Kansas Health

New issue of Health Care News out

The December issue of The Heartland Institute's Health Care News is out, and it is packed full of excellent pieces.

Sean Parnell weighs in on the specialty hospital debate with "Specialty Surgical Hospitals: Better Health Care through Innovation":

Specialty surgical hospitals, which focus on a few areas of surgical practice such as heart surgery or orthopedic surgery, are a good example of innovation at work in the U.S. health care industry.

Compared to general hospitals, specialty surgical hospitals typically offer increased productivity, lower costs, and better patient outcomes. The key is specialization.

General hospitals, which fear a loss of revenue to these superior rivals, have succeeded in getting Congress to prohibit temporarily any development of new specialty surgical hospitals. Congress should lift that moratorium and allow specialty surgical hospitals to continue to expand. They lower costs and provide high-quality care ... and isn’t that what the politicians say they want to achieve?

Devon Herrick explains why consumers suffer when some drugs are pulled off the market in "Merck's Vioxx Withdrawal Illustrates Power of Regulation by Trial Lawyers":


In all likelihood, there is probably little, if anything, wrong with Vioxx. In clinical trials conducted prior to FDA's approval of the drug, Merck followed almost 4,000 patients over the course of a year. Researchers found no sign that Vioxx caused heart attacks, although they did notice an increase in high blood pressure among patients taking the drug.

The ones who suffer the consequences are the patients, and they should be allowed to decide whether a drug like Vioxx is worth the risk, rather than having the decision made for them by other people's lawyers. What is truly unfortunate is that the only people to benefit from the development of lifesaving drugs removed from the market due to these lawsuits are the trial lawyers.

And Conrad Meier underscores the problem of overstating the uninsured in "Politicians Using Flawed Data on Uninsured Population":

Prior to the November election, presidential candidate Senator John Kerry (D-MA) wrote in an October essay for Health Insurance Underwriter magazine, "Roughly 45 million American have no health insurance at all."

Ever since the U.S. Census Bureau released its August 26, 2004 report on the nation's uninsured population, politicians have used the data to make health insurance policy decisions, and single-payer activists have used the data to lobby for government-mandated or -administered national health insurance. By the Bureau's own admission, however, the data are incorrect: The number of uninsured is greatly overstated.

After a closer look at the data released in August and a consideration of analyses performed since then, a more accurate picture of the uninsured problem emerges. The good news is that the number of Americans without health insurance policies is not indicative of a crisis requiring more taxpayer-funded government regulations and mandates. The bad news is that policymakers are relying on extremely flawed data.

Forbes recommends HSAs in 2005 Investment Guide

[Carrie Coolidge, "Saving for Your Health," The 2005 Investment Guide, Forbes, 13 December 2004.]

The new Forbes Investment Guide is out, and the authors recommend HSAs from both a health insurance and savings perspective. Included in this piece is a chart of providers and interest rates:

For the right customer an HSA can save thousands of dollars a year. "HSAs change the mentality of consumers," says Jeffrey E. Daniher, a fee-only financial adviser in Cincinnati. "They will start shopping around for the best price and not have unnecessary procedures done." Adds Helen L. Modly, a fee-only planner in Middleburg, Va.: "Suddenly generic drugs won't look so bad to many of us."

Unlike a flexible spending account, an HSA is an account you don't have to tap into. In fact, smart, prosperous customers won't even make withdrawals to pay their doctor bills. They will pay those bills out of pocket, allowing their HSAs to compound tax-free as de facto IRAs. If the money is ultimately used decades later to pay postretirement medical bills, so much the better: The account is better than an IRA because the funds are untaxed.

Happy Thanksgiving

[Anthony Gregory, "Giving Thanks to Family, Friends and the Market," LewRockwell.com, 23 November 2004.]

Kansas Health will be taking a break for Thanksgiving until next week. Until then, you may find the following commentary of interest:

I also owe thanks to thousands of other people, without whom the Thanksgiving dinner I eat – along with most other meals I enjoy – would be beyond my reach.

I am referring to the grocers, the farmers, the storeowners, the truckers, the managers, the shipping industry, and all the other good folks who, thanks to the magnificent market economy, are able to serve their ends along with others’, mostly strangers’, in a system of mutual exchange and mutual benefit.

Think of all the incredible food present at a Thanksgiving dinner. Chances are, the vegetables, meats, spices and breads traveled a mighty distance to get to your table. Thanks to the market, most Americans can enjoy a dinner that even kings in centuries past could only dream of.

The market economy allows hundreds of millions of people, the world over, to cooperate in ways that no central planner could possibly contemplate, let alone direct, all to bring you your Thanksgiving dinner, all other meals you enjoy, and all the other necessities and luxuries of modern civilization. Every single day, billions of economic decisions are made and tasks carried out by hundreds of millions of individuals. Together, they achieve the unthinkable. Every day.

A disservice to Kansas

[Nick Gillespie, "Jayhawk Down," Reason, 18 November 2004.]

