January 24, 2007
By MERTON C. BERNSTEIN
Special to The Star
We have reached a national consensus on health insurance — it costs too much and covers too few. Most “reform” proposals, like California Gov. Arnold Schwarzenegger’s and the health insurance industry’s, camouflage their real costs with tax breaks and other subsidies.
But coverage and cost are not two separate problems. Repeated double-digit cost increases caused coverage of millions to disappear. To cover the uncovered, we must — and we can — make better use of the $2 trillion public and private medical-care programs now expend. Banishing unnecessary nonbenefit costs could generate funds to cover everyone.
It is not reform to make individuals insure themselves. An individual mandate would require establishing and maintaining records just to keep track of compliance; enforcement proceedings against every noncomplying individual; processing requests for exemptions; keeping tabs on those not exempted; and repeatedly updating all these steps.
It is not reform to condition subsidies on poverty. Such tests, which also would require repeated updating, would cost tens of billions when applied to millions of people. That helps explain why means-tested Medicaid costs almost 5 percent more to administer than nonmeans-tested Medicare. Nor is it reform to vary millions of individuals’ subsidies based on the inevitable variations in individual income — at great administrative cost.
These nonreforms only increase costs — massively reducing funds for essentials like vaccination. They pepper the much-heralded Massachusetts and Schwarzenegger health-care plan and the health-care-provider proposal, backed by AARP, to extend coverage. Understandably, that proposal omits to say who will pay.
Permitting physician ownership interests in testing laboratories, imaging facilities, hospitals, nursing homes and pharmacies would provide inducements to prescribe what they sell. Rather than assuming that everyone would resist temptation, medical societies and legislation should shut those cookie jars. That would improve care and reduce costs.
Reform will elude us if the public and policy-makers mistake what needs changing. For example, in a 2006 Kaiser Foundation opinion poll, “too many malpractice suits” tied for second as the largest cause of ballooning health-care costs. Yet analyses show that malpractice premiums and litigating costs constitute just 1 percent of medical- care outlays.
If Medicare covered us all, more of the health-care dollar would go for treatment and prevention. Currently, insurers and providers spend huge amounts to match billions of billings with thousands of private plans and many public programs with differing eligibility and benefit criteria.
Medicare for All would save most of those nonbenefit charges. Some object that savings would be slight because providers must maintain records for treatment. Yes, but that recordkeeping does not require clericals to determine what programs, if any, cover claimants, and if so, what is billable and how much is reimbursable.
To tame costs and extend coverage, we must harvest savings where now we sow and reap inefficiently. The Schwarzenegger and Massachusetts gimmicks and the plan shaped by the same people who designed the perplexing and inefficient Part D — health insurers and AARP — plow other fields. Instead of savings, they increase nonbenefit costs. That’s not reform.
Merton C. Bernstein is a Coles Professor of Law Emeritus at Washington University. He was principal consultant to the National Commission on Social Security Reform and is a founding board member of the National Academy of Social Insurance.
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