Thinking Toward 2009

Washington is not waiting for the November 4 election results to begin planning its health reform agenda for next year.

The Washington Times reports today that Sen. Ted Kennedy is taking a leading role:

From his sickbed, Sen. Edward M. Kennedy has secretly been orchestrating meetings with lobbyists and lawmakers from both parties to craft legislation that would greet the new president with a plan to provide affordable medical coverage to all Americans, a measure he has called "the cause of my life."

Mr. Kennedy has been sidelined for months with a dangerous form of brain cancer. But despite his disheartening medical prognosis — or maybe because of it — aides and activists say, the Massachusetts Democrat's decades-long quest for health care reform may now be closer to success than ever.

The meetings actually are far from secret. A key architect of the Massachusetts health reform plan, John McDonough, joined the senator's staff this spring to lead the reform effort.

He has been holding dozens of meetings over this last several months with key constituent groups (I was asked to present on consumer-directed solutions in July) to gather information and build support for the effort. Sen. Kennedy talks with McDonough and other staffers every day about their progress.

"Here's a guy who has made a serious effort on health reform several times in the past and failed," said John Rother, a top executive at AARP, the senior citizens lobby. "There will be a very strong impulse in the Congress to do things for him, especially things he really cares about, and health care would be at the top of that list."

"There is this real feeling," Mr. Rother added: "'Let's do it for Ted.'"

Sens. Ron Wyden and Bob Bennett also are continuing their efforts to build bi-partisan support for sweeping health reform, as are Senate Finance Committee Chairman Max Baucus, ranking member Chuck Grassley, and others in both the House and Senate.



Getting employers in line may be a challenge: A new survey by the Mercer consulting firm finds that businesses are far from united on what direction reform should take.

"Half-hearted at best" might be one way to describe the overall level of employer enthusiasm for pending proposals, according to a survey conducted July through September of 3,400 employers.

Small employers will be the biggest challenge. Of the 545 employers surveyed who do not offer coverage, most told Mercer that offering health insurance now "is far beyond their means." When asked how much they would be willing to contribute per employee per month for insurance, 59% said between nothing and $50. "Only 10 percent said they would pay at least $200," Mercer said.

So what solutions do they prefer? Half favor an individual mandate in which "people are required to have coverage if they can afford it, either through their employer or purchased on their own."

There also was significant support for having the federal government take over the health costs of a company's most expensive workers (46%), and 34% said that ERISA should be waived so all employers would be included in state health reform programs.

Clearly, we have a lot of educating to do for employers to see the significant down-side risks of all of these proposals.


  • Individual mandates always lead to employer mandates as companies lose control over costs and benefit structures.
  • Government reinsurance for employers would push federal price controls and bureaucracy deeply into employer plans.
  • And opening up ERISA will lead to no end of regulatory mischief, mandates, and intrusion, undermining employer efforts to control costs.



What would be my advice? A Fortune 100 CEO asked me recently what two things would be most important for his company to do regarding health reform. They are highly committed to continuing to offer health coverage but are increasingly worried about costs.

First, I said self-insured companies need the protection of ERISA so that they can continue their innovative programs to give employees incentives to engage in healthy behaviors and become partners in managing health costs. They are seeing real results with their programs and need to have a protected climate to continue.

And second, they need to engage in the debate over covering the uninsured through private health insurance. If tens of millions of people were to be added to the rolls of public programs — Medicaid, SCHIP, or new government programs — that would mean doctors and hospitals would be facing low government payments for an even larger number of their patients.

Providers would shift even more of their costs to private plans just to keep their doors open. No amount of company efficiencies would be able to mitigate this cost-shifting.



The debate continues over the best ways to provide subsidies for the uninsured. A new Urban Institute study concludes that providing subsidies to individuals rather than to businesses is fairer and more efficient.

Authors Linda J. Blumberg and John Holahan conclude that subsidies for individuals and family members are better at targeting low-income people — those who are least likely to be insured. Such a system is more equitable since individuals with similar economic circumstances would receive similar treatment. Furthermore, employer subsidies are of little use to workers who cannot afford health insurance even if their employers offer it or to those who are unemployed, they said.

"Given these issues," they conclude, "it is probably best to rely primarily on individual and family income-related subsidies."