Although his tongue may be planted in his cheek, Reason editor Nick Gillespie makes a serious charge in this recent column - it doesn't matter what tax rates are like in states like Kansas, because no one cares:

If you had to choose somewhere to live, would you really go to Kansas if you could figure out any way, short of acting in porn or in a dinner-theater version of Rent, to stay in New York?

The simple fact is that many people—arguably most people—are ready, willing, and able to pay a premium to live in more densely populated areas where things cost more money and take more time, where there are more regulations, higher taxes, bigger annoyances, you name it. That is, where the hassle factor, including man-made petty annoyances such as taxes and regulations, are higher.

And the folks at Forbes and the Pacific Research Institute are unlikely to be trekking en masse to Kansas anytime soon. Why is that? Because most of the time, economic freedom's just another word for nothing else to do.

The problem with the logic here is that it basically provides politicans a free ride. Regardless of whether you are in a popular destination on the coast or a rural area in the heartland, people will come or go no matter how much you tax or regulate based on other factors.

This ignores the phenomenon of people who move to cities at a young age and then make the switch to suburbs as they age, have families, etc. This can take place at the state level, as well. Every year, there is a fresh crop of recent graduates that head to places like New York or D.C., and every year, there are those who decide the negatives that come with those places outweigh the amenities Gillespie speaks so highly of. Over time, links to friends and family back home may become more important than the flashing lights.

The other issue here is that there is a definite correlation between high taxes, burdensome regulation, and impaired economic growth. As Ohio University economist Richard Vedder has shown, economic growth and productivity declines as taxes and regulation grow. While Kansas cities may not have the draw that New York or L.A. does, that does not mean that policymakers should not attempt to compete where the state has the potential for a comparative advantage - those lower taxes and fewer regulations. Foreign companies looking to locate plants in the U.S. are not locating in New York City, for example, rather they are often building in rural areas. Some investors apparently value what they can find outside of major metropolitan areas.

In fact, by emphasizing the flashy glitz of the big cities, Gillespie may even be encouraging politicians to avoid the real work of addressing these deficiencies and instead focus on areas where there is definitely no comparitive advantage - sports arenas, for instance.

Some people may be willing to make some trade-offs to live elsewhere, but it is those on the margin that policymakers should work to retain or attract.

What goes into prescription drug prices

[Deroy Murdock, "Why new drugs cost so much," The Washington Times, 22 November 2004.]

As shown by the recent article on state efforts to "crack down" on drug prices, public officials are increasingly targeting pharmaceutical companies as enemies of the people who charge exhorbitant fees for cheaply manufactured remedies. But, as columnist Deroy Murdock points out, that picture does not reflect reality:

"Of the 1,200 molecules tested here last year," [Merck's] Dr. [Graham] Smith says, "eight went on to the next step. And not all of those will go on to become drugs." Dr. Smith and his team of analytic chemists fail steadily, on average, for 6 ½ weeks before discovering a potential therapy. Another 32 days usually pass before that happens again.

Merck is not alone in throwing most of its darts straight into the floor. According to John T. Kelly, M.D., of the Washington-based Pharmaceutical Research and Manufacturers of America, "Only 5 in 5,000 compounds that enter preclinical testing make it to human testing. And only 1 of these 5 tested in people is approved for sale."

Citing Tufts University data, Dr. Kelly added: "On average, it costs a company $802 million to get one new medicine from the laboratory to U.S. patients. This process normally takes 10 to 15 years." This is why new cures cost what they do, and why price-controlled Canadian drugs, industry-led product discounts, and California Democratic Rep. Henry Waxman's comment that "frankly, it doesn't make sense to me" that innovation and high prices are connected, all will make it harder for Merck's lab and its counterparts to cover their costs. These factors boost the odds that the lights in these miracle factories will flicker, then fade to black.

The vaccine against this ailment is for pharmaceutical companies to teach Americans — starting with Washington's bipartisan political class — a simple but vital truth: Those little pills do not invent themselves.

Blue Cross: HSAs available in all U.S. states by 2006

[Keith Snider, "Blue Cross insurers offer health-savings accounts," Bloomberg News, The Oakland Tribune, 18 November 2004.]

It looks like the big insurers are committing to HSAs:

The Blue Cross and Blue Shield Association, whose health plans cover one in three Americans, said health-savings accounts that companies are relying on to help cut medical costs will be available in all U.S. states by 2006.

Blue Cross insurers offer health plans similar to the new accounts in 39 states now, the association said in a statement. Health-savings accounts allow people to set aside money tax free to pay for medical expenses and are paired with high-deductible coverage for major costs such as surgery.

Participation by Blue Cross companies may be crucial to the future of the tax-free accounts, created in a Medicare law that President George Bush signed last year and touted during his re-election campaign. Blue Cross plans cover about 91 million Americans and include member companies such as Anthem Inc. and WellPoint Health Networks Inc.

Blue Cross and Blue Shield of Louisiana said 53,000 people had enrolled in its health-savings account as of Sept. 30.

