PBS had an interesting program about The Netherlands Health system last night. The Netherlands (Dutch), has been on the cutting edge of a number of health care issues over the years, including policies for physician assisted suicide for the terminally ill and allocation of resources for maternity and child care. Recently, the Dutch decided to switch from a single payer health care system to an open market, privately insured system, where every resident has a health care budget. This approach could work for the United States, but a number of changes would have to be made to the insurance regulatory infrastructure. This article addresses those system delivery concerns.
Question of Scale
First of all, lets talk about scale, The Netherlands is a tiny country compared to the United States, with excellent public transportation and health services in place for the entire country. In the USA, if you have a car, transportation is excellent, though costly, but access to healthcare in rural and poor areas is much more limited in America than in The Netherlands. Secondly, the country has the same health care insurance standards for everyone in the country, not fifty different standards like the states.
Health Insurance Regulation
In America, the Insurance Commissioner of each state regulates the health insurance industry and though commissioners have a national organization with some standardization recommendations, each state is free to do what it wants for health insurance regulation. There is very little standardization in health care insurance or service delivery in the United States, which is partly the cause of the incredible disparity in cost of care per capita compared to other industrialized countries. Also, about half of the USA health care system is financed by private employer plans and for those employers who choose to take some risk and self insure their health plans, there is an exemption from most of the insurance commissioner regulatory authority. So, this begs the question, how would you standardize the process? The answer is an amendment to the ERISA law, which created this health insurance loophole in the first place. Though it may be easier just to do the pay or play and provide the allowance/subsidy as needed, than to dictate benefit design to these stakeholders.
Lack of Standardization
It is one thing for The Netherlands to take its existing long established policies on basic care, palliative care, and eldercare and change their financing system, but the USA doesn’t yet have standardized policies for health care services. Also, since the administrative cost for private insurance is about three times that of the largest government run program, Medicare, it is hard to see how administrative savings will be made in this scenario. The government has more control to drive system delivery changes with Medicare than it would have with several hundred insurance companies. I can just see the marketing geniuses working on their differentiation campaigns now.
Potential Applications from Netherlands Style Market Based Health Plan
The Dutch have a few options to select from for health care insurance, from basic, to deluxe, and pay an individual cost accordingly. Dental, vision, and luxury services are in the latter package. The United States health care reform movement should require a minimum level of care for all of its eligible residents, including primary care, hospitalization, and prescription drugs. A secondary plan may include basic dental and vision services, whereas the deluxe plan could include better coverage in those areas. One consequence of providing an individual health care allowance is the individual would have to take more responsibility in accessing and choosing health care. Theoretically this policy would reduce unnecessary services.
Evidence Based Treatment
In The Netherlands, new prescription drug and other treatments are subject to an administrative review to determine medical evidence and efficacy of the intervention before approving the treatment. This concept would also be a sound mechanism to thwart excess profiteering in the U.S. health care system. Though some patients may be concerned that they are not receiving the latest treatment, this does not necessarily mean their treatment isn’t effective. There are many instances in health care where a lower tech treatment is just as effective as the more technological one. For example, in wound care, the individual vacuum devices that are affixed to the patients wound are less costly and often more effective than hyperbaric treatment. U.S. citizens have to learn to access quality data when making health care decisions.
Universal Availability of Health Quality Data
Though alpha health care organizations, like Virginia Mason Medical Center, have been integrating quality reporting into their system for years, there is limited national standardization of quality reporting. The NQA or National Quality Association has good data available, but it has not been integrated into all health care delivery systems. Quality measures are complex, but leading health care organizations, like Seton Family of Hospitals, a division of Ascension Health, have incorporated quality into their program development measures for years. If you look at medical standards nationally, each specialty has its own education group that advocates for certain treatment protocols. Perhaps the start of a national standardization movement for basic health care is to create a roll-up of these separate quality measures and continue to refine the process.
Accountability and Reporting
Again, given the scale of The Netherlands compared to the U.S.A. and the fact they migrated from a standardized program initially, their reporting issues are less problematic than for the U.S. migration into a standardized health program. Reporting simplicity, transparency, and auditing would be crucial to maintaining equity in a national health care program. Given the Unites States recent bouts with criminal banking activities and the usual health care fraud scams, the importance of tracking private insurance payers is even more crucial. Since the banking industry has wanted to get into the health care industry for years, this may be their opening, so beware of the foxes in the hen house.
Wednesday, October 7, 2009
Friday, September 18, 2009
Pay or Play or Pay and Pay; Obama versus Baucus Health Plans
Baucus Health Plan
Senator Baucus of Montana broke away from his committee to present his approach to a United States health care overhaul. His plan proposes a complicated series of benefit changes in Medicare/Medicaid, along with taxes on health care suppliers, employers, and individuals, depending on the health care scenario. It is like trying to look through depression era glass for the economy in this approach. First of all, I don’t think adding more taxes to an already expensive health care delivery system will make it less expensive. If anything, this type of proposal will drive more people into the government option Obama plan.
Both the Obama and Baucus health plans rely on the employer system for health care financing, as opposed to a program based on individuals selecting their health plan from regional cooperatives, with a tax credit allowance, and some employer allowance. I am often asked why we expect employers to provide health care in the USA and my only answer is, "because that is the way it is now." It would be interesting to hear what employers, both large and small think about their preferred level of contribution to health care for their workers. According to the Employee Benefit Research Institute’s 2009 Health Confidence Survey, 83% of their constituent’s support a public health option. An employer mandate for a national health plan gleans 75% support as well. This organization is a conservative, employer, and insurance based entity, so if this is what their subscribers are saying, Brunhilde has finished her aria, and the curtain is coming down on the current health care marketplace.
Similarities
Similarities between the Baucus and Obama plans include the following features: guaranteed ability to obtain coverage regardless of pre-existing conditions, less predatory pricing based on gender and age, and a reduction in the uninsured populations. These are all good mechanisms to get more people eligible to obtain treatment, so their medical conditions can be better managed and less expensive in the long run.
Differences
Baucus recommends the use of nonprofit health care purchasing cooperatives (Community Health Plans or Health Maintenance Plans), to meet the needs of the uninsured population. Does he mean HMO’s or CHP’s? The problem with spreading the cooperative method to the entire United States population is scale; these are localized primary care provider organizations, not national health care institutions. Also, Community Health Plans deliver primary care at a lower cost than HMO’s although their history is briefer. The Obama public option would have the advantage of existing scale with the government already providing a number of health care services. The government is in a position to negotiate the largest discounts for supplies (theoretically) and prescriptions. Since insurance companies will be prohibited from dropping sick individuals from their plans and they will be required to accept all new applicants, there will be some attrition in the number of providers. Depending on your economic perspective, this is either an intended or unintended consequence of the policy change.
Medicare Reform
Obama’s plan expressly closes the gap in prescription drug coverage for seniors, called the donut hole, which is good. I also like his intent to improve quality and care coordination for Medicare recipients. Most of us will be on Medicare coverage someday and that is when we will experience our highest health care expenses. Since the costs for Medicare are escalating beyond sustainability, as a population we should be reviewing this program for efficiencies as a part of our national health care reform initiatives.
Things I would change in Medicare payments include the following:
-Establish an evidence based payment policy for orthopedic treatments (including hip transplants), that considers value delivered over life expectancy
-Tighten up on medical supply payments for motorized wheelchairs and other areas of abuse
-Optimize government purchasing power for the Medicare prescription program
-Stop paying for Viagra on Medicare (increases the risk of a cardiac event)
-Align reimbursements with optimized treatment protocols, which offer sound clinical results and affordable treatments
Finally, I would also institute a fee schedule for Medicare premiums based on earnings, which was voted down by the AARP years ago. Note to the AARP, look you are relying on the current taxpayers to finance your health care, and you are going to have to compromise a little. Be nice to the young people, we will need them when we are old.
