Hoosier POWER

Indiana Gov. Mitch Daniels (former head of the Office of Management and Budget in Washington) has signed an innovative piece of health care legislation to ?expand access to health insurance, make citizens healthier, and engage patients in being more responsible consumers of health care.?

First the good news: The Healthy Indiana Plan creates a new HSA-type of mechanism for those who are currently uninsured and eligible for the new program — uninsured adults earning up to 200% of poverty. It combines a funded account for first dollar health expenses, high-deductible private insurance coverage, and a separate fund for preventive services.

Those participating in the program will get a payment toward funding a POWER account to pay their medical bills under $1,100. The government will pay premiums for commercial insurance to cover bills above $1,100. Deposits to the POWER account will be inversely proportional to income. The lower a person’s income, the more the state will deposit. Whatever the deposit, beneficiaries will be required to put some of their own money into the account to top it off. They would spend money from the account for routine bills and when it is exhausted, insurance triggers in.

It’s a great idea to bring price transparency and individual responsibility into a public program.

But the program is being criticized because it relies on an increase in the state cigarette tax to bring in $206 million a year to fund the health insurance program. The state tax money is being used as leverage to draw down additional federal matching Medicaid funds of up to $800 million. And it raises eligibility for Medicaid up to 300% of poverty. In Indiana, this is solidly in the middle class.

It just shows how even a true conservative like Mitch Daniels can’t resist the temptation to maximize the state’s take in federal Medicaid dollars. Bob Helms of AEI argued the case vociferously before our Medicaid Commission that the Medicaid match rate is at the root of state and federal problems with Medicaid. Until the funding formulas are changed, we can’t blame the states for taking advantage of this open and unlimited pipeline to federal dollars.

Gov. Daniels is operating within the system we have, but he deserves credit for his innovative plan for the uninsured to bring individual responsibility, price awareness, and private insurance into a new program for the uninsured. He and his able and forward-thinking secretary of the Family and Social Services Administration, Mitch Roob, now must fight the bureaucracy in Washington to get approval to put their innovative POWER initiative in operation. If it works, this could be a new model for other states to follow.


I had a flood of responses to my article in Monday’s Wall Street Journal about the new retail health clinics opening in Big Box stores and pharmacies around the country. Out of scores and scores of messages and phone calls, all but one praised the piece and liked the innovative, consumer-friendly concept — which some readers hadn’t known about.

But one family physician called from New Jersey very upset, saying that these clinics will further ?dumb down? the practice of medicine. He said the nurses who will staff the clinics just aren’t trained to handle the complex cases they will be presented with and are very likely to miss important problems.

We had a long conversation about the protocols the clinics will be using and also about what people are supposed to do with their sick child on a Friday night. ?They should have paid attention, and they’d have known they were sick before then,? he said. ?Even still, they can call me 24-7, and I will see them.? He also operates a cash practice so his fees aren’t that much more than the clinics’ charge.

I told him that if there were enough family doctors that practiced the way he does, there might not be a need for these clinics. But at least in this one segment of our health care system, the market and consumers will decide if this new concept will fly.


The Commonwealth Fund is at it again with another headline-grabbing survey showing how absolutely abysmally dreadful the U.S. healthcare system is.

It says we rank last among six nations it surveyed, including Australia, Canada, Germany, New Zealand, and the United Kingdom, in a long list of access, efficiency, equity and other measures . You might note that these other countries have very different health structures than we do, with much more government domination.

There is more wrong with this survey than we have time or space to describe here, but a core problem is the kinds of questions they ask.

No where that I could find do they talk about relative survival rates after someone is diagnosed with cancer or how quickly you can start chemotherapy or get heart surgery if you are in crisis — questions that get to the true quality of medical care in a country.

This study is based on a public opinion survey of primary care physicians in these countries, asking how easy it is for their patients to get care evenings and weekends, waiting time to see a doctor, how easy it is to print out a full list of the medications their patients are taking, etc. We have a very different system with a lot of problems. But we also have strengths, which this survey largely ignores.