In the Northwest, the Regence Group is trying to sell the accounts to employers such as WSA, a coalition of 1,100 small technology companies. Regence sells Blue plans in Washington, Utah, Oregon and Idaho.

"These accounts offer a great opportunity for small businesses to offer affordable health care to their employees," Maureen Mortaloni, chief financial officer of WSA, formerly known as the Washington Software Alliance, said in a statement.

[Matthew Hisrich, "HSAs Are Increasing Americans' Health Coverage," The Topeka Capital-Journal, 26 September 2004.]

A high-tech vision for the future of health care

[Steve Lohr, "Building a Medical Data Network," The New York Times, 22 November 2004.]

There has been quite a bit of buzz surrounding the cost savings and improved health outcomes resulting from a shift away from paper records and toward digital. But, as this article explains, there may be much more on the horizon and the future of the third-party payer system may be at stake:

[D]igital patient records are merely a first step toward a broader vision. Those records could become building blocks in a nationwide biomedical computer network for assembling and distributing up-to-the-minute epidemiological studies. The network could show researchers and physicians what treatments work for people with similar characteristics, ailments and, eventually, gene markers. To protect privacy, personal identifiers would be stripped out of the national network.

There are plenty of technical obstacles and privacy concerns that would have to be overcome. Yet such a network is part of the 10-year plan being promoted by the National Institutes of Health, among others. "The dream is that every physician will be able to tap into that national biomedical network from his or her desktop computer," said Dr. Eric Jakobsson, who heads the Biomedical Information Science and Technology Initiative at the National Institutes of Health.

The presumed benefits would be improved quality and higher standards of health care. But such a network would also provide the basis for far more efficient markets in health care - and would have the potential to shake up both the pharmaceutical and health insurance industries.

The drug price delusion

[Robert Pear and James Dao, "States devise own remedies for drug costs," The Wichita Eagle, 21 November 2004.]

According to this article reprinted from The New York Times, public officials in states around the country are trying to solve their escalating health care costs by focusing on drug spending:

Alarmed at soaring pharmaceutical costs, states are trying a range of tactics to curb spending on prescription drugs for Medicaid recipients, public employees, prisoners and other residents, bringing them into lobbying combat with the drug industry in capitals across the nation.

A dozen states have joined purchasing pools to use market power to reduce costs. Dozens more are requiring Medicaid recipients to use generic drugs or lower-priced products from preferred lists.

And in one of the more innovative programs, Oregon and 11 other states have joined in an effort to compare the safety and effectiveness of hundreds of drugs. Medicaid officials steer doctors and patients away from costly drugs found to have no proven clinical advantage.

Worries have risen so high in West Virginia that the governor called a special session of the Legislature on Tuesday to consider legislation authorizing a single state coordinator to negotiate discounts on drugs purchased for the state's insurance and health care programs. The measure passed unanimously.

The problem with this approach is that it addresses a symptom of a larger problem, and therefore will create a host of unintended consequences, none of which are likely to be positive. In addition, it places public officials in positions far outside of reasonable responsibility - determining, for instance, the appropriate medical regimen for patients. This kind of decision should be left between doctor and patient, and there is no reason for shifting the choice to a public agency other than cost.

Cost, though, is really where the argument for such draconian measures falls apart. Research has shown that drug costs are not nearly as significant a factor in health care as some claim, and that the rise in drug costs is largely due to a rise in drug use - not a rise in price. This increased use can pay off in reduced expenditures elsewhere in the system, a point often lost in the discussion of health care costs.

Regardless of the role prescription drugs play in rising health care costs, clamping down on their pricing and use through artificial government means fails to address the underlying overutilization taking place throughout the health care system. If public officials are serious about curbing this long-term problem, then their focus would be much better placed on introducing consumer-driven options.

Businesses taking a stand against more taxes to pay for expanding broken Medicaid program

[Steve Painter, "Business group to counter tax push," The Wichita Eagle, 19 November 2004.]

It turns out that Kansans are not as interested in tax increases as the Governor may think:

The chamber group commissioned both a public opinion poll and a study to make its case that taxes are already too high.

The poll found that half of Kansans think they pay too much in taxes, while 43 percent say they are taxed about the right amount. But 76 percent said state spending should be cut before lawmakers consider raising taxes.

A knowledge gap in costs is harming patients

["Bearing the cost of medical treatment," NCPA Daily Policy Digest, 19 November 2004.]

Neither doctors nor patients tied into third-party payment insurance have the incentive to research costs the way that they would if patients were paying for care directly. The result is a "knowledge gap" that is unfortunately leading to negative outcomes. The answer is a shift to consumer-driven care:

Doctors need to know how their patients bear the cost of medical treatment in order to reach positive health outcomes, says Rebecca Voelker, writing in the Journal of the American Medical Association.

Currently, doctors know very little about their patients’ ability to pay for the medications they are being prescribed. One study finds that about 65 percent of physicians never discussed out-of-pocket costs with their patients.