My verdict on the Baucus Plan is that it is DOA, but it certainly contributes to an improved level of discussion on health care reforms, when someone else had the guts to reveal his plan. Like the Greek God of wine, Senator Baucus, I raise a glass to you.
This article was written by Roberta E. Winter, MHA, MPA and may be reprinted with her permission, 9/17/2009
Senator Baucus of Montana broke away from his committee to present his approach to a United States health care overhaul. His plan proposes a complicated series of benefit changes in Medicare/Medicaid, along with taxes on health care suppliers, employers, and individuals, depending on the health care scenario. It is like trying to look through depression era glass for the economy in this approach. First of all, I don’t think adding more taxes to an already expensive health care delivery system will make it less expensive. If anything, this type of proposal will drive more people into the government option Obama plan.
Both the Obama and Baucus health plans rely on the employer system for health care financing, as opposed to a program based on individuals selecting their health plan from regional cooperatives, with a tax credit allowance, and some employer allowance. I am often asked why we expect employers to provide health care in the USA and my only answer is, "because that is the way it is now." It would be interesting to hear what employers, both large and small think about their preferred level of contribution to health care for their workers. According to the Employee Benefit Research Institute’s 2009 Health Confidence Survey, 83% of their constituent’s support a public health option. An employer mandate for a national health plan gleans 75% support as well. This organization is a conservative, employer, and insurance based entity, so if this is what their subscribers are saying, Brunhilde has finished her aria, and the curtain is coming down on the current health care marketplace.
Similarities
Similarities between the Baucus and Obama plans include the following features: guaranteed ability to obtain coverage regardless of pre-existing conditions, less predatory pricing based on gender and age, and a reduction in the uninsured populations. These are all good mechanisms to get more people eligible to obtain treatment, so their medical conditions can be better managed and less expensive in the long run.
Differences
Baucus recommends the use of nonprofit health care purchasing cooperatives (Community Health Plans or Health Maintenance Plans), to meet the needs of the uninsured population. Does he mean HMO’s or CHP’s? The problem with spreading the cooperative method to the entire United States population is scale; these are localized primary care provider organizations, not national health care institutions. Also, Community Health Plans deliver primary care at a lower cost than HMO’s although their history is briefer. The Obama public option would have the advantage of existing scale with the government already providing a number of health care services. The government is in a position to negotiate the largest discounts for supplies (theoretically) and prescriptions. Since insurance companies will be prohibited from dropping sick individuals from their plans and they will be required to accept all new applicants, there will be some attrition in the number of providers. Depending on your economic perspective, this is either an intended or unintended consequence of the policy change.
Medicare Reform
Obama’s plan expressly closes the gap in prescription drug coverage for seniors, called the donut hole, which is good. I also like his intent to improve quality and care coordination for Medicare recipients. Most of us will be on Medicare coverage someday and that is when we will experience our highest health care expenses. Since the costs for Medicare are escalating beyond sustainability, as a population we should be reviewing this program for efficiencies as a part of our national health care reform initiatives.
Things I would change in Medicare payments include the following:
-Establish an evidence based payment policy for orthopedic treatments (including hip transplants), that considers value delivered over life expectancy
-Tighten up on medical supply payments for motorized wheelchairs and other areas of abuse
-Optimize government purchasing power for the Medicare prescription program
-Stop paying for Viagra on Medicare (increases the risk of a cardiac event)
-Align reimbursements with optimized treatment protocols, which offer sound clinical results and affordable treatments
Finally, I would also institute a fee schedule for Medicare premiums based on earnings, which was voted down by the AARP years ago. Note to the AARP, look you are relying on the current taxpayers to finance your health care, and you are going to have to compromise a little. Be nice to the young people, we will need them when we are old.
My verdict on the Baucus Plan is that it is DOA, but it certainly contributes to an improved level of discussion on health care reforms, when someone else had the guts to reveal his plan. Like the Greek God of wine, Senator Baucus, I raise a glass to you.
This article was written by Roberta E. Winter, MHA, MPA and may be reprinted with her permission, 9/17/2009
Thursday, September 3, 2009
Insurance is Not Health Care
To listen to the vitriol regarding health care reforms for Americans, you would think we were in the civil war again. I have noticed a number of trends in blogs and citizens meetings on health care reform and thought I needed to speak up.
Number one, insurance is not health care, it is a financing vehicle for people to pay for health care and this is available to approximately half of the United States population. In order to obtain "private health insurance" many conditions must exist such as:
1) The employer offers health care
2) The employee actually makes a living wage and can afford the premiums
3) A health insurance company serves their area and is accepted by clinicians and hospitals
4) The person is not disabled or otherwise uninsurable
5) Or an individual policy may be available in their region or rural locale
Obviously a lot of employers are not offering health insurance, which is representative of the "private health care system" we have now. As an example, I know someone who worked up to thirty-six hours a week for a nonprofit organization which refused to consider that fulltime employment, so they could exclude that employee from eligibility for the health plan. This represents a market failure in economic terms and thus encourages the government to step in to make up for private market lapses. This is an example of the abuse that happens everyday in business and why the Obama Administration is advocating a pay or play policy for employers. Yes, it is time that employers pay for health insurance or contribute into the regional pool for those workers.
Number two, it does matter when you access health care, because obtaining appropriate care in a timely manner not only saves lives, it saves society money. By refusing to provide basic health care to United States residents we are merely choosing to pay more later for manageable conditions. Examples of these are breast cancer, prostate cancer, prenatal care, hypertension, and diabetes. The current United States health policy, which does not provide fair and equitable access to primary care for all residents, is effectively saying we will pay more later for residents who have these conditions and defer treatment. For example, a young couple, in Arizona, did not have insurance when she became pregnant with twins, yet both of them had jobs. Consequently, she was not able to obtain optimal prenatal care, which resulted in a delay in diagnosis, with potentially tragic results. This lapse in treatment was not their fault, it reflects our shortsightedness as a people that we choose to pay the higher cost for our lack of effective treatment for those who need health care.
Number three, for those Rambo-types who think they can provide for their own health care on a pay-as-you-go basis, I would be willing to bet that you don’t have a chronic disease or a sick child or failing parent. All you have to do is look at the number of individual bankruptcies filed in this country for health reasons to understand the impact on people who were no longer able to pay. A person’s inability to afford health care is not some moral failing, it is a combination of poor health policy and opportunity or just plain bad luck.
Finally, all of the examples I gave have happened to someone in my family. I am sure the rest of you can think of similar examples in your families too. Can’t we put aside partisan differences and work together to improve health care access and delivery for everyone?
Number one, insurance is not health care, it is a financing vehicle for people to pay for health care and this is available to approximately half of the United States population. In order to obtain "private health insurance" many conditions must exist such as:
1) The employer offers health care
2) The employee actually makes a living wage and can afford the premiums
3) A health insurance company serves their area and is accepted by clinicians and hospitals
4) The person is not disabled or otherwise uninsurable
5) Or an individual policy may be available in their region or rural locale
Obviously a lot of employers are not offering health insurance, which is representative of the "private health care system" we have now. As an example, I know someone who worked up to thirty-six hours a week for a nonprofit organization which refused to consider that fulltime employment, so they could exclude that employee from eligibility for the health plan. This represents a market failure in economic terms and thus encourages the government to step in to make up for private market lapses. This is an example of the abuse that happens everyday in business and why the Obama Administration is advocating a pay or play policy for employers. Yes, it is time that employers pay for health insurance or contribute into the regional pool for those workers.
Number two, it does matter when you access health care, because obtaining appropriate care in a timely manner not only saves lives, it saves society money. By refusing to provide basic health care to United States residents we are merely choosing to pay more later for manageable conditions. Examples of these are breast cancer, prostate cancer, prenatal care, hypertension, and diabetes. The current United States health policy, which does not provide fair and equitable access to primary care for all residents, is effectively saying we will pay more later for residents who have these conditions and defer treatment. For example, a young couple, in Arizona, did not have insurance when she became pregnant with twins, yet both of them had jobs. Consequently, she was not able to obtain optimal prenatal care, which resulted in a delay in diagnosis, with potentially tragic results. This lapse in treatment was not their fault, it reflects our shortsightedness as a people that we choose to pay the higher cost for our lack of effective treatment for those who need health care.
