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Insurance Universal United States
The United States is the only industrialized country in the world that does not offer all its residents some form of universal health care. According to the most recent statistics from the US Census Bureau, there are 47 million Americans with no form of health insurance, accounting for 15.8% of the entire US population. While many argue that the United States has the “best health care in the world,” attributing advanced medical technology and state-of-the-art facilities, others point to the many problems including fragmentation, inefficiencies, and escalating costs that plague the current system. Furthermore, the United States spends more per capita on health care than any country in the world, nearly 24% higher than the next closest country and over 90% higher compared to other countries considered global competitors. According to the Organisation For Economic Co-Operation and Development (OECD), the United States per capita spending on health care is twice the average of all other OECD countries.
The term “universal health care” refers to providing every citizen of a country with health insurance. There are several theoretical approaches to accomplish this, and every country is different in how universal health care is achieved. While every industrialized country in the world other than the United States has some form of universal health care, the United States has the benefit of using other countries’ programs as blueprints to develop a system. While no system is perfect, an ideal system will have advantages that far outnumber any disadvantages. Because this is a health policy and therefore political matter, it is likely that no system will ever provide 100% satisfaction to all constituents in the system. However, the goal should be to get as close to universal satisfaction as possible.
After investigating several universal health care models, I believe the most ideal (and potentially successful) method is a single-payer model. This paper will examine the structure of such a model, highlighting key areas such as cost, access, quality, and ethics. Brief comparisons with other models and countries may also be used to emphasize differences and demonstrate potential benefits for a single-payer model.
What is Single-Payer?
Single-payer refers to a way of financing health care, both from the standpoint of collecting money for health care services and reimbursing providers for health care costs. In a single payer system, both the collection and reimbursement of funds are the responsibility of one entity – the government. The government collects funds from individuals and businesses, mainly in the form of taxes, and the government reimburses providers for health care services delivered to individuals enrolled in the universal health care program.
The United States currently employs a multiple-payer model (non-universal). As a result, the collection of money for health care is a joint responsibility of the private insurance industry, which collects premiums and other payments from individuals and businesses, and the government, which collects taxes from individuals and businesses. Furthermore, reimbursement is also the responsibility of both the private insurance industry, which reimburses providers for health care services delivered to privately-insured individuals, and the government, which reimburses providers for health care services delivered to publicly-insured individuals. Publically-insured individuals are people enrolled in government health insurance programs such as Medicare, Medicaid, S-CHIP, and the VA system.
It should be noted that single-payer is different from “socialized medicine.” Socialized medicine refers to a system like the National Health Service in the United Kingdom, where the mechanisms of delivery of health care are owned by the government. In other words, the government owns the health care facilities and the physicians work directly for the government. In comparison, the mechanisms of delivery of health care in a single-payer system are not necessarily owned by the government. Physicians can be either in private practice or public practice, and hospitals can be both publicly- or privately-owned. For example, in Canada’s single-payer system, physicians are predominantly in private practice, while hospitals are both public and private. Therefore, single-payer does not specify a health care delivery mechanism; it specifies a health care financing mechanism.
Denmark, Sweden, and Canada are examples of countries with single-payer financing of health care. While the US does not have a universal health care system, it does currently have a single-payer program – Medicare, which is the national health insurance program for people aged 65 and over. Because Medicare is a single-payer program, a provider taking care of a Medicare patient has only one entity to bill - the government. In contrast, a provider has multiple entities to bill when dealing with privately-insured individuals due to the large number of private insurance companies.
Single-Payer System Overview
No two single-payer systems are alike. For example, Canada’s system is different from Sweden’s, which is different from Medicare in the United States. Physicians for a National Health Program (PNHP) have put together a proposal for a single-payer universal health care system in the United States. The details of this proposal are included below, and will be used as a foundation for discussion on how a single-payer system would be structured in the US.
In this program, every resident of the United States would be enrolled in a public insurance system (the National Health Insurance or “NHI” program). Coverage would include all necessary medical care, including mental health, long-term illness, dental services, and prescription drugs. Coverage decisions would be determined by a national board of experts and community representatives; unnecessary or ineffective interventions would not be covered. Patients would not be billed for medical care covered under the NHI program; rather, all costs for covered services would be paid by the NHI program. Private insurance that covers services covered by the NHI program would be forbidden, although private insurance would be available to insure patients for services not covered under the NHI program.
