By Joie Meissner, N.D.
Vital News (Seattle), Spring 2013
As N.D.s most of us are sole proprietors or in small group practices where we may feel cut off from the larger healthcare system. Yet what happens in the reform of our larger healthcare system will have an enormous impact not only on our practices and our patients, but also on our friends, families and on our own lives.
Ours is the most expensive healthcare system on earth. We spend billions more on healthcare than other industrialized nations yet we are the only industrialized country in the world that does not provide some type of universal health coverage to its people. No one dies due to lack of healthcare access in other industrialized countries, and yet a study done by Harvard Medical School and Cambridge Health Alliance found that nearly 45,000 deaths occur annually in our country due to lack of healthcare access. According to this study, there is a 40% increased risk of death in uninsured American adults.
We spent $2.8 trillion in 2012 on healthcare. This is $750 billion or 27% more than the per capita costs of healthcare in other developed countries, yet WHO ranks our healthcare system’s performance 37th in the world.[2,3]
Despite its high cost, 50.7 million Americans do not have adequate access to healthcare. Public outcry over the state of healthcare has already led to the attempt at nationwide healthcare reform known as Obamacare. The high cost of the multi-payer system is at the heart of our unsustainable healthcare costs, costs that can be predicted to lead to even more dramatic changes in the healthcare system in the years following full implementation of Obamacare.
The anticipated healthcare changes will affect all sectors, including naturopathic physicians, their patients and the treatments they often recommend. Understanding the shape that future reforms will likely take and our potential role in these reforms can help our profession and our patients have greater control over our destiny.
In order to understand the reforms necessary to solve our healthcare crisis, we first need to understand that unsustainable costs are occurring due to the lack of governmental and industry price controls and due to the expanded number of insurance plans and carriers, which respectively lead to skyrocketing hospital charges, and pharmaceutical prices as well as and excessive administrative costs in our current system.
Steven Brill, writing in Time magazine, uncovered the fact that hospitals set their fees for goods and services based on hugely inflated “chargemaster” pricing schemes that bear no relationship to costs, but which allow “non-profit” and for-profit hospitals to maintain plush surplus revenue and astronomical executive salaries.
Brill found that drug prices are so inflated under the current healthcare system that if pharmaceutical prices were controlled to the same degree that they are in other developed countries, we would save more than $90 billion annually and $25 billion/year in Medicare/tax payer savings.
The Private Insurance System Jacks Up the Price of Healthcare
Between 25-30% of all US healthcare dollars go to pay for administration. Because of the substantially higher administrative cost of the private insurance carriers as compared to non-privatized counterparts like Medicare or Medicaid and because of the logistical inefficiency inherent in having thousands of insurance plans and carriers, the private insurance system inevitably jacks up the price of healthcare.
According to healthcare economist Gerald Friedman, Ph.D., the inefficiencies in our healthcare system which lead to its unsustainable price tag are allowed to exist because the prevailing economic view sees the free-market as the remedy to healthcare overspending. He explains that the for-profit system economic framework that views healthcare spending as waste is why we have problems ensuring that all our citizens have access to healthcare.
The For-Profit System; Cherry Picking and Lemon Dropping
Despite the fact that other economists like Paul Krugman, Ph.D., Nobel Prize-winning economist Kenneth Arrow, Ph.D., and Friedman himself would strongly disagree, Friedman asserts that the prevailing economic viewpoint holds that governmental health insurance promotes over-utilization of healthcare which, in turn, promotes wasted spending. He further asserts that this viewpoint leads the insurance carriers to engage in practices that results in lack of coverage for all Americans. He explains that profit in health insurance comes from a practice called ‘cherry picking’ and ‘lemon dropping’ in which insurance providers discourage the sickest patients, who incur 70% of healthcare costs, from being able to obtain insurance while providing membership incentives to the healthiest patients who incur only 10% of these costs. The profit motive behind the mainstream practice of lemon dropping is the impetus for many of the rules and clauses in insurance policies such as the pre-existing condition clauses that denied many Americans medical insurance coverage.
Sixty-two percent of all American bankruptcies are due to unpaid medical bills; 78% of these were insured at the time. Obamacare’s injunction against coverage caps was designed to prevent the growing number of medical bankruptcies. However, Obamacare does not prevent coverage caps from causing health insurance premiums to rise, thus allowing the high numbers of medical bankruptcies to continue.
