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Monday, February 28, 2005


No need for "terrible" solutions to Medicaid spending


[Phillip Brownlee, "Beast: Medicaid gobbling budget," The Wichita Eagle, 28 February 2005.]

The Wichita Eagle's Phillip Brownlee is correct to point out the need for reform in the state's Medicaid program:

Lawmakers have been appropriately focused this session on school finance. But there is an even bigger financial challenge facing the state -- and one that may be even more difficult to solve than adequately funding schools.

The state's share of Medicaid costs have been increasing an average of 12 percent a year -- and they are expected to keep climbing. As a result, the state is having to use most of its revenue growth to cover these increasing costs, rather than spend the extra money on education or other state needs.

[T]he bottom line is that one way or the other, lawmakers have to tame this budget beast.


Unfortunately, he sees no way out:

The policy dilemma is that the options for controlling costs are all terrible. For example, lawmakers could raise some eligibility requirements, but do they have the stomach to kick away vulnerable Kansans who really do need help? They could also reduce reimbursement rates to hospitals and physicians, but the state's rates are already among the lowest, and dropping them more could cause physicians to stop treating Medicaid patients.

In reality, legislators do have the ability to craft a program that is more effective at meeting the needs of beneficiaries while also containing costs. Florida is doing just that. So is South Carolina. There needs to be a genuine discussion of the growth in costs to motivate action, but just as importantly we must not lose sight of the fact that reform does not have to mean "kick[ing] away vulnerable Kansans who really do need help." Those Kansans are the same ones who are being underserved under the current program. Both they and the taxpayers paying for Medicaid deserve better.

[John McClaughry, "Patient Power: A Health Care Reform Agenda for Kansas," The Flint Hills Center, May 2004.]

Out of control

[Editorial, "Runaway costs damage economy," The Kansas City Star, 28 February 2005.]

While it should come as no surprise, rising health care costs are once again making headlines around the country thanks to a new release from the Centers for Medicare and Medicaid Services:

Businesses, political leaders and the public should all take note of the federal government's latest forecast on health-care costs. It's a storm warning.

According to the Centers for Medicare and Medicaid Services, health-care costs will continue their rapid rise through the next decade, claiming nearly 19 percent of the gross domestic product by 2014 — a record.

All this will just get worse unless more attention is focused on restraining health-care costs. The new federal report predicts that public and private spending on health care will average more than $11,000 per person by 2014, up from just more than $6,000 in 2004.


Some of the crisis may be overblown. For instance, it may not necessarily be a sign of trouble if society chooses to spend more resources on health care relative to anything else. And health outcome comparisons that show the U.S. lagging other countries are often subjective at best. But the pace of spending growth is truly astounding, while the level of satisfaction remains low.

The problem is to address both deficiencies. Where applied, top-down controls such as managed care have actually achieved successes at containing costs, but satisfaction is a problem and that leads policymakers to shy away from their use. Until a reform is introduced that allows for choice while also instilling cost sensitivity, health care cost growth will continue to make headlines. Fortunately, consumer-driven health care aims to accomplish just that goal.

[Devon Herrick, "Health Savings Accounts: The Future of Health Care for Kansans," The Flint Hills Center, 14 February 2005.]

Heritage Foundation event focuses on South Carolina Medicaid reform

["Escaping the Morass: South Carolina's Plan to Transform Medicaid," The Heritage Foundation, 28 February 2005.]

The Buckeye Institute's Mike Bond, who came to Kansas to discuss Medicaid reform last year, has been working with South Carolina to develop a free-market approach to Medicaid. The model is now seen as one that can be adapted to other states. Today, The Heritage Foundation held an event featuring South Carolina Governor Mark Sanford. Bond also presents, providing some greater detail on the program. The event is available for viewing online.

[Matthew Hisrich, "Staying the Course: Medicaid Reform in Kansas," The Flint Hills Center, January 2004.]

Thursday, February 24, 2005

Government health care spending projected to outpace private spending

[Pauline Jelinek, "Medicare change boosts government share of health costs," Associated Press, The Lawrence Journal-World, 24 February 2005.]

The new Medicare drug benefit is tipping the scales in favor of government-provided health care in the U.S., but the trend has been on its way up for decades. Based on the outcomes in more socialized countries, this is a trend we should be working to reverse:

Within a decade, the government will be footing the bill for nearly half the nation's medical costs, its share propelled higher by the new Medicare drug program, administration economists estimated Wednesday.

At the same time, total health spending -- both private and government -- will take an ever-larger portion of America's economic output, said the report from the Centers for Medicare and Medicaid Services.

By 2014, overall medical payments are projected at about $3.6 trillion, with the government footing $1.8 trillion, or 49.4 percent, and private funding covering just over 50 percent, it said.

The federal share has been rising for decades. In 1965, the government was covering roughly 25 percent of health costs and private parties 75 percent, according to the report. Last year the government paid 45.6 percent of an estimated $1.8 trillion in medical bills.

Eventually, the two sides will reverse roles, with the government paying more than half.


[Richard B. Warner, MD, "The Real Culprit," The Flint Hills Center, December 1997.]

NCPA president praises Ohio long-term care proposal

["Medicaid 'Partnership' Program," NCPA Daily Policy Digest, 24 February 2005.]

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According to The Wall Street Journal, more and more seniors are sheltering assets and letting taxpayers pick up the tab for their nursing home care. A whole industry of lawyers has built up to help the process along. Insuring for this type of care makes sense, but people will only take that step if states stop allowing them to pass the buck. Ohio's efforts to put a stop to it receive some praise from NCPA president John Goodman in this article:

Ohio is considering a proposal under which the state would claim title to a senior's assets, giving him a zero-interest loan against Medicaid benefits until he is deceased. The assets would then be used to offset the costs incurred by the state for his care. Seniors who choose cheaper care options would get to keep more of their assets. This is "the most aggressive effort to control long-term care costs anywhere in the nation," says John Goodman of the National Center for Policy Analysis.

[Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," The Flint Hills Center.
Matthew Hisrich, "First Things First: Kansas Medicaid Program Must Get its House in Order Before Expanding Home-based Care," The Flint Hills Center, 20 August 2004.]


Utah Medicaid in the spotlight


[Kirk Johnson and Reed Abelson, "Model in Utah May Be Future for Medicaid," The New York Times, 24 February 2005.]

Former Utah Governor Mike Leavitt is now head of The U.S. Department of Health and Human Services, which oversees Medicaid. Having taken bold action in his home state on the program and with The Bush Administration keen on reform, it would probably be worthwhile to review his work thus far:

In Utah, Mr. Leavitt's plan departs from the traditional Medicaid program on two main fronts. First, it spreads out a lower, more basic level of care to more people, and reduces coverage for some traditional beneficiaries by imposing co-payments for services. And second, it relies on the generosity of doctors and hospitals to provide specialty services free of charge.

