01/2003 The Galen Report

Published January 1, 2003

It’s already clear congressional and White House leaders really meant it when they promised health care issues will be a top priority in the 108th Congress.

Our schedules have been booked with wall-to-wall meetings and travel as members and staff–including many for whom health care has not previously been a priority–are scrambling to get ideas and initiatives ready for 2003.

The PDS Plan

The biggest demand is for information about the Prescription Drug Security plan Joe Antos of the American Enterprise Institute and I are developing.

We offer a structure for a privately delivered benefit that gives seniors a choice of plans with competitively negotiated price discounts. It builds an infrastructure for overall modernization of the program around the Federal Employee Health Benefits Program (FEHBP) model; provides the greatest subsidies to lower- and moderate-income seniors; and offers a chance for everyone to participate in catastrophic coverage–all goals of the House-passed drug bill. But we structure the subsidies in a new way that’s gaining a lot of attention.

I was very privileged to be included in Secretary Tommy Thompson’s meeting at the Institute of Medicine, expertly organized by John Hoff and his team at the Department of Health and Human Services.

Thompson wanted to explore ideas for programs to begin right away, including demonstration projects for medical liability, individual ownership of health insurance, better use of information technologies, prevention, and quality.

John brought together a diverse group of health experts, from business to labor to academics, who filled the day with ideas and insights. It won’t surprise you that I focused on the importance of empowering consumers to be more engaged in decisions about their health care and health spending through tax credits or “health certificates.”

The certificates (read: vouchers) would be redeemable at health insurance companies for major discounts on policies. They would be run through the spending side of the budget rather than through the tax system for those who don’t owe taxes.

I was also in Palm Springs, California speaking to the California Medical Association at the invitation of their energetic and able Executive Vice President and CEO Dr. Jack Lewin. My topic was consumer-driven health care, and these docs say “Bring it on!” They are ready for change.

Jack also had the guts to invite three insurance executives to talk to the group, including physician Jack Rowe, who heads Aetna. The docs threw barbs at the execs, angry over the control their companies have over their lives and practices, with one coming to the microphone to proudly announce he had been able to fire each of the three companies from his practice.

Rowe did the best job of building a bridge between doctors and insurers since he is both. In fact, putting consumers in the driver’s seat will help, forcing the two sides to be partners rather than adversaries.

— Grace-Marie Turner


The Fantasy of Reference Pricing
John R. Graham
The Fraser Institute, 11/29/02

In 1995 Canada’s British Columbia province developed a complicated system to contain government spending on drugs by subsidizing the price of less-expensive drugs and forcing patients to pay more for newer, more expensive medicines. But the plan has backfired: BC’s “Pharmacare” costs have increased 38 percent more than costs in other provincial governments that do not discriminate between more-expensive and less-expensive drugs.

Also, the program has had negative consequences for patients’ health. The Fraser Institute’s John Graham suggests eliminating the failed program, which biases patients’ choice against innovative and new medicines, and replacing it with a tiered network of co-payments that motivates doctors and patients to consider “value for money” and restores patient choice.

Full text: www.fraserinstitute.ca/shared/readmore.asp?sNav=pb&id=448

A Gathering Storm in California Health Care
Naomi Lopez Bauman
The Latino Coalition Foundation, 12/5/02

The Golden State has some of the best medical care available, but “unfortunately, health care access, quality, choice, and affordability are becoming increasingly scarce in California,” says Naomi Lopez Bauman. She says managed care has stripped consumers of control and reduced access to the newest medical treatments.

Bauman cites numerous studies to examine why costs are rising, how this impacts the availability of health coverage, and what can be done to give more choice and control over health decisions to the nation’s largest minority community: Hispanics.

Full text (pdf): www.thelatinocoalition.com/issues/pdf/CaliforniaHealthCareStudy.pdf

Governors-elect Focus on Drug Costs, Medicaid Funds
Joel B. Finkelstein
American Medical News, 12/09/02

Health care reforms that lower prescription drug costs and expand Medicaid programs will be among the major goals for next year’s governors-elect, says AMNews’ Joel Finkelstein.

A state-by-state post-election review of health care proposals conducted by the National Academy for State Health Policy says three key areas will receive the greatest attention and action next year:

  • pharmacy initiatives (44 percent of governors-elect have proposed one or more initiatives designed to make prescription drugs more affordable);
  • Medicaid and SCHIP; and
  • market-based initiatives, including tax credits, medical savings accounts, and defined-contribution programs.

Finkelstein says rising premiums for medical liability insurance will also become a key issue if the federal government does not pass tort reform legislation early next year.

Full text: www.ama-assn.org/sci-pubs/amnews/pick_02/gvsd1209.htm

National Academy for State Health Policy analysis: www.nashp.org/Files/Gov-Elect_Health_Policy_Analysis.pdf

Taking Health Care In-house
David Shook
BusinessWeek Online, 11/18/02

Ever-rising health insurance premiums are leading several large companies to develop radical new ideas for cutting medical costs while continuing to provide quality medical care to employees and their families, says BusinessWeek Online. Wisconsin based printing company Quad/Graphics has hired its own doctors and nurses and taken its health care almost entirely in-house.

Quad/Graphics doctors see only about 12 to 16 patients a day, roughly half as many as an HMO doctor usually sees in a day. Its employees are “thrilled” and Quad/Graphics has seen many other benefits, including an annual savings of $6.5 million.

Full text: www.businessweek.com/bwdaily/dnflash/nov2002/nf20021118_0219.htm

The Impact of Social Security and Medicare on the Federal Budget
Congressional Budget Office, 11/14/02

The CBO reports in a “Long-Range Fiscal Policy Brief” that Social Security and Medicare will run a cumulative deficit of $6.6 trillion when properly accounted through 2026, not the surplus of $6.5 trillion the programs’ trustees estimate.

CBO says internal transfers between Treasury accounts cause a distortion “that obscures the growing strains that the programs are placing on the government’s finances.”

Full text (pdf): ftp.cbo.gov/39xx/doc3982/11-14-LongRangeBrief6.pdf

Material for this report is provided by The Galen Institute, P.O. Box 19080, Alexandria, VA 22320, http://www.galen.org. Grace-Marie Turner is president. The report was produced by Elizabeth Lamirand, who can be reached at 703/299-9550, and edited by Conrad F. Meier, managing editor of Health Care News.