Tuesday, June 23, 2009

Public Option, Trojan Horse

The “healthcare reform” debate is now condensing down to whether or not there will be a “public option” included in it. Dr. David Himmelstein raised an interesting point in an interview with Bill Moyers back in May, suggesting that such an option might not only be irrelevant but might actually be to our disadvantage. But first, to restate my case that what is being discussed is not reform at all. Here is President Obama, with a phrase that he has repeated many times,

We have historically a tradition of employer based health care and although there are a lot of people who are not satisfied with their health care, the truth is that the vast majority of people currently get their health care from their employers, and you've got this system that's already in place.

The emphasis, added by me, is just plain a false statement. Ford Motor Company does not employ a horde of doctors and nurses and own a network of hospitals. People do not get healthcare from their employers. What they get is health insurance from their employers, and if they are “happy with what they have and don’t want to lose it” it is because they have never had to use it due to any kind of serious illness.

I am covered by my wife’s employer-provided plan, one of the “gold plated” plans that Obama wants to tax. To obtain the best degree of coverage, the plan limits me to certain doctors and hospitals, it restricts what medications it will pay for, and when I got sick in 2003 my out-of-pocket expenses came to more than $30,000 for the year. Happily, we were not in a position that a financial impact like that bankrupted us. Others are not as fortunate.

Bill Moyers: You had had cancer of the uterus, and while your husband was suffering from heart disease. And you went bankrupt even though you were insured?

Donna Smith: Yep. That's why I was asked to testify. I tell people that our story, my husband's and my story's not unique. It's not because we're so unique that people talk about us because we're not unique. So many millions of Americans do what all middle-class families do. You hang on. You watch your premiums rise over time and your benefits shrink. And as long as you're healthy, you absorb some of that cost and you deal with it and you make decisions.

But if you get sick, you find out just how inadequate that insurance may be. And I tell people not only did I have health insurance, I had Aflac disability insurance and a health care savings account on top of that. So we were like the prime example of responsible people who try and keep ourselves covered. And yet when we got sick, there was no way the deductibles and out-of-pocket maximum exposure added up so quickly that we were buried very quickly financially.

So how, precisely, does extending health insurance to more people solve that part of the problem? How does having health insurance help someone who cannot pay the $500 deductible? If someone cannot afford that first $500 of medical expense then they have no access to healthcare, whether they have insurance coverage or not.

The Public Option
The public option is touted as a method of keeping the private insurance “honest” by competing with them while not having to make a profit, thereby driving down the cost of insurance. The unvoiced hope is that it would eventually drive the private plans out of business and lead to single payer. Enter Dr. Himmelstein, single payer advocate, who says that the public option is a half measure that provides only small savings at best.

Bill Moyers: There aren't any details. But he seems to be advocating a public option that would compete with the private insurance-driven sector, as a way of lowering the cost. What do you think about it? Is that- am I reading his plan correctly?

Dr. David Himmelstein: Well, most of the cost savings he's talking about are really illusory, I think. And my research group has done most of the research work on administrative costs in health care. And the administrative costs he's talking about saving are a tiny fraction of the potential savings under single-payer. 'Cause hospitals have to keep their bureaucracy, if you're dealing with hundreds of different plans. And doctors have to keep the bureaucracy in our office. You don't actually get the streamlining that you get from having one payer that has one set of rules and can pay lump sum budgets to hospitals. But more than that, we're worried that the public plan actually becomes a dumping ground for the unprofitable patients. As it's happening in Medicare.

You can go read the transcript of the interview, or watch it, but to condense the argument a bit, it consists of three parts; you are eliminating the bureaucracy of a handful of insurance companies but not that of thousands of medical providers, the private plans will “cherry pick” the healthy people and dump the sick ones into the public plan, and instead of leading to single payer the public plan winds up failing and proving that “government can’t do healthcare.”

The first point is certainly right; you have not reduced the cost for one single doctor’s office. That doctor still has to deal with all the differing forms for different insurance companies, plus the new public option, and deals with obtaining payment from all the multiple sources. This “healthcare reform” has made no cost savings here.

I question that there is any administrative cost savings at the insurance level. No one has indicated how the addition of a public plan will cause the insurance companies to reduce staff, other than a desire to reduce costs. One way to reduce costs is to reduce benefit payments, and that seems like a significantly likely outcome. Maybe they’ll trim their “overhead” but that is, as the doctor points out, pretty trivial compared to the provider overhead that cannot be trimmed.

The second point is an illegality, but since when has that ever stopped corporate America? Dr. Himmelstein points out that, despite bring illegal, it is routinely being done with Medicare today, and you can bet it will be done with a public option.

The third point, not really made well in the interview since the idea of a public option as a bridge to single payer is being kept below the horizon lest it scare supporters away from it, is that with all the sickest people being dumped on it and therefore operating with severe losses, the public option can then actually be used as proof that government-run healthcare is not viable, leading to the return of private health insurance dominance.

My question is, why do we have to go there in baby steps and half measures at all? The obvious answer is, of course, that we have no leadership on the issue but that begs the question. Why do we have no leadership for single payer?

Barack Obama says that going to single payer is “too disruptive.” What? Are we children who cannot handle disruption? As Dr. Himmelstein points out, it doesn’t disrupt the doctors or hospitals, they just continue to practice medicine, but their billing and collections get a lot easier. Agreed, the insurance executives will find it fairly disruptive.

Canada took the plunge in the early seventies. They just said, “Okay, let’s do it.” And they did it. Are we less courageous, less able, than Canadians?

Dr. Sidney Wolfe: ... [a]nd in Canada, back in 1970 or so, they were spending the same percentage of their gross national product as we were on health. They had huge numbers of uninsured people. They had the same insurance companies. Blue Cross Blue Shield. They decided to just get rid of the health insurance industry.

And the guy that led that, Tommy Douglas, founder of Canada’s national healthcare system, was voted by Canadians who use that system as the greatest leader in Canada's history.

Not half measures; not health insurance; healthcare. Just do it.

2 comments:

  1. bruce3:23 PM

    the health insurance business is very large very powerful and too many politicians are beholden to it (and other things). There needs to be a strong leader that will say waht needs to be done.. damn the torpedoes, full speed ahead.

    Well, there's more. But Jayhawk has said most of it.

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  2. This whole situation could be solved with a trial of this new system on a small community, lets say one county, and then see how it works there. Make a lot of graphs, statistics and see what's what. I'd say that would be one solution to all of this arguing.

    Take care, Lorne

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