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Issue #6, January 26, 2006

Will the State of the Union Take a Page from Healthy Competition?

According to The Wall Street Journal, Bush administration officials say that during the State of the Union address on January 31 the president will ask Congress to expand health savings accounts (HSAs). HSAs are tax-free savings accounts that individuals may save and use to pay for out-of-pocket medical expenses. The officials say that President Bush will propose (1) increasing the amounts that HSA holders may deposit in their accounts tax-free and (2) allowing HSA holders to purchase health insurance with their HSA tax-free dollars.

Cato scholars first proposed these reforms as part of the "large HSAs" proposal contained in Healthy Competition: What's Holding Back Health Care and How to Free It, a book by Michael F. Cannon and Michael D. Tanner. The authors further propose allowing individuals to combine an HSA with any type of health insurance or to open an HSA as a stand-alone account for their health care needs.

A State of the Union Health Policy Wish List

Expect to see President Bush make health care reform the centerpiece of his State of the Union address. Since the Bush administration's health care record has been mixed, in a Washington Times op-ed, Michael F. Cannon offers a "health policy wish list" designed to "help the administration straighten up and fly right." Cannon argues that the president should (1) propose the creation of "large HSAs," (2) push for interstate commerce in health insurance, (3) avoid further expansions of federal power over health care, and (4) reform Medicare.

Heed the Diagnosis, Beware the Prescription

In an op-ed on National Review Online, Cannon comments on recommendations made by economists John Cogan, Glenn Hubbard, and Daniel Kessler in their book Healthy, Wealthy & Wise. Cannon notes that four of the authors' five proposals would increase federal power over the health care sector. The fifth proposal—a handful of health care tax reforms—would allow HSAs to be combined with any type of insurance, but it would also increase taxes on those who now fully fund their HSAs.

Medicare Rx: Stay Tuned for More Spending

The Medicare prescription drug program took effect January 1 to much criticism. The principal complaint to date is that implementation interrupted coverage for many low-income seniors whose drugs were previously purchased by Medicaid. Many of those "dual eligibles" were automatically enrolled in Medicare prescription drug plans. The transition has been less than seamless. Some seniors have been charged for drugs that, under the law, should have been covered. Others learned that the drugs they use are not covered by their newly assigned drug plan. Many seniors have been turned away from pharmacies without their medications.

Every real or perceived failing of the Medicare drug program will lead to calls for more government spending. A number of states have committed taxpayer dollars to ensure that dual eligibles continue to receive the drugs they need. Legislation has already been introduced that would have the federal government reimburse the states and seniors for costs they were not meant to bear. Other proposed legislation would extend the open enrollment period for Medicare drug plans, which could also increase federal outlays. Expect additional proposals to increase federal spending on this program when drug plans begin to drop particular drugs and pharmacies, or drop out entirely.

Investigating Organ Transplant Centers

Last month Sen. Chuck Grassley (R-IA) demanded an in-depth investigation of problems at organ transplant centers across the country after UCI Medical Center shut down its liver transplant program. UCI turned down an unusually high number of livers in the last five years, reports the Los Angeles Times, because it could not perform enough liver transplants to maintain "proficiency," as federal standards require.

Lack of technical expertise and innovation is just one of the consequences of the artificial shortage of transplantable organs that was created in 1984 when Congress outlawed payments to organ providers. As a result, patients waiting for organs outnumbered donors by six to one in 2004, and more than 6,200 patients died while waiting for transplants that year.

In Healthy Competition, Michael Cannon and Mike Tanner argue that those unnecessary deaths will persist until Congress relaxes or repeals federal restrictions on payments to organ providers.

Upcoming Cato Institute Speaking Engagements & Media Appearances

Michael Cannon to Discuss Medicare and Health Care Reform TONIGHT on The Jim Bohannon Radio Show

WTNT 570 AM
January 26, 10:00 p.m. EST
Stream the segment live here.

Michael Cannon to Speak at the National Pay for Performance Summit

Panel: "The National Pay for Performance Debate"
February 7, 2006, 12:45 p.m. PST
Copanelists: Suzanne Delbanco (CEO, Leapfrog Group); Dr. R. Adams Dudley (Associate Professor, UCSF); Dr. Jack Lewin (CEO, California Medical Association); Dr. Robert Margolis (CEO, HealthCare Partners); Dr. John Nelson (Past President, AMA); Dr. Samuel Nussbaum (CEO, WellPoint, Inc.); John Rother (Director of Policy and Strategy, AARP); and Peter V. Lee (President, Pacific Business Group on Health).

Recent Cato Institute Events & Media Appearances

"Heed the Diagnosis, Beware the Prescription," Michael F. Cannon, National Review Online, January 26, 2006.

"A Blueprint for Health-Care Freedom," Michael F. Cannon, Washington Times, January 25, 2006.

Michael Cannon discussed HSAs and health care reform on "Upfront with Vicki McKenna" (1310 WIBA-AM, Madison, WI), January 24, 2006.

Michael Cannon addressed the Health & Human Capital Management Congress, January 24, 2006. Panel: "HSAs and the Impact on Healthcare Quality and Delivery." Copanelists: John C. Goodman (President, National Center for Policy Analysis) and E. Neil Trautwein (Assistant VP, National Association of Manufacturers).

Michael Cannon spoke at the Texas Public Policy Foundation's Fourth Annual Policy Orientation, January 9, 2006. To download audio from the panels ("Prescription for Medicaid: Principles and Practical Solutions" and "What's Wrong with Health Care?"), click here.

Michael Cannon addressed the Denton County Medical Society, January 10, 2006.

Michael Cannon discusses state health care legislation on CNBC, January 5, 2006 (Real Media).

"Does Obesity Justify Big Government?" Radley Balko, The Freeman, December 1, 2005.

Michael Cannon discussed universal coverage on Regional News Network (NYC), November 30, 2005.

Healthy Competition: What’s Holding Back Health Care and How to Free It, Cato Book Forum, November 29, 2005.

Healthy Competition is a periodic newsletter produced by the Cato Institute. It features news and commentary on current health policy issues from a free-market perspective. If you wish to subscribe to this free newsletter, update your address, or be removed from our list, please click here and follow the instructions. Send feedback to healthycompetition@cato.org.