THE FEDERALIST PRESCRIPTION

Extending health care to the uncovered, one state at a time

With his leg injured in a recent skiing accident, Arnold Schwarzenegger, California's governor, this week announced a plan that could change the terms of America's health-care debate. The Republican in charge of the country's most populous state, where 6.5m people, almost one resident in five, lack medical insurance, said he wants to introduce universal health-care coverage.

His recipe is a combination of insurance-market reform, government subsidies and--most important--compulsion. "Everyone in California must have insurance," Mr Schwarzenegger argued. "If you can't afford it, the state will help you buy it, but you must be insured."

Although the details are still sketchy, Mr Schwarzenegger's plan is very like another pioneering health-care reform that was successfully championed by another Republican governor in a strongly Democratic state. In April 2006 Mitt Romney, then the governor of Massachusetts and now a leading Republican presidential candidate, agreed on a plan for universal health-care coverage with the state's Democratic legislature. It too made health insurance mandatory, and it also included insurance reform and subsidies.

Massachusetts, and now California, have the boldest plans. But they are not the only states concerned with reducing the ranks of the uninsured. Illinois, Tennessee and Pennsylvania have pledged to insure all children. Half a dozen other states have official commissions charged with producing comprehensive reform plans this year. Could the states jump-start American health-care reform?

America has 47m people without medical insurance, around one sixth of its population. No one doubts that this is both morally vexing and economically inefficient. The uninsured get too little preventive medicine, but hospitals are, by law, obliged to offer them (expensive) emergency care, thus raising costs for everyone else. And as health-care costs have risen, and premiums with them, the ranks of the uninsured have grown.

Unfortunately, America's national debate about health-care reform has been stalled for more than a decade by a combination of ideology and political cowardice. The left argues that the solution is more government intervention; the right espouses deregulation and consumer choice to slow cost increases and so make insurance more affordable. Both sides are cowed by the memory of Hillary Clinton's disastrous failure to rewrite the rules of American medicine in 1994.

State governors have less ideological baggage. States have often been America's policy laboratories, pioneering changes that become national models. In the late 1980s and early 1990s, for instance, Wisconsin led the revolution in welfare, the system of government handouts aimed mostly at poor single mothers.

But health care has proved trickier. Massachusetts tried and failed to force employers to provide health insurance two decades ago. One problem is that the federal government controls most of the money. Medicare, the giant health scheme for the elderly, is federally financed and run. Medicaid, the scheme for the poor, is organised at the state level but co-financed with Uncle Sam. All told, state governments pay for only about 13% of America's medical spending. If you include the huge tax subsidies for employer-provided insurance, the federal government's share is almost 40%.

Nonetheless, three things suggest that state-led innovation has greater promise now than in the past. The first is the Schwarzenegger-Romney effect. Now that America's biggest state has put universal coverage at the top of its political agenda, the feds will have to take notice. Mr Romney will also ensure that health-care reform looms large in the presidential race that is already under way.

Second, the big federally-funded State Children's Health Insurance Programme (SCHIP) is up for renewal this year. Introduced a decade ago, it gives the states $5 billion in grants a year to help children whose families are just above the poverty line (and hence ineligible for Medicaid) get access to health care. The money comes from Washington, DC, but states can spend it as they wish. Many Democrats want to expand SCHIP. And third, several congressmen are now pushing laws that would explicitly encourage state experimentation by making it easier for states to innovate using federal money and, in some cases, by offering more money.

Bay State experimenting

A lot depends on whether the states' reforms actually appear to work. All eyes are on Massachusetts, since it is the first state actually to enact (rather than merely propose) comprehensive reform, particularly the mandatory purchase of insurance. From July 2007 every resident must have health insurance, or face a $1,000 fine. People with incomes up to three times the federal poverty threshold (almost $60,000 for a family of four) will get subsidies to buy insurance. Firms with more than ten workers must offer employees a health plan or pay the state a "contribution" of up to $295 per employee.

Massachusetts has also revamped the insurance market for individuals and small businesses. A new clearing house, the "Commonwealth Connector", is designed to offer more choice and cheaper plans for those outside big firms. People in this "Connector" will be able to offset their health insurance against tax, a perk until now available only to employers.

Forcing everyone to buy insurance is probably the only way to avoid the "adverse selection" problem that plagues health-insurance markets. Younger workers in good health avoid buying coverage, leaving higher-risk people in the insurance pool, thus driving up premiums. And if the uninsured workers fall really ill, they become free-riders on the others, since hospitals are required to treat them at public expense: had they been treated earlier, they might have been cured more cheaply.

Massachusetts's success will depend on whether its mandate actually prompts people to buy insurance. To avoid political uproar when the law kicks in, the state has left itself plenty of wriggle room. The individual mandate will not apply unless "affordable" insurance is available. But the greater the wriggle room, the less effective the mandates will be.

