July 01, 2009
5 min read

The summer of health care reform: More coverage for less?

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All the campaign talk and political posturing have passed. President Obama eloquently and repeatedly said while campaigning, “You can keep your health insurance, keep your choice of doctor and keep your plan.” Last month, the president’s Council of Economic Advisers reported on “The Economic Case for Health Care Reform” and determined that action needs to be taken to limit the overutilization of medical care in this country while curtailing the skyrocketing costs. Telling Americans to reduce their utilization of health care for the good of the federal deficit probably is not going to work at the same time that the government plans to expand health care coverage to 46 million Americans who have been underutilizing care.

The recent report kicks off the summer of 2009 when the administration will and/or should explain the real details of their version of the new “universal coverage.” The concept of “affordable access to quality medical care for all” being advocated as we face the reality of increasing burdens of rising health care costs in this country needs to be backed by an explanation and demonstration of how it will all be funded.

Fix before expanding

Voters should now expect an onslaught of discussions into the administration’s plans for health care reform. One of the current strategies reportedly being employed is to minimize discussion, frame the debates carefully, not provide extensive written details in advance and then move quickly for its passage.

Douglas W. Jackson, MD
Douglas W. Jackson

Last month in an extensively covered speech to the American Medical Association, President Obama said, “When it comes to the cost of our health care, the status quo is unsustainable. So reform is not a luxury; it is a necessity. When I hear people say, ‘Well, why are you taking this on right now? You’ve got all these other problems,’ I keep on reminding people I’d love to be able to defer these issues, but we can’t.”

At this early phase of talks, most believe that a final bill from Congress will include provisions for a government-backed insurance plan, similar to Medicare that will give people an “affordable” option for health coverage. However, what we should learn from the Medicare experience is that the government has no record of decreasing health care costs without significantly increasing taxation, mandates and cost controls ie, price freezing.

We have also learned from history that times of crisis are seen by some politicians as the opportune moments to make changes.

Taxing benefits

The Congressional Budget Office (CBO) points out the need in the next 10 years for increased revenues to fund over $1.2 trillion in potential deficit spending for the proposed reform, which would still leave some 36 million people uninsured.

One option set forth to further subsidize the proposed new health care plan is taxing health care benefits. This will constitute a significant tax increase. In early discussions, Democratic leaders, including chairman of the Senate Finance Committee Max Baucus (D-Mont.), have expressed their desire to tax these benefits. Other Democrats who initially said they would never support such taxes now say they will not rule out the idea.

Another idea being discussed would be a value-added tax, which traditionally is assessed to companies that make consumer goods within a certain market. Officials estimate that such a tax would have raised $285 billion from the health care industry last year.

The current administration will probably make any plan to raise revenue by taxation more palatable initially by stating that these new taxes will be for the “wealthy only.” However, they will have few options other than taxing health care benefits and/or institute other highly unpopular levies. Otherwise, the strains on our already out-of-control federal budget will impact our economy even further than it already has.

A study by the nonpartisan Center for Studying Health System Change, conducted last year, found that 43 million Americans with health insurance were struggling with medical bills and that 20% of them were considering filing for bankruptcy due to their medical bills. These are the people who have medical insurance and the same people that the government wants to partially fund their version of health care reform.

Do you remember when John McCain (R-Ariz.) in the campaign wanted to discuss the business workplace deduction for health care insurance and/or offer the deduction to individuals purchasing their own health insurance costs? Obama attacked John McCain successfully and warned against tax increases on the middle class and the radical nature of this approach.

McCain’s responses were not effective and did not engender much interest and/or support among the voters. However, it seems as though the Democratic-controlled Congress has changed their opinions on the matter.

Is there any chance for bipartisan support in an arena where mostly everyone agrees the current private system is flawed and must change? I doubt it since liberals want one payer and conservatives want tax incentives and subsidies for a private system.

State-level experience

We can get bipartisan support for health care reform, but let us look at the health care reform experience in two states: California and Massachusetts.

These attempts for health care reform were tried as a bipartisan approach. They both had Republican governors and Democratic legislatures, which one would think might facilitate a bipartisan approach. What I have been reading about the reform in Massachusetts is that it has cost considerably more then projected.

In the more than 3 years since Massachusetts launched “Universal Care,” it appears its spending is exceeding its revenues and they are forced into introducing greater price controls and mandates. They are further discussing the concept of more aggressively excluding low return-value services, further regulating reimbursement, limiting profits and establishing cap costs.

As Massachusetts’s plan unfolds and plays out, it would be interesting to hear what the original stakeholders who supported these changes from the beginning think now.

California’s attempt at reform did not even get off the ground or even come close to universal coverage: The needed bipartisan support did not materialize and the economy slumped. In addition, as a result of California’s overspending in many areas, we now see contractions in previous state-funded medical care. At the time the reform was being proposed, California was experiencing a rate of uninsured that was double what was being seen in Massachusetts.

Where, then, can the reformers get the money to fund the new, yet-to-be-seen-in-detail proposals? It is tempting for Congress to count on savings from health information technology, preventive medicine, pay-for-performance systems and only paying for treatments with proven or consensus outcomes.

The CBO has noted there is no solid evidence that these measures will save much money. Hence, we come back to taxing and means testing health benefits. Removing tax benefits to employers for offering plans will most likely be opposed by unions with gold-plated plans. It appears the Obama administration will defer to union resistance and propose further taxpayer subsidization of the employer plans. Some of the other Democratic considerations to raise revenue, such as eliminating tax deductions for charitable hospitals, an excise tax on liquor, reducing Medicare reimbursements and further means testing for Medicare and universal insurance, will not even make a dent in reducing the federal deficits we may see as a result of health care reform.

Why rush?

What is the need to rush into a program that will further increase our deficits without some proven or realistic methods for holding down or reducing medical costs? We need to see plans to reduce the growth of health care costs that the CBO feels is reasonable. We should not allow a sweeping restructuring without a thorough discussion of the costs and consequences this will have for years to come.

I support meaningful health care reform. This means analyzing the impact on necessary future federal funding, restricting overutilization and how and who will ration the care. Whether you call it rationing or some other name, trying to fund our current utilization of medical care and new technology and expanding coverage will be even more unsustainable in the future. However, two issues may slow a rush to legislation this summer. They are the funding sources and actually establishing the additional government-backed health care plan.

Douglas W. Jackson, MD
Chief Medical Editor