Making Choices

The Census Bureau has reported that more Americans have health insurance than it had previously reported. It says about 1.8 million more people had health insurance in 2005 than it reported last August, bringing the uninsured number down to 44.8 million.

It turns out that the undercount was largely for dependents. Our colleague Doug Badger points out that these new numbers should be discussed in the context of the debate over expanding the State Children’s Health Insurance Program since the new figures now show that the percentage of children who lacked coverage in 2005 is actually quite low by historic standards.

Doug created a table from the new numbers:

Total Uninsured Uninsured kids
2001 41,207 (14.6%) 8,509 (11.7%)
2002 43,574 (15.2%) 8,531 (11.6%)
2003 44,961 (15.6%) 8,373 (11.4%)
2004 43,498 (14.9%) 7,721 (10.5%)
2005 44,815 (15.3%) 8,050 (10.9%)

In light of this, is a $50 billion expansion of SCHIP really a good idea? And even more, is it really a good idea to expand SCHIP to “children” as old as 25 and to kids in families making $83,000 a year, as Sen. Clinton and Rep. Dingell have proposed?

Better policy would be for states to focus on making sure that the lower-income kids already eligible for SCHIP are covered. Then any extra money that Congress puts on the table could be spent providing help for other groups where the uninsured rate is many times higher – including lower-income working Americans.

The president’s health initiative would be a much better investment in restoring equity to the health care system and expanding coverage more efficiently.


Mark McClellan testified recently before Congress about an issue that largely stays under the radar — drug safety. But decisions are being made now in Washington about this issue that will affect every person who takes prescription drugs and will have huge implications for the future of drug innovation in the 21st century.

The Food and Drug Administration, which Mark headed from 2002 to 2004, is woefully underfunded and understaffed to use modern information technologies to learn more about the effectiveness and safety of medications over their life cycle. Mark said that the Vioxx withdrawal shows the imperative for change.

It just doesn’t work to “rely on the hope that overly busy health professionals will file individual reports on adverse events involving drugs.” Instead, he said, we need a systematic, electronic infrastructure to monitor the safety of drugs. He says that a more sophisticated reliance on electronic data could have detected “the significant association between Vioxx use and serious cardiovascular events” in months rather than in years.

Mark recommends “extensive use of electronic, interoperable, real-time clinical data systems for active safety surveillance.”

A relatively modest investment of several hundred million dollars could bring the FDA into the Information Age and likely save tens of thousands of lives by learning much more much sooner about the safety of prescription drugs.

Unfortunately, drug safety isn’t as compelling politically as insuring children. But investing in these new information technologies not only could save lives, but could make the process of drug development and approval more efficient, reducing the cost of producing new drugs. A few hundred million vs. $50 billion? Seems like a good investment.


America’s Health Insurance Plans will announce next week its new estimates of the number of people who have purchased health insurance that qualifies them to open a Health Savings Account. Expect to see continued steady growth from last year’s 3.2 million figure.

As we have said all along, HSAs are not a silver bullet for the problems in our health sector but are one tool to give people more control over their health spending and greater incentives to become better informed and active in making choices.

Grace-Marie Turner


  • Medicaid Advantage: A medical home for dual-eligible beneficiaries
  • Everything you wanted to know about Medicare but were too confused to ask
  • The Massachusetts health plan: The good, the bad, and the ugly
  • Why Walter Reed went wrong
  • SCHIP funding up in smoke? Tobacco taxes not the way to fund children’s health insurance
  • Breast cancer breakthroughs
  • Administrative costs for advance payment of health coverage tax credits: An initial analysis

Authors: Grace-Marie Turner and Robert B. Helms, Ph.D.
Source: Galen Institute, 03/30/07

Grace-Marie Turner of the Galen Institute and Bob Helms of the American Enterprise Institute have proposed creation of a new Medicaid Advantage program that would integrate acute and long-term care benefits for seniors who are eligible for both Medicare and Medicaid into a single program, managed by the states, to provide a medical home and better coordinated care for these beneficiaries. The Medicaid Commission, on which the authors served from 2005-2006, included Medicaid Advantage as one of the key recommendations in its final report. This paper provides further detail on the idea.
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Author: Joseph Antos
Source: The American, 03/27/07

AEI’s Joe Antos has written a primer that answers basic questions about Medicare, which he says is “America’s largest and most endangered health insurance program.” Antos explains what Medicare is, how the program works, and if it will be sustainable in the future. He also describes Medicare Advantage plans and the new drug benefit, including the doughnut hole. Antos concludes by suggesting ways to fix Medicare, including changing payment incentives, enhancing competition, and promoting personal responsibility.
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Author: David A. Hyman
Source: Illinois Law and Economics Working Papers Series, 03/07

The Massachusetts health plan “represents a hybrid approach, incorporating ideas from across the political spectrum ?[but] there is enough ‘bad’ and ‘ugly’ in the mix to raise serious concerns,” writes Professor David Hyman of the University of Illinois College of Law. Hyman provides a basic description of the Massachusetts plan and finds that its good features include the reemergence of the states as significant policy-making bodies in health care; making the federal tax preference for employer-based health insurance more accessible; and shifting the focus to getting the uninsured to obtain their own private health insurance. The plan’s “bad” and “ugly” features include the play or pay employer-mandate model; inadequacies of an individual mandate; ignoring out-year costs; and excessive regulation of the coverage market. “Regulation may be necessary to deal with some specific forms of market failure, but it should be enacted only after due consideration,” concludes Hyman. “Massachusetts appears to be incapable of learning this lesson.”
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Author: Sally C. Pipes
Source: New York Post, 03/23/07

