It is instructive to watch the wrestling match in California over comprehensive health reform which could preview the national debate likely to take place in 2009.
The legislature is six weeks into a special session on health, after failing to reach an agreement in the regular session. The Democratically-controlled legislature and Republican Gov. Schwarzenegger both want to reach a deal to put a financing measure on the ballot for voter approval in November of 2008.
But that is pretty much where the agreement ends. The legislature passed a bill, which the governor vetoed last month, that would have required employers to pay a new health coverage payroll tax of 7.5 percent. Gov. Schwarzenegger says that is too much and wants employers to pay from zero to 4 percent of their revenues.
The debate has set up a classic battle between business and labor. Democrats oppose the individual mandate in the governor's plan and also want employers to pay a bigger share of the costs. The California Labor Federation says that the subsidies in governor's plan for health insurance are not enough. Schwarzenegger's upwardly-revised plan would allow families of four with a household income of $72,000 to be subsidized by the state. The labor federation wants subsidies for families with a household income of up to $83,000. (Sound familiar? This is where New York State wants to take eligibility for the State Children's Health Insurance Program).
The labor federation has launched an aggressive campaign saying that Schwarzenegger's plan would gouge the working class by requiring people to buy health insurance without enough subsidies. In a bit of irony, the group has hired Chris Lehane, a promoter of Michael Moore's films and an ex-aide to former President Clinton, to direct its campaign against Schwarzenegger's plan — which has many of the features of the health plan recently unveiled by Democratic Presidential Candidate Hillary Clinton.
For its part, the governor charged that the Democrats' bill opened a back door to a government-run, single-payer system, shifted poor families into state-run, unionized hospitals, imposed stiff penalties on employers, didn't mandate coverage for individuals, and forced employers to shoulder an unfair burden with the 7.5 percent payroll fee.
And there's more. Gov. Schwarzenegger introduced a new idea to pay for his plan: privatizing the California state lottery. This could bring in $15 billion to $37 billion, but no one knows for sure since no state has ever sold its lottery. The idea was met with skepticism.
The legislature finally held a hearing on Schwarzenegger's $14 billion plan this week. While everyone agrees this is an "historic opportunity," they are far apart on how to seize the moment. They should instead listen to the advice of Loren Kaye, president of the California Foundation for Commerce and Education.
"Political leaders should prioritize resources on two immediate needs: addressing the most vulnerable Californians?and insisting on structural changes to create incentives for more appropriate and efficient delivery of care, more transparency in health care costs and outcomes, and empowerment of the ultimate health care consumers. This approach has a far better chance of increasing health access and improving health outcomes without damaging the California economy."
And the battles continue in Washington over reauthorization of SCHIP. The Senate passed the latest version of the bill (HR 3963) Thursday night by a vote of 64-30. President Bush has vowed to veto the legislation, and the House is expected to fall short of the two-thirds majority to override. Just like last time.
While there is no chance that the program will be allowed to end, the current extension ends on Nov. 16. Congress will either have to pass another temporary extension or try, for the third time, to pass a permanent reauthorization. Senators are meeting with House members (which is rare in Washington) to see if they can tweak the bill to win 13 more votes from House members to override the president's veto.
The administration issued a strong statement opposing the measure, saying that it would raise taxes to move two million children from private insurance to government programs, would not provide stable funding for the program, fails to prioritize poor children, provides incentives to put ineligible people on the program, and misdirects funds from poor children to adults.
The main reason that SCHIP has become so contentious is that we are trying to have the national debate over the future of our health sector in the back corridors of Congress through this legislation. The real question is how to best provide coverage for children — and families — caught in the Galen Gap. The great majority of the uninsured are caught between making too much to qualify for public programs and not having the higher incomes and better-paying jobs that bring health insurance.
In the next round of this debate, we need to begin to have a clearer conversation about how to expand access to health insurance. Are we going to expand existing public programs, like SCHIP, to cover children and families? Or are we going to create new subsidies, such as refundable tax credits, to help them purchase private coverage? That is the debate we should be having.
