The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

Public and Private Sectors Facing Tough Health Care Decisions

Posted by Alan on February 17, 2008

I’ve written numerous times in this blog on what’s needed to achieve meaningful health are reform: increase access to health care coverage; and constrain escalating medical costs. The latter is the most important. If we don’t get control of health care costs we won’t be able to afford to provide access. Not only that, health care costs will vacuum resources away from other important societal needs.

There’s been some success in recent years on increasing access. The State Children Health Insurance Plan has resulted in coverage for millions of children that otherwise would likely to have gone without. Carriers have created innovative products that have proved popular with young people and those seeking catastrophic coverage. (There’s also been numerous disappointments during that time, when opportunities to expand coverage failed).

In fact, a substantial component of the uninsured could obtain coverage today. As Aetna CEO Ron Williams noted at a meeting of the Business Council in Florida last week, 20 percent of the uninsured are eligible for Medicaid and the state children’s health programs, but fail to enroll in those programs. In an article on the conference by Jason Szep of Reuters, Mr. Williams also noted that 10 percent of the nation’s 47 million uninsured are college students and “could be easily and relatively cheaply enrolled for health care insurance.”

At the same conference, Angela Braly, the CEO of WellPoint, called for expansion of programs aimed at children and low-income families. WellPoint estimates this could cut the uninsured by 25 million if all 50 states acted to cover all children and increasing eligibility for Medicaid.

It’s true that too many of those eligible for public programs fail to enroll in them. It’s true that some states have had success in requiring college students to have health care coverage. And it’s true that expanding children and low-income health programs would bring many of today’s uninsured into the system. The problem, however, is that these programs are under tremendous stress. The safety net that has assured health care for all is crumbling.

In Los Angeles, for example, there are plans to shut 11 health clinics to meet the county’s $195-$331 million budget deficit. According to the Los Angeles Times,  a majority of the Board of Supervisors opposes these closures, but simultaneously, health officials are drawing up contingency plans that would shutter all of the county’s health clinics — facilities that provide “more than 160,000 urgent care visits and nearly 180,000 specialty care visits a year, mostly from the uninsured and poor.”

Meanwhile, in Sacramento, doctors providing care to Medicaid patients will see their reimbursement rates cut by 10 percent as the state makes a mid-year adjustment to its hemorrhaging budget. As a result, fewer physicians are likely to accept new Medicaid patients or some may stop seeing program participants altogether.

America’s current health care system is already a mix of private and public health care programs. The private sector is under attack for its rescission practices, among other issues. The public sector is going broke and, even in the best of economies, seems unable to reach out to all those promised care.

What’s needed is a national dialogue about priorities. If Americans are serious about expanding coverage, they’re going to have to find a way to pay for it in good economic times or bad. And that means keeping it affordable. States should not balance their budgets by breaking their promise to those whom they promised coverage.

The private sector is also going to have to clean up its act. Behaving legally is not enough, they have to act right. Carriers need to act in ways that earns the public’s respect by demonstrating an appreciation of the critical role these enterprises play in society — a role that requires them to meet a higher standard than most corporations. Business as usual could mean no business at all.

There’s a strong demand among voters to change the country’s health care system. Given all that’s happening, that’s not surprising. And, given all that’s happening, it’s not going to be easy, either.


4 Responses to “Public and Private Sectors Facing Tough Health Care Decisions”

  1. Arianna Huffington said

    I think mandatory 10 year no parole sentences for any company representatives or lobbyists who impede the process of health reform (as determined by a commission of 100% health care consumers would be a salutary idea.

  2. Gil said

    Mark Goodman brings up an interesting (if rather dated) argument that is constantly brought up in an attempt to show that Medicare cannot be as good as private insurers. The 2-3% figure is, as Mark points out, a figure arrived at by looking at gross payment rather than per/patient claims. The argument is made that administrative costs and overhead should be looked at in the per-capita figure (which, by the way still gives Medicare a $133 to $271 per person advantage according to the Keiser Family Foundation), but in truth this does not truly look at administrative costs at all.

