By Johnathon S. Ross, M.D., M.P.H.
Communique: Academy of Medicine of Toledo and Lucas County, April-May 2011
Many physicians care about the injustice of a health care system that leaves 50 million of our patients, friends and family uninsured, but it is health care spending that threatens to destabilize the entire U.S. economy. We need to cover the uninsured and control costs. There are 50 million uninsured Americans despite spending $2.6 trillion annually. This is about one-sixth of the entire country uninsured and spending is at 17 percent of our GDP.
The number of uninsured has grown by about a million each year for the past 20 years. Ohio has 1.48 million uninsured despite spending over $80 billion annually. Contrary to popular thinking, the uninsured are not the chronically unemployed or illegal immigrants. Almost 80 percent of the uninsured are working people and their children.
One of the reasons many of the working class uninsured cannot afford to purchase insurance is that their incomes have not kept up with medical cost inflation. In fact only the wealthiest 5 percent have come even close to keeping up. Medical inflation continues 3 percent to 5 percent above the overall inflation rate.
Over the past 30 years, working families would have needed above 100 percent real growth in income adjusted for underlying inflation in order to keep up with rising health care costs. Most have seen their incomes rise only a few percent or less.
We already have what it takes to take care of everybody. The fixed overhead costs (buildings, nurses, doctors and equipment) of the health care system result in a large and expensive infrastructure that we all need in case we get sick.
The infrastructure is maintained by patient use and payments. Since only a small number of individuals are actually receiving care at any time (20 percent of patients generate 80 percent of costs), these payments for fixed costs must be shared by everyone. If these fixed costs are not met, the infrastructure will shrink, degrade or even disappear.
These fixed costs make up over 60 percent of spending and must be in place before a single sick patient can receive comprehensive care. We all must contribute if we want the care to be there when we need it.
Public financing (taxes) already accounts for 60 percent of total spending (Medicare, Medicare, VA, public employees and the tax deductibility of health insurance). Business and personal out-of-pocket payments cover the rest. In the U.S., public spending alone exceeds the total per person health care costs of eight European countries that cover all their citizens with better health outcomes. Businesses only pay about 20 percent of the total cost, yet they seem to exert an undue amount of influence over U.S. health policy decisions. That’s because about 60 percent of Americans receive their insurance coverage as a benefit of employment. These working people and their kids are the healthiest in our society and cost less to cover than the elderly, disabled and poor who have been left to public programs to cover.
You will hear conservative pundits complaining about health reform. They characterize it as a giant government takeover that “will ruin best health care system in the world.” (John Boehner actually said this recently!) Do we have the best health care system in the world?
According to Organization for Economic Cooperation and Development, the best international comparison data show that Americans live shorter lives and lose more healthy years of life to treatable illness than most of our economic competitors. Our infant and maternal mortality exceeds theirs. We are not more expensive because we are older. We do not smoke or drink more, use more doctor visits or hospital days or overstaff with nurses. We are in the middle of the pack regarding use of technology, joint replacements, transplants and on medical research articles published based on relative population size. We do feel we have better access to technology, although physicians in several other countries feel they have about the same level of access.
The one place we clearly lead is in the cost of our system where we spend almost twice as much as our economic competitors per capita. These excess health care costs are built into every American product and reduce our economic competitiveness. Our costs are rising much more sharply, although all the western democracies are struggling to control health care costs. Although our outcomes may be better for a few specific types of illnesses (breast cancer for example) by almost every general measure our outcomes are worse and our costs are twice as high.
This is why health reform has been under serious ongoing discussion since the debate over Medicare which resulted in a universal national health insurance program, but only for those over 65 and the disabled. The passage of the Patient Protection and Affordable Care Act (ACA) is a continuation of that debate and has left us divided and confused. What has this law brought about so far and what does it hold for us in the future?
One year after the passage of the ACA several provisions have already gone into effect. The number of Ohioans affected is in parentheses:
· Young Ohioans can keep or obtain insurance coverage on their family plans until age 26 (35,000).
· Insurance companies are prohibited from denying coverage to children with pre-existing conditions. (Many insurers dropped “child-only” coverage in response.) (unknown)
· High Risk Pools funded by the ACA now subsidize the uninsurable (1,100).
· Insurance companies may no longer impose lifetime dollar caps on enrollees. (unknown)
· The Medicare Prescription Drug benefit “doughnut hole” is being closed (110,000).
· Medicare beneficiaries can receive wellness checks and other preventive care without a co-pay or deductible (150,000). All private insurers will need to completely cover preventive care also.
· An estimated 127,800 small businesses in Ohio are eligible for the ACA’s tax credit to help purchase health insurance for employees and of those, 38,900 are estimated to be eligible for the full credit. (unknown)
· Grants, matching funds and other resources now available will help transform the way Medicaid funds long term care by shifting away from institutional care toward home and community-based care. (unknown)
· Employers can obtain re-insurance to help subsidize coverage to early retirees 55+. This will be a major financial benefit to large employers and they are already taking advantage of it.
· Insurers will have to spend 80-85 percent of premiums on care. Primary care physicians will get increased payment from Medicare and Medicaid.