The New York Times ran a chilling story this week about Chinese chemicals flowing into the world drug market. A trade fair in Milan featured booths by companies that have been accused of shipping counterfeit drugs into the U.S. market and supplying steroids to illegal underground labs. The owner of one company couldn't man his booth because "He was in a Houston jail on charges of selling counterfeit medicines for schizophrenia, prostate cancer, blood clots, and Alzheimer's disease".
Because the chemical companies are not required to meet even minimal drug-manufacturing standards, there is little to stop them from exporting unapproved, adulterated or counterfeit ingredients. The substandard formulations made from those ingredients often end up in pharmacies in developing countries and for sale on the Internet, where more Americans are turning for cheap medicine.
"Underregulated manufacturers are increasingly becoming the source of [active pharmaceutical ingredients] used in the production of counterfeit medicine," said R. John Theriault, recent head of global security for Pfizer. "The facts are irrefutable. The importation of counterfeit, infringing, misbranded, and unapproved pharmaceutical products in the United States is increasing exponentially," he said.
The story reports on one of the unapproved vendors that shipped drugs to an Internet pharmacy that penetrated a legitimate supply chain in Europe. Acting on tips from major pharmaceutical companies, U.S. officials devised a plan to stop the shipments to the U.S.
The pharmaceutical companies have sophisticated monitoring and tracking systems to protect their supply chains. If members of Congress were to be successful in enacting legislation to allow importation of prescription drugs, that means citizens could go around these protections. Contamination of the U.S. pharmaceutical market by counterfeit, unsafe, and even lethal chemicals would be virtually guaranteed.
What are they thinking?
And to end on a brighter note, our friend and admired colleague, Roy Ramthun, who oversaw the implementation of Health Savings Accounts at Treasury and went on to the White House to serve as the president's top health policy adviser, has produced a valuable new guide to HSAs. His consumer-friendly booklet, called "A Common Sense Guide to Health Savings Accounts," offers practical, accurate, and informed guidance on the accounts and associated insurance. This is HSAs for Dummies, only much better. There's also a wealth of information on Roy's website.
RECENT NEWS ARTICLES AND STUDIES:
Health Care Costs
Economic Insecurity: Americans' Concerns about their Jobs, Personal Finances, Retirement, Health Care, and More
American Enterprise Institute, 10/29/07
AEI's Karlyn Bowman reviews survey data from a number of public opinion polls to gauge Americans' anxiety about economic issues. The polls show that Americans are indeed worried about health care costs and are particularly concerned about paying for future medical care. For example, 62% said that they were very or somewhat worried about not being able to afford the health care that they think they needed, according to an October 2007 Kaiser Family Foundation survey; the rest were either not too worried or not worried at all. In ranking costs that have gone up, 57% said health insurance costs have gone up, just below property taxes (60%) and state taxes (41%), but far below the price of gasoline (96%).
2007 Health Confidence Survey: Rising Health Care Costs Are Changing the Ways Americans Use the Health Care System
Employee Benefit Research Institute, 11/07
EBRI's 2007 Health Confidence Survey finds that Americans overwhelmingly would prefer $7,500 in health insurance from their employers rather than $7,500 in taxable income. (A smart choice, considering that health benefits are not taxed but the income is.) About half say that their employer would have to pay them up to $15,000 in wages as a trade off for health coverage. And 15% said that no amount of taxable income would be enough to make up for the loss of health insurance. Also, all of the criticism of the U.S. health sector is having an effect: 15% of Americans rated our health care system as "poor" in 1998 compared to 29% today. Only 4% say it is excellent. Yet, once again, 88% are satisfied with their own health plans. The survey also shows that Americans say they are taking better care of themselves, talking more carefully to their doctors, and only seeing the doctor for "more serious conditions or symptoms" in response to rising costs.
Kaiser Health Tracking Poll: 2008
Kaiser Family Foundation, 10/07
The Kaiser Health Tracking Poll finds that while Iraq remains a top issue, health care ranks second, and is the top domestic issue. Among the presidential candidates, Sen. Hillary Clinton is overwhelmingly identified with health care, but voters are split over whether they think her new policy initiative differs from her 1990s effort, with 35% saying it is the same, 30% saying it is different in important ways, and 36% saying they don't know. Further, across political parties, women are more likely than men to name health as a top issue. Nearly half (45%) of women name health care as one of the top two issues they'd like to hear candidates discuss, compared with three in ten men.
