The Amazing Maze of US Health Care

Imagine that an employer can hire professional talent for a day, a week or for years and not have to consider health care as a fixed cost.

Imagine that same professional talent is without work, whether through illness or simply lack of work, and yet does not have to worry about paying for health insurance.

Sound like a health reformers ideal.  Provide employers the flexibility to hire talent as needed.  Provide health care for workers even when they have no income.

This model exists now

This is the model of the multi-employer health & welfare plan.

Multi-employer plans are common in those unionized industries with seasonal or irregular employment: transportation, needle trades, construction trades, and theater trades, for example.  They are governed by a board with equal numbers of employers and union representatives.  Employers pay a negotiated rate per hour worked into the Fund and the Fund provides benefits through periods of employment and transitional unemployment.  Some funds are fiscally sound enough to provide benefits through retirement.

But this is not a competitive model.  Not when your competitors provide few, if any health benefits.  The unions with benefit funds are more sensitive to the cost of health care than many of the industrial and public sector unions.  They negotiate a total wage package and see more clearly the trade-off between wages and benefits.

During the last decades they have seen medical inflation eat into their real income.  It is no wonder that Unions for Single Payer includes many unions more who traditionally have not been at the leading edge of past union struggles for health care reform.

The multi-employer fund as model

As employers increasingly abandon employer sponsored health plans in their never-ending race to the bottom, the multi-employer plan stands as a model for all of America.

Employers pay for health care only while workers are working.  They pay enough to cover workers when they are not working.  As a national model, employers would pay a percentage of all compensation, including part time wages, compensation to free lancers, bonuses, commissions and any other form of compensation.

Workers would give up a portion of their wages only while they are working.

Employers would gain unprecedented flexibility in hiring.  Decisions about part time work, part year work, job sharing, work hardening, phased retirement would not be encumbered with the fixed cost of health care.  Because workers would have equal access to health care; employers not offering health insurance now would have access to a larger labor pool.

Workers would be free to choose job opportunities or a career path or even an entrepreneurial enterprise without regard to an employer’s health plan offering.

How does this multi-employer model match up to the single payer model?   Pretty well.  They both would enjoy a near monopsony – a single buyer purchasing from a multiplicity of sellers.  Governance would be different.  The multi-employer plans would be regional private funds with local employer-employee governance.

Government would still play a significant regulatory role.  Several large regional plans would create a national system that encourages delivery system reforms and payment system reforms tailored to the unique requirements of the local economy.

It’s a model that has worked well for some Americans in the past and can be a model for all Americans in the future.

The American Benefits Council, the preeminent advocate of employer-sponsored benefit programs in Washington D.C., offers this prescriptions for health care reform – build on what works.

Fit for the Scrap Heap

Employer sponsored health insurance is not a system that works.  I say that as a 25 year employee benefits professional.

Despite what its proponents say in its support, their actions tell a different story.

Employers want out.

And the numbers over the last 15 years show they are getting out.

They are dropping their health care plans.  Fewer employers offer plans and those plans cover fewer employees.

From 2000 until 2007, the percentage of the population covered by employer-sponsored health insurance declined from 68.3% to 62.9%, a decline of 5.4% of a growing population, according to a study by the Economic Policy Institute.

Workforce numbers reveal an even more startling trend.  In 2007, 71% of all workers were covered by health insurance offered by their employer, down from 74.8% in 2000.

Pay attention to the words “offered by their employer”.  It does not include employees who have health care coverage through their spouse’s employer or through their parent’s employer.

Still 71% of all workers.  But only 55.4% of all private sector workers.  For all the ballyhoo about maintaining private plans, only 55.4% of private sector employees are covered by their employer.  I wonder just how many of them are covered by their spouse’s tax supported employer plan.  We rely on tax supported health care plans for government employees to provide health care for a significant percentage of the workforce.

In fact, according to Steffie Woohandler and David Himmelstein, when you included tax supported health care for government employees, the United States already pays more in taxes for health care than any other country on the planet.

That’s not all

Employers show their true disdain for the business of health care in other ways.

