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Home / Washington Business - March/April 2005 / A Modest Proposal |
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A Modest Proposal |
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Written On: March/April 2005 |
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Written By: by Jeff Gingold |
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A decade after it was the dominant national political issue, health care remains “hot” for a simple reason: Few proposed solutions have anything to do with the core problem of controlling growth of health care expenditures. Most so-called solutions merely shift or add costs to the system under the guise of “anticipated future savings.” In the meantime, health care spending continues to grow at an unsustainable pace that erodes prior, well-intended reforms and jeopardizes the ability of businesses to continue to provide coverage to their employees. Here is my modest proposal: Don’t make it worse than it already is. Focus on solutions that make health care more affordable before adding components that cost more, and utilize actual savings — not projected savings — to expand coverage. This is not just a problem for Washington. Here is how the Kaiser Family Foundation describes private, per-capita national health spending (adjusted for inflation) between 1960 and 2003: “The growth rate in the portion of national health expenditures paid from private funding has cycled upward and downward over the last 40 years. During this period, public and private efforts to rein in accelerating costs through wage and price controls, voluntary hospital cost containment, and, most recently, through managed care and the threat of health reform have triggered sharp declines in private spending growth. But these periods of decline have always proven temporary and have been followed by rapid growth in costs. Average annual growth in private per capital health spending (3.6 percent from 1960-2003) is more than twice the average annual growth in GDP (1.4 percent) over the same period.” Health care spending and costs in dollars increased by a staggering 88 percent between 1992 and 2002. However, as a percentage of GDP, health care spending remained relatively stable, generally fluctuating between 13.1 percent in 1992 and 13.3 percent in 2000, and then rose dramatically to 14.1 percent in 2001 and to 14.9 percent in 2002, again according to the Kaiser Family Foundation. A Seattle Post-Intelligencer article on Feb. 24, 2005, noted that in 2005, health care spending totals 15.3 percent of GDP and Centers for Medicare and Medicaid Services project it will hit 18.7 percent in 2014. The Seattle Times reported in mid-February 2005 that this is not just a problem for private health care programs. Government systems in Europe that have instituted waiting lists for elective procedures are extending this practice to medically necessary services. Patients are being out-sourced to other countries for care. Government health care systems established and maintained by taxes that many in our country would consider confiscatory, are beginning to be privatized. Within this global crisis of health care affordability, Washington faces budget problems that challenge our ability to maintain competitive educational and transportation systems. Our kids in high school are working harder, getting better grades, and acquiring knowledge of subjects that were college-level for us. Yet, we are told to expect there will not be enough space for them in our state colleges and universities because the state can’t afford it. Government as a Safety Net Under these circumstances, why would we want to invest our state’s limited resources in expanding the Health Care Authority’s responsibilities for public employees in an attempt to duplicate what already is available to small business through the private sector, and what is the basis for believing it will be more affordable? Saving on health care costs by combining administrative and marketing functions, and by leveraging “better deals” on provider and institutional payments, are advantages already available to several hundred thousand employees and dependents of Washington businesses today, in health care plans offered through association (such as AWB’s CompWise), member-governed group, and trust plans. Affordability, of course, is relative. Some small employers might find a $100 per month premium unaffordable. Moving these people into a government pool will not address that issue. However, our government can fulfill an important role as a safety net by giving the private sector a fair shot to provide truly basic coverage, and by subsidizing enrollment in programs that empower and reward responsible utilization. Government does not fulfill this role when it enters into competition with the private sector and exempts itself from legal, regulatory and financial obligations that are imposed on private-sector competitors in the health care market. Economies of scale derived by a large group of public employees in purchasing health insurance do not necessarily transfer to an aggregation of many small, diverse private-sector employer groups. Aggregating purchasing power can reduce administrative and marketing expenses and enhance customer service functions. However, administrative and marketing costs represent a relatively small part of the health care expense pie. The most significant slice of the health care expenditures pie is in claims payments for medical professionals, institutional providers and prescription drugs. We have invited a misimpression that health insurance is free because someone else, the employer, is paying for it. Further separating the covered individual from the true cost of the coverage through a government pool does not address cost and utilization issues. Groups and their enrollees should have incentives to achieve and maintain good claims experience. Experience rating does this and community rating does not. Experience rating reflects the actual experience of a group and makes insurance more affordable for groups that are able to keep claims costs down. Instead of expanding risk pools that insulate covered people from management of their health care expenditures, we should enable small employers to provide their employees and dependents with an affordable, basic level of coverage. For those employers who cannot afford to help their employees establish health savings accounts, we should be looking at how a government safety net can provide financial assistance. The program should include incentives for utilization of preventive care. We need to find consensus around health care policy that promotes good health for life and is implemented through laws and regulations that meaningfully empower and financially reward groups and individuals for appropriate, cost-effective use of health care resources. We need our government to serve us as a safety net for those of us who cannot afford health insurance and to cover the reasonable and necessary costs of health conditions that are beyond our control. In the meantime, we cannot afford solutions that mask the problem, jeopardize a fragile competitive market, and make coverage less affordable for those who have it. Jeff Gingold is a long-time board member of AWB and is very involved with health care issues in Washington. Gingold is an attorney at Lane Powell, P.C. in Seattle.
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