Health Care Coverage in America: Understanding the Issues & Proposed Solutions
This guide was prepared by the Alliance for Health Reform with a grant from The Robert Wood Johnson Foundation, and designed by GMMB of Washington, DC. We trust that this publication will prove useful to a wide audience looking for reliable, up-to-date information on one of America’s most pressing social problems during Cover the Uninsured Week 2004 and beyond.
Reason
November 2004
Mandatory Health Insurance Now!
By Ronald Bailey, Reason’s science correspondent
Unfortunately, there is no prominent political or intellectual figure on the national scene offering a comprehensive free-market alternative to socialized medicine.
Why not just tell Americans they are responsible for buying their own health insurance from now on? If people couldn’t pay for medical care, either through insurance or out of pocket, they wouldn’t get it. “After people begin to notice the growing pile of bodies by emergency room entrances,” Tom Miller (Cato Institute) wryly suggests, “they will quickly get the message and go get medical coverage.”
Since it’s unlikely that Americans will allow their improvident neighbors to expire without medical care in the streets, is there a politically palatable alternative that can preserve and expand private medicine in the United States? Yes: mandatory private health insurance.
Maintaining our private medical system is vital because American health care and medical science are the most advanced and innovative in the world. If a national single-payer health care system is adopted, most medical progress will be stopped in its tracks.
http://www.reason.com/0411/fe.rb.mandatory.shtml
Comment: For those not familiar with Reason, it is a monthly magazine of “free minds and free markets,” representing libertarian views.
This particular article is of interest because it describes the problems with our health care system from the libertarian perspective. But more importantly, rather than coming to the conclusion that health care must be left solely to the free marketplace, the author concludes that the government must mandate health insurance for everyone.
PNHP and single payer are mentioned several times in the article. The promise of affordable, comprehensive care for everyone through a public program is a frightening thought for libertarians, thus they challenge our proposal with absurd and untrue charges such as the inevitable suppression of innovation. Yet most libertarians are also very human and are repulsed by the concept of a “growing pile of bodies” that lacked affordable access to health care. And they recognize that single payer has been identified as a program that would actually work. To stave off a single payer system, they have had to provide an alternative. It is ironic that they abandon their fundamental cause of freedom by supporting a model that requires patients to include private insurance bureaucrats in their health care relationships.
The point is that all of us (moderates, conservatives, liberals, libertarians, and authoritarians) are now convinced that we must pool resources in some manner to be certain that those with needs will have affordable access to health care. All proposals involve the government to some degree. So let’s finally sit down and agree on which specific polices would be most effective in providing affordable, comprehensive coverage for all. For those who need help, we have a document that clarifies the issues:
http://www.physiciansproposal.org/proposal/Physicians%20ProposalJAMA.pdf 1. Libertarian support of mandatory health insurance (Don McCanne)
1. CMS projections for health spending – 2005 (Don McCanne)
2. The California Health Insurance Reliability Act (CHIRA)
(Don McCanne)
3. What is CHIRA? (Don McCanne)
Health Affairs
February 23, 2005
U.S. Health Spending Projections For 2004-2014
By Stephen Heffler, Sheila Smith, Sean Keehan, Christine Borger, M. Kent Clemens, and Christopher Truffer
Projected National Health Expenditures (NHE) for 2005:
$1,936.5 billion – Total NHE
$6,423.1 – NHE per capita
15.6% – NHE as percent of GDP
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w5.74
Comment: These numbers are from the Office of the Actuary, Centers for Medicare and Medicaid Services (CMS). These are very useful numbers for your advocacy work since they represent what we are spending this year on health
care, qualified as “CMS projections for 2005.”
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Message: 2
Date: Thu, 24 Feb 2005
Subject: The California Health Insurance Reliability Act (CHIRA)
California State Senate
SB 840, The California Health Insurance Reliability Act (CHIRA)Introduced by Sen. Sheila Kuehl, February 22, 2005
For the bill, at this link in the block “House:” enter “Senate” and then for “Bill number:” enter “840”
http://info.sen.ca.gov/cgi-bin/pagequery?type=sen_bilinfo&site=sen&title=Bill+Information
Comment: Many will be curious about the funding. The bill describes the intent of utilizing funds that are currently directed to other government programs such as Medicare, Medicaid, and SCHIP. But under “Article 2. Revenues” it merely states “(Reserved).”