The program would be funded by combining current sources of government health spending (Medicare, Medicaid, etc.) into a single fund with modest new taxes, such as a small payroll tax or earmarked income taxes. While taxes will increase for individual citizens, the increase will be offset by reductions in premiums and out-of-pocket spending. Employees may also receive higher wages from employers, who will no longer have to pay as much for health benefits as part of employee compensation (i.e. instead of paying employees in health benefits, employers will pay higher wages).
Hospitals would receive a global budget from the NHI program, which means that they would receive a lump sum to cover all operating expenses every month. Hospitals would need to find a way to stay within their global budget while still providing all necessary medical care.
The global budget for the hospital would not cover “capital expenditures” (e.g. facility expansions, purchasing new equipment). Such expenditures would be funded by the NHI program separately from the global budget. Approval for capital expenditures would be based on community needs to prevent over-concentration of technology and facilities in one area.
Physicians would remain in private practice or continue to work for private hospitals. In terms of reimbursement, physicians could choose one of three ways of being reimbursed: fee-for-service, salary at a health care facility, or salary within a capitated group. In fee-for-schedule, a national fee schedule for each type of treatment would be negotiated each year between the NHI program and provider organizations (e.g. medical associations). For salary at health care facilities, physicians who work for hospitals and other health care facilities would receive a fixed annual salary. For salary within a capitated group, a group practice or non-profit HMO that employs physicians would receive payments from the NHI to pay their physicians. These payments would be capitated – that is, a payment would be made every month for each patient enrolled with a physician to cover the cost of taking care of patients.
In terms of drugs, an expert panel would create and maintain a national formulary of prescription drugs covered under the NHI program. Prices for drugs and supplies would be negotiated with the NHI program, which would get a good price from manufacturers due to its bulk purchasing power.
Currently, the US health care system is driven largely by economic forces, which are based on a profit motive. The theory behind the US system is that private health insurance companies seeking to maximize profit will compete with each other, and therefore drive down overall costs. However in practice, this does not happen as health care costs are rising at an unprecedented rate. Interestingly, from 2000-2004, profits for the top 17 US health insurance companies rose 114%; in contrast, the profits of companies in the S&P 500 (an index of 500 commonly owned stocks) rose 5% during the same period. Also during that time, the number of uninsured individuals grew by six million people, and health insurance premiums rose 60%. And contrary to popular belief, the newly uninsured were overwhelmingly native citizens, not immigrants. A possible explanation for this is that insurance companies deny insurance to people with pre-existing conditions, conduct heavy utilization reviews, and “cherry-pick” (selectively insuring the healthy and charging higher premiums for the less healthy). In the end, private health insurance companies seeking to maximize profit have no incentive to insure everyone, as this would require them to insure patients with high health care costs.
In a single-payer system, overall costs would be reduced by reducing administrative overhead. More importantly, a single-payer program would greatly facilitate cost controls because of its centralized administration. The complexity of the US health care system has been the subject of much criticism. As the prominent Brookings Institute economist Henry Aaron wrote, “Like many other observers, I look at the U.S. health care system and see an administrative monstrosity, a truly bizarre mélange of thousands of payers with payment systems that differ for no socially beneficial reason, as well as staggeringly complex public systems with mind-boggling administered prices and other rules expressing distinctions that can only be regarded as weird.” A 2003 New England Journal of Medicine study calculated the administrative costs involved with insurance overhead, employers’ costs to manage health care benefits, hospital administration (e.g. billing), administrative costs of practitioners (e.g. billing), and administrative costs of long-term care facilities. The study estimated that in 1999, as much as $294.3 billion was used for administrative costs, representing 31.0% of health care expenditures in America. In contrast, in Canada’s single-payer system, administrative costs represented 16.7% of health care expenditures. It should be noted that the study also discussed the difficulty in calculating true administrative costs. For example, the actual number of $294.3 billion should not be taken too literally, as this may be an overestimate of nearly $50 billion. The more important point is that the administrative costs in the US are very high. For a single-payer model, the goal would be to reduce administrative costs that are wasteful. For example, a 2005 study showed that in California, private insurers devote 20-22% of their spending to “billing and insurance-related functions” (BIR). While the definition and measurement of BIR is potentially controversial, one conclusion that can be drawn from the study is that physicians, hospitals, and insurers devote a large amount of money to handling claims and hiring administrative staff to deal with billing. These costs, along with costs like marketing and advertising, are among the administrative costs that would be saved by switching to a single-payer system. The specific amount saved would vary according to the design and functions of the new system.
