Single-payer plan helps all
Richard Iammarino, M.D.
The Charleston Gazette
December 13, 2007
All presidential candidates seem to have plans for universal health care. Details are sketchy — and has been often said, “the devil is in the details.” All plans have or should have wellness initiatives which stress personal responsibility for health care.
Is health care a right or a privilege? I believe it is a right recognized in every industrial nation except ours.
Many health-care professionals see the current U.S. system as broken. I know some doctors who are leaving practice early and discouraging their children from becoming doctors because of the problems.
Americans pay on the average more than $7,000 a person on health care, the highest cost in the world — yet we rank 35th to 40th in world health parameters. How can this be? Health costs soon will account for 20 percent of our gross domestic product. These costs are already reflected in the price of automobiles and many other products.
Our high health costs are related to several issues. These include billing mechanisms, prescription drug costs, hospital charges, doctor charges, and health insurance costs including overhead and profits. What can be done?
I have been a physician for 54 years and have seen many iterations of health financing. In the 1960s when Medicare became a reality, the American Medical Association opposed it vigorously, but now embraces it along with the federal-state Children’s Health Insurance Program. Many AMA members now favor universal coverage as well.
Three states have universal coverage. While each state’s plans vary, none has a single-payer system. To understand the benefits of a single-payer plan, explanations are in order: There is a difference between cost and charge. For example, the cost to manufacture a box of corn flakes may be 15 cents, yet you will be charged anywhere from $1.25 to $3 for it. There are legitimate reasons for the price. These include processing, packaging, distribution, advertising and profit for both the company and the store.
In medical care, most charges are not related to cost. This is an important point. There have been many attempts to tie charges to cost. As health-care bills go up, it is clear that these are not working. It is in this area that a single-payer plan makes sense and will save money. A single-payer plan is the most effective way to help charges relate rationally to cost. The reason is the ability to be effective in negotiations.
A few months ago, Morgantown’s community hospital, Monongalia General, increased its daily room rate about 10 percent and cited the reason as costs of retirement plans for a segment of its staff. Interestingly, the increase wasn’t passed on to Medicare and PEIA patients. Why were Medicare and PEIA excluded? Because they both negotiate charges with the hospital. Private health insurers generally don’t, because they just pass along the increases to the subscribers.
Most hospitals are nonprofit entities. This does not mean they do not make money, but means their excess money is spent on hospital-related activities like expansion of programs and buildings. Morgantown’s two hospitals are doing rather well in this regard.
I hope it surprises no one that we have, horror of horrors, government-run socialized medicine. It is called Medicare and Medicaid. Do they have problems? Yes. Do they provide, in general, affordable health care for the elderly and poor? Yes.
Overhead is really the cost of doing business. The overhead for Medicare is 3 percent to 4 percent. Private health insurers have much higher administrative cost because they need many more people to determine and process claims. There is a lot of paperwork involved between providers and subscribers. These companies are owned by shareholders and need to make money to survive. Top-level managers are very well compensated. Overhead for private for-profit health plans is between 12 percent and 30 percent. Compare that to Medicare’s 3 percent to 4 percent.
There are a large number of private insurance companies. Each has its own system of control. They often have to authorize medical procedures in advance, and may have different criteria. These complexities force hospitals, doctors and other professionals to learn different systems of reimbursements. Although I am no longer in practice, I receive invitations to “coding seminars,” which are needed by the staff of many doctors to navigate the complex formulas for payment. Paper is strangling the system.
Drug costs are another reason for our higher health-care costs. We are only one of two countries in the world that allow TV advertisements for drugs. New Zealand is the other, and it is considering banning them. We are an over-drugged country. With less than 5 percent of the world’s population, we account for over 40 percent of global prescription and over-the-counter drug use. It is very hard to get a handle on drug costs and charges. After his inauguration, Gov. Manchin talked of a way West Virginia might use its purchasing power to lower costs. While it did not happen, it was an example of the possible use of negotiation to lower charges.
Medicare Part D (prescription coverage) is another issue. Passage of this bill was a disgrace. Congress was held hostage at a late-night session until enough favorable votes were available. Drug companies lobbied hard for passage. Congressmen and aides who backed the bill are now working for drug companies. This story was told as a segment of “60 Minutes.” Many drug companies were quick to raise their prices right after the bill’s passage. Insurance companies also are having a bonanza. The sickest patients who require expensive drugs over a long time have to pay significant out-of-pocket costs. You might be surprised to learn that Medicare is forbidden by this law to negotiate charges. Drug company lobbyists won on this issue and we pay.
What would a single-payer system do? While the government may be the “single payer,” it does not have to be. Go back to the Medicare program. It pays less because it negotiates. Insurance companies can negotiate and perhaps do, but have less leverage, and as organizations responsible to their shareholders, need to make a profit or go out of business.
As I look at the whole picture, the single-payer plan is the only one that will have a chance to eliminate the excess profit in health care and help stem rising costs through negotiating power. However, maybe the single most important reason for adopting a national single-payer system is that it will allow all of us to receive affordable health care.
I believe we are all together as a country and we need to stand together to provide affordable health care for each other.
Dr. Iammarino is retired and lives in Morgantown.