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We Need Order, Not Chaos, In Health Care Financing

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We Need Order, Not Chaos, In Health Care Financing

by Jack Bobo

As I write this column, two unions representing workers at General Electric have called for a two-day strike to protest increased co-payments in their health insurance plan. GE, like many other companies, is struggling to cope with increases in health care costs, which over the past three years have exceeded 45%. Another rise of 15% is expected this year, and no relief is in sight.

Given the fact that GE is usually regarded as a progressive corporate employer, I can readily surmise that conditions are even worse in other business settings.

At the same time, it is being reported in the media that increasing numbers of doctors are “firing their patients,” in the sense that they will no longer take patients covered by Medicare or what they call “penny pinching” HMOs because of inadequate reimbursement for services rendered. Doctors are also striking in some states in protest over the outrageous cost of medical malpractice insurance.

These events, plus many others, make it clear that the pressure on our health care delivery system is coming from both ends with increasing numbers of people being squeezed out as a consequence.

Additional problems are being created by people who are not being squeezed out, but rather are opting out because they do not wish to pay for health insurance. This is particularly true when working couples are insured by their respective employers–but neither is willing to pay for dependents coverage, thereby leaving the children exposed.

Despite the many virtues and advantages of our health care delivery systems, it is all too clear that we have manifold problems that are growing and must be solved. Systems in other countries have, at various times, been hailed as models that we may replicate in this country–Canada and Scandinavia to mention two. But after a closer look, those systems have problems of their own and would not solve or replace the difficulties in our own system.

It seems to me that we must build our own model capitalizing on our present strengths, while at the same time recognizing the demographic, cultural and economic challenges we face that differ from other countries.

I believe we have learned a lot from our experience with Medicare, and while not perfect, it is a lot better than some of its critics would have you believe. Often, problems in the system are more the result of political posturing than systemic failures.

It seems to me that we should try to build upon the foundation we already have, but with a greater role for private insurance than we have at present in Medicare. Perhaps we could structure a plan for people pre-age-65 that provides Medicare benefits after a deductible of some level well above the post-65 level in present Medicare. Such a deductible might be 10 or 20 thousand dollars.

Private insurance or Medical Savings Accounts could provide the bottom dollar coverage (deductible), co-insurance and catastrophic coverage above the Medicare limits. Such a plan might resemble the following illustration.

One of the advantages of such a system is that it would require everyone to participate in the government-sponsored portion and provide some relief to the costs of private insurance. It might also reduce the number of those opting out of the present system.

When the private sector financers of health care (insurance companies and HMOs) try to control health care costs, they are usually villianized in the media and often hammered by lawsuits. Every horrible example resulting from attempts at cost containment are spread over the news with the most ominous of overtones. The image of the insurance industry is never portrayed as the institution that makes financing health care practical for most families, but more often than not the cold-hearted bullies that kick new mothers and their babies out of the hospital hours after birth.

Consumer activists have long criticized insurance companies for not being a more proactive surrogate for the policyholder patient at bill paying time. But just let them try to exercise that duty and all hell breaks loose. I believe government is better able to handle such grief.

But no new system is going to be fully effective in reducing costs unless we tackle the problem of expenses associated with litigation. The surgeons in West Virginia have a legitimate beef–malpractice insurance rates, which reflect the costs of litigation and “jackpot justice,” are a travesty.

I believe there is a solution because the present conditions are not without precedent. At the turn of the century, clever lawyers were defending their corporate clients from industrial accident claims with numerous tactics. There was the principle of “assumed risk” that held that when an employee was hired, he or she could see for themselves that there were dangerous conditions and so if they got hurt, it was their own fault as they had assumed the risk of working in such a place. Then there was the co-servant rule, which held that if you were injured by a fellow worker, then by virtue of the fact that you worked with him, you should have known he was dangerous to be around and should have taken precautions. Additionally, there were delaying tactics that often prolonged the proceedings until long after the claimant was dead.

These were the conditions that gave rise to Workers Compensation to protect American workers from terrible working conditions and the misery they often caused. Now the shoe is on the other foot and we need a patients compensation system to replace the expensive and capricious process we now have.

In the final analysis, if a person is injured as a result of a medical procedure, it makes little difference to the patient whether or not it was an accident or simply the consequences of an unavoidable risk. In either instance, they need help and it should not be left to the whims of a jury or the talent of the respective lawyers to settle matters.

Today that tactic is creating chaos–what we need is order.

Reproduced from National Underwriter Life & Health/Financial Services Edition, January 27, 2003. Copyright 2003 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.