Experiments elsewhere in New England suggest that the voluntary route to universal health-care coverage is costly and difficult. Maine and Vermont are both trying to insure all their citizens. Both have rejigged their insurance market for individuals and small businesses. Both are offering subsidies to poorer people. But neither compels anyone to buy insurance. Vermont's plan was introduced less than a year ago. But Maine's plan has been up and running since January 2005, and its results have been disappointing. According to Cristy Gallagher of the New America Foundation, a Washington, DC, think-tank, only 15,000 people have enrolled so far. The state is a long way from covering its 130,000 uninsured citizens, while the subsidies are proving costlier than expected.

Besides, although obliging everyone to have health insurance can compensate for some of the extra cost of covering the uninsured, it does not offset it entirely. Massachusetts could push for universal coverage in part because only 10% of its citizens lack health coverage. The state was also blessed with lots of money to fund its reforms: an annual $385m pot of federal Medicaid funds, as well as $600m a year that was already being used to help reimburse hospitals for treating the uninsured. Most other states have less money and greater need. Covering California's 6.5m uninsured, for instance, will cost the public purse around $12 billion a year. Mr Schwarzenegger expects $5 billion of that money to come from the federal government. He plans to raise the rest from a mish-mash of taxes on employers, doctors and hospitals.

Going for kids

The cost of expanding health coverage explains why many states have set themselves less ambitious goals than universal insurance. One popular and attainable one is to insure all children. Only about 3% of children are both uninsured and ineligible for help under either SCHIP or Medicaid. Several states are simply expanding their SCHIP schemes to cover children higher up the income scale. Illinois allows any parents to buy into SCHIP if their children have been without health insurance for more than a year. Pennsylvania offers free coverage to families who earn up to twice the official poverty rate.

Other states, however, are concentrating on the much larger problem: low-paid workers in small firms. Only 50% of small businesses now offer health insurance, down almost 10 percentage points since 2000. Several governors are trying to stem this decline by subsidising bare-bones health insurance for these people.

Arkansas, for instance, has launched a scheme in which the state subsidises the premiums of poor workers in small firms provided every worker is enrolled. To control costs, the coverage is limited to six doctor visits and seven days in hospital a year, and two prescriptions a month. New Mexico has a similar subsidised deal for small employers with a $100,000 annual limit on coverage. Tennessee has set the premium rather than the coverage, creating an insurance plan that costs $150 a month, of which it will pay $50, though just what the plan will cover is not yet clear. The hope is that people will prefer cheap, if limited, health care to none at all.

It is tempting to pour cold water on all this state activity. The most radical innovation--forcing people to buy health insurance--may prove unenforceable. Will Massachusetts's new Democratic governor, Deval Patrick, really risk levying heavy fines on low-paid workers without health insurance? And even if the idea works at first, the model will surely collapse unless the ever-growing cost of treatment can be brought under control. As the plan's architects admit, that was not the main priority.

For now, however, such cynicism is misplaced. America's governors are focusing on an important issue that Washington has ducked for too long, and, in several cases, are tackling it with bold new ideas. Now it is up to President Bush and the new Democratic Congress to respond.

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Copyright of The Economist © 2007

MINIMUM-WAGE HIKE CLEARS HOUSE

The House on January 10 voted 315-116 to approve a bill to increase the nation's minimum wage from $5.15 to $7.25 an hour over two years. All Democrats were joined by 82 Republicans in voting for the measure, which would provide the first increase in a decade; at least 28 states have a minimum wage higher than the federal requirement. Republicans offered an alternative measure to exempt small businesses from paying the wage increase if they provide their employees access to health insurance. Rep. Buck McKeon, R-Calif., noted that Democrats objected when Republicans passed a minimum-wage hike last year as part of a bill that also included elimination of the estate tax. But House Education and Labor Committee Chairman George Miller, D-Calif., replied, "What is it you don't understand about being poor? What is it you don't understand? You are stuck at $5.15 in today's world. You can't buy the gasoline to go to work, the bread to put on the table, the milk out of the refrigerator." In the Senate, where a minimum-wage debate is expected once ethics legislation is wrapped up, Republicans are seeking to add several tax breaks, especially for small businesses. Although the underlying bill is widely expected to pass, the GOP's leverage in the 51-49 Senate may win concessions.

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By Richard E. Cohen

KENNEDY SUGGESTS MEDICARE COVERAGE BE EXTENDED TO ALL HEALTH

Senate Health, Education, Labor and Pensions Chairman Kennedy today called on Congress to extend Medicare to all Americans to respond to skyrocketing healthcare costs and provide insurance for 47 million uninsured citizens. "Health costs are threatening the livelihoods of millions of families because insurance premiums are rising four-and-half times faster than wages," he said in the committee's first hearing of the new Congress. "Many of us have views on how best to address the crisis. I believe the right way is to extend the guarantee of Medicare to all Americans," he said. Kennedy's plan would allow enrollees to choose among any of the health plans offered to members of Congress and the president. According to Kennedy, the plan would save $380 billion annually through reduced administrative costs, a universal electronic medical record system and reduced insurance overhead costs. Cost savings also would be garnered from covering uninsured Americans because they would receive preventive care and earlier treatment of disease, according to Kennedy's office. Meanwhile, Sen. Ron Wyden, D-Ore., also is poised to introduce his own healthcare measure, which would ensure universal healthcare coverage by ending the employer-based healthcare system, terminating Medicaid, and requiring every American to buy private insurance through state-run entities.

