Health Care, Not Coverage

For the next three months, the Supreme Court will mull the constitutionality of the new health care law. At stake is the government’s requirement that its citizens buy private health insurance. But whatever the outcome, it’s a foregone conclusion that some fundamental change must be instituted in the financing of health care delivery.

Today, enormous sums of taxpayer money are spent on the administration of health care programs such as Medicaid. Those administrative costs could be sharply reduced and the savings put to what is really needed — providing health care. With the information technology available today, public agencies should consider eliminating their function as a government-run insurance operation and focusing their resources on paying providers to deliver care.

Consider Medicaid, the shared federal and state program for the poor. When Medicaid was created, it was designed to replicate the private insurance function. But the basic purpose of insurance is to protect the policy holder’s assets against a catastrophic event causing risk of personal bankruptcy. Because the very nature of qualifying for Medicaid requires recipients to first spend down their assets and then earn an annual income below a certain percentage of the federal poverty level, what assets is the policy protecting? The person doesn’t need health insurance. He needs health care.

Unnecessary bureaucracy

When the government created Medicaid as a look-alike insurance product, it developed an oversight operation that has not kept up with what technology can do to make a system run more efficiently. And unlike private insurance, it built a system requiring monthly updates of each of its 50 million recipients’ eligibility, including filled-out and faxed-in monthly reports, income receipts, etc.

This requires an army of workers to process piles of eligibility paperwork. Over the years, as the program grew, so did the administrative staff.

To be sure, Medicaid has grown up as an adjunct to safety-net programs such as unemployment benefits and food stamps. As a result, aggressive screening procedures were designed to avoid fraud and to deter those who do not qualify from enrolling. But now that drastic cost-cutting measures have become necessary, we shouldn’t automatically cut services at the patient care level.

Instead, let’s also look at how technology can help achieve savings.

For example, California’s health care agency reported that it employs a full-time staff of 27,300 to monitor and implement its Medicaid, financial aid and food stamp programs. At an average annual cost of $110,000 per employee, California is budgeting more than $3 billion yearly for administration. That’s money not spent on medical care, food stamps, or the financial assistance — just on the cost to watch over these programs.

It’s therefore conceivable that the government would save significant money if it switched its focus from qualifying people for public insurance to simply qualifying them for care at the point of service.

Point-of-care system

Currently, we have state and federal administrators checking Medicaid applications online with the IRS. We already trust health providers with Americans’ most private information — their medical records. Why not take it a step further? A health care provider could easily share online capability with the Medicaid agency to immediately qualify or disqualify a person at its clinic or the emergency room.

When people without insurance seek treatment, a trained staff member could simply go to an online address, input basic patient data, and check for available options and whether their income (checked online as it is now with the IRS) qualifies them for government services. This point-of-care enrollment would provide automated checkpoints for eligibility and implement a transparent system with fraud controls.

Today, technology can place at our fingertips a world of information and data, all of which allow us to make major decisions with a relatively reliable level of comfort. When it comes to health care, we should look seriously at how technology can help us provide care and cut costs in our efforts to protect this precious delivery system.

Carly Fiorina is director of the advisory board for the Foundation for Health Coverage Education, a non-profit aimed at educating uninsured people about their options to get insurance. She’s also a former chairman and CEO of Hewlett-Packard. This post first appeared in USA Today.

48 replies »

  1. It’s how Medicare has been structured to pay providers. There’s no reason Medicare can’t adopt private insurance mechanisms to fight fraud – but they would need legislative powers that congress would have to give them. Right now they are legislated to pay in no more than 30 days. That does not give a lot of time for checks and balances. But guess what, the first to complain about better fraud prevention would be providers who would be subject to more stringent rules.

  2. then its not Medicare, its some imaginary program politicians have been promising for 46 years that has never and will never happen. When they passed Medicare do you think it budgeted $90 billion for fraud?

