Universal Health Coverage Funded at the Community Level
THE CASE FOR COMMUNITY MANAGED UNIVERSAL HEALTH COVERAGE
Ray A. DeCormier, Ph.D.
Marketing Professor
Central Connecticut State University
This idea was first presented in 1995 and it is as relevant today as it was then. For clarification, the terms Universal Health Insurance, National Health Insurance or Universal Health coverage are used interchangeably.
THE PROBLEM
Listening to the news concerning the United States' Medical and Health Insurance Industry's state of affairs, it is astonishing the large number of people, between 40-50 million, who do not have health insurance. Including those with inadequate insurance, the number approaches 100 million people.
Another concern is the staggering rate at which medical and health costs are escalating. The economy is growing at 3% per year, yet health cost is escalating at 12% per year. Presently health cost consumes about 12% of the GNP.
However, this covers only about 60% of our population. In other industrialized nations their total health cost is closer to 5 or 6% of their GNP. Yet, that covers 100% of their population. Why such a large discrepancy? This paper addresses the effects of this discrepancy, reasons why they occurred, and how to solve them.
EFFECTS OF LARGE HEALTH CARE COSTS
If health costs are not checked soon, it will seriously infringe on other segments of the U.S. economy. The result is that as people spend a greater percentage of their pay on medical services, they do not have the money to spend on other goods and services. This predicament will doom the need for many services, ultimately leading them to extinction, or it will force a change to the medical process as we know it. This writer advocates change.
In the United States, medical insurance is purchased in part by the business community. However, rising medical costs devastate business organizations in numerous ways. First, entrepreneurs are unable to start businesses. This is because they cannot afford to leave secure jobs to risk their family's welfare to the ravages of over priced medical costs. Next, smaller businesses cannot effectively compete with larger businesses. Unable to afford a decent health care program for their employees, they cannot attract and secure a competent labor force.
In addition, larger businesses vying in world markets are beginning to curtail their health insurance programs to cut costs. This action allows them to survive against foreign competition. Those businesses unable to drop health programs because of labor contracts, circumvent this tremendous cost by diluting their domestic labor force through job exportation. Simply stated, businesses can no longer afford to carry health insurance programs. With these problems facing our country and business community, is there a solution to the medical services dilemma?
BACKGROUND
Before businesses provided health insurance programs for their employees, most people paid or negotiated for health services directly with their doctors. In exchange for medical services the wealthy paid more than the poorer families, and the indigent bartered for services with goods. Under that system, both rich and poor had reasonable access to basic medical service.
Wanting more benefits for their members, unions demanded that health insurance coverage be an employee benefit. Later, to extend benefits to more employees nationwide, the U.S. Government offered tax incentives to businesses as an inducement to provide medical coverage for their work force.
At first, only a minority of companies provided health insurance programs. Because money was available, to earn more income doctors now charged insured patients the same rates as their wealthier clientele. This insurance now guaranteed a new group of customers preferential treatment over uninsured patients. Still, people without health insurance could obtain reasonable medical service because most doctors were willing to bargain with them. But once enough employers (led by all levels of government) offered health insurance to their employees, the demand for services by full paying customers superseded the supply of doctors. This further reduced services to the uninsured. Today, an uninsured person who cannot pay before being treated can actually be denied medical service as long as it is not life threatening.
Next, the American Medical Association (AMA) compounded the problem for protectionist reasons. Since they control medical school enrollments, they regulate the supply of doctors. To maintain high incomes for their association members, they refused to increase enrollments to meet the demand. Due to an inadequate supply of doctors, and a high demand from full paying customers, doctors' incomes rose dramatically. Yet, proportionally more citizens are denied medical services than ever before.
Among medical professionals worldwide, U.S. medical doctors are by far the highest paid group. The U.S. medical profession absorbs twice as much of the nation's GNP (12%) than other groups take from their country (6%). Yet only 60% of the U.S. population has medical insurance protection while other countries provide protection for 100% of their population. Simply stated, the U.S. medical profession services fewer people and receives more income. This is the predicament the United States society finds itself in right now.
How long will this situation continue? This will continue as long as the AMA politically controls the supply of medical personnel in the United States, and the U.S. government is reluctant to implement a public medical policy.
WHO'S COVERED, WHO'S NOT, AND WHO ACTUALLY PAYS THE BILL?
One way to view the health care issue is to ask the question, "Who's covered, who's not, and who actually pays the bill?" As this writer views it, in one form or another, our government basically subsidizes those people possessing good health insurance plans. That is, all people covered by welfare and Medicaid have decent insurance plans. All municipal, state, and federal employees have satisfactory insurance programs. Even prisoners have better access to medical services than most uninsured. All major corporations, especially those with lucrative government contracts subsidizing sizable portions of their business, have good health insurance arrangements. Major corporations' sub-contractors, again funded by government contracts, have adequate medical programs. In essence, it is a governmental unit that funds, or subsidizes, most good health insurance plans in the United States.
Granted, many companies have no government assistance to pay for, or assist, their employees' medical insurance cost. However, when analyzed, many of those companies’ insurance packages do not even provide minimal coverage. Instead, they furnish just enough to induce their employees into thinking that they have an adequate health insurance program. The plain truth is that many of these programs lack substance.
THE SADDEST PROBLEM CONCERNS THE WORKING UNINSURED
In our society, there exists a very unfair situation. There are many groups of employees who have no coverage at all. They are found working very hard in small businesses such as diners, restaurants, manufacturing shops, retail stores, nonprofit organizations, or as salespeople. Having much experience in the business world, this writer knows that these people usually work much harder for their money than many other groups of employees. They often work long hours at low wages, and are frequently subject to sever job and health hazards. Should they own a home and should a family member contract a serious illness, the regrettable fact is that they could lose all their property to medical expenses. Is this what society endorses? This writer thinks not!
WHEN COMPANIES GO BROKE
Many people with health coverage now work for financially weak companies. What happens to them when their companies fail? Unfortunately, they are left without health insurance. The situation is more severe for older people than for younger people because it is usually easier for younger people get another job.
AFFECT OF AGE AND HEALTH AS A HIRING CRITERION
The unemployed middle aged group (55-62) finds the insurance dilemma most difficult. This is because they are susceptible to expensive medical procedures such as heart bypasses. Sadly, due to higher medical costs associated with their risk, many companies refuse to hire this group for full time jobs. To compound the problem, most people in this age group are unable to secure decent health programs privately because of the prohibitive cost ($2,000 - $4,000 per/year). Further, due to their age they are not even eligible for Medicare. This is surely a disheartening predicament for this group.
LOSS OF LIFE SAVINGS TO MEDICAL COSTS
A terrible injustice for anyone is to lose his or her life savings to medical costs. All too often, this happens to uninsured (i.e.: elderly) people. For example, if a person without health insurance experiences a serious affliction, exorbitant medical costs often deplete a person's entire life savings within a short period. These people have spent a lifetime working hard and contributing to our society to earn this money. Do they deserve losing their entire estate to a medical problem? As a society, do we want this situation to continue? To resolve this predicament, all society needs to do is establish a decent National Health Insurance program for all its citizenry.
WHEN DOES MEDICAL INSURANCE BECOME A RIGHT?
American society is at a point where access to good medical service should no longer be a privilege, but a RIGHT! One way to consider this issue is to view the right to medical insurance like the right to the pursuit of life itself, because ultimately it is!
Objectively, there are many medical doctors making a fortune at the government's (peoples) expense. Let me explain. Many doctors justify their high incomes by implying that it is only a fair return for the high cost of their education. However, most informed people disagree with that contention. Realistically, there are many Ph.D's, attorneys, leading engineers and scientists, who earn substantially less money than MD's, yet have had to pay the same in terms of time and money to cover their educational expenses.
Also, many in the medical community justify their high incomes under the guise that it is the cost of technological advances. Yet, much medical technology is not really new. Still, many doctors continue to charge as if what they are doing is really current. The sad truth is that society has more than paid its fair share for this technology. It is now time for society to benefit from this investment.
No matter what reasons are used to justify high medical costs, still, no one should ever be held hostage to medical blackmail simply because he/she does not have health insurance or money. To deny one medical service is just as ridiculous as denying one access to a good education, because ultimately society loses.
The point is that there comes a time some things must move from Privilege to Right. Concerning access to decent medicine that time is now! Mentioned earlier, no one can deny that one governmental body or another funds most of the population's medical insurance already. Isn't it time to cover the rest of society?
NATIONAL HEALTH INSURANCE VERSES UNIVERSAL HEALTH COVERAGE
When referring to National Health Insurance, this writer states that all Americans should have access to good health services. However, due too much misunderstanding, National Health Insurance has a negative connotation in America. Therefore, a more appropriate term to use instead is Universal Health Insurance (UHI) or Universal Health Coverage (UHC).