They are making their employees pay more.  Over the past year employer payments for premiums have increased at an average of 9% a year. While that increase is consistent with the overall increase to employers, it does not include the additional costs of higher out of pocket expenses resulting from higher deductibles, higher co-payments and co-insurances.

They are offering their employees more restrictive health care networks and more restrictive pharmacy formularies.

They are designing plans that are deliberately intended to encourage less utilization of medical services.  The result is that U.S. citizens go to the hospital less often, stay for shorter periods, visit the doctor less.  They do pay more, though.  Did someone say they were afraid of rationing?

These changes were not greeted eagerly.  Anyone remotely connected with collective bargaining over the last 15-20 years knows that health care benefits have been and continue to be the most contentious bargaining issue between labor and management.

Employers can still do more than write the checks

Employers can and do provide a constructive role in health care.  Employers have been a prime mover in creating pressure to improve the “value” of the money spent on health care.  They have  undertaken a wide range of initiatives to promote and improve workplace wellness.

But they do not need to sponsor their own health plans to continue those roles.  Many employers in countries with national health plans have developed wellness programs and the motivation for creating a healthy workforce extends far beyond decreasing claims costs.

So what keeps employers tied to this outmoded model.  For companies that can afford it, it is an attractive retention tool.  But smaller companies that are disadvantaged in the marketplace for talent should view things differently.  Are they so blinded by anti-government ideology that they can’t recognize a better more pragmatic solution?

Not all employers are willing to step outside the ideological box and ask the question posed by Jonathan Weber, the founder, publisher, and CEO of New West, a media company covering life and business in the Rocky Mountain West.

Why Should I Have To Pay for My Employees’ Health Care?

Let’s decouple health costs from paychecks.

But in today’s economy, the concept of the paternalistic employer is obviously outdated. We are all encouraged not to count on the company, to stay mobile and flexible, to start our own businesses, to be our own brands. So why the vestigial legacy of employee-provided health care, which severely inhibits the flexibility and mobility of the work force?

Good Question.  Ask the American Benefits Council.

Next week – An existing model that could be an example for the future.

Wednesday, September 9^th, President Barack Obama stood before the American people and a joint session of Congress and said:

If you are among the hundreds of millions of Americans who already have health insurance through your job, … nothing in this plan will require you or your employer to change the coverage or the doctor you have.  (Applause.)  Let me repeat this:  Nothing in our plan requires you to change what you have.

Someone will need to explain to me why this is a good thing.

The door may blocked

As the President was speaking these words, the 70 workers at SK Hand Tool Corp in Chicago, IL were without health insurance because their employer had made that decision for them.  It had unilaterally stopped paying for health insurance for its employees.

An inviting portal

As the President was reassuring Americans that they could keep their health insurance, the employees of SK Hand Tools, represented by Teamsters Local 743, were starting the third week of a strike to keep their health insurance.

That strike would eventually last for ten weeks.

There is an overwhelming body of health policy research that supports the necessity of continuity of care to improve population health outcomes.  Yet for most Americans, employment is not a continuous engagement.

Why do we build a system that relies on continuity on another system that flourishes on discontinuity?

The door needs a key

Human resource professionals will argue that good employment practices encourage employee retention.  But the same HR professionals spend a significant amount of time and psychic energy on issues related to discontinuity – turnover, hiring, firing, growth and “downsizing”.

Turnover is a fact of employment life. It should not be a part of our health care life. Last week, I argued that an improved patient delivery system is a necessary pre-condition for an improved health care delivery system. To enter into the health care delivery system we must pass through a portal that screens us based on criteria such as age, income, dependent status, military status, ethnic status, and employment.

But employment status is not a reliable portal

• “Working age” describes only that portion of our lives that begins after we end the first phase of our education until we become too old or infirm to continue working
• Only 60% of firms offer health insurance
• 30% of the work force are people who primarily work as free lancers or part time employees, people not typically eligible for health care benefits

The doors open to different spaces

If we continue the image of a portal into the health care system, changing employers means changing portals.  But pass through a new portal and you enter a new space within the health care delivery system.  In health care jargon this is called a network.

