This piece is something for a class I'm in at Los Angeles Valley College. It's probably a bit too meaty to go in as an op-ed In Real Life(tm), but this is something I really feel passionate about and can go on and on about.
I want to post it here because I'd like to have folks here "kick the tires" before I submit it to my prof. I think it's way important because I respect at least most of your opinions here, and I think that something we have neglected to do: make the business case for health care reform. If we phrase it correctly and understandably, with less appeals to sympathy and more to the bottom line, we might change some minds.
And changing minds is srs business. ^_^
Piece is Creative Commons Share-Alike licensed by yours truly, S. Michelle Klein-Hass. Share and enjoy.
It is conventional wisdom that business people are against meaningful, comprehensive health care reform. However, more and more are coming around to the idea that perhaps leaving health insurance to the "free market" has been more harmful than helpful, and that the cost of health insurance is parasitical to their bottom line.
They see the experience of Toyota in the United States and see how the car-making giant is retreating from making cars here. They see how WalMart has attempted to shift its low-paid workers to taxpayer-paid programs like Medicaid. And they see how companies are being bankrupted out of their desire to do the right thing and cover their employees.
The pairing of health insurance and employment was an accident of incentives and disincentives given to industry during World War II. Working under wage and price controls, industry found it very hard to retain key personnel. Since they could not offer raises in excess of the wage caps, they got around them by giving out fringe benefits. And chief among them was health insurance. There were others: credit unions, paid vacation, winter parties, and company picnics. But health insurance was the biggie.
Originally health insurance companies were largely not-for-profit organizations. The most recognizable of these were the Blues: Blue Cross and Blue Shield. Blue Cross started in Texas in 1929 as a hospitalization plan run in concert with Baylor University’s teaching hospital. Blue Shield had roots back to health care cooperatives run in concert with lumber mills as early as the turn of the 20th Century.
Those on the West Coast probably also know of Kaiser Permanente, a company started originally as a non-profit to manage care for those working on the California Aqueduct from 1908 to 1912.
Currently, the status of the Blues and of Kaiser is hard to tease out. Some Blues are still run as non-profits, but most have converted to being shareholder-owned public for-profit companies. Kaiser has several elements that remain non-profit but others that are run as for-profit enterprises. The other dominant companies in the field are run as for-profit enterprises.
Kaiser, alone in the current field, runs its system in a similar way to the British National Health Service and the US Veteran’s Administration. Kaiser owns the hospitals and clinics, and doctors and nurses are direct employees of Kaiser. Doctors own a percentage of the medical centers associated with the hospitals, but are still basically salaried employees.
The rest of the field is far less vertically integrated. Insurers are paid premiums, and set up "networks" of physicians that agree to take the insurer’s insurance as payment. They deal with hospitals and medical groups on an individual basis and largely on a case-by-case basis. This is why one of the hardest to manage costs for a doctor is the cost of chasing down each insurance company and getting reimbursement from insurers. Often a doctor will have to pay one or more full-time clerks to handle this task for a given practice.
Although the public perception of the current patchwork system is that you pay your premium in order to receive care, this is not how it works. An adversarial system is set up, by design or accident. Paying claims are considered "medical losses," and claims adjusters are incentivized to deny, rather than provide, care. The burden of proof exists on the backs of patients and doctors to prove that the care is medically necessary, a determination not always made by the medically qualified but instead sometimes by unqualified bureaucrats.
Patients are often instructed to call their insurance company first, rather than call their doctor or 911, to get "pre-approval" of care. It is an overly complicated and wasteful system. Thirty cents of every dollar received in premiums goes to management and marketing of health plans. This is acceptable overhead if you are selling widgets, but unacceptable if you are providing people’s health care.
Although Medicare has been perennially under fire, and often in precarious financial straits, it manages to only take three cents out of every dollar laid out by the Medicare General Fund, and received from patient premiums, for overhead. 97% of Medicare goes to paying for actual rendering of health care, or what private insurance cynically calls "medical losses."
The non-system of medical care of the United States is largely the laughing stock of the rest of the world. According to the World Health Organization’s 2000 study in medical outcomes, the US ranks 37th in a pack of 191 countries. It is on the bottom of the industrialized world, and is more comparable in outcomes to developing countries like Colombia, Chile and Costa Rica.
And because of the over-reliance on employers as providers of health care, we have somewhere between 45 and 50 million people chronically without health insurance; and something like 60 million of the population, permanently and temporarily, in any given year without coverage. For those 45 to 50 million chronically uninsured and the 10 million temporarily uninsured in any given year, their outlook is grim. According to a recent study by Harvard Medical School, a little fewer than 45,000 people every year lose their lives to treatable diseases which might have been caught at a curable point if they had health insurance.