  3. Barrry,

    Latest estimates I have seen is that the Black Market economy is about ~10% of GNP in the US annually with illegal drugs, sex trade/porn, and informal labor accounting for a majority of it. Amazing thing is that marijuana grown in the US is actually estimated to be worth 10-20% more than actual corn production.

    Actually quite low too worldwide.


  4. No, not “right”.

    My understanding of Medicare fraud is the rules that Medicare legislatively has to follow for providers, not patients e.g. pay providers within 30 days. Medicare for all does not mean the same rules for providers, it does mean healthcare for patients not having to worry about qualifying for care.

  5. John, why would it be, “no questions asked” as in no oversight? You use a credit card and no questions asked at the checkout, but there’s plenty of oversight. And yes, it would be called Medicare for all, that means everybody, so the only fraud would be provider fraud. Works great in a lot of countries spending less than we are.

  6. Just swipe a card and get paid by the state! How wonderful! Don’t we call that Medicaid or Medicare, which fewer doctors accept? And what with all the fraud in those programs, do we really want a “no questions asked” payment policy. It’ll never happen.

  7. Ah, Nate, the right/conservative viewpoint isn’t winning accolades from this MD either. I’m a moderate, independent person. Extremes don’t serve society, they expect society to serve them.

  8. ” It is ALWAYS inefficient when the government pays private entities for providing services to someone else.”

    True but it is always more inefficient when the government tries to do it itself.

    Problem with the last question is how much it should cost is no where close to what it would cost. We should be able to insure those over 65 for $5,000 a year. It actually cost the government $7700 to do it. Getting actual cost and government spending to meet never seems to get even close.

  9. So, by your statement above, Ms Mahar, from april 15 3:12, everyone is entitled to the same level of care regardless of what they bring into the office, correct? So, convicts should access the same system as high society bigwigs, right? Illegal immigrants should get the same services as a citizen born here and paying taxes responsibly for decades, hmm?

    People with overt terminal or congenital illnesses that historically up to this point in time have less than a 10% likelihood of realistic response to interventions should be in front of those with more treatable illnesses, am I interpreting this all correctly?

    It is why the extremes of liberals who are overtolerant are as detrimental to society as the conservatives who are intolerant and want to banish anyone under $100,000 income to the sewer. Come on moderates, where are you in hearing this lame rhetoric over and over!?

  10. Amen to this comment. You know what else is always glossed over if not flagrantly ignored: an industry that has an expense account for the country of what, couple to 3 trillion a year in costs, and so much money going around and then attracting the nefarious element that lives by the adage, “there is a sucker born every minute” and the focus on profit margins just increasing that salivating component of “I want some”, skimming off 0.01 percent that ends up being a couple 100 Million dollars, who’s going to miss that money?

    yeah, interesting no one wants to touch that seemingly simple point. Profit comes at someone else’s expense, eh? Just as long as it is not that writer’s wallet/purse!

  11. Seems to me many of you are glossing over the main point of the article – Americans need health care not health insurance. There need not be any “plan” for them. This would not be “Single Payer” as there would be no “payer” in the current meaning of that term. The government buys real estate and hires workers. It is ALWAYS inefficient when the government pays private entities for providing services to someone else. The government never trusts those it pays (sometimes for good reason) and the administrative overhead that results is not simply those low percentages everyone likes to quote, but also includes the costs incured by the private providers of care due to compliance with inane regulations. The more useful number to compare would be how much would it cost to TAKE CARE OF an individual versus how much would it cost to COVER an individual.

  12. No, Margalit, it is not single payor. It is single welfare payor. And it is more efficient, since there is no wasteful bureaudratic spending “enrolloing” those who do not use healthcare.

  13. just found this, those poor illiterate people sure seem to know how to complete enough of the forms to get the checks.


    “IRS estimates that between 23 and 28 percent of EITC claims are paid in error.”

    I guess by this measure Medicare at 10% fraud is actually a huge success.