California has a requirement that any new tax requires a two-thirds vote in the Senate and in the Assembly. This statement from Sen. Kuehl’s press release suggests her strategy: “Means-based premiums, assessed according to income and payroll, would replace all premiums, deductibles, co-pays and out of pocket expenses.”
—————————————————————————————–
Message: 3
Date: Thu, 24 Feb 2005
Subject: What is CHIRA?
CHIRA, The California Health Insurance Reliability Act, SB 840, is Sen.Sheila Kuehl’s single payer bill for the state of California.
Rutland Herald
February 22, 2005
Editorial
Clarity on health care
As Vermont legislators confront the burdens and the irrationality of Vermont’s health care system, they face numerous obstacles. One of the most fundamental obstacles is conceptual. A new book written by three Vermonters and to be released within days from now goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform.
The authors are Cornelius Hogan, a longtime public servant who has served in the Cabinets of Republican and Democratic governors; Dr. Deborah Richter, a
physician and expert on health care reform; and Terry Doran, a journalist who has helped put together a book of unusual clarity and insight. It comes at a crucial moment in Vermont history and ought to be read by every member of the Vermont Legislature.
One of the authors’ central insights can be encapsulated in a number. They point out that about 70 percent of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 percent of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.
The authors refer to this infrastructure as a “shared service.” It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 percent of Vermonters account for about 70 percent of health care spending. And yet it would be impossible for that 10 percent to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.
We spend most of our lives among the 90 percent who are not piling up huge
medical expenses. But we know that if we want those services ready for us
when we need them, we must share the expense even when we are not using
them. That is why we have health insurance.
The problem is our health financing system is disorganized, erratic and unreliable. In the past four years, about 20,000 Vermonters have lost insurance. The Medicaid program for low-income Vermonters is stacking up an enormous deficit. The costs to businesses and individuals continue to escalate at double-digit rates. One of the reasons is that our helter-skelter system of health financing requires an enormous administrative expense for chasing or denying payments. About $1 billion out of $3 billion in health expenditures in Vermont goes to administration.
Past attempts at cost controls have not worked, mainly because they have focused on the individual rather than the system. Managed care was an attempt to curb usage by focusing on individual claims. Thus, HMOs and insurance companies set up bureaucratic systems for screening out what were deemed to be unneeded services. The public rebelled at the interference, and the system failed to control costs.
The focus on individual demand is appropriate in its place. Gov. James Douglas has proposed programs for managing chronic disease better and for promoting good health. These are useful for the individual and, to an extent, for the system.
But we are always going to have a predictable level of health care needs- births, broken legs, heart attacks, diabetes, end-of-life illnesses – and we will continue to need to maintain the infrastructure necessary for coping with these demands. The authors note that it is the capacity of our system that costs us, not its use. It is good to encourage heart health, but medical specialists know that in a population the size of Vermont’s there will always be a certain level of heart disease. Our medical facilities and personnel will have to be there to deal with it, and the underlying assumption of our system is that we will share the cost.
It is an underlying but not fully acknowledged assumption. We share the cost at present by means of insurance provided, if we are lucky, by our employers. Many Vermonters are not so lucky. They are underinsured or not insured at all. A high percentage of all personal bankruptcies occur because of health care crises – a sign that the system is not working.
If we acknowledge the assumption that our system depends on shared costs, like our highways or our schools, then we could put in place a more dependable way of financing it and controlling its costs.
That will be the topic of another editorial.
http://rutlandherald.com/apps/pbcs.dll/article?AID=/20050222/NEWS/502220310/1018/OPINION
Comment: The concept is straightforward. If we want health care to be there when we need it then we must all participate in funding the health care infrastructure so that it is always available. Expecting it to be funded primarily by individuals at the time of expensive, on-demand use is totally unrealistic. Thus insurance.
But what is the trend in insurance today? Under the banner of consumer empowerment, there is a drive to make insurance much less expensive for the
80-90% who are relatively healthy. This is accomplished not only by reducing
benefits and increasing cost sharing, but, more ominously, by gradually transforming the insurance market into one that places the majority who are
healthy into low cost pools (i.e., low cost, high deductible insurance) while leaving the few with high costs in very expensive (unaffordable) pools or with no coverage at all. Only the government would have the capability of funding these high risk pools.
