Real Insurance

The Los Angeles Times carried a story on Sunday about the struggles some consumers face with their high-deductible health insurance plans.

The Times reports on a couple that bought a policy with a $2,500 annual deductible and a $335 monthly premium. “We were just looking for something [with a premium] we could afford,” Nancy Warrington said. “The high deductible didn’t even dawn on me.”

?The insurance was a mixed blessing,? the Times reports. ?Although it covered Nancy’s appendicitis, Todd’s back injury and an assortment of other medical needs over the years, the annual deductible also saddled the San Diego couple with more than $10,000 in debt.?

Caveat emptor. The Warringtons made a decision to purchase insurance with premiums they could afford in order to have insurance protection for potential major medical bills that they likely couldn’t afford. That’s how real insurance works. Their policy no doubt protected them from tens of thousands of dollars in medical bills, but not from the deductible they agreed to.

When people buy homeowner’s and car insurance, they don’t buy insurance that covers having their plumbing fixed or their oil changed because they know that would be too expensive. Instead, they pay for routine maintenance themselves, knowing they have insurance to protect them if they have a fire or a major accident.

People with high-deductible insurance are making a similar trade off. Most people would rather have policies with low-deductibles and low co-payments, but few families can afford the $10,000 or more in annual premiums the insurance would cost. Those with high-deductible policies generally save money on lower premiums, but that means being prepared to pay some costs out of pocket.

The last quote of the article captures why we have the problems we do in the health sector:

The Times reports that a San Fernando woman ?had a dizzy spell [last year] but put off going to the emergency room partly out of financial concern, she said. It turned out to be nothing serious.?

“Still,” she said, “there should be no consideration of dollar figures when it comes to your health.”

Simply put, the attitude many people have regarding health care is: Someone else should pay.

Can we have all of the medical care we could ever want for free, no strings attached? Single-payer advocates who write to me passionately believe that is the case.

What’s Latin for, ?There’s no free lunch??


The Health Policy Consensus Group has produced yet another important policy document, outlining policy steps for the best way to provide health insurance coverage for children and families. As Congress prepares to begin consideration of reauthorization of the State Children’s Health Insurance Program, 37 health policy experts from the main market-oriented think tanks offer a brief summary of our larger vision of expanding access to health insurance through free-market reforms:

  1. SCHIP should focus on children who are most in need and also give them access to private health insurance.

  2. Tax policy governing health insurance should be fair and equitable.

  3. Private sector coverage for lower-income working families can be expanded through direct assistance, including vouchers or refundable health care tax credits for the purchase of health insurance.

  4. Greater flexibility should be allowed in SCHIP and Medicaid to allow access to private health insurance.

Dramatically expanding SCHIP to cover the great majority of children, as some Democratic leaders are proposing, would divide families, with government taking over responsibility for providing health care for children. Is that the direction we want to go in this country? I think not. Our statement offers better options.


Joel White, Galen Institute visiting senior fellow and head of JCWhite Consulting, is heading a new coalition — Health IT Now! — which is urging quick action on health information technology legislation.

After many years in leadership roles on Capitol Hill, Joel knows how to get things done. He will be working with former Sen. John Breaux and former Rep. Nancy Johnson, co-sponsors of the coalition, and a prestigious list of patient, practitioner, and employer groups, including the National Association of Manufacturers.

The group will work to promote existing legislation that meets its goals, including federal leadership on a private-public partnership to develop interoperability standards, product certification, and quality measures; creation of federal financial incentives for providers; consumer empowerment; and privacy.

NAM president John Engler said health costs are ?our biggest struggle, no question. And the cure isn’t aspirin, it’s IT.?

Go, Joel.


I traveled to Palm Coast, Florida, (and back) yesterday to give a speech to a conference of labor union executives and managers of public employee benefit programs who wanted to learn about health savings accounts.

Even these groups that are very cautious and conservative find themselves pulled into the world of consumer-directed health care. Here is my PowerPoint presentation. I was very surprised to see the level of interest in the experience of other companies in experimenting with ways to engage employees in being better managers of health care resources.

I used as one example the biggest labor union in Manitowoc County, WI, which has agreed to HSAs for its members. Employees pay no premiums, the county puts $3,000 a year into each employee’s HSA and that fully covers the deductible. What employees don’t spend, they keep.

