Most of the health policy proposals offered so far by President-elect Obama and the Democratic leadership in Congress would require much more centralized control over our health sector.

Mr. Obama has promised repeatedly, "If you have health insurance, then you don't have to do anything. If you've got health insurance through your employer, you can keep your health insurance, keep your choice of doctor, keep your plan."

But his proposals would in fact change the health care system for everyone, leading to more political control over the one-sixth of our economy represented by the health sector.

The larger role for government is clear in some of the major proposals being offered by Mr. Obama, his advisors, and congressional leaders, including: A new national health insurance program based upon Medicare, a new National Health Insurance Exchange, creation of a new Federal Health Board, a play-or-pay mandate requiring companies to provide health coverage for their workers, expansion of Medicaid and SCHIP, and allowing a buy-in to Medicare for people aged 55-64.

But other ideas that appear less centralized also would lead to more government control: Comparative effectiveness reviews where a federal body would pass judgment on medical treatments and procedures; government assumption of high-risk employees for companies; and major new rules governing private insurance such as guaranteed issue and community rating.

Not to mention the possible imposition of a federal mandate that Americans, starting with children, must have health insurance.

All of these proposals would indeed lead to greater centralization and government control over our health care economy.

The promise, of course, is that this will reduce costs. But this is belied by experience. Massachusetts is a case in point as cost overruns continue to be one of the state's dominant problems.

Wringing costs out of the system is difficult since one person's unnecessary expenditure is another person's paycheck. Anyone subject to cuts will be first in line to fight to protect the status quo.

One example: When the Bush administration issued seven rules last year designed to curb illegal use of Medicaid funds, including outright fraud, the administration faced a firestorm of opposition in Congress.

I testified before the Energy and Commerce Committee, detailing examples from reports by the Governmental Accountability Office and the Office of Inspector General at HHS about state uses of Medicaid money not authorized by law, including transporting people to bingo games.

The witness table was filled with representatives of groups on the receiving end of the money who said that the cuts would be devastating to them. Not surprisingly, Congress voted this year to delay implementation of the rules until next year, likely buying time to scrap them altogether.

In health care, we need to follow the money. If there is greater centralization in the payment systems, then that inevitably will lead to greater political control over medical decisions and the delivery of care. Innovation and doctor-patient control over decisions are likely to be sacrificed if the government assumes an even bigger role in the health sector.

Mr. Obama clearly recognizes the promise of innovative 21st century medicine. He introduced the Genomics and Personalized Medicine Act (S.976) last year, saying: "…scientific advancement in the field of genomics…is already beginning to change the paradigm of medical practice as we know it, and has profound implications for health and health care in this nation."

A wonderful piece by the Manhattan Institute's Peter Huber in the City Journal explains that one-size-fits-all medicine is giving way to tailored medical treatments that allow physicians to target treatments to individual patients based upon their own specific genetic code.

So the conflict is clear: Centralization or personalization.

Is it possible to have both? I doubt it. Once politicians taste political control over such a large sector of our economy, it is extraordinarily difficult for them to back away.

I am reminded of a quote by Paul Starr, the Pulitzer-Prize Winning Sociologist who wrote The Social Transformation of American Medicine: The rise of a sovereign profession and the making of a vast industry (Basic Books, New York. 1982. P. 235).


"Whoever provides medical care or pays the costs of illness stands to gain the gratitude and good will of the sick and their families. The prospect of these good-will returns to the investment in health care creates a powerful motive for governments and other institutions to intervene in the economics of medicine.


"Political leaders since Bismarck seeking to strengthen the state or to advance their own or their party's interests have used insurance against the costs of sickness as a means of turning benevolence to power."

We have other ideas about how to solve the problems in our health sector, as you know. But they go in very much the opposite direction — toward free markets, free people, and free choices.

The coming health reform debate will involve this central question about control over health care decisions, and the future of our health sector and the future of medicine.

Let the debate begin.

