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Don't Adopt the Medicare Model in Expanding U.S. Coverage

July 30, 2009 By:
David E. Edman
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Americans have access to the best health care in the world, but our system of insurance is broken, leading to unacceptably high health care costs, wasteful spending and a lack of access or insurance for some. Experts agree that approximately 30 percent of the $2.5 trillion dollars of our annual health care expenses are wasted on unnecessary, inappropriate and poor quality care.

At one extreme, some people argue for single-payer, government-run health care -- a so-called "Medicare for All."

Why would we want to do this? The current Medicare program is a financial train wreck. As our largest health care payer, Medicare has led the way to lots of wasteful spending. It is a politicized system, not an economic one. Decisions are made -- and providers are paid -- based on who has the power, not on who provides the most value as determined in the marketplace.

The critical question is: "What's the proper role for government in health care reform?" Should government "negotiate" with doctors and hospitals, set payment rates and cut the checks, as is done for Medicare parts A and B in this country, and with government-run health care in Canada and England?

Or should government manage and pay into a system of competing private insurers, establish the rules of engagement, serve as referee, and promote competition based on quality and cost of care? Examples include the nontraditional Medicare Advantage Part C Program and our Federal Employees Health Benefits Program, known as FEHBP.

In my view, the answer is clearly the latter. In Canada and England, where government sets the rates, pays the providers and limits the supply of services, everyone is covered and per capita costs are lower, but there are waiting lists for services, a dissatisfied public and a growing system of private insurance.

In the United States, there are many examples of inefficiency and waste in the current Medicare program. And since Medicare covers only 60 percent of costs on average, recipients need private supplemental insurance to pay for health care services that Medicare doesn't cover.

And what about the call for a "public option" -- a new Medicare-like program to compete with private insurance firms?

Again, I would argue no because this will lead to a single-payer system. To control costs, such a program would have to set payment rates sufficiently low, and that would drive physicians and private insurance companies out of the market. The claim that you will be able to "keep the current health insurance plan that you like" is false, because employers will drop their current private insurance in favor of the "cheap" public option.

So how do we solve the problem? By creating a voluntary, health-insurance exchange where private citizens, employers and the government (on behalf of the indigent) pay into a system of competing private insurers, such as the Federal Employees program. In that program, insurance companies submit competitive bids once a year to the federal government's Office of Personnel Management.

Federal employees then get information on benefits, costs and services, and can make their annual election of a carrier and a benefits plan. Competition to attract members on the basis of cost, quality and outcome is what keeps costs down while providing the best possible care.

A system of "managed competition" will spur innovation, allowing us to continue to deliver the best services. Other reforms that should be encouraged include: electronic medical records, greater consumer choice, personal responsibility, transparency, pay for performance, and prevention, wellness and heath education.

In short, the answer is not to insure more people into the current "broken" system. Fix the system first, and then require all citizens to purchase health insurance (like car insurance). We should let Congress know that we support reform, but oppose any expansion of government-run health care, including a "public option" health-insurance plan.

David E. Edman is a health care consultant and the Managing Partner of Risk Management Partners LLC in Wayne. He can be reached at 610-975-4415 or via e-mail at: david@RMPLLC.biz.

 

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