Universal Health Insurance,
But Which Way?

by Donald W. Light

an Internet article

The growing number of uninsured and people finding out that their policies are covering less and less is seriously compromising quality care for all of us. It is also bankrupting the safety-net teaching and public hospitals. More and more people are finding it onerous to pay cash for services and drugs their health insurance does not cover. As the Presidential primaries roll out, we need to understand why reliable health insurance is needed and what the competing proposals offer.

The Consumers Union estimates that one in every four households is at risk for paying out thousands of dollars for a serious accident or illness, because their health insurance coverage is inadequate or nonexistent. The number of people without health insurance has been increasing by more than a million a year for over a decade and stands at 44 million. Thatís equivalent to everyone living in every Atlantic coastal state from Georgia to New Jersey, plus Tennessee and Kentucky.

Private employers are fueling the problem by walking away from their role as the providers of health insurance. Only half of them offer it, and the insurance they do provide pays for only 23% of the nationís health care bill. Although the Chamber of Commerce still defends this system, itís falling apart. The high cost of employer-based health insurance is also a burden to businessmen competing in world markets. Their overseas competitors do not have to pay for health care, or for a health benefits staff and costly consultants to custom-build their health care policies. Instead, the best health care systems overseas provide comprehensive, hi-tech services for everyone for about two-thirds our average cost, and they are much cheaper to run.

What shall we do? All the major stakeholders have a plan for solving this problem, and the array of choices seems bewildering. All of them build on what we have now, but on different parts. From my perspective as an analyst of health care systems in European countries, the ìbig pictureî differences are easier to see and more important at this point than the details.

First, the Health Insurance Association of America has mounted a national campaign called ìInsureUSAî to promote a package of reforms that would expand federal programs for the poor and provide tax-based subsidies so that the uninsured could buy private health insurance policies. Vice President Gore, Bill Bradley and the AMA propose similar packages, each with their own variations. All of these proposals build on the most complex parts of our current system, where citizens and employers lose about $200,000 of every million dollars to the costs and mark-ups in the system, leaving only $800,000 for clinical care. These proposals would lock in some of the inequities that now discriminate against people with serious health problems or high risks.

Second, Familes USA and the American Hospital Association offer a somewhat simpler and cheaper approach. They would expand Medicare and the recent plan to cover all children (CHIP) so they cover more uninsured working people and families. These plans are somewhat more equitable, but they keep the costly commercial insurance market that is based on actuarial underwriting or The Inverse Coverage Law: the sicker you get, the less coverage you get, and the more you pay for it. Private health insurance in some other countries is designed to prevent that and to reward people for taking out a policy when they are young and staying enrolled year after year.

All these proposals build on costly maze of programs we now have -- employer-based commercial health insurance, plus Medicare, Medicaid and related government programs to fill in some of the gaps. Most of them say little about how broad or deep the coverage would be, and several want more employer discretion, which could mean even less coverage than people have now. Moreover, they do not sufficiently address discontinuities of coverage as people change jobs, have babies, or leave their jobs for any reason.

Third, the Service Employees International Union proposes an excellent series of phase-in changes that would convert our voluntary, employer-based system to a universal, insurance-based system with comprehensive and equitable coverage and premiums. It would move millions of people from have health unsurance to reliable health assurance. Their proposal would take us to where most insurer-based systems in other countries have ended up, after starting roughly with our kind of mixture of private insurance, private pay, and public programs. So if we passed something like InsureUSA now, we would probably end up with what this union is recommending after an unnecessary delay of 20 years.

Even simpler and still cheaper is the fourth approach taken by the American Nursing Association. They propose to universalize Medicare and broaden its coverage so that it includes prescription drugs, prevention, and more mental health care. The nurses contend that incremental solutions like the proposals above have not and will not work. Too many people go in and out of eligibility or have to move from one program to another. Moreover, administering different plans for different folks is a costly nightmare that leaves too many uncovered for too long. ìKeep it simple and equitable,ì they argue. ìUniversalize Medicare.î

The American people overwhelmingly want universal health insurance of some kind that is affordable and reliable. So far we have not done it, because our system of ìunsuranceî (the least secure, most complex insurance system in the world) is so profitable to insurance companies and several battalions of insurance agents and health benefits experts. Universalizing this commercial insurance by having all taxpayers subsidize another $40 billion, could rightly be called the Commercial Insurance Welfare Act. But employers also support the current arrangements, because they believe in private enterprise and think they are getting a bargain, which they clearly are not.

In fact, employers, business leaders and investors have paid dearly for this belief, even though the tax subsidy they receive means they pay only fifty cents of every premium dollar. The reason? Cost controls are much weaker, so that over any 10-year period, investors and corporations end up paying more than they would have if there had been strong controls but no subsidy. Moreover, they have the burden and expense of being distracted from their main business to deal with benefits design, selecting plans for their employees, and monitoring performance.

Apparently, employers think their beliefs are worth an extra $120 billion in premiums and weaker controls to have Aetna, CIGNA and the Blues run health care plans rather than to have universal Medicare run them. In both cases, the providers will be private, but are insurers and corporate managed care worth that much more than universalized Medicare? Are they more efficient or more fair? Do they control costs better?

Medicare is clearly more efficient. Even with its tangle of red tape, it returns about $960,000 out of every million dollars for health care services. In our trillion-dollar system, thatís a saving of $120 billion. The crazy-quilt character of our current system is also wasteful. Even with the $110 billion tax subsidy to employers, about half of them do not provide health insurance, and the other half (along with the rest of us) bear indirectly the consequences.

Universalizing Medicare is clearly more fair. The whole commercial insurance industry is based on discriminating against higher risks, but when it comes to health insurance, people want more coverage as their health risks increase or their health problems worsen, not less. They want health assurance, not health unsurance.

But businessmen and legislators think that managed care through commercial insurance has controlled costs better. Actually, Medicare and Congress did a better job from l983 to the early 90s. Since then, managed care has been credited with flattening cost increases from about 12 percent to about 2 percent a year. Most of that happened thanks to Mr. Greenspan engineering much lower inflation, and some of that gain occurred by making employees pay more in cash and thinning coverage. But commercial managed care did drive down costs by paying hospitals and doctors much less than before. Now that gain has been achieved, you will see Medicare and Congress controlling costs better and more fairly than will the commercials.

The choice comes down, then, to what you are willing to pay for your beliefs about which way to universalize health insurance. If you believe that Medicare is a dreaded form of socialism and therefore universalizing it would be terrible, then your belief will cost $160 billion in tax subsidies for private policies, plus higher administrative costs and greater inequalities. Of course the physicians, the hospitals, the drug companies and the insurers favor corporate managed care, because they know cost controls will be weaker. Thatís why you will see a lot of Harry and Louise talking about InsureUSA, and ads asking if you want ìbig government in your medicine chest.î The alternative is to have managed care companies in your medicine chest. Either way will build on what we have, only on different parts and with rather different consequences for fairness and costs.

Donald Light is a Fellow at the Center for Bioethics at the University of Pennsylvania and a professor of health care at the University of Medicine and Dentistry of New Jersey/School of Osteopathic Medicine. lightd@mail.med.upenn.edu Tel:215-573-8108 Fax:609-258-2180

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