At the hearing, HELP ranking member Michael Enzi, R-Wyo., focused his comments on his own pet project, a small business health bill that would allow small firms to band together across state lines to bargain for insurance premiums. "I firmly believe that small business pooling power is an important component of any health reform effort," he said. Enzi can expect a fight on his small business healthcare bill, which most Democrats oppose, but he indicated he will cooperate with Kennedy on other issues. For example, Enzi said he wants to move forward with one component of Kennedy's agenda, a health information technology bill. Several witnesses at the hearing also called on Congress to reauthorize the State Children's Health Insurance Program, which both Republicans and Democrats have called a high priority. "I'm struck by how much agreement we've heard from a diverse set of participants," Kennedy said. Witnesses represented all facets of the advocacy community, including business, labor, health providers, and policy analysts.

In a procedural hiccup, Kennedy was unable officially to assume the gavel of the committee in the hearing because the Senate has not yet approved a funding resolution for committee budgets. Enzi gaveled in the hearing and then turned the meeting over to Kennedy.

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By Fawn Johnson

A HAMSTRUNG HEALTHCARE AGENDA

Their hands are tied.

Giddy Democrats danced into control on Capitol Hill last week, with healthcare a headliner of their agenda. But seldom has there been less wiggle room for substantive action by a new majority party in Congress. A tissue-thin margin in the Senate, large budget deficits on the horizon (pay no heed to last week's White House disinformation campaign on that score), threatened vetoes and a lack of political will combine to make it a rather tepid changing of the guard.

OK, a couple of modest healthcare bills, notably reimportation of prescription drugs from Canada, might even become law. Other actions, such as expansion of embryonic stem-cell research and allowing HHS to negotiate drug prices in Medicare Part D, may attract a measure of bipartisan support, but a Bush veto will only serve to hand the Dems good campaign issues for 2008.

Even if one of these controversial ideas is slipped into larger bills that the president feels compelled to sign, they won't do much to address the central healthcare issues of the day: the rising tide of uninsured and the health cost crisis.

Dramatic responses to the coverage problem are highly unlikely. Sen. Ron Wyden (D-Ore.) recently announced an interesting plan for an individual health insurance mandate coupled with an end to employer-based coverage. Employers would give their portion of the premiums to their employees, who would buy private coverage but couldn't be turned down because of their health status or age. Subsidies would be offered to help people up to 400% of the poverty line pay their premiums.

We don't know what Wyden's bill would cost, but it would be a lot, and neither money nor will exist to see it through. We already are looking to a deficit that would be $286 billion without the $100 billion "emergency" funding for the wars in Iraq and Afghanistan, and fixes for the alternative minimum tax and the physician Medicare reimbursement program, both of which may cost in the hundreds of billions of dollars.

Turning back the president's tax cuts for the wealthy, no matter how fiscally sound such a move would be, appears to be untenable for the Democrats, who don't want to be labeled tax-and-spenders.

There is, however, one area of health coverage that presents an opportunity, even in these billion-dollar-pinching times. The State Children's Health Insurance Program must be reauthorized this spring. This program, because it includes state matching dollars, could be leveraged to cover several million adults for a relatively modest investment.

SCHIP, for those who don't follow it, gave states a total of $40 billion over 10 years to provide health coverage for children who lived in families that earned too much to qualify for Medicaid, but not enough to afford private insurance.

Even people like Mark McClellan, the former CMS chief under Bush, have come out in favor of expanding the scope of the program to target some of the most vulnerable of the uninsured. And because it involves children, a larger SCHIP is unlikely to be vetoed.

As to health costs, there simply does not appear to be much interest in the issue from the new majority. Already we have seen some disparaging remarks about pay-for-performance, quality measures and evidence-based medicine from some influential Democrats.

They should reconsider: It doesn't cost very much to use the federal government's financial leverage to push for preventive care, lifestyle changes such as smoking cessation and nutrition counseling, evidence-based clinical decisionmaking and disease management programs that have at least the promise of slowing health spending increases.

These are a handful of changes that could help the Democrats at least begin to fulfill their campaign promises, not just go begging for more ammunition for 2008.

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By Todd Sloane

CHANGE WILL BE INCREMENTAL

Democrats will push a healthcare agenda, but Bush still stands in the way

In the 110th Congress, new leadership will bring new priorities. However, we have to be realistic: President Bush will continue to occupy the White House for two more years.

Instead of working toward quality healthcare for everyone, President Bush wants to dismantle the parts of our healthcare system that work--Medicare, Medicaid and the coverage that most of us receive through our jobs. We can't expect too much from a president who ignores the overwhelming majority of Americans who support life-saving stem-cell therapy.

That doesn't mean Congress will be at a standstill on healthcare. On the contrary, we will be working to make much-needed improvements in our health system, helping to control rising costs and slow the loss of insurance coverage. But for the next two years, our efforts will be more incremental than some of us, me included, would prefer. (See related story, p. 28.)

