The Quest for
By Sally C. Pipes
President and CEO of Pacific Research Institute
The National Congress on the Un and Under Insured
December 11, 2007
• ―Understanding Health Care is similar to unraveling
an onion with many tearful moments.‖
• Health care reform--#1 Domestic policy issue in
states and 2008 presidential election.
• Two Visions: One focuses on government,
mandates, and taxes. The other focuses on
markets, free will, and innovation.
Two Competing Visions for Health Care
1) PRI’s Vision:
Consumer-Driven Health Care — Enabling consumers
and doctors to make health care decisions that are right
for them will improve the effectiveness, affordability, and
value of our health care spending.
Americans need universal choice in health care.
Individual choice and free markets will solve problems of
the U.S. health care system. HSAs will help unleash
2) The Other Vision: Call in Government
¯ Today, the government vision is in ascendancy,
advocated by both its traditional proponents on the
center-left and by some Republicans who want to force
everyone to purchase health insurance or face fines.
¯ Senator Clinton’s ―American Health Choices Plan‖
estimated to cost $110 billion relies on mandates, taxes,
subsidies, controls on insurance companies, and
expanding medicaid and S-CHIP.
¯ Senator Clinton: ―When I’m President, we will have a
universal coverage system in our country so that every
American has the health care they deserve.‖
Government already accounts for 45% of health care
economy. Politicians want the other 55 %.
• Universal Coverage — Romney Care, Arnold Care,
Paul Krugman, Rellman, Woolhandler, Physicians for
National Health Insurance.
Universal Insurance Coverage
• United States is much criticized for being the only industrialized
country that doesn’t offer taxpayer-funded universal health
• High numbers of uninsured around the country
– 47 million nationwide (revised by Census Bureau); 17 million Y >
$50,000; 10 million > $75,000; 14 million eligible for
Medicaid/SCHIP; 8 million chronically uninsured.
– 85% working; 2/3 working full-time; 1/3 young. Most uninsured
because between jobs or young and do not think they need HI
and it is a bad investment
• This is seen as a moral failing.
Universal Coverage or Adequate Access
• Mandated insurance coverage is not the same as access to
health care when one needs it. Federal law.
– People without insurance secure care in the United States.
– In the British medical journal Lancet Oncology, a study on
cancer survival rates after 5 years show Britain 16th out of 23
countries for females and 15th in males. The U.S. is at the top.
Outcomes, not life expectancy are key.
– Michael Moore in his movie ―Sicko‖ where I have a cameo
appearance, points to the wonderful health care systems in
Canada, UK, France, and Cuba, which are all ―free.‖
– People with government coverage wait and wait in socialist
systems. – Berlusconi, Canada. OR & CA turned down initiatives
and Switzerland just voted against single payer. 3.2 million out of
32 mill. Canadians waiting to get a primary care doc. 827,429 on
waiting list for procedures. 7
– Rituxan and my uncle; twins; quadruplets in Calgary; brain tumor
patients go to the U.S. and sue Ontario government for unjustly
long wait times.
– Belinda Stronach, former Can. Tory MP who switched to the
Liberal party in 05, opposed a two-tiered hc system for everyone
but herself. When diagnosed with breast cancer in June 2007, on
the advice of her doctor in Canada, she flew to California for her
surgery and paid for it out of her own wallet.
– In Canada—13th out of 22 OECD countries in MRI machines and
17th out of 21 in CT scanners per 000.
– Average wait in 2007 from seeing a primary care doctor to getting
treatment by a specialist--18.3 weeks.
– Canada Supreme Court decision June 2005--Ban on private
health insurance and health care is illegal--Chief Justice Beverly
McLachlin ―access to a waiting list is not access to health care‖
―Idea of a single payer system without a waiting list is an
oxymoron.‖ – Madame Justice Marie Deschamps
“Canada has the very best health care that the 1970s can provide”
– Shortest CT Scan wait 1 month; longest 2 months
– MRI wait between 7.8 and 20 weeks
– Longest waits--neurosurgery and orthopedics
– Shortest--medical oncology 4.2 weeks; radiation
treatment 5.7 weeks
• Central tenant of Universal Coverage: Through individual
and employer mandates, government could more
efficiently manage the insurance system, cut out profits,
and insure everyone.
• Apply this statement to any other area of our economy,
and it becomes absurd.
• Is the Post Office more efficient than Federal Express or
UPS because it doesn’t have to earn a profit?
• Why not abolish competition in markets that provide
other necessities: HUD could build all of our houses;
DOT could produce our cars; the Department of
Agriculture could provide us with food, from the farm to
the store shelf. 10
• A big part of the push for individual mandates rests
on an assertion that the uninsured, particularly the
young, high earning, voluntarily uninsured, push
costs onto the private insurance system by using
free care and expensive emergency rooms. This
sounds good, and is used by politicians looking for
justification for new taxes and mandates. Yet it fails
• Dr. Daniel Kessler of Stanford just showed in a
study that public programs (Medicaid and Medicare)
add 10% to premiums of private payers; the
uninsured only 1.4%
• Insurance should be there for catastrophes as with
auto and home insurance and should not be tied to
• We don’t use our car insurance to replace our tires
or our house insurance to replace a broken window.
The Quest for Universal Coverage:
It started in Massachusetts in January 2006
Mass Miracle or Mess
• Massachusetts passed Romney Care into law, April 2006.
The Details: To solve the problem of the MA uninsured
• Plan built on employer mandate and individual mandate and
government created Commonwealth Connector, which
allows for pre-tax purchase of individual health plans.
– Employers not providing health insurance will be taxed at
$295 per head.
– Beginning in July 2007, residents must purchase a state-
approved plan or be fined.