Serious health consequences can result because patients will cut back on their medication either by skipping doses or splitting pills if they don’t have enough money. Voelker observes patients rarely discuss financial matters with their physician:

* About two-thirds of individuals who cut back on their medication due to its expense never tell their physician in advance.

* About one-third of individuals who cut back on their medication never even discuss medication cost with their physician; in two-thirds of these cases, their doctors never bothered to ask about their ability to pay.

Contributing to the problem is that most doctors do not know the cost of common prescription drugs, with many of them underestimating the financial burden.

As a result, the effective treatment of illnesses may be undermined due to doctors misinterpreting therapeutic failure for reasons other than the patient cutting back on their medication.

[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]

What smokers owe society

[Robert A. Levy, "Smokers Already Are Paying a High Cost for Their Habit," The Cato Institute, 17 November 2004.]

With the Governor's proposed cigarette tax hike, "sin taxes" have become a hot topic in Kansas. Sebelius has pointed to the high costs of smoking as rationale for increasing the tax, but does the argument hold water? Robert Levy of Cato isn't so sure:

[There are] three types of costs: Private internalized costs can be eliminated by choosing not to smoke. Externalized costs of secondhand smoke can mostly be redressed by recognizing private property rights and providing for smoke-free areas on government property. Externalized costs of pooled risk programs can be remedied by permitting rational discrimination against smokers who impose those costs.

Yes, there may be some residual cost for which smokers should be accountable. But don't forget that state and federal excise taxes already yield revenues of 76 cents per pack and smokers have been socked with a quarter-trillion-dollar cost payable to state governments under the terms of the Master Settlement Agreement. In short, smokers more than pay their way.

A blessing or a curse?

[Marc Kaufman and Brooke A. Masters, "FDA Is Flexing Less Muscle," The Washington Post, 18 November 2004.]

As if in response to the post yesterday on an overbearing FDA, this article appeared today in The Washington Post:

In the past four years, the Food and Drug Administration has taken a noticeably less aggressive approach toward policing drugs that cause harmful side effects, records show, leading some lawmakers, academics and consumer advocates to complain that the agency is focusing more on bolstering the pharmaceutical industry than protecting public health.

The spin here is that the agency has been captured by the industry. Since Congress decided that pharmaceutical companies would be picking up a decent chunk of their own approval costs, this is not an altogether outrageous concern. Nonetheless, it is important to not confuse a lack of disciplinary action with a lack of regulation:

The small number of drug withdrawals since 2001 reflects the fact that fewer new drug applications have been submitted and approved, and that the FDA has been more active in looking for signs of liver- and heart-damaging side effects before approving new drugs, said Alan Goldhammer, associate vice president of the Pharmaceutical Research and Manufacturers of America (PhRMA). As a result, some potentially dangerous drugs never made it to the market, he said. The FDA has required stricter monitoring and management of patients to minimize the risk for others, he added.

"The FDA spends more than $2 million doing a new drug review," he said. "That's 13 person-years looking at safety, efficacy and the manufacturing process. That is a significant effort that has been lost in this whole debate."

What is also left out of this discussion is the loss of lives and incentive to innovate as a result of a slow and burensome regulatory process. We have to recognize that there are trade-offs involved in the current level of oversight, and that the benefits of speeding up the process may outweigh the costs.

Distorted markets and distorted expectations

[Randy Meents, "Hazards of imported medicines," The Kansas City Star, 15 November 2004.]

Missouri Pharmacy Association president Randy Meents argues in this column that allowing importation may introduce unsafe drugs into the U.S.:

Importing drugs from other countries is a violation of the Food, Drug and Cosmetic Act. It is potentially dangerous to bring drugs from foreign sources, bypassing our country's closed medication distribution system.

The U.S. drug distribution system was not designed to facilitate prescription drug importation. The system was designed to keep unapproved and potentially unsafe medications from entering the U.S. drug supply. Intentionally circumventing this system creates an opportunity for mislabeled, mishandled, subpotent, or counterfeit drugs to make their way into the hands of patients.

He may very well be correct, but the problem here is misidentified. By establishing itself as the arbiter of safety and sealing the borders, the FDA has inserted itself into an otherwise market-driven process.

Why is it that Americans can purchase any number of products from overseas without the fear of harm, but for prescription drugs this is unacceptable? It can't be because they are a health product - every device in U.S. hospitals is certainly not manufactured here.

The problem is that the FDA's improper role in the market has created an inappropriate expectation of safety (and one that does not always hold true). As a result, the market fails to operate along traditional lines - where consumers make decisions based on a host of factors including price, quality, reputation, etc. (the doctor-patient relationship and third-party payment factors in here as well, but there is an independent regulatory effect).

The unintended side-effect of this intrusion is that overseas producers, rather than having to establish an market position as under normal circumstances, can take advantage of the presumed safety of pharmaceuticals.

