Two Competing Visions for Health Care

1. Miracle Cure:How to Solve America's Health Care Crisis and Why Canada Isn't the AnswerSally C. PipesPresident and Chief Executive OfficerPacific Research Institute

2. Two Competing Visions for Health Care (1) PRI’s Vision:Empowering Consumers: Consumers Must Be in the Driver’s Seat • The Other Vision: Increasing the Role of the Federal Government

3. (1) PRI’s Vision:Empowering Consumers Health Savings Accounts (HSAs) • Health Savings Accounts put the insurance back into health insurance, put the patient back in charge of health care, and will reduce the costs of health care • 77% of HSA users are families with children • One-half have incomes of $50,000 a year or less • One in three HSAs is purchased by a person or family that was formerly uninsured

4. (1) PRI’s Vision:Empowering Consumers HRAs Prove Big Win for Whole Foods; Intel and Varian Looking at HSAs Health Savings Accounts (HSAs) • Whole Foods CEO John Mackey switched the company to an HRA/MSA-style health plan in 2003 after claims exceeded premiums collected by $7 million • Offers high deductible insurance to its employees — $500 for prescriptions and $1,000 for standard medical care • Company pays 100% of premiums for full-time employees (87% of employees) • Deposits from $300 to $1,800 each year in a savings account

5. (1) PRI’s Vision:Empowering Consumers HRAs Prove Big Win for Whole Foods Health Savings Accounts (HSAs) • Employee coverage has increased from 65 percent to 95 percent, as employees no longer face a premium • Medical claims dropped 13 percent while hospital admissions plummeted by 22 percent • Company's costs held constant in a year when similar employers with traditional plans faced increases of 14 percent • Only one in 10 employees drained their savings account; this meant that $14 million — $560 per account — rolled over for use in 2004 or future years1 Results [1] Ron Lieber, “New Way to Curb Medical Costs: Make Employees Feel the Sting,” The Wall Street Journal, June 23, 2004.

6. (1) PRI’s Vision:Empowering Consumers Association Health Plans Tax incentives for low-income Americans Health Care premiums for catastrophic insurance to be tax deductible Out of pocket health care spending should be tax deductible Competition in health insurance, across state lines Move away from employment-based insurance Eliminate tax preference given to employers at end of WWII Medicare/Medicaid reform

7. (1) PRI’s Vision:Empowering Consumers Stopping Lawsuit Abuse is a Critical Ingredient in Health Care Reform Litigation Reform • Since 1975, medical malpractice costs have increased by 11.9 percent a year, compounded2 • In 2002, malpractice costs totaled $25 billion, or $250 per U.S. household; that's more than half what the average household spent on prescription drugs3 • These costs are passed on to consumers — by cost increases or eliminating care; in some cases, hospitals have stopped delivering babies Problems [2] U.S. Tort Costs: 2003 Updated, Trends and Findings on the Costs of the US Tort System, Tillinghast-Towers Perrin, p. 16. [3] Ibid.

8. (1) PRI’s Vision:Empowering Consumers Litigation Reform (cont.) • Cap non-economic awards • Inform juries if patients have access to other sources of money for injuries • Pay judgments in installments • Use a system of binding arbitration • Place reasonable limits on attorneys' fees Solutions These changes could reduce total health care costs by up to nine percent

9. (1) PRI’s Vision:The 45 Million Uninsured • 14 million could sign up for Medicaid or SCHIP but have not • Approximately 16 percent earn more than $75,000/year and 30 percent have an income greater than $50,000 • 8.2 million Americans are chronically without health insurance for 2 years or more4 Every American could be insured tomorrow if the money devoted to regulating health insurance was spent instead on health insurance5 [4] All the above statistics: Blue Cross Blue Shield Association, “The Uninsured in America,” May 2003, http://bcbshealthissues.com/issues/uninsured.[5] Christopher J. Conover, “Health Care Costs and the Uninsured,” Testimony 04-02, May 2004, Joint Center, AEI-Brookings Joint Center for Regulatory Studies.

10. (1) PRI’s Vision:Reasons for Cost Increases • First dollar coverage • Lack of personal responsibility • Expensive emergency room use by uninsured • Third-party payer system "Nobody spends somebody else's money as wisely or as frugally as he spends his own.“6 — Milton Friedman [6] Milton Friedman, “How to Cure Health Care” Hoover Digest, 2001 No. 3

11. (1) PRI’s Vision:Drug Importation Every $1 of increased spending on newer pharmaceuticals reduces other health care expenditures by an average of $7.17.7 — Professor Frank Lichtenberg, Columbia University Drug spending is neither a problem for the health care system as a whole nor the average American household [7] Frank R. Lichtenberg, “Benefits and Costs of Newer Drugs: An Update,” National Bureau of Economic Research, Working Paper 8996, June 2002.

12. (1) PRI’s Vision:Drug Importation (cont.) On average, American households spend $487 a year on prescription drugs, less than the amount they spend on fees and admission to entertainment events • Importing price controlled-drugs is a political gimmick, not a solution • Canada’s drug market is $14 billion; the U.S. is $160 billion • Recent decision by Canadian International Pharmacy Association • Approving drug importation will affect research and development • FDA reform essential Source: U.S. Department of Labor, Bureau of Labor Statistics, “Consumer Expenditure Survey, 2001,” Table 3.

13. (1) PRI’s Vision:Drug Importation (cont.) Pharmaceutical Industry Programs • Administrative fee of $12 purchases a month's supply of any Eli Lilly and Co. product for low-income seniors or disabled Americans without prescription drug coverage • Novartis and Pfizer offer similar programs • U Share Prescription Drug Discount Card ("U Share Card"), which became effective June 1, 2004

14. (2) The Other Vision:Increasing the Role of the Federal Government Americans Must Not Succumb to the Siren Song of Government-Run Health Care, as the Canadian Experience Shows • Everyone is enrolled in Medicare – no consumer choice • Bureaucrats control the hospital system through strict budgets • Care is rationed • Patients wait at considerable cost in pain and suffering • Technology is limited • Innovation is discouraged "If you think health care is expensive now, wait until you see what it costs when it's free." — P.J. O'Rourke

15. (2) The Other Vision:Increasing the Role of the Federal Government Canada Has the Best Health Care the 1970s Can Provide • A severe shortage of diagnostic machines • Ranks 16th among the 25 OECD nations in the availability of CT scanners and 20th in MRI machines8 • Between 1993 and 2004, the median waiting time from referral by a general practitioner to non-urgent treatment by a specialist increased by more than 90 percent, from 9.3 weeks to 17 weeks9 • If President Clinton had been a Canadian citizen he would have waited nearly 6 weeks, instead of four days, for his urgent bypass surgery [8] OECD Health Data 2003. [9] Nadeem Esmail and Michael Walker, “Waiting Your Turn: Hospital Waiting Lists in Canada (14th Edition) Fraser Institute, October 2003.

16. Solutions: • Putting consumers in the driver's seat • Practical solutions to specific problems If we do not succeed in empowering consumers, single-payer health care will come to America