    “What do I do if I refuse to prepare an EITC claim as the customer wants and I know the individual goes to a preparer down the street that is not as scrupulous?”

    “Sometimes during the interview process, the preparer is aware the taxpayer is not giving the right information or is changing the story to get EITC. The preparer refuses to file an inaccurate return and the taxpayer leaves the office.”

    Great list of questions here. Not so reassuring answers.

  14. The Ozarks are supposedly the poorest part of America, when I go visit family there you see new boats and trucks all over the place. There is tremendous underground economy. Just because you tell the government your poor doesn’t mean it is true.

    In NV all of the tip income has a huge distorting impact on the income. People under the TIPS program with the IRS supposedly make 30K per year but easily afford 300K houses.

    Its another example of the fallibility of ivory tower academic studies and government work, unless you actually know the area and spend time in it the numbers are meaningless.

    All we have to do is look at the spending habits, there is obviosuly plenty of disposable income.

  15. Maggie –

    I think you overstate the importance of formal education in the ability of the poor to cope with and function in our society. Relatives of mine who have worked with low income people for decades tell me that while they may lack even a high school education and sometimes can barely read, they are very “street smart.” For programs ranging from food stamps to housing vouchers to Social Security disability and Medicaid to the EITC, as a group, they are well aware of what’s available and how to qualify for and access benefits.

    Regarding tax returns, I think the underground economy is huge. Millions of people either don’t get W-2 forms or derive a meaningful portion of their income from tips and other cash payments. Think about how many people are employed by restaurants, hotels and motels or work in personal service occupations or own businesses with a significant number of cash transactions. In healthcare, provider fraud is a far more significant issue than any wrongdoing by patients but low income people are quite capable of accessing government benefits to which they are entitled by law even though there are always some who fail to sign up.

  16. The data I’ve seen points to 7-8% average admin cost for self-funded plans. But that isn’t the full administrative burden. Most of it is on the provider side, not insurers.

    About 30% of US health care costs pay for administrators, while in Canada and most other nations it is 15-20%. Lower insurance costs are only about 1/3 of the difference. Much of the rest is provider administration to deal with diverse payers and a maze of different rules. I agree standardization needs to happen on the provider side as well, and in the long run it hasn’t helped anyone to allow providers to opt out of EDI.

  17. Maggie is correct that some portion of the uninsured live in the cash economy, and do not file taxes or receive a government check.
    Either they are illegals trying to stay under the radar, or living with relatives.

    So even in my tax-based repayment scheme for the uninsured, some people will still get free hospital care.

    In most states and cities, this is a pretty small number. In the Mexican border states and parts of the deep South,, it is a larger number. The real reason that some states are opposed to Medicaid (even if they only pay for 10% of it) is they do not want to attact any more poor people than they already have.

    I do not have the answer. But my plan will work for most of the working poor in most places. It is wildly cheaper to help 40,000 people with ER care. than to force 1 million persons to buy health insurance. About 4-6% of the uninsured actually have a serious illness or injury in any one year. (Nate has noted this in the past.)

  18. BobbyG above;

    “Why not just cut the “eligibility” crap entirely? One of my picks with PPACA is all that ad nauseum dense language”

    I think you meant;

    Ad nauseam; a Latin term used to describe an argument which has been continuing “to [the point of] nausea”.

    Pretty pathetic when your only contribution is to run spell check and your to stupid to even do that right.

  19. From what I can find German sickness funds spend around 6% of their budget on administative cost. That is the same or slightly more then what self funded plans spend now. Eliminate all the reporting and penalities they suffer under and it would be even lower.

    Which country, single payer or multi-payer have admin cost meaningfully cheaper then self funded plans have now?

    There are also billions in additional administrative cost.

    I see the same flaws in PPACA as we saw in HIPAA. FOr all these great requirements on standard plans, and ability to look up eligibility providers still are not required to do it.

