02/2003 The Galen Report

Published February 1, 2003

President George W. Bush is meeting with congressional leaders, White House staffers are working around the clock, and the question everyone is asking is: What are they deciding about spending proposals for Medicare, prescription drugs, and the uninsured?

The decisions being made now will launch the debate over hugely consequential health care issues. The President told leaders he will put substantially more than $190 billion into his budget for a drug benefit, and he and aides have said repeatedly the benefit will be incorporated into other improvements in the Medicare program.

What could be at risk, however, is money for the uninsured. Census Bureau figures issued in late September put political leaders under growing pressure to take action. The battles will be over providing new free-market tax incentives or taking the all-too-easy path of further expanding old government programs.

Even as we write, consequential decisions are being made by the administration about global protection of intellectual property rights. Activists are pressing hard in World Trade Organization talks to further expand authority to pirate drug patents, putting research and development in the pharmaceutical industry at risk.

The activists’ real target is global capitalism, and undermining intellectual property is their strategy. Property rights are a cornerstone of the economy of any developed or developing economy. Leaders must decide if this country will continue to fight for this essential protection in these talks and also in the coming debate in Congress over giving seniors access to cheaper generic drugs.

As Kate O’Beirne asked in a recent column in National Review, “There are over 400 new anti-cancer drugs being researched; scores of others are being studied in the hope of treating Alzheimer’s and diabetes. Which of these does the public want to see canceled for lack of research funds?”

— Grace-Marie Turner


Covering America: Real Remedies for the Uninsured, Volume 2
Tom Miller; David B. Kendall, Jeff Lemieux, and S. Robert Levine; James A. Morone Economic and Social Research Institute, 12/02

Covering America promotes serious consideration of a diverse range of comprehensive proposals to provide affordable health coverage for millions of uninsured Americans.

Tom Miller of the Cato Institute proposes a reformed health care system that would promote efficiency and economy by redesigning market incentives, especially for individual consumers, as well as using tax credits and safety net reform to remove financial barriers to getting care. “Market-based reform begins with more neutral tax treatment of health insurance purchasing options, emphasis on protection against major risks, and deregulation of health care suppliers,” writes Miller.

David Kendall, Jeff Lemieux, and S. Robert Levine, of the Progressive Policy Institute, offer an option that builds on the present system, but provides substantial tax credits to make coverage more affordable. This plan includes performance-based grants to states linked to improvements in coverage rates, access to care, health care quality, outcomes, public health, and protection from financial hardship.

Full text: http://www.esresearch.org/publications.php

Scandlen, Francis Testify on FEHBP Improvements
Greg Scandlen and Walton Francis
Testimony to the Subcommittee on the Civil Service, Census and Agency Reorganization, 12/11/02

Greg Scandlen and Walton Francis were among the witnesses at a December 11 hearing before the House Civil Service Subcommittee chaired by Representative Dave Weldon, MD (R-Florida). The hearing focused on “Recent Developments in the Federal Employees Benefits System” and what further improvements could be made.

Scandlen and Francis shared a panel with representatives from four unions: the National Treasury Employees Union, the American Federation of Government Employees, the National Association of Retired Federal Employees, and the American Postal Workers Union.

All the unions except APWU expressed skepticism about increasing consumer power in health care, especially medical savings accounts, which they said benefit only the “healthy and wealthy.” APWU has recently begun offering a consumer-directed health plan to federal workers, but even they opposed MSAs for federal workers.

Scandlen said the charge that MSAs benefit only the healthy and wealthy is completely false and is rebutted by all the available research. He added the FEHBP could learn from what the private sector is doing, including the movement towards consumer-driven plans, using a fixed contribution, and encouraging more private indemnity plans.

Francis noted the FEHBP “outperforms” many private-sector benefit programs, but still needs significant improvements, including a fixed federal contribution to encourage selection of lower-cost options, fewer mandates, better coordination with Medicare, and more choices of plan designs.

Full text of Scandlen testimony: http://www.galen.org/news/ScandlenTestimony.doc

Full text of Francis testimony: http://www.galen.org/news/Francistestimony.doc

Hospitals Are Just Playing the Medicare Game
Chris Middleton
Health Policy Prescriptions, 12/02

“Gaming the system has always been part and parcel of the federal Medicare program,” says Chris Middleton of the Pacific Research Institute. Hospitals and other providers are tempted to exploit the program’s flaws because “Medicare’s price control system is clumsy and easily manipulated.”

Tenet Healthcare Corp., for example, is accused of overcharging Medicare and contributing to overall medical inflation by listing high retail prices. “The continued gaming of Medicare’s bureaucrat-controlled price system provides one more reason to transform Medicare into a defined contribution program of competing private insurance plans,” concludes Middleton.

Full text: http://www.pacificresearch.org/pub/hpp/2002/hpp_02-12.html

Health Insurance Tax Credits: Will They Work for Women?
Sara R. Collins, Stephanie B. Berkson, and Deirdre A. Downey
The Commonwealth Fund, 12/02

A new study by The Commonwealth Fund reports researchers searched the Internet in 25 cities to find low-deductible, comprehensive health insurance for $1,000 to $1,500 a year. Not surprisingly, they found a wide range of options: $1,000 would buy a 35-year-old woman a policy in Nashville, Tennessee with a $5,000 deductible. In California, the same person could buy a policy with a $500 deductible–primarily revealing the distortions in the individual market caused by state regulation and mandates.

The apparent intent of the study is to discredit tax credits by showing they would be useless in helping low-income women afford coverage. But buried in the study is an admission that the tax credit would cover half the cost of the premium for a comprehensive, low-deductible policy in many of the cities studied.

Professor Mark Pauly of the University of Pennsylvania Wharton School has produced studies showing providing a tax credit worth half the value of a decent health insurance policy would encourage half of those eligible for the credit to obtain insurance. If purchasers tolerated higher deductibles, even more could purchase coverage.

It is important to pay attention to the needs of the poorest and sickest uninsured. Studies like this one, which focus only on worst-case scenarios, distort the debate and could deny millions of people–many of them women–the opportunity to have the security of insurance coverage for themselves and their families.

Full text (pdf): http://www.cmwf.org/programs/insurance/collins_creditswomen_589.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.