The Kaiser Family Foundation is also tracking campaign health care news, analysis, and events on its new website, health08.org. The site provides side-by-side descriptions of the presidential candidates' health policy positions, public opinion survey results, videos of speeches and debates from the campaign trail, and original interviews and resources.
Market Forces in Health Care
Competition in Health Insurance
American Medical Association, 10/07
The American Medical Association has long been concerned about the impact of consolidated health insurance markets. This study shows that physicians in many markets across the country do not have bargaining power with dominant health insurers and that many health insurers are in a position to exert monopsony purchasing power. In 299 of the 313 markets the AMA surveyed, one health plan accounts for at least 30% of the combined HMO/PPO market. The AMA believes it is time to re-examine the legal landscape and the very substantial barriers to competing plans entering health insurance markets that have resulted in unfettered consolidation of health insurance markets. The AMA says that if not corrected, the imbalances in the marketplace will have serious negative long-term consequences for the health care system.
Consumer-Driven Health Care
The Common Sense Guide to Health Savings Accounts
HSA Consulting Services, LLC, 10/07
Roy Ramthun, former senior health policy advisor at the White House and now president of HSA Consulting, has published a consumer-friendly guide to Health Savings Accounts (HSAs). The guide examines the finer details of HSA accounts and the health insurance policies that accompany them. In each section, a "Buyer's Guide" provides advice, reminders, and things to consider when examining an HSA. Additional help is provided through answers to frequently asked questions, definitions of terms that are commonly used with HSAs, and a description of additional resources available throughout the Internet. The guide will be kept current with any changes in the laws, regulations, or operational details of HSAs.
The Revised SCHIP Bill: Still Bad Health Policy
The Heritage Foundation, 10/29/07
The revised SCHIP bill, passed by the House last week in response to the President's veto of the original legislation, is still bad health policy, writes Owcharenko. She says the House bill shares many deficiencies with the original version: It raises the general federal income eligibility threshold for SCHIP from 200% to 300% of the federal poverty level; covers adults; crowds out private coverage in favor of government coverage; expands the program to new populations; micromanages the premium assistance option; depends on an unstable funding source; and sets up a contingency fund to bail out overspending states. Heritage's Bob Moffit writes that The More Children, More Choices Act of 2007 that Heritage helped to develop, which combines SCHIP reauthorization and state experimentation with a health care tax credit for middle-class children, is a more balanced approach.
Delivering Better Value in U.S. Health Care: The Role of Physician Performance Measurement
American Enterprise Institute Event
Monday, November 5, 2007, 12:30 p.m. – 4:30 p.m.
Medicare Part D: What Now, What Next?
Alliance for Health Reform Briefing
Monday, November 5, 2007, 12:15 p.m. – 2:00 p.m. (Lunch included)
Grace-Marie Turner speaking on the Fact or Fiction show
WBZT-AM Radio Broadcast
Tuesday, November 6, 2007, 5:00 p.m. – 6:00 p.m.
West Palm Beach, FL
Utah Health Insurance Association Event
Thursday, November 8, 2007, 9:00 a.m. – 12:00 p.m.
Salt Lake City, UT
Grace-Marie Turner will speak about state health reform initiatives to achieve universal coverage. For more information, contact Mr. Kelly Atkinson at 801-263-1516.
Beyond Health Insurance: Public Policy to Improve Health
University of Illinois Event
November 15-16, 2007
For more information, contact firstname.lastname@example.org or 312-996-6188.
Overtreated: Why Too Much Medicine is Making Americans Sicker and Poorer
National Institute of Health Policy Lecture
Thursday, November 15, 2007, 4:30 p.m. – 8:00 p.m.
Transforming Health: Fulfilling the Promise of Research
PhRMA and Research!America Event
Friday, November 16, 2007, 8:30 a.m. – 2:00 p.m.
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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