Trouble Brewing


  • HELP Reform Bill
  • Ironies Abound
  • Details Matter
  • Early Score
  • Quote of the Day
  • Featured Articles

    The first Democratic bill in the hopper this week came from Sen. Kennedy's Health, Education, Labor, and Pensions Committee, taking 615-pages to turn most of whatever is left of our private health sector over to government.

    The normally-genteel Sen. Orrin Hatch was quoted in The New York Times this morning as calling the bill "the most liberal bunch of gobbledygook I've seen in my life — a complete liberal mishmash of ideas." Keith Hennessey, director of the National Economic Council under President Bush, was the first to present a detailed analysis, which you can find here.

    Having actual legislative language on the table triggered a cascade of criticism.

    The U.S. Chamber of Commerce, National Federation of Independent Business, National Retail Federation, and other business groups came out strongly against the employer mandate contained in the bill, calling it a new tax that will cost jobs and ultimately put a heavier burden on workers.

    America's Health Insurance Plans, the nation's biggest health insurance lobby, protested the bill's inclusion of a new public insurance option. Labor unions said they are worried about Congress levying taxes on employer benefits.

    Then the American Medical Association got in a battle with itself over the public plan option.

    It put out a statement earlier this week that said: "The introduction of a new public plan threatens to restrict patient choice by driving out private insurers, which currently provide coverage for nearly 70 percent of Americans."

    Then it backed down some, no doubt from White House pressure, to "clarify" its earlier statement: "The AMA opposes any public plan that forces physicians to participate, expands the fiscally challenged Medicare program or pays Medicare rates, but the AMA is willing to consider other variations of a public plan that are currently under discussion in Congress."

    Reports say the AMA's retraction of its perceived opposition to a public insurance option did not sit well with many of its members, and the debate surely will come to a head during the group's annual meeting next week, where President Obama is expected to speak.



    The Senate Finance Committee plans to present its health reform bill next week, and it is expected to include a revised public plan in the form of government-organized insurance "co-operatives."

    Finance Chairman Max Baucus is trying to appease moderates with the idea. "It's got to be written in a way that accomplishes the objective of the public option, even though it itself is not public," he said in a revealing moment.

    The idea could work if it follows the outlines of conservative House Democrats. They want to make sure that Medicare payment rates are not used as the basis for reimbursement, that the plan is self sustaining and does not rely on taxpayer dollars, and that it would have to follow the same rules and regulations as the private plans, including establishing a reserve fund. Should subsidies be provided for the purchase of health insurance, they must be available for the purchase of public and private plans equally.

    Why, then, would we need a public plan if it is required to follow exactly the same rules as private plans?

    But the left is balking at the idea of compromise. New York Senator Charles Schumer insists that the co-op must meet certain conditions. "It has to have a significant infusion of federal dollars right from the start, so it has the clout to compete against the insurance companies."

    House Speaker Nancy Pelosi said House Democrats strongly want a government-run insurance plan to be part of any health care overhaul and called for a "level playing field" for public and private health care providers. (See above comment by Schumer. How can it be a level playing field when there is a "significant infusion of federal dollars right from the start"?)

    It's absolutely vital that Congress draft this legislation carefully because it will have consequences for millions of Americans for decades to come. Hasty action to rush these bills through this month could lead to catastrophic mistakes.



    Ironies abound: Despite all of this, The New York Times somehow decided, in a news headline this week, that "Consensus is forming among most Democrats" on health reform.

    And President Obama scolded Congress this week and told them to stop their deficit spending. But then he turned around and said they could ignore his warning when it comes to health care, giving his okay to spend money we don't have on a massive new government entitlement.




    Details matter: The original legislation creating Medicare, enacted in 1965, made the following promise: "Nothing in this title shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services. . ."

    More than 100,000 pages of regulation later, the federal government controls virtually every aspect of medical care provided through Medicare, deciding what will be covered and what won't, what every person or institution providing those services will be paid, and the rules and regulations they must follow to stay out of jail. Beware of early promises because Congress can come back to amend any legislation it passes.



    Early score: Rep. Paul Ryan, Sen. Tom Coburn, and the other sponsors of the Patients' Choice Act (PCA) were not only the first to introduce actual health reform legislation last month. This week, they were the first to get an actual cost estimate of their plan by economists Steve Parente and Lisa Tomai of HSI network, an independent health care consulting firm in Minnesota.

    Their study says the plan would cover 34 million more people, to reduce the number of uninsured by 72%. The potential net cost of the PCA, including entitlement reforms already scored by the Congressional Budget Office, would be $200 billion over 10 years, far lower than the $1.5 to $1.7 trillion estimated cost of the White House plan.



