By Philip Caper, M.D.
Sun Journal (Maine), Feb. 24, 2019
At Maine AllCare we are often asked “How are we going to pay for health care for all Americans?” The simple answer is: “We will redirect the more than $750 billion per year that we currently waste.”
In 2012, The Institute of Medicine (now the Academy of Medicine, part of the National Academy of Science) published a report that estimated the amount and sources of inefficiency (they called it “waste”) in the American health care system. At that time it amounted to $750 billion per year nationwide. That amounts to about $3 billion per year in Maine alone. There is more than enough money in the health care system in the United States to cover everybody, including Maine, and significantly improve the coverage we all deserve in the bargain.
Replacing our fragmented mixed public-private insurance system with improved Medicare for all could effectively address each of these sources of waste:
Excess administrative costs: First, by replacing insurance policies with a single publicly financed system, we will eliminate the need for medical underwriting, the core, high cost business of insurance companies. The unpopular practice of excluding “pre-existing conditions,” the setting of deductibles and scaling premiums based on age, medical history or geography are a few examples of the worst medical underwriting practices. People know that the obligation of insurance companies is to deliver profits, not health care. Administrative costs for Medicare in 2016 were just 1.2 percent and the overhead at for-profit insurance companies is estimated to be between 17 and 25 percent — much of it due to medical underwriting.
Second, such a change will eliminate the costs of enforcing compliance with multiple insurance plans, each with its unique benefits and eligibility requirements. The tracking of deductibles, copays and various unique twists by doctors, hospitals and other entities provides no health benefit, and costs are estimated at more than $200 billion. Put another way, each doctor in the U.S. requires more than $80,000 per year in administrative support, but in Canada it is just over $20,000.
Excessively high prices and unnecessary and inefficiently delivered services: By centralizing funding, we will create new tools to restrain overall health care costs. Putting the entire system on a budget will control costs by setting firm (but flexible) limits on the total resources available. By constraining growth in overall spending (currently much higher than any other developed country), we will put downward pressure on the very high prices for medical goods and services. That will include reining in the documented excess of lab tests and procedures currently being done. Why should a test or procedure cost one amount at one hospital and, 100 miles away, cost a third of that figure? The growing practice of traveling to other countries to have a procedure and having the medical vacation cost half of the same procedure here at home shows that the for-profit system simply doesn’t work for patients.
Missed prevention possibilities: We will create a pool of money to invest in primary disease prevention — an activity that is now badly underfunded. We do fund early detection, but not the primary prevention of disease. One reason prevention is so underfunded is that insurance companies have little or no incentive to invest in practices with mostly long-term payoffs, due to short-term churn in insurance coverage. Primary prevention is a public good and should be financed through public sources.
Fraud: Centralizing health care financing, as in Medicare, will create a unitary and universal database to assist in the detection of waste, fraud and abuse. The current system of medical coding is fraught with abuse, but it is often hard to detect because data is so fragmented. From procedures and services never performed to overcharging for drugs and devices, there is significant waste and abuse.
Together, the above factors account for more than $750 billion a year (as of 2012), and rising. Recouping that wasted money in our dysfunctional system will allow us to provide high quality health care for everyone. Of course, we must not penalize the people now in administrative jobs that do not add value. Transition to value-added jobs can be funded with a portion of the existing waste.
By putting everybody in the same system, we will replace the balkanized system that is constantly subject to political attack and bickering and causes the public so much suffering. It would assure extending the broad public support and funding that Medicare currently enjoys.
This is economically sound, common sense, conservative economics. We can save money and have universal coverage providing long-needed peace of mind to all Americans. That sounds to us like a pretty good deal!
Dr. Phil Caper is an internist and founding board member of Maine AllCare.