The Real Agenda

Our health sector is like a giant ship: It takes a great deal of effort to change direction, but even a small change can lead to a very different destination over time.

For the last six years, the health sector has been moving toward more free-market solutions, introducing patient choice and competition into a system that had been largely dominated by top-down, centralized management. A few very familiar examples:

  • Consumers have new incentives to become partners in managing their health costs through financing options like Health Savings Accounts and Health Reimbursement Arrangements.

  • The average senior participating in Medicare Part D has a choice of several dozen prescription drug plans that compete fiercely to offer a wide choice of drugs and benefit options at the lowest premium prices.

  • And seniors, especially those with lower incomes and no supplementary retiree coverage, are flocking to Medicare Advantage plans that compete to offer a full range of medical benefits, often including prescription drugs and many times for less than seniors would pay for traditional fee-for-service Medicare.

The results are impressive: Many companies that have introduced consumer-directed plans have seen health insurance costs moderate and even fall. An Aetna survey found, for example, that companies with full-replacement HRAs saw their health coverage costs increase only 3% over three years.

Seniors have driven the average premium price for the standard Part D plan down from the projected $37 a month to $22 a month. And seniors who enroll in Medicare Advantage plans receive on average more than $1,000 a year in added health services.

Competition is working.

But there are threats on the horizon. They are coming in what would appear to be small changes, but they could chart a dramatically different course over time. A few examples:

  • Chairman Pete Stark of the House Ways and Means Health Subcommittee has said he does not believe there is a place for private competition in Medicare. One of the ways that competition could be eliminated is to starve the private Medicare Advantage plans of funds. It happened before when reimbursements were cut for its predecessor, Medicare+Choice, and millions of seniors lost their M+C coverage options.

    If the private plans are shut out again, would they make the huge investment a third time to come back into Medicare? Maybe not. And the possibilities that private competition promises for the future could be lost for a long time.

  • The House has approved and the Senate leadership is intent on passing legislation that would get the federal government into the business of drug price ?negotiations? for Medicare Part D. As Leslie Norwalk of the Centers for Medicare and Medicaid Services has said, government does not have the expertise or the tools to do this. And it doesn’t need to: Price negotiations already are taking place every day between the pharmaceutical companies and the drug plans that do have the tools and expertise. Government instead uses the blunt instrument of dictating prices.

  • And the Senate Commerce, Science, and Transportation Committee this week held hearings about a bill introduced by Sen. Byron Dorgan to open U.S. borders to imported, price-controlled drugs.

    In an acknowledgement of the safety risk, Sen. Dorgan’s bill would require the Food and Drug Administration to devote resources to monitoring imported drugs for safety, a huge diversion of resources for the agency. Meanwhile, new cancer drugs, better diabetes medicines, and possible cures for Parkinson’s would sit in a growing backlog.

    The debate over drug importation is really about importing price controls. It would be so much better to have an honest and open debate about price controls rather than these veiled and dangerous policy proposals. The upcoming debate over the Prescription Drug User Fee Act will provide similar ripe opportunities for mischief.

Small steps make a big difference. The policy proposals being debated in Washington – and these are only a few of the growing list – reveal a very different philosophy than the market-based perspective that has dominated the debate for the first part of this decade.

And these small steps could indeed take us in a very different direction of injecting much more government rather than patient control over decisions and limiting the choices that would be available in the future. All of these initiatives, no matter how seemingly complex or tangential, are worth our interest and attention.

Grace-Marie Turner


  • California and universal health coverage

  • Socialized medicine elsewhere shows why it is a failure

  • Recommendations for reauthorization of the State Children’s Health Insurance Program: Cover Kids First

  • Prescription for trouble

  • The health insurance exchange: Enabling freedom of conscience in health care

  • HCA to list prices for hospital care

  • Low-income & minority beneficiaries in Medicare Advantage plans

Source: Medscape General Medicine, 02/23/07

Grace-Marie Turner discusses the challenges presented to employers, individuals, taxpayers, health plans, and medical providers by California Gov. Arnold Schwarzenegger’s health reform plan. You can view her webcast video commentary, presented by Dr. George Lundberg, Editor-in-Chief of eMedicine and Medscape General Medicine.
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Author: Grace-Marie Turner
Source: Chicago Sun-Times, 03/03/07

The British may have universal health coverage, but they also can face long waiting lines, shortages of medical professionals, and even shoddy care, writes Grace-Marie Turner in a commentary for the Chicago Sun-Times. For example, in the U.K., only 49% of adults and 63% of children were registered with public dentists, with waiting times for appointments as long as six years. In Canada, The Fraser Institute found that the average waiting time for referral by a general practitioner to a specialist is at a record 18 weeks. And access to cancer care in Japan is in crisis. ?Those who advocate for universal health care may have their hearts in the right place, but they would do well to examine how the systems they support are actually performing around the world.?
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Author: Grace-Marie Turner
Source: Galen Institute, 03/07/07

?The upcoming debate over funding the State Children’s Health Insurance Program provides opportunities for Congress to use ten years of experience with the program to correct flaws and reshape it to be more responsive to the emerging 21st century health sector,? writes Grace-Marie Turner of the Galen Institute. Turner recommends six principles for SCHIP reform: cover kids first; cover low-income kids first; don’t crowd out private coverage; keep families together; create new purchasing pool options for families; and get the subsidies right. ?With these six principles in mind, Congress can begin to bring some needed discipline to the SCHIP program and bring it back to its core purpose of covering kids first,? concludes Turner.
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Nina Owcharenko of The Heritage Foundation has two new papers about children’s health insurance coverage: ?The Truth About SCHIP Shortfalls? and ?Health Insurance for Uninsured Children: Doing Health Care Right.?