In doing so, the state has in many ways reframed and reshaped the national debate over Medicaid and health care for the indigent, experts say, broadening the focus from the question of who does and does not have health insurance, to what constitutes basic health coverage.

[Leavitt] has said in his recent speeches and in testimony before Congress that while no state will be the blueprint for the Medicaid overhaul, a main goal of the administration is to provide coverage for those now left out of the system, by spreading that coverage around and, perhaps, reducing benefits for some people now covered. Repeated requests to interview Mr. Leavitt were unsuccessful.

"Wouldn't it be better to provide health insurance to more people, rather than comprehensive care to a smaller group?" Mr. Leavitt asked in a speech this month. "Wouldn't it be better to give Chevies to everyone rather than Cadillacs to a few?"


While the plan is at odds with the idea of restoring true insurance through catastrophic coverage, it does represent an innovative approach that is worth keeping an eye on, especially with its main proponent in such a powerful position.

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

Wednesday, February 23, 2005

"A fundamental reorientation of the health care business...is already under way"

[Paul D. Mango and Vivian E. Riefberg, "Health savings accounts: Making patients better consumers," The McKinsey Quarterly, Web exclusive, January 2005.]

The authors of this recent article first diagnose the fundamental problem in the health care system:

US health care premiums have continued to escalate as a result of three basic problems: third-party payers that insulate consumers from the financial implications of their health care choices, a lack of transparency in the quality of care and in the prices providers charge, and a reimbursement system that rewards activity over outcomes.

And then proceed to explain how consumer-driven health care will turn this model on its head and impact consumers, payers and providers:

Whatever the take-up of consumer-driven health plans, a fundamental reorientation of the health care business toward the consumer is already under way. Payers will have to make choices that could decide their longer-term role and economic influence in the market. Providers face extraordinary demands on their operating effectiveness as they attempt to compete on the basis of value in a world increasingly focused on price, quality, and service transparency.

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

Healthy lifestyles reduce the need for expensive prescriptions

[Laura Vanderkam, "Want lower drug bills? Look in the mirror," USA Today, 14 February 2005.]

Taking an unusual look at the demand side of the drug price equation, USA Today rightly suggests that pharmaceutical companies could not charge what they do for drugs if no one was buying:

[T]he biggest demand-booster is that we don't take care of ourselves. It's no secret Americans are in bad shape. Two-thirds of us are overweight. We stew in our own stress. After years of weight gain, we suffer from high blood pressure, high cholesterol, even Type II diabetes. Obesity, combined with lying on the couch after fatty meals, contributes to acid reflux. Stress and inactivity can worsen depression.

"Why worry about your diet when Lipitor can have you out at age 90 playing bocce on the beach somewhere?" jokes Mark Pettus, chief of staff at the Berkshire Medical Center and author of The Savvy Patient. Doctors find it easier to write prescriptions than teach us new diets. Behavioral medicine, notes Pettus, is a tough sell. But small changes matter:

•A 1999 Duke University study found that exercise worked as well as Zoloft in treating depression. Exercise was even more effective in preventing relapses.

•A 2003 University of Toronto study found that a diet high in soy protein, fiber and almonds lowered cholesterol as much as statins.

•A Diabetes Prevention Program study in 2001 found that folks with impaired glucose tolerance who lost 5%-7% of their weight cut their risk of diabetes by 58% — more than preventive treatment with diabetes drug metformin.

•A Harvard University study, published in 2001, found that a low-salt, low-fat diet lowered systolic blood pressure in individuals with hypertension about the same amount as hypertension drugs.

There are limits, of course. Everyone could eat oat bran and jog, and we'd still have heart attacks. But on average, prevention is a contract. If you don't smoke, exercise an hour a day and eat right, you'll need fewer drugs in the long run. We should keep this in mind when drug companies jack up prices.

Taking ownership of one's health is "hard work," says Pettus, but unlike drugs, "it's not going to cost you a penny."

Tuesday, February 22, 2005

Washington state doctors like cash

[Nick Perry, "A health plan that covers it all: cash," The Seattle Times, 15 February 2005.]

Consumers are pushing for change in health care through HSAs and other tools, but change is coming from other areas, as well. More and more doctors are getting fed up with the administrative burden of government program and insurance company paperwork and are switching to a cash-only basis:

Carolyn Kunard, 54, is typical of a new breed of cash patient. When husband Craig Kunard was laid off from his job at the Experience Music Project in Seattle a couple of years ago, the Mukilteo couple found themselves paying $750 a month to keep their insurance through COBRA, a federally-mandated program that helps people maintain health insurance between jobs.

The Kunards found that their insurance did not help much with their prescription costs. So they switched to paying around $300 per month for a policy that covers only expensive, catastrophic care, and began paying the full cost for prescriptions. Then they discovered the cash-only Save Now Discount Pharmacy in Lynnwood.

"It's unbelievable to me the prices you can get here," Carolyn Kunard said on a recent visit.

Save Now founder Todd McElroy said that's because he saves up to 30 percent of staff costs by eliminating insurance paperwork. Even as the pharmacy becomes larger, the labor savings will be more than 15 percent, he said. That enables him to offer prices competitive with low-price Canadian pharmacies, he said.

Dr. Vern Cherewatenko of Renton said he decided to switch to a cash-only system in 1998 after he found himself bogged down in insurance paperwork. For every minute he was spending with a patient, he'd spend seven minutes dealing with paperwork, he said.

Not anymore.

"I'm seeing a few less patients, but I'm able to spend a lot more time with them," Cherewatenko said. "I'm profitable and they're happy."

Cherewatenko also launched SimpleCare, a nationwide network of doctors and patients who support a cash system for routine care. He said 18,000 providers pay a small fee for an educational packet about running a cash-only business, and to be listed on a Web site.

"It's fixing the doctor-patient relationship. It's getting reconnected without the middlemen in between," Cherewatenko said.

Kansas highlighted in Wall Street Journal piece on "crowding out"

["The Middle Class Burden on Public Health Insurance," NCPA Daily Policy Digest, 21 February 2005.]


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The concern that public insurance crowds out private coverage has been around some time, but with proposals in Kansas to expand HealthWave and Medicaid, the data is increasingly relevant:

More middle-income families are relying on government programs for health insurance, even when their own private employers provide coverage, says the Wall Street Journal.

Families that can not afford private insurance but are above the income limit to quality for Medicaid are turning to state programs such as the State Children’s Health Insurance Program to insure their children. However, observers say the growing demand on the program is unsustainable:

* The Employee Benefit Research Institute notes that private coverage declined from 74.4 percent in 2000 to 71.5 percent in 2003.

* Since 2000, nationwide enrollment of children in SCHIP programs has increased by 76 percent to about 5.8 million.

* In Kansas, 51 percent of the children in the state’s SCHIP program have at least one parent who is eligible for private coverage.

Programs such as SCHIP require enrollees to pay premiums and co-pays, however, the costs are much lower; one might pay $60 per month to cover two children as opposed to paying a few hundred dollars per month through a private insurer.

