Hal Holman is a professor of Medicine at Stanford University, and Diana Dutton is a research fellow at the London School of Economics and a former director of health services research at Stanford. The married couple supports Obama.
Many people think Hillary Clinton has a better health plan than Barack Obama. She repeatedly tells voters her plan will cover everybody, while Obama’s will leave out 15 million people. Newly emerging data tell a different story.
Since 2006, Massachusetts has been running what amounts to a pilot test of Clinton’s universal mandate plan, requiring all uninsured residents to buy private insurance or be penalized. The state regulates participating insurers and subsidizes costs for lower-income people. Yet after two years, nearly half of the uninsured still aren’t covered, despite strenuous outreach. To boost enrollment, Massachusetts has stiffened fines – up to several thousand dollars. Nevertheless, many people remain uninsured, citing more pressing needs. Clinton insists her mandate wouldn’t force people to buy insurance they can’t afford, but that’s exactly what’s happening in Massachusetts. The state has had to exempt 20 percent of the uninsured because they couldn’t afford even subsidized premiums.
Clinton’s plan would also likely fall far short of universal coverage. She hasn’t said how her mandate would be enforced, but has mentioned the possibility of garnishing wages. Without affordable insurance, a universal mandate means little.
Massachusetts highlights the difficulty of expanding private coverage
and keeping costs under control. Since 2006, Massachusetts employees’
health insurance premiums have been rising faster than the national
average – individual annual premiums now average $5,370 vs. $4,476
nationally – and Massachusetts workers bear more of these costs than do
workers nationally (24 percent vs. 16 percent). With subsidy costs soaring, the
Massachusetts plan is running 30 percent over budget, and its survival is
uncertain. Meanwhile, the state’s major health insurers made over $1
million in profits every day, and charged overhead costs five times
higher than Medicare’s. “What Massachusetts has done successfully,” one
health care official wrote, “is to provide a new revenue stream for the
private insurance system. What remains elusive is health care for
In short, mandating universal coverage is easy, paying for it is not. The cost of expanding private insurance coverage nationally with
government subsidies is likely to swamp the federal budget.
Reigning in costs is the central challenge facing any health reform.
Both Clinton and Obama project savings from modernizing information
technology, stressing prevention, and coordinating delivery of care. Both would create a government-regulated insurance “market,” requiring
insurers to cover everyone at the same price regardless of their
health, and offering a Medicare-type public program with comprehensive
benefits open to all. The goal of this regulated insurance market
would be to drive costs down by increasing competition among insurers,
while ensuring adequate benefit packages and preventing discrimination
against the sick. Whether such reforms would actually control costs
remains to be seen. They will surely meet resistance from health care
industry groups that benefit directly from continued price escalation
and market expansion.
Anticipating such resistance, Obama has proposed a plan that is
intended to move toward universal coverage without putting an unfair
burden on individuals in the process. Will his plan leave 15 million
people uninsured, as Clinton claims? More than 80 leading health policy
experts have stated publicly “there is simply no factual basis” for
this assertion. Most analysts agree that the combination of purchasing
pools, subsidies, easy enrollment, mandatory children’s coverage, and
existing insurance will cover the vast majority of Americans. Former
Labor Secretary Robert Reich thinks Obama’s plan will actually cover
more people than Clinton’s, once all the details are clarified.
Of course, no plan will amount to anything unless it can get through
Congress. Polls show that most Republicans oppose a universal mandate,
but party leaders concede their case is weaker against Obama. Clinton’s 1993 health reform effort failed in Congress largely over the
mandate, and many people remain leery of government coercion in health
care. Given our faltering economy, Obama’s incremental approach to
reform makes sense both politically and fiscally.
Paradoxically, Obama may promise less but accomplish more. With
growing public demand for better coverage, he may finally break the
health reform logjam.
Heath insurance should only be needed for catastrophes or the seriously ill.
Doctors could take the system back.
Traveling Doctors could make house calls. Or
Post a price list on the wall for 15 minute increments of time. Post a price list for cost of vaccinations or other services.
A quick 15 minute visit could be $20 or so
30 minute $40 or so
and so on.
The patient hands the G.P. cash and is out the door for simple diagnosis.
Charge a fair rate. Have patients pay cash. Not as much overhead for billing. Get a person to answer phones and file. Keep more of your money.
Customers will shop around based on price as well as service.
To the question of what doctors charge. As a post-bacc pre-med student, with my original career in business, doctors have been extremely open with me about the finances of their practice. Here is what I have learned:
First, whereas most businesses have several points of revenue, there is one ‘money maker’ in your doctor’s office, the doctor. Some have techs which conduct test procedures, such as ECHOs at a cardiologist. However, that procedure only becomes billable once a doctor has reviewed it. A PA practices with a doctor.
