The Other Washington

Has Washington learned from experience?

Not Washington, D.C., but Washington state?

Possibly. The state was among the most aggressive in the 1990s in implementing health insurance reforms, including guaranteed issue, community rating, and a big dose of coverage mandates.

But the "reforms" brought huge increases in insurance premiums and new limits on coverage. Premera Blue Cross, then the largest carrier in Washington's individual market, for example, raised premiums on its once-most popular plan by 78% between 1995 and 1998 — about 10 times the rate of medical care inflation. And the plans stopped covering maternity care, prescription drugs, and mental health — all of which they had covered before.

Citing mounting losses, the major carriers stopped writing new policies in the individual market, and people couldn't find individual policies at all in many parts of the state.

Seeing rising costs and a rising number of uninsured, the state pulled back on its reform agenda of aggressive government intrusion into the health insurance market.

The Washington Policy Center, the state's leading think tank, has followed these issues closely and held its annual health care conference this week. I traveled to Seattle to deliver the keynote on Tuesday. Daniel Mead Smith and his team got a huge turnout for this event, with more than 400 attending, including state legislators, medical and business leaders, and the media.

They are anxious to hear about what is going to happen on the national scene, where many of the proposals look a lot like the ones they already have tried.

I spoke about the contrasts between the visions for health reform offered by the presidential candidates, summarized in a piece that ran the morning of my talk in the Seattle Post-Intelligencer. (See below for our write-up and link). I also moderated a panel on state efforts at reform where the audience heard about the efforts and struggles in Wisconsin, California, and Massachusetts in trying to achieve universal coverage. The bottom line: It is a much heavier lift and much more expensive than political leaders had anticipated.

Galen also hosted a dinner that night at the spectacular Columbia Tower Club, on the 75th floor of the tallest skyscraper in the city with a stunning view of the ocean, city, and hills below. Among our distinguished guests were three state legislators — Rep. Bill Hinkle, the Ranking Member of the House Health Care Committee, Sen. Cheryl Pflug, Ranking Minority Member of the Health and Long-Term Care Committee, and Sen. Linda Evans Parlette, the Senate Republican Caucus Chair — who are working to create more competition and options for consumers in a state that has been battered by experiments at health reform for at least 15 years.

More companies are now in the market in Washington state after the regulations were eased, and eHealthInsurance says a 50-year-old woman could get a policy in the individual market for as little as $90 a month for an HSA-qualifying plan or $550 for a first-dollar, comprehensive plan. Competition is better than control, a lesson that Washington, D.C., needs to learn.

And we thank our friend Adm. Stephen Barchet, former Deputy Surgeon General of the Navy, retired physician, and policy advocate par-excellence, for joining us at both events and for continuing to keep us updated on Washington state's stuggles and successes.



So the national debate now can go one of two ways: Leaders can say that Washington state just didn't try hard enough and that more regulation was needed. Or that we need to introduce something that we don't have now — a truly competitive market for health insurance with real consumer choice.

But there is so much distrust of the market right now. Health reform plans being offered at both the national and state levels involve so much government intrusion that there would be no way for market competition or consumer choice to work.

But the market can work if we realign incentives and allow genuine competition to generate new products and efficiencies among health care providers, facilities, and insurers competing on diverse products and prices.



The market can respond: The Philadelphia Inquirer carried a story this week showing that six insurers, including Aetna, are developing a program that will pay primary care doctors to more closely track their patients' health.

This is in response to criticisms that public programs and private insurers only pay to treat people after they are sick. About 150 doctors in 32 primary-care practices will participate in the program, with the companies rewarding doctors for email and phone consultations, offering advice to patients on how to take better care of themselves, and other wellness and prevention programs.

The program will have the flexibility to experiment and see what works in this pilot program, which has the support of Gov. Ed Rendell.



I will be participating in a panel discussion this Monday about the Massachusetts health care reform plan. The briefing is being hosted by the Alliance for Health Reform and will be broadcast on C-SPAN2.



And a bit of excitement on the street outside our office in Old Town Alexandria today: The Blue Angels are in town for an air show at Andrew's Air Force Base tomorrow, and they were at a nearby hotel this morning. Tara and Jena Persico of our office, daughters of career Navy Master Chief Mike Persico, heard their motorcade assembling outside, and we all went down to cheer them for their service and extraordinary skill as pilots. They could not have been nicer, greeting the assembled crowd and offering autographed pictures of their planes in formation.