· Everyone will need to buy insurance or pay a fine. Those below 133 percent of poverty will be enrolled in Medicaid. Those from 133 percent of poverty to 400 percent of poverty will receive subsidies to purchase private insurance from among a range of insurers through state based insurance exchanges with standard benefits packages. Those who do not purchase insurance will be fined except for specific hardship cases. Cost sharing is limited to no more than 6 percent to 30 percent of premiums for those from 133 percent to 400 percent of poverty. There are no subsidies for those above 400 percent of poverty but they will be allowed to purchase insurance through the exchanges.
· Employers of more than 50 individuals must provide insurance or pay into a fund that will help subsidize coverage for the uninsured.
· The Congressional Budget Office estimates about 32 million of the 50 million uninsured will be covered, about half by expanded Medicaid and half by private coverage in the exchanges.
· Revenues needed for these programs are about $100 billion yearly (about a 4 percent increase in current annual spending). Physicians usually get about 20 percent of spending on health care so the ACA will likely increase physician incomes by $20 billion.
· Revenue is raised from taxing insurers and reducing excess payments to their Medicare Advantage plans, by taxing pharmaceutical companies and tanning salons, and by reducing the deductibility of some medical expenses and high cost health plan premiums. There are also assumptions of savings in Medicare and Medicaid based on changes in payment approaches. (See below)
· Five year grants for state based malpractice reforms are part of the ACA. Texas passed strong limits on malpractice awards seven years ago. This lowered malpractice premiums by over 50 percent, but has had little effect on health care cost growth.
There are many other good public health and quality improvement ideas in the ACA. Sadly, there are fewer that are likely to control costs. We already have evidence from the one state with ACA like reform-Massachusetts. They have reduced the number of uninsured to only 4 percent. This is less than one-fourth the national rate. However, costs continue to rise sharply despite reform.
It appears that you can cover most Americans with a mandate to buy private insurance, but if you leave the for-profit medical industrial complex untouched, costs will continue to rise unabated. Although some pundits claim that the health information technology, bundled payments and accountable care organizations promoted by the ACA will help to control costs, there is little supportive data from trials of these approaches under Medicare or to suggest that information technology will lower costs, though it might improve the quality of care.
If the ACA is unlikely to be highly effective in coverage and cost control, what are the alternatives? All the other advanced countries have covered everyone using one of three approaches.
A national health service (e.g. Great Britain, Sweden) is true socialized medicine where the doctors, nurses and other providers are public employees and the hospitals are publicly owned. A national health insurance with many not-for-profit insurers with a single negotiated fee schedule and very tight public insurance regulation (Germany, Netherlands, France) and lastly, single-payer national health insurance (Canada, Taiwan, Australia and our own version for seniors, Medicare). These are the systems that have been proven to provide universal coverage and cost half per capita.
It is worth noting that our own example of a single payer, Medicare, has actually had better cost control than private insurance over the past 40 years and has been more innovative (e.g. DRG’s, the RVU fee schedule, and public reporting of outcomes.)
Medicare is our best example of a successful American national health insurance system. It is funded by taxes that are placed in a trust fund (an efficient way to collect the needed revenue) and involves everyone in paying their fair share. A single insurer is hired, by competitive bid, to just process the Medicare bills according to a single fee schedule. This simplicity keeps insurance overhead for Medicare at less than 3 percent of premiums.
Private insurers will waste more than five times as much on administration and profits even with the restrictions of the ACA. Under traditional Medicare, doctors practice privately and are not employees of government. Hospitals are privately managed by their community based boards. Medicare is not socialized medicine. It is social insurance just like Social Security.
When we created Medicare in 1965, Canada created a Medicare system for Canadians of all ages. They even call it Medicare just as we do. Prior to 1965, Canada had a private insurance system just like ours. Their ability to control costs and provide care to all is proof that such a system can be changed and could work for all of us especially given our much more generous funding which is about twice as much per capita.
Taiwan also had a system like ours, but with many more uninsured (40 percent). Just over a decade ago, after study, they rejected the private insurance model and created a single-payer Medicare system for all Taiwan’s citizens. They made the transition in just a couple years and covered everyone with no significant increase in spending. The Canadians covered everyone, the Taiwanese covered everyone, and we did it for seniors with social insurance that provides better administrative value, better cost control and better outcomes.
The ACA continues under serious challenge politically. The individual mandate is possibly unconstitutional. Although there are many good aspects to the ACA as mentioned above, evidence suggests that the ACA will still leave almost 20 million Americans uninsured and will not control overall costs very effectively.
On the other hand, there is good evidence that an improved and expanded Medicare would cover everyone for no more than we spend now given the large administrative savings that would result from the simplicity of this type of reform. It would improve outcomes and control costs as similar systems have in other developed nations.
Medicare is constitutional. Many of the financial interests that are profiting form the current system will fight against the increased public accountability the ACA or an improved an expanded Medicare for all would bring to the health care system. Political challenges will remain either way.
An improved and expanded Medicare for all is likely to save more money, save more lives while allowing us to practice without the hassles that are the hallmark of the private health insurance system. Physicians must choose to show leadership on this tough political problem. We need to support covering everyone and cost control. Doing nothing is not an option.