Proposal of the Physicians' Working Group for Single-Payer National Health Insurance
The Patient’s View - NHI would establish a right to comprehensive health care. Each person would receive an NHI card entitling him or her to care without co-payments or deductibles. The card could be used at any fee-for-service practitioner and at any institution receiving a global budget. HMO members could receive non-emergency care only through their HMO, though they could readily transfer to the non-HMO option.
Thus patients would have a free choice of providers and delivery systems, and the financial threat of illness would be eliminated. Taxes would increase, but would be more than offset by the elimination of insurance premiums and out-of-pocket costs.
The Practitioner’s View - Physicians would have a free choice of practice settings. Treatment would no longer be constrained by the patient’s insurance status, nor by bureaucratic dictum.
Fee-for-service practitioners would be paid promptly. The entrepreneurial aspects of medicine - the problems as well as the possibilities - would be limited. Physicians could concentrate on medicine; every patient would be fully insured, but physicians could increase their incomes only by working harder. Billing would involve imprinting the patient’s NHI card onto a slip, checking a box indicating the complexity of the encounter, and sending the slip (or electronic equivalent) to the physician payment board. This simplification of billing would save each practitioner thousands of dollars annually in office expense.
Bureaucratic interference in clinical decision making would sharply diminish. Costs would be contained by controlling overall spending and limiting entrepreneurial incentives, obviating the need for the kind of detailed administrative oversight characteristic of current practice.
Salaried practitioners would be insulated from the financial consequences of clinical decisions. Since savings on patient care could no longer be used for institutional expansion or profits, pressure to skimp on care would be minimized.
The Effect on Other Health Workers - Nurses and other personnel would enjoy a more humane and efficient clinical milieu. The burdens of paperwork associated with billing would be lightened. The jobs of many administrative and insurance employees would disappear, necessitating a major effort at job placement and retraining. Many of these displaced workers might be deployed in expanded programs of public health, health promotion and education, home care, and as support personnel to free up nurses for clinical tasks.
The Effect on Hospitals - Hospitals’ revenues would become stable and predictable. More than half of the current hospital bureaucracy would be eliminated, and the remaining administrators could focus on facilitating clinical care and planning for future health needs.
The capital budget requests of hospitals would be weighed against other priorities for health care investment. Hospitals would neither grow because they were profitable nor fail because of unpaid bills - though regional health planning would undoubtedly mandate that some expand and others close or be put to other uses. Responsiveness to community needs, quality of care, efficiency and innovation would replace financial performance as the “bottom line.” Proprietary hospitals would be converted to not-for-profit status.
The Effect on the Insurance/HMO Industry - The insurance/HMO industry would have virtually no role in health care financing, since public insurance administration is more efficient, and single source payment is the key to both equal access and cost control. Indeed, most of the extra funds needed to finance the expansion of care would come from eliminating insurance company overhead and profits, and abolishing the billing apparatus necessary to apportion costs among the various plans.
The Effect on Corporate America - Firms now providing generous employee health benefits would probably realize savings because their tax contribution to NHI would likely be less than current health insurance costs. Since most firms competing on international markets would save money, the competitiveness of U.S. products would be enhanced. Tax-based NHI funding might, however increase costs for companies not now providing health benefits.
Health Benefits and Financial Costs - Ample evidence indicates that removing financial barriers encourages timely care and improves health20.
Independent estimates by several government agencies and private sector experts indicate that NHI could cover all of the uninsured and eliminate co-payments and deductibles for the insured, without increasing total health care costs21 22 23 24 25. Savings on administration and billing (which would drop from the current 25% of total health spending to under 15%) would approximately offset the costs of expanded services. However, the expansion of long term care (under any system) would increase costs. Experience in Canada suggests that the increased demand for acute care would be modest (after an initial surge)26 27, and improvements in health planning and cost containment made possible by single source payment would slow health care cost escalation. Vigilance would be needed to stem the regrowth of costly and intrusive bureaucracy.
Unsolved Problems - This brief proposal leaves many vexing problems unsolved. Careful planning will be needed to ease dislocations during the implementation of the program. The encouragement of prevention and healthy life styles, and improvements in occupational and environmental health will not automatically follow from the institution of NHI. Similarly, the abolition of racial, linguistic, geographic and other non-financial barriers to access will require continuing efforts. The need for quality improvement will remain urgent. High medical school tuitions that discourage low income applicants, the underrepresentation of minorities, the role of foreign medical graduates, and other problems in medical education will remain. Some patients will still seek inappropriate care, and some physicians will still succumb to the temptation to increase their incomes by encouraging unneeded services. Assuring adequate research funding, engendering collegiality and excellence in academia, and minimizing the commercial skew of current research priorities will remain challenging. Though NHI will not eliminate these problems, it will establish a framework for addressing many of them.
Alternatives To NHI
President Bush and others have proposed a variety of health reforms aimed at slowing cost growth, shoring up Medicare, expanding coverage, and improving efficiency. These proposals share several common themes.
1 - “Defined contribution schemes” and other mechanisms to increase patients’ price sensitivity.
Some prominent economists and corporate leaders favor limiting employers’ premium contributions to a fixed amount, pressuring employees to choose lower-cost insurance options. Many cite the Federal Employees Health Benefit Program (FEHBP) as a model for such reform.
Unfortunately, costs in the FEHBP have risen as rapidly as in Medicare or for private employers, providing little evidence that the defined contribution approach contains costs. Moreover, this approach assures a multi-tiered insurance system, with lower-income workers forced into skimpier plans. In the long run, such programs are more likely to shift costs from firms to employees than to slow overall cost growth.