Number three, for those Rambo-types who think they can provide for their own health care on a pay-as-you-go basis, I would be willing to bet that you don’t have a chronic disease or a sick child or failing parent. All you have to do is look at the number of individual bankruptcies filed in this country for health reasons to understand the impact on people who were no longer able to pay. A person’s inability to afford health care is not some moral failing, it is a combination of poor health policy and opportunity or just plain bad luck.
Finally, all of the examples I gave have happened to someone in my family. I am sure the rest of you can think of similar examples in your families too. Can’t we put aside partisan differences and work together to improve health care access and delivery for everyone?
Tuesday, August 18, 2009
Overhauling Healthcare Czarina Style
Overhauling Health Care Czarina Style
The United States is known for its wastefulness of consumer goods and energy resources but the excess in our health care system is beyond comparison by all global measures. It is incomprehensible that informed citizens would chose to squander our national resources given a reasonable choice. This dilemma was aptly cited as a national crisis in the National Academy of Sciences Report to President Bush. It is essential that the correct problems be addressed in order to solve resource allocation and equity of distribution in US health care. This analysis explores various perspectives and clarifies what elements have the greatest opportunity for sustained change in the US healthcare system.
Enhancing healthcare and delivering a more affordable product are not mutually exclusive. The polarization that occurs between the public and private healthcare camps only serves to undermine progress for better consumer outcomes. Sean Sullivan’s characterization of prescription drug coverage policies for Medicare patients was inaccurate and inflammatory. Several major insurers in Washington State offer Medicare supplement policies with open enrollment provisions, regardless of insurability annually. Coverage for prescriptions is offered under the contracts. University of Washington Professor Sullivan’s assertion that coverage was only offered by fly-by-night companies to insomniacs was incorrect. Additionally, his assessment that insurance companies put small pharmacists out of business was also inflamed by his personal ire. Insurance companies serve as third party administrators for their clients and they have a fiduciary obligation to provide the most attractive contracts for their clients. This means if they can negotiate an RX discount and offer lower drug prices from a Prescription drug wholesaler, they are going to strike a deal. It is not the responsibility of the insurance company (ies) to support drug stores, large or small. Business failure for any small business is common, because of reduced margins and flawed business plans, but other industries lack the convenience of uncontrollable health care costs for their business failure.
Public perception that everyone in health care is making a profit is grossly in error. Of the remaining insurance companies in the healthcare business, profits are uneven and inconsistent. Profits generated are from business linked to health care contracts, not from the administration of those contracts. Biotechnology companies are another industry in health care that is an extremely volatile sector. Many providers in health care operate on a not-for-profit basis, hospitals, clinics, and insurers. The only segments of health care that seem to be consistently profitable are the drug companies and medical supply companies. Politicians tend to attack industries for sound bites and voter approval rather than the more laborious work of regulatory reform. It is far easier to criticize the health care system and its components than it is to promulgate change.
Much debate ensues about the percentage of United States Health care that is publicly versus privately financed. This is a circular argument as in a democracy the public investment is paid for by private taxpayers. The focus should not be which sector is paying as much as how can we work together to do a better job of administering, selecting, and distributing health care in our country. In order to move forward on a system renovation we need to agree on what as a country, we do well in health care. Below is my list of excellence in health care within the USA:
Creating new technologies to treat specific diseases
Promoting popular healthful practices, like anti-smoking campaigns and dental hygiene
Innovation of health care administration over the world wide web
Minimal wait times for services
A wealth of resources spent on experimental procedures to prolong life
Fairness dictates agreement on what the United States does not do well and here is my selection for the dubious honor:
Cover all citizens
Provide affordable health care to all citizens, but especially in the private sector
Provide excellent pre-natal care regardless of economic circumstances
Judiciously spend money on treatment of viably challenged patients
Develop and distribute effective medical treatments to the population regardless of social demographics
Administer national health resources efficiently
Rather than arguing about whom pays for the present health care system, lets deescalate the situation by identifying what we as a nation agree on for good and poor outcomes and processes in the system. A nonpartisan group with broad representation from the healthcare industry, government, and academia need to work on creating a more efficient system. Polarizing the debate along political lines serves to delay any real reform. An atmosphere of respect would go a long way to gaining greater receptivity for trade offs in reform issues. Health care reform is by no means a win win situation for everybody. Instituting a national mandated health care program could produce the following winner and losers:
Winners
Uninsured
Employees of small employers
Not for Profit Hospitals/health care providers
Senior Citizens
Families
Losers
Small employers(depending on cost)
Unions (one less bargaining chip)
Drug companies
Single employees
This is by no means a complete list, but here is my rational for the categorizations.
Uninsured
First of all, the uninsured, estimated at forty two to forty eight million, would emerge as clear winners in a government mandated health care approach. The uninsured are made up of the unemployed and working citizens who do not have access to affordable healthcare but are not poor enough to be covered by Medicaid. It should also be noted that the nation would win in an indirect fashion by covering these members, as maintenance of health is less expensive to provide than emergency room care, often the only care mode available to this constituency. An additional tax or a reduction in tax spending in another area would be required to cover the uninsured, so to that extent the tax subsidizers would lose here. In my financial calculations of a single payer health system, I estimated it would cost twenty-eight dollars as of October 2002, per paycheck to cover the uninsured.
Employees working for Small Employers
Small employers are least able to pay for employee benefits and are less likely to subside family health care costs, so I believe employees of small employers would gain more from a nationally mandated proposal than their employers. Small businesses would fight this mandate tooth and nail with the prediction that millions of jobs would be lost due to the increased cost of the new tax. In truth, this would only adversely affect the employers who are not taking care of their employees. Other small employers may find the single payer plan to be less costly than current options and simpler administratively. For industries like farming, which employs a significant migrant worker population we would expect the price of food to increase in the USA or a reduction in local jobs in that industry.
Large Employers
I am defining large employers as those with 500 or more employees. It is my belief that these businesses would benefit from the simplicity of a single payer plan and the cost would not exceed what they are already paying. The existence of Leapfrogsuggests that large employers are very concerned about the present health care system of public private resources effectively managing health care. Large employers would also win because a mandated benefit would remove some of the power of unions to dictate benefits and costs to corporations. Conversely, I perceive the unions would lose because they would lose a bargaining chip. Labor unions are already suffering from lack of differentiation and loss in membership, so a national healthcare policy would only exacerbate the problem.
Hospitals
For purposes of analyzing the impact of a uniform adequately funded national healthcare program, I am only addressing hospital outcomes. Presently under the hodgepodge funding arrangement, hospitals are struggling to survive, especially in rural areas. With a guarantee of funding, assuming fair DRG schedules, stability would enhance this sector of the industry. It is possible for profit hospitals could lose some margin, but that would depend on how they marketed their services. A single payer system would not mandate that hospitals be not-for-profit. Ancillary services like cosmetic surgery could still be paid for on a private basis. Virginia Mason in Seattle Washington has an extensive cosmetic surgery business for example. Hospitals that have excellent outcomes could be selected as magnet facilities for certain procedures and may not have to spend as much money on promotion, so they could win as well. Hospitals with poor outcomes or redundant services would lose and potentially close in an economically efficient system. It would probably take years to achieve this result.
