Consumer Confidential
By David Lazarus
LA Times Staff Writer
11:26 AM PDT, August 26, 2007
The American Medical Assn. says it’s going to spend millions of dollars to highlight the plight of the uninsured in general — and the organization’s own remedies in particular.
What the AMA isn’t saying is that its plan would steer about 47 million people into the health insurance industry’s most expensive form of coverage. And it would probably leave taxpayers holding the bag.
“Under the AMA plan, the vast majority of Americans would have the means to purchase healthcare coverage,” the group’s president-elect, Nancy Nielsen, said in a statement last week while unveiling the “Voice for the Uninsured” campaign.
“It would give individuals choices, so they can select the appropriate coverage for them and their families, and would promote market reforms in the insurance industry,” she said.
That sounds appealing. But let’s take a look under the hood.
The AMA plan would maintain the current employer-based insurance system that covers most working families but is a growing headache for U.S. businesses. Insurance premiums continue rising and, increasingly, workers are being forced to pay a greater share of the costs.
Meanwhile, the AMA plan would extend tax credits to uninsured people that could be used to purchase coverage in the individual insurance market.
One problem is that tax credits in effect represent a government subsidy for purchasing insurance. That money would have to come from somewhere: higher taxes most likely, or funds cut from other federal programs.
The AMA says most of the money could come from reallocating existing tax credits provided to employers and high-income people. But it acknowledges that additional taxpayer funds could be required.
The other key problem with the plan is that individual insurance policies are typically the most expensive coverage available to consumers, at least if they’re comprehensive enough to match the coverage provided by many employers.
And that’s assuming an insurer will grant coverage to a particular individual. If that person has a preexisting condition, qualifying for coverage can be tough.
“It’s a flawed plan because it’s the most expensive way that we could extend health coverage to everyone,” said Don McCanne, a senior health policy fellow with Physicians for a National Health Program, a group of 14,000 doctors who advocate a government-run insurance system similar to programs found in all other industrialized democracies.
“It’s a ridiculous approach because you’re supporting this terribly inefficient industry,” he said.
According to the nonprofit California HealthCare Foundation, a single person making about $30,000 a year would have to spend 16% of his or her income on healthcare if covered by the average individual policy. That’s $4,800.
That same person would spend 3.5% of his or her income ($1,050) on health expenses under coverage provided through the typical plan offered by California companies with 50 or fewer employees, the foundation determined.
The big gap is mostly caused by the higher deductible that usually accompanies individual policies. In other words, the individual policyholder agrees to shoulder a greater burden of healthcare costs in return for lower annual premiums.
The foundation concluded that an individual insurance plan covers only about 55% of the average policyholder’s medical bills, while a small-group plan typically covers 83% of such costs.
The AMA says its plan would require “a number of regulatory reforms” to ensure that individual policies are affordable and that people with preexisting conditions aren’t denied coverage. But it doesn’t say how such reforms can be achieved.
“We think lawmakers ought to do the right thing for the American people,” said Jeremy Lazarus, a Denver psychiatrist and member of the AMA’s board of trustees (and no relation to a certain columnist).
Whatever else, the AMA is to be commended for attempting to raise the political profile of the uninsured and for seeking to make this a priority issue for presidential candidates.
But if your goal is universal coverage, expanding our dysfunctional system isn’t the answer. In fact, it might only make things worse over the long run.
The United States already spends about twice as much per person on healthcare as most other developed nations. However, the average American doesn’t live as long as people in countries that guarantee medical coverage to their citizens, and infant mortality is higher.
The AMA opposes a national single-payer insurance system because, the organization says, it could limit the types of treatment provided and stifle innovation. But the AMA isn’t opposed to trying out such a system at the state level.
A bill, SB 840, from state Sen. Sheila Kuehl (D-Santa Monica) would do just this in California. It’s an experiment worth doing.Having taxpayers help purchase very expensive coverage for potentially high-risk people? That’s an idea that should never limp out of the emergency room.
Consumer Confidential runs Wednesdays and Sundays. Send tips or feedback to david.lazarus@latimes.com.