But then where does the government get its money? From taxes paid primarily
by the majority who are healthy. In fact, 60% of our health care system is already funded through the tax system. So why are we wasting health care dollars on insurer middlemen who are creating innovative, rinky-dink pseudo-insurance policies for the healthy?
Since we’re paying for it anyway, why don’t we adopt an equitable method of
funding our “shared service.” None of us use all of our highways, but we want them there when we need them. Can any less be said about our health care system?
BCBS HealthIssues.com
Association Health Plans
A Step Backward for Small Employers and Consumers
February 2005
Congress is considering legislation to exempt association-sponsored health insurance plans (called Association Health Plans or AHPs) from existing state consumer protections. While promoted as a way to address health insurance affordability problems facing small businesses and their employees, the research overwhelmingly indicates that this proposal will make health insurance less accessible, less affordable and less secure for the vast majority of small employers and individual consumers.
A large number of organizations oppose AHP legislation due to concerns about the impact that it would have on access to dependable and affordable health
insurance, including: the American Academy of Pediatrics, the American Cancer Society, the American Diabetes Association, Association of Health Insurance Advisors, the Blue Cross and Blue Shield Association, the Coalition Against Insurance Fraud, the National Association of Insurance and Financial Advisors, the National Partnership for Women and Families, and the National Small Business Association.
This compendium is intended to inform policymakers about this legislation by summarizing the research examining the impact AHPs would have on healthcare
coverage. Taken together, these studies provide a comprehensive economic,
policy and legal analysis of this proposal.
The overwhelming conclusion reached by these studies is that AHPs would:
* Increase premiums for the vast majority of small employers and their workers;
* Fail to address the problem of uninsured small businesses and workers;
* Lead to widespread plan insolvencies and fraud among these AHPs;
* Make it difficult or impossible for small businesses with older, sicker workers to have access to affordable health coverage; and
* Take away state-based consumer protections that millions of Americans rely on today, including the right to appeal when a health plan denies reimbursement for medical care.
http://bcbshealthissues.com/relatives/100240.pdf
Comment: This report is a compendium of conclusions from fifteen different
sources, all indicating significant adverse consequences of policies supporting Association Health Plans (AHPs). It is quite obvious that this is a political document. But it is crucial to understand whose politics this represents. A cursory glance through the list of opponents to AHPs is revealing:
http://www.protectyourhealthcare.org/allies.html
Though some interests may be on the list partially for self-serving reasons, the great majority are concerned about patient-consumers. AHPs would reduce
affordable access to health care.
If AHPs represent flawed health policy, why is there support for them? The following statement from the National Federation of Independent Business (NFIB) sheds light on this issue:
“AHPs would allow small-business owners to band together across state lines through their membership in a bona fide trade association, like NFIB, to purchase health coverage for their families and employees. For example, many small-business owners are members of several associations such as NFIB, the U.S. Chamber, the National Restaurant Association or other trade groups. If AHPs became law, a small-business owner could purchase health benefits through any one of these entities that would act much as the human resources department of a large company.”
http://www.nfib.com/page/AHPs.html
Should health care reform be about adding the NFIB and the U.S. Chamber of
Commerce into the equation as additional middlemen, or should it be about
ensuring affordable access to care for everyone?
Published in Times Argus, Vermont
By Stuart E. Williams, M.D. Family Physician Berlin
It is time for Vermont to establish a universal coverage, single-payer health-care system. We already have a network of excellent non-profit hospitals and well-trained health professionals in Vermont. Our quality of health care ranks with the best states in the nation. Yet high administrative costs, underfunding of Medicaid, and especially, the increasing numbers of uninsured and under-insured Vermonters are threatening our ability to maintain this quality of care.
We can overcome these threats by making a bold move in Vermont. A unified system for health-care reimbursement would reduce administrative costs by 30 percent, eliminate cost-shifting, increase our purchase power for medications and, most importantly, provide equitable health-care coverage for all Vermonters. This can be done in a way that distributes the financial burden fairly and maintains patients’ choices of providers. We are fortunate to have imaginative and compassionate leaders in state government who are capable of forming a state-wide unified health payment system, but they need our encouragement and support. Many communities will offer voters a chance to support a universal health referendum on Town Meeting day. Legislators also pay attention to calls and letters from their constituents. Let us broaden this discussion and encourage debate on specific plans to achieve reform. All Vermonters deserve access to quality health care.
