Who Should Pay For Health Care Reform?

July 1, 2002

With the failure of previous federal plans to reform health care, other options must be considered. How might this effect the reimbursements for providing care?

Ten years after Bill Clinton won the presidency on a platform that included a major overhaul of the American health care system, nearly 40 million Americans have no health insurance, businesses are shifting the costs of medical care to their employees, hospitals and physician groups are seeking bankruptcy protection from the courts, and senior citizens are taking bus trips to Canada to try to buy essential medications at affordable prices.

The new president of the American Psychiatric Association, Paul S. Appelbaum, M.D., took office with the admonition, "The moral obligation of a just society to provide for the needs of the less fortunate, as we would want our needs met were we in their places, teeters on a precipice."

Charles Kolb, president of the Committee for Economic Development, a nonprofit, nonpartisan business group, told reporters in Washington, D.C., "The problem is not a lack of good intentions, but a series of structural flaws," as the group issued a report titled A New Vision for Health Care: A Leadership Role for Business.

But the nation's political establishment, burned by the failure of the Clinton health proposals in 1994, shies away from directly confronting the challenges of fixing the system. Instead, it prefers to nibble around the edges with plans for a partial subsidy of prescription drugs for Medicare recipients, a so-called patient bill of rights aimed at protecting consumers from the worst excesses of managed care, debating parity for behavioral health care and tinkering with targeted programs aimed at at-risk populations such as children.

"It is still a shameful fact that some 39 million Americans--men, women and children--do not have health insurance," wrote syndicated columnist Helen Thomas, "and although a number of organizations have begun an effort to get [U.S.] Congress to move on the subject, there is no chance that will happen this year."

"A sober recognition has settled in Washington that little can be done to expand or improve health coverage while health care costs spiral out of control and the federal budget sinks deeper into deficit," a New York Times editorial cautioned in May. "Lawmakers seem to be betting that voters will not punish them for inaction. But they cannot put off the issue forever."

"In American politics, the structure of government makes it hard to get a majority on anything, except war," Theodore R. Marmor, Ph.D., professor of public policy and management at Yale School of Management, told Psychiatric Times. "When we have elections, we don't elect the government, we elect people in the government."

Marmor elaborated on the consequences of the impact of a government composed of independent individuals in a book chapter he wrote with Jonathan B. Oberlander, M.D., University of North Carolina School of Medicine, last year:

The American national legislature, measured in terms of its independence, administrative capacity, and ability to purse policies that diverge from the executive, is the most powerful in the world. Members of Congress who head committees and subcommittees have their own platform to introduce health care reform bills that differ from the president's or their own parties. As a consequence, any debate over health reform produces numerous bills sponsored by Congressional policymakers seeking to be entrepreneurs. The lesson is a sobering one for reformers. Even if there is a Congressional majority in favor of national health insurance, it does not mean there is a majority for any one plan.

In the interview with PT, Marmor added, "We have an 18th century form of government and a 21st century set of responsibilities that require positive government action."

"Of the 18 advanced industrial countries with varying democratic guarantees politically, we're the only country that has not put together a health care system that's universal," Quentin Young, M.D., president of Physicians for a National Health Program (PNHP), said in an interview with PT.

According to a report issued by the Centers for Disease Control and Prevention, most of these other countries provide health care at far less per capita than the United States. In 1998, the United States spent almost $4,200 per capita on health; Switzerland, $2,800; France, $2,000; Germany, $2,400; Canada, $2,300; and the United Kingdom, $1,500. In looking specifically at mental health care, a report from the World Health Organization shows that the United States spent 6% of its total health care budget on mental health, as compared to 11% in Canada and 10% in the United Kingdom. Even some third world countries spend more on mental health care than the United States. According to the WHO data, Singapore and Egypt respectively spent 7% and 9% of their total health care budget on mental health.

Young added, "I'm not saying that any of these systems is what we should do. We have a superior health work force: 10 million [people], including some of the best doctors, nurses and support personnel in the world. Health care is the only social problem we have where there's enough resources in place to solve the problem, if we could only figure out the way to employ them."

He continued, "The real answer is to get our heads screwed on right. At present, we're doing a bunch of bad things: the emergency room is being used as a primary care clinic, which is the most costly, counterproductive arrangement; you can't get out with less than a $2,000 to $3,000 bill. There are exorbitant administrative costs: 1,500 companies eating up 15% to 30% of the budget. We have no long-term care arrangements; you have to become a pauper to get on Medicaid. We should be putting more emphasis on support systems in the home. And there's the idiocy of mental health contracts that say you can only have six visits a year, as if you can predict the need for treatment or put a number in front."