If the goal is to insure all Americans, the real question is "HOW" can society accomplish this objective in the most efficient and economical manner? The first step in attaining this goal is to acclimate our citizenry, political leaders, and medical providers to the idea that decent health coverage is not a privilege, but a "RIGHT". Next, society must declare that it will not tolerate any interest group exploiting one's medical condition to force wealth, labor, or anything else for that matter, from an individual. Until then, we cannot say we are truly a free people. Finally, for UHI to be effective and cost efficient, it must be funded at the proper buying level, and executed in a competitive environment.
UNDERSTANDING BUYING LEVELS
How other democratic capitalistic societies address
universal health coverage and problems they encounter
As almost everyone knows, the United States is the only major industrialized nation in the world not to have a medical program for all its citizenry. Optimistically, this offers us an opportunity to assess how other countries are attempting to solve their funding problems as they implement their National Health Insurance programs. More specifically, what is the effect of medical services in terms of cost and efficiency as it relates to various buying levels?
FEDERALLY FUNDED PROGRAMS
When we think of the word "Federal" or "National", most of us think of Washington, D.C., the President, and Congress. When using the word "State", most thinks of a State such as California or Connecticut. To simplify matters for the following sections this writer uses the term Federal and National interchangeably. In other words, this paper shall refer to the Country of Great Britain (England) as a Federal or National entity rather than as a State, although most Europeans refer to Great Britain as a State.
As most know, England has a National Health Insurance program funded at their Federal or National Level. This program is so important to their citizens that when surveyed, "Which social program would they be willing to eliminate, including even the educational system?” overwhelmingly, the last one to be abolished was their National Health Plan. In turn, the average "Brit" did not view paying for Health Insurance through taxes as an unreasonable burden. Deductive reasoning suggests that paying for health insurance through taxes is not the problem, nor the issue.
However, England does have some problems with respect to the administration of their health program. Their critics say the system is slow to service its citizenry and slow to change to a fast changing environment. Yet, this writer did not personally experience slow service when suffering with a hand ailment during a recent visit. Still, after listening to the criticisms about National Health Insurances, they sounded similar in nature to those mentioned about any large bureaucratic institution. After analyzing the comments, the problem is not in having a Universal Health program, but with actuating the system in an efficient manner at the federal level. Most experts agree that once a National Government becomes a buyer and/or an implementer of a service, as with all bureaucratic institutions, inefficiencies arise. Presently, England is trying to correct their bureaucratic inefficiency problem by "privatizing" certain aspects of their medical system. Yet, they intend to maintain their universal health program.
In the United States, critics rightly claim that excessive costs and inefficiencies crop up in all programs implemented at the federal level. If one analyzes Medicare or Medicaid, their inefficiencies are blatantly obvious. Of course, the main critics are members of the private sector. The lesson learned here is that the Federal Government should not be the buyer or implementers of medical insurance. Instead, the Federal Government should act solely in the capacity as policy maker and fund raiser, and leave the implementation and administration to the appropriate sector(s).
PROVINCIALLY OR STATE FUNDED BUYERS
Canada purchases and implements its Universal Health system at the Provincial level. In the U.S., this is comparable to the State Level. Similar to England, Canada has implementation problems because level of services is so closely related to political whims. Although many experts say their system is more efficient than England's, in this writer's opinion it is still wrought with similar problems because politicians direct the system and bureaucrats execute it. The truth is that large political buying units (Federal or State) more often result in more expensive and less efficient administrative systems especially for community needed services.
BUSINESS BUYING LEVEL
In the United States, the business level purchases most health insurance for its employees (even though the ultimate benefactor is usually a governmental body). One reason the system works so efficiently is that the private sector, through doctors and insurance companies, administers it. The problem is not in poor medical service. Actually, for those who have health insurance, the medical service is very good. The main problem is that it does not cover all people, because:
1. Not all people work for one reason or another, and
2. Not all employers can make insurance available to their employees because they cannot afford it.
There is another problem with this level as the buying unit. The cost of service is very expensive and this buying level is unable to control the basic cause of this expenditure (controlling the supply of doctors by the AMA). While this problem will be addressed later, the lesson learned here is that efficiency and good quality service occurs when private enterprise executes a system.
POSSIBLE SOLUTIONS TO FUND HEALTH INSURANCE
THE U.S. GOVERNMENT (FEDERAL LEVEL) OR STATE (STATE LEVEL)
AS BUYERS OF HEALTH INSURANCE
Lately, our Federal and State politicians ask, "How can the government provide health insurance for all its citizenry?" In most quarters, politicians intellectually agree that the Federal or State Government should not be in the health insurance business. This is because when they get involved in any business venture, they usually go overboard and develop huge bureaucracies and unnecessary expenses. For example, consider services administered by the Departments of Labor, Transportation, Education and Post Office. Many critics argue that if private enterprise managed these functions there would be greater efficiency at less cost. The conclusion is that large governments normally end up spending much more for the service than the service warrants. Yet, the politicians know that having a Universal Health program is the correct thing to do. The major question is "How can society bring this concept to fruition in an economical and efficient manner?" Let us consider some alternatives our politicians are presently contemplating.
BUSINESSES AS THE BUYERS OF HEALTH INSURANCE
Lately, the prevalent idea is to pass laws mandating that all businesses provide health insurance for its employees. The notion behind this proposal is that if you work, you should have access to health insurance. This sounds very good in principle; however, the problem with this suggestion is that:
1. It straps business with a very large fixed cost. Unfortunately for small businesses, this is an impossible hurdle to overcome. Presently, most small companies fail in spite of themselves. This idea would force more businesses out even faster than normal. Since small companies are the seeds for the future economic welfare for the United States, this is hardly a situation society can afford. This is like killing the goose that lays the golden egg.
2. Businesses that go out of business leave their employees with no health insurance. Isn't the objective to have all people insured, not just those who are working?
3. What does a business know about health insurance anyway? Frankly, not much! This is a fair statement because the reality is that most companies are not in the business of providing health insurance. They are in business to create and provide a product or service. Why not just let them do that? Why force upon them another cost (i.e., analysis, purchase, and administration) of health insurance?
4. Forcing small businesses to provide health insurance for their employees will surely destroy the entrepreneurial spirit that still exists in America. No one, or very few, could go into business burdened with a high fixed medical insurance expense. How would new businesses get started then?
5. Businesses, even large ones, cannot compete against international companies whose health care costs are at least 50% - 75% less than their costs. Even General Motors is having trouble!
For these reasons, it is very imprudent to mandate that businesses provide Health Insurance for its employees.
INDIVIDUAL AS PURCHASER OF HEALTH INSURANCE
Securing health insurance at the individual level just does not work in a modern society. The major reason is that too many people do not earn enough money to pay the exorbitant health insurance costs. Presently, those without good incomes already find it difficult to get proper food and shelter. How could society expect them to pay excessive premiums for medical insurance?
Furthermore, for those without insurance, it is their children (and ultimately society) that suffers most. The problem is most severe among the working poor and unemployed. When medical calamities occur, it is this group that ends up with broken families. First, a family loses its estate, next they divorce, and then they resort to welfare to attain medical benefits. Wouldn't it be wiser just to provide medical coverage from the start and possibly salvage the family? Hopefully, the ideas contained in this paper could eliminate one major reason for welfare!
Also, if there should be a pandemic, those who do not have insurance would not go to doctors until its too late and worse, would help spread the infection faster and further.
DISCUSSION
A. Paying for, and administering medical insurance at the Federal or State level is the most inefficient and probably the most expensive way to go. This is because this purchasing level can only do things through bureaucracies. Historically, bureaucracies are both inefficient and ultimately very expensive for society. It may be appropriate for society to purchase military services at the federal level, or state police at the state level, but this is not the correct level at which to purchase health insurance.
B. Also, it does not make sense to buy health insurance at the business level because it:
1. is a very unstable purchasing group. Companies go out of business too quickly to effectively insure all Americans
2. straps business with a very large fixed cost that makes them uncompetitive in world markets
3. discourages the creation of small businesses
Instead, it is most important to let businesses do what they do best. That is to manufacture goods and services.
C. The individual level is the most appropriate level for purchasing most things. However, it does not make sense to have individuals buy health insurance because:
1. this purchasing level is economically too unstable, and
2. individuals cannot afford the inflated cost of health insurance
Question: So, what level is best for society to purchase health insurance?
Answer: The community level is the most appropriate purchasing level of health insurance, but only in a competitive environment
COMMUNITY - LOWEST STABLE BUYING LEVEL
The most efficient and least expensive way for society to buy health insurance is to have the community purchase it in a competitive environment. Competition assures high quality service at low prices. The Community assures stability and security for this important need since it is the lowest stable-buying unit. It also offers prudence and frugality to the purchasing decision since it is very a conservative buyer.
