Is the time right for a single-payer system?
Health experts and the public are calling for reform
In November, Oregon voters were asked to consider a once unthinkable measure: abolish private health insurance in favor of a taxpayer-funded, single-payer health system that would cover everyone.
Although the proposal was defeated, many observers were surprised at how much public support the effort received. As it turns out, the Oregon campaign foreshadowed the emergence of renewed debate about overhauling the U.S. health care system.
Following the 1994 defeat of the Clinton administration’s proposal to offer Americans universal health insurance, reforming the nation’s health system largely fell out of favor with political leaders in Washington. But with health care costs continuing to skyrocket, an estimated 1.4 million Americans losing their health insurance last year — joining the 41 million who already had no coverage — many experts feel the time is ripe for reform.
In addition to the Oregon initiative, potential presidential candidate Al Gore told the Los Angeles Times in November 2002 that he has concluded that a government-sponsored single-payer system is the solution to the crisis, and he would make universal health coverage a central part of his next campaign.
In December, the American Medical Associa-tion (AMA) announced its own reform proposal for expanding health insurance coverage. And Bruce G. Bodaken, chief executive of Blue Cross Blue Shield of California, proposed a plan combining mandated employer coverage and state subsidies in order to cover all of California’s 6 million uninsured residents.
"I think the environment now is very similar to 1992," notes Kenneth Thorpe, PhD, a member of the Clinton administration’s Health Care Reform Task Force, and currently chair of the department of health policy and management at the Rollins School of Public Health at Emory University in Atlanta. "If you go back to the genesis of the interest in broad-based reform — universal coverage and some national effort to control the growth of spending — those conditions are back once again, and they are accentuated by a lot of things that the Institute of Medicine has pointed out with respect to the quality of care."
Concerns about the rate of medical and medication errors, the rising unemployment rates, and the rising cost of health insurance are swamping the U.S. health system. And there is nothing currently on the horizon that might slow those trends down, he states.
"There has not been a lot of interest in broad-based reform until now," he says. "The conventional wisdom was that the only way you could proceed was through incremental small reforms — basically, targeting certain populations but leaving everyone else alone."
The legislation creating the state Children’s Health Insurance Program was the last national effort to address specific populations that lacked health coverage and that occurred in 1997, he adds.
Now, people are looking at the underlying problems in quality, coverage and cost and coming to the conclusion that a broad-based national approach is required.
However, broad-based does not necessarily mean a government takeover of the entire health system, say Thorpe and others. There is plenty of room for fixing problems without a such a complete change.
The American Medical Association’s proposal calls for employers to create defined-contribution plans that set aside funds for employees’ health care costs. The plan also calls on Congress to pass legislation that would allow such accounts to rollover funds from year to year.
Such a proposal is similar to the consumer-driven model proposed and piloted by CareGain, a Monroe Township, NJ-based health care asset management company, says Amit Gupta, MD, CareGain’s president and chief executive officer.
Under their model, employers fund individual health care reimbursement accounts at a set amount and then provide a health insurance plan that kicks in and pays for health care costs that exceed that.
Such a plan allows employers to reduce their high insurance premium burdens by only contracting with insurers for catastrophic medical coverage. At the same time, employees have the freedom to choose the health care provider and services they want.
"Let’s say an employer gives everyone a $2,000 account with an insurance policy behind that, and tell the employee that, based on how they spend that $2,000 over the course of the year, [the company] will distribute any funds left in the account at the end of the year in the employee’s own personal, portable health care IRA," Gupta explains.
If the employee needs health care immediately, the funds are available. But if like the majority of people they do not need major services that year, they can roll over the funds to save for when they do need it.
"They can use the rollover to purchase long-term care insurance or similar products if they choose," he says.
Ninety percent of third-party payer transaction volume is in the outpatient setting, Gupta notes. The administrative costs of processing all of the $10-$15 copay claims drive up the employer premiums.
If the company only contracts with the insurer for the relatively few claims that rise above the $2,000 in the reimbursement accounts, they save a great deal of money, he claims.
"It lowers administrative costs while giving people incentives to save their resources for when they need it," he notes.
