Stealth Reform

Congressional leaders are arguing over whether they'll get a comprehensive health reform bill passed this year or next. But, in fact, major health reform is speeding through Congress in two bills that are on the fast track to enactment — SCHIP and the economic stimulus bill.

Expansion of the State Children's Health Insurance Program to children in families well into middle-income ranges passed the Senate yesterday and will likely be signed into law by President Obama early next week. In some states, children in families earning $100,000 or more would be eligible for taxpayer-supported insurance, as would adults already receiving it, clearly changing the mission of the program.

Sen. Roger Wicker (R-MS) asked, "Is the real intent of this legislation to replace the private health care system with a government-run health care system?" The response from Senate Democratic whip Richard Durbin (D-IL) was that he didn't want to "trap people into private health insurance." Heaven forbid!

Nine Senate Republicans broke ranks and voted with Democrats in favor of the SCHIP expansion; 40 Republicans crossed over and joined nearly all Democrats in passing the nearly-identical House version of the bill last week.

Nonetheless, the partisanship in the debate was evident: Sen. Charles Grassley, the top Republican on the Senate Finance Committee, said he was "disgusted" by the way Democratic leaders handled the debate. "It does not bode well for cooperative work in the coming months," he told The Washington Post.

But the real game-changing health provisions are in the economic stimulus bill, where millions of Americans would be added to Medicaid and other taxpayer-financed health programs — without committee hearings or virtually any debate.

Here are some, but by no means all, of the health reform provisions in this gargantuan economic spending bill:


  • Middle-class entitlement: Having redefined SCHIP as a program for middle-income children, the Congress wants to do the same with Medicaid. The stimulus bill would have the federal government pay 100% of the costs for states who extend Medicaid coverage to unemployed workers and their families, no matter what the families' income or assets.


  • Employer mandate: Employers would be forced to continue COBRA coverage for workers until they qualify for Medicare, even though it could significantly increase their health costs at a time many companies are struggling just to stay afloat.


  • A new public program: The federal government would reimburse workers for at least 65% of the tab for COBRA coverage, creating a major new health spending program, without the slightest debate over whether this is the best mechanism or over the economic distortions this would cause.


  • Federalizing medical decisions: The bill would create a Comparative Effectiveness council in which the federal government would rule on whether medical treatments are worth the money. HHS Secretary-designate Tom Daschle also would get a $400 million slush fund, likely used to set up his dream Federal Health Board to direct traffic in our $2.2-trillion health economy.


  • HIT: The bill would spend more than $20 billion on health information technologies, despite the fact that no one has been able to come up with a workable plan to spend even a fraction of that amount wisely. "This is an attempt to squelch a growing private market that is competing to improve transparency and let consumers compare providers and costs," Kimberley Strassel says in her Wall Street Journal column today entitled "Democratic Stealth Care."

There are huge and far-reaching consequences to every one of these initiatives, and the American people know little or nothing about them, much less their huge ramifications.

Nonetheless, the left already is celebrating.

House Majority Leader Steny Hoyer gave "a rousing speech to a friendly audience of liberal health advocates, gathered in Washington for a conference sponsored by the left-leaning health advocacy group Families USA," according to Congressional Quarterly.

But building consensus for reform is going to take time, and Hoyer warned that the next step in comprehensive health reform legislation could slip into next year.

That won't sit well with Daschle, who wants Congress to act fast! He believes that the Clintons failed in their attempt at comprehensive reform by publicizing too many of the details of the plan in advance and letting debate last long enough for opponents to mobilize.

Does that mean he thinks that if too many people find out what's actually on their reform agenda, they won't support the bitter medicine? Is that really democracy in action, especially for health care, something that affects absolutely every American?

But with SCHIP and the stimulus bill, Daschle is getting his way with a big head start on a major expansion of the role of government in health care.

This chart from Heritage tells the full story about the direction we already are heading in government dominance of our health sector.

