Consumer Power Report #140

Linda Halderman, MD, is working as a policy consultant to California State Senator Sam Aanestad and has written to notify CHCC members in California of a hearing taking place on Wednesday, August 20 before the Senate Health Committee.

The hearing is on SBX1 27, a bill sponsored by Senator Aanestad to improve California’s high-risk pool, the “Major Risk Medical Insurance Program” or MRMIP. The board of MRMIP lowered the enrollment cap in May from 8,100 to 7,100 and $18 million in reserves have been diverted to other programs, according to Dr. Halderman. There is now a waiting list of 800 people to enroll in the program.

SBX1 27 would do a number of things to improve California’s high-risk pool.

• It would move funding to a premium assessment like most other states have done.

• It would provide more choice in benefit design, including an HSA-compatible program.

• It would raise the annual and lifetime maximums from the current $75,000/$750,000 to $150,000 and $1 million.

Perhaps most interesting, it would create a “rider pool” for the healthier uninsurables. Dr. Halderman notes that 19 percent of current enrollees have had no claims and 83 percent had less than $5,000 in medical expenses in 2004. This bill would allow carriers to “rider-out” certain non-chronic conditions to get lower premiums and pay directly for these existing conditions.

The Commonwealth Fund (not to be confused with Pennsylvania’s Commonwealth Foundation) has issued another report on how awful the American health care system is. This report is based on a Harris Interactive poll of 1,004 people age 18 or older. It was written up by Sabrina K.H. How, Anthony Shih, Jennifer Lau, and Cathy Shoen.

The take-away factoid is, “the health care system does not serve the public well — eight of 10 respondents say it needs to be fundamentally changed or completely rebuilt.” This breaks down into 32 percent saying it needs to be “completely rebuilt,” 50 percent saying it needs “fundamental change,” and 16 saying it needs “only minor change.”

Wow! Pretty sobering, eh?

Well, it would be if these attitudes were unique to the United States. But they are not. In fact, although she doesn’t mention it here, Ms. Shoen was also co-author of a 2002 article in Health Affairs that asked people in five English-speaking countries the exact same question — “When looking at your own health care system, would you say it needs only minor change, fundamental change, or to be completely rebuilt?” In every country about 80 percent of the population said their own system needs either fundamental change or to be completely rebuilt. In 2001, the percentages that said their own system needs only “minor change” was 25 percent for Australia, 21 percent for Canada, 18 percent for New Zealand, 21 percent for the United Kingdom, and 18 percent for the United States.

In fact, the “minor change” result (the most favorable) plummeted in Canada from 56 percent in 1988/1990 to 21 percent in 2001, from 34 percent to 15 percent in Australia, and from 27 percent to 21 percent in the UK (New Zealand wasn’t included in the earlier survey). In the United States “minor change” increased from 10 percent in 1988/1990 to 18 percent in 2001. So opinion significantly improved in the States while it was dropping in the other countries.

One might think that Ms. Shoen would have mentioned these results in her latest paper, just to put the survey results in context. But, so it goes in public policy research these days — no context, no balance, no real understanding. Just one-sided advocacy. And you wonder why we get lousy policy that never seems to work?

We haven’t visited medical tourism for a while, but the concept is growing. The NCPA’s Devon Herrick has just released a short paper on the topic, which he calls “health care free trade.” He says “6 million people a year worldwide are expected to travel for medical care by 2010,” and American insurers are beginning to include coverage of overseas providers. It cites a survey that says 11 percent of employer health plans are now covering medical travel.

Mr. Herrick lists many of the reasons for its growth, including lower labor costs overseas, less third-party payment, limits on malpractice liability, and lower prices charged by equipment suppliers to developing nations. Oddly, he doesn’t mention fewer regulations and the monetary exchange rate as contributing factors.

But the paper says international competition is good for American consumers and suggests a few things that public policy could do to encourage it. These include modernizing state licensing laws to recognize qualified providers in other jurisdictions, allowing financial incentives for patients who are willing to travel abroad, and allowing Medicare and Medicaid patients to take advantage of foreign services.

Speaking of global health, it’s kind of funny how little we hear about “drug reimportation” these days. Oh, yes, it is a part of the campaigns of both Senators McCain and Obama, but that just illustrates how out of touch they are. Out in the real world, no one is seeing it as much of a solution to anything anymore.

Montgomery County, Maryland was one of the first jurisdictions to begin an official program to help residents buy drugs from Canada, and it was followed by state-wide action in several states, most notably Illinois.

But Montgomery County repealed its program and the Illinois program, which was joined by several other states, filled only 11,000 prescriptions in its first year of operation which started in October, 2004. Today, it is hard to find out whatever happened to the program that is called “I-SaveRx..” A Google search came up with lots of press releases extolling the program when it was first introduced, but nothing about any evaluation afterwards. Even a search of the Chicago Tribune came up with zero mentions of the program.

As often happens, the real world has a way of making politicians look foolish. One of the things that happened to this whole idea was something politicians have no control over — the exchange rate. For a while the strong dollar made Canadian drugs appear cheap, but then the dollar tanked and Canadian drugs became a whole lot more expensive. It had little to do with price controls in Canada or pharmaceutical manufacturers ripping off American consumers. All of that was political posturing by cynical politicians. It was only about the exchange rate.

Ten years ago, in August 1998, the Canadian dollar (also known as the “loonie”) was worth $0.66 American. It was dropping, and finally reached dead bottom in January 2002 at $0.62 — an all-time historic low. That is when the politicians noticed how cheap drugs seemed to be in Canada. Golly.

Since then the Canadian currency has been on a steady and steep climb upwards, reaching $1.09 in November 2007. That means things sold in Canada, including prescription drugs, cost 76 percent more in 2007 than they did in 2002. Duh!

Since then the dollar has bounced back slightly and Loonie is currently worth $0.94, but that is nowhere near enough of a difference to resurrect the one-time interest in using Canada to solve our drug price woes. Let’s hope the Obama and McCain camps are listening.

One of the absolute best resources out there is from the National Association of Health Underwriters. They have a “Healthy Access Database” that is broken into sections on employer coverage, individual coverage, and public programs. Each section is then broken into specific areas on such things as high-risk pools, ERISA regulations, state Medicaid, and SCHIP programs. If you get many questions from perplexed consumers, this is a resource you should bookmark.