I usually do not write about health policy in the U.S. because it is somewhat outside of my area of expertise, but I have been thinking about the issues with health care reform this year and thought I would provide some analysis. Watching the news, there seems to be a lot of resistance to health care reform this year. The cost for reform is one of the big stumbling blocks – given the actual price tag to the country that was floated by the various agencies charged with analyzing such things. However, if you think about it, our current, unreformed system of health care results in the insured paying for more than their own care.
For one, let’s talk about the uninsured. There are approximately 50 million Americans that lack health coverage today in the U.S. This does not mean that this people do not get any health care. To the contrary, well over 10 million Americans get health care from Federally Qualified Health Centers (FQHCs), a significant proportion of which are people without health insurance. In addition, there are a substantial number of other health care entities that provide health care to the uninsured at low or no cost, but are not yet federally qualified to do so. FQHCs are funded by the federal government today, at a cost of about $2 billion. We taxpayers pay for this. We are subsidizing this care today. Other entities that provide free or subsidized care do so through private grants, which some of us subsidize today through charitable donations, the United Way, or so forth.
Second, some have been claiming that health reform in the U.S. will just lead to a lot of people waiting around to get health care. At least in Maryland, by law, emergency rooms are required to treat whoever shows up in them, whether the patient is having a cardiac arrest or just has the flu. (See Md. Health-General Code Ann. 19-3a-02(b)(2)(vi) for freestanding emergency centers). Because of this, there are a fair number of patients that present to the ER who are uninsured. As an aside, economically speaking, emergency rooms tend to be loss leaders for the inpatient facilities to which they are attached. What this means is that the ER’s costs are not fully borne by the ER revenue stream from patients and insurers; much of the cost is actually covered by the patients that the ER can admit to the main hospital after initial workup and treatment by the ER physician. However, that also means that uninsured patients who present to the ER for a non-emergency health condition pass costs along to the main hospital which must be covered by inpatient operations, and by extension to those of us that are insured and go to that hospital.
For example, an uninsured patient that presents with the flu at the ER is treated and sent home. They may pay little or nothing for the visit, but the visit actually costs $800. The hospital covers this cost by charging a bit more for every patient who is actually admitted on a per day basis (or other costs that are charged in units). Some admitted patients won’t be able to pay either, so those that can also end up paying a bit more to cover uninsured admitted patients and uninsured ER-only patients. So if you have private insurance today, your rates are set in part based on the actual costs of providing health care to uninsured patients who can’t afford to pay on their own, because the hospital has to pass the costs of treating these patients to someone who can pay the hospital.
If health reform meant that everyone would now go to their local ER, regardless of what the condition or illness was, this would be a bad idea. Any time that I have been to an emergency room, there is a queue; the waiting room is always full no matter the time or the season. However, if health reform actually could redirect patients that do not have emergency health issues to an alternate resource that they could actually afford and would see them, this would help improve an existing “wait problem” for care today, while simultaneously reducing the actual costs borne by hospitals for non-emergent ER visits (which should mean that we can pay less per visit to the inpatient section of the hospital).
And speaking of waiting around – the truth is that even insured people tend to wait for health resources to be available under the current U.S. system of care delivery. Many doctors have 3-6 week lead times for scheduling in advance, their schedules are crowded with overbooks and double books, they often run late because of inefficiencies with the schedule and with administrative tasks; in short, competent physicians usually have too much demand for their services. This causes queuing. Health reform may not really be able to address this problem head on. Part of it is a technology issue; there could probably be developed a more sophisticated scheduling algorithm that would help to improve scheduling patients for care delivery, and allow for overflow to other providers, etc. But part of the problem is insufficient health care delivery points on the map. We apparently need more physicians to treat us.
Third, there are a fair number of U.S. personal bankruptcies each year (granting that the rates have been higher than normal this year because of the recession). Lack of insurance and a large, unpaid medical bill are a primary cause of personal bankruptcies. On the surface, if you haven’t filed bankruptcy yourself you might think that this has no effect on you. But bankruptcy is a bad thing generally. For one thing, the person who files for protection and has a $100,000 medical bill they have no hope of paying is injured because the cost to them for credit post-bankruptcy is considerably higher than pre-bankruptcy. In addition, a bankruptcy will limit the person’s job opportunities, will probably prevent them from gaining security clearance for sensitive jobs in the government, and otherwise limits their economic productivity within the U.S. economy, all of which is bad for the economy and for all of us.