The lowest possible buying level is the individual. For reasons mentioned above, this level is not feasible. The second stratum for purchasing health insurance is the business level. However, this level is also too unstable. The fact that companies (including large organizations) go out of business dictates that this level is much too unstable for purchasing such an important human essential as health insurance. The fourth and fifth levels are the State and Federal Governments respectively. Again, for reasons mentioned earlier, these levels can purchase health insurance for society, but neither in an efficient nor a cost effective manner.
The third tier is the community level. In this writer's opinion, this is the most appropriate level for purchasing health insurance. Since it is the lowest stable buying level, a sense of security is evident. Also, historically, it has a good record for providing basic societal needs at reasonable costs. This includes the purchasing of education, police protection, fire protection, land development planning as well as a host of other community services such as garbage collection and libraries. Why wouldn't this level be as discerning to selecting and proportionately financing medical programs as it is in handling its other social responsibilities? Still, to be efficient, medical services must be attained in a competitive environment.
ATTAINING UNIVERSAL HEALTH COVERAGE IN A COMPETITIVE
ENVIRONMENT
The following scenario considers the goal of:
1. everyone having health insurance, and
2. assuring the health insurance business exists in a competitive environment.
To accomplish this, this paper advocates changing some laws and using the powerfully invisible arm of competition to keep prices low while preserving high quality service.
BASIC ASSUMPTIONS:
To institute Universal Health Coverage and cut costs as well, the following assumptions are presented.
Assumption I. All People Have a Right to Medical Service.
It must be recognized that all individuals in the United States have a RIGHT to good, basic, medical service. The U.S. Government should guarantee this right. However, some communities may want to limit some medical procedures such as cosmetic plastic surgery. Still, certain communities may want to include them in their program. Under this system, community members determine what level of service is appropriate.
Assumption II. Federal Government’s Responsibilities
The purpose of the Federal Government is to set rules and minimum national standards. It should have the power to change rules and standards, as it deems necessary. Also, it should have the ability to punish wrongdoers. Furthermore, representatives making up this medical standards board should come from various professions, and not just from the medical society.
The government's aim is not to administer the medical system, but to assure that it meets minimum standards. Should a major catastrophe occur that is beyond the capacity of the state to control, such as a wide spread plague, the Federal Government would act as the ultimate catastrophic insurer. The Federal government also would be responsible for setting national tort law standards as well as national tax ramifications for funding purposes.
Assumption III. State Government’s Responsibilities
The purpose of the State Government is to set rules, rates, and minimum State standards. Similar to the Federal function, its purpose is not to administer the system, but to help police the system. The State would be responsible for raising funds and fund catastrophes for the individual. In addition, it would set State tort law standards and tax ramifications. Again, policy boards should include all interested parties and not just representatives from the medical society.
Assumption IV. The Community’s Responsibilities
The community would be responsible for demographic accounting and for raising a reasonable portion of the money for medical insurance through soliciting State and Federal grants programs. Yet, some costs should be paid by individuals or families. This is discussed in greater detail later in this paper.
Next, A community does not necessarily have to be a political community such as a town. Rather, it can be a group of 25,000 to 50,000 people living near to each other. The group should be large enough to support the cost of medical services but not so large as to discourage individual involvement. For example, it may consist of two towns serviced by a local hospital. It may even encompass a large land area such as a county. This purchasing unit (community) would be responsible for covering all people within its domain. This even includes the traveler who might be involved in an accident in that community. Whatever the composition of this purchasing unit, the Federal and State government must give this entity the ability to raise funds in various ways.
Also, it should be understood that the Community is not the administrator of any services. Instead, its capacity is to screen eligible insurance competitors, process information, collect funds, and act as the ultimate payer for the community's insurance. Within the community, the individual's or family's responsibility is to select exactly what level of coverage it deems necessary. This includes determining deductibles and other particulars, beyond minimum standards.
Assumption V. Society Should Only Provide Medical Coverage
It must be assumed that people do not want to get sick, it just happens. Since people want to be healthy, they should have a right to good medical coverage for the body, eyes, ears, teeth and mind.
The type of medical services the community should cover are those that are usual and normal. It should cover maladies such as influenzas, broken legs, cancer, chronic diseases, and births. The State and/or Federal government should fund catastrophic problems (e.g., AIDS or experimental surgery).
Note: Medical benefits should only include medical services. It should not incorporate income. If a person wants income insurance, this would be purchased personally.
Assumption VI. Administrative Responsibilities Belongs to Private Enterprise
The administration of this system would be done between communities, doctors and Insurance companies with most of it being done by the latter two.
Assumption VII. Research and Development is a Joint Venture
Federal, State and community governments along with pharmaceutical and insurance companies would be responsible for funding much Basic Pharmaceutical and Medical research. Presently, too much research is orientated towards developing maintenance products. By involving government and companies in this aspect of medicine would force them to explore for cures. Since cures are less expensive for society in the long run, it is in this alliance interest to fund this type of research.
Assumption VIII. Competition and Control
It should be noted that the invisible arm of competition is the key to the successful administration of this concept.
1. Insurance companies would negotiate rates with doctors and bid for the community's business.
2. The insurance companies and communities would negotiate their proposal/s to cover (say) a one or two year period. The period of coverage is negotiable but should never extend longer than five years. Thereafter, rebidding must occur. This assumption has the effect of creating turnover and maintaining competition between insurers.
3. Further, to be in the medical insurance business, insurers would be required to take on a pre-determined proportion of "A" - "E" risks until all communities are covered. Some communities have higher risk than others do. For example, an older community might be rated "E". However, through premium equalization and good planning, all communities would be able to afford medical coverage.
4. To assure the community an adequate supply of medical personnel, insurance companies as well as States would have the right to operate medical schools that meet Federal and State standards. This action would keep overall medical costs lower and insure a proper balance between supply and demand for medical personnel. For continued cost control, the insurance companies should have the right to negotiate directly with doctors and other medical providers in and outside a community. Since competition creates an efficient environment, the market would adequately determine the medical costs for society's needs.
5. Society should encourage each insurance company to monitor the market and report infractions to the society's regulatory agencies. This includes reporting violations committed by other insurance companies, doctors, communities and patients.
NARRATIVE CONCERNING THE INTERACTION OF THE ABOVE ASSUMPTIONS
The ideas expressed above should result in an efficient, cost effective, stable medical environment that covers all its citizens. Still, the system would be flexible. It would not stagnate the dynamic nature our medical providers are presently experiencing in efforts to cut costs (i.e. HMO's, standard programs, etc.) while still rendering quality medical service.
Model
The model presented in this paper employs the assumptions patterned after ones used by the State of Connecticut and by many large corporations for their employees. The only difference is that the community assumes the role of purchaser and private enterprise is given a more active role.
The system works this way. The insurance companies (more than one company) develop various medical plans to present to communities. These plans could be HMO's, Hospital/Doctor agreements, or any other plan that meets minimum standards. Since insurance companies would have the ability to fund medical schools, some insurance companies may even want to use their graduates as part of their plans. This would insure an adequate supply of doctors and medical technicians.
Next, these programs would be presented to the community decision-making group for consideration. This group may consist of volunteers, or elected officials, such as those presently serving on much local school and zoning boards. This community decision board's responsibility is to assess the various insurance plans and decide on which programs make sense to their constituents. To assure access to information, annually, insurance companies would disseminate information to the community's constituents. One or two years after the initial choice, constituents could change their plan, if they wanted. This ability would assure turnover and allow for competition to thrive.
RATIONALE FOR MONEY COLLECTION METHODS
Monies would come from many sources such as:
1. from Individuals and families
2. deductibles paid to insurance companies
3. communities raising funds by taxing, lotto games, grants and penalties
4. National and State taxes
1. Monies Collected from Individuals and Families
The constituent (family or individual) should pay a small annual fee for medical insurance. The fee might be $100, $200 or $300 per year per family. For indigent families, a sliding scale may be considered depending upon income. The premium must be low enough so that everyone will contribute to it, yet, it must be high enough to compel people to select a program that correctly meets their needs. This action results in personal commitment.
2. Monies Collected from Deductibles Paid to Insurance Companies
After the patient goes to the doctor, the system should require a small deductible (say $2, $3 or $4 per visit). There also should be a small deductible for prescription drugs ($2 or $3). The deductible should be small enough so not to discourage people from going to the doctor for something they consider serious. Yet, it should be large enough to deter hypochondriacs from attaining services for minor ailments.
Since preventive medicine works (actually reduces long term medical costs), to encourage it, regular checkups should have only a minimal deductible (say $1). This concept should be applicable all across medical areas.
Society should also make Psychological Care available to people. However, society may have to manage this area differently. For example, to qualify for psychological help, a panel of psychiatrists, psychologists, social workers, or religious personnel (if desired by the recipient) might have to interview the patient first. After an evaluation, the panel would determine the appropriate level of help. Again, a small deductible might be appropriate for this service.