You don’t need to change employers to confront a new portal.  Employers routinely place their health coverage out to bid.  A new health plan frequently means a new network forcing at least some workers to choose between continuing their relationship with their existing doctors and paying more out of pocket or choosing a new in-network doctor.

In addition, slightly more than half of employees covered by health plans work in firms that offer multiple health plans.  These employers offer annual “open enrollments” that permit employees to change health plans. The conclusion.

Employment is not an efficient portal into the health care delivery system because:

• It is not always there
• It is not there for all employees
• It does not always lead to the same health care delivery system

Next week:  Employers don’t really want to be in this business anyway.

An improved patient delivery system is a necessary pre-condition for affordable and quality health care.

What do I mean by a “patient delivery system”?

Understanding  patient delivery system means recognizing that people without health insurance do not receive treatment until they are in an immediate life-threatening situation.

I cannot back this up with a scientific study, only my daily experience.  But that experience contradicts an oft cited myth that no one who needs health care is turned away.  One of the most common reason that people call our office is because something happened to their health insurance that lead to a denial of treatment.

It may be as simple as the doctor calling the wrong number or it may be that the member has failed to pay their share of their health insurance premium.  But the reasons don’t make the stories any the less heart breaking.

Checkpoint Charlie for health care

To enter the health care delivery system, patients need to pass through one of the many portals that guard access to health care.

People who are employed, some people who are employed,  gain their access through employer provided health insurance.  This also permits access by their children and spouse.  Some of those may also be employed.

People over the age of 65 and certain disabled people pass through the Medicare portal.

Some people who meet certain tests for age, income, gender, and/or parental status are permitted to pass through the Medicaid portal.

Those who don’t present sufficient credentials to pass thorough one of the previously mentioned portals may be able to tap into the market for individual insurance, but only if they are healthy.

There are additional portals for members of special groups, the Veteran’s Administration or the Indian Health Service, for example.

Their common characteristic is their exclusivity; you need to pass a test to pass through the portal.  Are you working? If not, are you poor enough, or old enough, or healthy enough, or a member of an exclusive group?  And might that change next month when you have a different employer or a no employer?

The portal you pass through into the magic world of health care delivery is only the first challenge in navigating the health care maze.  That portal determines which part of the health care delivery system you have access to, how much those providers are paid, which services will be reimbursed and under what rules.

It is most unfortunate that how much providers are paid is the major factor determining which providers you will have access to.

Patient delivery and care delivery

The defining characteristic of our health care system is that patients don’t have uniform access to the health care delivery system, and that that providers don’t have consistent access to the same group of patients.

How do you coordinate care in that scenario?  Is it no surprise that millions of Americans have no primary care doctor?

There are a lot of factors contributing to the high cost of health care?  Delayed care that leads to more expensive care needs to be one of the easier causes to address.

When we deny care to millions of Americans because they have not passed through one of the approved portals and their need for treatment is not acute enough, that costs the American health care system lots of bucks.

A system that makes access to health care delivery easy can encourage primary care over expensive emergency room care.

A system that that offers the same portal into health care despite employment status or income or age permits the provider community to take a longer term view of patient care.

That is why an improved patient delivery system is a necessary pre-condition for affordable and quality health care.

Next week – why an employment based system is not an efficient patient delivery system.

You have heard the arguments.

In the first corner:  “We have the best health care system in the world.  People travel to this country from all over the world to get the best health care.  the parking lots in hospitals bordering Canada are full of cars with Canadian license plates.”

In the second corner: “There are 100,000 deaths per year from hospital infections and a similar number from prescription drug errors, and an equally horrific number of people who need to be re-admitted to the hospital for complications.  And what about “Never Events”, those medical errors that are described as adverse events that are unambiguous (clearly identifiable and measurable), serious (resulting in death or significant disability), and usually preventable.

And there is a voice in a third corner: “We have the most expensive health care system in the world yet the United States is not ranked among the top twenty nations in infant mortality, maternal mortality, longevity, or hospital admissions avoidable with access to health care.” Read the rest of this entry »