Healthy Insurance?
The air is
full of information and misinformation re: healthcare, these days. There are
numerous misstatements and poor statistical analyses from both sides of the
healthcare debate. A reasonable person with time on their hands can, if they
are willing, find reasonably comprehensive and accurate answers to many of these
questions, but many, blinded by partisan fervor of either side, simply take
whatever their flavor of the month politico tells them and make it their
mantra.
Accordingly,
as objective an analysis as possible might be appropriate. The best way I can
suss out to do this is by posing the usual
pros, cons, and position
statements and then analyzing their validity. I will, however, start
with an assumption, based on my own political belief, that being that First:
Our current system is not working for most Americans financially, and leaves
many unable to obtain even routine medical services, which would in some cases, avoid far costlier emergency
services in hospital vice preventive out patient care. Second: it is possible
to specifically indentify reasons why that is true.
1. "Single Payer Health Care is a panacea for all ills
related to availability and cost."
A: There is
no perfect "one size fits all" approach to providing universal health care. The UK National Health
Service is a single payer, universal
system and Switzerland is a multiple insurer (but mandatory) system, both of
which are aimed at every citizen having access to primary care fee free at
point of service. In fact, the US has a
hybrid system, in which Seniors on Medicare and anyone on Medicaid already are
being cared for in a sort of single payer reduced fee (not free!) system.
Like it, or not, these services are paid for by everyone's tax dollars,
while many Seniors also pay additional
out of pocket for various supplementary programs such as hospitalization and
drug plans.
2. "Single payer systems cost more in taxes"
A: True, but
incredibly misleading. American conservatives tend to ignore the composition of
spending; to them, just about all spending is equally bad.
As a
percentage of GDP, Europeans do pay a larger share of income in taxes, but as
far as health care itself is concerned,
the UK pays 8% of GPD for the national Health Service, while the US pays
15% , or almost double the UK's share, of GDP when public and private spending
is considered as a whole. Europeans tend not to have this attitude towards higher tax
rates because their governments provide them with benefits from which all
residents gain.
a. First is cash allowances that almost all
families with children receive. We have something similar, the earned-income
tax credit. Because it is part of the tax code, it reduces the tax burden; in
Europe such programs are part of the budget and thus raise spending. Moreover,
the earned-income tax credit benefits only low-income workers; in Europe,
family allowances benefit virtually all families with children.
b. The impact
on the tax burden can be dramatic if one views family allowances as negative
taxes. For example, in Luxembourg, an average married worker with two children
pays a nominal income tax rate of 16.5 percent (including state and local income
taxes), while an American in the same situation would pay 5.2 percent. But once
family allowances are subtracted from the Luxembourg worker’s income-tax
payment, the effective tax rate falls to just nine-tenths of 1 percent.
c. More
importantly, almost every other country has some form of national health
insurance that covers, on average, 72 percent of all health costs. The
comparable figure in the United States is 46.5 percent, and almost all of that
is accounted for by Medicare and Medicaid, which almost exclusively benefit the elderly and the poor.
d. The average
American family of four in 2012, the last year for which I could find hard
data, had an average total healthcare cost of
$24,671 in total healthcare costs.
Of this figure, $10,473 was paid by the family, $6,408 through payroll
deductions, and $4,065 in out-of-pocket expenses incurred at point of care.
What this means to the individual family is that the average 27% of income paid in all taxes is actually
(considering healthcare as a "must have") more like 38% when private
health care spending (the $4,065) is factored in!)
3. "The health care isn't as good; wait times are
outrageous."
A: Britain’s National Health Service stipulates
a standard that patients should wait in an emergency room no more than four
hours if they are to be admitted to a hospital. The organization also tracks
how many patients wait more than six weeks for needed diagnostic tests (under
1% recently). Latest UK data shows a
wait of about 46 days for elective surgery, a number improving. Canada is much
worse, but has made significant improvements over the last three years. This
has not however, deterred several
politicians recently from using 2008 data as if it were current when comparing
Canada's single payer system to US conditions.
So OK, Single
payer in the UK is quicker than in the US in most ER instances and not very far
behind in elective procedures. This does not factor in, , and it is a huge
factor, the additional waiting due to financial burdens which, in the US, may make
a patient forgo the elective procedure altogether, due to co-pays, etc.
