Leaping Into Reform

Congress is progressing toward major health reform in just the first few weeks of this year, but cracks in support already are starting to show.

The Senate is expected to debate a significant expansion of the State Children's Health Insurance Program next week, with passage virtually assured. It would pour tens of billions more into the program and allow states to expand publicly-funded health insurance to children in families earning well over $100,000 a year.

And the "stimulus" bill would spend $825 billion to try to boost the economy and, in the process, would lead to a huge expansion of government — especially in health care.

There are significant boosts in Medicaid spending and new mandates on employers to extend COBRA coverage to their former workers. The bill also would create the platform for major federal involvement in comparative effectiveness studies and health information technologies. These all are major items on the checklists of the Democratic Congress and the Obama administration.

This is a big step toward HHS Secretary-designate Tom Daschle's goal of quick legislative action to implement the vision he laid out in his book, Critical.

"I do not believe we should draft a bill laying out this vision in excruciating detail," he wrote. "I believe a Federal Health Board should be charged with establishing the system's framework and filling in most of the details."

Since he controls the levers of the regulatory bureaucracy, these two bills will create the platform for significant progress toward the goal of putting millions more people in public programs, creating new federal programs, and cracking ERISA with a new employer mandate.

And we haven't even seen the bill yet that Senator Ted Kennedy will be offering, although it is expected to closely follow the outline that Senate Finance Chairman Max Baucus offered late last year.

But already, the cracks in support are showing:


  • Comparative effectiveness: House Appropriations Chairman David Obey was a bit too open in explaining the goal of comparative effectiveness studies, saying in report language that it would keep patients from receiving more expensive medications and procedures — creating a firestorm of protest.


    The original language said that procedures and interventions "that are found to be less effective and in some cases, more expensive, will no longer be prescribed." Mr. Obey had to pull back, but the goals of federal rationing now are clear.


  • Information technology: While saying it supports privacy safeguards, America's Health Insurance Plans told House Speaker Nancy Pelosi that regulations required under the privacy provisions would "restrict information that could be exchanged for health promotion, disease management, and care coordination programs."


    John Glaser, chief information officer for Partners HealthCare in Boston, warns "…you can bring in too much money too fast and not only waste it, but set us back…If it's too hasty, you can create so many bad experiences that people say…'My data's a mess and my patients are angry.'"


    The National Association of Chain Drug Stores wrote to Ways and Means Chairman Charles Rangel that stimulus language "unfairly penalizes providers who have already adopted health information technology" by requiring new, potentially costly and operationally burdensome mandates.


  • COBRA expansion: COBRA, or the Consolidated Omnibus Budget Reconciliation Act, allows workers to remain under their former employer's health plan temporarily if they pay 100% of the premium cost and a 2% administrative charge. The stimulus bill would extend COBRA eligibility and create a new federal program to partially fund the premiums.


    It also would permit COBRA-eligible individuals who are 55 years or older and who have worked for an employer for at least a decade to retain COBRA coverage at their own expense until they become eligible for Medicare or get a new job with health insurance.


    The National Business Group on Health said it has serious concerns about the bill. COBRA was designed as a temporary source of health coverage and "is the wrong vehicle to assist the uninsured on a permanent basis," the group wrote. The actual cost of COBRA can be as high as 133 percent to 150 percent of the average per-employee plan costs.


    "These costs would significantly increase if people could keep COBRA longer," wrote NBGH president Helen Darling. It warned that the proposed expansion of COBRA would increase health care costs for employers and employees.


  • Medicaid: The bill includes major new spending for Medicaid, but, "Unfortunately, the $87 billion allocated for more Medicaid money for states doesn't appear to hold them accountable for ensuring that the tax dollars are spent wisely," House Republican Leader John Boehner warned. A new report from the Government Accountability Office shows that at least 10% of Medicaid dollars are wasted.