However, since state programs underpay providers, private premiums will rise to cover the shortfall as more people enter the public insurance market.


[Matthew Hisrich, "Additional Medicaid Spending is Irresponsible," The Flint Hills Center, 22 July 2004.]

Friday, February 18, 2005

PAWs vs. PIWs

[Arnold Kling, "The Millionaire Next Door vs. the Politician in Washington," Tech Central Station, 18 February 2005.]

Arnold Kling provides a somewhat amusing, and somewhat disconcerting, analysis of the disconnect between free-spending Washington and thrifty Americans in this column. The implications for health care policy in Washington and Topeka are worth noting:

Many on the left are willing to allow the market to operate in the ever-declining portion of the economy that produces material goods. However, they insist that education, health care, and retirement are too important and complex to be left to the private sector. The Washington power-lusters are as savvy as any businessman in gravitating toward the growth industries.

On the one hand, there are what Stanley and Danko call the Prodigious Accumulators of Wealth (PAWs). On the other hand, there are the views of politicians and left-wing academics, making up what I call Power-Intoxicated Washington (PIWs).

For those of us who value self-reliance and thrift, the economic trends suggest a need to increase saving and to invest heavily in human capital. For those who value paternalism and redistribution, those trends provide an excuse to "help" more people in more ways. This tends to exacerbate the conflict of values, because ultimately the redistribution policies require heavy taxes on those of us who save and try to educate ourselves.


Where did this op-ed come from?


[Steven Wolfson, M.D., "Abandoning the sick is pretty 'evil' too," The Topeka Capital-Journal, 18 February 2005.]

What reason would a doctor in Connecticut have to write to a paper in Topeka, Kansas, and spout over-the-top rhetoric such as this:

Now the insurance industry, authorized by Congress this year, is offering high deductible policies and Health Savings Accounts that shift even more financial burden to individual subscribers. They also transfer much of the administrative burden of adding up how much we have paid for the services we have needed, how much we have left in our "account", and what services we will use.

Those who are healthy, or have secure financial resources, will take advantage of the lower premiums these plans offer. The poor will struggle. The elderly in nursing homes may simply lie there, unknowing, while the process rolls over them. But "I'm all right ... "


The answer lies in his affiliation. A quick visit to MinutemanMedia.org reveals that the good doctor is part of an effort to distribute "progressive" op-eds and "balance the flood of free columns that comes in daily from the prolific Right."

It's hard to spot the "flood of columns" they mention in Topeka, at least. Regular Cap-Journal contributors Donald Kaul and Jim Hightower are Minuteman members, and so articles like that above appear alongside others such as "You can't save Social Security by destroying it" in the same day. Perhaps someone should recommend Arnold Kling to the editors.

Ohio legislators work to reduce mandates

[Tracy Kershaw-Staley, "Bills aim for affordable health care premiums," The Dayton Business Journal, 14 February 2005.]

In an attempt to reduce the barrier health insurance mandates place in the way of affordable coverage, legislation has been introduced in Ohio that will allow for "mandate-lite" policies. Considering the above-average number of mandates in Kansas, policymakers here should follow their lead:

Employees at Prime Digital Printing voted last year to stick with their existing health benefits package despite the rising cost.

But Kim Hoskins, business manager for the 40-employee printing company, said she's not sure how many more increases the company, which picks up 50 percent of the premium costs, can withstand.

"I don't know at what point Prime Printing can continue that," Hoskins said. "We bear a huge increase as well as the employees."

There's a new option brewing in the state legislature that could make health plans more affordable for small employers such as Prime Digital Printing. Both the Ohio House and Senate have introduced legislation that would allow small businesses to offer employees health plans that do not cover certain health benefits required in Ohio.

The plans are a viable option for the uninsured, said Ann Womer Benjamin, director of the Ohio Department of Insurance.

"One of the missions of the department is to find insurance options for as many of our 1.3 million uninsured as we can," she said. "Small businesses have fewer and fewer affordable options for health insurance, and they are increasingly deciding to not offer health insurance to their employees."


["Kansas Health Insurance Mandates Exceed National Average," The Flint Hills Center, 2005.
Matthew Hisrich, "State Mandates reduce insurance affordability," The Flint Hills Center, May 2004.]

Thursday, February 17, 2005


HSA "credit cards" on their way


[Tom Anderson, "HSA vendors want to add credit," Employee Benefit News, February 2005.]

Besides the now debunked claim that only the "healthy and wealthy" will benefit from health savings accounts, one of the oft-repeated concerns about the tools is that if someone takes out a high deductible insurance policy and then a major medical problem occurs before they have built up sufficient funds in their HSA, they will be in serious trouble. Some companies such as Golden Rule offer riders that assist policyholders with these potential costs during the first year of enrollment. Others are now beginning to also consider the option of offering credit:

"One roadblock to consumer-driven health care in HSAs is the cash flow issue to the employee participant," observes John Hickman, head of the health benefits practice at Alston & Bird LLC in Atlanta. Vendors want to offer HSA participants a credit line to help deal with health expenses early on, he says.

The IRS prohibits using an HSA to collateralize a loan, but vendors could offer a credit line based on the participant's credit worthiness, Hickman says. The credit offering would have to follow standard lending rules. The legal basis for credit is not so much a benefits law issue as an issue with banking and lending compliance, he says.

Univison Inc., a subsidiary of UnitedHealth Group that provides health benefits administration to large employers, is piloting a program to offer some form of credit with its HSA, says spokesman Daryl Richard. "We're in the R&D phase and considering different possibilities," Richard notes.

Vendors have already released debit HSA cards this year with multiple-purse capability, Hickman notes. He expects to see HSA cards with credit lines by the spring.

Long-term care lessons from Minnesota

["Public and Private Financing of Long-Term Care: Options for Minnesota," A Report to the Minnesota Legislature, Minnesota Department of Human Services Continuing Care Administration, 15 January 2005.]


Identified as a "leader" in the area of Medicaid long-term care reform by The Center for Long Term Care Financing, the state of Minnesota recently released a review of financing options for long term care that contains some revealing language:

At the heart of the issue of long-term care financing is the concern that, by 2030, more people than ever before will turn to Medicaid as the way to finance their long-term care. This could include those who are already “Medicaid-bound” as well as those who have been called the “tweeners,” that is, a group with lifetime income and assets adequate for retirement but inadequate for long-term care costs. Even the “financially independent” boomers, those who could self-fund their long-term care, may feel a sense of entitlement to a public program like Medicaid, because it pays for an expensive product that most people do not like and do not want to pay for with their own money.