    Payors were forced to spend 100s of millions if not more to accept EDI claims, but doctors were not required to bill electronically so it was not used for years. The same mistake was made again, payors are required to spend billions in the hope that providers use it. Any day I rather providers go to the web to look up eligibility and benefits but half their staff are barely functioning idiots who wait till the patient is in the office then they call and want someone to read them a 100 page plan doc right now.

    If providers would just take advantage of currently available technology we would save billions.

  20. “In the U.S., millions are functionallly illiterate”

    How many of those millions have anyone but themselves to blame for being that way? Education up through high school is 100% free and if your poor most of college is two. For 99% of the illiterate it is a result of their own personal decisions.

    Medicare, Medicaid, and all other assistance forms should be written at a 12th grade level. If your to stupid to complete them then you get no assistance until you learn. The left created these millions of illeteriate people sustained on the public tit. Failed welfare policies, failed public housing, failed education system more concerned with Union benefits then education.

    It is well past time the left was held accountable.

  21. “On filing taxes– Yes, there are tax assistance centers. But a grreat many poor people don’t know where the are –or how to find them.”

    Great many, how many is that exactly, a dozen, maybe two dozen? Yes we should make sure all laws are written so 2 dozen people aren’t inconvienced.

    “In 2008, 24 million taxpayers used the EITC program to claim more than $48 billion.”

    Great many more have no problem finding the forms when free money is involved.

  22. “A health care provider could easily share online capability with the Medicaid agency to immediately qualify or disqualify a person at its clinic or the emergency room.”

    This is not where the majority of Medicaid dollars are spent. Much of it is spent for long term care, home health care, general medical care, including hospital based care, for the 9-10 million elderly people eligible for both Medicare and Medicaid (dual-eligibles) and childbirth. Medicaid pays for roundly 40% of the 4 million births in the U.S. each year including many children born to illegal immigrants who come here specifically to have their children so they can get birthright citizenship. In many cases, hospitals can qualify people for Medicaid retroactively so they can get paid. In any case, just how is a medical clinic or hospital ER going to verify income and/or assets to confirm Medicaid eligibility in real time?

    I’ve said before that uncompensated care is wildly overstated as an issue driving up healthcare and health insurance costs. According to an article published by the Kaiser Family Foundation a few years back, uncompensated care raises hospital costs and prices by about 6% from what they would have otherwise been and disproportionate share hospital (DSH) payments offset a good portion of that. Young, healthy illegal immigrants, for their part, don’t use much healthcare except for maternity which is a significant issue in a few states that share a border with Mexico. – TX, NM, AZ and CA. The cost of educating their children, though, is a much more significant and expensive issue.

  23. Peter 1 —

    I agree that people who can help themselves should help themselves.

    But some people can’t.

    In the U.S., millions are functionallly illiterate (this includes English-speaking white Americans– Google the topic.

    The numbers are both startling and depressing.

    My point was only that many low-income Americans would find the list of what they must bring totally daunting.

  24. “this is what you must bring if you want assistance”

    Maggie, at some point people need to help themselves. Tax preparers can’t collect the necessary documents for them AND assume the applicant is truthful. The docs are necessary to prevent fraud.

  25. Bob– You write:
    The patient repays the system over time, through the income tax system.

    What if the patient is unemployed? A great many people who are in their late 50s and early 60s will be permanently unemployed.
    What if the patient is an African-American twenty-one year old with no job and no prospects of getting a job?

    Even those who receive unemployment benefits often don’t have enough money for food, etc since benefits are based on what they earned on their lost job.

    “”Tax Policy Center data show that only about 17 percent of households did not pay any federal income tax or payroll tax in 2009, despite the high unemployment and temporary tax cuts that marked that year.”http://www.cbpp.org/cms/index.cfm?fa=view&id=3505

    On filing taxes– Yes, there are tax assistance centers. But a grreat many poor people don’t know where the are –or how to find them.

    This is why “Each year, too many families do not receive Earned Income Tax Credit (EITC) dollars that they are entitled to, because they don’t know how to claim the credit or don’t file an income tax return.”