The traditional response to government-created difficulties is additional government intrusion. This necessitates still further intervention, etc., etc. This need not be the case. If policymakers are willing to address the fundamental problem in the system - the FDA's over-intrusive role in drug development and approval - then we can restore a true marketplace to the drug industry and safely open the borders to overseas competition.

Stephen Moses on Superman and Long-Term Care

["LTC Bullet: Of Superman, Bedsores and Nursing Home Litigation," The Center for Long-Term Care Financing, 3 November 2004.]

According to The New York Times, Christopher Reeve's recent passing may have been brought on by a bedsore - a common problem among those paralyzed, and as Stephen Moses points out, among those in long-term care facilities as well:

If Christopher Reeve, who could afford the best possible long-term care, can succumb to complications from a pressure sore, how can we expect nursing homes to eliminate such complications for Medicaid residents when Medicaid pays nursing homes $4.1 billion short of break-even annually and liability insurance costs are consuming most of the meager reimbursement increases Medicaid occasionally provides?

People need to wake up and realize that already, but far more so in the future, access to quality long-term care--especially home and community-based care--will depend on the ability to pay privately for such care.

Juries need to realize that bad outcomes in nursing homes are not necessarily caused by greedy owners or corporate bureaucrats unwilling to pay for quality care. Bad outcomes usually reflect systemic problems caused by excessive dependency on inadequate government financing.

Policy makers and tax payers need to realize that the same lawyers artificially impoverishing affluent seniors to qualify them for Medicaid nursing home care are often the same practitioners suing nursing homes for providing allegedly poor care to their Medicaid-underfinanced residents.

Until we understand the complicated, deep-seated connections between these superficially unrelated facets of the long-term care problem, we'll have little hope to improve care quality.

[Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," Submitted to Members of the Kansas State Legislature, The Flint Hills Center, January 2004.]

The impact of third-party payments on health care costs



University of Texas economist Craig Depken recently pointed out on his blog, Heavy Lifting, that The Joint Economic Committee has a great series of charts available on their website. Included among them are some excellent resources for those interested in health care policy. The chart above, for instance, offers a dramatic picture of the unsustainability of third party payments. Until consumers begin to behave as though they are spending their own money rather than someone else's, this trend will only worsen.

Book Review: Tom Miller on Herzlinger's Consumer-Driven Health Care: Implications for Providers, Payers, and Policy-makers

[Tom Miller, "Driver’s Ed For Backseat Drivers," Health Affairs, November/December 2004.]

Tom Miller, former health policy studies director at the Cato Institute, explains how it is that Market-Driven Health Care author Regina Herzlinger gets it both right and wrong in her latest book - consumer driven health care will be a major force of change, but employers and regulators need to allow consumers to run the show:

Part of the problem is that the "buyers" of most health insurance and health care are third parties (employers, insurers, and government administrators) rather than the end users (consumers) who have to live, or die, with the consequences. Regina Herzlinger is back on the road again to point this out, in Consumer-Driven Health Care. But this voluminous collection of her latest thoughts, and those of seventy-three other purveyors of consumer-driven health plans, health care, and health policy, focuses much more on how to deliver consumer-centered care than on who pays for it.

Where are the assertive, empowered, and (presumably) risk-taking consumers, and what do they really want? We don’t hear their voices directly in this volume, because Herzlinger is really selling her ideas to a different audience. But she assures us that consumers want government to provide the money to enable them to purchase the health care that they choose, instead of providing it to them in one-size-fits-all style.

As remains true of most grand reform blueprints, it’s best to set forth more limited basic objectives that help realign incentives and then get out of the way while buyers and sellers unbundle health benefits, put some of their money on the table, and learn from trial and error. New tax rules for HSAs and HRAs have already gone a long way in setting the stage by helping level the playing field for control of health care dollars. Putting more dollars at risk and up for grabs can help capture the attention of both consumers and those who aim to serve them.

Of course, the usual set of policy experts will insist on imposing protective speed bumps and higher performance standards before letting consumers actually go out on the road with not much more than a restricted learner’s permit (and plenty of airbags on board). But we should remember how we got to today’s exit ramp away from the high costs, uneven access, and quality chasms experienced with other designated drivers at the wheel. In any case, the real competition to sort out the hype and hope of consumer-driven health care will involve finding better ways for patients and medical care providers to collaborate, reengineer the delivery of care, and share responsibility for lifetime health maintenance. Real consumer-driven care can’t afford to get stuck in the slow lanes of insurance plan selection. Freeing up more cash for point-of-service decision making might finally get us out of low gear, if the backseat kibitzers will just fasten their seat belts and lean back.

[Greg Scandlen, "Choice is revolutionizing health care," The Wichita Eagle, 28 September 2004.]

UMB ahead of the game on HSAs

[Christopher Tritto, "Banks see health saving accounts as profitable opportunity," The Business Journal of Kansas City, 12 November 2004.]

UMB Bank, one of the co-sponsors of our recent HSA workshop, made headlines last week for its efforts to take banking into new territory:

The advent of health savings accounts, one feature of last year's sweeping Medicare legislation, is creating a new business opportunity for banks, and UMB Bank is getting out in front of the trend.

