As our national dialogue concerning health care reform continues, it is important for every American to understand what is at stake, what is being proposed and what the potential consequences of congressional action and inaction may be.
Emotional arguments from both sides of the political spectrum have done little to enlighten and inform us about the details of how our leaders in Washington plan to address the cost and delivery of health care in this country.
With that in mind, I read the bill -- H.R. 3200, America's Affordable Health Choices Act of 2009 -- currently being proposed in the House of Representatives. Reading the bill in its entirety afforded me the opportunity to see in black and white what this measure sets out to accomplish, how Congress plans to get there and, ultimately, how it falls short.
Our health care system produces arguably some of the best quality health care outcomes in the world. Our commitment to research for continued advancements in treatments and cures is almost unparalleled. Access to health care is afforded to all Americans.
Yet the cost of care continues to grow ever more burdensome. Health insurance premiums are out of reach for a large number of Americans. This simply should not be and cannot continue. As the employer of more than 900 people, my primary focus for years has been to explore ways to enable all of our workers to afford health insurance for themselves and their families.
President Obama and the late Sen. Edward M. Kennedy were right in their call for health care reform. The leadership in the House of Representatives issued an overview paper dated Aug. 10 that suggested that without reform "the cost of health care for the average family of four is projected to rise $1,800 every year for years to come." Such projections are even more sobering when you consider the multitude of families who now live without health insurance and those who struggle to afford it.
The same paper goes on to say that the United States has "the most expensive health care system in the world. We spend almost 50 percent more per person on health care than the next most costly nation. But we're no healthier for it."
The cost of our health care system carries with it several burdens that create a sort of financial cyclone, which is both expensive and difficult to understand. Among the significant drivers of this situation are: the cost of access for those without insurance via emergency room visits; the true cost of "charity care" to the system and the payers in the system; cost shifting from existing public programs, chiefly Medicare and Medicaid, to private insurers; the cost of liability insurance in our overly litigious environment; the payment methods within the current system; and the cost of defensive medicine.
Understanding the contributors to our current health care quagmire underscores the need to focus reform efforts on three main areas: reducing the cost of health care and the drivers that contribute to that cost; improving universal access, especially to primary care physicians; and continuing to improve quality and outcomes.
>Where the bill falls short
Some, including myself, would argue that many of the requirements of Bill H.R. 3200 are admirable. However, the mechanisms outlined for carrying out the proposals fall far short of achieving meaningful reform.
The aspect I found most surprising is how punitive this proposed package of laws and measures is. The bill's writers spent hundreds of pages establishing penalties and fees that can be levied against physicians, employers and even individuals.
Clearly, those who steal, cheat or act inappropriately should be punished in accordance with the law. However, the fact that hundreds of pages are devoted to punitive measures rather than reform measures made me skeptical about the bill's actual focus.
My answer came in looking for proposals that actually addressed the primary flaws of our current health care system: cost and the factors that make care so expensive. In no area is the bill more lacking than in its complete absence of tort reform.
Numerous studies have suggested that liability coverage and defensive medicine contribute approximately 12 percent to 24 percent of our national health care costs. Doctors frequently order MRI and CT scans as a defense to liability rather than out of medical and diagnostic necessity.
Indeed, our tort laws need to continue to protect the victims of gross negligence. However, our current system of laws permits, if not encourages, individuals to litigate if they are essentially unhappy with their health outcomes regardless of the cause of their illness or injury, including the contribution of lifestyle choices such as smoking, weight, risky behavior and other factors. The proposed bill seems to expand this system instead of contracting it.
A system that permits litigation only under the standard of gross negligence will lower the costs built into the health care system for insurance and reduce unneeded defensive medicine directives from physicians.
In his recent address to Congress, Obama made an invitation to deal with tort reform issues. In an effort of true reform, this invitation must be backed up with comprehensive action, not simply demonstration projects. Otherwise, it will be little more than a missed opportunity to truly lower the prohibitive cost of care in this country.
In that same vein, the focus of our payment method should also be realigned. Since our public and private insurance providers pay for procedures, our current health care system encourages high volumes of procedures be performed. Our focus should instead be on outcomes and the establishment of a new system for paying for health care in America.
After reading the bill, I believe it is arguably disingenuous to call this measure health care reform in the truest sense. Rather, this bill seems to focus primarily on health insurance reform, Medicare and Medicaid reform, and establishing new taxes and penalties.
In various sections throughout the bill, the federal government is allowed to set the standards for all health insurance plans. This in and of itself should raise the question as to whether the government deserves to be placed in charge of this highly personal and important part of our lives.
>Putting the cart before the horse
As an example of the political motive to rush this legislation past the American people, an early section of the bill calls for a detailed study relating to employer health care markets and raises five basic and proper questions to be studied. But the push is to reform the marketplace now before such study, which officials have identified as needed, is even started, much less complete. This is just one example of where lawmakers have put the proverbial cart before the horse.