As Vermont legislators confront the burdens and the irrationality of Vermont’s health care system, they face numerous obstacles. One of the most fundamental obstacles is conceptual. A new book written by three Vermonters and to be released within days from now goes a long way to clarifying the conceptual confusion and pointing the way to meaningful reform.
The authors are Cornelius Hogan, a longtime public servant who has served in the Cabinets of Republican and Democratic governors; Dr.Deborah Richter, a physician and expert on health care reform; and Terry Doran, a journalist who has helped put together a book of unusual clarity and insight. It comes at a crucial moment in Vermont history and ought to be read by every member of the Vermont Legislature.
One of the authors’ central insights can be encapsulated in a number. They point out that about 70 percent of health care costs represent costs of infrastructure. By infrastructure, they mean the hospitals, clinics and personnel that are always available to us whether we are using them at a given moment or not. It is important to address the costs of pharmaceuticals and other supplies, but they only account for about 16 percent of health care costs. Reforming the health care system means taking a look at how we finance the health infrastructure.
The authors refer to this infrastructure as a “shared service.” It is a service we expect to be on call for us whenever we are in need. It so happens that about 10 percent of Vermonters account for about 70 percent of health care spending. And yet it would be impossible for that 10 percent to shoulder the entire cost of the hospitals, physicians and other fixed expenses that were there waiting for them when they got sick.
We spend most of our lives among the 90 percent who are not piling up huge medical expenses. But we know that if we want those services ready for us when we need them, we must share the expense even when we are not using them. That is why we have health insurance.
The problem is our health financing system is disorganized, erratic and unreliable. In the past four years, about 20,000 Vermonters have lost insurance. The Medicaid program for low-income Vermonters is stacking up an enormous deficit. The costs to businesses and individuals continue to escalate at double-digit rates. One of the reasons is that our helter-skelter system of health financing requires an enormous administrative expense for chasing or denying payments. About $1 billion out of $3 billion in health expenditures in Vermont goes to administration.
Past attempts at cost controls have not worked, mainly because they have focused on the individual rather than the system. Managed care was an attempt to curb usage by focusing on individual claims. Thus, HMOs and insurance companies set up bureaucratic systems for screening out what were deemed to be unneeded services. The public rebelled at the interference, and the system failed to control costs.
The focus on individual demand is appropriate in its place. Gov. James Douglas has proposed programs for managing chronic disease better and for promoting good health. These are useful for the individual and, to an extent, for the system.
But we are always going to have a predictable level of health care needs— births, broken legs, heart attacks, diabetes, end-of-life illnesses — and we will continue to need to maintain the infrastructure necessary for coping with these demands. The authors note that it is the capacity of our system that costs us, not its use. It is good to encourage heart health, but medical specialists know that in a population the size of Vermont’s there will always be a certain level of heart disease. Our medical facilities and personnel will have to be there to deal with it, and the underlying assumption of our system is that we will share the cost.
It is an underlying but not fully acknowledged assumption. We share the cost at present by means of insurance provided, if we are lucky, by our employers. Many Vermonters are not so lucky. They are underinsured or not insured at all. A high percentage of all personal bankruptcies occur because of health care crises — a sign that the system is not working.
If we acknowledge the assumption that our system depends on shared costs, like our highways or our schools, then we could put in place a more dependable way of financing it and controlling its costs.
This editorial is written by the editorial board at the Rutland Herald. He is a Pulitzer prize winning journalist and a very big deal in Vermont.
http://rutlandherald.com/apps/pbcs.dll/article?AID=/20050222/NEWS/502220310/1018/OPINION
A haven south of the border
Douglas Bower – For the Atlanta Journal-Constitution
Guanajuato, Mexico — I had become too sick to live in America.
Even with private insurance, even with Medicare, we couldn’t keep up with my medical bills. So we found a country where we could, and we left.
Picture this: A childless, middle-aged couple, both gainfully employed, both college-educated, living a frugal but happy life near Kansas City. The husband is diagnosed with a chronic, incurable illness. He has to quit work because the illness is very serious.
But, not to worry: After four long years and a legal battle, he gets on Social Security disability and therefore qualifies for Medicare. There is also the added security of the wife’s health insurance to cover the expensive prescriptions and everything else Medicare doesn’t. Everything will be fine because they are insured, and they will continue to live a happy yet frugal life. Or will they?