So for all practical purposes the entire office staff is dependent on the doctor for bringing in revenue. Each requires a salary. I’m sure this truth, is somewhere in the back of everyone’s head but it needs to be given full consideration as a CRITERIA for defining a successful health care system. Nurses, techs, clerks, schedulers, all deserve a salary. The owner of the building the doctor operates in, deserves rent. The utilities deserve payment for use of electricity.
Because none of the above is going to change under a socialized medical plan, you can’t really expect doctors to go along with it. We’re talking about systematically controlling their revenue stream, without relieving the pressure of costs.
Now, to attempt an answer to questions on charges.
Few charges are actually obtained.
We are already, in many ways, a socialized system.
If the doctor bills $300, Medicare is unlikely to reimburse near that amount. The government pays an amount based on a set schedule. This schedule creates, like other parts of government code, perverse incentives. More on that…but first to illustrate, imagine a doctor does a new procedure, which he/she has not billed for prior:
The example provided to me was of a patient complaining of hearing loss. Upon observation, his ears were profoundly jammed with wax. The doctor retrieves instruments, and goes about removing the logjam (the instruments were not q-tips, for those laughing). Afterwards, he wonders what the hell to charge! He decides upon $30 (clearly, below the amounts being suggested in above posts).
He will also charge for an office visit. There are 5 levels and it’s only a level 5 which might deserve the $300 being discussed. I’m citing Austin, TX prices–not NYC…but not Rogers, AK.
As a straight forward visit this is likely Level 3 and the charge near $100.
Total bill: $130, separately accounted. Medicare pays: The full $30 for the ear procedure! This is rare. Usually they do not give a full reimbursement. The patient does not pay the remainder, but only 25% of what Medicare paid. (I’ll put the math to that below).
The lesson to the doctor: he should have charged more for the procedure. The patient paid nothing. Private insurance may have allowed for an even greater charge.
So he wizens up, and charges $100 to remove the next impacted ear wax, and what follows is hypothetical.
Medicare allows $60 reimbursement, it pays $48 and the patient receives a bill for the remainder of $12. The doctor did not get his full $100…but that’s OK.
Aetna allows for a charge of $80! Had he charged only Medicare’s allowed $60 he’d lose $20. So in this case, (figure same co-pay) the private insurer pays $64 and the patient settles a bill for $16.
The doctor is satisfied when neither Medicare nor Private insurers pay his full bill because at this point he can assume that between the variety of private insurers, he never misses out. Unlucky is the patient who holds no health insurance. They receive a bill for $100.
However, consider that the doctor could charge $200 for this procedure. As is, the insurers are going to pay their amounts, regardless. So while completely unreasonable, charging $200 would gurantee that there is not an insurer on Earth who holds out on the Doctor. No insurer is out there, receiving this charge for $200, laughing at the sucker because, when they look at their reimbursement schedule:
Earwax Removal: $300
Ponder these perverse incentives:
If the doctor has sympathy on the uninsured and charges $20 for the procedure discussed, Medicare will say–OK, obviously you’re willing to do your work for less. We will pay no more than $20 either.
Doctors can not freely care for one another–“Professional Courtesy.” One doctor I know finds this especially appaling. In the 70s he could give free care indiscriminantly, so anyone, and family, affiliated with the hospital never received his bill. This courtesy extended to every laborer in the hospital.
An insurance company can claim a prior condition–years after a policy has been held. This is paramount to an individiual with retirement savings finding their present stock portfolio dropping claiming their holdings negative returns were based on a prior condition of inept management and actually getting their money back—rather than the inept management receiving golden parachutes to incent the bozos to leave! Insurers must do due diligence. This is done because the actuaries have calculated that the few cases which will reveal existing conditions are not worth the labor costs of a full review. Clearly it’s much cheaper to delve through a history of hypertension once an individual has had a heart attack!
If they don’t think the cost/benefit justifies doing their homework on day one, then they should not get to do it after the fact.
Surgeons simply make much, much more for their time. $1500 for a vascualar surgery which takes 90 minutes for a highly talented surgeon. He works for $1000/hr. (Remember he has office staff to pay himself).
As a cardiologist put it, we don’t get paid to ponder medical questions. Sitting with a patient to get to the bottom of their medical problem for an hour is sometimes neccessary, but I receive less compensation than I would for a few ECHOs and Holters (some diagnostic tests).
If we want to have a preventative practice of medicine, which goes a long ways towards lowering health care–then we have to acheive two contradictary goals.
1.) Make it cheap enough that patients will schedule the check-ups needed to make early diagnosis and prevent more complicated situations.
