02/2002 Galen Report

Published February 1, 2002

Supporters of free-market health reform have a new reason to be in high spirits. For nearly a decade, the health care debate has been dominated by proposals to expand government control over the health sector in any number of ways—expanding Medicaid, letting more people into Medicare, creating new programs like SCHIP, and regulating the socks off private health insurance.

But the tide may be shifting.

The debate in Congress over the best way to provide health insurance coverage for displaced workers signals the beginning of a new phase in which market-based policy initiatives are gaining strength.

The economic stimulus plan passed by the House contained a refundable tax credit worth 60 percent of the cost of an insurance policy (with no caps). Ways and Means Chairman Bill Thomas led the charge by putting his tax credit initiative on the table, and President George W. Bush followed with a complementary proposal of his own. While the Senate didn’t act on the stimulus bill before the 2001 holiday break, passage in the House is a significant step forward.

Equally important, free-market advocates now realize they have a winning hand with an idea on health care reform. House Speaker Dennis Hastert issued a fact sheet, saying that under the plan “developed by House Republicans and Senate Democrat Centrists, ANYONE eligible for unemployment insurance after losing their job would receive a health care tax credit to pay for their health care needs.”

They claimed the egalitarian high ground with a tax credit idea that would reach not just those eligible for COBRA, but also the other “45 percent of laid-off workers in small and medium-sized businesses and those who never had job-based health care.”

This signals an important opportunity to begin a new conversation on the best way to help people get health insurance. Giving individuals more control over their health spending through direct subsidies for private health insurance is the right answer for the uninsured, and also for Medicaid recipients and Medicare beneficiaries. Tax credits could create new energy for important consumer-driven changes in the health sector.

— Grace-Marie Turner


A Stubborn Fight Revived
Robin Toner
The New York Times, 12/20/01

The deadlock over the economic stimulus bill has shown that the debate over health care is very much alive. “It’s the issue that won’t go away, and the economy brings it four-square back to the front of the political agenda,” says Diane Rowland, executive vice president with the Kaiser Family Foundation.

“Republicans want to use tax credits to help individuals buy insurance in the open marketplace,” writes Robin Toner in The New York Times, and “Democrats want to shore up the employer-based system with federal assistance.” Both sides are well aware that any changes made now will have an impact on future legislation.

Full text of article: http://www.nytimes.com/2001/12/20/politics/20ASSE.html (free but requires registration)

How to Improve the Federal Employees Health Benefits Program
Chris Middleton
Pacific Research Institute, Action Alert

The Federal Employees Health Benefits Program (FEHBP) is being threatened by rising premiums and a decline in the number of available plans, says Chris Middleton of the Pacific Research Institute. Middleton argues the plan is being hurt by defined benefits that all plans are mandated to include and a “premium support” model that does not reward those who choose lower-cost health plans.

Three changes are recommended: 1) Repeal the 75 percent limitation (the percent the government will pay for each employee’s plan) to “inject renewed price competition into the program.” 2) Allow any new plan to participate—not just HMOs. 3) Eliminate mandated benefits, “allowing federal employees to choose the benefits package that they find to be the best value.”

Full text of paper: http://www.pacificresearch.org/pub/act/2001/act_01-12-12.html

Employers Report Significant Health Care Concerns and Are Looking for New Solutions
Hewitt Associates, LLC

A new survey by Hewitt Associates LLC finds “the rate at which health care costs are rising is alarming for employers,” and they are looking toward models that expand consumer choice solutions. Hewitt surveyed more than 700 U.S. organizations and found health costs are “becoming a number one priority because they’re impacting the bottom line.”

Two-thirds say they are offering employees the ability to select from various levels of coverage and services at varied costs. Many are using tiered coverage not just for prescription drugs but also for hospital services. Others are giving employees new ways to comparison-shop online for coverage and services.

The key is increasing employee involvement in decisions by increasing their price awareness, although a big 39 percent said they “are not comfortable with consumers getting more involved” in health care decisions. [Paternalism lives on?]

Full text of survey press release: http://was.hewitt.com/hewitt/resource/newsroom/pressrel/2001/12-17-01.htm

Big Pharmaceuticals Take the Gloves Off
Stephen Pollard, Centre for the New Europe
The Wall Street Journal Europe, 12/17/01

Pharmaceutical companies have thrown down the gauntlet, “making it clear they’ve had enough of Europe’s price-fixing ways,” writes Pollard. Pfizer CEO Hank McKinnell and AstraZeneca CEO Tom McKillop are among those who say patients are being denied access to the best new medicines for years as a result of long negotiation with European governments over drug approval and prices.

Europe is refusing to “pay its fair share” and as a result, “the U.S. ends up funding all the research and development,” says Steve Slovick with Cambridge Pharma Consultancy in New York. The consequences for Europe: cutting profits, which means cutting research, which means cutting back on innovation, which means cutting the number of patients who can be helped.

Full text of article (requires subscription): http://www.wsj.com

The Galen Report is a monthly review of health policy matters provided by the Galen Institute, PO Box 19080 Alexandria, VA, 22320, http://www.galen.org. Grace-Marie Turner is president. The report is compiled by editor Elizabeth Lamirand, who can be reached at 703/299-9550.