Sunday, July 12, 2009

The Silence in the Health Insurance Debate

There's a really big elephant in the room where the question of universal health insurance is being debated. And everyone is assiduously avoiding any mention of it. That's the question of how medical care is allocated. Yet, allocation is crucially important to the question that is vigorously debated: costs and who should bear them.

The subject of allocation of medical care is taboo, at least in America. This is the nation that enshrined the pursuit of happiness in its creation myth. To this day, the notion of limits is unacceptable. Just last fall, the American Dream was renewed when voters chose a nonwhite boy from a broken family of modest means as its President. The idea that the latest in medical care shouldn't be available to all in need isn't accepted.

However, you can't provide unlimited amounts of anything and health care is no exception. Allocation happens early and often in America, and it isn't pretty. Nonprofit hospitals (which probably comprise a majority of all hospitals) are required to provide a modicum of free or discounted care to those who cannot afford to pay. And they do. But it appears that charity patients don't receive the same quality of care as the well-insured and well-to-do. It should come as no surprise that money matters. Even in countries with universal health insurance (like Canada and various European nations), the well-off are free to plunk down cash on the barrelhead for more and better health care--and they do, going to other nations if necessary.

Allocation decisions are also made in the regulation of health insurers. Health insurance companies are principally regulated today by state governments. These regulators decide, among other things, what policies sold in their states must cover. In some states, group health insurance contracts must cover acupuncture treatments, while other states do not require such coverage. The federal government decides what Medicare, Medicaid, and other federal health insurance programs, will cover. The regulatory process is a place where politics can affect the way health care is allocated, and has played an increasingly important role in recent years.

Allocation also is done on the front lines, by physicians. They, presumably, make determinations based on medical need and appropriateness. However, concerns over malpractice claims lead some physicians to recommend more, rather than less, testing. And, unfortunately, there have been all too many allegations that some physicians stood to gain financially from diagnostic tests or treatments they recommended. Thus, we have a degree of misallocation, a crucial problem in controlling costs.

Health insurers compete for the most desirable business (group insurance contracts) by trying to keep costs under control while providing expansive looking coverage. Thus it is that delivering mothers are often discharged the day after giving birth, and many breast cancer surgery patients as discharged a day or two after surgery. Physicians are unhappy because their professional judgment is superseded. Patients are unhappy because they are booted out of the hospital before they feel ready for the outside world. This, however, is another way health care is allocated.

Then, there are "exogenous" factors, like layoffs and unemployment, when formerly well-insured persons are suddenly scrambling for any sort of coverage. As unemployment levels rise, health care allocations shift away from the laid-off and their dependents. They have limited measures like COBRA to continue coverage for a while, albeit at a high cost. See and Some assistance with the costs is provided by the administration's recent stimulus bill. See

There is no simple resolution to the allocation problem. The seemingly arbitrary and almost cruel limits of some private insurance policies have led a majority of Americans to support the formation of a federal health insurance plan. To avoid this result, the private sector needs to get it together fast, and effectively. There is reason to doubt it will succeed. Private insurance companies could have competed for the revenues that Social Security now gets, by offering low cost annuities and similar contracts that would guarantee a fixed (or even inflation adjusted) income during the golden years. Instead, insurers endeavor to sell high-cost, high commission, complex, and confusing annuities that sometimes seem to contain more surprises than benefits. Something comparable seems to be happening with many private sector health insurance policies, which have high administrative costs, incomprehensible complexity and a surfeit of surprises that don't involve the payment of benefits.

Conflicts of interest that physicians may have when making recommendations for tests or treatments should be prohibited, especially with respect to Medicare, Medicaid and other federally funded payments. Medicare and Medicaid might control costs better if conflicts of interest were eliminated, instead of the current approach of cutting physician reimbursements to the bone and pressuring honest physicians to provide quality services for little or no income.

We should have a more open dialogue about how much medical care we are truly willing to pay for. There is nothing wrong with having the Cadillac of national health insurance programs. We have the Cadillac of national defense systems. The U.S. Navy rules the high seas and safeguards shipping lanes for all. The U.S. Army and Marine Corp have more combat capability than any other nation's ground forces. The U.S. Air Force provides the finest air defense in the world. If we want, we can have the finest of national health insurance programs. We just need to be willing to pay for it.

Much of the opposition to the Obama Administration's plan has coalesced around the question of who will pay for the national health insurance program. This is politically savvy because no one wants to pay more taxes. As we can see from California's politics, focusing on tax burdens has an uber-NIMBY quality that paralyzes the political process and prevents anything constructive from being done. The naysayers on national health insurance are desperately trying to throw the health insurance debate into the tax burden briar patch, because that's where nothing gets done.

The administration should openly discuss the elephant in the room. Talking about what the government can provide presents the problem in positive terms: here, electorate, is what you get. It may be limited--indeed, of course it has to be limited because there can't be unlimited health care. But Medicare started off as a limited program, and still is a limited program. No politician in Washington who has functioning survival instincts would suggest repealing Medicare. Medicare can be and is supplemented by private insurance coverage--and so could any general federal health insurance program.

The administration would take a positive step by openly discussing how much health care insurance the government would provide. That would also clarify how much the cost would be. Taxpayers have only the example of the private sector as a frame of reference, and are understandably frightened by its history of skyrocketing premiums, very high administrative costs, and coverage limitations that most severely affect those in the greatest need. The government program should leave room for private insurance programs. Americans don't want anyone uninsured and they also want choice. These seeming inconsistencies can be accommodated by extending the mixed public-private health insurance system that, with Medicare and Medicaid, we already have. It is important to accentuate the positive, and doing so could help make national health insurance a reality.

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