2.)Make those office visits appropriately lucrative for the doctor so that he/she can sit with the patient and scrutinize their health to uncover quiet, early symptoms.
Keep in mind that a doctor has to pay his or her staff. Keep in mind that a doctor forgoes at least 8 years of productive labor while being educated and trained. Not to mention a doctor is likely to incur at minimum $100K and up towards $250K in costs during 4 years of school. They then continue their training for up to 7, even 10 years, with little pay for the first 4 and perhaps moderate pay for their final years.
Talented, intelligent individuals who must also possess people skills to enter today’s ultra-competitive medical school classes, these are people who could make high salaries in other industries. Those jobs they neglect, to be doctors also have promises of raises, and bonuses while medicine is providing negative salary growth against inflation. For all of this, doctors must wonder:
Is America going to ask us to take care of them, but no longer be willing to take care of us?
To close, Dr. Michael DeBakey stated, if doctors were in charge, everyone would have medical coverage. Politicians and insurers are in charge. Obama will not sort this problem out through legislation. McCain will not see the problem clear by market magic. The politician who relinquishes the situation to the caregivers who first set out to solve these problems can offer America the hope to move forward. Government must play a role–it must support doctors with an ounce of faith that, on better than average, we work because above all, we care.
MY GENUINE THANKS IF YOU READ ALL OF THIS WITH AN OPEN MIND!!! And yes, I want to shout that.
Medicare Reimbursement Math
Doctor charges $160
Medicare will allow a charge of $100
Of that $100, they pay 80%, so $80
The patient pays %20…of the $100 allowed charge, not the $200 doctor’s charge. The total reimbursement can not be above what Medicare allows.
$20 is 25% of the $80 Medicare paid
BOTH of the presidential candidate health plans have major flaws.
For details, see http://blog.faberhealthcare.com.
Joseph “Yossi” Faber
Faber Healthcare Solutions
you do bring some interesting points, however the most basic visit to the doctor’s office doesn’t cost only a few dollars (i.e. 40 or 50), but rather several hundred (I believe the national average is about 200ish per visit. Can anybody confirm?). I know my sister in law, a general physician, told me that they bill insurance companies some $300 per visit – and that’s only for a general checkup! By getting people to pay out of pocket who would be able to afford such prices? Let alone for the whole family. For that matter, few of those in the lower 50% would be able to afford such treatment, especially if they have kids or are caring for elderly relatives.
Obviously, some kind of subsidy is required (name one country that does not subsidize health insurance and still maintains good health throughout their population). Which brings to number 2: you say that mandated health insurance will never work. While I do agree with you, to an extent, this is not always the case. For example, most, if not all, of the countries with excellent health insurance are government oriented to one extent or another (just look at EU or Japan. Even cuba, from what I recall, has a system with results comparable to that of the US, yet is 100% government sponsored and with FAR less resources per capita).
But you are right in that we need to do something about the insurance companies 🙂
Simplify the system and that is the only way cost can be controlled.
1) We don’t need insurance for every single health care service we receive; for a simple visit to a doctors office, why do we need insurance if the doctor charges a reasonable rate which is totally transparent. Medicare pays only about $40 for doctors office visit. Can we not pay from our HSAs? We don’t need to worry about in/out of network, copay, coinsurance, deductibles, filing claims, etc. For more than 90% of the procedures, we can pay from our HSAs and on average the our direct payment to the doctors WILL be less than what you pay the insurance as premium. Where is the need for insurance…paying the premium is like throwing the money out the window.
2) For the remainder of the procedures that are very limited in number (mostly catastrophic in nature), let the federal Govt provide basic coverage. Of course, we all have to pay more taxes.
Health insurance provided by ‘for-profit’ corporations is only a JOKE. Get out of this mindset first. Mandating health insurance will NEVER WORK. In US, median HOUSEHOLD income in 2006 was $48,200. It means, 50% of the families made less than $48,200 in 2006. In the current system, these families (average 3 persons/family) will need a minimum of $21,000 at the national per capita health care expense of over $7000.
Families making less than $48,200 simply CAN NOT afford to spend over $21,000 on healthcare. PERIOD. Please stop talking about insurance. IT WILL NOT WORK.
To john :
I think you will see with time that Obama is on the right track. It will take some time but it’s the right solution.
“To boost enrollment, Massachusetts has stiffened fines – up to several thousand dollars. Nevertheless, many people remain uninsured, citing more pressing needs.”
More pressing needs such as gasoline and food. If you think there is a health insurance affordability problem now, wait until the winter heating season when oil and propane prices will put many people over the edge. I agree with a mandate but not within the present insurance structure. For real change we need to go to single-pay with price controls – that’s what every other single-pay country has had to do. The insurance model will NOT work. I for one would not miss health insurance corporations and the raw fact is if this country ever did go single-pay, then insurance workers would just have to find other employment like the employees of other now dead or dying industries. We cannot continue on this upward price spiral for healthcare, and the healthcare industry, like the oil industry, is not interested in a solution.