Initially Congress will focus on Speaker Nancy Pelosi's (D-Calif.) "Six for '06" agenda, which includes two important healthcare items: fixing the Medicare prescription-drug program so that the HHS secretary negotiates drug discounts for Medicare beneficiaries and passing legislation to promote real stem-cell research. The House of Representatives will pass these two initiatives in January, setting the stage for meaningful action on healthcare in the months to come:

* Restoring Medicare's board of directors. Once we've completed the Six for '06 agenda, my focus will turn to oversight and management of Medicare. It is my intent to return the Ways and Means health subcommittee to its traditional role as, in effect, Medicare's "board of directors." For the past six years, Republicans in Congress have conducted almost no oversight of the administration's activities. Instead, they choreographed cheerleading sessions to compliment each other on the great work they were doing to bring "choice" to Medicare, all the while dismantling the traditional program through design and neglect.

Their focus has been to maximize the choices of private health insurance plans available to Medicare beneficiaries, rather than choice of physicians and hospitals--the choices that truly matter to patients. As a result, Republicans have placed Medicare on a path toward destruction. We need to reverse the march toward privatization and once again put Medicare on solid footing.

One way Republicans have made private plans in Medicare more attractive is by paying private plans 12% more than it pays fee-for-service. Equalizing payments between plans and fee-for-service would save upward of $50 billion over 10 years and would be a good place to begin.

Republicans also subjected Medicare to a bud get gimmick--called the 45% trigger--designed to indicate the sky is falling with regard to the program's financing and hasten its demise.

Further endangering Medicare, Republicans allowed a defective physician payment formula to be in effect far too long, forcing physicians and other providers to annually beg Congress to override the cuts the formula would have forced. Making providers angry at Medicare further aids Republican efforts to privatize it.

In addition to these topics, there are many other issues on which oversight is overdue--everything from ensuring that beneficiaries are receiving the benefits they are eligible for through the Medicare prescription-drug program to reviewing quality improvement programs to ensure that taxpayer resources are being carefully stewarded. We could fill the next two years in this arena alone. These efforts are necessary to guarantee that Medicare remains a high-quality program for generations to come.

A healthy, functioning Medicare program that pays adequately is an asset to healthcare providers working in a country where more and more people are uninsured--and from whom payment is not necessarily possible. Improving Medicare should be a bipartisan commitment. Again, I will work to restore that philosophy in the new Congress.

* Expanding coverage for kids: One major healthcare imperative in the 110th Congress is to reauthorize the State Children's Health Insurance Program. SCHIP is a combined federal and state program designed to provide coverage to uninsured children above Medicaid eligibility, but in families with incomes below 200% of poverty (higher in some states). Even with this program in place, we saw the number of uninsured children in America increase 5.1% to 8.3 million in 2005 from 7.9 million in 2004.

Reauthorizing this program provides the opportunity to improve it as well. Ideally, I would expand SCHIP to all children, and parents who provided coverage for their children from elsewhere could opt out.

Otherwise, anyone who takes a child as a deduction on their tax return would be assessed an annual SCHIP premium. Subsidies would be available for lower-income families on a sliding-scale basis. I don't know how much bipartisan support we could obtain for such a proposal, but I would happily dare the president to veto children's health insurance.

Bipartisanship is an important part of my game plan. While expanding government-funded healthcare might not be a bipartisan success, there are still plenty of opportunities for bipartisan cooperation. When I chaired the health subcommittee from 1985 to 1994, Bill Gradison of Ohio served as my Republican counterpart. Together, we wrote plenty of good Medicare legislation. In 10 years, my subcommittee never sent a bill to the House floor that was not co-sponsored by both Gradison and me. I intend to pursue a similarly bipartisan course this Congress.

All of these are important improvements to our healthcare system. If we can move forward in these arenas in the 110th Congress, we will enter the 2008 presidential election cycle, in which I expect healthcare to be a major issue. Then, we can turn to the pressing need to follow the rest of the world in guaranteeing that everyone in our nation has affordable healthcare.

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By Pete Stark

LEADER OF THE PACK: KEITH ELLISON

Keith Ellison may be the first Muslim in Congress, but that isn't how he wants you to identify him.

During his campaign, he said, his op-ponents tried to "instill fear based on my religion. I'd go to the communities they were targeting and let them know who I was, what I had planned. I would go and let them know I was an advocate for them."

"I think that when you are a Congressperson, you are probably a role model for a whole lot of people. I could be a role model for people that see themselves as community organizers or for short people, because I'm only 5'7". There could be a whole range. I'm just proud to be who I am."

Ellison, 42, is a lawyer and served in the Minnesota House before being elected to Congress, said that he did not get involved in politics to be elected. "I first got involved in politics [to improve] the lives, qualities and conditions of people, which involved attending community meetings and marching in protests as a teenager." Ellison first ran for the Minnesota House in 1998 but lost the Democratic-Farmer-Labor Party's endorsement to Greg Gray. In 2002, he won the race to serve House District 58B in the Minnesota state legislature.