Senior Citizens and RX Use
Presently senior citizens spend about 25% of their income on prescription drug costs. There are several reasons for this hardship; drugs are a favored method of treatment in the USA, an aging population, and the high cost of prescriptions due to financing of research and corporate profits. If a single payer health care system were in place, the drug developers would not be able to charge whatever they want for medications. This would lower the cost to seniors and other RX users. Of course the well financing corporate darling drug companies, who have consistently produced profits of 20%, would lose in this proposal. Their argument would be we couldn’t finance research to save lives if we don’t have the ability to recoup our initial investment. Some would argue they would be forced to leave the USA to produce their products, so jobs would be lost. Still, because of the degree of education and expense in developing these biotech facilities, they are all near major academic medical centers, so it is doubtful all of the drug companies would leave. Finally, France is a major developer of new drug therapies, so invention is possible with a socialized heath care approach. Invention and public health are not mutually exclusive.
Families
One could argue that citizens with families would benefit more under a single payer government mandated health care approach than childless employees. Based on my calculations, the average increase in payroll tax would be seventy-two dollars per pay period, which is less than the cost of providing family health coverage in private employer plans. Most employees are paying several times that amount to cover their dependents for insurance. So, families would be clear winners. Childless citizens may argue they are not getting the requisite benefit, but the increase in payroll tax is no different than the subsidy of lower income retirees and widows with Social Security Benefits now. The SSI and Survivors benefits are disproportionately geared to provide a greater income replacement ratio to citizens earning less than the social security cap. In other words, a low-income worker will have a higher income replacement ratio than a higher earning worker.
Where do we go from here
The solution to get all of these disparate groups invested in the idea that a single payer reform is a viable idea is to be ready to bargain and offer some trade offs. My suggestion is don’t try to have the government take over everything, at least not initially. This would be politically explosive and untenable. I suggest that providers continue to operate in their current form, but the coalition of public and private interests decides on the mandated benefit levels and sets prices. So, the government lays the ground rules for what is acceptable. Doctors and hospitals can continue to operate in their current form, but without the billing hassles for reimbursement and greater economic security from tort reform and price regulations. I also suggest that all present forms of government provided healthcare stay the same, but with improved funding for the poor. However, the administration of all nongovernment health care plans would change in my proposal as health czar. I am advocating a government contract for private administration of a nationalized heath care program. This would appease the major insurance companies who have invested millions in infrastructure for claims payment systems and eliminate the weak organizations. It would allow private industry to raise capital for a paperless conversion for claims payment, with all citizens enjoying the benefit. I am envisioning regional health administrators, with perhaps seven regions in the United States. This would also give the citizens the security of knowing that everything wouldn’t change under a single payer proposal. By allowing all parties to be represented at the negotiating table we can invent a more efficient and equitable health care system in the USA. I believe we can achieve close to universal coverage and more affordable coverage for all with the integration of public and private resources.
This article was written by Roberta E. Winter, MHA, MPA in October 2007 and may be reprinted with her permission.
The United States is known for its wastefulness of consumer goods and energy resources but the excess in our health care system is beyond comparison by all global measures. It is incomprehensible that informed citizens would chose to squander our national resources given a reasonable choice. This dilemma was aptly cited as a national crisis in the National Academy of Sciences Report to President Bush. It is essential that the correct problems be addressed in order to solve resource allocation and equity of distribution in US health care. This analysis explores various perspectives and clarifies what elements have the greatest opportunity for sustained change in the US healthcare system.
Enhancing healthcare and delivering a more affordable product are not mutually exclusive. The polarization that occurs between the public and private healthcare camps only serves to undermine progress for better consumer outcomes. Sean Sullivan’s characterization of prescription drug coverage policies for Medicare patients was inaccurate and inflammatory. Several major insurers in Washington State offer Medicare supplement policies with open enrollment provisions, regardless of insurability annually. Coverage for prescriptions is offered under the contracts. University of Washington Professor Sullivan’s assertion that coverage was only offered by fly-by-night companies to insomniacs was incorrect. Additionally, his assessment that insurance companies put small pharmacists out of business was also inflamed by his personal ire. Insurance companies serve as third party administrators for their clients and they have a fiduciary obligation to provide the most attractive contracts for their clients. This means if they can negotiate an RX discount and offer lower drug prices from a Prescription drug wholesaler, they are going to strike a deal. It is not the responsibility of the insurance company (ies) to support drug stores, large or small. Business failure for any small business is common, because of reduced margins and flawed business plans, but other industries lack the convenience of uncontrollable health care costs for their business failure.
Public perception that everyone in health care is making a profit is grossly in error. Of the remaining insurance companies in the healthcare business, profits are uneven and inconsistent. Profits generated are from business linked to health care contracts, not from the administration of those contracts. Biotechnology companies are another industry in health care that is an extremely volatile sector. Many providers in health care operate on a not-for-profit basis, hospitals, clinics, and insurers. The only segments of health care that seem to be consistently profitable are the drug companies and medical supply companies. Politicians tend to attack industries for sound bites and voter approval rather than the more laborious work of regulatory reform. It is far easier to criticize the health care system and its components than it is to promulgate change.
Much debate ensues about the percentage of United States Health care that is publicly versus privately financed. This is a circular argument as in a democracy the public investment is paid for by private taxpayers. The focus should not be which sector is paying as much as how can we work together to do a better job of administering, selecting, and distributing health care in our country. In order to move forward on a system renovation we need to agree on what as a country, we do well in health care. Below is my list of excellence in health care within the USA:
Creating new technologies to treat specific diseases
Promoting popular healthful practices, like anti-smoking campaigns and dental hygiene
Innovation of health care administration over the world wide web
Minimal wait times for services
A wealth of resources spent on experimental procedures to prolong life
Fairness dictates agreement on what the United States does not do well and here is my selection for the dubious honor:
Cover all citizens
Provide affordable health care to all citizens, but especially in the private sector
Provide excellent pre-natal care regardless of economic circumstances
Judiciously spend money on treatment of viably challenged patients
Develop and distribute effective medical treatments to the population regardless of social demographics
Administer national health resources efficiently
Rather than arguing about whom pays for the present health care system, lets deescalate the situation by identifying what we as a nation agree on for good and poor outcomes and processes in the system. A nonpartisan group with broad representation from the healthcare industry, government, and academia need to work on creating a more efficient system. Polarizing the debate along political lines serves to delay any real reform. An atmosphere of respect would go a long way to gaining greater receptivity for trade offs in reform issues. Health care reform is by no means a win win situation for everybody. Instituting a national mandated health care program could produce the following winner and losers:
Winners
Uninsured
Employees of small employers
Not for Profit Hospitals/health care providers
Senior Citizens
Families
Losers
Small employers(depending on cost)
Unions (one less bargaining chip)
Drug companies
Single employees
This is by no means a complete list, but here is my rational for the categorizations.
Uninsured
First of all, the uninsured, estimated at forty two to forty eight million, would emerge as clear winners in a government mandated health care approach. The uninsured are made up of the unemployed and working citizens who do not have access to affordable healthcare but are not poor enough to be covered by Medicaid. It should also be noted that the nation would win in an indirect fashion by covering these members, as maintenance of health is less expensive to provide than emergency room care, often the only care mode available to this constituency. An additional tax or a reduction in tax spending in another area would be required to cover the uninsured, so to that extent the tax subsidizers would lose here. In my financial calculations of a single payer health system, I estimated it would cost twenty-eight dollars as of October 2002, per paycheck to cover the uninsured.
Employees working for Small Employers
Small employers are least able to pay for employee benefits and are less likely to subside family health care costs, so I believe employees of small employers would gain more from a nationally mandated proposal than their employers. Small businesses would fight this mandate tooth and nail with the prediction that millions of jobs would be lost due to the increased cost of the new tax. In truth, this would only adversely affect the employers who are not taking care of their employees. Other small employers may find the single payer plan to be less costly than current options and simpler administratively. For industries like farming, which employs a significant migrant worker population we would expect the price of food to increase in the USA or a reduction in local jobs in that industry.