CareGain is working with different third-party payers to develop products to market to companies. They have worked with several different small companies serving as pilot programs for their model.
"Our smallest company was a five-person company, and the largest was a 100-person company," he notes. "We took small companies because we wanted to enroll 100% of the work force."
All of the pilot companies have reported satisfaction with the model program.
Shifting decision making
The current managed-care dominated health system has not been able to control costs and provide the care consumers want because the decision-making power is left mostly to the insurers, who negotiate contracts with preset fees for products and services.
As a result, consumers feel restricted in their health care choices yet at the same time are unaware of the true costs of the care they receive, says Gupta.
"For example, Claritin is the big allergy drug — people know about it because of all of the advertising," Gupta says. "To the consumer in an HMO plan, it was just a $10 copay. They would go to their physician and say, I need Claritin.’"
The reality, says Gupta, is that the real cost of Claritin to the insurance company was around $300. Comparable competitor’s drugs are up to $90 cheaper, and the generic versions are only about $30 for a month’s supply.
"Consumers have no idea what the real costs are," he says. "They need to be educated so they can make the choices they need to make."
Under the CareGain model, consumers could still get the high-end allergy drugs, but they would have to decide whether it was worth $300 out of their $2,000 account, instead of just a $10 copay.
For major medical services and procedures, the insurance coverage still is there. But on the smaller items, the consumer bears more of the burden.
"You decide whether you need the $300 drug or the $30 version, you and not the insurer and not the physician," he notes.
Any future health care cost-containment efforts that do not come from the patient and physician are doomed to fail just like past efforts, agrees Thorpe.
"Previous efforts have been concocted by the employers and the health plans and providers were left out of the discussion," he notes. "We know that doesn’t work.
National leadership needed
It is not as though no one knows what is wrong with the health system and what to do to fix it, Thorpe says. But there is no national dialogue or impetus behind changing the status quo.
"We have to get this back on the public agenda," he states.
Large-scale efforts need to be made in the efforts of steamlining administrative processes, such as billing and record keeping that consume so many resources, as well as addressing the problems of medical errors and the low quality and the high cost of care.
"There are also opportunities for both the public and private sector to step up to the plate on the quality side," he says. "We have technologies and interventions to fix the problems of medical errors, and hospitals are willing to initiate these measures, but somebody has to come up with the initial capital to pay for it."
Coverage for the uninsured
Once the nation focuses its attention on resolving the crisis, the government should support coverage of those unable to obtain employer-sponsored insurance by funding demonstration projects at the state level, Thorpe says.
"The IOM’s approach was that you basically kick in some money and have the states put together three model approaches to do it," he explains. "The problem now is we give states some discretion in how they provide coverage, but we don’t give them any more money to do it."
CareGain’s Gupta says his company is proposing to host and manage individual health care reimbursement accounts and health care IRAs for the uninsured, funded by donations from those with employer-sponsored accounts willing to give a small amount of their rollover amounts to another person.
"We think, if it is marketed correctly, many people would be willing to do this," he says.
Government subsidies could also fund these accounts, and the taxpayers would see the same cost savings available to the employers choosing this model, Gupta says.
There are a number of coverage models that could work to offer a safety net to the uninsured, Thorpe says. The problem with the last effort at legislating universal coverage was that different stakeholders were too attached to their preferred plan and unwilling to compromise, he states.
"We have to think about compromising from everybody’s favorite approach," he explains. "Right now, we have a third who like Option A, a third who like Option B, and a third who like Option C. And the alternative is the status quo. So we have to figure out a way to build coalitions so that everybody’s second choice isn’t to just do nothing."
Whatever proposals are ultimately chosen, universal coverage has to be the cornerstone of any new reform effort, he adds.
"To me, having universal coverage is a precursor for having broad-based cost control as well," he concludes.
- Amit K. Gupta, MD, President & COO, CareGain Inc., 3A S. Middlesex Ave., Monroe Twp., NJ 08831. Telephone: (609) 409-3666.
- Kenneth E. Thorpe, Emory University, Rollins School of Public Health, 1518 Clifton Road N.E., Atlanta, GA 30322.