Small business in particular is squeezed by the current lack of comprehensive solutions. 53% of small business simply cannot afford to give their employees health insurance. And entrepreneurship is crippled by the current system. The problem of "Job Lock" chains people to being employees of a larger corporation to maintain their access to health care. They might have the next great idea, they might be tinkering in their garage on the next new thing that might make them the next Edison, or the next Wozniak and Jobs, but the high cost of buying individual insurance and the problem of pre-existing conditions that might make them uninsurable at any cost prevents them from making that leap.
Big Business is also fettered by the high cost of insurance, and is made uncompetitive in a world where all other industrialized nations have some sort of comprehensive, universal health care system. The crisis at GM and Chrysler was the result of two Pterodactyl-sized chickens coming home to roost: a 1950 deal with the United Auto Workers that "back-loaded" the funding of pensions 50 years into the future, and the exponential rise in health insurance costs. For American carmakers, health insurance costs trump even the cost of raw materials.
Toyota has chosen, on several recent occasions, to move North American production of its cars to Canada. The most recent of these decisions was to move production of several Toyota models from its NUMMI plant in Fremont, CA, once co-owned by GM, to one of Toyota’s facilities in Canada. And plans by Toyota to build a new plant in Alabama were scrapped in favor of ramping up production in Canada.
Why is the Great White North’s siren call so irresistible? The answer is in their health insurance scheme. More properly, there is a "Medicare" (they use this name too) administered by each province in Canada. Everybody in a given province is in, and nobody is out. The pool of insurance is province-wide, covering both the sick and the healthy. It is paid for by income taxes, but when you consider the employee share of health insurance costs in most industries it is comparable.
Take-home pay for the average Canadian worker remains at about 82%, including Medicare tax. Take-home pay for the average worker in the United States is actually 81.9%. Those in the province of British Columbia pay a modest premium on top of their provincial Medicare tax. There is no employer share in Canada. Employers can and do provide private "Medigap" insurance to their employees in Canada, but those costs are puny compared to the cost of full-blown insurance coverage for US workers.
Canada’s health care system – or more properly multiple interlocking systems – is not the only kind in the industrialized world. On one end of the spectrum is Germany, Switzerland and the Netherlands, which all rely on a publicly funded "sickness fund" that in turn funds highly regulated (and the key here is highly regulated) private insurers that complete for the business of families. This system has its origins with Bismarck and 1880s Prussia, and is perhaps the most time-tested system we have.
The other extreme is the United Kingdom, with its National Health Service, which maintains a network of hospitals and clinics and basically employs the doctors and nurses and allied health care professionals who work there. The rest of the industrialized world have systems that lie somewhere in the middle of these two extremes. In most of these countries, there is private health care that offers services not covered by the system, like plastic surgery, dentistry and vision care.
In former Soviet and Warsaw Pact countries, the fall of the Soviet Union has meant a precipitous crash into an uncertain health care future. In some more wealthy countries in the region, health care systems have been reconstructed, although most no longer fit the mold of "socialized medicine" that existed when under the Soviet sphere of influence. In others, access to health care has declined.
The fee-for-service patchwork that sprang up in the wake of the collapse of the Soviet Union has meant that economic "winners" have had no trouble getting "Cadillac" health care, but those left in the dust of economic restructuring have had little to no access. As a result, maternal and infant mortality has gone up in the wake of the end of the Soviet health care system. Public health disasters like the rise of drug-resistant Tuberculosis and HIV/AIDS spread have followed in their wake. And as a result, life expectancy is plummeting in the former Soviet countries.
In China, a similar rebuilding effort is taking place. The old Maoist system with its "barefoot doctors" and highly socialized system had faded away soon after the death of Mao, replaced with a largely fee-for-service model. China is actually facing many of the issues the United States is facing, and is gearing up for a new regime based on a "social insurance"/single payer model.
The big difference is that China’s system is likely to be up before ours is. Since the political structure remained unchanged even though the economic structure shifted considerably since the death of Mao, decisions are still made and imposed from the top down. To quote George W. Bush, "This would all be easier if we had a dictator, provided, of course, I’m the dictator."
In the United States, reform cannot be imposed from the top down, by dictatorial fiat. One of the main changes made by President Barack Obama since his inauguration has been a less heavy-handed style at the top, and a willingness to seek consensus rather than ram initiatives down the collective throat of the legislature. It is actually good that the current President has decided to largely reject, rather than embrace, the "Unitary Executive" policies of the previous administration. But it makes for a lot messier debate, a slower process through the legislature, and a lot less certainty about what the reform process will eventually lead us.
Ultimately all of the proposed solutions are fairly weak tea. The best bills that developed out of the House of Representatives have only a limited Public Option that would start up in the year 2013. The current Senate Finance Committee bill is not only weak on reform, but would actually represent a government bailout of the health insurance industry. The "Baucus Bill" or what wags have called "The Max Tax" would deliver to the industry a captive market forced, by law, to buy insurance at any amount the market will bear.