This is an opinion survey that is very light on hard data, and yet it is being used to club the U.S. health sector once again. Is the strategy to wear down the morale of our health care workers and tear down the U.S. system so voters will demand that it be replaced it with a government-run version? You have to wonder.

Grace-Marie Turner


  • Portrait of an ER at the breaking point
  • Illinois tax implosion
  • Risk pooling and regulation: Policy and reality in today’s individual health insurance market
  • Black Wednesday at the FDA
  • Drug safety proposals and the intrusion of federal regulation into patient freedom and medical practice
  • Health care half truths: Too many myths, not enough reality

Author: Arian Campo-Flores
Source: Newsweek, 05/10/07

Newsweek provides a chilling portrait of an emergency room in crisis. Like many ERs across the country, Atlanta’s Grady Memorial Hospital suffers from ?cutbacks in funding, a growing pool of uninsured people, and an older and sicker population that requires more costly treatment.? On a typical Saturday night at Grady’s ER, ?overflow patients lie in gurneys lining both sides of the hallways, while scores more sit anxiously in the waiting room outside; head-trauma victim after head-trauma victim arrive throughout the night, because most other hospitals in the area had either no ICU beds or no neurosurgeons available.? Grady has wait times that ?regularly reach eight hours and can sometimes stretch to 12 hours or more,? according to Newsweek. The hospital ?lost more than $20 million last year, up from $13 million in 2005 and $10 million the year before.? Grady has introduced a number of reforms in an effort to better triage care, including a Care Management Unit aimed at treating patients with congestive heart failure and diabetes, and a fast-track section to treat mild conditions like coughs and cuts, but it’s unlikely that these reforms can stem the hospital’s flow of red ink.
Full text: www.msnbc.msn.com

Source: The Wall Street Journal, 05/14/07

Efforts by the states to achieve universal health coverage continue to falter. In Illinois, Governor Blagojevich faced ?the political rout of the year? in his failed attempt to fund universal health coverage with a new ?gross receipts tax? on Illinois businesses, the Journal reports in a lead editorial. Several prominent members of the Governor’s own party, including Chicago Mayor Daley, said the huge tax hike was a jobs killer that would chase businesses out of the state. ?One lesson here is that it is far easier to talk about ‘progressive’ political causes than to pay for them without doing larger economic harm,? the Journal concludes. In an op-ed for The Boston Globe, Sally Pipes of the Pacific Research Institute looks at Massachusetts’ progress in achieving universal health coverage a year after enactment. Its implementers have made numerous changes ?each of which as increased current and future government spending, increased the government’s role in regulating the healthcare market, decreased individual responsibility to purchase insurance, and made certain that the plan will fall far short in achieving universal coverage.?
Full text: www.opinionjournal.com

Authors: Mark V. Pauly and Bradley Herring
Source: Health Affairs, May/June 2007

Wharton University Professor Mark Pauly and Bradley Herring of Emory University examine risk pooling in the individual health insurance market and find that the market works much better than detractors would have us believe. They found ?a very high level of risk pooling? in the individual market, and their research shows that the premiums for individual insurance ?are less than proportional to risk.? In states that strictly regulate premiums, individual insurance premiums for high risk individuals are lower than premiums for similarly high risk individuals in other states. But this comes at the price of an increase in the total number of people in that state who are uninsured. They recommend that policymakers focus on ?ways to lower administrative expenses for individual insurance? rather than on counterproductive efforts at premium rate structuring. The authors discussed their paper at an AEI conference last week, with video available.
Full text: www.aei.org

Author: Mark Thornton
Source: The Wall Street Journal, 05/14/07

?While our lawmakers obsess over FDA ‘safety reforms,’ no one is holding this government agency responsible for its complicity in stalling therapies for life-threatening diseases,? writes a former medical officer for the Food and Drugs Administration in a scathing commentary in The Wall Street Journal. Dr. Mark Thornton criticizes the FDA’s recent decision to reject two new promising drug therapies designed to fight cancer. One of those drugs that tackles a rare bone cancer in children ?was summarily dismissed as irrelevant,? writes Thornton. The reason? ?The statistical data showing the odds of efficacy were 94% surety instead of the usual goal of 95% surety,? he writes. ?It will be years before we know the full impact of these decisions and how many cancer patients, young and old, have had their lives cut short as a result.?
Full text: www.wsj.com