Another motivator to reform long-term care financing is the current structure of Medicaid. Its current structure as a “welfare” program presents a number of perverse incentives to the elderly and their families faced with long-term care costs. Critics claim that there are strong incentives to transfer assets using a number of legal mechanisms. Critics also claim that the program insulates individuals against the true risk of long-term care because they assume that “the state” will help pay for long-term care if all else fails. This attitude works against the message from insurance agents, financial planners and the government about the need to protect oneself privately against the risk of long-term care. A recent study goes even farther and concludes that the existence of Medicaid in its present form as a payer of last resort presents a fundamental impediment to the growth of any private coverage, and that changes in the structure of Medicaid are necessary but not sufficient to spur expansion in the private long-term care markets.

[W]e need to eliminate the mixed messages that the general public receives about its personal responsibility for long-term care on the one hand, and perceptions of easy access to publicly funded long-term care on the other.


[See Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," The Flint Hills Center.
Also, Matthew Hisrich, "First Things First: Kansas Medicaid Program Must Get its House in Order Before Expanding Home-based Care," The Flint Hills Center, 20 August 2004.]

Wednesday, February 16, 2005


Change necessary, but Kansas must choose the right prescription for health care woes


[Editorial, "Costly care," The Lawrence Journal-World, 16 February 2005.]

The editors of The Lawrence Journal-World are correct to point out the need for decisive action on Medicaid:

The state's Medicaid costs have risen by 30 percent over the last two years and are expected to rise 9 percent this year to over $2 billion a year. According to state reports, the increase is being driven by families, including many single mothers with children, whose jobs don't provide health insurance benefits.

Without some changes, Medicaid costs will continue to eat away at the state's budget, reducing money available for other purposes like education and transportation.


The recommendations go awry, however, in supporting changes that will only make matters worse. If Medicaid costs are increasing, for instance, does it make sense to expand the rolls without reform?

A campaign would try to add 40,000 Kansas children to HealthWave, the state's existing health insurance program for children from low-income families, and expand HealthWave to cover the uninsured parents of many of those children.

Getting these families in a health insurance program would encourage them to seek checkups and preventative care that might reduce serious illnesses. That, in turn, may lower the state's cost for their care.


"May" is the operative word in that last sentence. More likely is that expanded coverage would eat away at private coverage while forcing taxpayers to pick up the tab. Not only that, no matter how charitable it may sound to cover additional people through Medicaid, expanding coverage in a broken program that is unsustainable is irresponsible and hardly a gift to anyone.

If legislators want to help those least able to afford coverage, then they should act to reduce costly mandates, promote HSAs where possible, and consider offering tax credits for the uninsured.

["Kansas Health Insurance Mandates Exceed the National Average," The Flint Hills Center, 2005.]

Investor's Business Daily: "Patients should also be consumers"

["Patient Health and Health Savings Accounts, NCPA Daily Policy Digest, 16 February 2005.]


Investor's Business Daily weighs in on the new eHealthInsurance survey, and sees the popularity of HSAs as a sign of dramatic changes in the health care system:

Health savings accounts (HSAs) are turning patients into consumers by replacing one-size-fits-all insurance plans with individually owned tax-exempt savings accounts. With HSAs, more people can afford to be insured and portable private savings accounts lower costs and encourage preventive care, says Investor's Business Daily (IBD).

When paired with a high-deductible catastrophic insurance policy, HSAs lower overall costs and increase overall care, says IBD. If money is left over at the end of the year, it simply accumulates in HSA and earns interest. By creating a nest egg of savings, people are more prepared for future health expenses, from major illnesses and long-term care to paying insurance premiums during job transitions.


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

Tuesday, February 15, 2005


New data on HSAs released


[Allison Bell, "Survey: Most HSA Buyers Get Drug Coverage," National Underwriter, 15 February 2005.]

Confirming earlier research on the demographics fueling HSA purchases, eHealthInsurance just released its latest annual survey. The numbers reveal a broad cross-section of the population:

Thousands of customers bought high-deductible individual and family health policies that were compatible with the new health savings account program in 2004, eHealthInsurance researchers report.

EHealthInsurance is not providing information about topics such as the percentage of applicants who were declined, but company researchers note that 48.9% of the HSA plan purchasers were age 40 or older. Only 34.5% of the purchasers of the conventional health insurance plans were over age 39.

The fact that purchasers of HSA-compatible plans tend to be older than other health coverage purchasers "may represent the level of understanding and interest in tax planning and long-term savings of many people further along in their careers," the eHealthInsurance researchers write.

eHealthInsurance researchers write that 99.4% of the HSA-compatible plans it sold included some kind of prescription drug coverage, and 85.4% included some coverage for doctor visits.

The average monthly cost for HSA-compatible plans was $137.94 for individuals and $277.45 for families, and 89% of HSA-compatible plan holders are paying less than $200 per person per month for coverage, the researchers write.


[Devon Herrick, "Health Savings Accounts: The Future of Health Care for Kansans," The Flint Hills Center, 14 February 2005.]

Friday, February 11, 2005

Is effectiveness too much to ask before more is spent?

[Barbara Shelly, "Anti-tax crowd forgets common good," The Kansas City Star, 11 February 2005.]

KC Star columnist Barbara Shelly is tired of hearing about "The Frugal Family" and says we all need to pay more taxes:

The Frugal Family gets introduced in speeches and budget debates. It's that family that sits down at the kitchen table and tallies up its bills and its income. If expenses exceed income, the family decides what it needs to give up to live within its means.

Government — so the reasoning goes — must learn to do the same.

I respect that family. I've been that family. But I submit that the Frugal Family has its breaking point. When you've canceled cable and magazine subscriptions and forgone vacations three years in a row, and you still can't afford to fix the car or take the sick cat to the vet, it's probably time to increase your means.

I further suggest that when a state has to eliminate vital services for disabled children (Missouri) or continually shortchange its public schools (Kansas), that state needs to look for new revenue.

The Frugal Family would send somebody out to get a second job, or think about refinancing the home. Missouri and Kansas have more options, but the bottom line is that somebody is going to have to pay more taxes.

It's a hard thing to propose. In today's political climate, opposition to taxes has somehow become a value.


At some point in the past, Shelly contends, family values included not opposing tax increases. American history dating back to the Boston Tea Party would seem to disagree. People generally find it difficult to swallow any situation in which they are asked to pay additional taxes without any indication that the taxes they are already spending are being used most effectively. Shelly seems to acknowledge this in theory, but then goes on to imply that "good" programs are more important:

Government's responsibility is to use people's money wisely. It's also to provide for the common good.


The two need not be mutually exclusive. Indeed, it is problematic to suggest that regardless of outcomes, government programs deemed by some as beneficial to "the common good" should receive perpetual - if not perpetually increasing - support.

Medicaid is a prime example of this. Few would say the program is worthless, but many would say that it does not meet its objectives and costs far more than it should even if it did. Given that fact, is it fair to shame taxpayers and politicians who attempt to reform broken programs before throwing more of The Frugal Family's money at them? Incentives matter - there is little incentive to make positive change in a system that passes funds along without oversight.

Shelly ends the column with the following:

The state that refuses to pay for safe roads, quality schools and healthy citizens is a state that no family, not even the Frugals, will find appealing.