An HSA is a tax-favored savings account that is used in conjunction with a high-deductible health insurance plan. It is designed to give individuals more control of how they spend money on health care and provide an incentive to save for future health care expenses and retirement.

Although some banks throughout the country are offering HSAs to retail customers, UMB is partnering with insurance companies to meet what is expected to be a huge demand for the products.

UMB provides checkbooks and debit cards that can be used to draw on HSAs and flexible spending accounts, holds money contributed to HSAs, issues financial statements and handles associated tax reporting requirements.

The HSA market still is evolving as consumer interest grows and insurance companies and banks explore niches to do business, said Dennis Triplett, executive vice president of UMB Bank in Kansas City.

"The key is for banks to figure out how they choose to strategically play in this market space," Triplett said. "Do they want to offer health savings accounts for individuals or in group markets controlled by insurance companies?"

HSA Workshop packed with information

Our November 12th workshop on health savings accounts and other low-cost insurance options was well-attended and featured one extremely informative presentation after the next. Flint Hills will hopefully have all of the presentations available soon, but for the moment, we can direct you to at least one: U.S. Department of The Treasury Senior Advisor for Health Initiatives Roy Ramthun presented "All About HSAs," a very comprehensive look at the topic.

Kansas Medicaid to expand as Tennessee program collapses?

[Editorial, "Needed," The Wichita Eagle, 14 November 2004.
"Expanded Medicaid in Tenn. proves too costly," The Wichita Eagle, 11 November 2004.]

The Governor's Healthy Kansas proposal has received a great deal of attention, and just Sunday the editors of The Wichita Eagle chimed in to condemn "partisan" attempts to boil it all down to petty finances:

Almost the moment that Gov. Kathleen Sebelius and Insurance Commissioner Sandy Praeger unveiled their long-awaited HealthyKansas initiative last week, the topic switched from what they would do with it to how they would pay for it: higher tobacco taxes.

That shift of focus reflects the political reality about the Kansas Legislature. Its tax-averse GOP majority may be skeptical of even a tax hike that can be viewed as a user fee on a famously unhealthy product. Though we may see in such an increase the unique opportunity to raise revenue while actually preventing premature deaths by reducing smoking, lawmakers may not concur.

The reality is that this is no simple turf war between callous conservatives and a charitable Governor. As it stands, the proposal does little to address the tremendous growth in the program while at the same time raising a tax to expand the rolls. If the situation in Tennessee can provide any lessons, it is that reform must come first:

The governor announced plans Wednesday to dissolve Tennessee's expanded Medicaid system and drop 430,000 poor and disabled people from the rolls of the health-care program that has been devouring a large chunk of the state budget. Democratic Gov. Phil Bredesen said Tennessee will instead return to a cheaper, more basic Medicaid program.

The move followed months of legal wrangling over the TennCare program, whose $7.8 billion price tag was projected to mushroom in coming years.

As the editors of the Eagle point out, "In Kansas, as in every other state in the nation, health care increasingly needs drastic measures." Unfortunately, Kansas Health can by no means be classified as a "drastic measure."

Governor releases health care proposal



[Dave Ranney, "Sebelius plan would pack on costs for smokers," The Lawrence Journal-World, 9 November 2004.]

While Governor Sebelius has fortunately chosen not to push for Dirigo-lite in Kansas, she is also not pushing for the type of fundamental change necessary to change the troubled course of Medicaid in the state. There is little in the proposal to change the underlying incentive structure:

Gov. Kathleen Sebelius on Tuesday unveiled a $50 million initiative aimed at extending health care benefits to more than 70,000 uninsured Kansans.

To pay for the plan, Sebelius proposed raising the state tax on cigarettes by 50 cents a pack.

"Raising taxes is always difficult," she said. "I think Kansans need to know how we're going to pay for it. You get nothing for free."

Sebelius, a Democrat, and Insurance Commissioner Sandy Praeger, a Republican, announced the plan at a morning news conference at Kansas University Medical Center. They later addressed the Kansas Hospital Assn.'s annual convention in Topeka.

Both the hospital association and the Kansas Medical Society have endorsed the "HealthyKansas" plan.

Under Sebelius' plan, the state's health insurance programs for employees and retirees would be combined with most of the state's Medicaid programs. Together, the two programs account for $1.6 billion in health care spending.

The newly created Kansas Health Care Authority would fall under the Department of Administration.

The authority would be the state's largest purchaser of health care services and, according to Sebelius, have a better shot at controlling costs.

Other elements of the initiative:

• An aggressive campaign aimed at adding 40,000 children to HealthWave, the state's health insurance program for children in low-income, working families.

• An expansion of the HealthWave coverage for "care-giving parents." Currently, parents whose incomes are less than 37 percent of the federal poverty guideline are eligible.

Sebelius has proposed adding 30,000 adults to the program by raising eligibility to 100 percent of the guideline, almost $19,000 a year for a family of four.