    Healthcare providers know that much of the administrative costs for patients are involved in ordering tests, treatments, getting approval for referrals and other dealings with the insurance companies. The fact is that private insurance has picked and chose their patients carefully so that there would be fewer claims, and then they throw every obstacle in the way to prevent claims. On the other hand Medicare insures everyone who applies!
    That is partly why their per capita claims are higher. These patients have to have more tests, therapies and consults and therefore are more expensive. In both Medicare and private insurance, each one of those steps is subject to administrative oversight and thus cost. This is where the real overhead is, and why the math should be done per $ and not per claim.

    Recently, (October 2007) the United States House of Representatives Committee on Oversight and Government Reform published it’s finding on the administrative costs of Medicare D (a privatized drug prescription plan for Medicare) versus traditional Medicare. They found that Medicare D administrative costs were 6 times higher than traditional Medicare! Of the average $180 per enrollee only $30 went to “Sales Cost”, while $107 went to administrative costs and $43 went to profit.

    But, this is only part of the problem. The cumbersome dealings with private insurance make it more difficult for healthcare providers to practice evidence based medicine. This, we (Healthcare Providers for Healthcare Reform- believe is the key to why we pay twice as much per capita for healthcare than any other country in the world but are near the bottom of the 30 OECD countries in life expectancy from birth, infant mortality and maternal mortality.

    In fact the benefit of Medicare on health has been supported in 2 recent papers. In the New England Journal of Medicine (2007;357:1221-8), one can see that the life expectancy from age 65 (when Medicare kicks in) compared to other OECD countries is markedly better than total life expectancy. In a recent JAMA paper (2007 Dec 26;298(24):2886-94), the authors showed that before age 65, there is a steeper decline in health status among the uninsured compared with those with health insurance. The drop in the uninsured’s health started to reverse once Medicare coverage kicks in at age 65. In fact, by age 70, the difference in health between the two groups was about half what would be expected in the absence of Medicare coverage.

    We need some form of universal coverage to restore the health of this country and we believe that we have a workable plan that will incorporate the best of government run and privately run insurance.

  3. Gil makes some interesting points and has some interesting suggestions. He like many other people don’t understand that Medicare’s overhead is not 2-3%. First of all Medicare doesn’t pay claims they contract it out to private companies. Secondly and most importantly the cost of paying a claim is the same for Medicare as it is for private companies like the Blue’s or United. They estimate their cost is 6%. Why the difference? Medicare claims are about 3x the size of non Medicare claims. $6000+ for an average Medicare claim versus $2000+ for a non Medicare claim.

  4. Gil said

    The current proposals by the presidential candidates for healthcare reform do not get at the root cause of the high price and poor return of the current healthcare system. Why do we pay twice as much per capita than any other country in the world yet come in 23rd to 25th place among the top 30 industrialized counties for longevity, infant mortality and maternal mortality? The answer is of course quite complicated, but much of it is due to the high overhead of the private insurance industry. Private insurance firms spend 13-28% of its revenue on overhead (to maintain a bureaucracy, profits and high CEO salaries) while Medicare only spends 2-3%. In addition, much of the bureaucratic efforts of these insurance companies hamper the efficiency of hospitals and office medical practices with “pre-certifications”, denials and other nonproductive practices.

    Universal, single payer systems are not politically viable (see Dennis Kucinich) and are too expensive. And most of the current proposals only force more people to obtain coverage.

    Our group, Healthcare Professionals for Healthcare Reform (HPfHR) developed a plan with the concept that the entire population should be covered for life sustaining and health promoting “basic” healthcare and that there should be the ability to obtain higher levels of coverage. In addition, the plan was designed not only to maintain the present “private practice” model for healthcare delivery, but also to make it more efficient and more effective.

    The plan ( has 3 Tiers of coverage; a basic level (Tier 1) would cover the entire population- “from cradle to grave” and would include all medical, surgical and psychiatric issues considered life saving, life sustaining and/or preventative care. Tier 2 would cover all medical, surgical and psychiatric issues considered to help with quality of life. Tier 3 would apply to all medical and surgical issues considered “luxury” items.

    Coverage of Tier 1 would be done by an expanded Medicare plan while Tier 2 would be covered by private payers. Tier 3 would not be covered (as is now the case).

    As Alan said, there is a strong demand among voters to change the country’s health care system, but unfortunately, none of the candidate’s plans will really do the job. We need to think outside the box.

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