Topics Today:

1. Here's a letter from the head of the WA State Chamber of Commerce on the topic of Washington State Healthcare Insurance Reform as being debated around the country.

2. Articles from the opinion page from the Wall Street Journal.

A. The Truth About Health Insurance Only nine states have the costly rules that Obama wants to impose nationwide.

B. The Whole Foods Alternative to ObamaCare Eight things we can do to improve health care without adding to the deficit.

MEMORANDUM

To: Association of Washington Business Members

From: Don C. Brunell, President

Date: August 12, 2009

Subject: Health Care Reform

OVERVIEW

Health care is a precedent-setting issue with generational impacts. We believe it is time for health-care reform, but we also believe it must be done right. The next few weeks will be critical to the national debate over health care, and I encourage you to use this time to get involved and share your concerns with Washington state’s congressional delegation.

With Congress home for the month of August, AWB members have a prime opportunity to tell Senators Murray and Cantwell, along with our nine House members, how the proposals would affect employers and the thousands of families they represent. This memo is designed to help you provide constructive feedback to your elected officials.

It’s useful to begin with what employers in Washington state do support when it comes to health-care reform. AWB, Washington state’s chamber of commerce, supports:

• Innovative solutions that expand access to affordable, private coverage include consumer-driven health-care plans like Health Savings Accounts (HSAs), small-business pooling, full tax deductibility of health plan premiums for individuals and small businesses, and eliminate restrictions on where insurers can offer coverage.

• Empowering consumers by implementing new technologies that give them timely, useful information about the cost and quality of their care, helping them make decisions that encourage competition and reduce costs.

• Administrative efficiencies through electronic record-keeping, secure sharing of medical records so providers can have instant access to a patient’s medical history to avoid treating with the wrong medications, and cost savings through the elimination of duplicative medical forms.

• Incentives emphasizing improved health that rewards providers based on outcomes and quality of care and consumers based on prevention and wellness.

• Eliminating fraud and waste in existing government health plans like Medicare, where fraud and waste has cost taxpayers millions of dollars.

• Addressing medical malpractice. Nearly 10 percent of health-care costs in the U.S. can be traced to defensive medicine, malpractice insurance and frivolous lawsuits. People who have been injured because of medical mistakes should receive just compensation, but there needs to be a better balance in our legal system.

• Creating a marketplace that encourages competition and a choice of insurers to help foster a competitive environment and keep costs in check.

We firmly believe that improvements in access and affordability can and must be made without stifling the innovations that have made America’s health-care system the finest in the world. It is also critical that current coverage for millions of Americans is not disrupted. That is why AWB opposes drastic changes under consideration in Congress. The federal government’s own non-partisan Congressional Budget Office warns that these proposals will actually raise health-care costs, not lower them while adding to the federal deficit. Specific components in the proposals that we cannot support include:

• Employer and insurance mandates, which would eliminate an employer’s ability to offer flexible, cost-effective options such as ERISA plans and HSAs. Instead, government regulators would determine what benefits must be included and how much employers must pay for them, driving up costs and forcing employers with tight margins to either reduce their workforce, cut benefits or compensation, or drop coverage altogether.

• A costly new government-run health plan with subsidized premium rates that would further undermine private coverage, moving at least 83 million Americans from private to public insurance in a major step toward a single-payer system. As with Medicare, such a plan would also pay doctors and hospitals only a percentage of what treatments actually cost, leading them to shift costs to patients with private insurance and their employers.

• New taxes on employers and employees to cover the cost of the new government plan and expansion of existing public plans, estimated at up to $2.4 trillion. This includes elimination or reduction of the tax deduction for benefits provided by employers, payroll tax penalties on employers that do not provide health benefits, a tax on private plans that offer better benefits than the government plan, or an income tax hike on individuals and small businesses.

AWB is one of 17 state chambers of commerce involved in Employers for Quality Health Care, a coalition of thousands of family-owned businesses and Fortune 500 corporations committed to providing quality health-care coverage. Employers like AWB continue to offer health benefits in the face of record cost increases because we know that access to care is vital to the health of our employees and our communities.

Health care is a complex issue, and AWB is working hard to find workable, cost-effective solutions. Please visit our Web site at www.awb.org for more information about the legislation or contact me directly at 800.521.9325 with questions or comments.

We welcome your input.

Thank you and please stay involved.

Don Brunell

Association of Washington Business

President

The Truth About Health Insurance

Only nine states have the costly rules that Obama wants to impose nationwide.