Author: Scott Gottlieb, M.D.
Source: The Wall Street Journal, 03/06/07

?Inside the federal agencies that oversee parts of the health-care system, there is a palpable view that doctors can no longer be trusted to do the right thing,? writes Scott Gottlieb of the American Enterprise Institute. ?Reflecting this pervasive mistrust of medical practitioners, Medicare is increasingly tying payments to the choices doctors make, compensating doctors more to follow certain cookie-cutter treatments,? he writes. But approaches like this ?harm patients because they impose one-size prescriptions in an area of science that is marked by variation,? concludes Gottlieb. ?The key to improvement is not direct regulation of patient care, but better tools and approaches for evaluating the pros and cons of the many choices patients confront.?
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Gottlieb examines how modernizing the Food and Drug Administration’s regulatory review process can improve access to life-saving medicines in his new white paper for the Food and Drug Law Institute’s Colloquium on Access to Unapproved Drugs.
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Author: Connie Marshner
Source: The Heritage Foundation, 03/01/07

?Americans should be free to choose health care coverage that does not subsidize procedures to which they morally object,? writes Connie Marshner for The Heritage Foundation. ?The most promising policy vehicle to give individuals this freedom is the state-based health insurance exchange (HIE), an idea under consideration in a number of states,? she writes. An HIE would create a state-wide insurance market that provides portability of plans and increased diversity. ?Health care reform should be based on the principles of economic freedom and freedom of conscience to ensure that consumers are able to receive care, and health care providers are able to offer care, that does not violate their individual consciences,? concludes Marshner. HIEs ?would give individuals and families access to greater choice, including health plans sponsored or endorsed by religious groups or others whose moral convictions shape their individual consciences.?
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Author: Todd Pack
Source: The Tennessean, 03/04/07

Nashville-based HCA, the nation’s largest hospital chain, will soon list prices for hospital care, reports The Tennessean. HCA launched a successful price transparency initiative last year and ?plans to start posting prices at its 13 hospitals in Tennessee this spring and have the program at most of its 165 U.S. hospitals by midsummer,? reports the Tennessean. ?Uninsured patients at HCA facilities can follow a link on a hospital’s Web site to see a range of prices for common procedures,? reports the paper. ?Patients who have health insurance will be given detailed instructions on how to call for an estimate?because discounts, deductibles and co-payments can vary greatly among health plans.?
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A new software application from the Mayo Clinic and Digital Cyclone delivers a variety of health information directly to cell phones. Mayo Clinic InTouch features first aid tips, health alerts, symptom checker, and emergency room finder.
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Source: America’s Health Insurance Plans, 02/07

Medicare Advantage plans — Medicare’s private comprehensive health plans — ?were a vital source of coverage for low-income beneficiaries in 2004,? according to a new study from America’s Health Insurance Plans. Lower costs and better benefits and coverage were the two main reasons that beneficiaries cited in choosing private Medicare Advantage health plans over traditional fee-for-service Medicare in 2004. Nearly half of Medicare Advantage enrollees and 68% of minority beneficiaries had incomes less than $20,000. MA plans were particularly attractive to beneficiaries who did not have access to retiree supplementary coverage or who could not afford to purchase Medigap coverage.
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SCHIP and Beyond: Improving Health Care Coverage and Quality for Children
Alliance for Health Reform Briefing
Monday, March 12, 2007, 12:15 p.m. – 2:00 p.m. (Lunch available at noon)
Washington, DC

For additional details and registration information, go to:

Major Employers: Controlling Your Healthcare Budget
ERIC 2007 Health Policy Conference
March 12 – 14, 2007
Washington, DC

For additional details and registration information, go to:

Restoring Fiscal Sanity 2007: The Health Spending Challenge
The Brookings Institution Event
Thursday, March 15, 2007, 10:00 a.m. – 12:00 p.m.
Washington, DC

For additional details and registration information, go to:

A New Wave in Health Savings Accounts
Lighthouse1 Webcast
Wednesday, March 21, 2007, 2:00 p.m. ET
For additional details and registration information, go to:

Charity Care and Community Benefit: Addressing Transparency, Responsibility & Standards
Oregon Health Forum Event
Thursday, March 22, 2007, 7:00 a.m. – 9:00 a.m.
Portland, OR

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.