• Creation of a Web site to help Kansans stay informed of discounts on prescription drugs.

Praeger's office would oversee several projects aimed at using tax-funded subsidies to help small businesses insure low-wage workers.

"I believe we have a moral responsibility to find a way to provide coverage that's affordable and accessible to all," Praeger said. "Access to health care should be a basic right."

Asked how much each program would cost, Sebelius said about one-third of the $50 million would be set aside for the subsidies. The remaining two-thirds, she said, would finance increased access to HealthWave.

Under the plan, revenues from the proposed tax would be kept in a separate fund and could not be used to offset other demands within the budget.

Medicaid programs now administered by the Department of Social and Rehabilitation Services -- payments to doctors and hospitals, mostly -- would move to the Kansas Health Care Authority. Programs aimed at helping the disabled avoid institutional care would remain at SRS.

Asked if that meant doctors and hospitals would fare better than the disabled, Sebelius replied: "This is in no way a two-tiered system."

The intent, she said, is to separate the "insurance pieces, so they can be run like a business" without interfering with services for the disabled.

If approved, the state tax on cigarettes would increase to $1.29 a pack from 79 cents a pack.

Sebelius also proposed raising the tax on tobacco products -- cigars and chewing tobacco, for example -- to 15 percent from 10 percent.

In the state fiscal year that ended June 30, taxes on cigarettes and tobacco products netted the state almost $120 million. The year before, the taxes generated $133.8 million.

"The tax went to 79 cents a pack on Jan. 1, 2003. That's why it went up like that," said Department of Revenue Secretary Joan Wagnon. "Since then it's come down -- but that's what (cigarette taxes) do, they spike, they come down, and then they plateau."

At 79 cents a pack, the current tax is projected to raise $118 million this year.

House Speaker Doug Mays, R-Topeka, said Sebelius and Praeger likely would have a fight on their hands.

"A tax increase -- even if it's on cigarettes -- is going to be difficult to get through the Legislature," Mays said. "It won't be popular among Republicans because they're against raising taxes, and Democrats won't like it either because going after cigarettes is one of the most regressive taxes there is."

Sen. Steve Morris, R-Hugoton, shared Mays' skepticism.

"I commend the governor and the commissioner for their efforts, but it's going to be difficult to get the Legislature to go along with that much of an increase," said Morris, chairman of the Senate budget committee. "Maybe there's another way to fund this puzzle?"

[Matthew Hisrich, "A Backgrounder on Kansas Medicaid," The Flint Hills Center, 19 July 2004.]

Advice for employers on HSAs

["An Example of How Not to Set Up HSAs for Your Employees," The HSA Insider, 8 November 2004.]

HSA Insider provides some excellent advice on how to approach an HSA offering for employees. The logic is simple - get greedy, and it will end up costing you:

Five Guidelines for Employers Offering HSAs to their Employees

1. Share the savings from switching to a high deductible plan with the employee by depositing a significant amount of the deductible in the account.

2. Offer the employees a hospitalization rider, either they can buy it or the employer can buy it.

3. Make a one time contribution to set up the account. On going fees
can be paid by the employee.

4. When you educate employees about the HSA choice, talk about the money in the account first, and the deductible after you talk about money.

5. Especially during the first year, only a certain percentage of employees will choose an HSA, even if you design the offer correctly. It is in the second year, when employees with hundreds of dollars in their HSA talk to employees who do not have an HSA, that you will see more employees choose the HSA. (“Jane got new glasses and contacts, and Johnny got a retainer with money in my HSA.”)

There are some employers who do not want to give their employees the HSA money. Why are these employers more comfortable giving an insurance company their money, than they are giving their money to their employees?

Interested in learning more about how to implement HSAs? Join Flint Hills for a workshop on November 12th in Kansas City and find out all the details. For more information, visit www.flinthills.org.

Government solutions to government-created problems

[David R. Henderson, "Cure for vaccine supply is not more government," The Wichita Eagle, 3 November 2004.]

Hoover Institution research fellow David Henderson confirms comments highlighted here earlier that the vacine shortage is not a problem of too little government intervention, but too much:

No one person or agency is in charge of making sure the United States has an adequate supply of bread. Do you line up for hours for bread? No one is in charge of making sure we have an adequate supply of VCRs, TVs or computers, yet anyone willing to pay the price can get one easily.

The reason markets work so well is precisely that no one is in charge. Instead, thousands of producers and millions of customers make decisions that mesh. Vaccines aren't special. It's true that flu vaccine not used this year must be thrown out. But bread not used this week must be thrown out, and there's no shortage of bread.

Indeed, the countries in the world that have done the worst are those in which one person or agency is in charge. In the Soviet Union, one agency was in charge of making sure people had an adequate supply of bread. The result was that bread lines were common. And lesser attempts at central planning, such as government-set price controls, have also caused shortages. Richard Nixon's price controls on gasoline in 1973 and Jimmy Carter's in 1979, for example, caused long lines for gasoline.