Research by Richard Vedder and others shows that Frugal Family members do tend to migrate based on tax burden. A better statement is: The state that spends taxpayer money on roads, schools and citizens without ensuring that roads are safe, schools are high-quality and citizens are healthy is a state that no family, especially the Frugals, will find appealing.

[Matthew Hisrich, "Additional Medicaid Spending is Irresponsible," The Flint Hills Center, 22 July 2004.]

Governor Sebelius in hot water with Canadians over drug proposal

["Canadian patients, seniors, pharmacists request meeting with U.S. governors," Press Release, Canada News Wire Group, 8 February 2005.]

The Canadian Treatment Action Council, Coalition for Manitoba Pharmacy, Best Medicines Coalition and Manitoba Society of Seniors have jointly released a letter to the six U.S. Governors - including Gov. Sebelius - that are pushing Canada to keep its doors open so that their drug importation programs will remain viable:

You should know that the increasing diversion of Canadian drugs to the United States has caused a great deal of alarm among those responsible for delivering health care in this country, as well as among those who depend on our prescription drug system. Minister Dosanjh has been very clear and has publicly committed to protecting Canada's prescription drug supply. We are confident that the Minister will follow through on this commitment, and we applaud his recognition that his first duty is to safeguard the health of Canadian patients.

Canada is not the cure to what afflicts your health care system. Surely you are aware of the following:

- Canada cannot be the "medicine cabinet" for the United States. Our population is one-tenth than that of the U.S., and uncontrolled American demand for our drugs would strain our system beyond the breaking point.

- You have a market-based system with market-based pricing. We have a price-controlled system. If Canada were to become a clearing-house for exports of medications to your States, prices would be forced up in Canada. Your cheap prescriptions would soon disappear, and Canada's drug system would collapse.

- Canadian patients risk shortages of medications intended for Canadians if the internet drug exportation business continues on its current path.

You readily acknowledge in your letter to our Prime Minister that the "unbalanced cost of prescription medicines in the United States is a contributing factor for America's health care crisis." Respectfully, we agree. Your system is in desperate need of political intervention. Unfortunately, that political intervention should be pursued in Washington, D.C., not in Ottawa. Your current efforts should be aimed at your own federal government, not the Canadian government.


[Matthew Hisrich, "Sebelius Is Practicing Black-Market Politics," The Wichita Eagle, 10 December 2004.]

Thursday, February 10, 2005

"Use Your Home to Stay at Home"

["How seniors can fund retirement," NCPA Daily Policy Digest, 10 February 2005.]

NCPA highlights a new study from The National Council on Aging today that details how reverse mortgages can keep people off of Medicaid and in their own homes:

Reverse mortgages could be used by millions of older adults to pay the rising costs of long-term care, a study by the National Council on the Aging has found.

One of the paradoxes of our long-term care system is that older Americans are struggling to live at home at the same time they own more than $2 trillion in untapped wealth, the report said.

Reverse mortgages are loans that allow homeowners aged 62 years or older to convert home equity into cash while still living in their houses. They receive the money as a lump sum, line of credit or monthly payments. The loan comes due when the borrower moves out or dies.

Mark McClellan, Medicare and Medicaid administrator, estimates that increasing the market for reverse mortgages could save Medicaid $3.3 billion annually by 2010.


Stephen Moses at The Center for Long-Term Care Financing takes issue with that figure:

The report vastly underestimates the potential savings to Medicaid from
home equity conversion. We...recently estimated a potential savings to Medicaid of $20 billion per year from reverse mortgages . . . almost immediately.

What's the difference? The NCOA report only recommends that people use their home equity voluntarily instead of making reverse mortgages a precondition of eligibility for Medicaid long-term care benefits. Because Medicaid exempts the home and all contiguous property regardless of value and estate recovery is easy to evade, merely jawboning people to use their home equity before applying for Medicaid won't work.

Besides, the report's argument against making spend-down of illiquid home equity mandatory is specious: "If reverse mortgages became mandatory to qualify for Medicaid, the healthy spouse who is still living at home could be left without any assets. Many could become trapped in an inappropriate living situation because they no longer have the financial resources to move out of a house that has become unsafe or too much to handle."

In truth, ever since the Medicare Catastrophic Coverage Act of 1988, community spouses have been assured an income and asset floor that has increased with inflation up to as much as $2,377.50 per month of income and half the joint assets not to exceed $95,100 as of 2005. If that isn't enough, or if the community spouse would have nothing left after spending down home equity, then special hardship waivers could and should apply as they do for other areas of Medicaid eligibility.


Wednesday, February 09, 2005

Kansas Insurance Commissioner on "allowing the market to work its magic"

[Karen Pallarito, "States Urged to Ensure Health Insurance for All," Forbes, 8 February 2005.]

Here is a good article featuring both recent Flint Hills speaker Greg Scandlen and Kansas Insurance Commissioner Sandy Praeger addressing a new Harvard School of Public Health report urging universal coverage. The latter's comments represent quite a dramatic shift from her endorsement of the Kerry health plan last year.

Scandlen's response:

"These ideas are just horrible," asserted Greg Scandlen, director of the Center for Consumer Driven Health Care at the Galen Institute in Alexandria, Va.

New Jersey, which enacted stricter regulations more than a decade ago, is a prime example, he said. A healthy 25-year-old male with a $500 deductible health insurance policy pays about $450 a month for individual coverage, more than three times what his counterpart would pay in Iowa, which has much less stringent regulations in place, the Harvard report shows.

What's more, the number of uninsured in New Jersey has been increasing quite dramatically, according to Scandlen.

"My contention is the market is broken because of the regulatory policies that groups like this have pushed for the last 20 years," he asserted.


Praeger's take:

Praeger, who chaired the National Association of Insurance Commissioners' Health Insurance and Managed Care Committee last year, praised the Harvard report for nicely laying out the problems in the individual insurance market and offering possible solutions. But those ideas probably won't stick in an environment "when less regulation, and allowing the market to work its magic" tends to be the favored approach, she said.

Wall Street Journal debate on health care

[Russ Roberts and John Irons, "Does Bush's Budget Proposal Set Right Priorities on Health Care?," Econoblog, The Wall Street Journal, 9 February 2005.]

In an excellent debate on the future of health care, George Mason economics professor Russell Roberts takes on Center for American Progress economist John Irons:

Roberts - Because of various government subsidies, out-of-pocket spending is a little more than 10% of total health spending (thanks to Alex Tabarrok at Marginal Revolution for the link). The rest comes from the government and insurance. Of course, if you don't have insurance or qualify for the government programs, you have to pay the full prices. Those prices have been driven up by the demands of all those customers who only pay a dime on the dollar. An elaborate bureaucracy of government and hospital employees tries to keep the system functional.

Irons - [A] restaurant with 90% subsidized food would certainly attract many customers and serve more food. But is this the case with health care? Personally, I wouldn't be rushing off to get my appendix removed or to sign-up for the colonoscopy of the month club no matter how cheap the procedures. The demand for health care is relatively insensitive to price, and this is especially true for the kind of care that is exceptionally expensive, such as end-of-life care.

