Bob Giaquinta for Congress

Health Care and Insurance

The World Health Organization, notes that the US ranks 37th in the world as to the quality, and fairness of our health system. We are the only developed country where a person can go bankrupt because of medical bills. No other country regards health care as an insurance business. Most other essential services, such as police, fireman, education, etc., are provided for in a civil society. About 15% of our GDP is spent on health care, which is much more than any other country, with poorer results. We may be able to institute a new system, which may be able to reduce the stress, caused by health insurance entitlements (Medicare, Medicaid, and pension entitlements), on the federal and state governments. Social Security, the Iraqi War, and defense appropriations must be rectified before anything can be accomplished in health care, we must try to balance the budget

Our system is neither economically or morally sound. About 50 million people do not have medical insurance, and it has been shown that not-for-profit health insurance is more effective than for-profit insurance.

How did we get here? In the 1970’s Nixon signed into law that not-for-profit (NFP) Health Maintenance Organizations (HMO) were to be an option for employees of large employers that offered health insurance. The idea was to prevent illnesses, not only treat them. Salaried physicians and infrastructure were used to keep the costs down. The government subsidized the startup of these HMO’s. The surpluses (profits) were carried over and would be used to lower future rates, and the executives would receive reasonable bonuses if their organizations did well. Reagan phased out these subsidies, depending on the “free market” to work on getting costs down. The heads of many HMOs saw an opening and wanted to purchase these NFP’s and make them for-profit organizations. This is legal, but you must get approval of the Board of Trustees, and pay full price. But there was no mechanism to set a price. Many of these companies were taken over for pennies on the taxpayer’s dollar. The principal owners of these organizations make hundreds of millions of dollars each year. Thus we have the huge insurance mess.

These companies will not insure people with pre-existing conditions, pay providers less, deny care, stall making payments, prices and fees are confidential, and they make paperwork so confusing that a ”wronged” individual can’t figure out what’s going on. The administrative costs are close to 25%, which means that 4% of our GDP is paid for administration of health care. The government, Medicare and Medicaid, is its biggest client, with over 20% of the Federal government's expenditures, and an even larger portion of individual States expenditures. Billions of dollars of fraud have been uncovered, mostly due to whistle blowers. Congress gave the FBI an extra million dollars a year to investigate this problem. When there no observable results the FBI, when questioned, said that most of the money was diverted to other projects. So who knows what amount of fraud still exists!

State and local governments use “pay as you go “ accounting, instead of accrual-based accounting. This method does not take into account the real debt for health care. This shows that most states are underfunded for retiree health benefits. Governments do not want to give pay raises, they would show up as a deficit, so they bargain with pension and health care increase, which are put off to future generational taxpayers. States must match Federal funds for Medicaid, however states do not have the option of running a deficit as the Federal government does. Over 20 states spend more on Medicaid than on K-12 education. One in six Americans are on the Medicaid roles. Many states, including Nevada, are having fiscal problems, partly because of having to match Medicaid, and paying for current and retired employee health care.

Private employers have also overextended themselves as far as retiree pension and heath plans. All businesses pay premiums to the government's Pension Benefit Guarantee Corporation (PBGC), which guarantees a portion of these entitlements. The problem is that the PBGC is paying out more than it is collecting, and is underfunded. Guess who is going to make-up the shortfall? That's right the taxpayer. Private companies are being smothered by health costs, both current and for retirees. It was estimated that $1500 for each GM car went towards health benefits.

Other problems are; the average amount of a retiree's time collecting Medicare benefits has grown 50% since 1965. People are living longer, more people retiring, and the Baby Boomers are just starting to retire. Also, there are more expensive treatment modalities of modern medicine. So the costs continue to rise. More importantly, the system is highly inefficient. Another problem is that patients have little incentive to evaluate the costs of treatment, since the insurance is paying for the procedure. They also are more inclined to use the system, because they do not directly bear any of the costs. This is compounded by the fact that they are not presented with an itemized bill for non-emergency treatment or why certain tests or medications are prescribed. The cost of a daily stay in a hospital can range from $5,000-10,000 per day. A person could probably stay in a five star hotel, have a 24 hour private nurse (who would attend to his needs, rather than being on a computer entering the days monetary charges), have gourmet room service meals, and have twice daily physician visits for a lot less money. There is no accountability to be had from anyone, unless there is a problem in payment. Fraud is going unchecked, partially due to the non-accountability of the patients and fraudulent providers. Patients must be required to sign off on all charges, with adequate inspection. There must be regulation and inspection of providers with very stiff penalties to discourage fraud.