Obamacare’s Exchange Benefit Plans Are Underinsurance Plans
Insurance policies sold on the exchanges created by Obamacare are only required to have actuarial values (AVs) of 60% (Bronze plan), 70% (Silver plan), 80% (Gold plan), and 90% (Platinum plan). This means that the actual health care expenses that a policy pays, on average, will be 60%, 70% and 80% respectively. For example, the purchaser of a bronze level plan can expect to pay 40% of actual medical bills even after paying the premiums. Due to their lower cost, AVs of 60% and 70% are likely to be the predominant plans chosen and these plans are highly inadequate coverage for any serious illness such as cancer.
Not everyone who needs healthcare will qualify for healthcare subsidies under Obamacare. Although Obamacare enacts laws to address the problem of lack of healthcare access, the Congressional Budget Office and Joint Committee on Taxation estimate that at least through 2022, 30 million of the 50.7 million Americans who currently have no insurance will still have no insurance after Obamacare has been implemented. Sources project an increased number of Americans will have very inadequate insurance, leaving them bankrupt should they become seriously ill.[12,13]
Based on the need to maintain profits, the cost of insuring those who need it most will lead insurer’s to inflate overall premiums and cost sharing expenses. Even those who qualify for Obamacare’s expanded Medicaid coverage will still have some cost sharing expenses that for them may pose a financial hardship and the increased cost sharing expenses for those who do not qualify for subsidies especially for those with serious illnesses (the lemons) may lead to bankruptcies and/or avoidance of medical care they simply cannot afford.
Sadly, these sorts of policies allowed under Obamacare will continue to result in extensive numbers of American medical bankruptcies and will not prevent insurers from shifting the costs of covering the sickest patients onto enrollees in the form of markedly increased premiums and cost sharing expenses (deductibles, coinsurance and co-pays).
Obamacare Isn’t Enough
The reasons why additional reforms beyond Obamacare are necessary is because Obamacare fails to ensure that
everyone is adequately covered, that those who are covered can actually afford to use healthcare services, and because Obamacare does not end the epidemic of medical bankruptcies or control the bloated costs that are bankrupting the American healthcare system.
To a large extent, Obamacare fails to control the unsustainable cost of American healthcare because it fails to use the government’s substantial purchasing power to bargain down prices for drugs and other medical goods and services and it fails to streamline excess administrative cost inherent in the private insurance system but instead it increases both the patient pool and the tax subsidies to the multi-payer system, the system that the prevailing economic paradigm lauds as the free-market solution. This is because it does not address the basic precept held by prevailing healthcare economists and policy makers, namely the idea that the free-market can remedy all the nation’s healthcare woes.
Healthcare as Commodity or a Right?
Brill and others including healthcare economists like Kenneth Arrow, Paul Krugman and Gerald Friedman maintain that the very nature of healthcare being essential to life itself abrogates its ability to exist as a free-market commodity. They hold that because healthcare itself cannot obey the laws of supply and demand, it cannot be treated like a for-profit commodity. Common sense tells us that when we are having a heart attack, we are not going to be in any position to bargain over the cost of lab tests. Because of this, Brill insists that the healthcare market will always be a ‘seller’s’ market’ with the seller setting the price as far into orbit as our US promissory notes will stretch.
The effects that the traditional “free”-market paradigm will continue to have on our ailing healthcare system are anticipated to lead to another public outcry for more healthcare reform. We are realizing that healthcare is too essential and too expensive to be treated like a commodity. The next outcry will be for something that goes beyond the for-profit-mindset: It will herald that healthcare is a human right, best supported by the implementation of a single-payer healthcare system.
We are the only industrialized country in the world that does not provide some type of universal health coverage to its people. A universal healthcare system such as single-payer is our long awaited reform that most other developed countries have already implemented.
Movement in the direction of a single-payer healthcare system has begun in our country. Vermont’s version of single-payer legislation was already passed by both houses, and that state is currently applying for a waiver allowable under Obamacare so that it can implement a state single-payer system. Most states have single-payer bills and there is a national bill called H.R. 676 that currently has 41 cosponsors. The effects of the single-payer reform regarding how we practice medicine and how we are reimbursed will be substantial. As physicians we need to understand how we will be affected and also how we can be a part of the single-payer system that is in the future of American healthcare.
Special Thanks to Sherry Weinberg, MD, Don Bunger, Don Mitchell, MD, Jim Squire, MD, Marti Schmidt, JD, David McLanahan, MD, Kathleen Myers, DDS, Kathleen Randall, MA, and Helen Thorsen CDP.
Click here for references. This is the first of a three-part series.
Dr. Meissner is a member of the Washington Association of Naturopathic Physicians and a primary care physician in Seattle’s Capital Hill area. Currently on the board of directors Physicians for a National Healthcare Program of Western Washington, her personal interests include food safety, securing a universal healthcare system and clinical research on multiple sclerosis at Bastyr University.