Roberts
- [T]he real price effect isn't on quantity but quality. When there's no extra cost to me in the restaurant for being a glutton, I don't just order more food but more expensive entrees. In the case of medical care, I always want that MRI or the extra test as long as it isn't too physically painful. That's a comfort. But sometimes those tests aren't given to me because my doctor or my health insurance company thinks they're too expensive. I'd rather see those decisions made transparently with the patient having the ultimate say.

Irons - [L]et's get more concrete about this.

[I]t looks like Medicaid will be cut by $60 billion over 10 years, meaning fewer payments to states to cover benefits.

What should we be doing? The big, long-run issue is with the growth of health-care costs. The rising cost of care is leading to strains on federal services like Medicare and Medicaid, as well as on private companies who are providing insurance. There is a grand failure to address these issues in a fundamental way.

In the meantime, cutting benefits for those that need coverage is irresponsible.


Roberts - [T]he president's proposed budget, by my count, has a whole bunch of new or expanded programs to make health care more affordable, particularly for low-income families -- including a health-insurance tax credit, something called a traditional health-insurance tax credit, a health-insurance tax credit combined with a Health Savings Account and, my favorite, "An Above the Line Deduction for Certain Health Insurance Premiums." Who can't get fired up over that?

University of Missouri - St. Louis economist Lawrence White also weighed in on the debate at Division of Labour:

How, you might wonder, is such talk of a large cut in Medicaid consistent with the Congressional Budget Office’s projection of uninterrupted growth in Medicaid spending for the next few decades...?

Turns out it’s the oldest trick in the budget book: the proposed “cut” under discussion is not a real cut, but only a moderation in the projected growth path. As the San Francisco Chronicle reports:

Also Thursday, the nation's top health official fleshed out proposals to cut $60 billion from the projected growth of Medicaid in the next decade.

And by the way, $60 billion over ten years, or $6 billion a year, is a drop in the Medicaid bucket. According to the Washington Post, Medicaid “is projected to cost $324 billion this year”.


Tuesday, February 08, 2005

Whole Foods CEO John Mackey addresses World Health Congress

[Stephen Miller, "Whole Foods: A Consumer-Directed Success Story," Compensation & Benefits Forum News, The Society for Human Resource Management, February 2005.]

While Governor Sebelius attended the National Health Policy Conference in Washington D.C. on February 2nd to tell the world about her Kansas Health proposal, she should have arrived in town a couple of days earlier. Then she could have attended the World Health Care Congress and heard what the market she denigrates is already doing about health care:

In another session at the World Health Care Congress, John Mackey, CEO of Whole Foods Market, called his company's adoption of a consumer-directed health plan a major success story. "In 2002, our claim in our self-insured health insurance plans exceeded our premiums collected by $7 million," Mackey said. At that time, his firm offered a cafeteria plan with three health plan choices and, Mackey said, "no incentives to economize."

To keep his existing plans solvent, "we were going to have to raise premiums 30-35 percent," said Mackey. The companies switched to an HRA plan in January 2003, eliminating the cafeteria plan "to minimize adverse selection." Whole Foods now pays:

• 100 percent of premiums for full-time employees.

• An increasing portion of family premiums based on service hours, and 100 percent of family premiums after 10,000 service hours.

The plan's deductible is $1,000 per year for medical and $500 for prescription drugs, with $3,500 maximum out-of-pocket expense per year for deductibles and co-payments for individuals and families.

In addition, the company deposits $300 to $1,800 into each employee's personal wellness account (PWA), depending on length of service. Any money not spent in one year can roll over, tax free, to be used in the future.

In the plan's first year, reports Mackey, medical cost per employee fell 42.8 percent from $2,795 to $1,599. Including PWA dollars, the new plan resulted in a 25.53 percent total decrease (to $2,082) in annual dollars spent per employee.


Governor Sebelius reveals distrust of the free market

[Governor Kathleen Sebelius, "Critical Issues for States," National Health Policy Conference 2005, 2 February 2005.]

Governor Kathleen Sebelius made a number of very revealing comments as the keynote speaker at this year's National Health Policy Conference. Speaking about Medicaid, she apparently takes the view that the program works, and it is society that needs fixing: "its very success is why the costs are increasing."

In addition, while she apparently appreciates free-market rhetoric, she holds practical application of the ideas in low regard:

I think while the rhetoric is important, we need to be cautious about embracing the so-called market-based approach, particularly in the Medicaid situation. I fully understand the benefits of efficient markets, but healthcare, frankly, isn’t a market in many cases, and it certainly isn’t a very efficient market. A central premise behind insurance is it’s a voluntary social compact. While we enter into an agreement to spread the risk by spreading the potential liability to a broad base, and individuals enter that compact to shield themselves from their direct liability, the fact that we have some insured overusing the system is a problem but the way to solve that, I think, is not to unravel the system that has been in place and worked very well for a number of years.

A second problem with market forces is that the perfect market requires perfect information. I hope you have a number of other speakers who echo this, but there isn’t any profession, any system, any segment of our economy that’s as information deprived as healthcare. What are the true costs? How do consumers inform themselves about quality? What constitutes healthcare in the long run, and how can consumers arm themselves with enough information to make those choices? What’s the relative worth of various treatments? Useful information for consumers is at a short supply at best, and for all the attempts to provide information on the availability and quality of healthcare, the healthcare industry operates with remarkable lack of transparency. The intersection between transparency and confidentiality makes it even more unlikely that consumers anytime soon will have high quality, easily available information without a huge push and huge investments.


The problem with health care is that for too long it has not been viewed, or treated, as a market despite the incredible failures of this approach. Continuing to deny this reality will only worsen the situation. As well, Governor Sebelius or anyone else would be hard-pressed to find an economist that can point to a perfect market. The issue is not that we need a perfect market, but that even imperfect information in an imperfect market yields far better results than any attempt to develop an artificial construct in place of the free market.

[Matthew Hisrich, "Additional Medicaid Spending is Irresponsible," The Flint Hills Center, 22 July 2004.]

"[A] fundamental shift in the way patients and physicians navigate the health care system is needed"

[Mitch Mitchell, "Poll: Health care system isn't working," The Fort Worth Star-Telegram, The Wichita Eagle, 8 February 2005.]

A new poll suggests that Americans find fault with the U.S. health care system, and one doctor says that minor changes will not be enough to turn it around:

A significant majority (64 percent) of those contacted by Research!America, a Virginia-based nonprofit organization that advocates for medical research, said that most Americans do not get the health care they need, and 41 percent said that they or someone they know has experienced a medical error.

The survey also reported that 41 percent of the respondents believed that they or a family member received incorrect or ineffective treatment.

