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Health Policy Q&A with PNHP Co-founders Drs. David Himmelstein and Steffie Woolhandler on 04/17/2009
PNHP should tell the truth: The “public plan option” won't work to fix the health care system for two reasons. .
1. It foregoes at least 84% of the administrative savings available through single payer. The public plan option would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians offices, and nursing homes. They would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs. These unnecessary provider administrative costs account for the vast majority of bureaucratic waste. Hence, even if 95% of Americans who are currently privately insured were to join a public plan (and it had overhead costs at current Medicare levels), the savings on insurance overhead would amount to only 16% of the roughly $400 billion annually achievable through single payer.
2. A quarter century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry picked healthier seniors, and have exploited regional health spending differences to their advantage. They have progressively undermined the public plan—which started as the single payer for seniors and has now become a funding mechanism for HMOs, and a place for them to dump the unprofitably ill. A public plan option does not lead toward single payer, but toward the segregation of patients; with profitable ones in private plans and unprofitable ones in the public plan.
Would a public plan option stabilize the health care system, or even be a major step forward?
The evidence is strong that such reform would have at best a modest and temporary positive impact—a view that is widely shared within PNHP. Indeed, we remain concerned that a public plan option as an element of reform might well be shaped in a manner to effectively subsidize private insurers by requiring patients to purchase coverage while relieving private insurance of the highest risk individuals, stabilizing private insurers for some time and reinforcing their control of the health care system.
Given the above, is it advisable to spend significant effort advocating for inclusion of such reform? No, for two reasons:
1. We are doctors, not politicians. We are obligated to tell the truth, and must answer for the veracity of our stance to our patients and colleagues over many years. Ours is a very different time horizon and set of responsibilities than politicians'. Falling in line with a consensus that attempts to mislead the public may gain us a seat at the debate table, but abdicates our ethical obligations.
2. The best way to gain a half a pie is to demand the whole thing.
Is fundamental reform possible?
We remain optimistic that real reform is quite possible, but only if we and our many allies continue to insist on it.
If we have to compromise at the end of the process, what should a public option look like?
This opinion article is compiled from conversations held during April, 2009, with health care reform advocates, including Physicians for a National Health Plan, Health Care for All NJA? and other advocates.
This draft (4-18-09) prepared for discussion, by Craig Salins
In other words, if we can’t get our pony, what should the kitten that we will settle for look like? Congress is finally considering serious health care reform, pushed by the Obama administration and by a worsening crisis nationwide. There are several competing options and proposals, representing a diversity of interests, each seeking to broaden coverage to all or most Americans and at an affordable cost.
One proposed option is simply to expand Medicare to everyone. It would cover all Americans, all ages, be financed publicly, and delivered privately through existing local health services and facilities.
Another option is to leave existing private insurance plans in place, for any Americans who want to keep their existing plan, while simultaneously establishing a public plan which would be open anyone—those who don't currently have coverage, or who desire to switch to a public plan. The expectation is that such a public plan would provide good benefits at a lower price, by operating on a non-profit basis, with a single risk pool nationwide, without expensive overhead.
But such a plan could be hijacked or derailed in Congress by special interests. If not designed with safeguards and combined with tight regulation of private insurance, a public plan could become simply a dumping ground for older, sicker enrollees at taxpayer expense, while letting the insurance industry reap a bonanza in public subsidies and profit: for enrolling healthy people who cost very little.
The insurance industry is already opposing the creation of a public plan option. They complain that it would compete with their established plans (it would, of course—fair competition is the point.) But the insurance industry might use their political clout through Congressional debate to “shape” the public plan so that it cannot succeed—or so that it works to their advantage, perhaps by taking sicker, more costly patients off their hands, leaving low-cost healthy patients to be milked for higher profit.
A public plan option must be designed with the public interest in mind—and not by those in the insurance industry who have private profit in mind at taxpayer expense!
These features below must be part of any public plan option—to achieve a plan that will work for all.
1. Any public option should directly pay providers (like Medicare does) - using a single, efficient public “payer” to pay for services delivered by private health care providers and facilities chosen by the patient. (This contrasts with a referral or “connector” plan, such as the Federal Employee Benefits Health Plan, that simply enrolls people in existing private insurance plans. A connector scheme is expensive, due to an extra layer of administration to broker the arrangement and the expensive overhead of private insurance.)
2. Comprehensive benefit package, one set of benefits for everyone regardless of age, employment status, enrollment group, geography, health status, or any other factor.
3. Free and complete choice of health care providers, including hospitals, clinics, all services.
4. Affordable. No excessive co-pays or deductibles. Appropriate cost-sharing from employers, individuals, and from public sources/programs such as Medicaid and Medicare.
5. Available to everyone including employers, employee groups, and any individual.
6. Guaranteed acceptance* No denial of coverage to anyone for health status, pre-existing conditions, or for any reason. No waiting period. No penalties for not previously having insurance.
7. Immediate enrollment and coverage* in a plan of patient's choice, at the point of first medical contact for those not previously enrolled in a coverage plan. No delay when coverage starts.
8. Community rating* Insurance premiums based on health care risks and costs for the entire population - not on any particular subset of risks and costs, such as those with chronic disease.
* These features should apply by law to all health care insurance - public or private - as a matter of public policy.
Also, if for now, Congress fails to enact HR 1200, HR 676, S 703, or a similar single-payer plan, such that private for-profit health insurance coverage continues to be part of the national mix of options—
There must be robust and effective regulation of private insurers:
1. to limit overhead administrative costs and investor profit (as is done now with regulation of public utilities); and
2. to prevent "cherry-picking"—enrolling only the healthy, and excluding those with pre-existing conditions or chronic disease, etc.; and
3. in general, to prevent the public plan option from becoming a taxpayer-supported dumping ground of sicker patients, while private insurance reaps a windfall from enrolling only the healthy.
Regulation of private insurance plans must include—at a minimum—the features above marked by (*).
Private insurance is the problem
Rather than solving the challenge of affordable health care for all, private insurance IS the problem.
Why? Because real savings can only be realized by eliminating the inefficiency that is built in to the private health care insurance system. A public option plan foregoes at least 84% of the administrative savings available through a nationwide single payer system—publicly-financed, covering everyone, and delivered through private and community-based providers of the patient's choice.
When there are hundreds of private insurance plans, hospitals and doctors need an army of clerks to handle all the different rules and limitations in processing payment and claims. Also, under our current system, the insurance industry spends greatly on screening efforts to “cherry pick” only the profitable enrollees, by excluding those with pre-existing conditions and chronic illnesses. The net effect is profitability for insurance companies, but too many uninsured, and higher costs to the public.
Until and unless there is a single-payer system, effective cost control depends on tight regulation of private insurance, to limit overhead costs where too many health care dollars are actually wasted—such as for marketing costs, investor profit, excessive compensation to CEOs and top management, corporate lobbying and campaign contributions, etc.
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