US healthcare

Washington's hottest topic

Karen Dente reports on a feverish summer for reformers

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Healthcare reform is underway with both chambers of Congress working hard this summer devising bills to overhaul the nation’s healthcare system. There are hopes for signing a bill in October, an ambitious goal that President Barack Obama is determined to meet, even if it takes ‘sleepless nights’ and a shortening or cancellation of the usual August recess by the Senate.
Three House and two Senate committees have been working on reform, each with their own bill. The House has so far included a plan for tax increases to pay for the gaps in coverage of the over 47 million uninsured Americans, an idea that the Senate Democrats are unlikely to favour. The legislation is expected to affect about 17% of the US economy but there is a lot of disagreement on how to allocate public resources to cover the many uninsured.
In an editorial in the New York Times, Obama stated that there is now broad agreement in Congress of about 80% of what has been set out to be achieved.
The White House has had discussions with several healthcare industry groups to help save costs and make sure everyone’s interests are met onboard the healthcare train for reform, including Big Pharma, doctors’ associations, and hospital groups. At this point the government already pays over 50% of the bills at the average American hospital because of expansion of Medicare and Medicaid, the publicly tax-funded healthcare plans for the elderly and indigent. The political left would like government-run insurance plans to have a level playing field with private ones, but this has faced opposition on several fronts, especially by hospitals who feel consistently underpaid for care by public insurances. It is the many uninsured Americans that show up in emergency rooms without being able to pay their bills who end up costing hospitals money. While the government subsidises hospitals to compensate for the loss, hospitals claim that it still costs up to 5% of their annual profits.
Among the health industry groups, the American Hospital Association (AHA) has now promised, as part of a deal, to accept $155 billion in Medicare and Medicaid cuts to hospitals over 10 years, which is less than the $225 billion that Barack Obama was striving for earlier this year. For hospitals this is probably a good deal, since they will be likely to benefit from increased business with more patients insured under a system of universal health insurance with subsidies for the poor, as some of the proposed reforms foresee. One concession the hospitals asked from the White House is to go down harder on clinics owned by doctors perceived to be anti-competitive and luring the most profitable patients, since they can refer them to their own company. The AHA’s main fear is that the government might set price controls, so the concession in terms of cuts comes as a good bargain if prices are to remain uncontrolled.
Another target for reformers desperate to locate cost savings is the drug industry. Big Pharma had announced earlier in June that it was willing to contribute $80 billion to fill the gap called the doughnut hole in the Medicare Part D drug plan for senior citizens over the next 10 years. They vow to cover up to 50% of drugs costs, which are very expensive for patented drugs in the US. This benefits the industry, since drug companies hope it will lead to brand name loyalty among senior citizens in conjunction with the PR benefit. They are also investing into a larger customer base, which promises them greater revenue. There are an estimated 3.4 million people who will hit the gap in drug coverage according to the Kaiser Family Foundation, and the out-of-pocket expenses for these is estimated to cost the industry $5 billion annually, so less than the $8-billion-per-year pledge. Should the reform costs to Big Pharma add up to less than $80 billion over 10 years this will be an enormous gain for the industry, according to some stock analysts.
Doctors’ groups are also concerned about ensuring that their interests will be met by Barack Obama’s healthcare reforms. The American Medical Association has been seeking to undo a provision that goes back 12 years in which a federal law limits the growth of Medicare reimbursements at the expense of doctors’ pay. According to an article in the New York Times, a budget office analysis said that the House bill would ‘result in a net increase in the federal budget deficit of $239 billion’ over the next decade partially because of an increase in Medicare spending to prevent drastic cuts in payment to doctors. The House bill, which hopes to achieve near universal health coverage, would seek to help finance the coverage of the uninsured by imposing a surtax on the rich and a payroll tax to employers (as high as 8% of wages) if they do not provide health insurance to their employees. The current estimated costs for the Senate Health Committee Plan and the House Plan are about $1 trillion over 10 years. There is concern that the new taxes required to help finance coverage for the uninsured, as it is envisioned by the reforms, might cost jobs in a recession and impact on small businesses, considered the backbone of the US economy. A mandate to expand Medicare and Medicaid coverage to include more needy citizens, as the House bill envisions, would fall on the back of States already underfunded in terms of public healthcare dollars. This has left State Governors concerned about how to come up with the necessary funding for covering expansion of a public healthcare scheme, especially given the outlook of the current recession.
What distinguishes the US healthcare system from that of most other western countries is the lack of coverage for a wide swath of its population, which results in Americans forgoing healthcare because of cost. Estimates of US deaths caused each year by lack of universal health coverage are as high as 20,000 with patients not seeing a doctor when sick or filling a prescription. While healthcare is unaffordable to many, it has wiped out savings among Americans who have health insurance but cannot pay their medical bills. A 2007 study by David Himmelstein showed that more than 60% of all bankruptcies are related to illness. Three points that Obama has been clear about ensuring in the new health plan includes change in terms of what insurance companies must provide for: nobody can be denied coverage based on a pre-existing condition, when they change jobs, or are too sick. Insurance companies have been discriminating against people applying for coverage on all these accounts.
But the big question for lawmakers, beyond figuring out how to finance the uninsured, is how to halt runaway healthcare costs that have been exponentially on the rise and are affecting even those countries that have public universal health plans. A problem with the current US healthcare delivery system is that it rewards volume of services over quality. Providing an incentive for reimbursement for quality of healthcare could be a good step in the right direction.
Ethicist Peter Singer from Princeton has put forth the argument that rationing healthcare may be the only sensible and sustainable solution to keeping down costs, either directly or indirectly through an independent agency like NICE in the UK. What needs to be figured out is which treatments are cost effective and should be provided for by the public. Having an expanded public health plan alongside private insurance options, in lieu of a single universal coverage and rationed healthcare, would show individuals who prefer to opt for private insurance what the costs of non-rationed healthcare really are when expenses are paid for out of their own pockets. The liberty of having access to non-rationed healthcare will need to come at some personal expense. In the end, however, the reform to the health plan should at least ensure every American’s right to access good healthcare.
Obama seems dedicated to making this happen by negotiating deals with industry groups and having the White House work closely with both chambers of Congress, however arduous the task, throughout these summer months. How precisely he will come up with the financing of a plan, without adding to the projected ballooning increase of the over a trillion dollar deficit he inherited from the Bush administration, remains to be seen. The cost of healthcare remains expensive and one factor is brand drugs that are given over generic ones that work just as well. ‘It will require discriminating consumers because ultimately we can’t afford this. We just can’t afford what we’re doing right now,’ Obama said at a press news conference in July in the White House.
Nefarious campaign tactics and political cynics are trying to exploit fear that the implementation of a public government-run health plan will spell out less choice for American consumers with rhetoric that increased government involvement would lead to ‘euthanising’ of the elderly population due to a clause to include end of life consultation as part of Medicare insurance, with many Republicans and conservative Democrats buying into this nonsense.
As Obama stated in an editorial in the New York Times, ‘what’s truly scary, what’s truly risky, is the prospect of doing nothing.’ If the healthcare system is left to its own devices, it will be the insurance companies that will continue to profit at the expense of discriminating against sick people. Health should not be treated as a commodity, and it shouldn’t be about politics. Let’s hope that Obama’s idealistic vision as President for achieving health insurance reform for the American people won’t be thwarted due to political pressures in the end.

01.09.2009

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