The Research!America survey, released Feb. 1, closely follows another survey released Jan. 11 by the Kaiser Family Foundation and the Harvard School of Public Health. This survey outlines 12 health priorities that it says should be tackled by the president and Congress in the coming year.

In this survey, respondents said they were most concerned about rising health-care costs and steep health insurance premium increases. Issues listed during the president's State of the Union address Wednesday, such as medical liability reform and stem-cell research, ranked 11 and 12 on the list of priorities, respectively.

Most people still have great faith in the United States health care system, said Susan Blue, a Fort Worth neurologist and president of the Tarrant County Medical Society. But there are some issues that need to be addressed, she said.

Medical liability reform, tax credits and other fixes mentioned in the president's State of the Union address are excellent ideas, Blue said. However, a fundamental shift in the way patients and physicians navigate the health care system is needed, as well as a re-examination of the way profits are removed from the system by insurance plans.

Insurance plans and government documentation requirements have limited the amount of time physicians can spend with their patients and patients seldom understand what their health insurance policies will and will not cover, Blue said.


Monday, February 07, 2005

Matthews, Ramthun and Scandlen featured in Business Journal article on HSAs

[Kent Hoover, "HSAs to dominate small business insurance market," San Jose Business Journal, 7 February 2005.]

Three previous Flint Hills speakers are featured in this recent article on health savings accounts appearing in business journals across the country:

Health savings accounts will become the most popular type of health insurance for small businesses in a few years, insurance experts say.

They say President Bush's proposals to expand tax breaks for HSAs would accelerate a trend already occurring as small businesses look for relief from years of double-digit premium hikes for traditional insurance.

HSAs are tax-free accounts individuals can use to pay for routine medical expenses. They must be combined with a high-deductible health insurance policy. Unused money in HSAs can be rolled over from year to year.

Employers can contribute to their employees' HSAs, and many small businesses already are replacing conventional insurance with high-deductible plans coupled with HSAs.

"We're inundated with requests on how HSAs work," says Roy Ramthun, the U.S. Department of Treasury's senior adviser for health initiatives.

Merrill Matthews, director of the Council for Affordable Health Insurance, says the president's proposals -- if passed by Congress -- would "really speed up the transition" to HSAs. But, he adds, "that's where the market wants to go" anyway.

Greg Scandlen, director of the Galen Institute's Center for Consumer Driven Health Care, agrees.

"I think the HSA market is going to grow phenomenally regardless," he says. "The impact will be in allowing lower-income workers who currently can't afford coverage to buy it."


Both Greg Scandlen's and Roy Ramthun's presentations are available online at: http://www.flinthills.org.

"Financial train wreck" can be avoided

[Dave Ranney, "State lawmakers warn of financial 'train wreck'," The Lawrence Journal-World, 6 February 2005.]

At the same time that Florida is being featured in The Wall Street Journal for its budget-saving Medicaid proposal, Kansas policymakers are predicting disaster:

By July 1, 2008 -- three fiscal years from now -- the state's KPERS, KDOT and Medicaid obligations are on track to exceed normal growth in state revenues, leaving little or no money for other increases.

"When you sit down and start looking at the numbers, it's not going to take you very long to see we're heading for a train wreck, regardless of what happens on school finance," said Sen. Dwayne Umbarger, R-Thayer and chairman of the Senate budget committee.

"We can't go on like this," he said. "Something has to happen; either a tax increase, or dipping into the ending balance, or expanded gaming -- something."


Or reform, which brings us to the key phrase this session: "Medicaid is eating us alive."

"Medicaid is going to eat us alive if it keeps going like it is, and if the economy goes stagnant on us, we're sunk," [said Rep. Jerry Henry, D-Atchison].

"The real meltdown is going to come with Medicaid," said House Speaker Doug Mays, R-Topeka. "Medicaid is just eating us alive, and it's only going to get worse."


[Matthew Hisrich, Staying the Course: Medicaid Reform in Kansas, The Flint Hills Center for Public Policy, February 2004.
Stephen A. Moses, "Project Proposal: Controlling Medicaid Long-Term Care Costs," Submitted to Members of the Kansas State Legislature.]


Florida Medicaid overhaul highlighted in Wall Street Journal


[Editorial, "Medicaid Rx," The Wall Street Journal, 2 February 2005.]

The Wall Street Journal showed an interest in changes to Medicaid at the state level with this recent editorial praising Florida:

If it succeeds, the Sunshine State's vision could serve as a template for reforms in other states. And in the best case, it could lead to a remaking of Medicaid in the same way that reforms in the early 1990s in Wisconsin and elsewhere paved the way for an historic and hugely successful national welfare reform.

From the consumer's perspective, Medicaid is a nearly incomprehensible maze -- which explains in part why so many participants head for expensive hospital emergency rooms when they need routine treatment. The defining feature of the Florida proposal is that it would transform the system into one centered on consumer choice, starting with letting participants decide how to spend the money allocated on their behalf.

Each participant would be assigned a premium with which to purchase coverage for basic and catastrophic care. Options would include HMOs, insurers and community-based networks of physicians and hospitals. Premiums would be risk adjusted, which is to say that someone with AIDS, severe mental illness or other serious conditions would receive a higher premium than a generally healthy person. By introducing competition, the aim is to encourage diversification of products and services.

A third feature of the Florida plan is even more innovative. Patients who follow the medical plan laid out for them by their doctors -- take their medication, have their children vaccinated, stop smoking -- will earn extra money that will be deposited for them in flexible-spending accounts.

They will be able to use that money for medical services not covered under their basic plan (say, eyeglasses or dental care) or to purchase more expensive coverage. Participants who eventually earn enough to go off Medicaid get to keep the money that's accrued in their personal accounts to use for health expenses -- a feature that should help ease low earners' transition to the private system.

This emphasis on personal responsibility will encourage healthy outcomes by providing incentives for patients to comply with their doctor's orders. And since a huge share of Medicaid budgets go to managing chronic conditions that often can be ameliorated by personal behavior, the potential to save money is enormous.

Without Medicaid reform, governors across the country will be unable to balance their budgets and coverage for the poor will inevitably get worse. By allowing states like Florida to test new ideas, Republicans in Washington can both honor their federalist principles and do better by the poor.


[Matthew Hisrich, "Kansas Needs Bold Medicaid Reform," The Wichita Eagle, 21 January 2004.]

Friday, February 04, 2005

Governor hopes legislature will pass her health care package sight unseen

[Scott Rothschild, "GOP says Sebelius balking at detailing health care plan," The Lawrence Journal-World, 3 February 2005.]

Pass now, ask questions later seems to be the approach Governor Sebelius is taking to her Kansas Health program. Taxpayers might prefer a little more explanation before anyone makes a $50 million decision:

Republican budget leaders Wednesday threatened to reject a major part of Gov. Kathleen Sebelius' health care reform package because they said she has failed to answer key questions about the proposal.

"The details on what makes this work are missing," said House Appropriations Committee Chairman Melvin Neufeld, R-Ingalls.