Now the bad
news: While we Americans sometimes look down on national health systems like
Canada’s and Britain’s because of their notorious waiting lists, there is
emerging evidence that lengthy waits to get a doctor’s appointment have become
the norm in many parts of American medicine, both for general doctors and for specialists. That includes patients with
private insurance as well as those with Medicaid or Medicare.
A July 14,
2014 Sunday Review article cites a
relevant recent study. Merritt Hawkins,
a physician staffing firm, polled five
types of doctors’ offices about several types of nonemergency appointments including
heart checkups, visits for knee pain and routine gynecologic exams. The waits
varied somewhat based on market and
specialty, but were revelatory.
For example,
patients waited an average of 29 days nationally to see a dermatologist for a
skin exam, 66 days to have a physical in Boston and 32 days for a heart
evaluation by a cardiologist in Washington.
In another unrelated survey, The Commonwealth Fund, compared wait times
in the United States to those in 10 other countries last year. “We were smug
and we had the impression that the United States had no wait times — but it
turns out that’s not true,” said a researcher for the foundation. “It’s the
primary care where we’re really behind, with many people waiting six days or
more” to get an appointment when they were “sick or needed care.” By the way,
"sick or needing care" gets you almost immediate medical care in the UK. A footnote here is no
searching for a doctor who will take your Medicare or particular brand of
insurance!
4. This one from a grossly under informed acquaintance, but
not atypical of many who don't know better. "Then why does everybody in the
UK buy private insurance?"
A: Simplest
answer?
They Don't! "Everybody" is about 11.6% of the population. Private
insurance isn't necessary, but will provide immediate (in most cases) access to
private hospitals and elective
procedures - by the same doctors who work in the NHS in many, almost all, cases! It may be a perk of employment or privately
purchased. No matter how purchased, the truth is that it is amazingly
inexpensive compared to even US Medicare supplements. A married couple on Medicare in the US will probably
pay at least $262 monthly for Medicare , parts B and D. This
works out to around $3144 annually and doesn't even consider the 20% co-pay on
most Medicare approved procedures. So, back to the drawing board for a Medicare
supplement which, if a good one, may cost another $50 or more monthly, for
another $1200 annually.
By contrast,
private insurance in the UK , which simply bills the NHS in the vast majority
of instances (no co-pays, no point of service fees), would cost this couple at
the most, for a top tier plan, perhaps $1500 annually. Private insurance in the
US is a must, in the UK it is a luxury.
5. "But it's the damned profiteering insurance
companies, right? They're the ones keeping costs up!"
A: Not so
much. While it is true that insurers are
frequently considered to be the bogeymen of American health care, it's
primarily because they do a lot of the
unpopular stuff: They’re the ones who charge you money for health care, who say
you can’t get something you want, who your bosses blame when they deduct more
money from your paycheck to cover health costs. They're the face the consumer
sees when he bitches about of health
care costs, and it’s hard to see what value they add to the system.
Yet the
preeminent problem with the Affordable Care Act isn’t the insurance industry.
In fact, the main benefits of nationalized health care can be achieved in
systems with hundreds, as Switzerland does, or
by even thousands, of for-profit insurers. No matter what Michael Moore
or others think, Insurers aren't the profiteering bandits they are sometimes
painted as.
A clearer way
to think about it is to consider profitability of the various stake holders in
private insurance. This is huge bucks -- and insurers aren’t where the big
profits in the health-care system go. In 2009, Forbes Magazine ranked health
insurance as the 35th most profitable industry, with an anemic 2.2 percent
return on revenue. To better understand this fact, consider that an average
industry's net ROR is about 5 to 6.5 % annually. To understand why our health-care system is so expensive, you need
to travel higher up the Forbes list. The pharmaceutical industry was in third
place, with a 19.9 percent return, and the medical products and equipment
industry was right behind it, with a 16.3 percent return. Meanwhile, doctors
are more likely than members of any other profession to have incomes in the top
1 percent.