“Walter Reed is a classic example of what’s wrong with government-run health care,” writes Sally Pipes of the Pacific Research Institute. She details “the bureaucratic morass” that led to the fiasco. “In 2004, amid the war, the Army decided to award Walter Reed’s maintenance and operations contract to itself. It soon emerged, however, that the Army had underestimated its costs.” The facility was in “procurement limbo for another year” as thousands of “badly wounded veterans from Iraq and Afghanistan streamed into Walter Reed requiring extensive therapy for brain injuries, amputations, combat stress and more.” Then the Pentagon’s base closure commission recommended Walter Reed be closed, discouraging the Army from investing in the facility. “Fast forward to early 2006, when the Army finally announced that IAP Worldwide Services, a private contractor, had won the maintenance contract. Because of bureaucratic delays, however, the contract wasn’t actually awarded until November, and IAP was prevented from beginning work until Feb. 4 [2007] — just two weeks before the Washington Post reported on the rats, mold and substandard living conditions at the hospital.”
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Author: Stephen J. Entin
Source: Institute for Research on the Economics of Taxation, 03/22/07

Congress is proposing a hike in the cigarette tax by as much as $1 a pack to pay for an expansion of the State Children’s Health Insurance Program, but Steve Entin of IRET concludes that this is “poor tax policy.” He says that selective excise taxes distort the economy, and the tax is highly regressive. He said that the tobacco tax would fall most heavily on the parents of the children the program is trying to help. “Schip is a transfer program designed to help lower-middle income families buy insurance for their children. Such transfer programs are, in theory, best funded by broadly based taxes that reflect the ability to pay,” he writes.
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Author: Scott Gottlieb, M.D.
Source: The Wall Street Journal, 03/26/07

“Elizabeth Edwards’s courageous press conference last week was a reminder of the progress that has been made against breast cancer,” writes AEI’s Scott Gottlieb. “Europe should be sharing in the progress against cancer, but large bureaucracies have been erected to contain costs, by slowing the introduction of new drugs and restricting how doctors can use them,” he writes. For example, “Five-year survival for breast cancer caught early in England is 78 percent, compared to 98 percent in the U.S.?German breast cancer mortality decreased by 9 percent from 1990 to 1998, while mortality in the U.S. dropped more than twice as much.” Medical progress “does not come cheaply or easily,” concludes Gottlieb. “But arbitrary restrictions on pricing — and especially on prescribing — set by agencies in Washington will take us off our current track and put us on Europe’s pathway.”
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Peter Pitts of the Center for Medicine in the Public Interest reports that in France, doctors are instructed “to prescribe fewer medicines – not for health reasons, but to save money.” He warns against following that path and says that the current efforts in Congress to get government involved in setting drug prices for Medicare would be “potentially catastrophic for both medical progress and drug choice.”
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Author: Stan Dorn
Source: The Commonwealth Fund, 03/07

Stan Dorn continues his series of reports on the Health Coverage Tax Credits (HCTCs) created under the Trade Act of 2002. In this latest study, he reports that, while HCTC administrative costs have fallen significantly since the program began, they still comprise about 34% of total spending. Dorn describes the incredibly complex payment mechanism for the credit (which would make Rube Goldberg proud). Because of the complexity of the application and payment system, and because of the low enrollment rate, administrative costs are relatively high. Dorn says that changes to simplify the HCTC program could lower administrative costs. These findings have important implications for any future tax credit plan intended to cover the uninsured, i.e., keep it simple. In testimony on the program before Congress this week, Dorn recommended that Congress revisit HCTC to fix problems such as affordability and access by increasing subsidy levels and simplifying the application process.
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Toward Free-Market Health Care
Conservative Women’s Network Luncheon featuring Grace-Marie Turner
Friday, March 30, 2007, 12:00 p.m.
Washington, DC

For additional details and registration information, go to:

Is There a Solution to the Medicare Physician Payment Problem?
American Enterprise Institute Event
Tuesday, April 3, 2007, 9:15 a.m. – 11:00 a.m.
Washington, DC

For additional details and registration information, go to:

Health Care Reconsidered: Options for Change
Brookings Institution Hamilton Project Forum
Tuesday, April 10, 2007, 9:30 a.m. – 12:30 p.m.
Washington, DC

For additional details and registration information, go to:

Should the United States Be More Like Scandinavia?
Cato Institute Policy Forum
Monday, April 16, 2007, 12:00 p.m. (Luncheon to Follow)
Washington, DC
For additional details and registration information, go to:

Nothing About Us Without Us: Patient/Consumer Participation in Evidence-Based Health Care
National Working Group on Evidence-Based Health Care Event
Thursday, April 19, 2007, 9:00 a.m. – 3:00 p.m.
Arlington, VA

For additional details and registration information, go to:

Consumer Directed Health Care Conference
April 30 – May 2, 2007
Las Vegas, NV

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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