Large Employers
I am defining large employers as those with 500 or more employees. It is my belief that these businesses would benefit from the simplicity of a single payer plan and the cost would not exceed what they are already paying. The existence of Leapfrogsuggests that large employers are very concerned about the present health care system of public private resources effectively managing health care. Large employers would also win because a mandated benefit would remove some of the power of unions to dictate benefits and costs to corporations. Conversely, I perceive the unions would lose because they would lose a bargaining chip. Labor unions are already suffering from lack of differentiation and loss in membership, so a national healthcare policy would only exacerbate the problem.
Hospitals
For purposes of analyzing the impact of a uniform adequately funded national healthcare program, I am only addressing hospital outcomes. Presently under the hodgepodge funding arrangement, hospitals are struggling to survive, especially in rural areas. With a guarantee of funding, assuming fair DRG schedules, stability would enhance this sector of the industry. It is possible for profit hospitals could lose some margin, but that would depend on how they marketed their services. A single payer system would not mandate that hospitals be not-for-profit. Ancillary services like cosmetic surgery could still be paid for on a private basis. Virginia Mason in Seattle Washington has an extensive cosmetic surgery business for example. Hospitals that have excellent outcomes could be selected as magnet facilities for certain procedures and may not have to spend as much money on promotion, so they could win as well. Hospitals with poor outcomes or redundant services would lose and potentially close in an economically efficient system. It would probably take years to achieve this result.
Senior Citizens and RX Use
Presently senior citizens spend about 25% of their income on prescription drug costs. There are several reasons for this hardship; drugs are a favored method of treatment in the USA, an aging population, and the high cost of prescriptions due to financing of research and corporate profits. If a single payer health care system were in place, the drug developers would not be able to charge whatever they want for medications. This would lower the cost to seniors and other RX users. Of course the well financing corporate darling drug companies, who have consistently produced profits of 20%, would lose in this proposal. Their argument would be we couldn’t finance research to save lives if we don’t have the ability to recoup our initial investment. Some would argue they would be forced to leave the USA to produce their products, so jobs would be lost. Still, because of the degree of education and expense in developing these biotech facilities, they are all near major academic medical centers, so it is doubtful all of the drug companies would leave. Finally, France is a major developer of new drug therapies, so invention is possible with a socialized heath care approach. Invention and public health are not mutually exclusive.
Families
One could argue that citizens with families would benefit more under a single payer government mandated health care approach than childless employees. Based on my calculations, the average increase in payroll tax would be seventy-two dollars per pay period, which is less than the cost of providing family health coverage in private employer plans. Most employees are paying several times that amount to cover their dependents for insurance. So, families would be clear winners. Childless citizens may argue they are not getting the requisite benefit, but the increase in payroll tax is no different than the subsidy of lower income retirees and widows with Social Security Benefits now. The SSI and Survivors benefits are disproportionately geared to provide a greater income replacement ratio to citizens earning less than the social security cap. In other words, a low-income worker will have a higher income replacement ratio than a higher earning worker.
Where do we go from here
The solution to get all of these disparate groups invested in the idea that a single payer reform is a viable idea is to be ready to bargain and offer some trade offs. My suggestion is don’t try to have the government take over everything, at least not initially. This would be politically explosive and untenable. I suggest that providers continue to operate in their current form, but the coalition of public and private interests decides on the mandated benefit levels and sets prices. So, the government lays the ground rules for what is acceptable. Doctors and hospitals can continue to operate in their current form, but without the billing hassles for reimbursement and greater economic security from tort reform and price regulations. I also suggest that all present forms of government provided healthcare stay the same, but with improved funding for the poor. However, the administration of all nongovernment health care plans would change in my proposal as health czar. I am advocating a government contract for private administration of a nationalized heath care program. This would appease the major insurance companies who have invested millions in infrastructure for claims payment systems and eliminate the weak organizations. It would allow private industry to raise capital for a paperless conversion for claims payment, with all citizens enjoying the benefit. I am envisioning regional health administrators, with perhaps seven regions in the United States. This would also give the citizens the security of knowing that everything wouldn’t change under a single payer proposal. By allowing all parties to be represented at the negotiating table we can invent a more efficient and equitable health care system in the USA. I believe we can achieve close to universal coverage and more affordable coverage for all with the integration of public and private resources.
This article was written by Roberta E. Winter, MHA, MPA in October 2007 and may be reprinted with her permission.
Wednesday, November 5, 2008
2008 Election Recap
Wow! Eighty percent of registered voters in Washington State showed up at the polls yesterday. The 2008 elections were a Republican’s nightmare, since high voter turn out typically means higher Democratic voters. America saw record numbers of voters across the country. Especially heart warming was the increase in new voter registration. As someone who has never missed a presidential election, I applaud this improvement in public participation in our democracy.
There were a number of issues that I blogged on in the past year, which were impacted by yesterday’s election(s). Here are the highlights:
Death with Dignity Approved
Former Governor Booth Gardner’s Death with Dignity Initiative in Washington State was approved with a 58% majority. This means that terminally ill patients, who obtain at least two medical opinions, can elect to end their suffering with the administration of lethal drugs.
McCain defeated
Senator McCain’s health care platform to eliminate the tax-free nature of employer provided health care through an individual health care credit program hit a sour note with the public. As I predicted in May, this health policy approach contributed to his defeat by freshman Senator Barak Obama.
Obama’s Health Care Platform
President elect Obama favors a "play or pay" approach for employers to provide health insurance coverage to all employees. Large employers would be required to offer health insurance to their workers or else they would be assessed a tax of 6% of payroll, which would go into a health care purchasing fund. Small employers would receive federal assistance to obtain health care for their workers, through regional purchasing cooperatives. Barak’s plan is to keep the public/private partnership we now have for health care, but to strengthen efficiencies and improve quality. He is an advocate of renegotiating Medicare prescription drugs under one federal contract, which would lower the cost of prescription medications for seniors. The pharmaceutical industry is most assuredly gearing up for heavy lobbying in Washington. Though President elect Obama does not favor mandating health insurance, his plan does include a series of provisions that would help millions more Americans have access to health care. This process will alleviate some of the pressure on hospitals, which have been burdened with the lion’s share of unfunded care.
Rossi Defeated
The impetus for my original blog was Washington State gubernatorial candidate, Dino Rossi’s lack of support for basic health care for poor children under the federal SCHIP expansion last year. Democratic Governor Christine Gregoire, a strong supporter of health care subsidies for the needy, defeated Mr. Rossi. Governor Gregoire expanded primary health care for poor children in Washington State under her first term and we can all breathe a sigh of relief this will not be undercut.
In conclusion, the public has spoken and it does see a role for government support and advocacy for its citizens, which is a reversal of the Bush Administration’s policies. Let us not forget to look at improving health care delivery efficiencies, not the least of which include the over use of technology and renegotiating Medicare drug coverage. At least with Mr.Obama we have someone who will listen to all parties before making decisions.
This article was written by Roberta E. Winter, MHA, MPA and may be reprinted with her permission.
There were a number of issues that I blogged on in the past year, which were impacted by yesterday’s election(s). Here are the highlights:
Death with Dignity Approved
Former Governor Booth Gardner’s Death with Dignity Initiative in Washington State was approved with a 58% majority. This means that terminally ill patients, who obtain at least two medical opinions, can elect to end their suffering with the administration of lethal drugs.
McCain defeated
Senator McCain’s health care platform to eliminate the tax-free nature of employer provided health care through an individual health care credit program hit a sour note with the public. As I predicted in May, this health policy approach contributed to his defeat by freshman Senator Barak Obama.
Obama’s Health Care Platform
President elect Obama favors a "play or pay" approach for employers to provide health insurance coverage to all employees. Large employers would be required to offer health insurance to their workers or else they would be assessed a tax of 6% of payroll, which would go into a health care purchasing fund. Small employers would receive federal assistance to obtain health care for their workers, through regional purchasing cooperatives. Barak’s plan is to keep the public/private partnership we now have for health care, but to strengthen efficiencies and improve quality. He is an advocate of renegotiating Medicare prescription drugs under one federal contract, which would lower the cost of prescription medications for seniors. The pharmaceutical industry is most assuredly gearing up for heavy lobbying in Washington. Though President elect Obama does not favor mandating health insurance, his plan does include a series of provisions that would help millions more Americans have access to health care. This process will alleviate some of the pressure on hospitals, which have been burdened with the lion’s share of unfunded care.