One result of price control programs and liability laws has been that the number of vaccine producers has fallen in 30 years from 25 to five. For some vaccines, there is only one producer.

The vaccine business is already a high-risk one, due to a limited product shelf life, uncertain demand and lawsuits. Do threats of price controls make being in the vaccine business more attractive?

The solution to our vaccine problems is not to put one agency in charge but, instead, to reduce the role of government so that the vaccine market acts more like the U.S. bread market and less like the Soviet one.

[See the archived entry, "Lessons from the flu vaccine shortage," The Flint Hills Center, 27 October 2004.]

Stories from the HSA frontlines

[January Payne, "Early Users of Health Savings Accounts Say So Far, So-So," The Washington Post, 26 October 2004.]

To read the headline of this article, one could easily get the impression that early users are less than satisfied with their HSAs. That often seems to be the role of an editor, though - come up with a title that bears little resemblance to the content of the article in question.

The only "detractor" in the article was upset because her debit card was stolen. She plans to keep her HSA:

"Like most self-employed people, I'm always struggling to find health insurance," Delony said. "This is the first time [a health plan] made financial sense."

All of the other comments in the piece are positive, as well:

"It's a fairly long list of things that [an HSA account] can be used for," said Modugno. "It's easy to keep track of . . . Before, it was really hard to keep your records straight."

The HSA plan "allows me to put away a considerable amount of money for those emergencies," Payne said. "We've built up a pretty good reserve."

Sally Pipes talks KerryCare on NRO

[Sally C. Pipes, "No Ill Will," National Review Online, 1 November 2004.]

Would you like your medicine more or less socialized? That's what this election boils down to according to PRI's Sally Pipes:

Kerry has repeatedly claimed that his proposal is "not a government plan." But that's just not true. KerryCare is one of the most expensive proposals in the history of government. It would increase federal spending anywhere from $1 to $1.5 trillion dollars — roughly the GDP of Russia — over ten years.

Twelve times larger than President George W. Bush's health plan, KerryCare would instantly nationalize a large segment of the U.S. insurance industry. And it would vastly expand both Medicaid and Medicare, two of the government programs people complain about most. How does Kerry expect to pay the bills?

Well, his campaign has come up with some very creative budgeting. Kerry says increased taxes on Americans who earn over $200,000 would cover his plan. But that would only bring in about $650 billion over a decade, leaving him hundreds of billions short and making new taxes on the middle class inevitable. For KerryCare alone, the average taxpayer would have to pay $10,000 over the next decade — or $1,000 per year, according to Americans for Tax Reform.

Surely, though, with its astronomical price tag, KerryCare would bring better medical treatment and cover the uninsured. Right? Wrong. Kerry's plan would not solve the problem of the 8.2 million chronically uninsured (out of a total uninsured population of 45 million). Instead, it would mostly address people who already have insurance — shifting up to 18 million people with private coverage into government-funded Medicaid programs and HMOs. In fact, nearly 60 percent of KerryCare would be spent on people who already have insurance. Even worse, about 90 percent of KerryCare's proposed funding would go to state governments, employers, and insurance companies — not to individuals.

Kerry's debate-night promise to give everyone the same insurance package that Congress gets represents a big step towards nationalizing U.S. healthcare. His "health alliance" plan would entail a direct transfer of tax dollars from federal coffers to private business — with the government reimbursing employers for three-fourths of the cost of catastrophic claims over $50,000.

Whereas KerryCare would expand government and subsidize big business, President Bush's proposed reforms take a fundamentally different approach: They put the individual first.

Today, the U.S. government already pays about 45 percent of all health-care costs. In other words, our system is nearly half-way socialized, which is one reason health-care costs are spiraling out of control today. Kerry would take America further down the path to socialized medicine, while Bush would guide us towards a free market.

[Matthew Hisrich, "A Better Alternative to Kerry Plan Already Exists," The Topeka Capital-Journal, 8 August 2004.]

Tax increase to pay for Governor's health plan

[Scott Rothschild, "Sin tax may fund new health plan," The Lawrence Journal-World, 30 October 2004.]

We've been waiting for more details to trickle into the public media about the mysterious health plan that is apprently being vetted out by administration officials. Thank goodness for the Journal-World, they seem to be the only paper covering the developments. Here's the latest: The Governor plans to jack up cigarette and other so-called sin taxes to cover the $50 million estimated cost of implementation:

At a briefing Friday for administration officials and dozens of medical and insurance officials, union representatives and health care advocates, the cost of the plan was pegged at $50 million.

Tax increases, including cigarette taxes, were said to be in the mix for financing the plan, according to several people who attended the invitation-only session.

Of those interviewed who attended the briefing, some said they were impressed by the proposal. Others said it seemed "generic."

The briefing was headed by Bob Day, director of the governor's office of health planning and finance.

Those who attended the briefing said it was obvious that it would be Sebelius' major initiative of the 2005 legislative session, which starts in January.