Michelle Obama is a bonafide healthcare administrator and health media expert. Clearly, consumer healthcare will be HER priority. Ironically, the new first lady of New York State is also a VP at a NYC-based health insurance company. These women are Harvard/Princeton educated experts — equal to their husbands in every way — policy-wise. I look forward to working with them both in the years to come! Healthcare won’t be a hobby or pet project — for them — or their husbands.
The political reality is that our federal government is helpless in managing subsidy flows to powerful industries. Our health system is many times the size of our farm economy, and yet Congress just passed a mammoth farm bill that is continuing to pay subsidies to farmers even though farm income is at record levels and corn is at $6 a bushel. Regulation is largely controlled by the regulated in our political system. A more heavily regulated health insurance market will mean that an $800 billion industry will write its own rules, using its campaign contributions as leverage. The pre-2000 John McCain had it right- we have to wrest control of our political process from the lobbyists and the campaign finance process. And McCain Feingold didn’t even graze it. Until we’ve fundamentally changed the money culture which dominates our political system (and sending the Clintons and Terry McAuliffe packing is an encouraging sign), we will continue to have meaningless conversations like this one about “national healthcare systems” and “universal coverage” and other meaningless platitudes and it won’t mean a damned thing.
When it come to health insurance, the plan that would hurt our economy the least is Hillary Clinton’s plan. Everyone would have health insurance. WA, NJ, NY and a few other states who have already tried Obama’s proposed health insurance plan of not mandating coverage. These states have driven out of the better insurance companies. When anybody can get health insurance without having to go through medical underwriting, people won’t get coverage until they need absolutely need it. Usually because of a serious illness. This causes health premiums to sky-rocket. That’s because insurance companies are only paying claims for unhealthy people. The plans in these states tend to not be that great either. If everyone has health benefits, the premiums would be less because healthly people would factor in on determining the premium.
I am flummoxed by the idea that somehow someone is going to come up with a magic formula that will make health INSURANCE work for everyone. PEOPLE! As long as health insurance companies are in control of American healthcare, there will BE no consistent, quality healthcare for anyone who couldn’t pay for it out of their own pocket in the first place. PROFIT, not care, is and will forever be the motivation behind health insurance.
What none of the economists, academics and policy makers seem to realize is the reality with which I myself live. I work at a non-profit AIDS services organization. THe agency provides United Healthcare insurance for which $100 is deducted from our paychecks. When I started 3 years ago, the co-pay was $10 and the deductible $100. A few months ago, the co-pay was again raised to $40 and the deductible to $1000. I cancelled my insurance because A)I can’t afford the co-pay B)there’s no way I would meet that high a deductible unless I was hospitalized and C)even as the rates soar, the service is decimated. Not only have some of my HIV+ co-workers been denied payment for their regular doctor visits, but one colleague recently diagnosed with breast cancer put in a claim for an MRI that her doctor felt was urgently necessary and United denied it, saying she should’ve had an X-ray instead. So in essence, in the 3 years she’s been paying $100 per month, she’s thrown away $3600. And that, folks, is where I am. I’m lucky to have good health genes and no overt or chronic problems and I’m also a member of an excellent alternative healthcare community, so the need to pay for allopathic medical care is non-existent at the moment. But I’m 52, there will be the effects of ageing to deal with and while I don’t expect catastrophic illness, who knows? If it hits, however, I won’t be going to the doctor unless I’m unconscious and someone else takes me. The majority of the people I know who aren’t HIV+ feel the same way. A friend recently told me that he would probably not ever go to the doctor for a check-up or screening. “After all, what’s the use of getting a diagnosis for something you can’t get the treatment for anyway?” So it’s not about how we finesse the system to make sure that the insurance lobby is placated. It’s about getting rid of the middleman of an insurance company and providing direct, quality care to anyone who needs it. We already pay for it with Medicare and Mediaid. I, for one, would be happy to pay that $100 per month, and even more, that I used to pay United to the IRS if it would go into a TRUE national healthcare system. And here’s another reality – I don’t care whether it’s called “public,” “socialized,” or even “communist” – as long as healthcare is no longer a capitalistic business. As is painfully evident in Mr. McCain’s elitist and ridiculous idea that the “free market” will take care of everyone if only we allow it to work the way it’s supposed to (uh-huh), those who are coming up with policy need to get away from theory and talk to some people like me who are dealing with the stark reality of the mess we have now. Just my two cents!