The model the Senate Finance Committee bill seems to follow is the dubious "reform" put into law by the Commonwealth of Massachusetts. It’s commonly referred to as "Romney Care" after former Massachusetts Governor Mitt Romney, who was a major proponent of the approach. Massachusetts was promised significant medical cost savings in exchange for an individual mandate on buying health insurance.
How’s that going for you, Mass? Oh yeah, not so good. The average cost in Massachusetts per individual per year for health insurance is now hovering close to $10,000. People are opting to take the fine of over $1,000 and take their chances rather than buy health insurance and comply with the law.
The percentage of uninsured is statistically unchanged by the mandate, and Boston emergency rooms are still cheek to jowl with the uninsured and uninsurable in the most inefficient treatment environment you can conceive. Since there are no standards for what constitutes adequate health insurance, most of these "inexpensive" policies are "junk insurance" policies that only cover worst case scenarios and leave you on your own for basic preventative health care.
Ultimately one needs to look at what insurance really is designed for rather than how it is used in health care payment now. Insurance is meant to cover ones finances against "black swan" events, not as a payment mechanism for a necessity of life. Automobile casualty and property damage insurance is meant to protect ones finances against car wrecks. Life insurance is meant to cover ones dependents against losing the family breadwinner to death or disability. Homeowners’ and Renters’ insurance is meant to cover a family against disasters and burglars. There are a myriad of policies that protect businesses from certain losses that could be fatal to the business.
But everyone needs health care. It is a genuine necessity of life. We don’t buy "hunger insurance," we go to the store to get groceries. We don’t buy "fuel insufficiency insurance," we go to the gas station and get gas for our car. We don’t buy "shelter insurance," we pay our rent or our mortgage each month. We don’t buy "water, power and gas insurance," we pay our regulated utilities an agreed-upon, state and local government approved rate for fresh water, electricity and natural gas.
And the utilities are perhaps the best and most equitable model available for a way forward in the health care conundrum. Early on in the history of America’s utilities, it became clear that the market would not be an appropriate model for a system everyone needed equal access to. A single system for power production, a single system for provision of fresh water, a single system for provision of natural gas made far more sense than multiple competing systems.
There was also a public safety reason for some utilities to become natural monopolies: natural gas and/or electricity can kill and destroy property if handled wrong. The experience with private fire companies attached to fire insurance convinced no less a mind than Benjamin Franklin to organize a volunteer fire department for Philadelphia. And the experience of Ancient Rome suggests that private policing and mercenary armies is not necessarily the best model for providing for the common defense.
Some things are public goods and dealt with in a different way than in the market because that approach simply works better, fringe Libertarian arguments to the contrary. It should become abundantly clear from the American experience and the experiences of other industrialized nations that the provision of health care resembles more the provision of public utilities than a commodity to be sold. Health care is ultimately a "your money or your life" proposition, and as such market constraints on price do not work. Ultimately what is needed is to treat health care like a utility.
The best way to do this is a social insurance approach, otherwise known as Single Payer. This will not mean the takeover of hospitals and doctors and the creation of a new bureaucracy. We have an excellent system to improve and build on with Medicare. If you roll the troubled Medicaid system and the successful S-CHIP system for insuring most children into Medicare, allow for adults under 65 to buy into it on a sliding scale, and remove the caps on FICA taxation of income to allow the wealthy to pay their fair share, you have the beginnings of something that can handle an "everybody in, nobody out" philosophy.
Medicare needs to be improved and reformed, but the influx of able-bodied, well individuals into one big public pool will go a long way to this reform. Fix reimbursement schedules to more closely resemble the "real world" and then reduce them as costs go down. Then, with the addition of new, paying customers in the pool and the increase in income from collecting everyone’s fair share of FICA, probably all the shoring up that has been needed for Medicare will happen.
Once health care is decoupled from employment, marvelous things will likely happen. Those who dearly want to be entrepreneurs will be freed to be entrepreneurs. Small business will flourish as those willing to do the right thing are freed to do so without breaking the bank. American goods will become more competitive with the rest of the world because the cost of health care will no longer burden the bottom line.
Medicare for all will mean the end of parasitical costs like Worker’s Compensation, Malpractice Insurance, and other types of insurance taken out because of the adversarial nature of medical torts. It will mean that automobile insurance will go way down because it will only have to deal with damage to physical property rather than also making injured people whole. You want tort reform? Open up Medicare for all.
Really, when you look at all this, there is plenty of upside, and the downside can be tinkered with to fix. The only industry to have anything to fear from this is the health insurance industry. They do just fine in countries that have single payer, social insurance-style health care systems: they cover gaps and pay for elective procedures. In Germany, Holland, Switzerland and other countries with "Sickness Fund" systems, they trade strong regulation in exchange for largely captive markets of people who must pay into the "Sickness Fund."
Once you get around the disinformation and the hysteria, a comprehensive, universal health care system really is good for business. Rather than fighting health care reform, business should take a good look at what health care reform really means to the bottom line and push hard to get real reform in place.