Sounds like a good time to explain a few facts about the modern insurance market. Start with the reality that nine out of 10 people under 65 are covered by their employers, most of which cover all employees and charge everyone the same rate. President Obama's horror stories are about the individual insurance market, where some 15 million people buy coverage outside of the workplace.

Mr. Obama does have a point about insurance security. If you develop an expensive condition such as cancer or heart disease, and then get fired or divorced or your employer goes out of business—then individual insurance is going to be very expensive if it's available. But what the President and Democrats won't tell you is that these problems are the result mainly of government intervention.

Because the tax code subsidizes private insurance only when it is sponsored by an employer, the individual market is relatively small and its turnover rate is very high. Most policyholders are enrolled for fewer than 24 months as they move between jobs, making it difficult for insurers to maintain large risk pools to spread costs.

President Obama talks about his health care plan at Portsmouth High School in Portsmouth, N.H.

Mr. Obama wants to wave away this reality with new regulations that prohibit "discrimination against the sick"—specifically, by forcing insurers to cover anyone at any time and at nearly uniform rates. But if insurers are forced to sell coverage to everyone at any time, many people will buy insurance only when they need medical care. This raises the cost of insurance for everyone else, in particular those who are responsible enough to buy insurance before they need it; they end up paying even higher premiums. And the more expensive the insurance, the less likely people will buy it before they need it.

That's one reason that only five states—Maine, Massachusetts, New Jersey, New York and Vermont—have Mr. Obama's proposal for "guaranteed issue" on the books today. New Hampshire and Kentucky repealed such laws after finding that they soon had an even smaller individual insurance market as companies fled the state.

Another proposed reform known as "community rating" imposes uniform premiums regardless of health condition. This also blows up the individual insurance market, by making it far more expensive for young, healthy or low-risk consumers to join pools—if they join at all. And if the healthy don't join risk pools, then premiums go up for everyone and insurers have little choice but to reduce their risk by refusing to cover those who have a high chance of getting sick, such as people with a history of cancer. This is why 35 states today impose no limits whatsoever on how much insurers can vary premiums and six states allow wide variation among consumers.

New York, New Jersey and Massachusetts have both community rating and guaranteed issue. And, no surprise, they have the three most expensive individual insurance markets among all 50 states, with premiums roughly two to three times higher than the rest of the country. In 2007, the average annual premium in New Jersey was $5,326 for singles and in New York $12,254 for a family, versus the national average of $2,613 and $5,799, respectively. ObamaCare would impose New York-type rates nationwide.

There are better ways to go. Tax credits to individuals to buy insurance would make it more affordable and thus strengthen the individual market. Other tax rule changes could also make it easier for people to join and form their own risk pools beyond their employers, such as through business federations, labor unions or, say, the Kiwanis Club. They would no longer be hostage to one job for insurance.

University of Chicago economist John Cochrane also argues that in a more rational individual insurance market, people could insure not merely against medical expenses but also against changes in health status. This kind of insurance would cover the risk of premiums rising as you get older and your health condition changes.

In turn, that would free insurers to compete for the business of all patients, including those with pre-existing conditions, because then they could charge enough to cover the costs—instead of passing them to others. As for those with rare conditions ("orphan diseases") that require a lifetime of special care and are thus uninsurable, this is where government subsidies could be both appropriate and affordable.

ObamaCare would impose on all 50 states rules that have already proven to be failures in numerous states. Because these mandates would raise the cost of insurance, ObamaCare would then turn around and subsidize individuals to buy the insurance that the politicians made more expensive. Only in government could such irrationality be sold as "reform."

The Whole Foods Alternative to ObamaCare

Eight things we can do to improve health care without adding to the deficit.

By JOHN MACKEY

"The problem with socialism is that eventually you run out
of other people's money."

—Margaret Thatcher

With a projected $1.8 trillion deficit for 2009, several trillions more in deficits projected over the next decade, and with both Medicare and Social Security entitlement spending about to ratchet up several notches over the next 15 years as Baby Boomers become eligible for both, we are rapidly running out of other people's money. These deficits are simply not sustainable. They are either going to result in unprecedented new taxes and inflation, or they will bankrupt us.