3. Monies Collected by Communities
In this system, it is the community's responsibility to raise a sizable portion of the money from various sources such as property taxes, dances, lotto &/or bingo games, penalties, and from other sources such as from State and Federal medical funding grant programs. For catastrophic problems such as liver transplants, or for region wide plagues, the State or Federal Government would be responsible for providing the extra money.
4. State and National Taxes
Anyone who has health insurance gets it at the cost of increased prices of all goods and services. So why not just lower the price of goods and services and increase the sales tax enough to cover a reasonable portion of health insurance costs. This is not an unprecedented initiative. Our highway system is the envy of the world because it is funded in great part by a gasoline sales tax. We could have a value added tax to fund Health Insurance. We could impose an import sales tax and of course a sizable portion of the money could come from income taxes. There are numerous ways for the State and Federal governments to raise the money, but there is a need to have communities raise money too so they have a vested interest in the process. One interested is to recognize and stop fraud at the local level.
In no event should a person ever be held hostage to a medical problem. He/she should not have to resort to begging, or insolvency, to finance a medical problem.
SOCIETY BENEFITS FROM COST REDUCTIONS
1. Marketing Costs Reduced
The first reduction comes from reducing marketing costs. There will always be marketing costs, however, this system substantially reduces the number of purchasing units (businesses vs. communities). This should lessen the huge marketing bill that currently exits.
2. Administration Costs Reduced
The greatest reductions come in the administration of the program. Costs for personnel who administer company insurance programs would be eliminated.
Administration at the doctors' offices would be lessened thus reducing their costs. For example, under this plan, collection costs would be lessened or even eliminated.
Although insurance companies would pick up volume, their administration procedures would be a lot less complicated, thus less costly. For the increased load, proportionally, their administration costs would not increase.
3. Keep Federal and State Bureaucracies to a minimum
Governments would not have to develop bureaucracies to handle administrative costs. The private sector would manage this function. Although the government would have policing responsibilities, even much of that function could be left to the private sector to administer. In other words, insurance companies could be given the power to employ inspectors to report on other insurance companies, doctor, community and citizen violations. Should the inspectors find infractions (i.e., fraudulent claims or promotions), these practices would be reported to officials and courts for adjudication. Penalties would include fines, or even loss of licenses to conduct business. As long as there is honest competition, this check would function properly.
3. Competition
In reality, there is only one way to effectively control costs and that is to let the invisible hand of competition do it. Although competition is good, it is only good between those who can effectively compete. Today, unfair competition exists between the sick uninsured individual and the doctor. The uninsured has no one to turn to while the medical community generally protects their own. Under this proposal, fair relationships would exist between communities, insurance companies, and medical associations. These groups can effectively compete against and cooperate with each other because each is healthy, stable and strong. To be sure that this proposal works properly, it is the Federal and State Governments' responsibility to assure that a lively competitive environment exists.
Once this occurs, there is no reason to suspect unreasonable costs or poor services to emerge. This is a logical assumption because it is the basis of Capitalism and Democracy within the United States.
SOCIETAL BENEFITS
1. All People have Medical Coverage at Reasonable Cost to Society
Medical problems are an insurance risk and can be calculated quite accurately using actuarial and statistical techniques. The most efficient way to pay for an insurance risk is to insure everybody. Insurance is least efficient when there are only a few people involved. Assuming the system does not pay money for one to be sick, one can argue that no one wants to be sick. It just happens. If someone wants to have an income while sick, they could purchase that benefit personally. Because maladies are an insurance risk, it is reasonably easy for actuaries to estimate the cost. Because of this ability to predict the cost, it is a relatively easy expense to budget for.
2. Productive Society
A healthy person is a productive person, and an unhealthy person is very expensive to society. For example:
a. How many people stay at jobs they truly hate, only because the job offers health insurance? Is that an efficient employee?
b. How many entrepreneurs do not take the chance at starting a new business because they cannot risk their families' medical welfare during those initial tough years? Does our society win when this occurs?
c. How many companies cannot compete against foreign competition (those competitors whose countries have a national health system) because of the fixed burden of expensive health programs on them? Even General Motors is having difficulty with this situation.
d. How many elderly people are unemployed because businesses will not hire them due to medical cost considerations?
e. How many people are under-employed because businesses will not hire them full time due to medical cost considerations?
f. How many people are on welfare because they need the medical benefits to protect them or their children?
What could our society achieve if it had a good Universal Health Insurance program for its citizenry? If society insured everyone and preventive medicine were truly employed, a healthy atmosphere would develop all sectors of our environment.
This writer envisions:
a. Society opening up its floodgates to creativity by unleashing millions of entrepreneurs who would love to tackle the risk of business.
b. People working at careers they love instead of laboring at jobs they hate just to maintain their health insurance program. Just think how much more efficient those employees would be?
c. More organizations hiring elderly people and employing more people full time, instead of avoiding or employing them part-time to escape expensive health insurance fixed costs. This cost would move from a fixed cost to a variable one.
d. People getting off welfare.
e. Homeless people finding jobs (and homes) possibly as gardeners, housemaids, or nannies.
By having Universal Health Coverage, many of these employment problems would be eliminated because medical benefits would not be a consideration. Just think how competitive our industries might be again, if not burdened with hostile employees and inordinate fixed medical costs. The results would be surprising.
3. Medical Breakthroughs
Consider this question. "What incentives are there now for our (USA) medical community to develop cures?" Other than for personal pride, there is none! It is not in the average doctor's interest to cure someone. As long as a patient has insurance, it is more profitable for doctors to keep them on some sort of maintenance program than to cure them. Is this productive? Also, it is not in the interest of the pharmaceutical companies to research cures. These companies only make money as long as someone takes a pill.
However, by involving all of society, there is every incentive to encourage doctors and pharmaceutical companies to develop cures. This would occur because cures mean lower cost to society. If a doctor did not want to cure someone, quickly, the system would discover it, and an alternative approach would occur.
Ever ask why Japan, England, West Germany, France, Italy and even Russia develop many more cures than the United States? It's simple. It is in their national interest to do so. It is not in their interest to support maintenance programs. The incentive has to be to maintain wellness through preventive methods and cures, not dependence through maintenance products and programs.
LEGAL CONSIDERATIONS
Today, the extreme awards resulting from medical malpractice suits are outlandish. Of course this leads to incredible malpractice insurance premiums that doctors have to pay just to be in business. If society were to implement Universal Health Coverage, just as there are limitations upon suits to the State, there would be limitations to malpractice suits. This would occur because society cannot afford to drive up medical costs through unreasonable lawsuits. Since medical treatment is not available to all, this problem cannot easily come under control. However, once good medical coverage became a right, quickly, society would have to address these tort problems. Then it could develop rewards and punishments that are fair to all parties. Again, this would occur because it is in the best interest of society to do so.
INSTALLATION
How could society install something like Universal Health Coverage throughout the United States?
It takes strong leadership at the Presidential, Congressional and State levels. It also takes many groups of concerned citizens. However, it is not as difficult as one might think. The reason is that there are many elements already in place. First, there are many insurance companies who administer medical insurance coverage so that would not have to be reinvented. Next, innovative programs (i.e. HMO's) are already available and could be offered to communities instead of to businesses.
In essence, the system is already in place. All that is needed is to:
1. have society institute a policy that covers all people,
2. change the buying level from business to the community,
3. let insurance companies fund medical schools,
4. change some laws to allow fair competition to develop.
A good way to institute Universal Health is to start with a pilot state and work out the administrative problems there. Thereafter, phase in Universal Health regionally until it is national in scope. The phase in period could occur in less than 5 years.
CLOSING
There are some people who feel that National Health Insurance, or Universal Health Coverage, is socialistic and should not exit. To those this writer says, "You are sadly mistaken." Some social ideas are good. For example, our country is smarter for implementing public education, nationally. It's safer for having community, state, and federal police protect our streets. And, it is stronger for having a national military system. Aren't these socialistic ideas that actually are good for our society? Of course they are.
This writer states that if our country had a good Universal Health Insurance program, a new sense of pride would emerge. This pride would be expressed in numerous ways. First, it would let businesses compete for labor with money and not with medical benefits. This would encourage people to work at jobs they really love. Also, it would give our elderly and underemployed better opportunities to work. In addition, many welfare recipients might be willing to leave welfare and go to work. This could help in solving the welfare problem.
This approach to solving our medical problems would help businesses become more efficient. This would occur because it would allow them to do what they do best, produce goods and services. For potential entrepreneurs, no longer would they be reluctant to take the risk due to the denial of medical services for their families. Instead, they would be free of this fear. This would allow them to unleash their creative powers to benefit all of society. Finally, if society instituted Universal Health Insurance in the manner argued in this paper, there is no question in this writer's mind that medical costs would go down and quality of services would go up. "What do you think?"
If you agree with these ideas, encourage them by establishing active citizen groups. Also, inform local, state, and federal representatives about the benefits of having Universal Health Coverage funded at the community level. This can be a reality if we work together to get sick America healthy again.
rdecormier@yahoo.com
Ray A. DeCormier, Ph.D.