By the fall of 2002, my wife and I could no longer afford my illness. I was afflicted with fibromyalgia syndrome, a pain and fatigue disorder that eventually leaves most of those afflicted unable to work. The decrease in my income, plus the 10 prescriptions I took (not counting the drugs my wife had to take), were breaking us financially. We were insured, but the co-pays, deductibles and non-covered expenses were eating away at our financial security, bite after bite.
We found a sort of bitter consolation in the fact that millions of Americans share our plight. It turns out that more than 50 percent of bankruptcies filed in 2001 were medically related and were by middle-class homeowners who not only had an income but also health insurance. The prevailing myth that most bankruptcies are related to credit card debt is not true. Less than 1 percent of filed bankruptcies result from credit card debt.
All-too-common plight
Researchers found that 1.9 million to 2.2 million U.S. residents filed a “medical bankruptcy.” The average person filing for bankruptcy during 2001 spent $13,460 on co-payments, deductibles and uncovered services even though they had private insurance.
“Our study is frightening. Unless you’re Bill Gates you’re just one serious illness away from bankruptcy. Most of the medically bankrupt were average Americans who happened to get sick. Health insurance offered little protection,” said Dr. David Himmelstein, an associate professor of medicine at Harvard Medical School who led the study.
Another one of the study’s authors, Elizabeth Warren, said, “It doesn’t take a medical catastrophe to create a financial catastrophe. A larger share of American workers are going to have insurance that’s like a paper umbrella. It looks good, and it might even protect you in a sprinkle, but it melts away in a downpour.”
In the fall of 2002, the sprinkle on our paper umbrella turned into an unstoppable downpour. We had to do something before it tore the paper umbrella to shreds and our lives along with it. Little did we suspect that our search for more affordable prescriptions would not only find us financial relief but also end up changing our lives.
An attractive option
We heard rumors that prescription drugs were cheaper in Canada and Mexico. Our research showed this was indeed true. But this, to be honest, was a scary proposition. I also read that the U.S. government was trying to shut down many of the Web sites through which you could order these drugs.
That’s all I needed — to get arrested for smuggling drugs through the U.S. Mail. Many Americans who live in border towns simply cross the border to get a prescription filled at substantially lower prices with no hassles. Moving to a border town was not what we wanted to do. But what did catch my eye was that, in Mexico, not only were my prescription drugs cheaper. Just about everything else was, too.
Digging deeper, we discovered that a large population of American expatriates, about 1 million, already live in Mexico, taking advantage of a significantly lower cost of living. This was a stunning revelation to us. Moving to Mexico hadn’t been a remote possibility; now it appeared to be salvation.
We began our new lives in a beautiful colonial city, the capital of Guanajuato state, also called Guanajuato, in August 2003.
We stepped into a new reality where everything— prescription drugs, housing, utilities, food, transportation, entertainment — is 25 percent to 75 percent cheaper than it is in America. My Social Security disability income more than adequately covers our expenses here in Guanajuato. An example is that I can buy all my needed prescriptions for less than the co-pay I forked over for one drug in the United States. I get a month of Prozac for less than $16. Same drugs, only affordable.
Is moving to Mexico an alternative for everyone? I doubt it. But it is working for us on so many levels that we have no plans anytime soon to return to the land of our birth.
The solution? I don’t know. What I do know is that we, and many other Americans, cannot sit idly by waiting for our elected officials to work it out. We had to take action, drastic as it was. That paper umbrella won’t last long.
San Francisco Chronicle
February 20, 2005
Medicare not easy to salve
By David Lazarus
“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank– and former director of the Congressional Budget Office.
…Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.
“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”
http://www.sfgate.com/cgi-bin/article.cgi?file=/chronicle/archive/2005/02/20/BUG27BDFVP1.DTL&type=business
Comment: If more individuals of the caliber of Robert Reischauer join with him in speaking up, the political obstacles will melt away.
Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3
Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations
(excerpt)
TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?
Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.
If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.
The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.
In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.
I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.
In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.
In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.
I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.
