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The Building Trades were well represented at the Health Care for America NOW rally on Thursday, June 25, 2009.

IBEW members at the Health Care for America NOW rally on Thursday, June 25th.

The International Brotherhood of Electrical Workers (IBEW) brightened the audience with their yellow shirts everywhere.  The Bricklayers and Allied Trades (BAT) cemented their presence with bright orange shirts.  Laborers International Union (LIUNA) carried their brown and yellow shirts well.  Plumbers & Pipefitters Local 5 from Washington DC gathered around their prominently placed banner.  I hope to hear from others that I missed.

The Building Trades have not always been in front of the charge for health care reform.  And in some ways there issues offer both insight into how health care has changed and guidance for how it could change.

The unionized building trades provide their members benefits exclusively through multi-employer benefit trust funds.  This vehicle is ideally suited for those industries where employment in often seasonal or temporary: the construction industry, the needle trades, the retail food industry, trucking and others. 

What do multi-employer funds teach us?

They offer guidance on continuity of coverage.  By maintaining eligibility from employer to employer, workers and their families don’t experience the disruptions of coverage that others who change employment experience.  The value of this should not be underestimated.

This blog has often criticized those who offer “delivery system reform’ as the number one priority.  I maintain that the patient delivery system needs to be fixed first. Only when everyone has coverage, and they understand how that coverage works, can we begin to be successful with chronic condition management, or medical homes, or patient centered care, or any of the other popular delivery system reform buzz terms that are out there. 

If a patient is involved an a chronic condition management program, and loses their insurance or changes to an insurance with different rules, any gains achieved may be lost with the transition.

Multi-employer plans offer examples of how that can work.

Multi-employer plans point the way on portability.

Congress faces the challenge of paying for coverage for the uninsured.  Most of those uninsured are working poor, people who earn too much to qualify for Medicaid.  Yet multi-employer are also set up to provide coverage between periods of employment. 

Employers pay into the fund while the employee is working and the fund provides benefits  when the member is not.  They protect their members from periods of unemployment that might result from either the local economic situation, or the members own disability status.

When I started as an apprentice with UA Local 520 in Harrisburg, PA many years ago, eligibility for benefits was established after three days and those three days established eligibility for six months.  Cost pressures have eroded the level of protection, but not the principle behind them.  It is not hard to see that this is not a model that is sustainable in isolation in the long run.

A key phrase in that last sentence is “in isolation”.

Recent economic events have shown us that corporations who take on a degree of social responsibility by providing health benefits or retirement benefits are at a competitive disadvantage in today’s economy.

That’s why the Building Trades were out in force on Thursday, demanding health care reform.

They want to stop the race to the bottom that they saw in the airline industry, the steel industry and is threatening the auto industry.

Multiemployer plans can no longer afford the kind of generous eligibility that my local offered thirty years ago.  Today cost pressures and competitive pressures threaten the very principles of continuity and portability that make the multi-employer plans so valuable to their members.

What can policy makers learn from multi-employer plans?

Require that all employers pay a uniform rate for health care per employee.  That can be based on hours worked or a percentage of income or amount paid for contract employees.
A portion of that amount should be used to provide transitional benefits for people who have lost their jobs.
Allow people to carry the same insurance from employer to employer.

If health care reform does not improve on the current system’s ability to guarantee continuity of coverage and portability of coverage, it will have failed the American public and confounded much needed efforts for delivery system reform.

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Does Congress really think they are doing anyone a favor with the new COBRA subsidy provision in the recently enacted stimulus package?

Why can’t they make it simple?

Conservatives who fear “socialized” medicine because it will make medicine more bureaucratic should acquaint themselves with COBRA regulations. Litigation over COBRA keeps lawyers and judges busy all over the country.  And what does any of it have to do with the delivery of care?

What is COBRA anyway?  The Consolidated Omnibus Budget Reconciliation Act of 1986 was one of those huge (thus the word omnibus) budget bills that included everything from tobacco price supports to fishing fees for foreign fishing vessels.   But it will be remembered because Title X (of XX) included provisions to permit those who lose their health insurance under an employer sponsored health plan to continue their health insurance under certain conditions (called qualifying events) and provided they pay the full cost of the coverage.

Because, the person without coverage is also usually without a job, and because the person must pay the full cost (actually 102%) of the coverage, very few people elect the coverage and those that do are more likely chronically ill individuals.  In insurance parlance, that’s called adverse selection.  The plan sponsor will usually end up paying more than they receive in premiums.

So what did Congress and President Obama do with COBRA? 

The new law makes the cost of COBRA premiums slightly more affordable.  Normally, a 65% discount would seem pretty attractive.  But the average cost of one of our family plans exceeds $1,000.  $350 – 450 per month for a family with one less breadwinner is still a stiff price.  Imagine selling a Lamborghini at 65% off!  $70,000 for a $200,000 car is a huge bargain.  But for someone without a job?