Marketing Professor
Central Connecticut State University
This idea was first presented in 1995 and it is as relevant today as it was then. For clarification, the terms Universal Health Insurance, National Health Insurance or Universal Health coverage are used interchangeably.
THE PROBLEM
Listening to the news concerning the United States' Medical and Health Insurance Industry's state of affairs, it is astonishing the large number of people, between 40-50 million, who do not have health insurance. Including those with inadequate insurance, the number approaches 100 million people.
Another concern is the staggering rate at which medical and health costs are escalating. The economy is growing at 3% per year, yet health cost is escalating at 12% per year. Presently health cost consumes about 12% of the GNP.
However, this covers only about 60% of our population. In other industrialized nations their total health cost is closer to 5 or 6% of their GNP. Yet, that covers 100% of their population. Why such a large discrepancy? This paper addresses the effects of this discrepancy, reasons why they occurred, and how to solve them.
EFFECTS OF LARGE HEALTH CARE COSTS
If health costs are not checked soon, it will seriously infringe on other segments of the U.S. economy. The result is that as people spend a greater percentage of their pay on medical services, they do not have the money to spend on other goods and services. This predicament will doom the need for many services, ultimately leading them to extinction, or it will force a change to the medical process as we know it. This writer advocates change.
In the United States, medical insurance is purchased in part by the business community. However, rising medical costs devastate business organizations in numerous ways. First, entrepreneurs are unable to start businesses. This is because they cannot afford to leave secure jobs to risk their family's welfare to the ravages of over priced medical costs. Next, smaller businesses cannot effectively compete with larger businesses. Unable to afford a decent health care program for their employees, they cannot attract and secure a competent labor force.
In addition, larger businesses vying in world markets are beginning to curtail their health insurance programs to cut costs. This action allows them to survive against foreign competition. Those businesses unable to drop health programs because of labor contracts, circumvent this tremendous cost by diluting their domestic labor force through job exportation. Simply stated, businesses can no longer afford to carry health insurance programs. With these problems facing our country and business community, is there a solution to the medical services dilemma?
BACKGROUND
Before businesses provided health insurance programs for their employees, most people paid or negotiated for health services directly with their doctors. In exchange for medical services the wealthy paid more than the poorer families, and the indigent bartered for services with goods. Under that system, both rich and poor had reasonable access to basic medical service.
Wanting more benefits for their members, unions demanded that health insurance coverage be an employee benefit. Later, to extend benefits to more employees nationwide, the U.S. Government offered tax incentives to businesses as an inducement to provide medical coverage for their work force.
At first, only a minority of companies provided health insurance programs. Because money was available, to earn more income doctors now charged insured patients the same rates as their wealthier clientele. This insurance now guaranteed a new group of customers preferential treatment over uninsured patients. Still, people without health insurance could obtain reasonable medical service because most doctors were willing to bargain with them. But once enough employers (led by all levels of government) offered health insurance to their employees, the demand for services by full paying customers superseded the supply of doctors. This further reduced services to the uninsured. Today, an uninsured person who cannot pay before being treated can actually be denied medical service as long as it is not life threatening.
Next, the American Medical Association (AMA) compounded the problem for protectionist reasons. Since they control medical school enrollments, they regulate the supply of doctors. To maintain high incomes for their association members, they refused to increase enrollments to meet the demand. Due to an inadequate supply of doctors, and a high demand from full paying customers, doctors' incomes rose dramatically. Yet, proportionally more citizens are denied medical services than ever before.
Among medical professionals worldwide, U.S. medical doctors are by far the highest paid group. The U.S. medical profession absorbs twice as much of the nation's GNP (12%) than other groups take from their country (6%). Yet only 60% of the U.S. population has medical insurance protection while other countries provide protection for 100% of their population. Simply stated, the U.S. medical profession services fewer people and receives more income. This is the predicament the United States society finds itself in right now.
How long will this situation continue? This will continue as long as the AMA politically controls the supply of medical personnel in the United States, and the U.S. government is reluctant to implement a public medical policy.
WHO'S COVERED, WHO'S NOT, AND WHO ACTUALLY PAYS THE BILL?
One way to view the health care issue is to ask the question, "Who's covered, who's not, and who actually pays the bill?" As this writer views it, in one form or another, our government basically subsidizes those people possessing good health insurance plans. That is, all people covered by welfare and Medicaid have decent insurance plans. All municipal, state, and federal employees have satisfactory insurance programs. Even prisoners have better access to medical services than most uninsured. All major corporations, especially those with lucrative government contracts subsidizing sizable portions of their business, have good health insurance arrangements. Major corporations' sub-contractors, again funded by government contracts, have adequate medical programs. In essence, it is a governmental unit that funds, or subsidizes, most good health insurance plans in the United States.
Granted, many companies have no government assistance to pay for, or assist, their employees' medical insurance cost. However, when analyzed, many of those companies’ insurance packages do not even provide minimal coverage. Instead, they furnish just enough to induce their employees into thinking that they have an adequate health insurance program. The plain truth is that many of these programs lack substance.
THE SADDEST PROBLEM CONCERNS THE WORKING UNINSURED
In our society, there exists a very unfair situation. There are many groups of employees who have no coverage at all. They are found working very hard in small businesses such as diners, restaurants, manufacturing shops, retail stores, nonprofit organizations, or as salespeople. Having much experience in the business world, this writer knows that these people usually work much harder for their money than many other groups of employees. They often work long hours at low wages, and are frequently subject to sever job and health hazards. Should they own a home and should a family member contract a serious illness, the regrettable fact is that they could lose all their property to medical expenses. Is this what society endorses? This writer thinks not!
WHEN COMPANIES GO BROKE
Many people with health coverage now work for financially weak companies. What happens to them when their companies fail? Unfortunately, they are left without health insurance. The situation is more severe for older people than for younger people because it is usually easier for younger people get another job.
AFFECT OF AGE AND HEALTH AS A HIRING CRITERION
The unemployed middle aged group (55-62) finds the insurance dilemma most difficult. This is because they are susceptible to expensive medical procedures such as heart bypasses. Sadly, due to higher medical costs associated with their risk, many companies refuse to hire this group for full time jobs. To compound the problem, most people in this age group are unable to secure decent health programs privately because of the prohibitive cost ($2,000 - $4,000 per/year). Further, due to their age they are not even eligible for Medicare. This is surely a disheartening predicament for this group.
LOSS OF LIFE SAVINGS TO MEDICAL COSTS
A terrible injustice for anyone is to lose his or her life savings to medical costs. All too often, this happens to uninsured (i.e.: elderly) people. For example, if a person without health insurance experiences a serious affliction, exorbitant medical costs often deplete a person's entire life savings within a short period. These people have spent a lifetime working hard and contributing to our society to earn this money. Do they deserve losing their entire estate to a medical problem? As a society, do we want this situation to continue? To resolve this predicament, all society needs to do is establish a decent National Health Insurance program for all its citizenry.
WHEN DOES MEDICAL INSURANCE BECOME A RIGHT?
American society is at a point where access to good medical service should no longer be a privilege, but a RIGHT! One way to consider this issue is to view the right to medical insurance like the right to the pursuit of life itself, because ultimately it is!
Objectively, there are many medical doctors making a fortune at the government's (peoples) expense. Let me explain. Many doctors justify their high incomes by implying that it is only a fair return for the high cost of their education. However, most informed people disagree with that contention. Realistically, there are many Ph.D's, attorneys, leading engineers and scientists, who earn substantially less money than MD's, yet have had to pay the same in terms of time and money to cover their educational expenses.
Also, many in the medical community justify their high incomes under the guise that it is the cost of technological advances. Yet, much medical technology is not really new. Still, many doctors continue to charge as if what they are doing is really current. The sad truth is that society has more than paid its fair share for this technology. It is now time for society to benefit from this investment.
No matter what reasons are used to justify high medical costs, still, no one should ever be held hostage to medical blackmail simply because he/she does not have health insurance or money. To deny one medical service is just as ridiculous as denying one access to a good education, because ultimately society loses.
The point is that there comes a time some things must move from Privilege to Right. Concerning access to decent medicine that time is now! Mentioned earlier, no one can deny that one governmental body or another funds most of the population's medical insurance already. Isn't it time to cover the rest of society?
NATIONAL HEALTH INSURANCE VERSES UNIVERSAL HEALTH COVERAGE
When referring to National Health Insurance, this writer states that all Americans should have access to good health services. However, due too much misunderstanding, National Health Insurance has a negative connotation in America. Therefore, a more appropriate term to use instead is Universal Health Insurance (UHI) or Universal Health Coverage (UHC).
