PBS aired a provocative Frontline program last week detailing many of the woes of patients with serious illnesses under the current employer-based health insurance system. A talented college senior gives up on engineering and settles for a job selling lamps because it offers good coverage. A middle age man loses his house, declares bankruptcy and has to move in with his mother after he lost his job and required bypass surgery. A self-employed woman finds her high-deductible high-premium insurance plan revoked retroactively based on a technicality, after she has a severely premature baby with very expensive medical needs. The CEO of a health plan which insures millions reveals that because of his history of heart disease, he himself could not qualify to purchase health insurance as an individual. The Kaiser Family Foundation, one of the most savvy health care policy groups, had to shop its insurance to another health plan when one of its employees had a sick baby and premiums skyrocketed!
The program does a good job of focusing attention on the equity issues of underwriting in our current health care finance system. On one hand, it’s not fair for a health plan (or the other subscribers to a health plan) to have to provide full coverage for a patient who signed up after they already knew about their illness. On the other hand – illness is already a substantial punishment, and it doesn’t seem right to also saddle the sick with enormous bills. It’s also not practical, because those with substantial illness are least able to pay such bills. Clearly, coupling a mandate to have health insurance with the elimination of medical underwriting is an attractive solution. It spreads the risk among many healthy people (critical to the “insurance” nature of health insurance), while dramatically decreasing the rate of uninsured patients. This is what the health insurance industry is currently advocating, and is incorporated into health care reform in Massachusetts.
The PBS show also quotes Uwe Reinhart, an economist at Princeton, who states that total administrative costs in the American system is 24% - substantially higher than other countries. Most observers think that the cost of administration of health care is the cost of administering health plans (administrative services plus profit). In fact, the administrative cost is a combination of the health plan administrative costs AND administrative costs on the provider side – and it seems perfectly possible that providers spend as much on billing as health plans spend on paying those bills. Since little of this administration adds value for patients, administrative simplification will be critical. I’m hopeful that bundling payments will allow for some degree of administrative simplification, although even in capitation it’s important to have a “claims-like” process to facilitate for quality control and health services research.
There continues to be a call for a public insurance plan (see today’s NYTimes editorial) I continue to worry that the main reason a government-sponsored plan is less expensive is cost-shifting to other plans – which would become impossible if we had “Medicare for all.” See previous post on how health plans can add value, and a podcast on this subject.
