Consumer Power Report #150

Published October 31, 2008

We are providing a special discounted rate for CHCC members to attend the Third Annual Awards Banquet. Originally we were going to charge $180, but with all the turmoil out there we decided to cut the price in half to $90. We would really like you to be there to congratulate our honorees, Roy Ramthun, Linda Gorman, and Jordan Shlain, MD.

If you aren’t already a member of Consumers for Health Care Choices, this is a fine time to sign up! There are oodles of benefits, including a year’s subscription to Heartland’s incomparable Health Care News, participation in our monthly health policy calls, and discounts on events throughout the year.

So, please join us on November 12 in Washington for good company and good food.

Please go to the CHCC page to join Consumers for Health Care Choices and

the events page to sign up for the banquet and other activities on November 12.



I spent some time recently at the annual Consumer-Driven Summit. I missed a lot of it because of other commitments, but I was glad to see many old friends and colleagues at the parts I was able to catch.

The program was heavy with presentations by CHCC members, including Regina Herzlinger as the opening keynoter, Sander Domaszaewicz of Mercer on the firm’s latest research, Lincoln Weed on legal issues, Tom Miller of AEI on the coming elections, and William Boyles of the Consumer-Driven Market Report moderating just about everything.

Attendance was down substantially. I expect it is partly because of the economy, partly because of the election turmoil, and partly because there are just too darn many CDH conferences. One could spend an entire year doing little but attend conferences.

This one is always notable because the Blue Cross Blue Shield Association unveils the results of its latest survey of CD Health activity. This year’s presentation reveals that:

  • BCBS enrollment in CDHPs has grown 50 percent in the past year, with 2.9 million in HSA programs and 1.5 million in HRAs.
  • Distribution of age and income matches very closely with the distribution for non-CDHP enrollment.
  • People who choose a CDHP want more control over costs and utilization.
  • Compared to people in a non-CDHP plan, people with HSAs are far more likely to ask their doctor about the cost of a recommended treatment (52 percent to 33 percent), choose a lower-cost option (36 percent to 23 percent), and use mail order for buying Rx (43 percent to 30 percent).
  • They are also far more likely to track their health care expenses (72 percent to 40 percent), estimate future expenses (38 percent to 22 percent), and discuss expenses with their doctor (38 percent to 27 percent).
  • They are about 50 percent more likely to participate in wellness programs.
  • They are slightly more likely to use preventative services and equally likely to receive necessary services and comply with prescribed treatment.
  • Savings due to reduced utilization equal $1,074 per member in full replacement groups and $615 for multiple choice groups.
  • Still, this year for the first time, CDHP enrollees are somewhat less likely to recommend the coverage to others (38 percent vs. 45 percent)

SOURCES: BCBSA Press Release ; BCBSA Slides


I had a great time in Pittsburgh a couple of weeks ago speaking to a meeting of the Society for the Education of Physicians and Patients (SEPP), along with Michael Tanner of the Cato Institute. I’ve been working with SEPP for 14 years and they have always done a great job in advancing free-market health care in Western Pennsylvania. This time they videotaped the presentations and put them up on You Tube. Here are links to the talk broken up into bite-sized segments.

SOURCES: (You Tube Part 1);
(You Tube Part 2);
(You Tube Part 3);
(You Tube Part 4);
(You Tube Part 5)


Congressman Sam Johnson (R-TX) has introduced legislation (HR 7148) that would allow so-called private contracting under Medicare and enable people to decline to enroll in Medicare without forfeiting their Social Security. It also would allow people who are otherwise eligible for Medicare to continue contributing to an HSA. Mr. Johnson, who is a member of the Health Subcommittee of the Ways & Means Committee, said in a press release, “If Warren Buffett wants to pay for his own medical care, I say we should let him.”

The private contracting issue means Medicare beneficiaries could see a private physician and pay directly for the service, without requiring the doctor to opt-out of Medicare altogether, provided there is a written contract between the physician and the patient and they do not attempt to bill Medicare for any part of the service.

The timing is interesting, coming at about the same time that a lawsuit has been filed alleging the Department of Human Services violated the Administrative Procedures Act in 1993 when it imposed the penalty of denying Social Security to those who failed to enroll in Medicare Part A. (See CPR # 148)

In an op-ed on this issue, Heritage Foundation President Ed Feulner says “You’d expect those who run entitlement programs to jump at any chance to trim expenses and save money (but) you’d be wrong. Federal policy says you can’t pull out of part A and still collect Social Security benefits. It’s a package deal. Washington thus compels citizens to take Medicare Part A, even if they wish to finance their own coverage.”

SOURCES: Congressman Johnson’s press release; Ed Feulner’s op-ed


One of the nicest articles I’ve ever read on HSAs was published in the St. Louis Post Dispatch and written by Jerri Stroud. She starts off by saying, “The concept behind health savings accounts is pretty simple: You put money into a tax-favored account to pay for medical expenses now and in the future.” True enough.

She goes on to explain the way they work and quotes Towers Perrin’s Jay Savan as saying that, “the plans can be a good deal regardless of your health or age if you understand them and plan for expenses accordingly.”

Ms. Stroud goes on to explain, “Savan said he recently priced a traditional preferred provider plan with a $500 deductible and $2,500 out-of-pocket maximum against a high-deductible plan with a $2,500 deductible. The traditional plan cost $1,600 more in premium, in addition to the $2,500 deductible. In addition, the buyer of a traditional plan would have pharmacy and physician co-payments, which don’t count against the out-of-pocket limits. With the high-deductible plan, the $1,600 savings could go into a health savings account. The account’s tax benefit of $448 (for someone in the 28 percent tax bracket) translates into $2,048 in purchasing power, Savan said.”

Now why is that so difficult for most reporters to understand?

SOURCE: St. Louis Post-Dispatch

On the other hand, there is Michael Hitzik of the Los Angeles Times. Mr. Hitzik writes a pretty interesting article about how health insurers are trying to reinvent themselves as financial service organizations.

He discusses WellPoint’s efforts to create a bank, saying it “illustrates a fundamental change in the industry: Insurers are moving away from their traditional role of pooling health risks and are reinventing themselves as money managers.” He quotes a Berkeley professor, Jacob Hacker, who says, “It’s a fundamental shift away from the idea of broadly shared risk. It’s going to lead to a complete transformation of the health insurer, which will be increasingly focused on providing management of money.”

He says HSAs are driving this trend and quotes CHCC member John Casillas as saying, “You’re going to see many billions of dollars moving from premium payments to professionally managed investment funds under HSA rules. Some people think that banks are going to threaten health plans by replacing them in the marketplace.”

He cites United Healthcare’s Optum Bank and the Blue Healthcare Bank, and notes that “OptumHealthBank has attracted $600 million in health savings account deposits from nearly 400,000 customers. The bank collected more than $34 million in service charges on those deposits in the year that ended June 30, according to its reports to federal banking regulators. Over the same period, it earned $46 million in interest and produced a profit of nearly $33 million for its parent company.”

But then he goes on to slam HSAs. He quotes Kaiser’s George Halvorson saying that HSAs are a step backwards, and Timothy Jost, a law professor in Virginia, who says, “Those plans are great if you’re healthy. Other people will find that they have access to health insurance but not health care.” And Mark Hall, another law professor, says, “The basic premises of consumer-driven health care are seriously flawed.” He goes on to illustrate all these problems by citing someone who doesn’t even have an HSA, but an $8,000 deductible.

But nowhere in the article is there even a single quote from anyone who supports HSAs or consumer-driven health care–not one. And so it goes with “journalism” today.

SOURCE: Los Angeles Times