Rossi Defeated
The impetus for my original blog was Washington State gubernatorial candidate, Dino Rossi’s lack of support for basic health care for poor children under the federal SCHIP expansion last year. Democratic Governor Christine Gregoire, a strong supporter of health care subsidies for the needy, defeated Mr. Rossi. Governor Gregoire expanded primary health care for poor children in Washington State under her first term and we can all breathe a sigh of relief this will not be undercut.
In conclusion, the public has spoken and it does see a role for government support and advocacy for its citizens, which is a reversal of the Bush Administration’s policies. Let us not forget to look at improving health care delivery efficiencies, not the least of which include the over use of technology and renegotiating Medicare drug coverage. At least with Mr.Obama we have someone who will listen to all parties before making decisions.
This article was written by Roberta E. Winter, MHA, MPA and may be reprinted with her permission.
Sunday, May 4, 2008
McCain Seeks to Eliminate Employer Health Plans
Presidential Candidate John McCain presented his healthcare reform ideas on April 30th, to a Tampa, Florida audience. True to his style, Senator McCain has taken a polarizing approach to health care reforms, by seeking to eliminate private employers from the provision of health care in America.
Here are the highlights of his reform ideas:
1. McCain would eliminate the tax preference for employer provided health insurance. Instead of a tax deduction for private employers to provide health insurance, he would offer a tax credit to taxpayer households, $2,500 for individuals and $5,000 for a family.
2. Individuals would purchase health insurance plans on the open market(s).
3. A guaranteed access plan would be available to all, even the unhealthy, whom private insurers would seek to exclude from coverage.
4. He is not in favor of a national health care plan.
5. He would encourage support of health savings accounts.
6. McCain seeks to reform Medicare reimbursements by bundling payments to physicians by disease or diagnosis.
7. Like everyone else, he encourages the proliferation of electronic medical records.
Analysis
Though private employers provide less than half of all the health care for USA residents, a disproportionate share of funding for health care services comes from the private sector. This discrepancy is partially due to the significant uninsured population in the country, which accesses health care through hospitals, thus causing those providers to increase their charges for paying customers, to make up for unreimbursed care. Additionally, government programs like Medicaid and to a lesser extent, Medicare, do not fully reimburse health care providers for their costs, which increases the burden of healthcare financing to the private sector health care system. Senator McCain, by removing the economic incentive for employers to provide health care, will encourage employers to cease providing group medical insurance. The spread of risk over large employer and collectively bargained groups at least provides some stability to the private health care system, which would be jeopardized by his individual market based approach.
McCain has stated that insurers have been taking advantage of healthcare consumers and by creating an individual health care purchasing climate, citizens will be better off, through increased competition in the private insurance marketplace. Need I remind him of the Medicare HMO debacle when the government provided incentives to insurance companies to recruit Medicare applicants to their HMO plans? In this scenario, enterprising insurance companies thought they could profit by insuring Medicare customers on the government’s capitated reimbursement formula only to realize they couldn’t manage the risks. All but a handful of insurers subsequently dumped their customers back into the marketplace, forcing retirees with chronic conditions to change providers yet again. Consumers were not better off with the marketplace approach to care; they were disrupted, in some cases jeopardizing their health. The insurers found managing the population was more difficult than they had anticipated. Though McCain’s health care reforms do not address Medicare, one wonders how an individualized health insurance purchasing market would improve care and reduce cost for individuals and families. One of the basic tenants of risk management is adhering to the "law of large numbers", which means we are better off pooling our resources in fewer large groups than splintered smaller ones. McCain’s health care platform does not seem to support the spread of risk over large populations, but rather "cherry picking" by smaller entrepreneurial insurance companies.
In terms of optimizing government purchasing, his plan adds complexity to the current regulatory climate for health insurance, by creating more entry points for health care initiation. One of the problems with efficient health care delivery in the United States is the variance in administration by virtue of 50 different insurance commissioner’s and their policies on health care underwriting, financial reporting, and administrative oversight. This would seem to be exacerbated by increased variables in his healthcare reform proposal. An open market for individual health care purchasing would increase complexity over the current employer driven marketplace, in terms of communication to households as well. If we consider the different educational levels of individuals, not to mention language barriers, how would this be handled efficiently and efficaciously?
Senator McCain’s ideas to change the Medicare reimbursement process by bundling per case have merit, because managing a patient with chronic disease should be done on a macro basis, not per line item for each transaction. Of course, accommodating patient acuity and cost-of-living factors into reimbursements for disease management would be key to fairness. No mention is made of how Senator McCain would align reimbursement with desired outcomes.
Guaranteed Access to Health Insurance is already provided in some states, like Washington, where the risk pool for individuals who can’t get health insurance through individual markets is managed by the state. The problem with this approach is the cost of the health care is prohibitively expensive for many people, yet these individuals are not poor enough to qualify for the state’s Basic Health Plan or Medicaid programs. McCain provides no specifics on how the federal government would address these concerns, other than to say he would work with the individual states.
The healthpolicymaven believes Senator McCain will experience fierce opposition from union representatives, the insurance industry, and many large employers. Once an organized media campaign is financed by these stakeholders, his health plan and maybe his presidential aspirations will go the way of Clinton’s first term national health plan. I am also betting voters won’t want to lose their employer health plans without a much clearer idea of what they will be getting from Mr. McCain and his advisors, one of whom is Carly (the hammer) Fiorina.
Here are the highlights of his reform ideas:
1. McCain would eliminate the tax preference for employer provided health insurance. Instead of a tax deduction for private employers to provide health insurance, he would offer a tax credit to taxpayer households, $2,500 for individuals and $5,000 for a family.
2. Individuals would purchase health insurance plans on the open market(s).
3. A guaranteed access plan would be available to all, even the unhealthy, whom private insurers would seek to exclude from coverage.
4. He is not in favor of a national health care plan.
5. He would encourage support of health savings accounts.
6. McCain seeks to reform Medicare reimbursements by bundling payments to physicians by disease or diagnosis.
7. Like everyone else, he encourages the proliferation of electronic medical records.
Analysis
Though private employers provide less than half of all the health care for USA residents, a disproportionate share of funding for health care services comes from the private sector. This discrepancy is partially due to the significant uninsured population in the country, which accesses health care through hospitals, thus causing those providers to increase their charges for paying customers, to make up for unreimbursed care. Additionally, government programs like Medicaid and to a lesser extent, Medicare, do not fully reimburse health care providers for their costs, which increases the burden of healthcare financing to the private sector health care system. Senator McCain, by removing the economic incentive for employers to provide health care, will encourage employers to cease providing group medical insurance. The spread of risk over large employer and collectively bargained groups at least provides some stability to the private health care system, which would be jeopardized by his individual market based approach.
McCain has stated that insurers have been taking advantage of healthcare consumers and by creating an individual health care purchasing climate, citizens will be better off, through increased competition in the private insurance marketplace. Need I remind him of the Medicare HMO debacle when the government provided incentives to insurance companies to recruit Medicare applicants to their HMO plans? In this scenario, enterprising insurance companies thought they could profit by insuring Medicare customers on the government’s capitated reimbursement formula only to realize they couldn’t manage the risks. All but a handful of insurers subsequently dumped their customers back into the marketplace, forcing retirees with chronic conditions to change providers yet again. Consumers were not better off with the marketplace approach to care; they were disrupted, in some cases jeopardizing their health. The insurers found managing the population was more difficult than they had anticipated. Though McCain’s health care reforms do not address Medicare, one wonders how an individualized health insurance purchasing market would improve care and reduce cost for individuals and families. One of the basic tenants of risk management is adhering to the "law of large numbers", which means we are better off pooling our resources in fewer large groups than splintered smaller ones. McCain’s health care platform does not seem to support the spread of risk over large populations, but rather "cherry picking" by smaller entrepreneurial insurance companies.