    This stie points out that there are tax assistance centers (“though locations and times may change” ) and this is what you must bring if you want assistance:

    Photo identification
    Social Security Cards for you, your spouse and all dependents
    Birth dates for tax payer(s) and the dependents on the return
    Property Tax statement (if you own a home)
    Wage and earnings statement(s) Forms W-2’s, W-2G’s, 1099-R, etc. from all employers
    Interest and dividend statement(s) from your financial institution(s) Form 1099
    A copy of last year’s Federal Tax Return, if available
    Bank routing number and account number(s) for direct deposit IRS strongly encourages direct deposit
    Other relevant information about income and expenses:
    – Total paid for day care
    – Day care provider’s indentification number or SSN
    If MARRIED FILING JOINT both spouses MUST be present to sign the required forms
    If MARRIED FILING SEPERATELY, the taxpayer MUST have the spouse’s social security number, date of birth and how the spouse completed his/her taxes with standard or itemized deductions both spouses must file in the same manner
    Tax preparers will not be completing tax returns on
    – Any business expenses (1099 MISC. income is ok)
    – Any rental property income/expenses
    – No more than two stocks

  26. It’s certainly true that we can cut down massively on administrative costs, but there is also much we can do to achieve this within an “insurance” based system. Remove the requirement to re-certify eligibility every month. Make the eligibility criteria less complex and onerous so fewer staff have to process the applications. Update the back office systems and make better use of the web. Standardize insurance benefits and processing standards (EDI, etc.) to a greater degree. Etc.

    Much of this is in the ACA, by the way, which is why there are billions in expected administrative savings coming from it, unless the Supreme Court blows it up.

    People keep forgetting (or do you not know?) that nations with multi-payer universal health care have administrative costs that are very close to those of single-payer nations like The Netherlands, Germany, Switzerland, etc.

  27. Nate is totally correct on the payment mechanism for the uninsured:

    a. treat them now ( we do not want people with broken legs turned away);

    b. the government pays the hospital immediately — not waiting for a barbaric private collection agency process…..

    c. the patient repays the government over time through the income tax system (no refunds, no credits, maybe some extra withholding)

    However, this system does need two extra items that Nate has not discussed:

    #1 –. A very small increase in income taxes, if we are going to be grown ups.

    The federal gov’t will be sending hospitals at least $30 billion a year for pay for EMTALA care, and even though this will be paid back eventually there is some up front cost. Now is a good time to start paying for mandates.

    #2 – .a national fee schedule for emergency rooms.

    If an uninsured person has a broken leg, it is proper that they must repay $2,500 over time to the surgeon and nurses who will care for them

    It is not proper that they be forced to pay $25,000 due to the bizarre list prices that hospitals maintain to deal with insurer discounting.

    (which reminds me, we also have to make provision for the minority of patients who might be admitted for a broken leg, but then complications ensue and they are in the hospital for a month. They will never be able to make full repayment through the tax system.)

    Bob Hertz, The Health Care Crusade

  28. “I doubt Maggie knows either or she would have told us.”

    Maybe Nate you could find anyone earning $15k who does qualify for Medicaid. Here in NC even if you’re aged, blind, and/or disabled the monthy limits are $908 for single and $1226 for a couple. Max assets (other than car, home, furniture, etc.) cannot be above $3k for a couple.

  29. “Low-income taxpayers do not have to pay for help with filing federal income taxes. The Internal Revenue Service provides assistance and grants to non-profit corporations to help low-income taxpayers calculate and file federal tax returns. If your income is below $49,000, you can receive free assistance and free e-filing if you have the information with you to complete the tax return and file. Taxpayers with income less than $58,000 a year may use free software online.”

    Number 4 responce of search for free tax return low income. Maggie must not know how to use the internet.

    Maggie are you arguing our poor are so poor now they can’t even afford free? From my experience in Southern CA and NV this is marketed very heaviliy to the spanish speaking population. This is not a program they need to search for it finds them.

