Health care reform finally on horizon - East Valley Tribune: Opinion

Health care reform finally on horizon

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Posted: Saturday, July 25, 2009 3:07 pm | Updated: 1:47 am, Sat Oct 8, 2011.

When my neighbor, who operates a small business, had a stroke, the first thing that came to mind as paramedics wheeled him away was, "Does he have health insurance?"

A former student of mine with polycystic kidney disease can't find private insurance to cover her pre-existing condition. Another friend worked his way out of homelessness, but hepatitis C forces him to keep his income below the poverty line so he doesn't lose health coverage through the state Medicaid program known as Arizona Health Care Cost Containment System.

While some of us have quality health care, few have health-care security. Many of us give up our entrepreneurial dreams to hold onto jobs with health insurance. We're one job loss away from facing exorbitant premiums or being locked out by pre-existing conditions.

The America's Affordable Health Choices Act moving through Congress is historic, but not yet affordable. Today, nearly 20 percent of the non-elderly population lacks health insurance. The nonpartisan Congressional Budget Office projects the proposed reform law would bring health-care security by raising coverage of legal, non-elderly residents to 97 percent of all Americans.

Extending insurance to everyone

The proposed law would expand Medicaid eligibility and provide a gradually phased out subsidized insurance premium requirement for individuals without employer provided health insurance. These individuals, with incomes up to 400 percent of the federal poverty line ($88,000 for a family of four), would have to purchase insurance coverage through an insurance exchange that would feature private and public plans.

Employers with payrolls above $250,000 would be required to either pay a substantial share of employee health insurance premiums or pay a payroll tax of up to 8 percent with employees purchasing care through the exchange. The bill also raises Medicaid reimbursement rates for health-care professionals, which currently lag behind Medicare, to parity over time. No longer would pre-existing conditions be excluded.

The American Medical Association supports the proposed law. Harry and Louise ads (the pharmaceutical industry) are back, but this time in support. The health care industry is dropping $1.4 million a day, bringing in 350 lobbyists with prior experience to Congress to help shape the package and to protect its financial interests. The only significant interest group grumbling is businesses, which chafes at the mandates.

The real price of health care

But Congressional Budget Office Director Douglas W. Elmendorf exposed a fly in the ointment and raised the ire of Democrats when he testified that the bill lacked effective cost controls.

With Republicans opposed and some Democrats holding out, the proposed law doesn't yet have sufficient votes in the House or Senate. The political tightrope requires making changes that address escalating costs without disrupting the fragile political coalition supporting it.

Presently, we pay 17 percent of our gross domestic product for private and public health care. That's 50 percent higher than any other industrialized country, and we still have mediocre performance.

Studies find the economics of health care defy simple supply and demand. While normally greater competition drives down prices, physicians in areas with a surplus of hospital beds are more likely to use them. Once a patient is admitted, the threshold for ordering costly tests drops precipitously.

While one might think that more specialists would reduce prices, we get the opposite result. Like hospital beds, as physicians are able to refer people more easily, they do so. Private providers invest in new technology to attract patients, but can't pay for it unless they use it. So technology drives its own use. And defensive medicine to ward off malpractice claims may account for one-fifth of tests and referrals, based on a Massachusetts Medical Society physician survey.

Doctors hire a small army to do battle with the bureaucrats in a myriad of private insurance companies. The insurance companies in turn try to check unnecessary treatments to keep down costs and enhance their profits.

Money isn't buying good medicine

All of this would be fine if it delivered better outcomes, but a thorough review of research by the Congressional Budget Office reports more services and overhead do not correlate with better health outcomes, just more cost. We lag behind other industrialized countries in health outcome statistics. A study published in the journal Health Affairs in 2008 ranked the United States last among 19 industrialized countries in avoiding preventable deaths.

Superior systems cost about half as much and governments are more involved in overseeing payments for health care. Physicians are often paid on a salary basis and do not reap rewards for prescribing extra treatments, which our decentralized fee-for-service system encourages.

On the flip side, national health insurance systems struggle with waiting lists for some non-emergency procedures. U.S. doctors rightly fear a cut in their incomes. Opponents seize on these perceived shortcomings in public campaigns to reinforce fears about dramatic change. Consequently, sufficient support for this option doesn't exist.

Reform malpractice laws

So where might we find the missing element to control costs?

Malpractice reform would awaken the trial lawyer lobby, but would likely win over many hesitant Republicans and Democrats. Malpractice litigation currently malfunctions.

A review of closed cases published in the New England Journal of Medicine in 2006 revealed compensation was awarded in a quarter of claims where no medical error occurred, while only in three-quarters of cases where errors occurred were patients compensated. An alarming half of costs go to overhead (lawyers, experts, and courts), and studies found nine out of 10 patients who suffer medical negligence never sue. A well-designed system for independent review similar to New Zealand would likely be a huge improvement.

Take control of doctor pay

Most experts agree we need to change incentives away from fee-for-service that pays for more, but not better, care. States should be encouraged to explore fee limits with pay for performance. In fee capitation, providers receive a fixed fee based on a patient's health status - creating an incentive for cost monitoring - while pay for performance rewards them for doing better so they don't skimp on care. Many details need to be worked out, but allowing states to explore this could provide big dividends.

No legislation will reach President Barack Obama unless it has 60 votes in the Senate. But if Democrats are willing to make changes that better address costs, we'll have an historic outcome that we can all be proud of!


Dave Wells holds a doctorate in political economy and public policy and teaches at Arizona State University. Contact him at The views expressed here are strictly his own.

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