In terms of optimizing government purchasing, his plan adds complexity to the current regulatory climate for health insurance, by creating more entry points for health care initiation. One of the problems with efficient health care delivery in the United States is the variance in administration by virtue of 50 different insurance commissioner’s and their policies on health care underwriting, financial reporting, and administrative oversight. This would seem to be exacerbated by increased variables in his healthcare reform proposal. An open market for individual health care purchasing would increase complexity over the current employer driven marketplace, in terms of communication to households as well. If we consider the different educational levels of individuals, not to mention language barriers, how would this be handled efficiently and efficaciously?
Senator McCain’s ideas to change the Medicare reimbursement process by bundling per case have merit, because managing a patient with chronic disease should be done on a macro basis, not per line item for each transaction. Of course, accommodating patient acuity and cost-of-living factors into reimbursements for disease management would be key to fairness. No mention is made of how Senator McCain would align reimbursement with desired outcomes.
Guaranteed Access to Health Insurance is already provided in some states, like Washington, where the risk pool for individuals who can’t get health insurance through individual markets is managed by the state. The problem with this approach is the cost of the health care is prohibitively expensive for many people, yet these individuals are not poor enough to qualify for the state’s Basic Health Plan or Medicaid programs. McCain provides no specifics on how the federal government would address these concerns, other than to say he would work with the individual states.
The healthpolicymaven believes Senator McCain will experience fierce opposition from union representatives, the insurance industry, and many large employers. Once an organized media campaign is financed by these stakeholders, his health plan and maybe his presidential aspirations will go the way of Clinton’s first term national health plan. I am also betting voters won’t want to lose their employer health plans without a much clearer idea of what they will be getting from Mr. McCain and his advisors, one of whom is Carly (the hammer) Fiorina.
Monday, February 11, 2008
Assessing the Real Cost of Health Care in America
Assessing the Real Cost of Health Care in America
We can’t measure the real cost of any public program, unless we consider the economic factors, such as opportunity cost, which is the cost of spending excessive resources on health care that could otherwise go to something else. In order to do this, lets look at what other industrialized countries have in per capita income and what they are spending for health care. Based on 2006 income data the United States is no longer the wealthiest country per capita. Norway is the wealthiest country with $53,100 dollars of gross national income per person, compared to the USA’s $44,200 per person. Ireland is third with an income of $41,300 per person. What is interesting is both of these countries have national health care plans and higher taxes than in the United States. When you compare spending on health care, citing the Journal of Health Affairs article published in June of 2004, Norway spent $2,920 per person compared to the United States $4,487 per person, and Ireland spent $1,935. Even Switzerland, with its high cost of living and land locked economy, spent considerably less than the United States, at $3,322 per person in that year.
Cost of USA Healthcare Impedes Economic Growth
Health care costs are frequently measured against Gross Domestic Product, which is the sum of what we produce in the United States. As a former farmer’s daughter, I grew up owning the ethos that we are what we produce. Gross domestic product per person is also greater in Norway than in the U.S.A., with $102,400 per person versus $90,700. (Ireland’s GDP is not on the top 13 list, so I have not listed it.) Even when you look at GDP per hour worked, the United States is not in the top three. Here is that breakdown; Norway $72.70/person/hr., Belgium $56.10/person/hr., Netherlands $52.10/person/hr., France $51.30/person/hr. and then the United States with $50.60/person/hr. There are a variety of ways to measure the value of a gross domestic product, such as per person per hour worked or just per person, but either way, the United States is no longer preeminent in GDP. When you couple that with the loss of the dollar in value throughout the world, (the Euro is worth 50% more than the U.S. dollar now), the cost of America’s existing health care system must be examined as an impediment to real economic growth.
USA Spending on Health Care
The argument against a cohesive national health care plan is often based on the presumption that financing national health care would be excessive, but in fact, all of the countries that have national health care programs spend less than the United States. It is time we as a nation look at what we are getting for our health care investment. Lets review the current financing mechanisms for health care in this country, including; federal programs, employer sponsored health care plans, and individually funded health care. Citing the most recent Kaiser Foundation reports for health care spending here is the breakdown for the United States Health Care Budget excluding Medicare:
Medicaid- (05 data)- $4,202 per individual
SCHIP Medicaid (05 data)-$-1,509 per child
Employer Plans (06 survey)-$4,479 per individual
$12,206 per family
Individual Plans (04 data)-$3,331
Determine What We Are Getting
No matter how you look at health costs in the United States, we are spending much more than any other industrialized country. Using this comparison of current health care programs and their costs, the reader should conclude they have a minimum budget of $3,397 per person for health care. As a society we need to determine the best way to finance our health care, which is already paid for by the individual through taxes, direct contributions, and increased costs in goods and services to cover corporate benefit programs. The question on the lips of everyone then becomes "What am I getting, not just what is the cost of the program."
Assessing Hidden Costs
To reveal the true cost of any program you have to do a solid cost/benefit analysis, which takes into account hidden costs like pass-through expenses for inadequate reimbursements to clinicians. An example of a hidden cost is when Medicaid fails to adequately pay hospitals or physicians for services, thereby requiring those providers to recoup higher fees from other patients in order to stay solvent. Other hidden costs include re-insurance for catastrophic claims for private plans, which the government could subsidize through a stop-loss guarantee and save employers about 5% in administrative expenses. Other areas of expense include plan administration and claims payment, which could be streamlined by requiring regional health care organizations to offer uniform benefits, and standardized claims processing. This could generate another savings of 3% to 6%. This combination of changes then creates the budget for allocating health care benefits, such as covering everyone for primary care.
Budgeting National Health Care
I did a quick calculation on how our health care investment, which averages $3,758 per person (excluding Medicare), compares to the average USA wage, and it is 7.68% of the average wage. So, if employers were going to continue to contribute to the cost of national health care, their share would be about half of that, or close to 4% of wages. This could be paid by contributions to a mandated benefit plan or through a payroll tax increase, but I am betting employers would rather contribute to a health plan than pay more taxes. Individuals would pay half of that figure also. For people who are of low income, the federal government would subsidize their cost. In this way we would have the start of an equitable health care financing system, where the budget is transparent, and inclusive of everyone. So, the next time you hear someone talking about health care costs, make sure you consider the whole picture, not just the insurance premium and not just the tax contribution.
This article was written by Roberta Winter, MHA, MPA and may be reprinted with her permission.
Recap on Presidential Candidate Health Care Reform Platforms
Deciphering Health Care Reform Platforms
This is part four in a series on the health care reforms as stated by Clinton, McCain, and Obama. I review wage and tax, as well as Medicaid and private health plan cost data. Briefly here are the summaries of the candidate health care reforms:
Clinton
Would extend health coverage to all residents through a combination of Medicaid/SCHIP expansion, employer mandates, and federal subsidies. Clinton would allow U.S.A. residents to enroll in the Federal Employees Health Benefits Plan if they do not have employer-sponsored coverage.
Who Pays
Clinton would require large employers to offer health insurance to their employees. She would also require residents to have health insurance. Clinton would limit tax cuts for taxpayers with incomes over $250,000 per year and use the revenue generated to pay for the federal subsidies for health care, like Medicaid expansion. She also estimates a reduction in expenses for payments to hospitals for the uninsured, probably through reduction in disproportionate share reimbursements.
McCain
McCain would not extend health coverage to all residents, but he would expand Veterans Benefits.