Grace-Marie Turner

Recent News Articles and Studies

Don't Stifle Private Ingenuity
Overview of the U.S. Health Sector
Grand, Yes. Bargain, No.
SCHIP: The Creeping Nationalization of Health Care
Fostering Accountable Health Care: Moving Forward in Medicare
Fake Drugs and Failed Governance
Improving Quality and Curbing Health Care Spending: Opportunities for the Congress and the Obama Administration
Mutual Obligation and the American Social Contract


Don't Stifle Private Ingenuity
Grace-Marie Turner, Galen Institute
The Philadelphia Inquirer, 01/26/09

Spurred on by competitive pressures, many health care companies have created impressive solutions to health sector challenges, driving down costs and expanding access, writes Turner. For example, Assurant Health offers an easy-to-use Web tool that lets users customize their health plans, and Aetna allows policyholders to research physician-specific pricing before going to a doctor's office. Private firms also have responded to consumer demand for more accessible care. TelaDoc offers telephone consultations with physicians 24/7, and patients typically get calls returned in less than 40 minutes, for just $35. These examples show the private sector can respond deftly to consumer demands, writes Turner. Under a government-run system with centralized control over benefits and payments, the incentives for such innovation would vanish. Instead of suffocating this progress with a mountain of rules and regulations, government should get out of the way and foster a climate for continued innovation.

Overview of the U.S. Health Sector
Grace-Marie Turner
Galen Institute, 01/30/09

The health care sector in the United States is unique among developed countries, and it is necessarily diverse to respond to the very different needs and demands of a country with 300 million people. Turner provides a concise profile of the public and private health sectors in the U.S., including safety net programs, and explains new ideas to increase access to health insurance while providing new incentives for the market to offer better, more affordable health care. Research Director Tara Persico ably assisted in research for this paper.


Grand, Yes. Bargain, No.
George F. Will
The Washington Post, 01/25/09

When the State Children's Health Insurance Program was created in 1997, its mission was to subsidize state governments as they subsidize health care for families too affluent to be eligible for Medicaid but not affluent enough to afford health insurance. But the Congress is expanding the program far beyond its original purpose, writes columnist Will. The term "poor" becomes an extremely elastic concept with children in some families with incomes well over $100,000 becoming eligible. He cites Grace-Marie Turner, president of the Galen Institute, as saying this SCHIP expansion is sensible — if your goal is quickly to get as many people on public coverage as possible and to have children grow up thinking that it is normal for them to get their health insurance from the government.

In a separate column, Will writes about a new council for Comparative Effectiveness Research, which would be created as part of the economic stimulus bill, which would dramatically advance government control — and rationing — over health care. The CER should be thoroughly debated, not stealthily created in the name of "stimulus," he says.

SCHIP: The Creeping Nationalization of Health Care
Diana Furchtgott-Roth, Manhattan Institute
RealClearMarkets, 01/29/09

SCHIP is the first congressional skirmish in what will no doubt be a multi-year ideological war over the government's role in health care, writes Furchtgott-Roth. Republicans and Democrats both want to reauthorize SCHIP, but with a difference. Republicans want to expand it by $5 billion over five years and want to treat this federal-state program as the government treats food stamps and housing vouchers — available to low-income Americans, who need them, but not to middle-income households. In contrast, congressional Democrats propose to increase SCHIP by $32 to $39 billion over five years and seek to move toward national health insurance — available to everyone, and paid for by the taxpayers, as in Europe and Canada. Do the American people want creeping nationalization of health-care financing, as they have seen creeping nationalization of the banks? Are they even being asked?


Fostering Accountable Health Care: Moving Forward in Medicare
Elliott S. Fisher, Mark B. McClellan, John Bertko, Steven M. Lieberman, Julie J. Lee, Julie L. Lewis, and Jonathan S. Skinner
Health Affairs Web Exclusive, 01/27/09

Medicare could save money and improve health care quality by providing financial incentives to providers for coordinating patient care through a shared savings program, according to research by Fisher, McClellan and colleagues. The authors demonstrate that such a program, implemented with the establishment of Accountable Care Organizations (ACOs), would eliminate waste, reduce overuse and misuse of care, and support the development of health systems that can deliver high-quality, affordable care. Medicare would establish spending targets for each ACO that reflected the predicted costs for their patients, and ACOs that met quality standards and held costs below the spending targets would receive bonus payments including a portion of the savings achieved. Based on an analysis of 2001-2005 Medicare data, the authors show that most physicians and hospitals could form ACOs by building on their current practice patterns. The analysis also shows that, with only modest changes in practice, Medicare would have seen real savings overall and successful participating providers would have received roughly $300-$400 per patient per year.