The government has tried to give more choice in health care options by giving tax free individual accounts to supplement health care. The following is a compilation of these bills; Flexible Spending Accounts- Must be spent before the end of the year Health Reimbursement Account – money is rolled over to the next year, but if you change jobs or insurance carriers the money is forfeited. Medical Savings Account- Money rolls over year to year and job to job. Limited to the self employed and businesses with less than fifty employees. Health Savings Accounts- Must have high deductibles with catastrophic insurance, and can only equal the amount of the deductibles

The Deficit Reduction Act of 2005 has allowed more leeway to the states in regards to Medicaid. Some states are trying to switch to HMOs, PPOs, or to put funds into private insurance.

The federal government spent over $400 billion on Medicare (over 3% of GDP), Medicaid was even more than that when you add both federal and state appropriations. That totals almost 7% of GDP. Add to this the amount paid by private company and individuals and we approach 15% of GDP. As shown below most other developed countries are insuring their citizens for 10%, or lower, of GDP.

The following is a synopsis of some of the other worldwide systems;

Great Britain Nobody pays for services Caretaker physicians (primary care) 8% of GDP Private physicians and hospitals Not good for elective procedures

Japan Cost is 8% of GDP Longest life expectancy and lowest infant mortality Must sign up for social insurance Government pays for poor No gatekeepers, all private businesses Health Ministry sets prices for all procedures If you lose your job, you are assigned a community insurer Business usually pays a portion of premium Insurance companies are not-for-profit

Germany – Bismark model 10%of GDP 90% enrollment Private physicians and hospitals Pay according to wage Insurance continues when unemployed Insurance companies not-for-profit Hospitals and drugs negotiate fees with Sickness Fund Medical schools are free Malpractice is $1500 per year Physicians earn about $150,000 per year

Taiwan 6% GDP Everyone must join One insurer (like Canada) Smart card - shows medical history, usage, billing, etc. Under-funded

Switzerland Everyone pays If they refuse they are assigned to insurance company Insurers are not-for-profit Administrative costs are 5% Drugs cost less

The things that seem to work best are; Insurance companies must insure everyone, and they can’t make a profit on basic care Everyone buys insurance Doctors and hospitals have fixed prices Patients should know the costs of treatment beforehand and have some financial responsibility Severe penalties should be enforced for fraud

Pure “socialization” is probably unattainable. Americans would not accept waiting weeks for an appointment, due to over-use of the system. Physicians and hospitals would not accept price controls. Probably the most ardent opposition would be from the for-profit insurance and pharmaceutical companies, which have the strongest lobbyists in Washington.

The only alternative left is to have a privatized system. Some of the items that might be proposed are; Insurance companies should be nation-wide not state-wide. This would enable the system to be more competitive. Government control should discourage monopolies from being formed, and regulate profits. A low cost “catastrophic” policy should be mandatory, with tax-break Health Savings Accounts being available for everyone, with companies paying for and matching the HSAs. and access for individual accounts. The insurance and HSAs should be transferable when changing jobs or with unemployment. Medicare- current enrollees should be allowed to continue on the present program. Those entering, and current enrollees, should have a choice of coverages (HMO, catastrophic insurance with HSAs, etc.) The participants would be provided with risk adjusted vouchers to pay the insurance. Medicaid – Offer risk adjusted vouchers to pay for insurance. Allow reduction in funding when the individual earnings exceeds the limit allowed for payment. This will encourage the person to continue working, with reduced benefits, rather than stop working if the health benefits will be removed.

As I said before, I would love to have insurance for all, but there are more pressing issues that must be rectified before that can happen, especially with the state of our present economy.

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