time period.

Medical Malpractice Reform
Pamela Villarreal, John C. Goodman and Joe Barnett
National Center for Policy Analysis, 12/18/07

The nation's medical malpractice system should be replaced by a system that automatically compensates patients for unexpected injuries or deaths, regardless of who is at fault, according to this NCPA report. The medical malpractice system is supposed to compensate victims of negligent medical practice for their injuries and discourage future errors, but the current system does both poorly, the report concludes. Fewer than 2% of patients who are negligently injured ever file a malpractice lawsuit, and of the lawsuits filed, fully one out of every three cases does not involve any medical error. And to protect against such lawsuits, doctors purchase malpractice insurance with high premiums, most of which are passed on to patients. To help stem this problem, the tort-law malpractice system should be replaced with a system in which liability would be determined by voluntary contracts that could include compensation without fault, adjustment for risk, full disclosure, and patient compliance.


Consumer-Driven Health Care

New Web Site Helps Consumers and Employers Make Smart Choices on Health Savings Accounts (HSAs)
HSA Insights, 12/18/07

A new consumer website, www.HSAInsights.com, has been designed to help individuals, families, employers and retirees understand the basics of health savings accounts (HSAs) and to give them resources and tools for making smart choices. The website features detailed charts that show individuals and families how much they could save with an HSA compared to a typical plan. It also includes an interactive HSA calculator for users to determine the potential future value of their HSAs based on their expected contributions and expenses.


Prescription Drugs

Drug Price Control 'Snake Oil'
Doug Bandow, Competitive Enterprise Institute
The Washington Times, 12/14/07

As state and federal officials push for importation of American medicines from abroad to obtain cheaper drugs, they would do well to look at the experience of our nation's capital, writes Doug Bandow. The Washington D.C. City Council outlawed "excessive prices" for medicines in 2005, but shortly after its passage, a federal District Court of Appeals voided the law, concluding that it would undermine the federal government's granting of patents to enable companies to earn the revenue necessary to fund innovative research. The city tried to appeal the decision, and lost again. Unfortunately, what makes price controls attractive politically is that their impact is invisible. People will not suffer the worst consequences of price controls for years, given th
e long lead time in drug development. Moreover, no one knows what cures will not be developed. The trade-off is cheaper drugs for voters today versus unrecognized deaths and hardship for the unborn in the future. Increased access to affordable medicines is a worthy goal, but price controls are not a worthy means. If public officials really want to help the sick, they will keep their hands off of drug production.

Stop the War on Drugs
Scott Gottlieb, M.D., American Enterprise Institute
The Wall Street Journal, 12/17/07

The travails of Eli Lilly & Company's estrogen-modulating drug Evista and Genentech's breast-cancer medicine Herceptin demonstrate the health consequences of prosecuting pharmaceutical companies for the practice of "off-label promotion" — allegations that drug companies "encourage" doctors to use medicines for purposes not yet approved by the FDA, writes Scott Gottlieb. The Justice Department rarely alleges in these cases that scientific information is false or misleading, only that a firm can be "ahead of the science" in sharing with doctors information about emerging uses of medicines, even when those new uses quickly become the mainstay of care. These charges are applied even when the information drug firms are sharing is part of educational meetings, peer review journal articles, or treatment guidelines issued by medical-specialty societies and government researchers. "Off label" are now dirty words in conventional lexicon, made synonymous with lawbreaking as a result of these prosecutions, even though these words describe the way more than half of cancer medicine is practiced. Efforts to confine patients and doctors to FDA-approved uses have their own health consequences, raising the question: Just who is in the best position to make these hard choices? Politicians wage broad wars on medicine to claim thin strips of ideological terrain. This would be good political theater if there weren't so many human victims.


UPCOMING EVENTS:

How Might "Pay-for-Performance" Affect Health Care in America
Robert Wood Johnson Foundation Briefing
Thursday, December 20, 2007, 9:00 a.m. – 11:00 a.m. (Breakfast included)
Washington, DC
For more information, contact Erica Garland at egarland@gymr.com or 202-745-5119.

Can Consumer-Directed Health Care Improve the Quality of Health Care?
National Economists Club Event
Thursday, December 20, 2007, Noon – 1:30 p.m. (Lunch included)
Washington, DC

Will an Optional Federal Charter for Insurers Increase International Insurance Competition?
American Enterprise Institute Event
Thursday, December 20, 2007, 2:00 p.m. – 4:00 p.m.
Washington, DC

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 www.galen.org.

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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.