With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure
Hsieh outlines his strategy
Taipei Times, Monday, Feb 21, 2005,Page 3
Premier Frank Hsieh defines the goals of his Cabinet as promoting negotiation and stability. `Taipei Times’ staff reporters Ko Shu-ling and Jimmy Chuang recently spoke with the former DPP chairman and Kaohsiung City mayor to find out more about his views on how he plans to approach `negotiation,’ especially on divisive issues such as health insurance, tax reform and cross-strait relations
(excerpt)
TT: Some have criticized as “unfair” your plan to increase the ceiling on indexed health insurance premiums and let the rich pay more. What do you think of this criticism?
Hsieh: A recent opinion poll shows that over 73 percent of voters support the measure. As the national health insurance program is, to some extent, a social insurance mechanism, I believe, as do other highly paid Cabinet officials, that it makes sense to have better-off Taiwanese pay more. The bottom line is that the program is only beneficial as long as society is stable, which is a more important consideration than how much the rich pay in their premiums.
If criticism of the new measure is justified, I’d like someone to explain how. I am not an expert on this, but I listen to the experts’ opinions and do the calculations myself. It’s not a good thing to listen to one person’s opinion and assume that something is wrong.
The change should be made based on three convictions. First, the national health insurance program must continue to work because it is extremely convenient, especially for the underprivileged. Second, because national health insurance is a social program, government intervention is necessary and we are obliged to shoulder certain financial burdens. Finally, we have to come up with strategies not only to save money, but to generate more. I firmly believe our national health insurance policy is among the world’s best.
In a bid to generate more money, we believe it is good to let the better-off pay a little more. While the current ceiling on indexed health insurance premiums is NT$87,600, it will be increased to NT$131,700. In other words, those who make NT$10 million a month will pay the same health premium as those who make NT$131,700.
I also believe the costs of promoting better health, education and disease prevention should be paid by the government rather than the health insurance program.
In addition, we have decided to raise the “health tax” on cigarettes. Our plan is to increase it from NT$5 to NT$10 per pack. It is estimated that such an increase will bring in an extra NT$1.5 billion to NT$2 billion each year. About NT$2 billion from air pollution fees will also be injected into the program.
In addition, we are considering requiring those responsible for public disasters, food poisoning, and major traffic accidents to pay the medical expenses of the victims. However, I don’t think it is right to channel lottery revenues into the program.
I hope to finalize the measure on how to better execute the hospital transfer system and its supplementary plan by July 1 or Jan. 1.
With the implementation of all the measures, I hope we will be able to keep the health insurance program afloat for two or three more years before the second-generation health insurance policy is in place. I believe most people will approve of the measure
By David Lazarus
There’s no simple or straightforward solution to Medicare’s funding woes. At least with Social Security’s looming troubles, the remedies can be narrowed down to three fundamental (albeit unpleasant) options: raise taxes, reduce benefits or borrow a big pile of money. It’s not so easy with Medicare.
“We cannot solve the problems that face Medicare without dealing with the broader problems that face health care in America,” said Robert Reischauer, president of the nonpartisan Urban Institute — a Washington think tank — and former director of the Congressional Budget Office.
Medicare and Social Security are plagued by the same demographic challenge– the pending retirement of millions of Baby Boomers. Both programs face huge funding shortfalls as fewer workers pay into each system and more retirees take money out.
In the case of Medicare, however, the fiscal difficulties come sooner and are considerably larger. Also, Medicare’s situation is greatly exacerbated by runaway prices for medical treatment and medication.”You can’t solve this by looking at Medicare alone,” Reischauer said. “There are systemic issues that have to be addressed as well. That’s the real problem.”
Medicare is the $350 billion-a-year federal health insurance program primarily for people over 65 or those with disabilities. It has about 42 million beneficiaries. (Medicare’s sister program, Medicaid, provides health coverage for about 44 million low-income recipients.)
As I reported Friday, Medicare costs are expected to surpass those of Social Security by 2024. By 2078, Medicare’s annual expenditures will be twice as large as Social Security’s.
The portion of Medicare that pays for hospital stays — the largest component of the program — is expected to be in the red five years from now. It will then have to start spending reserve funds.
By 2019, those reserves are expected to be gone and the program will no longer be able to pay full benefits. Medicare’s deficit over the next 75 years is projected to run as high as $27.7 trillion, compared with a $3.7 trillion shortfall for Social Security over the same period.
