Health Care Week

President Bush devoted the week to making a big push for his health reform plan, starting with his Saturday radio address, then a meeting on Tuesday at the White House, and a hospital tour and a roundtable discussion in Chattanooga, Tennessee, on Wednesday.

All of this sends a strong signal about the importance that the White House attaches to health care and to energizing a positive conversation over free-market reform.

I had the honor of being included in the small meeting in the Roosevelt Room of the White House on Tuesday with the president and with HHS Secretary Leavitt, the most senior White House officials, and CEOs of major insurance companies.

During the meeting, the president was particularly focused on ways to revitalize the market for individually-purchased insurance. Don Hamm, president of Assurant Health, told the president that the individual market is actually a lot healthier than many people think and would be transformed with his plan to provide a generous standard deduction for health insurance. (That is our belief as well as millions of Americans start searching for health insurance policies that offer the best benefits at the lowest prices.)

Other executives around the table do most of their business in the employer market, but virtually all of them are either in or are moving into the individual market – a harbinger of the future. Aetna CEO Ron Williams said that the success of seniors shopping for private plans in the Medicare Part D drug benefit proves that consumers can drive the market to provide greater value by choosing those plans that offer better benefits and lower prices.

The White House also recognizes that states are where the action is. Secretary Leavitt told us he has met personally with more than a dozen governors so far to talk about their plans to provide more affordable health insurance options for their citizens, and he plans to talk to as many more in the next two weeks. He said that 25 states already have serious reform measures moving forward. Some regional purchasing pools may be an option, as contiguous states allow their citizens to buy policies in a broader market.

President Bush and Sec. Leavitt will meet with the nation’s governors when they hold their winter conference in Washington this weekend to push the president’s plan to give everyone a generous tax break for buying health insurance and to redirect federal resources to the states to induce competition and generate more affordable choices in their health insurance markets.

The president always returns to this touchstone that “the best decisions are made by providers and patients, not by government or insurance companies.” And he always gets applause.

Incentives work and competition works. What we need to do is engage the power of consumers to transform our health sector to become more efficient, more responsive to consumer needs, and more affordable.

The president’s idea sharpens the debate between those who believe that the answer to the problems in the health sector lies in much more government involvement through mandates and expansion of public programs, and those who believe that the free market can and does have much more potential to get health insurance costs down and to provide people with greater access to coverage and more choices.

What a privilege it was to be part of this meeting and part of the conversation over these important and transformative changes.


Two studies released this week focus on the high cost of health care in the United States. A new Health Affairs study reports that our expenditures on health care will double to $4.1 trillion over the next decade, consuming almost 20% of GDP by 2016.

Another study by McKinsey & Company tries to analyze why health care costs so much more here. McKinsey concludes that one reason is the lack of “sufficient incentives to patients and consumers to be value-conscious in their demand decisions.”

While the report has bad news for virtually every part of the health sector, it does reflect its complexity, saying that responsibility for high costs is “widespread across the system.” The bottom line: “[M]ost components of the US health care system are economically distorted [and] no single factor is either the cause, or the silver bullet, for reform actions.”

But we could get a good start by getting incentives right for consumers to be more value-conscious in their health spending.


We recently lost a dear friend and trusted colleague with the death of Bob Holmen, an advisor to the Mayo Clinic and a man who shaped the conversation over health policy for decades. We want to share with you this tribute from our mutual friend, Dr. Richard Reece, that captures our sentiments about losing this very special and gifted colleague.

Bob was larger than life, and we will miss his guidance and his friendship. Farewell, dear friend.

Grace-Marie Turner

P.S. Grace-Marie will be away next week. Health Policy Matters will return on March 9.


  • Benefit design innovations: Implications for consumer-directed health care
  • The rise of in-store clinics — Threat or opportunity?
  • Even safety needs limits
  • Making Medicaid Work: A practical guide for transforming Medicaid
  • Health Coverage Passport
  • Future by formulary

Authors: Ha T. Tu and Paul B. Ginsburg
Source: Center for Studying Health System Change, 02/07

Innovations in health insurance benefit design have the potential to make patient cost sharing a more effective tool, but few employers have incorporated those designs into their health benefit offerings, according to a study from the Center for Studying Health System Change. “Innovative benefit designs include incentives to encourage healthy behaviors; incentives that vary by service type, patient condition or enrollee income; and incentives to use efficient providers,” write the authors. The study identifies several factors that limit the effectiveness of increased cost sharing and finds that “regulations governing high-deductible, consumer-directed health plans eligible for health savings accounts (HSAs) preclude some promising benefit design innovations and dilute the incentives in others.” The study recommends moving “away from a one-size-fits-all HSA benefit structure toward a more flexible design” and notes that President Bush’s proposal to offer a standard deduction for those with health insurance “would motivate changes in benefit structures toward more extensive cost sharing, increasing the need for benefit design innovations.”
Full text:

The New York Times reports that “many companies are recognizing the limits to shifting too much of the cost of medical care to employees” and are offering innovative benefit designs, including free prescription drugs. A number of employers, including Marriott International and Pitney Bowes, provide free prescription drug to help employees manage chronic conditions like asthma, diabetes, and high blood pressure. Princeton University health economist Uwe E. Reinhardt says companies are realizing that “if you get people’s obesity down, cholesterol down, asthma down, you save a lot of money.”
Full text:

Author: Richard Bohmer, M.B., Ch.B., M.P.H.
Source: The New England Journal of Medicine, 02/22/07

Although many physicians question the quality of care provided at the growing number of in-store medical clinics, such as MinuteClinic and RediClinic, “these clinics raise important issues regarding the future design of primary care delivery,” writes Dr. Richard Bohmer of the Harvard Business School. “Health care services tend to be loosely stratified, typically by patient age, by body system or by disease,” writes Bohmer. “In-store clinics, by contrast, stratify the primary care market into more and less complex care and are carefully configured to serve the needs of the less sick,” he writes. Additionally, “in-store clinics reflect a well-designed operating system in which all the elements – location, physical structure, information systems, staffing, clinical and business processes, and a range of services – are aligned to meet a particular population’s needs effectively.” These clinics “deserve consideration as one potential mechanism for managing a particular class of medical problems, serving a particular patient need, and maximizing patient benefit with limited resources,” concludes Dr. Bohmer.
Full text (pdf):

Author: Peter Pitts
Source: Barron’s, 02/17/07

Part of this year’s congressional agenda “includes plans to set up a separate safety bureaucracy within the Food and Drug Administration, empowered to demand additional studies and tests from pharmaceutical manufacturers at any time and for any reason — even years after a drug hits the market,” writes Peter Pitts of the Center for Medicine in the Public Interest. “Safety will always be an issue, but it should never be the only issue,” he writes. “Patients also have a right to timely access in medicine,” concludes Pitts. “Congress should be wary of safety measures which arbitrarily end otherwise successful programs, slow down research and encourage destructive lawsuits.”
Full text:

Peter Pitts also writes in a commentary in The Baltimore Sun about the growing practice of intellectual property theft in countries such as Thailand, China, and India. For example, the military-appointed government of Thailand recently issued “compulsory licenses” to obtain two patented prescription drugs. Some members of Congress have expressed their support for such actions. “This is a slap in the face to pharmaceutical companies, whose expensive investments in drug research and technology ensure that these lifesaving medicines exist in the first place,” writes Pitts.
Full text:

Authors: Newt Gingrich and Rishabh Mehrotra
Source: Center for Health Transformation and SHPS, 02/20/07

In this collaborative work, former House speaker Newt Gingrich offers a practical guide to transforming Medicaid. The book includes excerpts from interviews with several state and federal Medicaid leaders, including HHS Secretary Michael Leavitt, offering their prescriptions for reform. Newt “outlines a framework for creating a 21st century Medicaid system that is intelligent, saves lives and controls costs” and offers four recommendations: align structure and incentives, promote social advancement, manage financial and health risks, and provide integrated delivery.
Full text:

Source: Federation of American Hospitals, 02/22/07

The Federation of American Hospitals has joined the race toward universal coverage by unveiling its own plan this week, one that includes a mandate that every American have health insurance. Medicaid and the State Children’s Health Insurance Program would be expanded, and new federal subsidies would be available on a sliding income scale to help those below 400% of poverty buy private insurance. Qualifying health insurance would be defined as standard-option Blue Cross/Blue Shield coverage with a $250 annual deductible, and premiums would be community rated. Employees would be required to participate in job-based insurance if it is offered. The Federation estimates that its plan would cover 98% of Americans and cost the federal government $115 billion in the first year.
Full text:

Author: John Stossel
Source: The New York Sun, 02/22/07

John Stossel of ABC News argues that the federal government should not be allowed to negotiate drug prices under the Medicare prescription drug program. “Government doesn’t produce things. It simply uses force to move things around,” writes Stossel. “So why think that Medicare, hardly a paragon of efficiency, should be given the power to negotiate — in reality, control — prices?” he asks. “Supply and demand” would be replaced with “take it or leave it,” he writes. “When government controls prices, it must eventually ration supplies. Consumers suffer. When the product is medicine, the results could be catastrophic.”
Full text:


How Will the President’s Tax Deduction for Health Insurance Work?
American Enterprise Institute Event
Monday, February 26, 2007, 9:00 a.m. – 1:30 p.m.
Washington, DC

For additional details and registration information, go to:

Reaching Out: Enrolling and Keeping Kids in the SCHIP Program
Alliance for Health Reform Briefing
Monday, February 26, 2007, 12:15 p.m. – 2:00 p.m. (Lunch available at noon)
Washington, DC

For additional details and registration information, go to:

Balancing cost, innovation and availability in healthcare
Centre for the New Europe Luncheon
Tuesday, February 27, 2007, 12:30 p.m. – 2:15 p.m.
Brussels, Belgium

For additional details and registration information, go to:

Is the U.S. Making Progress in Reducing Disparities in Healthcare Access and Quality?
Kaiser Family Foundation Webcast
Friday, March 2, 2007, 1:00 p.m. ET
For additional details and registration information, go to:

2007 WBL Summit
The Women Business Leaders of the U.S. Health Care Industry Foundation Event
March 7-9, 2007
Irving, TX

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

If you wish to subscribe to this free weekly newsletter, update your address, or be removed from our list, please send an e-mail message to

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.