Ellison and his wife Kim are the parents to four children. Originally from Michigan, Ellison moved to Minnesota to attend law school. After graduation he stayed in the state and began to practice law and that's when his political ambitions started to emerge.

He said that his father inspired him, saying, "any jackass can kick down a barn, it takes a carpenter to build one. It's one thing to talk about how there are problems, it's another to go out there and solve them."

When he was younger, he said that he fought to try and fix the societal injustices in the world, but as he got older, and was nudged by his wife, he realized it was time to become constructively involved. "It's one thing to raise issues, but it's another thing to build a world where people of all races, colors and cultures can participate equally in society," he said.

In his campaign to succeed U.S. Rep. Martin Sabo, Ellison said that his biggest obstacle was reaching out to diverse communities. "I had to knit together a fairly diverse coalition and I had to inspire them and make them stick in the coalitions and make sure all factions of our constituency were being heard."

A staunch opponent of the war in Iraq, he hopes for his legacy to be getting the United States out of Iraq by setting the country on a course where peace is the guiding principle and working towards withdrawal of troops. He supports the work of fellow Democratic U.S. Reps. Nancy Pelosi and Jack Murtha.

Other policy priorities for Ellison are health insurance and economic prosperity. He aims for a form of national health insurance and a single-payer health insurance plan. Ellison said there is no reason for poverty to exist in America and to address it Congress needs to create economic opportunities for the middle and working classes.

He hopes his election will inspire other Muslims to define themselves by what they do to work for peace and justice, not just their religion.

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By Theodora A. Blanchfield

DELEGATES DEBATE HOT OH ISSUES

In a debate, delegates and speakers discussed the role of OH technicians, OH education, tax incentives for employers who provide OH services, and sickness certification.

* OH technicians: Given that healthcare assistants are now doing vaccination administration in general practice, should OH practitioners now be delegating some procedures to OH technicians?

Cynthia Atwell, chair of SOHN, said: "There is no problem with this in principle. We can't do it all ourselves. Our role is to interpret the results. Providing they are properly trained, there are no limitations…There might need to be a supervising nurse trained in anaphylactic treatment…It's got to be a way forward."

David Maslen-Jones, member of the Nursing and Midwifery Council (NMC), added that there were moves to have healthcare assistants regulated, and that it is almost as if a second tier of nurse is being developed

* OH education: OH nurses could be missing out on training for core skills, such as dealing with hand arm vibration syndrome, or lung function testing.

Anne Harriss, OH course director, London South Bank University, said there was not the capacity to provide specialist training in such areas.

Atwell questioned whether the current OH curricula were fit for purpose. "What is that [fit for purpose]? The NMC says we've got to educate nurses to degree level, but are we really looking at the skills nurses need to undertake the work? It needs a review. All of OH need to get involved, including the NMC and the universities."

Maslen-Jones said the NMC "had no understanding of what OH nurses do on a day-to-day basis" before changing the registration of nurses so that OH nurses were listed on the same part of the register as public health nurses. However, he said OH educators had won the battle for an OH pathway in education and development.

* Tax incentives: Should employers get tax incentives for investing in OH?

Bill Gunnyeon, director of health, work and wellbeing at the Department for Work and Pensions, said: "The DWP has suggested to the Treasury that this is an area worth looking at."

The key issue for the Treasury is to ensure that employers are not given tax breaks for providing private medical insurance that they would have given anyway. Gunnyeon said the £10m sum announced for NHS Plus in November 2006 was to be used on a loan basis to encourage the NHS to invest in better OH services for small businesses.

Professor Dame Carol Black argued that there was a bigger issue for small firms which could go out of business if they had a major OH problem.

* GP sicknotes: Should the link between sickness certification and statutory sick pay be severed so that there is less reliance on GP sicknotes?

Gunnyeon argued that staff would still need to see their GP whatever the relationship to sick pay. Harriss said problems included lack of understanding of work processes among GPs, and disincentives for GPs to refuse a sicknote, including their role as patient advocate and the risk of being threatened or attacked by patients. Atwell said Unions were suspicious of reforms to sick notes and lawyers might encourage staff to take extra time off work to win tribunal claims.

THE BAIT DEBATE

Could tax incentives entice firms to spend on OH? The insurance industry seems to think so, and is lobbying the Treasury. Nic Paton analyses their chances of success

Work and pensions minister Lord Hunt has said he can "understand the psychological importance" of it, OH tsar professor Dame Carol Black is to buttonhole officials at the Treasury about it, and health insurers are becoming increasingly vocal about its merits. One way or another, what might once have been thought a somewhat arcane issue -- that of tax incentives in return for investment in workplace and occupational health -- has suddenly become a hot topic.

Certainly, as Tim Baker, commercial director at Norwich Union Healthcare, concedes, there is what in US politics is sometimes called 'big mo' over the issue.

"I do not expect the government to simply come up with an announcement that they are going to put fiscal incentives in place," he explained. "There is a further way to go, but there is a degree of momentum."

What's going on?