But, in addition, that bankrupt’s medical bills are very unlikely to be paid through the bankruptcy proceeding. The hospital is likely an unsecured creditor, and they are at the end of the line with their hand out to the bankruptcy trustee. That “bad debt” is a cost to the medical provider, who will pass it along to patients in the future that will pay for medical care in the form of slightly higher unit costs.
The more bankruptcy filings, the more unsecured creditors that aren’t made whole who are health care providers, the higher the costs of care for everybody else. So again, us taxpayers are by and large the same people who actually end up paying the medical bills of the bankrupt, either out of our own pockets when we go to the hospital, or through higher health insurance premiums that our employers pass on to us each year, or through our taxes (think Medicaid and Medicare, both of which pay for inpatient stays, both of which are paid for by taxes, and both of which are billed at increasing rates by hospitals, in part to cover overall costs of providing care to patients without insurance who lead to bad debt for the hospital).
Fourth, there was this whole “death panels” claim about health reform, whereby the government was going to establish panels that would deny care to the elderly because they were too expensive. Of course, this is silly. If we were going to have such things, we would have a better name for them (maybe, “end of life decision making committee” or better yet “pull the plug on granny committee”, or something else that would be more catchy and might be more alliterative). But, really, this is tied into the idea that the government, through health reform, would stop a person’s doctor from treating the patient appropriately, perhaps because of cost, or just because the government bureaucrat was a nasty person. The whole matter is rather bizarre.
But, it also doesn’t speak to what goes on today. For example, there are committees that determine the priority and qualifications for patients to receive replacement organs because there is a long line and a short supply of organs available. Plenty of patients die each year for lack of an available replacement organ that was needed. (See this article for 2008 statistics on this issue) I don’t know that we call the committees “death panels,” but it is a classic example of a pre-existing queue that results in health care rationing.
Health insurance companies also make decisions about what they will pay for and what they will not. As far as I know, health insurers don’t decide to pull the plug on the elderly per se, but health plans do make choices for their insured patients about what services the patients will pay for out of pocket (or not receive at all if too expensive for the patient), what drugs are on and off the formulary (you may have to take the generic version of a pill, even if you’d rather take the brand name, for example), along with a host of other choices made ultimately to reduce overall costs to the plan. In our market system, I suppose you can change plans if you choose to, but because your health plan is often tied to your employer, that would usually mean changing jobs – which is not a very practical way to change your health plan.
So, this whole “death panels” thing is really about trying to “ration” care to patients so that more people get the basics, most likely at the expense of others that can pay for optional services. I’m sure that isn’t very palatable to patients with the means to pay for their thirteenth tummy tuck, but this is also, more or less, the status quo. Health care is rationed today by our insurers for most Americans. If health reform led to a more rational way to provide basic health care to more Americans, it would be the right thing.
And here is the other side to this: let’s say that we did institute a governmental body that would “ration” care. Such an entity is governed directly by the U.S. constitution and federal law. Do you really think that such a group would implement the “no life support for patients over 75” rule? Really?
To summarize, the U.S. spends about 16% of GDP on health care, which is substantially more than most other places in the world. Approximately $2.4 trillion (that is trillion with a “t”) is spent each year on this, or the total economic output of Italy. And ultimately, this money comes out of the pockets of those who can actually afford to pay for health care. By design, that means that those who can’t afford health care are being subsidized today by those that can. The challenge for health reform is to do a better job at cost redistribution than our present system, either by spreading out costs over a much larger pool (such as all 300 million Americans, rather than over the much smaller pools of employer-sponsored health plans today), increasing efficient delivery of health care (through technology that saves time or increases accuracy and reduces risk of harm), and/or perhaps encouraging more supply of health care providers to help meet the existing demand for services.
We’ll see what happens. Stay tuned for developments.