The new law allows those terminated between September 1,2008 and February 17^, 2009 and who initially declined their COBRA election, another opportunity to elect the coverage at the reduced rate.  And they can begin their coverage March 1 instead of the date of the qualifying event.

Unlike regular COBRA, the subsidy is limited to those who are “involuntarily” terminated and their family members.  The plan sponsor can rely on the employees’ attestation that they were involuntarily terminated.

Unlike regular COBRA, the subsidy is limited to those whose income is below certain levels ($145k for singles and $290k for couples).  Curiously, that determination is made based on the income tax filings of the subsidized participant.  I can imagine that there will be a lot of hair splitting on that issue.

Unlike regular COBRA, the participant can elect coverage other than the coverage they were enrolled in at the time of their termination, provided it is a less expensive option.

The subsidy is only available for 9 months wile COBRA eligibility extends for 18 moths.

The subsidy ends after the 9 months or after the participant becomes eligible for other coverage.  That raises a lot of questions.  How will the plan sponsor know if the participant is eligible for other coverage?  What if the participant doesn’t even know that he or she or the children are eligible for other coverage, for example Medicaid or SCHIP?  It is easy to imagine a situation where an individual may not be eligible when they start out

An unproductive bureaucracy!

The process is a maze of intersecting, overlapping, and competing bureaucratic interests.  The plan sponsors sends notice to everyone who might be eligible.  The individual claims eligibility by asserting that they were involuntarily terminated.  The IRS determines if the participant met the income limits.  The IRS also indirectly reimburses the plan sponsor by permitting credits on the quarterly tax withholding reports. The Department of Labor decides any disputes about eligibility.

Imagine a single payer system where eligibility was not dependent on employment!

Imagine how much simpler the bureaucracy would be!

Imagine how much more meaningful the result would be!

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In discussing the nation’s health care system, “broken” is the most common descriptive term.  Almost all stakeholders seem to agree on the adjective.  Not Mr. Tevi Troy, writing recently for the Weekly Standard.

Health Care Reform Can be a Stimulus

I have argued that a major overhaul of health care would be a significant stimulus to the economy by leveling the competitive playing field for both employers and workers – those currently working, those out of work and those working on the margins.  In the long term, it would free up capital, both the monetary kind and the human kind, for more productive investments.

It does not surprise me that Congress might see things differently.  The major health care provisions in the stimulus package that will be approved by the Senate have very little to do with stimulus and everything to do with safety net.  Support for state Medicaid programs and provisions related to COBRA.  There are two small provisions in the package that do attempt to push the reform agenda a tiny fraction of an inch.

There is a provision in both House and Senate versions of the bill for for further development of electronic medical records and there is money for “comparative effectiveness research”.

These are hardly earth shaking provisions, unless you are listening to the likes of Mr. Tevi Troy.  To Mr. Troy and his ilk, these measures are the Ft. Sumter of the liberal war on the US health care system.

What planet to these people live on?

Electronic Medical Records

The Institute of Medicine has demonstrated that tens of thousands people die each year from prescription errors, many of which could be avoided with legible prescriptions.  One sure way to improve that simple process would be a script printed by a computer.  Errors could be avoided if doctors knew what other drugs the patient was taking.  That information can be provided by an electronic medical record.

Yet Mr. Troy and other right wing fear mongers describes the stimulus as a “threat to American health care.”

But as Dr. David Brailer points out in a Health Affairs blog post, the stimulus for electronic medical records will only be successful if it focuses less on the technology and more on the organizational and human impediments to its widespread adoption.

Effectiveness Research

Likewise, the defenders of the broken status quo react even more vociferously to the “comparative effectiveness research” calling it a “federal infrastructure that could be used as a tool for government rationing.”

Again according to the Institute for Medicine, one hundred thousand people a year die from hospital acquired infections.  Only 50% of people receive care in accordance with recognized best medical practice.  And yet research on the effectiveness of medical treatments is a threat?

I used to work for the Pennsylvania Health Care Cost Containment Council (PHC4), a state agency on the leading edge of public reporting on the outcomes of health care.  The PHC4 has demonstrated repeatedly that there are wide unexplained variations in the quality of care and in the practice of care.

The United States pays more for health care than any other country in the world.  And not just a little bit more.  We spend almost fifty percent more than the next most expensive country – Switzerland.  We pay more in taxes for health care than countries with tax supported health care systems and yet almost 90 million people had some period during 2006-2007 when they went without health insurance.  The United States does not rank among the top twenty nations in life expectancy or infant mortality.  This should be an embarrassment.

Investments to improve the delivery of care are long overdue.

Yet if the reactions of the out-of-touch to these modest patches to the status quo are a gauge, we are in for a noisy debate when real reform gets center stage.

