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NAVIGATION PNHP RESOURCES
Posted on February 16, 2009

Richard Gottfried on private and public coverage decisions

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The last Quote of the Day message discussed Medicare’s national coverage determinations process (NCD), using as an example the decision to decline coverage for computed tomography colonography (CTC) when it is used as a screening test for colorectal cancer.

New York Assemblyman Richard Gottfried responds:

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February 13, 2009

All insurance plans make decisions about what they will cover. With employer-sponsored insurance, insurance carriers know that their client is the employer, whose only interest is keeping costs down. There is only downward pressure.

The people who run public insurance have pressure to keep costs down, but it is balanced by pressure from the public (to whom they are ultimately accountable, especially with a program like Medicare that is not only for the poor) to keep quality and services up. So there is a balancing of downward and upward pressure.

Even if we move from employer-sponsored coverage to individuals buying their own insurance, the pressure would still be overwhelmingly downward. When making the choice among possible plans to buy, individuals are also under enormous pressure to focus exclusively on price. Hardly anyone would ask whether CTC is covered.

Since someone is going to make choices about what gets covered, we’re all better off if it is done by publicly-sponsored, publicly-funded and publicly-accountable coverage.

Richard N. Gottfried
Chair, Committee on Health
New York State Assembly
822 Legislative Office Building
Albany, NY 12248
250 Broadway, #2232
New York, NY 10007
(518) 455-4941
(212) 312-1492
GottfrR@assembly.state.ny.us

Comment:

By Don McCanne, MD

Richard Gottfried points out an extremely important distinction between the nature of coverage decisions in public health care financing systems, and in private insurance financing systems, whether employer-sponsored or individual coverage.

Whether it is the employer or the individual who is making a decision on the purchase of insurance (not the purchase of health care), with our current very high health care costs there is tremendous downward pressure on insurance premiums.

Slowing the the rise in premiums for private plans can be accomplished only by reducing coverage - by reducing benefits covered (e.g., maternity, mental health services, restricted list of contracted providers, prior authorization requirements, etc.), or by increasing the out-of-pocket costs for the patients (e.g., higher deductibles, higher copayments, higher coinsurance percentages, tiering of coverage, capping total amount of coverage, etc.)

This is precisely the recent history of private health coverage. Premiums continue to increase, and, though less and less affordable, the increases have been slowed enough to still maintain a market of private plans, even though that continues to decline as the rate of employer-sponsored coverage continues to fall. The perverse tradeoff is that this downward pressure slowing the rate of premium increases has caused an intense upward pressure in out-of-pocket spending, often making health care no longer affordable for those who do have private insurance.

Contrast this with public health care financing. As Richard Gottfried points out, the downward pressure to control government health care spending is balanced by an upward pressure from the public to demand health care quality and adequate services.

Medicare is a prime example. The public is opposed to any reduction in Medicare benefits. In fact, increasing coverage by adding prescription drug coverage was due to public demand. They are now demanding that it be improved further through measures such as eliminating the donut hole.

What could explain the apparent dilemma that people seem to be quite willing to purchase inadequate private plans that may not provide the financial protection that they need, yet they are not willing to accept inadequate coverage in a public health care financing program such as Medicare? Part of the answer may lie in the subliminally perceived relative inequity of premiums for private plans versus taxes for public programs.

The premiums for private plans are determined directly by the benefits covered by the plan, minus the cost sharing shifted to the patient. Costs are now so high that either premiums will be unaffordable, or out-of-pocket payments will be unaffordable, or, in actuality, downward pressures in the face of high costs are making them both unaffordable. More people are beginning to recognize that this is an obsolete method of financing health care.

The level of tax contribution for a publicly-financed health care system is not related to the benefits that are offered, but is determined by the ability of the individual or employer to pay the tax. Polls demonstrate that individuals are willing to pay more taxes that would be spent on publicly-financed health care. People seem to realize instinctively the fairness in this.

They also realize that Richard Gottfried is right. The downward pressure on private plans has caused most of us to look for relief from a health care financing system that is so badly broken. At the same time, the balanced pressure on Medicare has caused us to be very protective of that program. Now if we could just extrapolate our thinking to support Medicare for everyone, we’d have it made.