Health Care Going in HMO-Type Direction
In the babble surrounding health care, keep two clear objectives in mind: One aim is to finance access to decent medical care for all Americans, and the other is to control expenses and get good value in U.S. health care.
There are grounds for hope that both goals will be fulfilled in this decade, but only if we stop kidding ourselves. Today’s system contains a gigantic subsidy for the American middle class--we have met the enemy and some of him is us. And though it is a technologically excellent system, it contains serious waste.
With clear objectives in mind, let’s look at what’s happening--and at what’s encouraging.
President Bush last week introduced a finance plan that lacked money and guts, but behind it lies an idea that may return--taxing medical benefits. Bush’s plan would give vouchers for health insurance, worth up to $3,750, to the 35 million Americans now without coverage. The President doesn’t say how to pay for such vouchers, but he has toyed with the idea of taxing employer-furnished health benefits for those earning more than $125,000 a year.
That idea was shelved but may come back as a tax on all who now have employer-paid insurance, because such a benefit amounts to a public subsidy. The arithmetic is simple: If health insurance costing $4,000 a year on average is given tax-free, it is worth $600 to $1,240, depending on the employee’s tax bracket.
That tax break for the 70% of the work force enjoying health insurance costs the government about $60 billion a year, more than enough to finance access for the 30% without coverage.
Of course, nothing will happen immediately--in an election year nobody offends voters by pointing out that they have their snouts in the public trough.
America spends a lot on health care--roughly $750 billion a year--because it has great medicine and because of waste. How much is wasted can be gauged by comparing the United States, which devotes almost 14% of its gross national product to medical care, to the Netherlands, Sweden or Germany. Those nations spend about 9% of their GNP on medicine, yet deliver care as good as that available in America.
The flaws in America’s system include overuse: 80% of U.S. health care is financed on a fee-for-service basis--the more services performed, the more money received by doctors and hospitals. That, say experts, has led to unnecessary procedures. In some U.S. hospitals, 80% of heart patients get an angioplasty--a reaming out of blocked arteries. In Sweden or Canada--countries with no higher levels of mortality--20% to 50% get angioplasty.
There is corruption. The government now pays 40% of U.S. medical costs through Medicare. But attempts to control costs by reducing Medicare payments has led to massive cost shifting--billing fully insured patients more to make up for shortfalls in Medicare payments.
Growth in U.S. medical costs is never less than 10% a year, even as general inflation has slowed to less than 3%.
To be sure, some cost growth is inevitable as advances in medicine enable us to live longer--meaning fewer get carried off in influenza epidemics but die one by one of chronic diseases such as cancer, heart trouble, AIDS, Alzheimer’s.
But such laudable advances are now imperiled by an overall rise in medical costs that is “unsustainable,” as Budget Director Richard G. Darman wrote in the latest federal budget. Reform is in the air.
To control expenses, some advocate a national health system like that of Canada, where the Ministry of Health and provincial governments allocate a budget for hospitals and decide what medical equipment to buy. Critics say that has led to waiting lines for treatment--something that would annoy Americans, but not as much as being told: “I’m here from the government to decide what’s good for your health.”
A congressional solution, called “play or pay,” would force employers to buy health insurance for employees or pay into a government plan--a scheme that could further subsidize the current system without controlling costs.
Yet real solutions are emerging in Cleveland, Memphis and other cities as businesses pool their purchasing power to buy medical care wholesale rather than retail.
In Cleveland, major corporations are judging hospitals and health care providers not only on price but on quality of care delivered--as reflected in the resulting health of patients--and allocating business accordingly.
Ultimately, say scholars Alain C. Enthoven of Stanford and Richard Kronick of UC San Diego, who have written on the health system, medical care will have to be purchased on a group basis--beyond the single corporation--and standards will have to be monitored by quasi-public bodies, as state boards of regents now monitor education.
The trends all favor an expansion of managed care--the type of health plan that works for a flat fee, as do health maintenance organizations. The day is coming when employees will have to pay extra for choosing a plan with choice of individual physicians, rather than going the group-provider, flat-fee route.
Such HMO plans now make up 20% of the U.S. health system, but in three or four years “they will account for 50% to 60%,” says Kenneth Abramowitz, a medical industry analyst for the Sanford C. Bernstein research firm. “Then real change will come.”
Not without controversy. As employees are asked to pay for insurance and choose HMO plans, there will be outcries that we are losing benefits. But it would be more accurate to say we are gaining efficiency.
“We spend more on telephones and computers than any other country, but we don’t complain because those things enhance our productivity,” says Kronick of UC San Diego. “Good medical care, without wasteful spending, will do the same for our society.”