The National Journal has launched a new blog inviting health policy experts, including yours truly, to post comments each week on a hot topic. This week, blog coordinator Marilyn Werber Serafini asked, "Is there a sensible way to change the tax treatment of health care that would be palatable to both Republicans and Democrats?"

Here is a link to see the debate. I will add my own post later today.



It's good to share: We produce Health Policy Matters as a free public service of the Galen Institute, part of our active effort to educate the debate over free-market ideas for health reform. Please feel free to circulate it far and wide to your colleagues, friends, and even those on the other side of the debate. No permission is needed.

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Grace-Marie Turner

Recent News Articles and Studies

America 2012: Health Care
McCain Health Care Plan Offers Needed Choice
The Top Ten Myths of American Health Care: A Citizen's Guide
Healthcare Shouldn't Be Linked to Employment
Drug Importation Is a 'Reform' We Can Do Without
A Worsening Medical Condition
CDHP Member Experience Survey


America 2012: Health Care
Business and Media Institute, 10/08

Grace-Marie Turner discusses Sen. John McCain's health care plan in an interview with the Business and Media Institute. She says that if employees were to decide to buy health insurance on their own, the competitive marketplace would require employers to offer higher salaries in lieu of health benefits. "The central point and the central idea in Sen. McCain's plan is expanding access to private health insurance coverage by spending more efficiently the dollars that we're already paying for people to get health insurance, and giving people the opportunity to make those choices themselves instead of having government dictate them," said Turner.

McCain Health Care Plan Offers Needed Choice
Amy Menefee, Galen Institute
Detroit Free Press, 10/22/08

The health care debate in this election isn't only about covering the uninsured, getting electronic medical records or improving care, writes Menefee. It's about who makes our decisions. Sen. Barack Obama is promising people his health care plan will take care of everything and everyone. But in the rhetoric of guarantees, the value of freedom has been lost. Obama's promise doesn't mention the (at least) five new bureaucracies he would create, starting with a new government health plan that would push private plans — and our choices — out of the marketplace. Government would determine health benefits for all of us. Sen. John McCain, however, proposes offering a refundable tax credit and portable health insurance policies that would give us more power as individuals to choose what we think is best for our families. It's up to the voters to tell Washington we're still the decision-makers, writes Menefee.


The Top Ten Myths of American Health Care: A Citizen's Guide
Sally C. Pipes
Pacific Research Institute, 10/24/08

PRI President Sally Pipes takes on ten popular myths about the state of health care in America in a new book, challenging the belief that only government can fix our health care system. In fact, says Pipes, "government overreach has put the system in a state of crisis." The final chapter lays out several patient-centered prescriptions for reform. "If we want to bring costs down and extend coverage to more Americans, we have to open the health care marketplace to competition — by abolishing costly government regulations and reforming the tax code to make insurance more affordable," says Pipes.

Harvard's Kate Baicker and Amitabh Chandra describe several common myths about the benefits and design of health insurance that interfere with the diagnosis of problems in the current system and impede the development of a much-needed bipartisan consensus on how to engineer reform.

Healthcare Shouldn't Be Linked to Employment
Jeff Jacoby
The Boston Globe, 10/19/08

De-linking medical insurance from employment is the key to reforming health care in the U.S., writes columnist Jacoby. Far from being a calamity, it would represent a giant step toward ending the current system's worst distortions: skyrocketing premiums, lack of insurance portability, widespread ignorance of medical prices, and overconsumption of health services. When patients think someone else is paying most of their health care costs, they feel little pressure to learn what those costs are — and providers feel little pressure to compete on price. So prices keep rising, which makes insurance more expensive, which makes Americans ever-more worried about losing their insurance — and ever-more dependent on the benefits provided by their employer. For 60-plus years, a misguided tax preference for employer-sponsored health insurance has distorted America's health care market. The solution is to restore market forces by fixing the tax code, and liberating Americans from an employer-based system that has made everything worse.