If the goal is to insure all Americans, the real question is "HOW" can society accomplish this objective in the most efficient and economical manner? The first step in attaining this goal is to acclimate our citizenry, political leaders, and medical providers to the idea that decent health coverage is not a privilege, but a "RIGHT". Next, society must declare that it will not tolerate any interest group exploiting one's medical condition to force wealth, labor, or anything else for that matter, from an individual. Until then, we cannot say we are truly a free people. Finally, for UHI to be effective and cost efficient, it must be funded at the proper buying level, and executed in a competitive environment.
UNDERSTANDING BUYING LEVELS
How other democratic capitalistic societies address
universal health coverage and problems they encounter
As almost everyone knows, the United States is the only major industrialized nation in the world not to have a medical program for all its citizenry. Optimistically, this offers us an opportunity to assess how other countries are attempting to solve their funding problems as they implement their National Health Insurance programs. More specifically, what is the effect of medical services in terms of cost and efficiency as it relates to various buying levels?
FEDERALLY FUNDED PROGRAMS
When we think of the word "Federal" or "National", most of us think of Washington, D.C., the President, and Congress. When using the word "State", most thinks of a State such as California or Connecticut. To simplify matters for the following sections this writer uses the term Federal and National interchangeably. In other words, this paper shall refer to the Country of Great Britain (England) as a Federal or National entity rather than as a State, although most Europeans refer to Great Britain as a State.
As most know, England has a National Health Insurance program funded at their Federal or National Level. This program is so important to their citizens that when surveyed, "Which social program would they be willing to eliminate, including even the educational system?” overwhelmingly, the last one to be abolished was their National Health Plan. In turn, the average "Brit" did not view paying for Health Insurance through taxes as an unreasonable burden. Deductive reasoning suggests that paying for health insurance through taxes is not the problem, nor the issue.
However, England does have some problems with respect to the administration of their health program. Their critics say the system is slow to service its citizenry and slow to change to a fast changing environment. Yet, this writer did not personally experience slow service when suffering with a hand ailment during a recent visit. Still, after listening to the criticisms about National Health Insurances, they sounded similar in nature to those mentioned about any large bureaucratic institution. After analyzing the comments, the problem is not in having a Universal Health program, but with actuating the system in an efficient manner at the federal level. Most experts agree that once a National Government becomes a buyer and/or an implementer of a service, as with all bureaucratic institutions, inefficiencies arise. Presently, England is trying to correct their bureaucratic inefficiency problem by "privatizing" certain aspects of their medical system. Yet, they intend to maintain their universal health program.
In the United States, critics rightly claim that excessive costs and inefficiencies crop up in all programs implemented at the federal level. If one analyzes Medicare or Medicaid, their inefficiencies are blatantly obvious. Of course, the main critics are members of the private sector. The lesson learned here is that the Federal Government should not be the buyer or implementers of medical insurance. Instead, the Federal Government should act solely in the capacity as policy maker and fund raiser, and leave the implementation and administration to the appropriate sector(s).
PROVINCIALLY OR STATE FUNDED BUYERS
Canada purchases and implements its Universal Health system at the Provincial level. In the U.S., this is comparable to the State Level. Similar to England, Canada has implementation problems because level of services is so closely related to political whims. Although many experts say their system is more efficient than England's, in this writer's opinion it is still wrought with similar problems because politicians direct the system and bureaucrats execute it. The truth is that large political buying units (Federal or State) more often result in more expensive and less efficient administrative systems especially for community needed services.
BUSINESS BUYING LEVEL
In the United States, the business level purchases most health insurance for its employees (even though the ultimate benefactor is usually a governmental body). One reason the system works so efficiently is that the private sector, through doctors and insurance companies, administers it. The problem is not in poor medical service. Actually, for those who have health insurance, the medical service is very good. The main problem is that it does not cover all people, because:
1. Not all people work for one reason or another, and
2. Not all employers can make insurance available to their employees because they cannot afford it.
There is another problem with this level as the buying unit. The cost of service is very expensive and this buying level is unable to control the basic cause of this expenditure (controlling the supply of doctors by the AMA). While this problem will be addressed later, the lesson learned here is that efficiency and good quality service occurs when private enterprise executes a system.
POSSIBLE SOLUTIONS TO FUND HEALTH INSURANCE
THE U.S. GOVERNMENT (FEDERAL LEVEL) OR STATE (STATE LEVEL)
AS BUYERS OF HEALTH INSURANCE
Lately, our Federal and State politicians ask, "How can the government provide health insurance for all its citizenry?" In most quarters, politicians intellectually agree that the Federal or State Government should not be in the health insurance business. This is because when they get involved in any business venture, they usually go overboard and develop huge bureaucracies and unnecessary expenses. For example, consider services administered by the Departments of Labor, Transportation, Education and Post Office. Many critics argue that if private enterprise managed these functions there would be greater efficiency at less cost. The conclusion is that large governments normally end up spending much more for the service than the service warrants. Yet, the politicians know that having a Universal Health program is the correct thing to do. The major question is "How can society bring this concept to fruition in an economical and efficient manner?" Let us consider some alternatives our politicians are presently contemplating.
BUSINESSES AS THE BUYERS OF HEALTH INSURANCE
Lately, the prevalent idea is to pass laws mandating that all businesses provide health insurance for its employees. The notion behind this proposal is that if you work, you should have access to health insurance. This sounds very good in principle; however, the problem with this suggestion is that:
1. It straps business with a very large fixed cost. Unfortunately for small businesses, this is an impossible hurdle to overcome. Presently, most small companies fail in spite of themselves. This idea would force more businesses out even faster than normal. Since small companies are the seeds for the future economic welfare for the United States, this is hardly a situation society can afford. This is like killing the goose that lays the golden egg.
2. Businesses that go out of business leave their employees with no health insurance. Isn't the objective to have all people insured, not just those who are working?
3. What does a business know about health insurance anyway? Frankly, not much! This is a fair statement because the reality is that most companies are not in the business of providing health insurance. They are in business to create and provide a product or service. Why not just let them do that? Why force upon them another cost (i.e., analysis, purchase, and administration) of health insurance?
4. Forcing small businesses to provide health insurance for their employees will surely destroy the entrepreneurial spirit that still exists in America. No one, or very few, could go into business burdened with a high fixed medical insurance expense. How would new businesses get started then?
5. Businesses, even large ones, cannot compete against international companies whose health care costs are at least 50% - 75% less than their costs. Even General Motors is having trouble!
For these reasons, it is very imprudent to mandate that businesses provide Health Insurance for its employees.
INDIVIDUAL AS PURCHASER OF HEALTH INSURANCE
Securing health insurance at the individual level just does not work in a modern society. The major reason is that too many people do not earn enough money to pay the exorbitant health insurance costs. Presently, those without good incomes already find it difficult to get proper food and shelter. How could society expect them to pay excessive premiums for medical insurance?
Furthermore, for those without insurance, it is their children (and ultimately society) that suffers most. The problem is most severe among the working poor and unemployed. When medical calamities occur, it is this group that ends up with broken families. First, a family loses its estate, next they divorce, and then they resort to welfare to attain medical benefits. Wouldn't it be wiser just to provide medical coverage from the start and possibly salvage the family? Hopefully, the ideas contained in this paper could eliminate one major reason for welfare!
Also, if there should be a pandemic, those who do not have insurance would not go to doctors until its too late and worse, would help spread the infection faster and further.
DISCUSSION
A. Paying for, and administering medical insurance at the Federal or State level is the most inefficient and probably the most expensive way to go. This is because this purchasing level can only do things through bureaucracies. Historically, bureaucracies are both inefficient and ultimately very expensive for society. It may be appropriate for society to purchase military services at the federal level, or state police at the state level, but this is not the correct level at which to purchase health insurance.
B. Also, it does not make sense to buy health insurance at the business level because it:
1. is a very unstable purchasing group. Companies go out of business too quickly to effectively insure all Americans
2. straps business with a very large fixed cost that makes them uncompetitive in world markets
3. discourages the creation of small businesses
Instead, it is most important to let businesses do what they do best. That is to manufacture goods and services.
C. The individual level is the most appropriate level for purchasing most things. However, it does not make sense to have individuals buy health insurance because:
1. this purchasing level is economically too unstable, and
2. individuals cannot afford the inflated cost of health insurance
Question: So, what level is best for society to purchase health insurance?
Answer: The community level is the most appropriate purchasing level of health insurance, but only in a competitive environment
COMMUNITY - LOWEST STABLE BUYING LEVEL
The most efficient and least expensive way for society to buy health insurance is to have the community purchase it in a competitive environment. Competition assures high quality service at low prices. The Community assures stability and security for this important need since it is the lowest stable-buying unit. It also offers prudence and frugality to the purchasing decision since it is very a conservative buyer.
The lowest possible buying level is the individual. For reasons mentioned above, this level is not feasible. The second stratum for purchasing health insurance is the business level. However, this level is also too unstable. The fact that companies (including large organizations) go out of business dictates that this level is much too unstable for purchasing such an important human essential as health insurance. The fourth and fifth levels are the State and Federal Governments respectively. Again, for reasons mentioned earlier, these levels can purchase health insurance for society, but neither in an efficient nor a cost effective manner.