Grace-Marie Turner

Jena Persico with Capt. Brendan Burks and Lt. Mark Swinger

Recent News Articles and Studies Saving Medicare
Lessons from the Clinton Plan
Candidates and Health Care Reform
A Profile of the American Health Sector
The Republican Health-Care Surrender
Blocking Medicaid Rules: Hurting Families and Taxpayers Alike
True Charity Health Care Comes from Community, Not Government
How the NHS Is Letting My Father Die
Why We Need a Market for Human Organs

Saving Medicare

Mark V. Pauly, Wharton School of the University of Pennsylvania and Joseph R. Antos, American Enterprise Institute
Forbes, 05/09/08

Pauly and Antos explain the options for dealing with Medicare's looming financial crisis: O
ther countries have capped health care spending and ration the demand for care through bureaucratic rules based on political value judgments, but there is a better way, they write. The U.S. could restrict the growth of public spending per beneficiary, replacing Medicare's open-ended entitlement with a credit that grows at a rate that is financially sustainable. Seniors could use the credit to help pay for health plans of their own choosing and add their own money to buy more expensive plans if they choose. Compared with today's Medicare options, this limit will not make people happy, they say, but today's generous options cannot be preserved without imposing intolerable costs on future generations. The options are to accept uniformly imposed, politically chosen and bureaucratically enforced cuts in benefits — or give seniors the power to make the best of a difficult situation.

Lessons from the Clinton Plan

Joseph Antos, American Enterprise Institute
Health Affairs, 05/13/08

The Clinton administration's attempt at health reform in the mid-1990s and the U.S. experience since then suggest some clear lessons for the next U.S. president, writes Antos. Public confidence in a major reform proposal must be won, and congressional support must be garnered, even if the election is a landslide. Insisting on universal coverage as a precondition may undercut the ability to enact other policies needed to improve the health system, he writes. Excessive regulation and price controls are likely to exacerbate underlying problems. The next president should take full advantage of market incentives to promote a high-value health system.

Candidates and Health Care Reform

Grace-Marie Turner, Galen Institute
Seattle Post-Intelligencer, 05/12/08

Sens. Barack Obama and John McCain are gearing up for a general election battle — barring a surprise surge by Sen. Hillary Clinton — in which they will offer very different visions for health care reform, writes Grace-Marie Turner. Obama sees a much larger role for government in the one-sixth of our economy represented by the health sector, but McCain has a very different vision: He wants to give patients control over their health care and health coverage decisions and would focus on new financing tools to help people buy health insurance that would be portable from job to job and new mechanisms for those with pre-existing conditions to get coverage. Congress will wrestle with the intricacies of reform, but in this election year, the vision is the key, and the contrast between the visions that Obama and McCain offer is stark, writes Turner.

A Profile of the American Health Sector

Grace-Marie Turner, Galen Institute
Gesundheit!, 05/08

Grace-Marie Turner provides an overview of the U.S. health sector in this publlication for the Stockholm Network, a pan-European think tank. Many Europeans believe that health care in the U.S. is entirely delivered through the private sector in a largely unregulated free market. However, health care financing and delivery are in fact characterized by significant government involvement, both through large public sector programs that finance health benefits for more than 100 million Americans and through a private sector that is highly regulated by the states. Turner profiles who the uninsured are, describes the safety net programs, and explains new ideas that are being offered to increase access to health insurance while providing new incentives for the market to offer better, more affordable health care.

The Republican Health-Care Surrender

Dick Armey
The Wall Street Journal, 05/15/08

Former House Majority Leader Dick Armey says conservatives in Congress should be promoting the principles of consumer choice, individual responsibility, and provider competition that would transform our broken health-care system. Instead, he says key Republicans are aligning themselves with those who advocate mandates on coverage, mandates for individuals to purchase insurance, and much more government intrusion into the health sector. They should instead embrace a rational, conservative solution to rising health-care costs that gets the government and other third parties out of the way, writes Armey.

Blocking Medicaid Rules: Hurting Families and Taxpayers Alike

Daniel Patrick Moloney, Ph.D.
The Heritage Foundation, 05/14/08

Congress is poised to block seven rules issued by the Centers for Medicare and Medicaid Services designed to curb certain Medicaid fraud and abuses. Of particular importance to American families is a rule that would remove Medicaid funding for non-medical expenses of school-based clinics, including "family planning" education and substance-abuse treatment referrals, writes Moloney. Congress should change Medicaid law to require that doctors and school nurses seek explicit, prior written informed consent of a child's parent or legal guardian before providing contraception or psychiatric care, writes Moloney. The proposed rules will not only reduce the fraudulent billing of the federal government, but will also empower parents to have greater involvement in the lives of their children.

There is insufficient accountability and transparency to taxpayers in the Medicaid program, writes Heritage's Nina Owcharenko. Some states have exploited this lack of transparency to their full advantage. Congress should not delay the Medicaid regulations that are intended to address these abuses.