Beyond reducing administrative costs, cost controls will be another effect of a single-payer system. In general, administrative costs are not thought to be a major cause of health care inflation. While these costs represent a large expenditure, reducing administrative costs in a single-payer system without instituting other cost control mechanisms would do little to slow the overall growth of health care costs. The strongest economic argument for a single-payer system is that it can control costs in a coordinated fashion because of the centralized nature of its administration. In contrast, because of the non-centralized administration of the current US health care system, effective cost controls are difficult to institute. For example, Medicare has been more successful at controlling costs than private insurers in recent years. However, these cost controls have had little effect on overall health care costs because private insurers have not instituted the same cost controls as Medicare.
Because of its centralized administration, a single-payer system can implement cost controls such as global budgeting for hospitals and supply limitations (e.g. preventing the purchase of too many MRIs in an area that is already oversaturated with MRIs). These measures are known to be some of the strongest cost controls available to policy makers. This is evident as other countries have been able to successfully institute such controls, slow down the rate of health care expenditure inflation, and still provide high-quality coverage to its citizens.Another example of cost control is that single-payer systems can reduced prices for goods and services due to bulk purchasing power. One study compared the price of a defined group of medications in different countries. The price of these medications in Canada, which uses its purchasing power to negotiate drug prices with pharmaceutical companies, was only 60% of the cost of the same medications in the US.The lower drug prices are one of the reasons why drug re-importation from Canada has increased in recent years.
Another cost control that would occur is the elimination of uncompensated health care. The current safety net for health care in the United States is emergency rooms and other types of care administered to uninsured individuals. However, the costs of these expensive treatments must be currently subsidized by increasing provider charges to insured patients, thereby increasing overall health care costs. A single-payer system would eliminate these costs while also increasing preventative care to avoid as many (costly) emergency room visits.
Finally, because billing is done by one entity, single payer systems facilitate the collection of massive databases that can be used to study and potentially improve practice patterns. The databases can also be used to screen for fraudulent billing by providers, as has been done in Taiwan’s new single-payer system.
Quality and Access Implications
Beyond the cost benefits, high quality of care and abundant access to resources are imperative to the success of any health care system. With a single-payer system, the most obvious benefit to access is that every individual in the US would have health insurance coverage. Therefore, patients would be able to access health care with minimal financial barriers. This improved access would also increase overall public health by increasing and promoting preventive/primary care. In addition, patients would have free choice to choose their doctor. In the current US system, not every provider accepts every form of health insurance, and the existence of managed care preferred provider networks is an impediment to free choice of providers. A single-payer system would also enable health care coverage to become highly portable. In the current US system, insurance status is usually linked to employment. However, a single-payer system would allow a person to go from job to job without experiencing interruptions in health insurance coverage. Moreover, separating insurance status from employment would also increase the number of small businesses, as there are many people who refrain from starting their own businesses because they are afraid to lose their health insurance (i.e. the “job lock” phenomenon).
Quality of care may also improve with a single-payer system. Physicians will be able to make clinical decisions based on best practices, as the influence of a patient’s financial circumstances will be decreased. Physicians will also enjoy increased compliance by patients, who will be able to afford the medications and interventions prescribed to them. The potential drawback in terms of quality is that technology-hungry Americans would have to accept limits on ineffective, questionable, or medically unnecessary interventions that would not be covered by the single-payer system. However, such interventions would be likely be covered by supplemental private insurance, as is the case in other countries with a single-payer system. As a result, technological innovation and subsequent increases in quality could still occur while still maintaining cost control mechanisms.
Ethical and Public Health Implications
At its root, the lack of universal health care in the United States is a moral and ethical issue. While other countries have declared health care to be a right, the United States treats health care as a privilege – only available to those who can afford it. In essence, health care in the US is treated as a commodity, and not as a social or public good. However, this designation contrasts to fundamental American beliefs in equality and equal opportunity. And, uninsured individuals face much more difficulty and adversity than insured individuals, thus reducing equality. The Institute of Medicine estimates that the uninsured have an excess annual mortality rate of 25%. This increased mortality translates into 18,000 excess deaths for people between age 25-64 per year, which is of comparable magnitude to the number of people in this age group who die each year from diabetes, stroke, HIV, and homicide. The suffering caused by lack of insurance goes far beyond the purely physical suffering experienced by uninsured individuals. Emotionally, lack of insurance contributes to anxiety, familial stress, depression, and fear. Financially, medical costs are a major cause of personal bankruptcy. Even without bankruptcy, the financial strain on families can be significant. If society believes that equality and universality are important features of a health care system, then the current US system is simply unacceptable. Morally and ethically, a universal health care system is the right thing to do.
