Health Care Should Be Driven by Mission, Not Money

Philip Caper, M.D.

As health care reform legislation enters a critical phase in Congress, it's important to keep our eye on the ball - elements essential to the success of any reform effort. In order to define those elements, we must have a clear understanding of the nature of the pathology in our dysfunctional health care system.

Modern high-tech health care is a right of the residents of most wealthy countries in the world - except the United States. America is exceptional in this regard. It is also exceptional in being the only wealthy nation where health care is considered to be a business.

To read a PDF of the full article, click here.

The Heart of Power: Health and Politics in the Oval Office

A Book Review by Philip Caper, M.D.

In many ways, the new book by David Blumenthal and James Morone is a fine dissertation on the role of the presidency and a succession of American presidents, stretching back to FDR, in the formulation of health care policy in the United States. But it does not address a central question. What are the barriers to reform of the American health-care system? Why has it been so difficult for American politicians to create a statutory right to health care for Americans - a right that every other affluent democracy created years ago?

To read a PDF of the full review, click here.

Re-Figuring Federalism: Nation and State in Health Reform's Next Round

Lawrence D. Brown
Professor of Public Health, Columbia University

Health reform must recognize the extensive role of states in U.S. health policy and reconcile national consistency with sub-national diversity. Re-Figuring Federalism: Nation and State in Health Reform's Next Round draws lessons both from federal-state relations in Medicaid and from the experiences of three other federal countries—Canada, Germany and Switzerland. It concludes that universal health coverage is compatible with a federal system, but that the federal government needs to establish central rules of the game.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Administering Health Insurance Mandates

C. Eugene Steuerle
Vice President, Peter G. Peterson Foundation

Paul N. Van de Water
Senior Fellow, Center on Budget and Policy Priorities

Mandates form an integral part of many proposals to expand health insurance coverage. Often, however, too little attention is paid to how and whether they can be administered. Administering Health Insurance Mandates finds that a mandate will be easier to administer when some or all of the following conditions are met: The mandate emphasizes facilitating compliance rather than penalizing noncompliance; It operates as a simple play-or-pay arrangement; It can accurately take advantage of regular withholding for most workers; It involves penalties that are moderate and collectable; It is coordinated with any subsidies and other public programs, including Medicaid; It is based upon other government payments that can be denied, such as tax benefits; It is applied only to those with more than low incomes, unless the penalty is denial of other benefits; Its size does not vary greatly with fluctuations in income, so any penalty can be collected currently and accurately.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

Paying a Fair Share for Health Coverage and Care

Jill Bernstein
Health Policy Consultant

Expanding health coverage will involve changes in the premiums and taxes people pay for health insurance and the amounts they pay out-of-pocket for specific health care services. Payment arrangements must generate sufficient revenue, promote efficiency in health care delivery, assure access to care for people who have low income or are in poor health, and minimize administrative costs and burden. Paying a Fair Share for Health Coverage and Care evaluates alternative approaches—including social insurance programs, means-tested premium assistance, and income-related cost sharing—according to these criteria.

Click here to download the full working paper, commissioned by a joint study panel of the National Academy of Social Insurance and the National Academy of Public Administration on Administrative Solutions in Health Reform. For a list of other papers and study panel members, click here. The project is funded by the Robert Wood Johnson Foundation.

A Prime Target for Health Care Reform: The $300 Billion, Yes Billion, Spent Wastefully on Processing Bills

Merton C. Bernstein
Coles Professor of Law Emeritus, Washington University; Former Principal Consultant to the 1982-83 National Commission on Social Security Reform; Founding board member of the National Academy of Social Insurance

Over 15% of the medical care dollar gets spent on “processing bills, claims and payments” according to a McKinsey Quarterly analysis.¹ That tots up to some $300 billion a year. In contrast, Medicare spends about 3% of its outlays for administration.

The reason is simple enough: health care providers – doctors, hospitals, laboratories and imaging centers – obtain most of their reimbursement from hundreds of insurers with thousands of insurance programs with different rate schedules. Some large hospitals have a hundred or more rates for the very same procedures depending upon the insurance arrangement for the patient, if any. This balkanized payment system deploys armies of clericals in medical care provider offices to match their billings – roughly a billion a year outside of Medicare – with those nearly countless programs. In addition, insurers often seek to pin the tab on other insurers, as when parents have different coverages from their employers or an injury or illness is allegedly work or accident related.

By contrast, Medicare sets uniform rates within each of its fifteen administrative regions. That makes it much simpler for Medicare to match bills with the appropriate fee. Medicare participants – providers and insurer intermediaries – develop familiarity with Medicare’s procedures and rates. That enables them to process bills more speedily, with fewer mistakes and at lower costs than non-Medicare charges require. Bottom line: Medicare’s system takes less time and much less money.

In addition, analysis of federal data for 2003 (before the Medicare Modernization Act with its subsidies for private insurers and a drug program that prohibits bargaining over charges) shows that the means-tested Medicaid and SCHIP (State Child Health Insurance Program) combined cost four percentage points more to administer than Medicare does. ² Medicaid and SCHIP must repeatedly ascertain whether applicants meet their low-income tests. Doing so runs up the non-benefit costs. Ditto innumerable other federal/state child health programs, such as well-baby services that focus on low-income people.

Further, Medicare intermediaries do not have the conflicts of interest that can spark controversies between insurers and medical care providers and patients. Whether any particular charge is reimbursed does not affect the bottom line of Medicare insurer intermediaries. But a non-Medicare private insurer determination in favor of reimbursement reduces its profits. And where an insurer acts as an employer’s plan administrator, it always wants to show the employer/client that it is holding down costs. That provides a powerful incentive to deny claims; insurers and their employer/customers even come out ahead by delaying payments.

The multi-billion dollar differences in non-benefit costs between Medicare on the one hand and private insurance and public means-tested programs on the other argue for locating insurance where it costs least - in Medicare. Medicare does not own or provide health services any more than private insurers do. Medicare uses private insurers to perform its detailed administrative clerical work. No “socialism” is involved; only practicality and common sense.

¹ Nick A. LeCuyer and Shubham Singhai, “Overhauling the US health care payment system”, The McKinsey Quarterly (June 2007). It used 2005 data from the Center for Medicare and Medicaid Services (CMS). The over 15% includes the more efficient payments for Medicare; hence the non-Medicare component is much higher than 15%.
² Centers for Medicare and Medicaid Services, National Health Expenditures by Type of Service and Source of Funds, CY 1960-2006.