Grace-Marie Turner

Recent News Articles and Studies

In Reforming Health Care, Keep What Americans Like
How Good is Canadian Health Care?
British Balance Benefit vs. Cost of Latest Drugs
Thinking About Tomorrow
Increasing Use of the Capitated Model for Dual Eligibles: Cost Savings Estimates and Public Policy Opportunities
State Medicaid Reforms


In Reforming Health Care, Keep What Americans Like
Amy Menefee, Galen Institute
Cincinnati Enquirer, 11/27/08

Though we hear repeatedly that our "broken" health care system is in need of an overhaul, a lot of people seem to favor an overhaul for others, writes Menefee. In fact, a startling majority of Americans — 77% — say the quality of their own health care was "excellent" or "good" in a recent study. Elected officials focused on reform should find out why. The aspects of care that people like are the ones we should keep. The American people are demanding competition, price transparency, portability, and patient control of their health care. They want private insurance options, and they don't want tax hikes. The new Congress must listen. And before embarking on a massive overhaul, elected officials also must listen to what people like instead of insisting that everything is broken.


How Good is Canadian Health Care?
Michael Walker and Nadeem Esmail
Fraser Institute, 12/01/08

Canada's refusal to consider increased private sector involvement and competition in health care has left the country struggling with a system burdened with lengthy waiting lists and aging medical technology, despite being one of the most expensive systems among industrialized nations, concludes this study from the Vancouver-based Fraser Institute. "Canada needs to reorganize its health care system to ensure we can actually deliver on the country's promise of a compassionate approach to health care," said Esmail. Canada spends more on health care on an age-adjusted basis than any other industrialized nation with a universal health access system except Iceland and Switzerland, yet it ranks near the bottom in terms of access to physicians and new medical technology. Most notable about this international comparison of outcomes is that all of the countries that have fewer years of life lost to disease and that have lower mortality amenable to health care than Canada also have private alternatives to the public health care system, including user fees at the point of access to care.

British Balance Benefit vs. Cost of Latest Drugs
Gardiner Harris
The New York Times, 12/02/08

The New York Times describes the controversial history of NICE, Britain's National Institute for Health and Clinical Excellence. The British government created NICE a decade ago to ensure that every pound spent buys as many years of good-quality life as possible, but the agency is increasingly rejecting expensive treatments. The decisions that get the most attention are those involving new drugs. Any drug that provides an extra six months of good-quality life for £10,000 — about $15,000 — or less gets approved, while those that give six months for $22,750 or less might not get approved. More expensive medicines have been approved only rarely, reports the Times, causing people to ask, "What price is life?" [The Galen Institute recently sponsored a forum on this issue featuring German expert Dr. Michael Schlander. Here is our summary of that meeting.]


Thinking About Tomorrow
Andrew J. Rettenmaier and Thomas R. Saving
National Center for Policy Analysis, 12/08

The accrued debts resulting from federal entitlement programs are not problems for tomorrow but for today, write Rettenmaier and Saving. Social Security and Medicare are on a course to eventually crowd out every other government program or usher in a significantly larger federal government. The authors find that the combined Social Security and Medicare debt owed to current retirees is $9.5 trillion, or almost $250,000 per person 65 and older in 2008. Since this amount has not been set aside, funding accrued benefits by themselves will require an amount equal to 54% of federal income taxes, for the next 100 years. The authors recommend reforming Social Security and Medicare so that each worker saves and invests funds for his or her own post-retirement pension and health care benefits. Over time, the programs would be transformed from the current pay-as-you-go programs in which each generation is dependent on the next generation of workers/taxpayers into funded programs in which each generation pays its own way.


Increasing Use of the Capitated Model for Dual Eligibles: Cost Savings Estimates and Public Policy Opportunities
The Lewin Group, 11/08

Approximately 8 million Americans are simultaneously covered by Medicare and Medicaid. Commonly referred to as "dual eligibles," they account for approximately 40% of the nation's Medicaid spending as well as approximately 25% of Medicare expenditures. This report estimates that large-scale savings can be achieved in transitioning the dual-eligible population into a fully integrated, capitated setting. For any given dual eligibles subgroup moved into a capitated setting, encompassing the full benefits package of Medicare and Medicaid covered services, the report estimates initial, CY2010 net savings (across both programs) of approximately 3% per year, growing to nearly 6% per year as of CY2024. Nationally, each percentage point reduction in dual eligibles' spending will yield more than $70 billion in savings across the 2010-2024 timeframe. The paper recommends permitting states to enroll all dual eligibles in targeted counties into a coordinated care setting, with a given dual eligible being enrolled in the health plan for both Medicare and Medicaid Services. States should also be permitted to share 50/50 with the federal government in the net savings that occur across the Medicare and Medicaid programs, which would motivate states to exercise their option to implement these initiatives, since today, any savings accrue entirely to the Medicare program.

