How do we get from this mess to universal health care?

ROBERT KUTTNER

November 13, 1991|By Robert Kuttner

WHILE Sen. Harris Wofford was roaring to victory in Pennsylvania, fueled by middle-class worries over health insurance, Secretary of Health and Human Services Louis Sullivan was presiding over a summit conference of the health-care establishment. Consumer groups were excluded from the session of leaders of big insurance companies, doctors' organizations and hospital executives.

Sullivan emerged from this session with the perfect symbol of the administration's vacuous health policy -- a proposed universal health-care credit card with only one flaw: It doesn't provide any health coverage.

The proposed card will include, on a tiny chip, your medical history, so a hospital will have access to pertinent information in case of an emergency. And it will be accepted universally by hospital billing systems.

It is very much like cards carried by Canadians, British, Germans, Swedes and inhabitants of other civilized nations, with the one key difference that you're on your own when it comes to paying the bill. If you don't happen to have any insurance, or if you were turned down because of a pre-existing condition, the card is worthless. It is a bit like a credit card with no line of credit.

According to Sullivan, this system will take about a decade -- a decade! -- to develop. This approach puts the card before the horse.

Sullivan says the card, and the accompanying harmonization of insurance claims forms, will save about $8 billion in administrative costs. But of course, the real administrative waste comes not from the fact that we lack a single card or a single set of reimbursement forms, but from the lack of a universal system.

Even with the card, some 1,500 different health plans will still exist, each with its own formula for "deductibles" and patient "co-payment" requirements, its different rules about what is covered and how physicians' decisions are to be second-guessed by insurance company reviewers.

A shift to a universal system would save not $8 billion a year but anywhere from $67 billion to $120 billion, according to various studies.

The other recent announcement of progress on the health-insurance front was an agreement by the state insurance commissioners to regulate "medigap" insurance. So called medigap policies cover things not covered under Medicare, such as prescription drugs and the first several hundred dollars of hospital bills.

Under this new system, thanks to some prodding from Congress, no elderly person will be denied medigap coverage or charged exorbitant rates because of a pre-existing condition. That's progress, of a sort -- but again we should keep in mind that we have medigap policies and worries about pre-existing conditions only because America lacks a universal health plan.

If the upset win by Harris Wofford in Pennsylvania's Senate race is any indication, health care is the Democrats' perfect issue for 1992. Or is it?

On health care, the voters are well ahead of the politicians of both parties. But, turning the general voter desire for universal, efficient health care into an actual functioning system involves very tricky politics. Even Wofford, though fervently committed to a universal system, was a bit vague on some key details.

The basic problem is imagining a transition from the present system to a universal one. Currently, health care consumes over $700 billion a year. About one-third of this is paid through private health insurance, most of which is financed by employers as a fringe benefit. About 43 percent is paid by some level of government, ultimately through taxes. The remainder -- about $300 billion -- is paid by individuals out of pocket.

To shift abruptly to a universal, tax-supported system would actually save consumers money. But to collectively finance those health costs now paid by individuals would require a national tax increase of something like $300 billion.

That's why many supporters of universal health insurance prefer a "play-or-pay" model, in which employers would be required to "play" by providing insurance, or pay a tax, and the unemployed would get coverage directly from government. This would cost just as much, but the taxation would be indirect.

The risk of this approach is that it would prolong the patchwork and the inefficiency. Countries that do use this approach, including Germany and Australia, regulate it stringently so that different pieces of the system do not try to save money by fobbing off costs onto each other or onto the consumer. To make "play-or-pay" work properly, the private health-insurance industry, as we know it, would cease to exist.

In order to solve the health-insurance crisis, Congress and the next president will have to undertake basic and massive reform, not gimmicks to patch the cracks in the present system. And the last place true reform is likely to emerge is from closed meetings of the medical-industrial complex.

The Bush administration keeps handing the Democrats a winning issue. Will the Democrats have the nerve to use it?

Robert Kuttner writes on economic matters.

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