Robert J. Field, Ph.D., J.D., M.P.H., director of the health policy program at University of the Sciences in Philadelphia, suggests a gradual path to health care reform. In an interview with PT, he noted that many employers are shifting their employee benefit plans to the "defined contribution" model instead of the "defined benefit" structure. Under the latter system, employers bought a package of health care benefits for their employees, with each employee getting the same basic coverage. Under defined contribution plans, employers earmark a set amount of money for health care, and the individual employees choose how that money will be spent. If the employees select a plan that costs more than the employer has budgeted, they pay for the difference in premium themselves.

"Defined contribution is the only answer we have for taking the next step in reform, at least on the financing side," Field said. "We tried managed care, which seems to have wrung out all the savings that it can and which antagonized enough people with its often-steamroller techniques. And now we're seeing gigantic premium increases, which is what managed care was designed to prevent, so we know something's not right. Having tried fee-for-service and managed care and having rejected for the time being a comprehensive national plan, we're looking at the idea of defined contribution plans or putting the ball in the hands of patients. We tried putting the ball in hands of the doctors, and they ran up costs. We put the ball in the hands of the insurance industry, and they antagonized everyone and interfered with care. Perhaps the patients can act as consumers do in other types of markets and make intelligent choices."

Young told PT that PNHP supports a single-payer system funded by taxes that would not include out-of-pocket copayments or deductibles for the patients. "Copays and deductibles are anachronisms that don't work, except to the detriment to people in poverty," he explained. He believes that the taxes necessary to support the single-payer system would be less than the nation's overall health bill under the current system.

"We pay for health care in three ways," he said. "First, through taxes that pay for Medicare, Medicaid, the Veterans Administration hospitals [and] the National Institutes of Health. The majority of health care costs are already born by the government, directly or indirectly, through the tax deduction for health expenses. Government now pays just over 50% of the health bill. Second, [we pay] out of pocket, through copayments, deductibles, pharmaceutical bills, which aren't covered by Medicare. Third, in lieu of wages: All of the premiums or benefits that we enjoy when we work for Corporation A or B or Small Businessman C are in lieu of wages. And when we get hit with double-digit cost increases, that's money out of our paychecks. Businesses are getting disenchanted with keeping this out of the hands of government. That formula has lost its glow, and businesses are increasingly responding in the worst possible way, by off-loading the costs to their workers, not covering families and cutting benefits."

Young recognized that there are vested interests in the current system which would resist change, and he proposes utilizing their abilities in other ways.

"It's a political question," he said. "A single-payer system translates to people losing jobs. How many insurance people--people at ends of telephone lines denying approvals, people holding up claims payments--are there? It may be as many as 200,000 to 400,000--that's just a rough guess--and that's where the savings come from, because those people will be redundant. So, we need to find new ways to use these people in a new system, perhaps training them to be counselors, guides or ombudsmen. Suppose we decide we want everyone to get immunizations, for example. And then there's the pharmaceutical thing: There's a world of education that needs to be done, moving peopleto generic drugs, patient education and so forth. The people in the drug industry coulddo that. Even early detection of depression and mental disorders could be facilitated by training people as screeners."

Marmor is less sanguine about the prospects for change, and much less enthusiastic about relying on the so-called Canadian model, where government pays for all health care services. "Perhaps one of the most serious barriers to adopting a national health system is the widespread perception that Americans have only two choices in health care," he wrote.

"This dichotomy in the American health debate is one that does not, we believe, serve reformers well. It leaves the mistaken impression that the Canadian program is the only available model of universal health coverage. It ignores the comparably successful experiences of universal health insurance in Western Europe, Japan and Australia...The exclusive focus is unfortunate, from a political perspective."

He suggested a more gradual approach to change. "One possibility could be mobilizing the states that are ready to go to universal health insurance," he said. Several states--for example, Maine, Vermont, Washington, Minnesota and Wisconsin--are already leaning toward some kind of universal care plan and could serve as laboratories for creating a model that might be transferred to the national scale. "One of the attractions of this so-called federal option is that it is not hostile to Republican ideology. It is much more likely that the Republicans in Congress would be willing to support a federal option than [for example] the expansion of Medicare downward to age 55."

Allowing more and more costs to be shifted to consumers may enforce market discipline on a health care system that has been notoriously undisciplined in the past. In any case, it will have to do until the political leadership finds the will to face the issues that must be confronted before the system can be reformed.