Drug Importation Is a 'Reform' We Can Do Without
Sally C. Pipes, Pacific Research Institute
The Examiner, 10/18/08

Many Americans believe that the importation of cheaper foreign drugs is an elegant solution to rising health care costs, writes Pipes. But some drugs are less expensive in nations like Canada because governments impose price controls on drugs in order to sustain their systems of socialized medicine, which leads to shortages, rationing, and even complete unavailability. Further, the safety concerns associated with importing drugs far outweigh any potential savings. Legalizing drug importation would cause drugs to flood the American market from all over the world, putting even more strain on a regulatory body woefully unequipped to handle it. In short, the benefits of legalized drug importation have been much exaggerated, while the real dangers associated with such a policy have been understated.

A Worsening Medical Condition
Henry I. Miller, Hoover Institution
The Washington Times, 10/19/08

A cornerstone of American medicine is physicians' ability to prescribe drugs for not-yet-approved uses, based on findings in the medical literature and their own clinical judgment, writes Miller. During the last several years, however, the increasingly risk-averse Congress and the FDA have been gradually moving toward "conditional," or limited, approvals of new drugs that place various restrictions on prescribing, distribution, sale and advertising. At the same time, legislators and regulators have imposed additional requirements for the demonstration of safety and efficacy to obtain even those limited approvals. The new conditi
onal approvals diminish the ability of physicians to exercise discretion and will worsen the conditions of patients and drug companies. At a time when the U.S. population is aging and needs innovative new medicines for a wide spectrum of degenerative and infectious diseases, these developments are not what the doctor ordered.

AEI's Scott Gottlieb writes that Sen. Obama's policies on drug access and his party's plans to control pricing — based on a view of medical care as a commodity to be purchased at the lowest price, with little allowance for innovation — would distort the financial incentives that inspire innovations and lead to fewer new drugs that can reduce long-term costs, extend life, and ease suffering.


CDHP Member Experience Survey
BlueCross BlueShield Association, 10/20/08

People enrolled in consumer-directed health plans (CDHPs) are more likely to budget for health care costs and participate in health and wellness programs, according to this BCBSA survey. It also found that CDHP enrollees are 30% more likely to track their health expenses than those in more traditional plans and 27% more likely to ask their doctors about the costs of treatment. When it comes to health and wellness, CDHP enrollees appear more engaged and proactive in preventive health measures. The survey found they are slightly more likely to have regular checkups, physicals, and preventive screenings than non-CDHP enrollees. CDHP consumers are also more likely than people in traditional plans to participate in health and wellness programs, including disease management, health coaching, nutrition and diet, smoking cessation, stress management, and exercise.

A new study from the CDC's National Center for Health Statistics finds that, from January – March 2008, 20.3% of persons under age 65 with private health insurance were enrolled in a high-deductible health plan, 5.3% were enrolled in a consumer-directed health plan, and 17.2% were in a family with a flexible spending account for medical expenses.

Upcoming Events

Grace-Marie Turner speaking on the Lukas Richards show
WKCR-FM Radio Broadcast
Saturday, October 25, 2008, 4:00 p.m.
New York, NY

Disruptive Innovation in Education and Health Care
American Enterprise Institute Event
Monday, October 27, 2008, 12:00 p.m. – 3:30 p.m.
Washington, DC

The Top 10 Myths of American Health Care
Pacific Research Institute Book Launch Reception
Monday, October 27, 2008, 6:00 p.m. – 8:00 p.m.
San Francisco, CA

What the Next President and Congress Need To Do About Medicare, Medicaid, and Social Security
Center of the American Experiment Event
Tuesday, October 28, 2008, 12:00 p.m. – 1:30 p.m.
Minneapolis, MN

Grace-Marie Turner speaking on the Finger Lakes Morning News show
WGVA-AM Radio Broadcast
Thursday, October 30, 2008, 8:30 a.m.
Rochester, NY

Medicare Prescription Drug Benefit Symposium
Centers for Medicare and Medicaid Services Event
Thursday, October 30, 2008, 8:45 a.m. – 4:00 p.m.
Baltimore, MD

Grace-Marie Turner speaking on the News Scene show
WCRX-FM Radio Broadcast
Tuesday, November 4, 2008, 7:15 p.m.
Chicago, IL

If You Build it, Will They Come? The Impact of Health Care on the Economy
Oregon Health Forum Event
Friday, November 7, 2008, 11:30 a.m. – 1:30 p.m.
Eugene, 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

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