Author: Scott Gottlieb, M.D.
Source: Health Affairs, May/June 2007

New proposals are being considered in Congress to ?balance the risks that all drugs have against the public health benefits they offer,? writes AEI’s Scott Gottlieb. But he says these proposals are flawed and would only increase FDA regulation over how drugs are prescribed and likely would not have averted recent crises such as those over the painkiller Vioxx and some antidepressants. ?Instead, the most immediate and direct impact of the heightened focus on drug safety issues appears to be a growing impetus on the part of federal decision makers? to try to mitigate drugs’ risk through restrictions on how pharmacists, physicians, and patients use them,? Gottlieb warns. ?Ultimately, we need a more robust system for the more rapid accumulation of post-market information that encourages collaboration among providers, payers, and product developers around the issues of drug safety,? he writes. ?If the profession does not take a more active role in addressing issues of risk associated with the growing benefits and increasing complexity of the medical products, then the pressure for ever-increasing federal intrusion into medical decision making will be relentless,? Gottlieb concludes.
Full text: www.aei.org

Authors: Arthur Garson Jr., MD, MPH and Carolyn L. Engelhard, MPA
Source: The Rowman & Littlefield Publishing Group, 05/07

Twenty popular health care myths are dispelled in this new book by Dr. Arthur Garson Jr. and Carolyn L. Engelhard of the University of Virginia. ?This book informs Americans about American health care, ways in which it is tarnished and ways in which it shines,? they write. They offer conventional wisdom and then proceed to take it apart. For example, ?Myth #1: American medical care is second-rate compared with other countries.? They argue that ?medical care in the United States is among the best in the world.? In an interview with the Houston Chronicle, Dr. Garson said he was prompted to write the book after the health care reform debates of the 1990s, when claims were made that health plans based on preventive care would save enough money to pay for the uninsured. Not true, he says. That’s Myth #6. ?The cold truth is that screening the entire population for high blood pressure?is very expensive.?
Full text: www.rowmanlittlefield.com


Is there a role for markets in health care?

Galen Institute and International Policy Network Event
Thursday, June 14, 2007, 12:00 p.m. – 3:00 p.m.
Washington, DC

For additional details and registration information, go to: www.galen.org.

Economic and Religious Freedom in Health Care
Health Care Conference Sponsored by The Society for the Education of Physicians and Patients and the Catholic Medical Association of Pittsburgh
Saturday, May 19, 2007, 8:30 a.m. – 12:00 p.m.
Pittsburgh, PA

Grace-Marie Turner is a featured speaker at this event. For additional details and registration information, go to: www.sepp.net.

Health Savings Accounts: Not Entirely Consumer Directed (Yet)
Cato Institute Policy Forum
Thursday, May 24, 2007, 4:00 p.m. (Reception to Follow)
Washington, DC

For additional details and registration information, go to: www.cato.org.

A Second Opinion: Rescuing America’s Health Care
Harvard University Countway Library of Medicine Lecture
Thursday, May 24, 2007, 5:30 p.m. – 6:30 p.m.
Boston, MA

For additional details and registration information, go to: http://www.countway.harvard.edu.

Value-Driven Health Care through Quality Improvement and Measurement
Kaiser Family Foundation Webcast
Friday, May 25, 2007, 2:00 p.m. ET
For additional details and registration information, go to: www.kaisernetwork.org.

Vital Signs & Side Effects: The Consequences of Likely California Health Reform
Pacific Research Institute Luncheon
Thursday, May 31, 2007, Noon – 1:30 p.m.
Sacramento, CA

For additional details and registration information, go to: www.pacificresearch.org.

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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