Thanks to the plan, Manitowoc County expects to save $1.1 million in 2008, and employees will save $685,000.

Money talks.

Grace-Marie Turner


  • Hearing on FDA’s role in evaluating safety of Avandia
  • Fundamental improvements in drug safety for the 21st century: Time for systematic, electronic infrastructure
  • U.S. index of health ownership
  • Paper kills: Transforming health and healthcare with information technology
  • Policy options to improve the U.S. health care system
  • Containing costs or restraining health care?

Source: House Committee on Oversight and Government Reform, 06/06/07

The controversy over the diabetes drug Avandia intensified this week during a hearing called by Rep. Henry Waxman, chairman of the House Committee on Oversight and Government Reform. Food and Drug Administration Commissioner Andrew von Eschenbach said during the hearing that Avandia and a competing diabetes drug, Actos, must carry stiffer warnings for prescribing physicians about cardiovascular risk. Responses from the think tanks:

  • “What critics are forgetting is that knee-jerk safety warnings come with their own dangerous side effects,” writes the Manhattan Institute’s Paul Howard. “In the long run, if companies and regulators cry wolf at every potential safety signal, patients and physicians won’t know what information to trust, or what risks they need to be most concerned about. And scaring patients with serious diseases away from effective therapies costs lives.”

  • “In the case of the Avandia study, NEJM editors gave short shrift to the study’s flaws,” writes Scott Gottlieb of the American Enterprise Institute. “Absent was any discussion by NEJM of the drug’s benefits, or advice from diabetes experts on how doctors should counsel their patients based on the information?There is a problem when some journals let antipathy for business interests and left-leaning views interfere with the medical decisions that they make, bending standards or stepping outside their mandate, using their prestige and influence in ways that distort medical facts in the aim of influencing political outcomes.”

  • Peter Pitts of the Center for Medicine in the Public Interest and former FDA associate commissioner questions the consistency of Dr. Steve Nissen, lead author of the controversial New England Journal of Medicine study about Avandia. Pitts reports in his blog about the Q&A during the Waxman hearings, ?Nissen was asked: ‘Would you tell doctors to stop prescribing Avandia.’ And his answer was ‘No.’ Indeed, the good doctor made the point that prescribing decisions should be made by a doctor in consultation with his patient and based on the available information.”

Full text:

Author: Mark McClellan, M.D., Ph.D.
Source: AEI-Brookings Joint Center for Regulatory Studies, 05/07

Mark McClellan, former commissioner of the Food and Drug Administration, recently testified before Congress on the issue of drug safety and the need to use modern information technologies to learn more about the effectiveness and safety of medications over their life cycle. The Vioxx withdrawal shows the imperative for change, said McClellan. We can no longer rely ?on the hope that overly busy health professionals will file individual reports on adverse events involving drugs,? he said. Instead, we need a systematic, electronic infrastructure to monitor the safety of drugs and ?extensive use of electronic, interoperable, real-time clinical data systems for active safety surveillance.? A more sophisticated reliance on electronic data could have detected the “significant association between Vioxx use and serious cardiovascular events? in months rather than years, said McClellan.
Full text:

Author: John R. Graham
Source: Pacific Research Institute, 06/05/07

The Pacific Research Institute’s John Graham has created a new ?U.S. Index of Health Insurance Ownership? to rank each of the 50 states on a new measure of health care freedom. Utah came out on top and New York state last in the degree to which their citizens are free to utilize health resources free from state overregulation. To rank health ownership among the states, Graham considered 24 factors, including the burdens of regulation and mandates, the degree of competition among providers, and innovation in public programs.
Full text:

Editor: David Merritt
Source: Center for Health Transformation, 06/04/07

The Center for Health Transformation ?guides the reader on a tour of the evolving health information technology and health policy landscape,? in a new book that covers topics ranging from protecting patient privacy to building health information exchanges and achieving interoperability. The book examines ?the role of state governments, health plans, and hospitals in implementing health information technology, as well as the potential of health IT to promote the adoption of best practices in ambulatory care and focus on prevention, wellness, and early detection.? Paper Kills was edited by CHT’s David Merritt, includes an introduction by former House Speaker and CHT founder Newt Gingrich, and features contributions from leading thinkers in health care, including Brandon Savage of GE Healthcare, Ed Hammond of Duke University, and Michael Heekin, chair of the Governor’s Health Information Infrastructure Advisory Board for the state of Florida.
Full text:

Source: National Restaurant Association, 05/07

The National Restaurant Association has launched a new health care campaign that promotes ?market-based solutions over blanket government mandates.? The Better Care, Lower Costs, Fewer Mandates campaign recommends policies that ?expand accessibility to quality health care; improve affordability for both employees and employers; promote flexibility to meet the diverse needs of the industry’s workforce; and enhance portability to help America’s increasingly mobile workers take their health insurance with them from position to position.? The NRA describes the legislative and regulatory policies that would help the industry move away from ?a government-mandated, one-size-fits-all program.? Recommended policies include the creation of small business health plans, allowing cross-state purchasing of health insurance, offering refundable tax credits to help lower-income workers purchase health insurance, and equalizing the tax treatment of health insurance. The NRA has also published a booklet that describes the experiences of some NRA member companies with these programs.
Full text:

A survey released by the National Federation of Independent Business finds that many small-business owners lack knowledge about health savings accounts and are unaware of the plans’ benefits. The survey indicates that small businesses need more ?education and information on HSAs from their insurance brokers and agents?while some businesses have reduced costs more than 40 percent by using the accounts versus traditional plans, the level of understanding goes up consistently with a firm’s number of employees.?
Full text:

Authors: Jacob Arfwedson and Peter J. Pitts
Source: Source: Centre for the New Europe and the Center for Medicine in the Public Interest

Jacob Arfwedson of the Brussels-based Centre for the New Europe and Peter Pitts of the Center for Medicine in the Public Interest examine four cost-containment mechanisms commonly used to restrain health spending: Health Technology Assessments, Rational Use of Medicine, Evidence-Based Medicine, and Relative Effectiveness. All four policies ?are population-based, have rigid exclusion criteria and can’t integrate new information or innovations,” write the authors. EBM, for example, has been distorted by health administrators ?that impose top-down, one-size-fits-all restrictions on patients and their doctors.? The authors conclude that these policies should give way to patient-centric and cost-efficient 21st century evidence-based medicine that promotes innovation and quality.
Full text:


Medicaid Financing: Challenges for Missouri and the Nation
Federal Reserve Bank of St. Louis, Washington University’s Center for Health Policy, and the Missouri Foundation for Health Event
Friday, June 8, 2007, 7:30 a.m. – 5:30 p.m.
St. Louis, MO

For additional details and registration information, go to:

Quality Care and Comfort at the End of Life: Changes Needed?
Alliance for Health Reform Briefing
Friday, June 8, 2007, 12:15 p.m. – 2:00 p.m. (Lunch available at noon)
Washington, DC

For additional details and registration information, go to:

What Should Congress Do about Generic or Follow-On Biologic Drugs?
American Enterprise Institute Event
Monday, June 11, 2007, 12:00 p.m. – 4:00 p.m.
Washington, DC

For additional details and registration information, go to:

The Second National Medicaid Congress: Strategies for Navigating the New Medicaid
June 13 – 15, 2007
Washington, DC

On Wednesday, June 13, Grace-Marie will speak about ?Improving Care for Dual Eligible Beneficiaries.? For additional details and registration information, go to:

Innovations in Consumer Driven Healthcare Plan Designs
Lighthouse1 Webcast
Wednesday, June 13, 2007, 2:00 p.m. ET

For additional details and registration information, go to:

5th Annual Health Care Conference
Washington Policy Center Event
Thursday, June 14, 2007, 7:30 a.m. – 1:30 p.m.
SeaTac, WA

For additional details and registration information, go to:

12th Annual Wall Street Comes to Washington Conference
Center for Studying Health System Change Event
Thursday, June 14, 2007, 9:00 a.m. – 12:00 p.m.
Washington, DC

For additional details and registration information, go to:

Who Killed HealthCare? America’s $2 Trillion Medical Problem-and the Consumer-Driven Cure
National Center for Policy Analysis Economic Policy Forum and Author Luncheon
Wednesday, June 20, 2007, 12:00 p.m. – 1:30 p.m.
Dallas, 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

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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.