NextGen Editorial: "Affordable American Health Care? More Feasible Than You Think"

Thankfully, the national elections just a month ago yielded a clear winner to the presidency, and to the delight of proponents of the "responsible party model," a clear majority of one party in both houses. With, theoretically, a like-minded executive and legislative branch in power for at least the next two years, some serious reform can finally be accomplished in such long-contentious policy issues as health care.

According to the American Medical Association (AMA), 44 million Americans did not have health insurance at any given time in the last year. More disturbingly, the San Francisco Chronicle reports that 20.6 million of these individuals were reported as working full-time. This is a serious problem. Studies have shown that a lack of health insurance is a significant deterrent to seeking both preventative and necessary medical care. Forgoing simple preventative care can clear the way for serious health conditions, meaning that when those of the uninsured who cannot afford medical expenses out-of-pocket come down with expensive-to-treat but cheap-to-prevent illnesses, they have no other recourse but to finally seek treatment in hospital ERs rather than from a PCP (primary care physician), running up what the AMA reports as over $40 billion in uncompensated costs each year.

What is not absorbed by physicians and hospitals is shifted in the form of inflated costs to private insurance companies and federally and state-funded government programs. There is a need, both ethical and economic, to ensure all Americans are fully covered.

A tax-funded universal health care system akin to that of Canada or many European countries is unfeasible in the US, at least at the present time, given a prevailing public inertia to any form of wealth redistribution, a reluctance demonstrated time and again by voting trends and empirical studies.

In the US, then, a plausible way to ensure universal health coverage is through an expansion of the employer-based health care market and support of the individual buyer's market coupled with a conservative extension of government programs to cover fully the neediest of the uninsured.

To ensure long-term sustainability of the private insurance industry and government programs, health care costs must be controlled. In 2001, total US health care spending was $1.4 trillion, up 8.7% from 2000, according to the National Center for Health Statistics. This hike outpaces both inflation and GDP growth, two economic measures to which policy makers generally seek to pin annual cost increases to consider expenditures in a certain area controlled. At the current rate of expenditure growth, Medicare will run out of funds by 2019. The private market is not immune, either: according to the San Francisco Chronicle, the premiums charged for job-based health insurance rose by 11.2% in 2003, again outpacing both inflation and GDP growth. At current growth and expenditure levels, it is inconceivable that insurance can be extended to all Americans and sustained in the long run, regardless of payer. If a significant cut that lowers all health expenditures is achieved, we will be able to prepare the private market to cover more people at affordable prices, a first step towards universal coverage.

Today in the news, we see a lot about medical malpractice and how tort reform is necessary both to keep doctors in practice and to lower health care costs (the burden of medical malpractice insurance costs and jury awards are, at least by some percentage, passed on to the consumer). The savings achieved with tort reform may in fact be significant, but at the moment, the issue is highly politically charged, with the Republicans, in general, in favor of reform, and the Democrats generally opposed to it. However, there is another avenue through which costs may be cut, a possibility less politically contentious than medical malpractice reform and for this, more likely to gain support from both sides.

Researchers at Harvard Medical School reported this year that the United States spends $399 billion annually on the administrative costs of health care providers (i.e., insurers, hospitals and other medical facilities, physician practices, and nursing homes). This amounts to a little more than 25% of total US health care expenditures. Cut that in half by adopting efficiency provisions afforded by information technology (IT), a very conservative goal, and overall spending will drop by 15%. Given the $1.4 trillion in health care costs paid in the US and a savings of $200 billion from a 50% cut in bureaucratic health expenditures, $200 billion/ 1.4 trillion= about 15%. The math is simple, perhaps over-simplified, and there probably won't be a direct linear translation to a 15% savings on one's medical bills and health insurance premiums (it could be less, it could be more) but the outcomes are the same: lower medical costs.

That adopting more efficiencies in health care through IT will lower costs is not a mere theoretical, pie-in-the-sky dream; such drastic decreases have been empirically observed by the Veteran's Administration (VA). By adopting the latest in IT, VA hospitals are able to pull patient records instantly and without cost; before the upgrade, the same process cost $9 per patient per visit. To achieve similar savings, we should adopt those efficiency provisions perennially recommended by the Congressional Budget Office (CBO) and finally proposed by Senator John Kerry (D-MA) in his recent bid for the presidency:

1) Switch from paper to electronic medical records for all Americans. Done properly, electronic records can be more secure than paper, not to mention more efficient.

2) Set quality benchmarks in the private sector that move providers toward electronic patient registries, electronic reminder systems, and computerized prescribing systems.

In addition to cutting administrative costs, such changes will save time, cut the likelihood of redundant procedures, and reduce medical error. Although use of IT will ultimately save providers money, the government should offer tax incentives to expedite the process. If the provider is a non-profit institution, then tax credits should be extended to software/technology/consulting firms that go to these non-profits and implement these systems pro bono.

To get other providers to switch to a simplified technology standard, the use of such systems should become a requisite to doing business with Medicare, Medicaid, and State Children's Health Insurance Program (SCHIP). Further, Congress could immediately mandate that all US government health care transactions be computerized using the latest in IT.

With lower health care costs stemming from lower overhead due to increased administrative efficiency, premiums in the private market should become more affordable, increasing the viability of the culturally-preferred market-based approach to extending coverage to the uninsured. Or, if expansions in government-run health care are proposed, lower costs will stand due to increased efficiency in the system. For those who still prefer to pay out-of-pocket, costs will still be lower. Everyone stands to benefit. Further, the billions provided in uncompensated care stands to drop solely on the virtue of decreased administrative costs, leading to less cost-shifting to private and public insurance, contributing to lower costs on that end. This is, of course, not considering the likely decrease in uncompensated care that will follow when more people opt for insurance as it becomes more affordable due to decreased health care costs and insurance premiums. Such an overhaul of the inefficiencies in all levels of the health care system will not happen overnight; however, these changes can feasibly take place within 4 years. Rooting out the unnecessary cash sinks in the systems will cost jobs, a sensitive topic at present. Tax incentives and in-house government technology upgrades will cost the government billions, and this will earn some critics given the current budget deficits.

But the costs are, for all intents and purposes, one-time, and the savings that the federal government will achieve in Medicare, Medicaid, SCHIP, and the Federal Employees Health Benefits program will justify it. Moreover, that such an undertaking will extend the longevity of public health care programs and will set the stage for a major expansion in the private health insurance market leading to a sustainable mixed universal health care system will validate this venture. And neither the Democrats nor the Republicans can argue with that.