Potential Disadvantages and Political Implications
While there are countless benefits to a single-payer universal health care system, there are also potential disadvantages as well as implications that must be considered for various groups. For example, private health insurance companies may be significantly crippled from a single-payer system, as their role would be dramatically reduced. In addition, the pharmaceutical industry does not stand to gain from a single-payer system because of the potential for price controls and bulk purchasing by the government and subsequent reduction in profits.
Beyond private sector implications, the viability of any public program lies in its funding levels, and the biggest potential disadvantage to a single-payer system is the threat of underfunding. This could occur as a result of underfunding by a hostile government, where a government that favors privatization might take measures to undermine the public system. In the United States, the strength of private special interests and lobbyists makes this a possibility. In addition, mismanagement of the program is also possible if the government misallocates funds, taking away money from vital services and decreasing quality. Moreover, while cost control mechanisms can reduce overall costs, overly-aggressive cost control could result in decreases in health care quality. For instance, inappropriately strict limits on the diffusion of technology might stifle positive innovation in technology. Similar to underfunding, this can be avoided through prudent management of the health care system, but it remains a potential concern. Finally, recession can also be a potential problem, as public health care systems rely on tax dollars, which decrease during recessions.
Because Canada is often used as a good example of a single-payer system, a concern based on anecdotal evidence suggests that waiting lists for medical procedures and long lines at hospitals are the norm with such a system. While waiting lists certainly do exist for certain non-emergent procedures, it is not at all clear that the “waiting list crisis” that is so often talked about by the media and opponents of a single-payer system actually exists. The lack of quality data on waiting lists from the Canadian government, coupled with the limitations of surveys (e.g. differing methodologies), makes it very difficult to conclude with any certainty the size of the true waiting list problem. While waiting lists also exist in the current US system, it is presumably a smaller problem than in Canada. However, with adequate structuring and funding, waiting times can be greatly reduced. It should be noted that in Canada, there is no waiting time for emergent procedures or primary care visits.
An implication (whether good or bad) with a single-payer system is that cost controls may involve a good deal of public debate. For example, the public will have influence over what is and what is not covered in the single-payer system. If there is a public outcry for technology even though it means paying more for health care, then the system will adapt to these demands. In the current system, coverage decisions by private insurance companies are dominated by special interests, and consumers play a very minor role.A system in which decision makers are directly accountable to the public is more likely to be responsive to public opinion than the current system, in which decision makers (i.e. private insurance company executives) are not directly accountable to the public. This could be good or bad depending on how well the public is willing to investigate various health care coverage issues.
However, most businesses would benefit with a single-payer system due to the decreased health care costs. In 2007, the average employer-based health insurance premium for a family of four was $12,106, while the premium was $4,479 for an individual. With a single-payer system, businesses would no longer be required to cover the vast majority of health insurance premiums for their employees. Depending on the specific proposal, businesses might be required to fund the new health care system through a payroll tax, but for most businesses, such a payroll tax is likely to cost less than providing health insurance for employees. This would also level the playing field for businesses, since businesses that do not provide health insurance gain an advantage over businesses that do provide health insurance (due to lower overall costs). Furthermore, a single-payer system would also help stimulate the US economy to better compete globally. Currently, US businesses are at a competitive disadvantage to foreign companies, which have lower health care costs and therefore lower prices on their products.
Feasibility and Conclusion
The transition from the current system to a single-payer model would undoubtedly be very difficult. Thousands of people who work for private insurance companies would need to be shifted to other sectors of the economy. Even though these individuals could be trained to work in the new public system, they would still experience a significant change in their lives. Because of these considerations, most single-payer advocates and policy analysts believe that any transition to a single payer system would necessarily be gradual, taking place over the course of many years. With any new public system, Americans will also have to accept more government control and less private control of the health care system. Neither the government nor the private insurance industry can currently claim great popularity with Americans, and the question is which entity Americans will trust more to manage the health care system.
Many of the potential disadvantages of a single-payer system can be avoided through proper management of the system (e.g. funding the system at a very high level and insuring adequate capacity). However, there are some drawbacks to the system that represent tradeoffs that the American public must consider. While there are other ways to achieve universal health care, most popular proposals build on the current system of for-profit employer-based insurance. While some proposals may be potentially beneficial, they do not achieve the philosophical purity, administrative simplification, or cost control potential that a single-payer system can achieve. A single-payer universal health care system seems to be the most ideal health care system for the United States, and hopefully it will become a reality in the not too distant future.
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