Yes. It’s the most efficient and effective way to design the health-care system
By WENDELL POTTER
There’s one fact that’s important to establish before any debate about health-care reform: The U.S. has the most expensive and fractured health-care system in the world, and American businesses have been picking up the tab.
Right now, we’re spending around $10,224 per person per year on health care. That amount is astronomical, and no other country even comes close.
We’re also not getting anything close to what we should be getting for all that money. Compared to other developed countries, we have lower average life expectancy, higher infant mortality, higher rates of preventable hospitalizations, and higher rates of mortality due to preventable illness.
We pay for this dysfunctional health-care system using a complex mixture of public and private programs. Medicare, Medicaid, and other public programs cover about 36 percent of us, about 7 percent of us buy our plans on the individual marketplace, and about 9 percent of Americans are uninsured.
Everyone else gets their coverage from a private group plan, usually from their employer. They’re typically considered the lucky ones, but the employer sponsored system is starting to collapse.
In 2018, annual premiums for a single employer-sponsored family plan rose to $19,616. That’s a 5 percent increase from the year before, and a 55 percent increase over 10 years. During the same 10-year period, inflation only rose 15 percent and wages only rose 23 percent.
Not only is insurance getting more expensive, it isn’t even good coverage. In fact, while more people are now technically covered, we’re seeing a steady increase in the “underinsured rate,” meaning that people have insurance, but their deductibles are so high they can’t afford to use it. People with employer-sponsored insurance are the largest driver of this rate.
When we put all this together, it paints a pretty gruesome picture. More and more money is going to insurance companies, it’s coming out of the pockets of American businesses and workers, we’re getting worse health outcomes, and many of us are unable to get the care we need.
More money spent on premiums means less going to raises, new jobs, new technologies, and new markets, and American businesses are being forced to compete with international companies that don’t have these overhead costs.
Worse, as costs for workers continue to rise, take-home pay is actually shrinking. America is a 70 percent consumer-driven economy. Nothing good happens when workers have less to spend on things like housing, food, transportation, and other goods and services.
There’s a lot of blame to go around for rising health-care costs.
One problem is that we pay twice as much for prescription drugs as other countries, thanks to the fact we have no real mechanisms to control prices and an easily manipulatable patent system.
Another is there is no consistency to what hospitals and providers charge for medical care, and no transparency in pricing.
However, the biggest problem is the commercial health insurance industry.
Health insurance companies don’t have any real power, or financial incentive, to negotiate prices for their clients. As hospital chains, pharmaceutical companies, and provider groups continue to consolidate, no insurance company has enough market share to effectively negotiate prices. Secondly, if prices do go up, insurers simply raise their rates and continue raking in profits.
They’re also incredibly inefficient. They spend huge amounts on oversized claim departments, marketing and advertising budgets, and executive salaries. They also add a lot of cost to providers. Since insurance companies are financially incentivized to deny claims, and because the multi-payer system has created a wide variety of complicated processes for filing, the average physician is now spending $100,000 a year interacting with insurance companies. As you can imagine, those costs add up quickly.
Luckily, there’s a simple solution: An Expanded and Improved Medicare for All system.
Let’s define the term. Medicare for All would be a publicly financed, privately delivered system. Your doctor, hospital, or other provider would still continue to operate independently. The big difference would be, instead of writing a claim and charging your insurer, they would submit a claim to Medicare. Medicare would be expanded to cover everyone, and would be improved to provide comprehensive coverage, including vision, dental, long-term care and prescription drugs. Instead of paying premiums, deductibles, and copays, health care would be financed by taxes and free at the point of care.
This would significantly simplify things for business owners. No more weighing coverage options and plans, which despite their best efforts, costs continue to rise. Medicare for all could finally reverse that trend.
Private insurers spend about 20 cents of every premium dollar on administrative costs, marketing and sales, salaries, profits, etc. That means 20 percent of our premiums are spent on things that have little if anything to do with the delivery of the care. In contrast, Medicare spends about 2 percent of its revenue on overhead. That’s hundreds of billions of dollars in savings right there, and providers would no longer have to deal with multi-payer claims systems, significantly reducing their administrative savings.
We’d also finally have the leverage we need to get drug and provider prices under control. The government would have significant negotiating power with large pharmaceutical companies and the ability to set standardized and transparent rates for health-care services.
Even when you consider the costs of increased utilization of health-care services, insuring those currently uninsured, and the likelihood that we would need to raise Medicare reimbursement rates, there are hundreds of billions of dollars in annual savings.
Business owners could pay a consistent and predictable tax to finance the new system, and the savings could be fully reinvested into their businesses, wages and economy.
Medicare for All is the most efficient, effective, and universal way to design our health-care system. There’s just no good reason to do anything else.
Wendell Potter is a former health insurance company executive, and the president of Business Initiative for Health Policy. He spoke recently at Southern Illinois University Edwardsville and wrote this column at the request of the Illinois Business Journal.