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– Booz Allen Hamilton Looks to 2003

By Greg Scandlen

One of the most interesting things to come out since the first of the
year is a letter from Gary Ahlquist, Senior Vice President at Booz Allen
Hamilton. This is Gary’s wrap-up of 2002 and look ahead at the coming
year. His perspective is worth paying attention to. He points out that
2002 was a year of neglect on the political front, but “real action” for
intermediaries, including employers, health plans and the IRS. “By the
end of 2002,” he writes, “the United States had answered a question it
was probably unaware it had asked: What structure would the health
benefits system have in the next decade (or two)?” He describes 2003 as
a year of “paradigm drift.” He points out that after the Clinton health
care initiatives, managed care was elevated from being a product to
being “the answer.” “Consumer-directed health plans address the
incomplete agenda left behind by 20 years of managed care
experimentation.” He says that the incomplete agenda includes employer
paternalism, distorted tax policy, the new era of two-income families,
and others. “Defined-contribution consumer-directed health plans will
not be the final form of American health care, but they will be the next
dominant form.” He then predicts some developments that will influence
the business environment in the near future, including: “the
commoditization of catastrophic risk coverage;” the need for new
capabilities for providers and suppliers; “the emerging role for
financial services firms;” continued consolidation and diversification
of health plans; and growth potential for heavily managed care plans. He
concludes by saying, “We believe 2003 will be viewed as the year that a
new wave of major structural change in health care began in earnest.”

Above article is quoted from the Galen Institute, Consumer Choice
Matters #6 3/5/03 http://www.galen.org

– The Good, the Bad and the Ugly

The Good: FERC Judge Rules Against California Scheming

An administrative law judge recently issued a preliminary ruling against
the state of California’s contention that it is owed $8.9 billion by
energy companies for their role in the energy crisis of 2000 and 2001.
On December 12th, Judge Bruce L. Birchman of the Federal Energy
Regulatory Commission (FERC) ruled that Enron, Duke Energy, Williams
Companies, and others are only liable for $1.8 billion in damages, and
that the state still owes providers a total of $3 billion. The ruling
must be reviewed by FERC’s three-member commission before it is
finalized.

FERC officials said they are still reviewing whether providers
artificially inflated natural gas and energy prices by engaging in
manipulative trading tactics and withholding supplies. The agency also
announced that it will require regulators to report evidence of
overcharging by February 28. Other federal and state agencies are also
conducting investigations.

The decision is a major defeat for the administration of California
Governor Gray Davis, which had accused FERC of ignoring the crisis. “I
am outraged over the action the FERC has taken in rigging the rules so
the administrative law judge had no choice but to give us a pittance
under the rules. We want at least $9 billion back,” said Davis.
California Public Utilities Commission President Loretta Lynch stated,
“Those energy companies illegally lined their pockets at California
rate-payers — expense and FERC is throwing pennies at our feet and
telling us to be happy with that.”

In the CEI policy brief, “California Power Market: ‘Gray’ Days Ahead?,”
former CEI research assistant Thomas Pearson points out that, “Fixing
California’ power problem is not going to be painless. Years of
government intervention and red tape in the power industry will take
time and trouble to overcome.” If only California’s forces of darkness
would recognize that.

The Bad: Environmentalists Continue to Dodge CAFE’s Impact on Vehicle
Safety

The National Highway Traffic Safety Administration (NHTSA) recently
approved an increase of 1.5 miles per gallon in corporate average fuel
economy (CAFE) standards for its “light truck” category, including SUVs,
minivans, and small trucks. The agency claims the increase — scheduled to
be finalized after a 60-day comment period — can be achieved with current
technologies and without requiring automakers to reduce performance or
vehicle weights. NHTSA administrator Jeffrey Runge said: “We are very
interested in doing whatever we can to increase fuel economy. What we
don’t want to do is to cause a safety consequence.”

Environmentalists attacked the size of the increase as too small,
ignoring evidence linking increased CAFE standards with increased
highway fatalities. Daniel Lashoff of the Natural Resources Defense
Council said, “If you measure the fuel savings in gallons, you’ve got a
trivial amount.” David Friedman of the Union of Concerned Scientists
called the increase “no more than what the industry has already
committed to.” Daniel Becker of the Sierra Club said, “It’s a minuscule
number compared to what’s needed and what’s technically achievable.”
Even Senator John Kerry (D-MA) chimed in: “I think Americans deserve
more than another sham White House effort to pretend to act in the
interests of energy security.”

But, says CEI general counsel Sam Kazman: “The 2001 National Academy of
Sciences study made it clear that CAF

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