Last month, Sebelius, a Democrat, unveiled a $50 million plan to expand health care coverage to thousands of uninsured Kansans.

But on Wednesday, Neufeld and other Republicans said they have been trying to find out details about the proposal but have been unable to get the attention of Sebelius or her top health care adviser, Bob Day.

Sebelius and Day were in Washington, D.C., on Wednesday where Sebelius was scheduled to talk about her health care proposals as the keynote speaker at the 2005 National Health Policy Conference.

Republicans also complained that they face a constitutional deadline of Feb. 11 to either reject the executive order or let it become law.

Some of the questions they posed concerned how the health care savings would be realized, the powers and authority of the chief of the new agency, and whether new employees hired by the agency would be classified or unclassified workers.

Gary Daniels, who has been acting secretary of SRS for the past three months, appeared before the committee, but said he did not know the answers to many of the questions posed by the committee.

Democrats sought to defend Sebelius, saying that seldom are gubernatorial executive orders given much scrutiny, and that many parts of the plan have been discussed for months.

"I believe this is the right step," said Rep. Bill Feuerborn, D-Garnett.


Kansas chamber: "Health care is our No. 1 issue"

[Erin Adamson, "Health care tops concerns," The Topeka Capital-Journal, 2 February 2005.]

Business owners in Kansas have one thing on their mind: rising health care costs:

The Kansas Chamber of Commerce says providing affordable health care for employees is the top concern of its small-business members, a spokeswoman said Tuesday.

A chamber poll of 300 small businesses found that 50 percent didn't provide health insurance for employees, said Marlee Carpenter, vice president of governmental affairs.


Kansas legislators should work to promote HSAs, reduce health insurance mandates and offer tax credits for coverage to the uninsured. Kansas business owners should be spending their time worrying about other things.

Drug reimportation debate

The discussion of drug reimportation from a free-market perspective is still lively.
Division of Labour recently posted this interesting exchange between economists Robert Lawson and Roger Pilon:

Roger Pilon of the Cato Institute, whose views I respect most highly, wrote me to suggest I rethink the drug reimportation issue. The guts of the exchange are pasted below. I have to admit he's got me on first principles. But I'm not sure I can live up to my first principles in this instance.

Roger wrote:
I was sorry to come across your OCPA "Perspective" on drug reimportation, which takes a quite different view [from mine]. Here is the link to testimony I gave in the Senate last week, which has links to an October WSJ piece of mine on the subject and to a much larger study Cato published last August.

I wrote:
Thanks, Roger. I really thought I was being broadly consistent in terms of the overall analysis, if not the policy result, with what I had read of yours on this issue in the past. I favorably cited your work on this on my blog once in fact. I will read your stuff carefully and reconsider my position to be sure.

Mainly, I wanted to argue that drug companies are right to want to stop drug reimportation because it prevents them from practicing the price discrimination they want to practice. Allowing for enforceable no-resale clauses would be my first best solution. At least this is what I wanted to say.

Roger wrote:
"Broadly," yes -- so broad, in fact, as to leave the impression that conservatives should be on the drug companies' side of the reimportation debate, when in truth the issue is far more complex than that. I too support no-resale contracts, but not the enforcement mechanism of a statutory ban. And that's the "subsidy" that leads to the political problem the companies now have.


[Matthew Hisrich, "Sebelius Is Practicing Black-Market Politics," The Wichita Eagle, 10 December 2004.]



Medicaid battle brewing


[Alexandra Marks, "Debate grows over who owns Medicaid costs," The Christian Science Monitor, 4 February 2005.]


State and the federal officials are beginning to recognize that time is running out to fix Medicaid. Everyone knew that shifting existing funds around and relying on accounting gimmicks as a way to deal with decreasing returns and increasing costs could only last for so long, but somehow other "priorities" always got in the way of reform.

As President Bush prepares to present his budget next Monday, the nation's governors have put him on notice: Don't try to balance it on our backs.

Their top concern is Medicaid - the $300 billion healthcare program that provides coverage for the disabled, 70 percent of the elderly in nursing homes, and low-income people.

Its costs are spiraling upward, draining state coffers as well as the federal treasury. The primary reason is that as more people lose private insurance, they end up in the Medicaid safety net. Over the past four years, the Medicaid rolls have jumped more than 30 percent. Combine that with the growing number of elderly in nursing homes, and you get a runaway fiscal train that both the states and federal governments agree has to be stopped. But there's a major fight brewing over how to do it.

On Monday, President Bush is expected to propose limiting the federal government's share of the Medicaid bill - perhaps cutting as much as $50 billion over five years. Federal spending on the program is now $180 billion a year. He'd do it by capping the federal allotment in exchange for giving states more flexibility in running their programs.


While the federal government can offer some assistance in terms of allowing for more flexibility in program design, the real onus for restructuring Medicaid falls on the states. Will Ohio follow the lead of states such as Florida, South Carolina and New Hampshire and settle the matter before it grows worse?

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

Tuesday, February 01, 2005

Scandlen spreads the good word about CDHC to multiple audiences

The Galen Institute's Greg Scandlen had yet another busy schedule on his second visit to Kansas in the last six months. On January 26th, he testified before two Senate hearings in Topeka, spoke before a room full of legislators at a Flint Hills luncheon, and addressed a packed meeting of The Medical Society of Johnson and Wyandotte Counties in Kansas City. On all occasions, interest in Health Savings Accounts and Consumer-Driven Health Care was very high.

Scandlen's powerpoint presentation before The Medical Society is now available online at The Flint Hills website,
www.flinthills.org.

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

Free trade for medicine

[John C. Goodman, "Free trade tack for drug imports," The Washington Times, 31 January 2005.]

NCPA President John Goodman counsels a strong negotiating position for the U.S. in regard to prescription drug trade in this recent column:

Under free trade, citizens of different countries would tend to pay the same price for the same drugs. Today, these prices differ vastly, often because of government policies designed to protect special interests. The consequences for consumers can be surprising. Though Americans frequently pay higher prices for brand-name drugs, they often pay much lower prices for generics and drugs sold over-the-counter.

In an ideal world, government would get out of the way and allow markets to work. Short of that, we need an aggressive trade policy designed to level the playing field.

For starters, we should insist that other countries respect patent rights, including the right of the patent holder to refuse to sell. The economic purpose of a patent, after all, is to create a monopoly right for a certain number of years so inventors can recoup research and development costs. For politicians in other countries, it is tempting to seize the benefits of American R&D without contributing to the cost.

Second, we need to allow contract settlement of resale issues. Let the pharmaceutical companies negotiate the terms of sale and the right to resell in the market place. Aside from safety considerations, government's proper role is to enforce contracts, not dictate their contents.

Finally, other countries need to open their markets to American producers of generic and OTC drugs. We should not allow regulation to function as protectionism under another name.


[Matthew Hisrich, "Sebelius Is Practicing Black-Market Politics," The Wichita Eagle, 10 December 2004.]


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