The same can be said of the bill's actions concerning private insurers. It is reported that 82 percent to 90 percent of all health insurance premiums pay for the direct care of covered individuals, meaning that the vast majority of the money being spent on premiums goes to pay physicians, hospitals, pharmacies and other providers. In order to drive down the cost of premiums, we must address the cost of services.
Unfortunately, rather than address the cost and the fundamental drivers of cost to truly make health care affordable, the proposed bill will instead restrict current health plans relative to premium increases moving forward. This method of cost control without cost reduction has historically created additional chaos.
The legislation's insurance reforms are not limited to private insurers. In fact, approximately half of the bill's 1,018 pages focus on changes to Medicare and Medicaid. When looked at in their entirety, the proposals appear to be a combination of everyone's wish lists for expanding those programs coupled with substantial compliance and financial penalties. The purported reforms include new requirements on providers along with decreases in reimbursements. To my eyes, this appears to be nothing more than cost shifting.
Consider the fact that there are provisions in the bill that allow the government to enroll individuals earning up to 133 percent of the federal poverty level into the Medicaid program, thereby making the individuals' home state responsible for half of the health care cost. Such subsidies would likely balloon Medicaid costs nationwide to the detriment of the states, which would not be able to opt out of the program.
At the same time, disproportionate share hospitals, or those hospitals that serve a disproportionate volume of Medicaid patients, will see their funding slashed by $10 billion between 2017 and 2019. Similarly, skilled nursing facilities are likely to see an increase in operating and liability costs coupled with a reduction in reimbursement rates.
There are numerous similar instances throughout the bill where reimbursements to providers under the Medicare and Medicaid programs will be reduced, without accompanying cost reductions.
>The public option
One of the most discussed proposals under this bill has been the creation of a public option insurance plan. Under this legislation, a new health insurance plan, created and operated by the federal government, will be established in order to provide health care coverage to all people lawfully present in the United States. The initial reserves for this plan will be established with $2 billion, presumably through either taxpayer funds or government borrowing.
This is an honorable goal that is worth pursuing. As I stated earlier, it is unfathomable that in a nation as great as ours, there are so many people without health care coverage. If indeed, the public option insurance plan will have similar underwriting methods as the current insurance industry, then I do not see the harm in introducing competition on a level playing field.
Unfortunately, the public option, as proposed, fails in its execution. The program is scheduled to start with premium costs that appear to be much lower than market rate. Presented with the opportunity to opt into a health plan that presents such savings, it is reasonable to expect that many individuals and employers will be enticed to enroll in the government's plan.
Absent any cost-reduction measures for the cost of providing care itself, however, the public option is almost certain to burn through its initial $2 billion reserves relatively quickly once the true costs of care begin to hit the system. The government will then be faced with the need to increase premiums within the public option or to increase taxes to pay for the public option.
This is what in business is known as a loss leader pricing strategy and, when applied to our national health care system, it could have dire consequences. Specifically, it brings into the realm of possibility the need to ration care in this country in order to control long-term costs.
In real terms, rationed care means that the entity that controls the health care system, in this case the government, will put a limit on the number of procedures that can be performed within the system in a given year.
It is not my opinion that the congressional leaders pushing the proposed health care bill are in favor of rationed care. To the contrary, I am certain they believe that the rationing of services will not result. However, studying the history of other countries and looking at the costs and drivers of cost in our own health care market suggest that it is a real possibility.
The public option will also take its toll on employers, who will be required to pay significant percentages toward their employees' health care premiums (72.5 percent for single coverage, 65 percent for family coverage) if they choose to offer private insurance, or pay a tax equal to 8 percent of their total payroll toward the public option. As someone committed to the well-being of those who work with me, I can say that employers should invest in quality health care plans for their workers.
Because Congress has sidestepped the issue of addressing the cost of care, the proposed requirement on employers will make it very difficult for many organizations to offer private insurance, therefore forcing them into the public option and decreasing the choice available to individual workers.
The employer requirement will also increase operating costs for many businesses to the point where they may not be able to employ as many workers as they presently do.
The net result
According to the Congressional Budget Office, America's Affordable Health Choices Act of 2009 is projected to cost Americans more than $1 trillion to set up over the next 10 years.
While there are some good measures in the bill, the lack of real reform and the physical and fiscal costs associated with it, as well as the potential long-term consequences, make it a prescription that our nation can ill afford.
Mark E. Hamister is chairman and chief executive officer of the Hamister Group. Over his 32 years in business, he has operated and managed numerous health care facilities across the country and served on several regional, statewide and national panels and committees focused on the delivery of quality health care.