Health Care Reform Analysis

PROBLEM

The health care legislation passed by Congress is deeply flawed.  It is based on the erroneous idea that the hand of government must take over the health care system in order to provide access to health care services and to control, or even reduce, costs.   Since the hand of government is the cause of increased health care costs, their increased involvement can hardly be the solution. 

BACKGROUND

In the late 1940's, the government enacted the Hill Burton Act, which was a government program that gave hospitals money to rebuild aging facilities for the promise to then give free care to qualified patients for the next 20 years.  This arrangement began the progression of cost shifting, that is to say, someone else had to pay for the services provided as "free care" to patients.

Later, in the 1960's, the federal government enacted the Medicare and Medicaid programs. The Medicare program was a cost based system. The government was to pay providers whatever it cost to provide services to Medicare patients.  In fact, the law still states that the government is required to pay what it costs to reimburse providers for the care of Medicare patients. 

For over forty years, various changes to the reimbursement system have been tried but always with the underlying requirement that the government pay the "fair and true" cost of providing services.  The costs of health care have continued to rise faster than the general costs of inflation.  Regardless of the payment schemes, Medicare costs keep rising.  In addition, the funding for Medicare is insufficient.  When Medicare Part D was enacted, Congress did not change the payroll tax rates to cover the cost of this additional benefit.  

One of the payment schemes is to negotiate reimbursement rates.  Medicare uses two methods to negotiate.  The first is to establish a rate for a given service.  The second is to simply not agree to pay for something even though the service is provided.  Because Medicare is so big and influential, providers capitulate and accept these limits to reimbursement.  Since there really is no such thing as a free lunch,  providers cost shift these Medicare costs to other clients.

Compounding this phenomena of not paying the total cost of providing a service, major insurance companies often tell providers that they will only reimburse the providers what Medicare pays.  The major insurance companies also have great influence with the providers, so the providers shift the costs not covered by Medicare or major insurers to the small insurance companies and the patients who pay directly for their services.  This results in published charges for services that have no reality to what payment for services really is.  Between Medicare and major insurance companies negotiating payments at considerable discounted prices from published charges, the published charges are really an indication of the severe cost shifting that is placed on the self pay person or small insurance company.

Medicaid is a program of blocks of money from the federal coffers that states agree to use for health care services for the indigent.  The Medicaid program is funded jointly from the federal government and from the state governments.  However, since the 1960s, the federal government has been expanding its coverage requirements to the states Medicaid programs.  These expanding requirements come from mandates by the Congress to the States and they are made without regard to the state's ability to fund their required portion.  

Because Medicaid programs never cover the costs of providing services, the States underpay providers.  State governments universally struggle with finding providers to cover the Medicaid population with appropriate health care services.  Medicaid coverage and demand for services will for the first time in Florida history become the largest component of the state budget this year, surpassing the cost of education!  Medicaid costs are simply growing and growing and consuming more and more of the taxpayers dollars.

Finally, states play a role in this complex maze of pressures shaping our health care delivery system and the resulting costs.  State legislators tell private insurance companies what services must be provided in their insurance products.  Over the years, more and more services have been mandated by state legislators.  We have moved the health insurance industry from insuring risk to providing comprehensive health care services.  This has resulted in higher premiums to cover mandated services.  In addition, the health insurance commissioners regulate the premiums for these products.  So between the legislators telling insurance companies to expand coverage and the insurance commissioner not allowing the insurance companies to cover the costs of these services, the insurance companies strike back by limiting who can be insured.  This leads to the undesirable situation where clients lose their insurance or can't get insurance or get denied coverage.  This adversarial position of pitting the insurance company against the patient is brought on by our government officials!

The hand of government, both at the federal and state level, has skewed the costs of providing health care services.  The government attempts to control costs through the political process by negotiating price and services.  However, this results in a bureaucrat mess, much like the complicated thousands of pages of legislation in the current public option proposal that Congress is debating. 

Repeal, Revise and Reform the Health Care Legislation

• Repeal HR 3590
• Mandate all health care services paid by insurance companies or the government shall have copays.
  
• Federally regulate health insurance products so that they may be sold anywhere in the US.
  
• Revise lawsuit abuse laws.
  
• Transition from employer based health insurance policies to individual owned plans, much like car insurance polices.
  
• Allow all health care expenditures to be tax exempt for individuals.
  
• Allow for catastrophic health care coverage to protect consumers when they are ill or unable to work
• Revise unemployment insurance to include coverage for health insurance premiums.
  

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