The third tier is the community level. In this writer's opinion, this is the most appropriate level for purchasing health insurance. Since it is the lowest stable buying level, a sense of security is evident. Also, historically, it has a good record for providing basic societal needs at reasonable costs. This includes the purchasing of education, police protection, fire protection, land development planning as well as a host of other community services such as garbage collection and libraries. Why wouldn't this level be as discerning to selecting and proportionately financing medical programs as it is in handling its other social responsibilities? Still, to be efficient, medical services must be attained in a competitive environment.
ATTAINING UNIVERSAL HEALTH COVERAGE IN A COMPETITIVE
ENVIRONMENT
The following scenario considers the goal of:
1. everyone having health insurance, and
2. assuring the health insurance business exists in a competitive environment.
To accomplish this, this paper advocates changing some laws and using the powerfully invisible arm of competition to keep prices low while preserving high quality service.
BASIC ASSUMPTIONS:
To institute Universal Health Coverage and cut costs as well, the following assumptions are presented.
Assumption I. All People Have a Right to Medical Service.
It must be recognized that all individuals in the United States have a RIGHT to good, basic, medical service. The U.S. Government should guarantee this right. However, some communities may want to limit some medical procedures such as cosmetic plastic surgery. Still, certain communities may want to include them in their program. Under this system, community members determine what level of service is appropriate.
Assumption II. Federal Government’s Responsibilities
The purpose of the Federal Government is to set rules and minimum national standards. It should have the power to change rules and standards, as it deems necessary. Also, it should have the ability to punish wrongdoers. Furthermore, representatives making up this medical standards board should come from various professions, and not just from the medical society.
The government's aim is not to administer the medical system, but to assure that it meets minimum standards. Should a major catastrophe occur that is beyond the capacity of the state to control, such as a wide spread plague, the Federal Government would act as the ultimate catastrophic insurer. The Federal government also would be responsible for setting national tort law standards as well as national tax ramifications for funding purposes.
Assumption III. State Government’s Responsibilities
The purpose of the State Government is to set rules, rates, and minimum State standards. Similar to the Federal function, its purpose is not to administer the system, but to help police the system. The State would be responsible for raising funds and fund catastrophes for the individual. In addition, it would set State tort law standards and tax ramifications. Again, policy boards should include all interested parties and not just representatives from the medical society.
Assumption IV. The Community’s Responsibilities
The community would be responsible for demographic accounting and for raising a reasonable portion of the money for medical insurance through soliciting State and Federal grants programs. Yet, some costs should be paid by individuals or families. This is discussed in greater detail later in this paper.
Next, A community does not necessarily have to be a political community such as a town. Rather, it can be a group of 25,000 to 50,000 people living near to each other. The group should be large enough to support the cost of medical services but not so large as to discourage individual involvement. For example, it may consist of two towns serviced by a local hospital. It may even encompass a large land area such as a county. This purchasing unit (community) would be responsible for covering all people within its domain. This even includes the traveler who might be involved in an accident in that community. Whatever the composition of this purchasing unit, the Federal and State government must give this entity the ability to raise funds in various ways.
Also, it should be understood that the Community is not the administrator of any services. Instead, its capacity is to screen eligible insurance competitors, process information, collect funds, and act as the ultimate payer for the community's insurance. Within the community, the individual's or family's responsibility is to select exactly what level of coverage it deems necessary. This includes determining deductibles and other particulars, beyond minimum standards.
Assumption V. Society Should Only Provide Medical Coverage
It must be assumed that people do not want to get sick, it just happens. Since people want to be healthy, they should have a right to good medical coverage for the body, eyes, ears, teeth and mind.
The type of medical services the community should cover are those that are usual and normal. It should cover maladies such as influenzas, broken legs, cancer, chronic diseases, and births. The State and/or Federal government should fund catastrophic problems (e.g., AIDS or experimental surgery).
Note: Medical benefits should only include medical services. It should not incorporate income. If a person wants income insurance, this would be purchased personally.
Assumption VI. Administrative Responsibilities Belongs to Private Enterprise
The administration of this system would be done between communities, doctors and Insurance companies with most of it being done by the latter two.
Assumption VII. Research and Development is a Joint Venture
Federal, State and community governments along with pharmaceutical and insurance companies would be responsible for funding much Basic Pharmaceutical and Medical research. Presently, too much research is orientated towards developing maintenance products. By involving government and companies in this aspect of medicine would force them to explore for cures. Since cures are less expensive for society in the long run, it is in this alliance interest to fund this type of research.
Assumption VIII. Competition and Control
It should be noted that the invisible arm of competition is the key to the successful administration of this concept.
1. Insurance companies would negotiate rates with doctors and bid for the community's business.
2. The insurance companies and communities would negotiate their proposal/s to cover (say) a one or two year period. The period of coverage is negotiable but should never extend longer than five years. Thereafter, rebidding must occur. This assumption has the effect of creating turnover and maintaining competition between insurers.
3. Further, to be in the medical insurance business, insurers would be required to take on a pre-determined proportion of "A" - "E" risks until all communities are covered. Some communities have higher risk than others do. For example, an older community might be rated "E". However, through premium equalization and good planning, all communities would be able to afford medical coverage.
4. To assure the community an adequate supply of medical personnel, insurance companies as well as States would have the right to operate medical schools that meet Federal and State standards. This action would keep overall medical costs lower and insure a proper balance between supply and demand for medical personnel. For continued cost control, the insurance companies should have the right to negotiate directly with doctors and other medical providers in and outside a community. Since competition creates an efficient environment, the market would adequately determine the medical costs for society's needs.
5. Society should encourage each insurance company to monitor the market and report infractions to the society's regulatory agencies. This includes reporting violations committed by other insurance companies, doctors, communities and patients.
NARRATIVE CONCERNING THE INTERACTION OF THE ABOVE ASSUMPTIONS
The ideas expressed above should result in an efficient, cost effective, stable medical environment that covers all its citizens. Still, the system would be flexible. It would not stagnate the dynamic nature our medical providers are presently experiencing in efforts to cut costs (i.e. HMO's, standard programs, etc.) while still rendering quality medical service.
Model
The model presented in this paper employs the assumptions patterned after ones used by the State of Connecticut and by many large corporations for their employees. The only difference is that the community assumes the role of purchaser and private enterprise is given a more active role.
The system works this way. The insurance companies (more than one company) develop various medical plans to present to communities. These plans could be HMO's, Hospital/Doctor agreements, or any other plan that meets minimum standards. Since insurance companies would have the ability to fund medical schools, some insurance companies may even want to use their graduates as part of their plans. This would insure an adequate supply of doctors and medical technicians.
Next, these programs would be presented to the community decision-making group for consideration. This group may consist of volunteers, or elected officials, such as those presently serving on much local school and zoning boards. This community decision board's responsibility is to assess the various insurance plans and decide on which programs make sense to their constituents. To assure access to information, annually, insurance companies would disseminate information to the community's constituents. One or two years after the initial choice, constituents could change their plan, if they wanted. This ability would assure turnover and allow for competition to thrive.
RATIONALE FOR MONEY COLLECTION METHODS
Monies would come from many sources such as:
1. from Individuals and families
2. deductibles paid to insurance companies
3. communities raising funds by taxing, lotto games, grants and penalties
4. National and State taxes
1. Monies Collected from Individuals and Families
The constituent (family or individual) should pay a small annual fee for medical insurance. The fee might be $100, $200 or $300 per year per family. For indigent families, a sliding scale may be considered depending upon income. The premium must be low enough so that everyone will contribute to it, yet, it must be high enough to compel people to select a program that correctly meets their needs. This action results in personal commitment.
2. Monies Collected from Deductibles Paid to Insurance Companies
After the patient goes to the doctor, the system should require a small deductible (say $2, $3 or $4 per visit). There also should be a small deductible for prescription drugs ($2 or $3). The deductible should be small enough so not to discourage people from going to the doctor for something they consider serious. Yet, it should be large enough to deter hypochondriacs from attaining services for minor ailments.
Since preventive medicine works (actually reduces long term medical costs), to encourage it, regular checkups should have only a minimal deductible (say $1). This concept should be applicable all across medical areas.
Society should also make Psychological Care available to people. However, society may have to manage this area differently. For example, to qualify for psychological help, a panel of psychiatrists, psychologists, social workers, or religious personnel (if desired by the recipient) might have to interview the patient first. After an evaluation, the panel would determine the appropriate level of help. Again, a small deductible might be appropriate for this service.
3. Monies Collected by Communities
In this system, it is the community's responsibility to raise a sizable portion of the money from various sources such as property taxes, dances, lotto &/or bingo games, penalties, and from other sources such as from State and Federal medical funding grant programs. For catastrophic problems such as liver transplants, or for region wide plagues, the State or Federal Government would be responsible for providing the extra money.
