Articles
Health Care Reform FAQs
by David Allen
The Independence Party of Minnesota is often described as socially inclusive and fiscally conservative. In the national health care debate, Democrats are advancing reform proposals and Republicans are opposing them. As the rhetoric has grown more heated, exaggerations and half-truths are increasingly eclipsing rational discussion. This article addresses the substantive health care issues in the format of most Frequently Asked Questions (“FAQs”):
Do we really need to fix health care?
Yes. As socially responsible people, we need to do something about a health care system that is directly responsible for 500,000 personal bankruptcies per year. Also, there are millions of Americans who would like health insurance, but are unable to find or afford coverage. As fiscally responsible people, we need to do something about the Medicare system which is projected to exceed the ability of the federal government to pay for it with the next 10 years. Also, it is appropriate for the government to address issues that cause the health care market to operate inefficiently and to treat consumers unfairly.
Is health care quality a problem?
Quality could be improved, but it is not a critical problem.
There are many areas where the U.S. health care system provides the best quality in the world. The U.S. has, at 78, one of the highest life expectancies in the world. U.S. cancer survival rates are better in the United States than in virtually every other country; for example, U.S. women have a 63% chance and men a 66% chance of living at least 5 years after a cancer diagnosis, compared with 56% of women and 47% of men in Europe. Preventive screening and management of chronic health care problems is also better in the U.S.; for example, U.S. women are more than twice as likely as Canadian women to have had a mammogram and more than three times as likely to have a Pap smear, only one in ten Canadian men have had a colonoscopy as compared to one third of U.S. men, and high blood pressure in diabetics is controlled in 36% of U.S. men but only 9% of Canadian men. Technology and medical advances are also superior in the U.S.; this is why people from all over the world fly to the United States for their health care needs.
There are also many areas where health care could be improved. We are better at treating disease then keeping people healthy in the first place. It has been reported that people who are uninsured receive less than two thirds of “optimal” health care. There is persuasive evidence that the U.S. tends to over utilize technology and expensive care options when less expensive diagnostic and treatment approaches might be as or more effective. Infant mortality rates in the U.S. vary widely by region, but on average are higher than most other developed nations. American diet, exercise, stress and other life style behaviors are generally poor.
Is uninsurance a problem?
Yes. It has been widely reported that there are 47 million Americans without health insurance. This may overstate the issue. Many of these people could get health insurance, but choose not to do so. Some of these people are illegal immigrants. Yet, there are still many millions of Americans who are legal citizens, want health insurance and cannot obtain it.
Some people do not feel that they should not have to be forced by the government to take responsibility for ensuring that others have health insurance. The reasons that the uninsured are a problem for all of us are both ethical and economic. Ethically, many believe it is the responsibility of the community at large to care for the essential needs of the less fortunate amongst us. Economically, it may cost us more when people don’t have good access to health care – we end up treating emergencies and chronic conditions instead – and the cost burden for this uncompensated care is not equitably shared.
Do we spend too much on health care?
Once our more basic needs of food and shelter are satisfied, improving our health seems like maybe it should be our next priority. The problem is that much of what we now spend on health care does not result in better health. It is estimated that about one-third of health care spending is administrative; mostly the costs doctors and hospitals incur as they comply with insurance and government reimbursement processes, government program costs, and the overhead of the health insurance industry. In addition, there is substantial evidence that there is substantial waste in the form of unnecessary or excessive use of testing and high cost procedures; the way doctors and hospitals have been paid since the introduction of Medicare and Medicaid in the 1960’s, third parties footing the bill, and concerns about malpractice liability have all combined to cause doctors and patients to overuse expensive health care resources.
Health care currently consumes about $2.5 trillion per year – approaching 20% of our economy. If half of this is being wasted on administrative costs and over utilization, this is a tremendous drag on our economy. This is substantiated by the fact that no other developed country in the world spends even 70% of what the U.S. spends on health care on a per capita basis.
What should the goals of health care reform be?
The goals of health care reform should be:
- Preserve excellent quality where it exists,
- Improve quality where excellence does not yet exist,
- Cover all Americans, and
- Decrease wasteful spending.
Does the reform being proposed achieve the goals it should?
No. The reform being proposed is likely to have mostly negative (but some positive) effects on quality, will cover more people, but will not address the problems of wasteful and unproductive health care spending.
Negative effects on quality will occur as a result of care decisions being shifted away from patients and doctors and towards the government. Under the reform proposals, more emphasis will be placed on ensuring that care is provided in accordance with uniform standards. This will decrease quality in that there will be less opportunity for care to be flexible to meet the unique needs of each unique individual. Negative effects will also occur as the need to control costs leads to decisions not to cover experimental, unproven or expensive treatment options; this will slow innovation.
Positive effects on quality will occur as a result of better systems for monitoring and measuring the efficacy of different diagnostic and treatment options.
Perhaps the greatest positive about the proposed reforms is that it will ensure that many more Americans are covered by health insurance.
