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Dear Mr. President...

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I am writing in response to your request for “fishy” information on healthcare. By way of introduction I should reveal a bit about my background and relationship to this issue.

I am old enough (85) to remember what life was like prior to the advent of widely available health insurance. I can still recall the difficulty my parents had paying for my appendectomy in 1934 and my brother’s tonsillectomy in 1935. My father worked for a large interstate company and belonged to a powerful union–but neither provided health insurance.

When I met my wife Gladys, I became aware of the tragedies that had struck her family because of medical expenses. Her brother developed a chronic and ultimately fatal illness at the tail end of the 1930s. The cost of surgery and around-the-clock oxygen tent and other services ruined my father-in-law financially, and to a degree physically. He was a successful homebuilder, but because he could not pay both medical bills and mortgage payments he lost three houses to foreclosure. He belonged to a strong union, but it offered no health insurance.

I am experienced enough in the health insurance business (53 years) to know what happened to change all this. Employer-provided health insurance got its first big boost during World War II when businesses were subjected to very high corporate taxes. As an alternative to paying the higher taxes, large companies offered tax-deductible health insurance to their employees. To be competitive for labor during and after the war, the practice spread among major companies. But small business was still left out of the loop.

It was not until the late 1940s and 1950s that tens of thousands of insurance agents, like me, began knocking on the doors of small businesses to tell them about health insurance products that had been developed for them. Such plans helped our smaller enterprises to be competitive for labor while relieving millions of American families of the fear associated with medical costs. It was a highly competitive market, which prevented companies from raising rates beyond reasonableness. All in all, it was a most successful venture benefiting everyone involved. In fact, it was so successful that today some groups have raised access to health insurance to a “right.” It is, I believe, a great testimony to the health insurance industry that so many today are not subject to the financial pressures of medical expenses.

But I also observed that as health insurance became firmly implanted in our culture, things began to change. Pressure groups began to lobby for mandated coverages that at first were optional. As these groups succeeded, choices available to businesses and individuals, as to coverage, became fewer. Covering those conditions, some of which were not even insurable risks, caused premiums to rise for everyone.

In 1965, President Johnson signed the act creating Medicare, a very good thing for senior citizens. However, it has created problems for private insurance that have not always been acknowledged. Medicare reimburses hospitals and professionals on a formula it has devised rather than paying billed charges in full. The formula excludes certain costs from their payment schedule, so reimbursement is always lower than billed charges. The fact that such charges are excluded from Medicare payments does not mean that the costs go away. No, Mr. President, those unpaid costs are shifted to those with private insurance or no insurance, and that is the primary reason you cannot have a public option parallel to private plans.

In 1977 another significant event occurred that would have a profound effect on the future cost of healthcare and the related cost of financing it (health insurance). Lawyer Van Osteen fought all the way to the Supreme Court to win the right for lawyers and other professionals to advertise. Slowly at first, but gaining momentum every year, trial lawyers have been laying a minefield over our healthcare delivery system. Every night we are bombarded with TV ads promoting lawsuits against healthcare providers. The right to seek redress in the courts for injury is an important right–but predatory lawyers are endangering that right.

The result of this activity has been the rise in the practice of “defensive medicine.” Healthcare providers have to protect themselves from lawsuits by ordering all tests or procedures that might conceivably have a bearing on a patient’s condition. Such tests, often unnecessary, add substantially to the cost of healthcare and insurance. When I started selling health insurance 53 years ago, the cost of medical malpractice insurance for a typical doctor was about $800 a year. Today many doctors pay over $100,000 for coverage and some specialties pay much more. Guess who pays for that, Mr. President?

So what is “fuzzy” in the dialogue being waged on healthcare? The main problem with healthcare today is its costs, and the effect that has on its financing mechanism (health insurance). I find it fuzzy that no one in your administration is addressing real cost factors. I realized that trial lawyers are an important part of your political base, but protecting them seems a high price to pay for allowing them to hold our healthcare system hostage. I do not believe that even tort reform can solve this mess. Perhaps it is time to consider an entirely new approach to compensating people who may be injured by the system–an approach that eliminates variances in rewards by juries and the cost of litigation. That would be real change, Mr. President.

I also find the rhetoric demonizing the health insurance industry “fuzzy” and far from reality. Mr. President, demonizing one group in order to rally support from others is an old trick, and one that historically has produced some very sad results. That is worse than “fishy”–it is downright scary.


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