    Quote of the day
    from Scott Gottlieb, M.D., a fellow at the American Enterprise Institute, in testimony yesterday before the Senate HELP Committee about Sen. Kennedy's bill: "The current proposals for 'fixing' healthcare rely on a lot of the usual patches. They increase political, rather than individual, control of the medicine, through a collection of new commissions, boards, and agencies. The plan before this committee shifts to the government, and probably Medicare, more of the clinical decisions properly left to people and their doctors."

    Grace-Marie Turner

    Recent News Articles and Studies

    Protecting Innovation and Progress in Medical Care
    Massachusetts Miracle or Massachusetts Miserable: What the Failure of the "Massachusetts Model" Tells Us about Health Care Reform
    Taxing Health Insurance: A Tax Designed to Be Avoided
    False Hopes, Empty Illusions
    How to Stop Socialized Health Care
    Medicare Costs Have Risen Far More than the Costs of Private Health Care
    Comparative Effectiveness Research: The Need for a Uniform Standard
    Canada's ObamaCare Precedent


    Protecting Innovation and Progress in Medical Care
    Grace-Marie Turner, Galen Institute
    Federal Coordinating Council for Comparative Effectiveness Research, 06/10/09

    Grace-Marie Turner testified this week about the role of comparative effectiveness research (CER) in American health care at the third listening session of the Federal Coordinating Council for Comparative Effectiveness Research. CER certainly has its place in the health care system in which multiple entities are analyzing and reviewing research, but it is extraordinarily difficult for one centralized government decision-making body to take into consideration the individual needs of multiple payers and 300 million Americans, said Turner. Rather than serving as an arbitrator that makes final decisions on the value of one treatment over another, the federal government can play a crucial role in aggregating information about the effectiveness of various medicines and treatments and disseminate that information to researchers, clinicians, and patients to allow the process of learning and innovation to continue in our health care system.


    Massachusetts Miracle or Massachusetts Miserable: What the Failure of the "Massachusetts Model" Tells Us about Health Care Reform
    Michael Tanner
    Cato Institute, 06/09/09

    With the "Massachusetts model" frequently cited as a blueprint for health care reform, it is important to recognize that giving the government greater control over our health care system will have grave consequences for taxpayers, providers, and health care consumers, writes Tanner. The program has failed even by its own goal criteria of achieving universal coverage. It has failed to restrain the growth in health care costs. And it has greatly exceeded its initial budget, placing new burdens on the state's taxpayers. At the same time, the Massachusetts plan has increased bureaucratic control over the state's health care system, limiting consumer choice. And it has set the stage for still more state intervention in the future, including price controls and explicit rationing. Health care reformers in other states and at the federal level should look carefully at the failures of the Massachusetts model, and learn from them, concludes Tanner.


    Taxing Health Insurance: A Tax Designed to Be Avoided
    Robert B. Helms
    American Enterprise Institute, 06/09

    The tax exclusion for employer-sponsored health insurance grew out of wartime wage rules to become a permanent fixture in U.S. labor markets, such that President Barack Obama ruled out lifting the exemption during the presidential campaign last fall. But the effort to limit fast-growing health spending — and to fund new health care initiatives — requires the tax money lost to the exemption, writes Helms. The tax exclusion for employer-sponsored health care makes up nearly 80% of current health-related tax revenue lost to the government. Not only will capping the exemption bend the curve of health care costs, it will also make it more feasible for smaller firms to offer more cost-effective insurance to their workers.

    False Hopes, Empty Illusions
    Thomas P. Miller, American Enterprise Institute
    USA Today, 06/10/09

    The political case for an individual insurance mandate is built on false hopes, empty illusions and larger agendas, writes Miller. The facts are that we really can't make up our losses on volume in health insurance. Unless a large number of new people can be coerced into paying more for it than it actually will be worth to them, insurance mandates create a perpetual conflict between escalating costs, limited resources and the false guarantee of rich coverage. An individual mandate actually would operate as a gateway drug to even greater addiction to government control of health care. A mandate in practice requires additional rules regarding exactly what it requires, how it's carried out and who pays for it. We first need to improve the value of health care delivered and invest in other, more effective ways to boost lifetime health. Insurance coverage still can be increased through less intrusive means, such as higher premiums for those who delay, or fail to maintain, coverage; more targeted and equitable subsidies; and better products that customers will purchase voluntarily, writes Miller.

    Capitol Hill Democrats would like to encourage longtime Republican backers of capping the tax exclusion for employer-sponsored insurance to come up with some of the money needed to finance an expansion of health insurance for everyone. In other words, re-enlisting as "tax collectors for the welfare state," under Democratic management, writes Miller in a letter to the editor of The Wall Street Journal. However, the current problem of how third-party payment overstimulates more spending on health care and raises both the price of services and insurance coverage won't be solved by redistributing some of the total amount of tax subsidies for health care from the open-ended tax exclusion to a tax credit and more Medicaid spending for the uninsured.