Who Pays
McCain want to change clinician reimbursements through the creation of a single fee for coordinated patient care, as opposed to the current DRG reimbursement based on billing per item. This reimbursement might benefit primary care providers more and possibly specialists who work with chronic diseases, like diabetes. It may not be to the benefit of all physicians however as some current reimbursements would either be eliminated or reduced. He indicates he would reform the tax code, including the elimination of tax preferences for employer paid health benefits. He would also provide a tax credit for individuals to obtain health insurance. He advocates medical savings accounts and high limit catastrophic insurance coverage with multi-year contracts.
Obama
Obama would require all children to have health insurance or to be covered on the Supplemental Childrens Health Insurance Plan, SCHIP. He would also require employers to offer health insurance coverage or to contribute to the cost of the public health plan alternative. Obama does support mental health parity, which would be a big plus for hospitals, who are the refuge for the mentally ill who can’t obtain other treatment. Obama would offer to federal reinsurance to employers, to protect them from significant medical claims. This provision would be very attractive to employers who are currently struggling with an unstable re-insurance marketplace.
Who Pays
Employers would be required to pay for the cost of health insurance under the Obama plan. Obama would also discontinue tax cuts to those with incomes over $250,000/year. He has not specifically identified revenue recapture under projected savings for health care reforms, but he does talk about gains through efficiencies.
We can’t measure the real cost of any public program, unless we consider the economic factors, such as opportunity cost, which is the cost of spending excessive resources on health care that could otherwise go to something else. In order to do this, lets look at what other industrialized countries have in per capita income and what they are spending for health care. Based on 2006 income data the United States is no longer the wealthiest country per capita. Norway is the wealthiest country with $53,100 dollars of gross national income per person, compared to the USA’s $44,200 per person. Ireland is third with an income of $41,300 per person. What is interesting is both of these countries have national health care plans and higher taxes than in the United States. When you compare spending on health care, citing the Journal of Health Affairs article published in June of 2004, Norway spent $2,920 per person compared to the United States $4,487 per person, and Ireland spent $1,935. Even Switzerland, with its high cost of living and land locked economy, spent considerably less than the United States, at $3,322 per person in that year.
Cost of USA Healthcare Impedes Economic Growth
Health care costs are frequently measured against Gross Domestic Product, which is the sum of what we produce in the United States. As a former farmer’s daughter, I grew up owning the ethos that we are what we produce. Gross domestic product per person is also greater in Norway than in the U.S.A., with $102,400 per person versus $90,700. (Ireland’s GDP is not on the top 13 list, so I have not listed it.) Even when you look at GDP per hour worked, the United States is not in the top three. Here is that breakdown; Norway $72.70/person/hr., Belgium $56.10/person/hr., Netherlands $52.10/person/hr., France $51.30/person/hr. and then the United States with $50.60/person/hr. There are a variety of ways to measure the value of a gross domestic product, such as per person per hour worked or just per person, but either way, the United States is no longer preeminent in GDP. When you couple that with the loss of the dollar in value throughout the world, (the Euro is worth 50% more than the U.S. dollar now), the cost of America’s existing health care system must be examined as an impediment to real economic growth.
USA Spending on Health Care
The argument against a cohesive national health care plan is often based on the presumption that financing national health care would be excessive, but in fact, all of the countries that have national health care programs spend less than the United States. It is time we as a nation look at what we are getting for our health care investment. Lets review the current financing mechanisms for health care in this country, including; federal programs, employer sponsored health care plans, and individually funded health care. Citing the most recent Kaiser Foundation reports for health care spending here is the breakdown for the United States Health Care Budget excluding Medicare:
Medicaid- (05 data)- $4,202 per individual
SCHIP Medicaid (05 data)-$-1,509 per child
Employer Plans (06 survey)-$4,479 per individual
$12,206 per family
Individual Plans (04 data)-$3,331
Determine What We Are Getting
No matter how you look at health costs in the United States, we are spending much more than any other industrialized country. Using this comparison of current health care programs and their costs, the reader should conclude they have a minimum budget of $3,397 per person for health care. As a society we need to determine the best way to finance our health care, which is already paid for by the individual through taxes, direct contributions, and increased costs in goods and services to cover corporate benefit programs. The question on the lips of everyone then becomes "What am I getting, not just what is the cost of the program."
Assessing Hidden Costs
To reveal the true cost of any program you have to do a solid cost/benefit analysis, which takes into account hidden costs like pass-through expenses for inadequate reimbursements to clinicians. An example of a hidden cost is when Medicaid fails to adequately pay hospitals or physicians for services, thereby requiring those providers to recoup higher fees from other patients in order to stay solvent. Other hidden costs include re-insurance for catastrophic claims for private plans, which the government could subsidize through a stop-loss guarantee and save employers about 5% in administrative expenses. Other areas of expense include plan administration and claims payment, which could be streamlined by requiring regional health care organizations to offer uniform benefits, and standardized claims processing. This could generate another savings of 3% to 6%. This combination of changes then creates the budget for allocating health care benefits, such as covering everyone for primary care.
Budgeting National Health Care
I did a quick calculation on how our health care investment, which averages $3,758 per person (excluding Medicare), compares to the average USA wage, and it is 7.68% of the average wage. So, if employers were going to continue to contribute to the cost of national health care, their share would be about half of that, or close to 4% of wages. This could be paid by contributions to a mandated benefit plan or through a payroll tax increase, but I am betting employers would rather contribute to a health plan than pay more taxes. Individuals would pay half of that figure also. For people who are of low income, the federal government would subsidize their cost. In this way we would have the start of an equitable health care financing system, where the budget is transparent, and inclusive of everyone. So, the next time you hear someone talking about health care costs, make sure you consider the whole picture, not just the insurance premium and not just the tax contribution.
This article was written by Roberta Winter, MHA, MPA and may be reprinted with her permission.
Recap on Presidential Candidate Health Care Reform Platforms
Deciphering Health Care Reform Platforms
This is part four in a series on the health care reforms as stated by Clinton, McCain, and Obama. I review wage and tax, as well as Medicaid and private health plan cost data. Briefly here are the summaries of the candidate health care reforms:
Clinton
Would extend health coverage to all residents through a combination of Medicaid/SCHIP expansion, employer mandates, and federal subsidies. Clinton would allow U.S.A. residents to enroll in the Federal Employees Health Benefits Plan if they do not have employer-sponsored coverage.
Who Pays
Clinton would require large employers to offer health insurance to their employees. She would also require residents to have health insurance. Clinton would limit tax cuts for taxpayers with incomes over $250,000 per year and use the revenue generated to pay for the federal subsidies for health care, like Medicaid expansion. She also estimates a reduction in expenses for payments to hospitals for the uninsured, probably through reduction in disproportionate share reimbursements.
McCain
McCain would not extend health coverage to all residents, but he would expand Veterans Benefits.
Who Pays
McCain want to change clinician reimbursements through the creation of a single fee for coordinated patient care, as opposed to the current DRG reimbursement based on billing per item. This reimbursement might benefit primary care providers more and possibly specialists who work with chronic diseases, like diabetes. It may not be to the benefit of all physicians however as some current reimbursements would either be eliminated or reduced. He indicates he would reform the tax code, including the elimination of tax preferences for employer paid health benefits. He would also provide a tax credit for individuals to obtain health insurance. He advocates medical savings accounts and high limit catastrophic insurance coverage with multi-year contracts.
Obama
Obama would require all children to have health insurance or to be covered on the Supplemental Childrens Health Insurance Plan, SCHIP. He would also require employers to offer health insurance coverage or to contribute to the cost of the public health plan alternative. Obama does support mental health parity, which would be a big plus for hospitals, who are the refuge for the mentally ill who can’t obtain other treatment. Obama would offer to federal reinsurance to employers, to protect them from significant medical claims. This provision would be very attractive to employers who are currently struggling with an unstable re-insurance marketplace.
Who Pays
Employers would be required to pay for the cost of health insurance under the Obama plan. Obama would also discontinue tax cuts to those with incomes over $250,000/year. He has not specifically identified revenue recapture under projected savings for health care reforms, but he does talk about gains through efficiencies.
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