• One year and a half later, and the Massachusetts plan is
moving along, although a bit modified in both its costs and
– Of the 115,418 who have enrolled, 90,000 have signed
up for free plans. Insurance companies now asking for
more $ than state willing to pay. Gov. Patrick wants to
limit enrollment in the ―free plan.‖ Threat of budget
– Those who have signed up for subsidized plans are
older and sicker than the general population.
– Premiums can be as high as 9.6 percent of a person’s
income, this is before deductibles and co-pays.
– Non-subsidized plans (Commonwealth Choice) started
May 1 and were mandatory by July 1. As of Sept. 1,
only 7,164 have signed up. $219 penalty does not kick
in til Dec. 1.
– Commonwealth Connector Authority bowed to
pressure and reduced monthly premiums on
subsidized but not entirely free plans. Will increase
program costs by $13 million.
– Connector authority decided more than 20 percent of
uninsured will not have to purchase insurance, and will
therefore still rely on free pool subsidies.
– The new bureaucracy has indeed dictated insurance
design, meaning that 250,000 people who have
insurance will now have to purchase other policies or
face fines. 15
• It’s not a question of if it will achieve universal
coverage. It won’t. Its only a question of how much
more it will cost taxpayers and residents of
Massachusetts once it’s fully in place.
• The same results will happen under any universal
coverage plan be it Hillary’s, Edwards’,
• And, all of these plans based on mandates, taxes,
insurance company controls, and expansion of
Medicaid and S-CHIP will ultimately take us down the
path to ―Socialized Medicine.‖
• In California, Gov. Schwarzenegger on January 8, 2007,
proposed a $12 billion expansion of care to provide
universal coverage to 6.5 million uninsured –He called it a
―Shared Responsibility‖ program.
– Individual mandate, employer mandate, guaranteed issue,
higher Medicaid reimbursement rates from the feds, high risk
pool for the working poor, tax on doctors and hospitals, and
expand Medi-Cal & SCHIP
Update on the Governor’s plan today?
– No Republican had sponsored a bill based on his plan.
– The Governor vetoed AB-8, the Nunez Bill based on a 7.5%
employer mandate and no individual mandate.
– Introduced as part of a special session the Health Care
Security and Cost Reduction Act—October 9/07 to enhance
Jan. 07 proposal
– Based on an individual mandate, guaranteed issue, and
– Individual mandate: all Californians required to have insurance
and substantial enough to protect families against catastrophic
– Employer mandate: Employers not offering coverage will
contribute based upon a sliding scale from 0 to 4% of payroll
– Doctors’ responsibility: removed 2% tax on gross
revenue but doctors will have new responsibilities and
incentives for the newly insured
– Guaranteed issue: all Californians will be able to buy
insurance regardless of medical history or age
– Affordability: Establishes new state subsidized
purchasing pool & reduces the amount that working
poor will have to pay for coverage in the pool
• 100-150% of poverty line—no contribution
• Sliding scale up to 250% of poverty—premium
limited to 5% of income
• Medi-Cal and Healthy families to be expanded to
provide low cost, no cost coverage to children--
$52,000 for a family of 3, regardless of immigration
Where is the Governor’s plan today?
– No financing attached; Financing mechanism based on
leasing the lottery to be put to Californians in a ballot
initiative in 2008.
– Coalition of California labor and consumer groups trailing
Gov. around the state to challenge and rebut his plan--
Spending will Explode:
– People with health insurance consume more than those
without it. Forcing people to acquire health insurance will
increase total health care consumption.
– Bureaucracy will grow and taxes will increase.
Practical Solutions from PRI
• End employer-based health insurance--a pillar of
Giuliani’s health plan; first dollar coverage; WW II gift,
contributes to uninsured problem.
• President’s tax equalization plan—level the playing
• Allow the purchase of health care across the state
• Reduce state regulations and mandates on insurance
plans. 1901 Nationwide in 2007; up from 1843 in 2006.
• Eliminate “guaranteed issue” and “community rating.”
• Expand Tax Breaks for Health Savings Accounts.
These provide for tax-free accumulation and real
protection against large losses, California
Governor supports this.
• Get people affordable care at convenient locations:
– Mini-clinics at WalMart, Target, Walk-In Centers
o People with Medicaid use emergency rooms even
more than the uninsured. There is price ―Transparency‖.
o Can reduce costs by uninsured not using emergency
o Reduce regulations: Doctor-Nurse Practitioner ratio.
CA Governor supports this.
• Med-Mal Reform
• Vouchers for the working poor so they can
purchase insurance from a state pool.
• High risk pools for the working poor.
• Free market solutions will ensure choice, quality,
and affordable health care for all Americans.
• The excitement over universal coverage as a
solution to the uninsured problem will not solve
our problems and will lead to a single-payer
system down the road.
“If you think health care is expensive, wait until it is free.”
• Special Report: The Uninsured: A Hidden Burden on Texas Employers and
Communities, April 2005, Carole Keeton Strayhorn, Texas Comptroller
• ―Access to Health Insurance for the Uninsured,‖ Texas Health Institute, December 1,
• ―Impact of Premium Changes in the Oregon Health Plan,‖ Office for Oregon Health
Policy and Research, February 2004.
• Jonathan Oberlander, ―Health Reform Interrupted: The Unraveling of the Oregon Health
Plan,‖ Health Affairs, December 19, 2006
• Massachusetts premium and enrollment data:
• Massachusetts-Style Coverage Expansion: What would it cost in California? California
HealthCare Foundation, April 2006.
• Peter J. Cunningham, ―What Accounts for Differences in the Use of
Hospital Emergency Departments Across U.S. Communities?,‖
Health Affairs, July 18, 2006.