True Charity Health Care Comes from Community, Not Government

Dr. Alieta Eck
Home News Tribune and the Courier News, 05/02/08

The way to care for the poor is through true charity — not government "charity" devised by politicians, writes Dr. Alieta Eck, a specialist in internal medicine and founder of the Zarephath Health Center. Government should step aside and let the physicians and the communities work together to solve the problem. For example, the Zarephath Health Center, which started in 2003, is open only 10 hours a week and yet currently provides free care to 200 patients per month — completely through the kindness of volunteer doctors and nurses. Expenses last year totaled $44,000, so calculations tell us that the physicians provided care, including free medicines, for an average of $22 per patient visit, writes Dr. Eck. Compare that with the average hospital ER visit of well over $1,000. Patients at Zarephath were grateful as they understood the sacrifice of the unpaid staff, and many transitioned to private physician offices once their financial situations improved, writes Dr. Eck. These patients might not still have New Jersey's overpriced health insurance, but they can pay something toward the real cost of their care, knowing that a backup of a free clinic still exists should they fall into hard times again.

How the NHS Is Letting My Father Die

Sarah Anderson
Daily Mail, 05/10/08

Sarah Anderson, an ophthalmologist with the U.K.'s National Health Service (NHS), provides a first-hand account of the country's 'postcode lottery,' a system which decides who gets vital drugs based on where a person lives. Her father, Ian, has been refused Sutent, a new cancer drug, which could provide the only real chance of treating his kidney cancer. Although Sutent has been licensed in Europe since 2006, the U.K.'s National Institute of Clinical Excellence has yet to decide whether it is effective enough to warrant the cost to the NHS. It is not due to pass judgment until next January, and in the meantime, each Primary Care Trust (responsible for the health services of the local population) is entitled to form their own policy on its use. Of the 3,100 patients a year who discover that they have advanced kidney cancer, fewer than 200 have succeeded in getting funding for the drug from their PCT. "I never for a moment thought that a life could be decided by something as arbitrary as one's address," she writes.

James Gubb of the London-based think tank Civitas argues that patients should be able to buy such treatments privately. Implicit rationing — clinicians hiding, or placing limits on, the range of choices available to patients under the guise of clinical necessity — has enabled the more affluent and articulate to gain preferential treatment, writes Gubb.

Why We Need a Market for Human Organs

Sally Satel, American Enterprise Institute
The Wall Street Journal, 05/16/08

Because of the global organ shortage, thousands of patients die unnecessarily each year for want of a kidney, writes Satel, a physician who is a transplant recipient. And because organ sales are illicit, corrupt brokers may deceive indigent donors about the nature of transplant surgery, cheat them of payment, and ignore their postsurgical needs and long-term complications. The only way out is to increase the supply of available kidneys — whether by a cash payment to potential donors or through some other form of compensation, writes Satel. A model system could establish a months-long period of medical screening and education. By providing in-kind rewards financed by the government — such as a down payment on a house, a contribution to a retirement fund, or lifetime health insurance — the program would not be attractive to people who might otherwise rush to flawed judgment (and surgery) on the promise of a large sum of cash. The way to stop illicit transactions — and the depredations of underground markets — is to sanction legal exchanges, writes Satel.

Upcoming Events


Grace-Marie Turner speaking on The Morning Show with Lou Lobsinger
WWCK-AM Radio Broadcast
Monday, May 19, 2008, 8:20 a.m. ET
Flint, MI

Presidential Forum on Health Care Reform
Women in Government Relations Event
Monday, May 19, 2008, 10:30 a.m. – 12:00 p.m.
Washington, DC

Massachusetts Health Reform: Bragging Rights and Growing Pains
Alliance for Health Reform Briefing
Monday, May 19, 2008, 12:15 p.m. – 2:00 p.m.
Washington, DC
Grace-Marie Turner and other panelists will discuss the Massachusetts health care reform plan.

The Complete Conference on Medicaid Managed Care
May 19-21, 2008
Washington, DC
Grace-Marie Turner will present "Bringing Consumer Choice into Medicaid" at 9:15 a.m. on Tuesday, May 20.

Wading Through Risk Pools: Practical Implications for Health Insurers
American Academy of Actuaries Capitol Hill Briefing
Tuesday, May 20, 2008, 2:30 p.m.
Washington, DC

Off-Label Uses of Approved Drugs: Medicine, Law, and Policy
AEI Legal Center for the Public Interest Event
Wednesday, May 21, 2008, 8:45 a.m. – 5:00 p.m. (Lunch Included)
Washington, DC

Social Determinants of Health & Consequences of Disparities
Oregon Health Forum Event
Thursday, May 22, 2008, 7:00 a.m. – 9:00 a.m.
Portland, OR

Reforming Health Care: Improving Quality, Controlling Costs, Expanding Coverage
The Brookings Institution and Cleveland Clinic Event
Thursday, May 22, 2008, 8:30 a.m. – 11:30 a.m.
Cleveland, OH



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

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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.