Tuesday, January 27, 2009

Universal Health Revisited

Universal Health Revisited

My mother-in-law loves insurance agents, and they love her. They offer relief from the hassle of deductibles and coinsurance that is most appealing to an 88-year-old. But the hassle-free life is brief. Soon she hears, “We don’t cover that,” or “your doctor did not provide one of our diagnostic codes,” aggravation and an unhealthy rise in her blood pressure follow. Can we eliminate this conundrum that constantly repeats itself?

We’ve tried. In 1947, President Truman presented a plan. The AMA railed against it as “socialized medicine.” In 1971, President Nixon put forth a program to provide a public plan that is better than most of what is now considered "progressive." The insurance industry and Congressional Democrats led by Ted Kennedy, defeated it. Hillary Clinton oversaw development of a broad coverage plan in 1993. Because of a proposed increase in employer funding, business lobbied against it. The insurance industry that had the most to loose led a lobbying attack that was championed by Congressional Republicans and some disaffected Democrats.

Every year financing health care has become increasingly more difficult. More and more Americans are no longer insured (47 million according to the Census before the latest downturn in the economy). About the same number are considered to have inadequate coverage.

Increasingly the electorate is asking our representatives to do something. But they seem to be stymied between the veritable rock and hard place. The rock is “how do we fund a program that will cost over $1 trillion,” and the hard place is “how do we counter the insurance lobby’s power.”

The largest insurer, Aetna, gathers more than 20 cents of each premium dollar for "administration." The proportion of an individual premium that goes to administration increases as the number of beneficiaries in an insurance pool decreases. Thus, small employers find that their premium per worker is much higher than larger competitors. Younger workers often opt out of employer plans because they view their share of the premium as “not worth it.” They’d rather risk the possibility of a heavy medical expenditure against paying the monthly premium. The loss of this healthy group increases the premium that must be paid to cover older workers. And we pay for these uninsured when they get sick, $43 billion in 2005.

In these troubled times, universal health care makes even more sense because more services can be purchased for less! According to The New England Journal of Medicine, Canada’s single payer plan spends 17 cents of each health care dollar on administration. The comparable U.S figure is 31 cents. The potential saving is 14 cents of each health dollar or $280 billion. The bargaining strength of a universal plan would reduce the price charged for all types of services similar to what Medicare has done, an estimated saving of $200 billion.

Employer and employee premium payments reduce income before tax. This tax advantage, amounting to $200 billion, would end and lead to increased income tax collection. The end of the Medicaid program would produce a saving of more than $200 billion. Without an income tax increase, general revenues would increase $400 billion.

The current method of financing health care is inefficient. How would the program be funded? We are already paying for it, in fact, as shown above, we are overpaying. Allocating for the program would continue to need contributions from employers, employees and government.


France’s health care system provides an example of what can be done. In 2000, the World Health Organization rated the French system the best in the industrialized world. (The U.S. ranked 37th of 191, just ahead of Cuba).

The French system is only partially publicly funded. Individual responsibility for paying for care increases with income. Individuals use private insurance, similar to Blue Cross and Blue Shield, to supplement public contributions. If a person falls below an income ceiling, stays more than 30 days in a hospital or has a chronic or debilitating illness, financial exposure is minimal. The equivalent situation for an American is often bankruptcy.

Almost all French providers accept the fee schedule set by government. Patients are responsible to pay providers directly, receiving reimbursement in about 10 days.

Based on studies between 1997 and 2000, the French have more resources per person than the U.S. Per 1,000 people, France has 3.3 physicians and 4.0 acute hospital beds; in the U.S., those numbers are 2.8 and 3.0, respectively. The only place the U.S. far exceeds the French is in nonphysician personnel: 1.9 in France, 5.7 in the U.S. Personnel who handle administration and billing account for the difference.

The French have twice as many office visits per capita, longer hospital stays, use more pharmaceuticals, but only half as many expensive MRIs as Americans.

Tax revenues fund 75 percent of the French health care program. Over half comes from a tax on employers and about 35 percent is from general revenues. Additional amounts come from taxes on automobiles, liquor, cigarettes and pharmaceutical companies and a 5 percent tax on earnings.

Why are we troubled about our health care system? After all, 83 percent of Americans have some form of third party coverage, yet only 40 percent are “fairly satisfied.” Are we more critical than the French, two-thirds of whom give high ratings to their system?

I submit that the U.S. system is balkanized and more bureaucratic than the French, the country that created bureaucracy. Our private insurers (there are about 1,300 of them) determine whom they will pay, for whom and how much based on contracts that change annually.

In the U.S., if you have the ability to pay, you can receive first class health care. But, a significant portion of our population (between 16 and 30 percent) is locked out and must resort to inferior, often more costly services, or none at all.

In 2006, more than 16 percent of our GNP went for health care; the French laid out less than 10 percent. While the French government funds 75 percent of services, the U.S. funds 50 percent. Yet, on a per-capita basis, we are spending more public funds than the French.

Looking at systems like France, I can see the possibility of providing access to first class care to everyone with the financial resources we now use, maybe even less.

On Monday, August 31, 2009, Paul Krugman wrote an article on the Nixon Proposal. I have been touting this proposal that is more progressive than anything that has been put forth, so far. I urge followers of this blog to view it: http://www.nytimes.com/2009/08/31/opinion/31krugman.html?hp

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