Examining Uncle Sam’s Role in Health Care

Originally Published in RMP Advisor, July 2009

by David Edman

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“First, Do No Harm” (from The Hippocratic Oath)
Sure, the American healthcare system needs to be fixed, but there’s a risk that curing the system will harm the patient. Will reform bankrupt our country or saddle future generations with enormous debt? Will we curtail or end access to services and healthcare providers of our choosing?

The US has the best healthcare services in the world, but our system of health insurance is broken, leading to unnacceptably high healthcare costs, significant wasteful spending, and a lack of access to healthcare services or health insurance for some. Most would agree that the status quo isn’t acceptable.

“Medicare for All” Means Less Access to Care
At one extreme, some people argue for a socialized, government-run healthcare system, a so-called “Medicare for All.” But there’s no evidence that this can work within the context of the American value system that allows freedom of choice and rewards personal responsibility. “Medicare for All” can reduce costs, but only by reducing access to care.

The current Medicare program is a financial train wreck waiting to happen. As the largest healthcare payer in the United States, Medicare has largely led to high levels of unnecessary, inappropriate, and poor-quality care. It’s a politicized system of healthcare, not an economic system. Decisions are made and providers are paid based on who has the political power, not who provides the most value as determined in the marketplace.

What’s Government’s Proper Role?
To quote Shakespeare, that is the question. Should government be a payer of healthcare services, set payment rates for providers and cut the checks as do Medicare parts A and B in this country and government-run healthcare in Canada and England? Or, should government manage and pay into a system of competing private insurers, establish the rules of engagement, referree, and promote competition based on quality and cost of care? Examples include the non-traditional, Medicare Advantage Part C Program and our Federal Employees Health Benefits Program (FEHBP).

Government-Run Healthcare Full of Ills
In Canada and England, government sets the rates, pays the providers, and limits the supply of services such as the number of hospitals and high-tech diagnostic equipment. This rationing of care keeps a lid on costs. Everyone is covered and per capita costs are lower, but there are waiting lists for services, a dissatisfied public, and a growing system of private insurance. In the US, Medicare wastes money beyond the pale, such as paying ten times the market rate for durable medical equipment in certain areas. The system leads to too many providers of expensive speciality services and not enough primary care providers. And, since Medicare covers only 60% of costs on average, recipients need private supplemental insurance to pay for healthcare services Medicare doesn’t cover.

Government Already “Managing Competition”
A far better approach is for government to pay into a system of competing private insurers, such as FEHBP. In this type of system, insurance companies submit competitive bids once a year to the federal government’s Office of Personnel Management (OPM). Federal employees, including members of Congress, then get the information on benefits, costs, and services and make their annual election of an insurance carrier and benefits plan. No waiting periods for coverage, no exclusions for pre-existing conditions, and the process for enrolling or re-enrolling in the chosen plan is simple. The individual knows exactly what services are covered, and how much single or family coverage will cost out of pocket. Health insurance plans for state employees are also examples of government-orchestrated “managed competition” in which participating health insurers must compete to sell their products based on cost and quality factors.

How Else Can We Improve Quality and Reduce Costs?
Once an effective “market” for health insurance services has been created, a program for national health reform should incorporate the following principles so the market functions fairly and efficiently:

Electronic Medical Records. By investing in electronic medical record systems, providers and insurance carriers will improve claim accuracy, provide a data foundation for personal responsibility and transparency, and reduce long-term operating cost.

Consumer Choice. For competiton to work, consumers should choose between a range of health insurance plans, from rich, comprehensive plans with higher premiums to high-deductible plans with low premiums.

Personal Responsibility. Consumers who self-insure a portion of their risk also take a greater role in managing their own health and assume a share of financial responsibility.

Enhanced Transparency. Effective consumerism depends on transparency—information to make good decisons. We must do a better job of collecting, analyzing, and disseminating data on the quality and cost of healthcare services from public and private sources.

Pay for Performace. Healthcare providers should be increasingly accountable for both the quality and efficiency of the care they provide and be paid for good performance.

Prevention, Wellness, and Health Education. Individuals should have access to an array of prevention, wellness, and health education programs. Those who live healthy lifestyles and make good healthcare decisions should get financial rewards.

What about Those Who Can’t Pay?
The answer is to fix the health insurance system first based on the above principles, so that waste in our healthcare system will be drastically reduced, allowing us to help those in need. Once the system is “fixed,” it makes sense to require all citizens to purchase health insurance (like car insurance) from a “managed competition” pool for small employers and individuals. Reducing the estimated $750 billion of wasted healthcare dollars will let us subsidize those out of work or otherwise unable to afford their own health insurance.

Time to Act
Eventually, America will emerge from the current mortgage, banking, and credit crises, but we run the risk of growing healthcare costs suffocating our future economic prosperity. Now is the time to act. Contact your Members of Congress today to let them know you support health reform but oppose any expansion of government-run health care, including a “Public Option” health insurance plan.