    House Republican leaders sent a letter to Speaker Pelosi recommending that the bill require states to submit budget plans to Congress before the extra Medicaid money is released to them.


    A Republican aide to the Energy and Commerce Committee told reporters that the Medicaid provisions appear to constitute a "permanent takeover of Medicaid by the federal government."

So while there is broad support for health reform in Congress, in the Obama administration, in the business community, and among the American people, it is those devilish details that keep getting in the way.

And this is only the beginning. Creation of an unelected, unaccountable Federal Health Board, a mandate and enforcement provisions for individuals to purchase health insurance, a play-or-pay mandate on employers to provide coverage to workers, expansion of Medicare, creation of a new government health insurance plan, and establishing a government-determined benefits package — and more — are part of the master plan.

All have many more constituencies with the potential to lose than to win, and their voices surely will be heard. This is not going to be easy.

Grace-Marie Turner

Recent News Articles and Studies

Inauguration 2009: Perspectives on Health Reform
The Fallacy of Health Care Reform as Economic Stimulus
The House Stimulus Bill and Health Care Assistance for Unemployed Workers
Congress Wants to Restrict Drug Access
UK Still Behind Much of Europe in Uptake of New Cancer Drugs
Building a National Health System: Learning From Other Countries’ Mistakes
Hospital & Physician Cost Shift: Payment Level Comparison of Medicare, Medicaid, and Commercial Payers


Inauguration 2009
: Perspectives on Health Reform

Health Affairs, 01/16/09

In this package of eight papers, Members of Congress, business, policy, and academic leaders offer their thoughts on the prospects for reform and advice on what the nation's health policy agenda should be at home and around the globe. Members of Congress offer a bipartisan vision for reform, health sector leaders lay out their reasons why reform is vital, and policy experts offer caution. For example, Henry Aaron of the Brookings Institution says the U.S. health sector is larger than the economy of France, and "it's not typical of democracies to transform something the size of all of France through a single piece of legislation, or even through multiple laws during a single presidency." He says the system's "chaotic disorganization" mitigates "against successful 'big bang' changes."

The Fallacy of Health Care Reform as Economic Stimulus
Robert A. Book, Ph.D.
The Heritage Foundation, 01/16/09

Any money the federal government spends on health care reform, health IT, Medicaid, roads and bridges, or anything else has to come from somewhere, writes Book. And that "somewhere" is either from increased taxes, more borrowing, or inflation of the currency — any combination of which would cancel out any "stimulus" effect of the new spending. Spending money on health care or roads and bridges might create jobs in the health care or construction industries, but that is only at the cost of jobs destroyed somewhere else. Prosperity cannot be achieved by simply moving resources around from one sector of the economy to another. Rather, it can be achieved only by increasing production, which can be induced not by spending but by reducing the taxes and regulations that inhibit productive activity.

The House Stimulus Bill and Health Care Assistance for Unemployed Workers
Nina Owcharenko
The Heritage Foundation, 01/21/09

If Congress wants to assist unemployed workers with their health care costs, it should minimize unintended consequences and maximize choice, flexibility, and cost effectiveness, writes Owcharenko. The bill proposed by House Democrats, which recommends spending $39 billion in new health care subsidies and in additional federal Medicaid spending, would do the opposite by limiting the availability of assistance only to those individuals who maintain costly employer coverage or join Medicaid. At a time when these unemployed workers and their families are struggling financially, it would be unwise to limit their coverage options. Instead, the federal government, working with the states, should give these families assistance and allow them to decide the best coverage option for themselves and their families.

Buried in the economic stimulus legislation is a provision further undercutting parental authority and expanding control of taxpayer dollars by family planning clinics, writes Dennis G. Smith of The Heritage Foundation.