Perhaps the greatest negative is that the proposed reforms will not address wasteful spending. There is nothing in the reform addressing the problems caused by third party reimbursement. In fact, the proposed reforms may make the cost problem worse by rolling back some of the progress that has started to be made through consumer-driven options.
How does the “public option” fit into the picture?
The “public option” is one of the most fiercely contested provisions of the proposed reform. Democrats insist that a government operated health plan, offered side-by-side with private plans, is essential to keep the private plans “honest”. Republicans counter that a public plan would have unfair competitive advantages over private plans because it could be subsidized by the government, and is therefore is likely to lead to a gradual replacement of private insurance with a public “single payer” option.
The problem with the Democrat’s argument is that, with over 3,000 health insurance companies in the country, competition alone will keep insurers “honest” – at least, within the market rules established by the government. What the Democrats need, however, is not honesty from private insurers; what is needed is a mechanism to enforce change. In order to control costs, the government must be able to define benefits and reimbursement rules – for example, to limit coverage for some very expensive types of health care. It would politically very difficult to enforce such rationing decisions through market rules – by issuing dictates saying “henceforth, no insurer will be allowed to pay for xyz, the latest cancer treatment”. It will be much easier to implement such a rule for the “public option” plan, thus forcing the private insurers to either sell at a higher cost than the private option or also adopt the rationing rule.
The problem with the Republican’s argument is that it is not clear that a public option leads inevitably to single payer health care. President Obama has pointed out the fallacy of arguing that government shouldn’t be involved in health care because it cannot do anything efficiently, but then also arguing that the public option is likely to be so efficient it will put private insurers out of business.
What’s wrong with single payor?
What’s so bad if the Republicans turn out to be right and the “public option” leads to single payor health care? Every other developed country in the world has government financed health care, the argument goes, so why shouldn’t the United States? The answer to these questions has three parts: quality, economics and politics.
The quality of government financed health care is different than what the U.S. is accustomed to. It is better for many; for example, the 37 million Americans who live at or below the poverty level and suffer higher levels of chronic health problems, parasitic diseases and infant mortality would probably see a significant improvement in their health care. For the middle class, routine health needs like well child care, vaccinations and annual physicals might be comparable to what people are currently experiencing; perhaps less convenient and personal, but this might be offset by not having to worry about paying for anything. However, the negative side from a quality perspective is that your doctor will likely have a more difficult time prescribing the latest medication or ordering a precautionary MRI and you may have to wait for months or even years to have a surgery to address back pain or your bad hip. Also, the rapid pace of medical innovation that we’ve come to expect will likely slow substantially.
The economic implications of single payor are a result of paying for health care through taxes. As mentioned previously, we spend about $2.5 trillion on health care currently. As a result of Medicare and Medicaid, about half of health care is already paid for by the government. However, adding another $1.25 trillion to government spending will increase taxes, sooner or later, by 25-40%. In terms of the impact on our wallets, this may not be as bad as it seems because the higher taxes will be offset by lower out-of-pocket and employer spending on health care. However, it does have an impact on people’s incentive to work. There is a compelling argument to be made that one of the reasons that the U.S. economy has grown so much faster than the rest of the developed world is because we have not been paying for as much of our health care through taxes.
The political implications of single payor are that allocation of health care resources will be decided by the political process. Already, with the Medicare system, we have seen that in some areas of the country, Medicare will pay hospitals and doctors much more than in other areas for exactly the same care. Countries with government funding often are subject to political battles about which cities or regions will receive scarce health care dollars.
Is further reform going to be necessary?
Probably. It is unlikely that the proposed reforms are going to lead to a single payor system, so high costs and waste will not be addressed. Therefore, the federal budget is going to balloon, resulting in some combination of higher taxes and higher federal deficits. Further action will be required.
Are there alternative approaches to reform that we should be considering?
Yes. It is estimated that 60% of health care spending is for predictable health care needs such as routine, preventative and chronic care. It is very inefficient to run this spending through insurance or government programs. We could be talking about reform that would stop processing some portion of this 60% through either the government or private insurers. Having predictable services paid directly by the consumer, with the needy getting government assistance, would introduce market forces that would greatly reduce the waste in this type of health care spending. The remainder of services could be covered, for example, through universal catastrophic insurance.
Why are the two dominant parties failing to meet our needs?
Because there are only two dominant parties, the politics boil down to one party proposing reform and the other opposing reform. The party doing the proposing is forced to propose the lowest common denominator – a mediocrity that is the least unacceptable solution to its constituents and the special interests that fund campaigns. The party doing the opposing is forced to simply say “no” – the political battle is won if reform is defeated or if reform passes and then does not perform well; there is absolutely no incentive to propose constructive alternatives or revisions because there is no third political party proposing a better alternative to which people can shift their political support.
David Allen is an independent health care consultant based in Bloomingtion, MN. He has worked in the health care industry for over 30 years. In 2004, he ran for state representative as an Independence Party of Minnesota candidate.
