The tide is finally rising under the idea of health care for all in America. It is no longer possible to tar this simple and ubiquitously implemented idea as a bid to “take away our freedom” or “destroy the free market.” Hearteningly, the debate is shifting towards the harder questions of when, and how.
One popular idea is to expand Medicare to cover all Americans — essentially turning the government into an insurance provider. This is a fine idea, and it works well in countries such as Canada and Taiwan.
But the transition would be beastly. Senator Bernie Sanders suggests a four-year transition from Medicare as it is to Medicare for all. This is too short a time period in which to dismantle the entire apparatus of the U.S. health insurance industry and repurpose the whole thing into a government entity.
But there is a simpler way.
While most developed countries other than the U.S. ensure universal access to health care, the specifics vary widely. An informative tour of the variety of possible health systems is provided by T.R. Reid in his engrossing book “The Healing of America.”
It surprised me to learn that there are many ways to provide universal access to care, and not all of them require the government to get into the business of providing health care or health insurance. Certainly, some systems — like the U.K.’s National Health Service or the Veterans’ Administration in the U.S. — involve the government itself providing health care, directly employing physicians and maintaining hospitals and clinics. But others — like Germany and Japan — maintain quality health care, low costs, rapid access and universal coverage within a nongovernmental system of care providers and insurance companies that looks much like the American system. What’s their secret?
The key similarities across all of the effective systems surveyed were that coverage needed to be universal to include the healthy people whose premiums keep the system solvent. And health insurers could not operate on a for-profit basis.
Why is this crucial? Shouldn’t the free exercise of capitalism magically ensure the highest value at the lowest cost?
Well, no. This works only under certain circumstances, key among them being that the quality of the product must be discernible by the consumer. This isn’t true for health insurance because health insurance companies don’t provide an actual product or service. Rather, their product is payment for services provided by health care workers. And every payment made represents a loss to the bottom line.
Hence the central conflict of interest inherent in for-profit health insurance: Insurance companies make more money by refusing the service they ostensibly provide — payment for health care. The more claims they deny, the bigger their profit margin. This is why insurance companies spend so much money paying people who figure out how to deny claims. In fact, private insurers have up to five times the overhead of Medicare, which doesn’t plow money and effort into figuring out how not to pay claims.
To add insult to injury, this army of foot soldiers dedicated to not paying claims has spawned an equally expensive counter-army of personnel on the doctor side of the equation, with endless finance administrators, insurance specialists and medical billing coders dedicated to combating the efforts of insurance companies not to provide payouts. That’s an enormous amount of money currently being wasted on the arms race overpayment.
A free-market proponent might expect that poor coverage would result in fewer people choosing that plan. But for that to be true, buyers have to understand what the plan actually covers, and insurance companies have learned how to be very opaque about that. In fact, skimpy plans are a great business strategy — so much so that when unregulated, they siphon off the healthy customers that insurance companies need to stay solvent, leaving plans that actually cover health care costs overloaded with ill, expensive patients (the much-feared “death spiral”).
The drafters of the Affordable Care Act (Obamacare) recognized this and created a legal minimum set of services that must be covered to prevent the selling of these false-front plans that provide only the illusion of health insurance. They also mandated that insurance companies shovel a minimum amount of their profits back into health care and quality improvements.
But the underlying incentive to minimize payouts, and to hide that from the consumer until the moment of truth, is still there. Trying to create legal barriers to profit-seeking business practices is inefficient and prone to loopholing. Additionally, the Obamacare rules don’t go far enough. Why should insurance companies be allowed to move people’s hard-earned premiums out of health care and into shareholder pockets at all?
A better approach is to mandate that health insurance companies operate as nonprofits. That means all surplus money must be put back into company improvements — not distributed to shareholders. In one fell swoop, this would disable the entire apparatus of actuaries, claims reviewers, claims adjusters and administrators who are dedicated to figuring out how not to pay claims. If all of the company’s profits are going to be put back into improving the quality of service, there is no incentive to try to avoid providing that service to improve the bottom line.
Transitioning from a for-profit to a nonprofit insurance model would be much smoother than transitioning hundreds of millions of people off of their existing employer-based plans and onto Medicare. It wouldn’t be necessary to dissolve all the existing health insurance companies; they would merely need to be restructured as nonprofits. This plan would also save the government from having to undertake the gargantuan task of expanding Medicare to over six times its current size. If the public still desires a government-provided option for insurance, Medicare expansion could be undertaken at a slower and less disruptive pace.
“Medicare for all!” sounds great, and it might be great. But simply moving to nonprofit health insurance would be cheap, straightforward and an important step in the right direction.
Thalia K. Robakis is a psychiatrist.
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