Congress Wants to Restrict Drug Access
Scott Gottlieb, American Enterprise Institute
The Wall Street Journal, 01/20/09

The biggest flaws in the House stimulus plan, which allocates $1.1 billion for studies to compare different drugs and devices to "save money and lives," aren't just political, they're scientific, writes Gottlieb. Key comparative medical questions usually hinge on when doctors should escalate care to include more invasive measures — not on bare comparisons between otherwise similar technologies, which is the focus of the House proposal. Conducting worthwhile comparative research is also more expensive than this bill accounts for, since big trials are necessary in order to look for differences between two "active" treatments that work, one perhaps a little better than the other. The Congressional Budget Office says that government-run comparative effectiveness studies won't actually save much money, yet the House still wants to conduct this research and, worse, to do the studies cheaply by adopting less rigorous research methods than commonly accepted. The risk is that the conclusions will be flawed and still used to restrict coverage decisions, especially by Medicare.


UK Still Behind Much of Europe in Uptake of New Cancer Drugs
PharmaTimes, 01/21/09

European nations vary enormously in their uptake of new oncology therapies, with the U.K. continuing to lag behind, reports PharmaTimes. The greatest differences are in adoption of new colorectal and lung cancer drugs, as well as those to treat renal and liver cancers, according to a new report. Austria, France and Switzerland are Europe's leaders in the uptake of new cancer drugs, while the poorest are Poland, the Czech Republic and the U.K., according to the study published by Dr. Nils Wilking and Professor Bengt Jonsson. Moreover, oncology drugs introduced before 1999 accounted for 68% of the European market for cancer drugs in 2007, while newer drugs launched 2006-2007 represented just 3%. The study also notes that the uptake of cancer drugs in the U.K. is far below the European average.

Building a National Health System: Learning From Other Countries' Mistakes
Brian Ferguson
Atlantic Institute for Market Studies, 01/09

Canadian health policy expert Brian Ferguson argues in this published lecture that the invisible hand of Adam Smith working through a market economy is the best regulator, even in the health sector. The role of government in the health care system cannot be to run every detail, he says. A medical system is too complicated a thing to be micro-managed by a centralized bureaucracy. It is important not to regard doctors as the enemy, and not to fear the private sector. Ferguson says a link needs to be established between doctors and patients to allocate resources efficiently. The best way to do that is to make patients responsible for paying at least part of their own costs. Private insurance and private supply can function as part of an efficient, universal national health system, he concludes.


Hospital & Physician Cost Shift: Payment Level Comparison of Medicare, Medicaid, and Commercial Payers
Will Fox, FSA, MAAA and John Pickering, FSA, MAAA
Milliman Inc., 12/08

The continued underpayment of providers by public programs leads to significantly higher health insurance costs for consumers and employers, according to a study from the independent consulting firm Milliman Inc. These underpayments create a payment gap to hospitals and physicians that privately insured employers and consumers must close t
hrough a "cost shift" or "hidden tax." Milliman estimates the total annual cost shift in the U.S. from Medicare and Medicaid to commercial payers is approximately $88.8 billion. The report finds that annual health care spending for an average family of four is $1,788 higher than it would be if Medicare, Medicaid and private employers paid hospitals and physicians similar rates, with total provider reimbursement unchanged.

Upcoming Events

Healthcare that Works: Answering President Obama's Challenge of Finding What Works
Center for Health Transformation Event
Monday, January 26, 2009, 10:00 a.m. – 11:30 a.m.
Washington, DC

Legal and Public Health Issues in Concierge Medicine
George Washington University School of Public Health and Health Services Event
Wednesday, January 28, 2009, 2:30 p.m. – 3:30 p.m.
Washington, DC

Learning from European Countries: Health Care Markets and Regulation in the Netherlands and Germany
AcademyHealth Event
Wednesday, February 4, 2009, 8:00 a.m. – 12:30 p.m.
Washington, DC

8th Annual Strategic Medicare Policy Summit
The Center for Business Intelligence Event
February 12-13, 2009
Washington, DC
Grace-Marie will speak on a panel about "Medicare Expansion, Entitlement Reform and National Health Coverage" on Thursday, February 12.





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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