2 - Tax subsidies and vouchers for coverage for the uninsured.
President Bush, as well as some Democrats, would offer tax credits to low income families who purchase private coverage.
The $2000 per family subsidy ($1000 per single person) that the President has proposed falls far short of the cost of adequate insurance; in Massachusetts, HMO family premiums average about $6000 annually. Hence, few of the uninsured could afford adequate coverage even with the subsidy. This problem would increase over time; premiums would surely rise more rapidly than subsidies. Most of the tax credits would subsidize premium payments for people who already have coverage, since employers would be tempted to drop insurance for employees eligible for subsidies. As a result, large outlays for tax subsidies would buy little new coverage; $13 billion annually would cover only 4 million (less than 10%) of the uninsured28.
Moreover, tax credits would amplify administrative inefficiency. If the IRS paid the year’s subsidy when tax returns were filed (i.e. the following April), it would come too late to provide the cash flow that low income families need to purchase coverage. Paying the credit with each paycheck would create an administrative nightmare; it would require ongoing monitoring of household income, qualification for the subsidy, etc.
In addition, the new coverage would be purchased from private insurers whose average overhead/profits consumes 13.6% of premiums - six times that of Medicare. Not surprisingly, the health insurance industry supports the tax credit approach; additional tax dollars would end up in their coffers, with little public oversight.
3- Expansion of Medicaid, CHIP and other public programs. Some Democrats favor expanding Medicaid eligibility by raising income limits for families, or by including poor, childless adults. Recently, the National Governors’ Association (NGA) proposed that states be allowed to buy stripped-down HMO coverage for Medicaid recipients, and use the savings to expand coverage.
Several problems bedevil these strategies. First, Medicaid already offers second-class coverage. Programs like Medicaid that segregate the poor virtually assure poor care, and are more vulnerable to funding cuts than public programs that also serve affluent constituencies. In most states, Medicaid payment rates are low and many doctors resist caring for Medicaid patients. As a result, access to care for Medicaid enrollees is often little better than for the uninsured29 30. Further cuts to benefits, as the NGA suggests, would leave Medicaid recipients with coverage in name only.
Second, even large Medicaid expansions in the past have failed to keep pace with the erosion of private coverage. Between 1987 and 1993, Medicaid enrollment grew from 20.2 million to 31.7 million, yet the number of uninsured rose by 8.7 million31. Only the unprecedented economic boom of the late 1990s interrupted this trend. An economic downturn would quickly deplete states’ tax revenues, reducing funds for Medicaid at the same time as rising unemployment would deprive many of private coverage.
Turning Medicaid dollars over to private HMOs assures that scarce funds will be diverted to overhead and profit, and places vulnerable patients at risk. In the first Medicaid HMO experiment in California a quarter of a century ago private plans routinely exploited poor patients, an experience repeated in Florida, Tennessee and other states. Past promises (e.g. in Oregon and Tennessee) that savings from Medicaid coverage cuts would lead to universal coverage have proven empty.
Finally, the complexity of enrollment procedures, the need for repeated eligibility determination, and the stigma attached to Medicaid and similar programs for the poor assures that many of those who are eligible will not be enrolled.
While few can argue with proposals to cover more of the poor and near-poor, Medicaid expansion without systemwide reform is a stopgap measure unlikely to stem future increases in the number of uninsured. It does not lead to universal coverage.
4- The Medicare HMO program and Medicare voucher schemes. Under Medicare’s HMO program, private HMOs have already enrolled millions of seniors. Medicare has paid these plans a set fee - 95% of the average cost of a Medicare fee-for-service enrollee in the region - for each enrollee. Several states have also pushed Medicaid recipients into privately-run HMOs. Many Republicans and a few Democrats hope to expand Medicare’s use of private insurers by offering seniors a voucher to purchase private coverage in lieu of traditional Medicare.
These strategies assume that private plans are more efficient than Medicare; that seniors can make informed choices among health plan options; and that private insurers’ risk avoidance can be thwarted. All three assumptions are ill-founded.
Medicare is more efficient than commercial insurers; costs per beneficiary have risen more slowly and overhead is far lower.
An AARP survey of seniors found that few had adequate knowledge to make informed choices among plans32.
Despite regulations prohibiting risk selection in the current Medicare HMO program, plans have successfully recruited healthier than average seniors. Hence HMOs have collected high premiums for patients who would have cost Medicare little had they remained in fee-for-service Medicare. Moreover, HMOs have dumped more than a million seniors in counties where profits are low, while continuing to enroll Medicare patients in profitable areas. As a result, HMOs have increased Medicare costs by $2 billion to $3 billion each year, and disrupted the continuity of care for many patients.
A voucher (so-called “premium support”) program for Medicare would also push low income seniors into skimpy plans - similar to the “defined contribution” approach to employee coverage discussed above. Moreover, Congress is unlikely to increase the value of the voucher to keep pace with the rising costs of private plans. Over time, seniors’ out-of-pocket costs for coverage would likely rise.
Health care reform is again near the top of the political agenda. Health care costs have turned sharply upward. The number of Americans without insurance or with inadequate coverage rose even in the boom years of the 1990s. Medicare and Medicaid are threatened by ill-conceived reform schemes. And middle class voters are fed up with the abuses of managed care.
Incremental changes cannot solve these problems; further reliance on market-based strategies will exacerbate them. What needs to be changed is the system itself.
National Health Insurance is an essential safeguard for our patients; its advocacy is an ethical responsibility of our profession.
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