    How to Stop Socialized Health Care
    Karl Rove
    The Wall Street Journal, 06/11/09

    If Democrats enact a public-option health insurance program, America is on the way to becoming a European-style welfare state, writes Rove, former senior adviser and deputy chief of staff to President George W. Bush. The public option is a bait-and-switch tactic meant to reassure people that the president's goals are less radical than they are. M
    r. Obama's aim, as some candid Democrats admit, is a single-payer, government-run health care system. Health care desperately needs far-reaching reforms that put patients and their doctors in charge, bring the benefits of competition and market forces to bear, and ensure access to affordable and portable health care for every American. Republicans have plans to achieve this, and they must make their case for reform in every available forum. Otherwise, our nation will be changed in damaging ways almost impossible to reverse.


    Medicare Costs Have Risen Far More than the Costs of Private Health Care
    Jeffrey H. Anderson, Ph.D.
    Pacific Research Institute, 06/09/09

    Much of the debate over President Obama's proposed "public option" hinges on its supporters' often-repeated claim that government-run health care is more affordable than privately purchased care, writes Anderson. But the comparison is always between government-run care, particularly Medicare, and raw private-insurance figures, without any mention of the dramatic change in the privately purchased health care market — a market that has shifted from being dominated by out-of-pocket payments to being dominated by insurance coverage. Those who wish to expand government-run health care, in the form of a new Medicare-like "public option," don't wish to reveal that the per-patient costs of government-run health care have increased far more than the per-patient costs of privately purchased health care — and that this is true even when viewing government costs in a charitable light.


    Comparative Effectiveness Research: The Need for a Uniform Standard
    Scott Gottlieb, M.D., American Enterprise Institute, and Coleen Klasmeier, Sidley Austin LLP
    American Enterprise Institute, 06/09

    Reconciling a new comparative effectiveness research (CER) agency with scientific standards established in existing regulations would enable government agencies to share a consistent framework for making decisions based on CER, write Gottlieb and Klasmeier. With the adoption of a uniform understanding of the level of clinical substantiation needed to make government decisions based on the results of CER research, conflicts between federal agencies could be avoided, physicians and patients could have a clear understanding of the level of scientific substantiation that guides government decisions, and companies would have greater incentives to sponsor their own research, all thanks to a clear path and level playing field for sharing and acting on this kind of information.


    Canada's ObamaCare Precedent
    David Gratzer, Manhattan Institute
    The Wall Street Journal, 06/09/09

    As the U.S. is on the verge of rushing toward government health care, Canada is reforming its system in the opposite direction, writes Gratzer. For example, Dr. Brian Day, an orthopedic surgeon, grew increasingly frustrated by government cutbacks that reduced his access to an operating room and increased the number of patients on his hospital waiting list. He built a private hospital in Vancouver in the 1990s. Dr. Day estimates that 50,000 people are seen at private clinics every year in British Columbia. According to The New York Times, a private clinic opens at a rate of about one a week across the country. Public-private partnerships, once a taboo topic, are embraced by provincial governments. And in the United Kingdom, the present Labour government has introduced a choice in surgeries by allowing patients to choose among facilities, often including private ones. Even in Sweden, the government has turned over services to the private sector. Americans need to ask a basic question: Why are they rushing into a system of government-dominated health care when the very countries that have experienced it for so long are backing away?

    Upcoming Events

    Grace-Marie Turner appearing on FOX Business Network
    Friday, June 12, 2009, 1:45 p.m. EDT
    Grace-Marie Turner will be a guest on Stuart Varney's show on FOX Business. Check your local listings for channel information.

    Grace-Marie Turner speaking on The Herman Cain Show
    WSB-AM Radio Broadcast
    Tuesday, June 16, 2009, 8:00 p.m.
    Atlanta, GA

    Health Care Reform
    Cato Institute Conference
    Wednesday, June 17, 2009, 8:00 a.m. – 5:00 p.m.
    Washington, DC

    Biosimilar Biological Products
    Congressional Quarterly Forum
    Wednesday, June 17, 2009, 8:00 a.m. – 11:00 a.m.
    Washington, DC

    Health Care Reform: The Long-Term Fiscal Impact
    Hudson Institute Event
    Wednesday, June 17, 2009, 10:30 a.m. – 12:00 p.m.
    Washington, DC

    Massachusetts — Three Years Later
    Cato Institute Capitol Hill Briefing
    Monday, June 22, 2009, 12:00 p.m.
    Washington, DC

    Arlington/Falls Church Young Republicans Meeting
    Monday, June 22, 2009, 7:30 p.m.
    Arlington, VA
    Grace-Marie Turner will discuss health care reform at a meeting of the Arlington/Falls Church Young Republicans.

    In Search of a Silver Lining: Health Care in the Recession
    Oregon Health Forum Event
    Tuesday, June 23, 2009, 7:00 a.m. – 9:00 a.m.
    Portland, OR

    Is This Socialized Medicine?
    Cato Institute Policy Forum
    Thursday, June 25, 2009, 12:00 p.m.
    Washington, DC



    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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