This proposal is similar to one adopted by the Medicaid Commission and offered by Grace-Marie Turner and Bob Helms. You can read more about their proposal here.

State Medicaid Reforms

  • Medicaid reform in Florida can claim significant success, writes former Governor Jeb Bush. Launched in 2006, new Medicaid is a patient-centered system that respects individual participants by empowering them to direct their own health care. Now expanded to five counties, 220,000 beneficiaries are currently participating in the pilot program. That's just 9% of the program's participation but more than the entire Medicaid enrollment in 12 states. Last month, the Florida Agency for Healthcare Administration recommended expanding the pilot project to 20 more counties. Expanding reform based on solid policy with a commitment to perpetual improvement will ensure Florida can continue to provide quality health care to more than two million poor, disabled and elderly Floridians.
  • Tennessee Gov. Phil Bredesen describes the success of CoverTN, a health-insurance plan that began in 2006 for those who are self-employed, or who work for small businesses that can't afford a traditional policy. It is a limited plan with shared costs and does not cover truly catastrophic events. This year, as of the first nine months, only four people out of the more than 15,000 people covered had hit the maximum overall limit of $25,000, and only three had exceeded the separate in-patient hospital limits. A larger number, 4%, hit the quarterly pharmacy limits during those first nine months. Even those wh
    o go over the benefit limits get the significant advantage of being able to piggyback their personal expenditures on the contracts CoverTN has negotiated. By doing this, they can often cut their costs on uncovered health care in half.
  • Louisiana's Medicaid reform proposal is designed to make the system work better for the people it serves while also insisting on accountability in spending and results, write Governor Bobby Jindal and Health and Hospitals Director Alan Levine. This year, Louisiana Medicaid will cost the taxpayers nearly $7 billion – $1.6 billion more than two years ago and a 28% increase. Jindal's proposal will transform Medicaid into an integrated health system for the poor that provides consumers with choice and a medical home; takes an aggressive stand against fraud and abuse; manages chronic disease and decreases emergency room visits; provides incentives for improved health behaviors, and expands the numbers of consumers who have the dignity of health insurance rather than languishing on the rolls of the uninsured.




Beagle Proves to Be Dog Show’s Best Friend
Richard Sandomir
The New York Times, 11/26/08

We love good writing and stories about excellence, and this article in the New York Times on Thanksgiving Day was both of these, plus a heartwarming story about the champion American beagle, Uno. It doesn't have anything to do with health care, but it was one of the cutest articles we've read in a long time and we had to share it with you. Don't miss the pictures.

Upcoming Events

Consumer Health World
December 7-10, 2008
Arlington, VA

Health Reform–Guaranteed?
American Enterprise Institute Book Forum
Monday, December 8, 2008, 2:30 p.m. – 4:30 p.m.
Washington, DC

OECD Congressional Seminar: US Economic Outlook
Organisation for Economic Co-operation and Development
Tuesday, December 9, 2008, 9:00 a.m. – 12:00 p.m.
Washington, DC

From the Broad Brush to the Fine Point: How to Enable Personalized Medicine
Center for Medical Progress at the Manhattan Institute Luncheon
Friday, December 12, 2008, 12:00 p.m. – 2:00 p.m.
New York, NY

Best and Brightest Forum on Medical Innovation
Monday, December 15, 2008, 1:30 p.m. – 4:00 p.m.
Philadelphia, PA

Healthcare Innovation in the 21st Century: HHS' Dynamic Role in the Biomedical and Device Development Process
Tufts Center for the Study of Drug Development Event
Tuesday, December 16, 2008, 2:00 p.m. – 4:00 p.m.
Boston, MA

2009 Legislative Preview on Health
Oregon Health Forum Event
Wednesday, December 17, 2008, 7:00 a.m. – 9:00 a.m.
Portland, OR



Health Policy Matters is a weekly newsletter containing summaries of timely and informative studies and articles on free-market health reform. It features a commentary by Grace-Marie Turner on the major developments and issues of the week as well as summaries of writings by participants in the Health Policy Consensus Group and other articles of interest from the health policy world, plus 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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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.