Generally, Americans don’t use
more health care than citizens of other countries. In point of fact we may, as
a nation, use a bit less because many simply can't afford to see a doctor. But
we pay a lot more for the health care we do get. Data gathered by the
International Federation of Health Plans show that an MRI costs, on average,
$1,121 in the United States and $363 in France. An appendectomy costs $13,851
in the United States and $4,782 in Switzerland. A birth by cesarean section
costs $3,676 in the United States and $606 in Canada. A bottle of Nexium -- a
common acid-reflux drug -- costs $202 in the United States and $32 in Britain.
The sad truth about American health care is that it costs more not because
insurers are so powerful, but because they’re so weak.
There are few
truly single-payer systems in the developed world. Canada has one, so does
Taiwan. (Note, this means that private insurance is illegal in Canada, unlike
the UK.) Most countries rely on
multiple insurers. Germany, for
instance, has more than 150 “sickness funds.” The Swiss and Dutch health
systems look a lot like the Affordable Care Act's health-insurance exchanges. About 90 percent
of French citizens have supplementary
health insurance. Sweden has recently moved from a single-payer system to one
with private insurers. The common factor, however is that all these countries pay vastly less for
drugs, surgeries or doctor visits than Americans do.
Why, you
ask? Because in every case the
government sets prices for health-care services and products. Insurers in
Switzerland don’t negotiate drug prizes with Pfizer or Smith- Kline. The Swiss
government simply sets its drug prices and lets Pfizer decide whether to sell
in Switzerland -- or not. And sell they do!
“The problem is that in the U.S. payers are fragmented while in other
countries they are unified even if there are many insurers,” according to
Gerard Anderson, director of the Center for Hospital Finance and Management at
Johns Hopkins University.
In the United
States, insurers are left to negotiate with hospitals and drug companies on
their own, resulting in their paying more as a result. In fact, because of this weak negotiating
position they frequently use whatever price Medicare is paying as a baseline
and then, because they lack the power to strike a similar deal, add a
percentage on top. One University economist
noted that when Medicare
increases what it pays for a service by $1, private insurers increase their
payments by $1.30 a - 30% bump. Thus,
sadly, US health care consumers suffer
from the worst of both approaches:
Prices aren’t set by the market, but they also aren’t set by the government.
Consequently, Medicare’s negotiating power is weakened by the threat that drug
companies or hospitals will opt to do business only with higher-paying private
insurers. We simultaneously miss out on the efficiency of a purely private
system and on the savings of a purely public one. Note that the previous discussion refers to Medicare, a large
entity, things are far more grim for the individual insurer.
6. "But I hate Socialism!"
A: So did
Theodore Roosevelt, but he knew extortion and monopoly when he saw it, too. I
have written at length elsewhere outlining the profiteering of major drug
companies. Above, I cited an "average" 19.9% industry wide profit margin. Truth told, for
the top three drug companies world- wide, the number is about 30%!! While these sharks will tell you that all
this profit goes into research and development, that is simply not so. All of
the big three spend more on advertising than on research! They spend a lot on
lobbying to protect the system which disadvantages each of us. A far too common
trend is the gradual increasing of pricing on a drug as it nears the end of
patent protection. While it costs progressively less to manufacture, sale price
increases. Multiple-sclerosis drugs are
a good example—a study published n Neurology examined nine different MS drugs
and found that their prices “increased annually at rates 5 to 7 times higher
than prescription drug inflation” between 1993 and 2013! Part of the blame for
this piracy can be traced all the way back to Medicare, Part D.
In 2006, the
U.S. government made a great effort to improve access to approved cancer drugs
by requiring Medicare Part D to cover such drugs. Conversely, the 2003 Medicare
Prescription Drug, Improvement, and Modernization Act contains legislation that
forbids Medicare from negotiating drug prices. So -yes, Medicare must cover the
drugs and yes, they must pay whatever the drug company has the balls to charge!
These policies have created an opportunity for drug companies, rendering them
the sole decision makers on the price of cancer drugs. At present there is
considerable question of whether current
pricing of cancer drugs is based on reasonable expectation of return on
investment or whether it is based on what prices the market can bear, with the
latter a more reasonable assumption! It isn't just Martin Shkreli and Turing,
either, a recent drug price change by Mallinkrodt for an infant seizure
medication jacked the price from $33 per vial to $69o for the same dose!
OK, that ought to do it
for a while. I'm not
going to post this as text on Face book, but will put it
on my blog. and link to it on FB. Please if you have comments, let me know on
FB. Thanks