While we clearly need health-care reform, the last thing our country needs is a massive new health-care entitlement that will create hundreds of billions of dollars of new unfunded deficits and move us much closer to a government takeover of our health-care system. Instead, we should be trying to achieve reforms by moving in the opposite direction—toward less government control and more individual empowerment. Here are eight reforms that would greatly lower the cost of health care for everyone:

• Remove the legal obstacles that slow the creation of high-deductible health insurance plans and health savings accounts (HSAs). The combination of high-deductible health insurance and HSAs is one solution that could solve many of our health-care problems. For example, Whole Foods Market pays 100% of the premiums for all our team members who work 30 hours or more per week (about 89% of all team members) for our high-deductible health-insurance plan. We also provide up to $1,800 per year in additional health-care dollars through deposits into employees' Personal Wellness Accounts to spend as they choose on their own health and wellness.

Money not spent in one year rolls over to the next and grows over time. Our team members therefore spend their own health-care dollars until the annual deductible is covered (about $2,500) and the insurance plan kicks in. This creates incentives to spend the first $2,500 more carefully. Our plan's costs are much lower than typical health insurance, while providing a very high degree of worker satisfaction.

• Equalize the tax laws so that employer-provided health insurance and individually owned health insurance have the same tax benefits. Now employer health insurance benefits are fully tax deductible, but individual health insurance is not. This is unfair.

• Repeal all state laws which prevent insurance companies from competing across state lines. We should all have the legal right to purchase health insurance from any insurance company in any state and we should be able use that insurance wherever we live. Health insurance should be portable.

• Repeal government mandates regarding what insurance companies must cover. These mandates have increased the cost of health insurance by billions of dollars. What is insured and what is not insured should be determined by individual customer preferences and not through special-interest lobbying.

• Enact tort reform to end the ruinous lawsuits that force doctors to pay insurance costs of hundreds of thousands of dollars per year. These costs are passed back to us through much higher prices for health care.

• Make costs transparent so that consumers understand what health-care treatments cost. How many people know the total cost of their last doctor's visit and how that total breaks down? What other goods or services do we buy without knowing how much they will cost us?

• Enact Medicare reform. We need to face up to the actuarial fact that Medicare is heading towards bankruptcy and enact reforms that create greater patient empowerment, choice and responsibility.

Many promoters of health-care reform believe that people have an intrinsic ethical right to health care—to equal access to doctors, medicines and hospitals. While all of us empathize with those who are sick, how can we say that all people have more of an intrinsic right to health care than they have to food or shelter?

Health care is a service that we all need, but just like food and shelter it is best provided through voluntary and mutually beneficial market exchanges. A careful reading of both the Declaration of Independence and the Constitution will not reveal any intrinsic right to health care, food or shelter. That's because there isn't any. This "right" has never existed in America

Even in countries like Canada and the U.K., there is no intrinsic right to health care. Rather, citizens in these countries are told by government bureaucrats what health-care treatments they are eligible to receive and when they can receive them. All countries with socialized medicine ration health care by forcing their citizens to wait in lines to receive scarce treatments.

Although Canada has a population smaller than California, 830,000 Canadians are currently waiting to be admitted to a hospital or to get treatment, according to a report last month in Investor's Business Daily. In England, the waiting list is 1.8 million.

At Whole Foods we allow our team members to vote on what benefits they most want the company to fund. Our Canadian and British employees express their benefit preferences very clearly—they want supplemental health-care dollars that they can control and spend themselves without permission from their governments. Why would they want such additional health-care benefit dollars if they already have an "intrinsic right to health care"? The answer is clear—no such right truly exists in either Canada or the U.K.—or in any other country.

Rather than increase government spending and control, we need to address the root causes of poor health. This begins with the realization that every American adult is responsible for his or her own health.

Unfortunately many of our health-care problems are self-inflicted: two-thirds of Americans are now overweight and one-third are obese. Most of the diseases that kill us and account for about 70% of all health-care spending—heart disease, cancer, stroke, diabetes and obesity—are mostly preventable through proper diet, exercise, not smoking, minimal alcohol consumption and other healthy lifestyle choices.

Recent scientific and medical evidence shows that a diet consisting of foods that are plant-based, nutrient dense and low-fat will help prevent and often reverse most degenerative diseases that kill us and are expensive to treat. We should be able to live largely disease-free lives until we are well into our 90s and even past 100 years of age.

Health-care reform is very important. Whatever reforms are enacted it is essential that they be financially responsible, and that we have the freedom to choose doctors and the health-care services that best suit our own unique set of lifestyle choices. We are all responsible for our own lives and our own health. We should take that responsibility very seriously and use our freedom to make wise lifestyle choices that will protect our health. Doing so will enrich our lives and will help create a vibrant and sustainable American society.

Mr. Mackey is co-founder and CEO of Whole Foods Market Inc.

Click here for previous entry