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:
Employees of small employers
Not for Profit Hospitals/health care providers
Small employers(depending on cost)
Unions (one less bargaining chip)
This is by no means a complete list, but here is my rational for the categorizations.
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.
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.
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.
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.