All the shortcomings of the healthcare restructuring result from the decision to leave it in the hands of private insurers.
With the Oct. 1 rollout of a major facet of the Affordable Care Act on the horizon, you’ll be hearing a lot about the glitches, loopholes and shortcomings of this most important restructuring of America’s healthcare system in our lifetimes. Here are a couple of things to keep in mind:
First, the vast majority of these issues result from one crucial compromise made in the drafting of the 2010 law, ostensibly to ease its passage through Congress. That was to leave the system in the hands of private health insurance companies.
Second, there’s an obvious way to correct this flaw: The country should progress on to a single-payer system.
The idea that the ACA is a logical precursor to single-payer, in which the government would be the source of all medical reimbursement, has been gaining traction as key thresholds for healthcare reform approach. The biggest milestone is the Oct. 1 launch of open enrollment for the health insurance exchanges that will offer individual insurance starting Jan. 1.
Last month, Senate Majority Leader Harry Reid made that point in a Nevada news broadcast, calling the ACA “a step in the right direction” but adding that the U.S. would have to “work our way past” private insurance-based healthcare. “We’re far from having something that’s going to work forever,” he said.
“There isn’t a popular groundswell yet” for a single-payer plan “because most people haven’t seen the ACA at work in detail yet,” says David Himmelstein, a professor of public health at the City University of New York and co-founder of Physicians for a National Health Program, the leading advocacy group for single-payer healthcare. But he anticipates that discontent will start in October “and accelerate through the winter.”
Among the law’s shortcomings, he says, are the lack of effective provisions to control healthcare costs and insurance premiums. Premium regulation remains in the hands of the states, and many don’t have strong regulatory oversight of health insurance. In California, health insurance premiums are exempt from prior approval by the insurance commissioner, unlike home and auto insurance. (An initiative to remove the exemption will appear on the November 2014 ballot.)
That’s not to say that the ACA won’t make health insurance more affordable and accessible to millions of Americans now excluded from the market. Published exchange premiums in 18 states have generally come in below expectations, and the federal subsidies available to most buyers will make them cheaper still.
In some cases the premiums may be higher than those of plans on the market now. But because of exclusions for preexisting conditions — which will no longer be legal — they’re actually unavailable at any price to people who will have no trouble qualifying for the exchange plans.
The ACA’s critics observe that a plurality of Americans still view the ACA unfavorably (43%, according to an opinion poll released in June by the Kaiser Family Foundation). They rarely acknowledge, however, that nearly 1 in 5 of those critics think the law doesn’t go far enough — that is, further toward single-payer.
In its earliest incarnation, the Affordable Care Act included a prototype government single-payer provision — the “public option,” a government-sponsored plan to compete with commercial insurers in the exchanges. The public option was deleted at the insurance industry’s insistence.
But the U.S. does offer a healthcare program that resembles single-payer. It’s Medicare, the broadly popular health plan that covers all Americans over 65. Medicare’s administrative costs are only about 2%, and its size gives it the clout to extract large discounts from doctors and hospitals. That’s why one oft-proposed version of single-payer is “Medicare for all” — simply expand its coverage beyond the 65-plus.
Canada’s single-payer system is another model. It’s popular and efficient and costs about one-third of America’s system to administer. Don’t believe the myths purveyed about Canada’s healthcare by the U.S. insurance industry’s minions.
As health economist Aaron Carroll has documented, Canadian patients and doctors are satisfied with the program. As for the contention that it “rations” care, he points out that care in the U.S. is rationed by cost: one-third of adult Americans surveyed by the Commonwealth Fund in 2010 said they had put off important treatment because of the cost. In Canada, the figure was 15%.
There’s little question that taking private insurers out of the American healthcare system would save hundreds of billions of dollars a year. Dozens of studies of federal and state single-payer proposals have found that single-payer plans could provide universal coverage — not even the ACA does that — and still save money.
Estimates of the administrative costs of commercial health insurers exceed 10%. That doesn’t include the costs to doctors and hospitals of maintaining billing staffs to deal with insurers and keep all their rules and peculiarities straight, or the time lost to individuals and their employers of navigating this unnecessarily byzantine system.
Add those, and the overall administrative costs embedded in the U.S. healthcare system come to 31% of all spending, according to a 2003 article co-written by Himmelstein for the New England Journal of Medicine. Administrative and clerical workers accounted for nearly 44% of all employees in doctors’ offices, they calculated.
What do Americans receive in return for all this overhead? Practically nothing. The insurance industry says its role is to hold down costs by negotiating for preferential fees from doctors and hospitals and trolling for abuses, but the truth is they’re totally ineffective at cost control.
Just last year I reported on an admission by Aetna and United Healthcare, two of our biggest insurers, that they had been snookered to the tune of $60 million by one chain of small surgical clinics in Northern California. That happened because the insurers didn’t hire enough staff to give the claims from those clinics decent scrutiny — in other words, their administrative costs, high as they were, didn’t buy adequate oversight.
The result, to cite just one example, was that United paid the chain more than $97,000 for a kidney stone operation that it usually covers for $6,851.
“Private insurance is a parasite in the system,” says Arnold S. Relman, the former editor of the New England Journal of Medicine and an advocate of healthcare reform. “It adds nothing of value commensurate with its cost.”
Relman believes that fixing the healthcare system will require more than single-payer. The delivery of care needs to be reorganized by promoting the formation of more “accountable care organizations” — medium- and large-scale group practices with hospital affiliates whose physicians would be salaried to discourage the overuse fostered by the fee-for-service system.
What’s really needed is political will. It would help if big companies, which grouse incessantly about the rising costs of covering their employees, would throw their weight behind a system that would relieve them of that burden.
The forces of opposition won’t lie down; the insurance industry won’t give up its central role in the healthcare system without a costly and bruising fight, as it showed in Congress and in numerous states, including California, where single-payer plans were on the table.
“It’s going to be a slow and painful process,” Relman says. “But sooner or later we’ll have to turn to single-payer. It’s the only logical solution.”