So, what's the issue, why has it suddenly become important, and what's it all got to do with hard-working OH professionals?

Last October, Norwich Union, one of the key drivers of this whole debate, published a lengthy report commissioned through NERA Economic Consulting that largely encapsulated the health insurance industry's thinking.

The research made it clear that, whatever the Department of Health (Doll) may say, the reality within the NHS is that there is little incentive to prioritise workplace health interventions, because other competing pressures are simply too great.

Yet, while employers have an obvious incentive to invest in workplace health, in making decisions they will often, quite naturally, look more at the payback for them rather than the benefit to society as a whole.

Also, the benefits of early intervention often only became clear over a long timeframe, which, as employees change jobs, further reduces the implicit incentive of spending money on their health.

This situation means the supply market for workplace health interventions and rehabilitation (such as physiotherapy and psychological therapies) remains weak, partly because of low demand and also a lack of innovation in product design.

Compounding this is the UK's tax system, which taxes OH as a 'benefit in kind', and in which OH attracts a National Insurance (NI) liability for the employer.

Fiscal incentives, such as tax breaks, matching funds or offsetting NI contributions (see box, right) could therefore encourage many employers -- particularly in the private sector -- to bite the bullet and invest more in workplace health intervention, argued NERA. Incentives should ideally focus on musculoskeletal disorders, mental illness and return-to-work schemes, it advised.

Tim Baker explains: "We have to be realistic that this is not going to be an area where the NHS is going to be able to plug the gap. I certainly think the economic argument is quite strong and the appeal to the government is around the competitiveness of UK plc.

"We could find ourselves falling behind with what is happening in other countries. In Holland, for instance, there has been significantly greater involvement of the private sector in this area and the social security system creates more incentive," he adds.

Proposals

Dudley Lusted, head of corporate healthcare development at insurer AXA, added flesh to this thinking in a wide-ranging speech to a fringe meeting at the Labour Party Conference last autumn.

"I believe that, while some organisations have proved the link between good health and improved performance, the data is patchy and because budgets are always tight it is hard to find new money," he said.

"I am convinced, however, that wavering companies will find significant new money if the pump is primed through a reduction in tax, and their imagination captured through an innovative communication programme," he added.

What Lusted then went on to propose was that the government should create an approved healthcare programme that, when implemented, would attract a reduction in NI contributions of, perhaps, 1%.

This programme would obviously need to be defined, but would need to include prevention, risk assessments, health promotion education and some level of management training, probably delivered through the internet, he argued.

"I envisage various documents describing best practice with guides on how to manage absence, how to identify stress, and so on.

"The programme should also include rehabilitation -- for example, to pay for private treatment for those medical problems that prevent employees from working," he said.

"The programme could be audited by a newly-enfranchised HSE through a combination of employer health policy reviews, staff audits and possibly some hard measures -- for example, some combination of absence and injury data," Lusted outlined.

"Direct financial incentives are likely to capture the attention of busy employers and therefore make the most difference to improving workplace health," he recommended.

But before OH practitioners start punching the air in delight at the prospect of workplace health being "pump primed", they need to recognise that there is the rather immovable obstacle of the Treasury to get past first.

Merits

There are, it appears, genuine differences of opinion within Whitehall about the merits of fiscal incentives. The Department for Work and Pensions, as evidenced by Lord Hunt's remarks, is known to be pretty enthusiastic about OH and its role, particularly in helping to reduce the cost of incapacity benefit by keeping more people in work.

While the Department for Work and Pension's basic position is that reducing the cost of absence and improved productivity should be incentive enough for most employers to spend money on workplace health, there is a sense ministers do at least see some merit in what they are being told.

Similarly, the Doll has been making enthusiastic noises about the need for more investment in workplace health for a number of years -- as witnessed by its ongoing commitment to, and investment in, NHS Plus and its public health agenda, much of which has a workplace health element to it.

But go to the Treasury, where any decision of this nature will actually be made, and the words 'bucket' and 'cold water' tend to spring to mind. As spokesman Nic Stevenson explains to Occupational Health, taking a sword to the Gordian knot that is the British tax reliefs system is not something high on Chancellor Gordon Brown's priority list.

"In setting tax reliefs, the Treasury considers whether or not they are the best incentive to encourage the desired behaviour," he explains. "In many cases, tax is too blunt an instrument to change behaviour, and is not the best tool to use.

"For instance, tax breaks only benefit businesses that make a taxable profit, and businesses will have to wait until the end of the tax year to realise the benefit of a tax break. In addition, incentives such as these complicate the tax system, and increase companies' administration burdens.

"In the case of workplace health schemes, it would be very hard to ring-fence these schemes, or any other vocational rehabilitation, from 'ordinary' private medical insurance provided by an employer, which is subject to tax and NI contributions on the employee," he continues.

The preferred approach, at least in the eyes of No 11 Downing Street, is to focus more time and energy on existing schemes.

Stevenson cites in particular the expansion of NHS Plus, the government's £1.6m Well@Work pilots (nine "healthy interventions" looking at how the health of employees at workplaces can be better improved) and the work by the Doll and Investors in People to incorporate workplace health standards into its award scheme.