  30. “They don’t know how to file taxes, and can’t afford to hire someone to do it for them.”

    Some rich people that spend all their time living in Ivory towers don’t know federal taxes are prepared for free in just about every state in the country.

    Which is understandable when your so buzy telling poor people how they should live you don’t really have time to actually spend with them to see how they actually live or what they actually need. They just know all this from their ivory towers.

    “I doubt Carlly realizes how many people earning $15,00 a year don’t qualify for Medicaid.”

    I doubt Maggie knows either or she would have told us. Strawman arguments are just so much more time efficient.

  31. Exactly Margalit – ride herd on providers not patients. Make everyone eligible then there’s no need to check who is or is not. States would just issue a health card which will keep track of each person’s medical treatment(s) and which can be swiped at the provider for reimbursement.

  32. Carly writes: ” A health care provider could easily share online capability with the Medicaid agency to immediately qualify or disqualify a person at its clinic or the emergency room.”

    As Bobby G. says: and if he or she (or her child) doesn’t qualify, then what?

    I doubt Carlly realizes how many people earning $15,00 a year don’t qualify for Medicaid. These folks won’t have cash in their pocket–or a credit card– to pay for their care at point of service.

    She also probably doesn’t realize that many very poor people haven’t filed taxes. Some don’t speak English. (Many older legal immigrants don’t speak English.) They don’t know how to file taxes, and can’t afford to hire someone to do it for them.

    So her imaginary system is not going to be able to automatically qualify them or disqualify them.

  33. as part two we withhold foreign aid to recover the cost of any care provided to illegal aliens.

  34. its only single payor for the uninsured and would without doubt create a two tier system liberals will cry themselves to sleep over.

    Insured people wont tolerate the long waits and bad doctors, nor should they.

    Just withholding tax returns would probably pay for the majority of uncompensated care. People start losing their child tax credits maybe they will sign up for the insurance they are offered already.

    The test should be not paying, people should still have the right to be uninsured as long as they pay their bills.

    If your unable to pay then government pays for you at their low rates but you never see another refund untl it is paid back.

  35. When people without insurance seek medical treatment, the government should just simply pay for it…

    Then do what they do in any other case…look to recover from any other responsible party. In the case of the uninsured, it will be the patient. He will have an up close and personal conversation with Uncle Sugar about appropriate healthcare expenditures, be put on a plan with whatever premium or subsidy and go forward.

    It makes no sense to sign everyone up prospectively.

    Just tell me where to send the bill.

    If the patient is illegal, deal with that. If the patient hasa chronic illness, get him a medical home and a care manager.

  36. “When people without insurance seek treatment, a trained staff member could simply go to an online address, input basic patient data, and check for available options and whether their income (checked online as it is now with the IRS) qualifies them for government services.”

    In if they don’t “qualify”?

    Why not just cut the “eligibility” crap entirely? One of my picks with PPACA is all that ad nauseum dense language detailing what is equal parts corporate welfare and outright “welfare” of the penurious means-testing variety. None of which delivers the first immunization or a1c test result.

    But, yeah, people want health CARE. We propose instead to give them new paths of endlessly vetted ELIGIBILITY for health care PLANS.

  37. There is undoubtedly administrative inefficiency at the level suggested in this article. There are problems with viewing technology as a panacea for this inefficiency. In the worst case scenario, we are basically transmitting information over an insecure network and subjecting millions of people to identity theft. Networks associated with state governments seem particularly vulnerable. The actual health care records being sent often contain too much sensitive information for this level of security and contain more errors than credit reports. There is no basic standard for software including the requirement that vendors immediately repair any error that may affect patient safety.

    There is a serious mismatch between the level of privacy and confidentiality needed to provide quality health care and the current IT infrastructure. That should be systematically addressed before we look at wider applications that puts larger numbers of people at risk as a trade off for efficiency.