Leslie Norwalk, deputy administrator of the Centers for Medicare & Medicaid Services, the government agency overseeing Medicare, said a funding gap of nearly $28 trillion appears daunting, but “within a 75-year window, a lot can happen.”
“There’s a long time between now and then,” she said. “When you think about how much the health care system has changed, it’s very hard to sit in my chair and imagine how things will be 75 years from now.”
Much could happen, Norwalk believes, that could bring down the cost of health care for future generations. But Robert Moffit, director of the Center for Health Policy Studies at the conservative Heritage Foundation, said it’s far more likely that researchers will come up with new drugs and new treatments that will further extend people’s life spans.
“These kinds of breakthroughs will be terribly expensive,” he said. “This will only add to Medicare’s costs.” Reischauer at the Urban Institute said he would tackle Medicare’s issues by effectively reinventing the nation’s health care system.
“I would start at ground zero,” he said. “I would spend a significant amount of money on an independent body charged with evaluating all the procedures and devices in health care and writing practical guidelines.”
By following such national guidelines, Reischauer argued, health plans and health care providers throughout the country would be able to eliminate redundancies and introduce new efficiencies.
“We need to begin building a new system brick by brick, and the system needs to be evidence-based,” he said. That’s all well and good, responded Heritage’s Moffit, but it’s not politically realistic to think that the United States can simply throw its existing health care system out the window and start again from scratch.
“We can’t do it all at once,” he said of fixing Medicare’s problems. “It’s too big to do all at once.” Moffit’s solution involves changing the Medicare program at first only for the Baby Boomers — those turning 65 after 2010. He would replace the average $6,500 now spent annually on Medicare beneficiaries with a yearly subsidy, perhaps in the form of a tax credit.
Recipients in turn would use the money to choose their own health care plan based on individual needs. If someone wants to spend all his cash on Viagra — which is covered under President Bush’s costly new Medicare drug benefit — that would be his decision.
“This would address some of the long-term cost issues,” Moffit said. “It would not be an open-ended entitlement. “We’re going to be spending a lot more on the Baby Boomers than we did on the World War II generation,” he pointed out. “There’s just a lot more of them. ”
Medicare’s Norwalk called Moffit’s suggestion “a very interesting proposal.” But, she added, “I don’t see it as politically viable.” Ida Hellander, executive director of Physicians for a National Health Program, a Chicago advocacy group, said Medicare’s woes demonstrate the need for universal medical coverage in the United States.
The clear solution, she said, is a so-called single-payer system similar to national health plans in Canada and elsewhere. “You can’t control costs,” she said, “until you have a uniform system.”
Under a single-payer system, any citizen could be treated by any doctor at any hospital. Payroll taxes would replace all existing premiums,deductibles and co-pays.
Medicare could serve as the bedrock for creation of a single-payer system. Between that program, Medicaid and Veterans Affairs, Hellander said, taxpayer funds already account for about 60 percent of U.S. health spending.
In California, state Sen. Sheila Kuehl, D-Santa Monica, plans to introduce legislation this week that would establish a single-payer system for state residents.
A recent report by the Lewin Group, a well-regarded health care consulting firm, determined that universal coverage along the lines of what Kuehl is proposing would reduce health care spending in California by $8 billion next year alone.
It also would provide coverage for the nearly 6 million uninsured people statewide and result in lower costs for virtually all California companies now providing insurance to employees, Lewin found.
Heritage’s Moffit rejected the notion of a single-payer system in this country. “That’s exactly the way to go if you want to reduce quality and personal freedom,” he said.
However, Reischauer at the Urban Institute said single-payer may ultimately hold the answers not just for Medicare but also covering the 45 million Americans now lacking health insurance.
“If push came to shove, I would want a single-payer system instead of the system we have now,” he said. “But the political obstacles to that are considerable.”
There it is again — politics. Proposals for improving health care from both the left and right are routinely dismissed as being politically unrealistic.
All that remains is a sense of chronic crisis and a leadership vacuum when it comes to tackling some of the most important issues facing this country.
Medicare, like Social Security, can be salvaged. It won’t be easy. It will be damned painful, in fact. But we’ll never know how painful unless we try. David Lazarus’ column appears Wednesdays, Fridays and Sundays. He also can be seen regularly on KTVU’s “Mornings on 2.”
Send tips or feedback to: dlazarus@sfchronicle.com.
Copyright 2005 SF Chronicle