And, he points out, there are already fiscal incentives available to employers in relation to workplace health investment. While employers are taxed on medical treatments, insurance and gym-memberships, there are other services not taxed as a benefit in kind.

These include treatment of work-related conditions or accidents, health screening and check-ups including eye tests, welfare counselling, equipment and services for disabled workers and in-house recreational facilities, such as gyms or sports facilities which can only be accessed by employees.

"In addition, VAT is reclaimed by businesses on expenditure directly related to the health and wellbeing of their employees. For example, VAT is reclaimable on the purchase of occupational health advice," Stevenson adds.

More questions

There are wider questions too that have barely been raised in the debate so far, worries Joanne Hindle, corporate services director at Unum Provident. Not the least of these, as repeated in almost any debate over the future of OH, is 'Where are the OH professionals going to come from to do this extra work?'

As Hindle puts it: "Even if it did happen, and it was announced it would be brought in next year, there is actually a very limited supply of people out there. OH specialists are not wandering the streets looking for jobs"

What's more, if small and medium-sized enterprises (SMEs) are the great black hole that OH needs somehow to plug over the next decades, tax incentives could in fact be a hindrance rather than a help, she argues.

"It is much more around the whole environment for health in the workplace not just OH. It is wider than tax efficiency. Some companies, for example, are never going to have access to in-house OH so, by default, you disenfranchise every SME from the tax incentive," she points out.

"You have to be very precise what you can give taxbreaks for," she adds. Taxbreaks, if implemented too narrowly, may even, inadvertently, end up limiting the range of workplace health initiatives a company might consider putting into place.

The issue may have 'mo' and there are always merits in having a debate. To be fair, advocates such as Lusted and Baker are realistic enough to recognise there is unlikely to be any favourable decision on this any time soon. But, with Gordon Brown almost certain to become prime minister this year, and the NHS and public sector being financially squeezed, how likely is it, either politically or in reality, that the government is going to turn around and shower cash on a sector already seen by many to be doing very well thank you?

In Hindle's eyes, at least, the message to OH professionals therefore has to be "don't hold your breath".

"With the public sector spending review next year, I just do not think there is the money there. There is such a small chance of success, maybe the industry should look at other areas," she advises.

"It is a slightly odd approach," Hindle concludes. "It is too narrow, they are pushing on a very dosed door and there are not enough people to do the job. We risk under-qualified people offering themselves instead."

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By Nic Paton

SUPERSTAR DRUGS DEBUT AS GENERICS

A dose by any other name works as well and costs less.

DESIGNER labels may excite fashionistas and sports-car fanatics, but many consumers are happy to stock their medicine cabinets with less-expensive generic alternatives to brand-name prescription drugs. Value-conscious shoppers will soon be able to pick from a bumper crop of generics. And they'll get a boost from insurers and employers who offer financial incentives to hop on the cut-rate bandwagon.

Assuming your doctor okays your switch to a generic alternative, you may save up to 80% off the cost of a brand-name drug. For example, a year's supply of the antidepressant Prozac costs $1,863. But the same amount of its generic equivalent, fluoxetine, costs just $433, according to a recent price survey by research firm Wolters Kluwer Health. "You get all the premium quality of a brand-name drug--you just pay less," says Dr. Bill Thomas, a Sherburne, N.Y., physician who specializes in elder care.

If drug coverage is included in your health insurance, you probably have a smaller co-payment for generics. Some employer plans even skip the co-pay altogether for generics, as a way of encouraging their members to switch to less-expensive alternatives. If you don't have prescription-drug coverage, buying generics will help you hold the line on out-of-pocket expenses.

Coming soon. What if your prescription medication isn't available in generic form? Wait a bit. Brand-name drugs with U.S. sales of about $30 billion could lose patent protection over the next two years. Five blockbuster drugs--Flonase, Pravachol, Toprul-XL, Zocor and Zoloft--went generic in 2006, and eight more pharmaceutical superstars are expected to debut as generics by 2008. As a result, consumers, employers and insurers could save nearly $50 billion by 2010.

Joan Zeleski has already grabbed her share of savings by switching to generics. The 51-year-old nurse used to take Desyrel for insomnia and paid $45 for a three-month supply. By switching to the generic version, she saves $56 on the same amount.

For convenience and the employee discount, Zeleski buys prescriptions from her hospital's pharmacy. Most people don't have that option, but they can still save by shopping around.

Wal-Mart rolled out a headline-making generic-drug program in 27 states late in 2006. Under the program, you can buy a 30-day supply of more than 140 generic drugs for just $4 per drug. The world's largest retailer says it plans to bring the discount program to as many states as possible. Drugs on Wal-Mart's $4 list include 12 of the top 20 most commonly prescribed medications. And you don't need insurance coverage or a discount card to qualify for the savings.

Other retailers also offer competitive pricing. Target says it matches Wal-Mart's generic-drug prices in most locations. Midwestern discount retailer Meijer fills prescriptions for some antibiotics, such as penicillin, free.