This study is part of a package of Health Affairs papers on the value of health care. Many of the papers were initially presented at the 15th Annual Princeton Conference in May 2008, titled "Can Payment and Other Innovations Improve the Quality and Value of Health Care?"


Fake Drugs and Failed Governance
Julian Harris and Philip Stevens, International Policy Network
The China Post, 01/16/09

The World Health Organization met last week to decide new measures against the exploding global trade in counterfeit medicines, but while the WHO wrangles over an international treaty and how to define the term "counterfeit," it is not addressing the real causes, including the failures of dysfunctional governments which prevent genuine manufacturers from protecting their brands, write INP scholars Harris and Stevens. Most medicines consumed in poor and wealthy countries alike are "generics," drugs whose patents have expired. This should create a thriving market of branded generics to assure buyers they are getting quality products. But a lack of respect for trademarks in developing countries means that patients can rarely be certain that the generics they buy are the genuine item. The WHO is doing good work in publicizing the threat and pushing governments to react, but the private sector has to be at the forefront of solutions, especially in developing countries: after all, it has a far better grip on drug production, storage and distribution. Governments can help by interfering less, taxing less and focusing on what would really help, like strengthening the rule of law.

The WHO's International Medical Products Anti-Counterfeiting Taskforce has called attention to the c
ommercial and public health costs of counterfeit medicines, but public health points to a new and broader role: to coordinate activities against all substandard drugs, which sicken or kill hundreds of thousands of people every year, write Roger Bate and Karen Porter in a separate article.


Improving Quality and Curbing Health Care Spending: Opportunities for the Congress and the Obama Administration
John E. Wennberg, Shannon Brownlee, Elliott S. Fisher, Jonathan S. Skinner and James N. Weinstein
The Dartmouth Institute for Health Policy & Clinical Practice, 12/08

The United States can extend coverage to the country's uninsured without substantially increasing overall health care costs, according to Wennberg, Brownlee and co-authors. Most analyses of coverage reform predict that we will spend more as a nation on health care once the uninsured gain coverage and begin consuming more care. But the authors predict that covering everyone will have a much smaller impact on the trend in health care costs, provided that capacity is not increased. Not increasing capacity while improving quality and increasing coverage can be achieved in a number of ways, including reducing oversupply of health care services in high-spending regions of the country. More than 20 years of research by the Dartmouth Atlas Project has shown that more spending on health care, more procedures and more hospitalizations does not result in better health outcomes for patients, the authors write.


Mutual Obligation and the American Social Contract
Stuart M. Butler, Ph.D.
The Heritage Foundation, 01/29/09

Mutual responsibility is the American social contract's central moral and social value, and continued respect for that value is essential if the huge financial commitments between the generations are to be managed in a prudent and secure manner, writes Butler. The social insurance programs we have constructed threaten to weaken the economic security of our children and grandchildren rather than strengthen it. Simple steps like automatic enrollment in savings plans and incentives to encourage long-term care insurance would help to foster personal financial protection alongside social insurance. Additionally, delinking health care coverage from the workplace would foster long-term and personally owned insurance contracts that could be carried into retirement. Such a redesign would also maintain the coalition needed to assure that any social contract and network of programs will be preserved.

Upcoming Events

Children's Health Coverage: A Primer
Alliance for Health Reform Event
Monday, February 2, 2009, 12:15 p.m. – 2:00 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

Grace-Marie Turner speaking on the Pittsburgh Renaissance Radio show
WMNY-AM Radio Broadcast
Wednesday, February 11, 2009, 5:30 p.m.
Pittsburgh, PA

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

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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.