Philadelphia Reflections

Executive Summary, continued

continues the inequity of denying the same tax exemption to everyone because of the nature of employment, and would be very hard to defend in open public debate, but even equalization will fail to adjust historical disparities in premiums upon transition to universal coverage (because of resistance to rebalancing the pay-packets). Secondly, service benefit compromises which might be tolerated in a private system become dubious within a government mandated one. And thirdly, businesses have outgrown their 20th Century role as a rescuer of vital community service, and now often regard health costs as a growing burden to company competitiveness, which stockholders must be induced to accept. Businesses themselves may be changing perspective and beginning to see the advantages of employee-selected and employee-owned portable health insurance. They may have come to see that employer-basing drove them toward selecting a one-year term model, rather than a lifetime whole-life model, and the employee-owned model is portable between jobs, and able to pay much of its own cost by compounding investment income. Many of the present complaints grow from discontinuity, while continuous coverage greatly reduces the expensive patchwork of multiple insurance forms, pre-existing conditions, uncoordinated successive insurance plans -- and is able to generate investment income, besides. The easiest way to become adjusted to a billing and information system is to avoid frequent changes in the companies running them. Forcing insurance companies to maintain a nationally uniform system is a disruptive way to get there, reduces innovation and competition. Beyond a certain point, people will rebel.

But among the opportunities neglected by mandated universal-coverage at community-rated seem to be: Opportunities for coordinated compound interest to finance coordinated lifetime systems; opportunity to coordinate insurance company information barriers at least enough to eliminate the need for up to three insurance forms to pay for one medical service completely; an opportunity to re-examine the technicalities of traditional patient cost-sharing, thereby downgrading or eliminating ineffective co-pay, but expanding much preferable deductibles buffered by Health Savings Accounts. In the past, many compromises were made to accommodate the highly untraditional insurance concept of service benefits, including bungled but laudable transitions to reimbursement by diagnosis-related groupings. It would be a great mistake, however, to equate this hospital approach with system-wide elimination of fee-for-service. Information systems and cost accounting based on item charges are highly developed and cumbersome to replace; no system outside the acute care hospital has more than experimented with other approaches. It would seem far simpler to modify insurance design to isolate two billing approaches (itemization and capitation) and force them to include, side by side, both office-based care and inpatient services using the same hospital cost accounting data to establish reimbursements. Mandated universal systems can facilitate some of these things, but the real test of democracy is to achieve them without resorting to force.

All of the foregoing areas of omission from the Affordable Care Act should be regarded as areas where improvements in the health administrative system might be possible for either political party to espouse. Therefore, if both parties might agree on some of them, progress might continue even though there is another acrimony in the background. The list of other approaches opened up to examine is probably longer than the average reader has the patience to read, but it includes Last-year of Life escrow, and gradual dispersal of the physical centers of health delivery away from tertiary centers, not toward them. More modest goals and timetables for computerizing physician notes would greatly reduce transition costs for providers. Centralized statistics might thereby be lessened, but the quality of care need not be. The savings from digitizing physician office notes have been greatly overstated, and mostly apply to physician practice aggregates, which inherently magnify communication and record-keeping costs.

Although health reform is now portrayed as a settled decision, the debate which preceded it never anticipated a 50% swing in cost difference between Obamacare and its insurance alternatives. At this time of national financial turmoil, such savings might actually exceed 5% of Gross Domestic Product, thus providing appreciable funds for other urgencies. It seems incredible that such an equilibrium would escape re-examination.

PRIORITIES NOT EXPLORED: Every reformer must choose priorities, but cannot escape criticism for other roads not taken. The chosen highest priority of ensuring everyone with community-wide premiums must also now demonstrate it was achievable without injuring the quality of care. It must also be demonstrated that the commendable goal of spreading expenses widely did not require so much complexity and inflexibility that the delivery system could not keep up with scientific advances. Even if all that can be achieved, the question will remain whether the time and effort might have been better applied to solve a myriad of other healthcare problems which have less to do with insurance. Other problems undiscussed in this paper might have included the financial abandonment of inpatient psychiatry, the unnecessary diversion of non-emergencies into hospital accident rooms in order to retain control of the system within acute care hospitals, unprioritized expenses encouraged by internal hospital cost-shifting, and distorted state budgets encouraged by complex shifting of underfunded hospital Medicaid costs to other payers, especially Medicare. By burying medical costs within insurance, physicians directed to use less expensive methods are denied truly useful information about the cost of components. (That is, not about posted charges, but about what is the true cost.) Item costs are the central signals used, and the present attack on the fee for service offers no substitute signals. The nursing profession is distracted by clerical functions, and its training programs transferred out of hospitals into less meaningful college environments, by reimbursement bundling. The medical profession has seen its overhead costs inflated by compliance with questionable reimbursement requirements, effectively impoverishing primary care, and overcompensating procedural alternatives which can more easily transfer overhead to the hospital. The serious issue of "Job Lock" raised by the earlier Clinton proposal is an inherent component of employer basing, probably continuing as long as employer basing does, and possibly as long as the Tenth Amendment does. The tax inequities for self-employed and small-business employed persons are stubbornly continued, as will be exposed when premiums stabilize. Many of these issues have insurance features because insurance is the dominant method of payment, but they are not considered here as direct consequences of the insurance model. While this list could be extended, its present extent already strains the limits of what can be coherently grouped by sources and causes. This paper confines a critical analysis of those insurance issues where solutions are proposed.

and Generally empowers non-physician administrative control through reimbursement as a means to control rather than assist the higher goal of widespread good medical care.

Originally published: Thursday, June 13, 2013; most-recently modified: Thursday, May 16, 2019