Savings tips. Finding the best deal on generics sometimes takes a little detective work. A Family paying for five common generic drugs could save more than $2,000 a year on top of the savings over brand-name medications just by looking for the best deals, according to a survey of generic-drug prices by Consumer Reports.

Check prices both in stores and online. Consumer Reports found that big discount stores, such as Wal-Mart and Target, and online pharmacies affiliated with drugstore chains, such as CVS.com, tend to charge the least. Costco warehouse stores and Costco's Web sire had the lowest generic prices in the survey. And you don't have to pay Costco's $50 membership fee to fill your prescriptions. (For more on Costco and other warehouse stores, see page 102.)

Drug prices vary depending on how much you buy and in what form. Tablets, for example, could be cheaper than capsules. And a 90-day supply may cost less than the typical 30-day prescription. Ask your doctor for a prescription you can buy in bulk, and talk to your pharmacist about the cheapest and safest form of each medication. With some medicines, you might save by buying large pills and splitting them into smaller doses. But check with your doctor or pharmacist to see if pill-splitting is appropriate for your prescription.

Don't be shy about asking your pharmacy if it can meet or beat a competitor's price. You might get a bargain and save yourself the hassle of moving your business elsewhere.

North of the border. Sure, you can save up to half the price of brand-name drugs if you buy from pharmacies outside the U.S. But importing medications from any foreign country except Canada is illegal In Canada, purchases must be made in person with a valid U.S. prescription approved by a Canadian doctor.

That legal exception does not extend to buying Canadian drugs over the Internet. It's illegal to order drugs from Canada online, but U.S. Customs and Border Protection says it will no longer routinely seize packages of non-narcotic prescription drugs mailed from Canadian pharmacies. It will, however, continue to conduct random searches for counterfeit medications.

Some consumers, particularly those who rely on brand-name drugs that do not have generic alternatives, think the savings available on imported drugs is worth the risk. If you are considering this route, shop only at Canadian pharmacies and Web sites, says Steven Findlay, managing editor of Consumer Reports But Buy Drugs. There's less chance of getting ripped off with fake drugs or endangering your health with weak or tainted medicine, Findlay says.

Some Canadian sites have been vetted by state governments and scrutinized by federal regulators. Minnesota, New Hampshire, Washington and Wisconsin, for example, have started programs to help state workers and other residents buy low-cost drugs from Canada (go to www.rx.wa.gov or www.minnesotarxconnect.com).

But it's not worth the trip just to buy generic drugs. "People aren't going to Canada to save $6," says Stephen Schondelmeyer, director of the PRIME Institute, which studies the economics of the pharmaceutical industry.

ONLINE PHARMACY

For Web resources to help you compare prices and medications, see kiplinger.com/links/drugs.

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By Thomas M. Anderson

AVERTING A BIG OOPS

Privacy cracks can happen in unexpected ways. New tools can avert costly slipups

A patient e-mails your hospital for directions to the outpatient department. Not much of a Health Insurance Portability and Accountability Act issue there, right? What if he also writes that the visit is to discuss his HIV test results?

For large health systems with sophisticated systems to secure electronic files and communications, such an exchange may not pose a problem. "The challenge we have in health care is, what about everybody else?" says Bill Crounse, M.D., director of provider business for Microsoft Corp. "Eighty percent of health care is delivered in settings that aren't large integrated systems."

HIPAA requires that hospital risk managers, IT directors and others who handle health information--including e-mail and instant messages--apply reasonable and appropriate safeguards to protect against disclosure.

The law sets stiff penalties for infractions. It has been a daunting task that's kept many providers from using the efficiency of e-mail to communicate with patients. Now, technology that prevents breaches of privacy without bogging down communications and workflow is becoming more available.

Winona (Minn.) Health uses an "e-visit" software module from Cerner Corp., Kansas City, Mo., that allows patients to log on to a secure Web site to communicate with their doctors. Others use encryption programs to secure e-mail, such as a program from Eastman Kodak Co.; group purchasing firm Consorta Inc., Schaumburg, Ill., offers it to members.

Microsoft says its newest e-mail offering, Outlook 2007, will allow users to put postmarks and expiration dates on e-mails and it can restrict e-mails from being forwarded or printed.

St. Peter's Hospital, Helena, Mont., uses a sophisticated program to scan and electronically monitor all outgoing e-mails for protected health information.

"We have filters in place to monitor e-mail activity--who's sending what and where they're sending it," says Daniel Sullivan, director of information services. "But if you're asking me if we're 100 percent sure nothing left the building, I can't go there."

Until recently, tools that meet HIPAA's privacy requirements have been clumsy and difficult to use. But tech advances now make it easy to manage e-mail communication transparently, says David Smith, a senior compliance analyst with Symantec Corp., the Cupertino, Calif., provider of security products such as Norton AntiVirus.

"Transparency has been the real dragon to slay. If the user has to take even one additional step, such as encrypting a message, it just didn't happen," he says. "Now it's built into these technologies and the user may not even know it's there."

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By Richard Haugh