4. State and National Taxes
Anyone who has health insurance gets it at the cost of increased prices of all goods and services. So why not just lower the price of goods and services and increase the sales tax enough to cover a reasonable portion of health insurance costs. This is not an unprecedented initiative. Our highway system is the envy of the world because it is funded in great part by a gasoline sales tax. We could have a value added tax to fund Health Insurance. We could impose an import sales tax and of course a sizable portion of the money could come from income taxes. There are numerous ways for the State and Federal governments to raise the money, but there is a need to have communities raise money too so they have a vested interest in the process. One interested is to recognize and stop fraud at the local level.
In no event should a person ever be held hostage to a medical problem. He/she should not have to resort to begging, or insolvency, to finance a medical problem.
SOCIETY BENEFITS FROM COST REDUCTIONS
1. Marketing Costs Reduced
The first reduction comes from reducing marketing costs. There will always be marketing costs, however, this system substantially reduces the number of purchasing units (businesses vs. communities). This should lessen the huge marketing bill that currently exits.
2. Administration Costs Reduced
The greatest reductions come in the administration of the program. Costs for personnel who administer company insurance programs would be eliminated.
Administration at the doctors' offices would be lessened thus reducing their costs. For example, under this plan, collection costs would be lessened or even eliminated.
Although insurance companies would pick up volume, their administration procedures would be a lot less complicated, thus less costly. For the increased load, proportionally, their administration costs would not increase.
3. Keep Federal and State Bureaucracies to a minimum
Governments would not have to develop bureaucracies to handle administrative costs. The private sector would manage this function. Although the government would have policing responsibilities, even much of that function could be left to the private sector to administer. In other words, insurance companies could be given the power to employ inspectors to report on other insurance companies, doctor, community and citizen violations. Should the inspectors find infractions (i.e., fraudulent claims or promotions), these practices would be reported to officials and courts for adjudication. Penalties would include fines, or even loss of licenses to conduct business. As long as there is honest competition, this check would function properly.
3. Competition
In reality, there is only one way to effectively control costs and that is to let the invisible hand of competition do it. Although competition is good, it is only good between those who can effectively compete. Today, unfair competition exists between the sick uninsured individual and the doctor. The uninsured has no one to turn to while the medical community generally protects their own. Under this proposal, fair relationships would exist between communities, insurance companies, and medical associations. These groups can effectively compete against and cooperate with each other because each is healthy, stable and strong. To be sure that this proposal works properly, it is the Federal and State Governments' responsibility to assure that a lively competitive environment exists.
Once this occurs, there is no reason to suspect unreasonable costs or poor services to emerge. This is a logical assumption because it is the basis of Capitalism and Democracy within the United States.
SOCIETAL BENEFITS
1. All People have Medical Coverage at Reasonable Cost to Society
Medical problems are an insurance risk and can be calculated quite accurately using actuarial and statistical techniques. The most efficient way to pay for an insurance risk is to insure everybody. Insurance is least efficient when there are only a few people involved. Assuming the system does not pay money for one to be sick, one can argue that no one wants to be sick. It just happens. If someone wants to have an income while sick, they could purchase that benefit personally. Because maladies are an insurance risk, it is reasonably easy for actuaries to estimate the cost. Because of this ability to predict the cost, it is a relatively easy expense to budget for.
2. Productive Society
A healthy person is a productive person, and an unhealthy person is very expensive to society. For example:
a. How many people stay at jobs they truly hate, only because the job offers health insurance? Is that an efficient employee?
b. How many entrepreneurs do not take the chance at starting a new business because they cannot risk their families' medical welfare during those initial tough years? Does our society win when this occurs?
c. How many companies cannot compete against foreign competition (those competitors whose countries have a national health system) because of the fixed burden of expensive health programs on them? Even General Motors is having difficulty with this situation.
d. How many elderly people are unemployed because businesses will not hire them due to medical cost considerations?
e. How many people are under-employed because businesses will not hire them full time due to medical cost considerations?
f. How many people are on welfare because they need the medical benefits to protect them or their children?
What could our society achieve if it had a good Universal Health Insurance program for its citizenry? If society insured everyone and preventive medicine were truly employed, a healthy atmosphere would develop all sectors of our environment.
This writer envisions:
a. Society opening up its floodgates to creativity by unleashing millions of entrepreneurs who would love to tackle the risk of business.
b. People working at careers they love instead of laboring at jobs they hate just to maintain their health insurance program. Just think how much more efficient those employees would be?
c. More organizations hiring elderly people and employing more people full time, instead of avoiding or employing them part-time to escape expensive health insurance fixed costs. This cost would move from a fixed cost to a variable one.
d. People getting off welfare.
e. Homeless people finding jobs (and homes) possibly as gardeners, housemaids, or nannies.
By having Universal Health Coverage, many of these employment problems would be eliminated because medical benefits would not be a consideration. Just think how competitive our industries might be again, if not burdened with hostile employees and inordinate fixed medical costs. The results would be surprising.
3. Medical Breakthroughs
Consider this question. "What incentives are there now for our (USA) medical community to develop cures?" Other than for personal pride, there is none! It is not in the average doctor's interest to cure someone. As long as a patient has insurance, it is more profitable for doctors to keep them on some sort of maintenance program than to cure them. Is this productive? Also, it is not in the interest of the pharmaceutical companies to research cures. These companies only make money as long as someone takes a pill.
However, by involving all of society, there is every incentive to encourage doctors and pharmaceutical companies to develop cures. This would occur because cures mean lower cost to society. If a doctor did not want to cure someone, quickly, the system would discover it, and an alternative approach would occur.
Ever ask why Japan, England, West Germany, France, Italy and even Russia develop many more cures than the United States? It's simple. It is in their national interest to do so. It is not in their interest to support maintenance programs. The incentive has to be to maintain wellness through preventive methods and cures, not dependence through maintenance products and programs.
LEGAL CONSIDERATIONS
Today, the extreme awards resulting from medical malpractice suits are outlandish. Of course this leads to incredible malpractice insurance premiums that doctors have to pay just to be in business. If society were to implement Universal Health Coverage, just as there are limitations upon suits to the State, there would be limitations to malpractice suits. This would occur because society cannot afford to drive up medical costs through unreasonable lawsuits. Since medical treatment is not available to all, this problem cannot easily come under control. However, once good medical coverage became a right, quickly, society would have to address these tort problems. Then it could develop rewards and punishments that are fair to all parties. Again, this would occur because it is in the best interest of society to do so.
INSTALLATION
How could society install something like Universal Health Coverage throughout the United States?
It takes strong leadership at the Presidential, Congressional and State levels. It also takes many groups of concerned citizens. However, it is not as difficult as one might think. The reason is that there are many elements already in place. First, there are many insurance companies who administer medical insurance coverage so that would not have to be reinvented. Next, innovative programs (i.e. HMO's) are already available and could be offered to communities instead of to businesses.
In essence, the system is already in place. All that is needed is to:
1. have society institute a policy that covers all people,
2. change the buying level from business to the community,
3. let insurance companies fund medical schools,
4. change some laws to allow fair competition to develop.
A good way to institute Universal Health is to start with a pilot state and work out the administrative problems there. Thereafter, phase in Universal Health regionally until it is national in scope. The phase in period could occur in less than 5 years.
CLOSING
There are some people who feel that National Health Insurance, or Universal Health Coverage, is socialistic and should not exit. To those this writer says, "You are sadly mistaken." Some social ideas are good. For example, our country is smarter for implementing public education, nationally. It's safer for having community, state, and federal police protect our streets. And, it is stronger for having a national military system. Aren't these socialistic ideas that actually are good for our society? Of course they are.
This writer states that if our country had a good Universal Health Insurance program, a new sense of pride would emerge. This pride would be expressed in numerous ways. First, it would let businesses compete for labor with money and not with medical benefits. This would encourage people to work at jobs they really love. Also, it would give our elderly and underemployed better opportunities to work. In addition, many welfare recipients might be willing to leave welfare and go to work. This could help in solving the welfare problem.
This approach to solving our medical problems would help businesses become more efficient. This would occur because it would allow them to do what they do best, produce goods and services. For potential entrepreneurs, no longer would they be reluctant to take the risk due to the denial of medical services for their families. Instead, they would be free of this fear. This would allow them to unleash their creative powers to benefit all of society. Finally, if society instituted Universal Health Insurance in the manner argued in this paper, there is no question in this writer's mind that medical costs would go down and quality of services would go up. "What do you think?"
If you agree with these ideas, encourage them by establishing active citizen groups. Also, inform local, state, and federal representatives about the benefits of having Universal Health Coverage funded at the community level. This can be a reality if we work together to get sick America healthy again.
rdecormier@yahoo.com
posted by Ray Decormier at 11:03 AM
8 comments