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The blogosphere is buzzing with discussions about the promise of health care reform.  For a weekly poster like me, it is impossible to keep up.  As 2009 approaches, and more importantly, as 1.20.09 approaches, I thought I would offer my insights into the topic from the perspective of the administrator of an employer and union sponsored health benefit plan

If there is one thing that unites the comments it is their oppositional posture.  Insurance companies are the most common enemy, but hardly anyone escapes.

So I would like to go on the offensive and tick off a few positives that I would like to see in health care reform.  Please indulge my autocratic use of the term “will”.  

1. Every individual will be required to have health insurance.  We don’t object to requiring drivers to have car insurance, homeowners to have homeowner’s insurance, employers to pay for unemployment insurance, liability, or workers’ compensation insurance.  A basic principal of insurance requires the risk to be spread among as many as possible in order to provide both the greatest protection to the insurers and the lowest possible cost to the insured.  

A mandate negates the need for medical underwriting, that unseemly practice of denying health insurance to those who are already sick.

2. There will be a defined set of benefit plans.  This is not a novel concept.  In order to cut through the misleading marketing around Medicare Supplemental (Medigap) insurance plans, CMS adopted a defined set (12) of permissible Medigap benefit designs. 

A set of clear benefit design options would eliminate underinsurance while permitting certain groups to “buy up.”  What gets included in any prescribed benefit design is the most controversial and consequently under discussed aspect of health care reform.  Every possible interest group comes out of the woodwork to argue its case.  I learned that in 1993 during discussions at the state level about health care reform.  It will take real leadership to settle this issue.

3. There  will be a uniform drug formulary.  This is consistent with a standard set of benefit plan designs.  Today, physicians must grapple with dozens of different drug formularies, if not more.   What is a preferred drug with one plan may not be permitted in another.  Too often the patient is put in the middle of that controversy and forced to pay extra for a drug that a doctor is receiving incentives to prescribe.  

4. There will be payment reform.  Much has been written about the inequities of the current payment system.  It does not provide adequate incentives for primary care; it does not adequately reward or incent quality care; it does not pay for care management; it does not adequately compensate for medical education.  I support and encourage each of these objectives.   

I just want to add one unifying principal to the mix.  There will be one system that will apply for each and every patient.  There won’t be one payment system for older Americans on Medicare and another for younger Americans on state Medicaid plans and still a bunch more for those insured by private health insurers and still yet a different set of rules for the uninsured.

5. Medical education reform will include major financial support by the federal government.    There are two major flaws in the current system of financing medical education.  The first is the unconscionable debt burden that encumbers new medical school graduates and distorts incentives throughout their careers.  The second is the costs incurred by institutional and professional providers to provide supportive apprenticeship (internships and residencies) programs.  There are lots of suggestions by others to improve the content of medical education.  I will leave that topic to them.  

This is not an item that gets priority treatment in reform discussions.  People seem ill inclined to sympathy for people who, they think, make too much money.  That thinking is backwards.  Doctors should start their careers owing their debt to their community, not to their bankers. 

6. There will be a system for a fair redress of medical errors. It should adequately recognize and acknowledge errors; compensate the victim and family fairly; assure that there is no financial gain to the provider; and ensure that systems are in place to prevent errors from recurring.

7. Cost to the individual will be based on ability to pay.  That is most easily understood in the context of a government, tax supported program.  But it could be possible to have private programs with payroll deductions based on income.  That is not an unheard of concept with some employers today.  The challenge will be devising administrative systems to handle those transitions between employment and unemployment as well as those independent contractors who are not payroll employees.  Perhaps some tax on 1099 income.  I’m sure experts on tax policy could devise a workable system.

8. There will be delivery system reform that eliminates the silos that keep providers apart and inhibits the delivery of coordinated care, chronic condition management, follow up and rehabilitative care,  and drug therapy management.   

9. There will be room for experimentation.  There will always be, I hope, providers who push the boundaries of accepted medical practice.  Patients need to understand when their doctor is pushing those boundaries.  At the same time doctors and institutions need to accept that something new is not acceptable just because they say so.  Patients and providers need to be open about the risk and the costs of these experimental treatments.

10. Above all, there will be recognition that the health of the nation is not dependent solely on its health care system.  It depends on good nutrition, opportunities for exercise and outdoor recreation, on the education of its citizenry, on safe working environments, on safe drinking water and sanitation systems, and on clean air.

Over time I will take the opportunity to expand on these topics.  Some may notice that I offer no silver bullets: fix this one thing and all will be right.  It took this country a long time to get into  this mess.  Fixing it will take time, leadership, and concerted effort.

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This past spring, Health Affairs, the premier health policy journal, had an interview with the German Minister of Health, Ulla Schmidt.  The interview focused on reforms to Germany’s health system instituted principally in 2007.  Minister Schmitt was asked what were the goals of the reforms. Her answer – she wanted to preserve the principles of social solidarity and affordability that had always been a part the German health system.

In comparison to health care in the United States, the Germans system could hardly be called a system in crises.  The per capita costs were about half of  what they were in this country $3,200 per person in Germany compared to $6,400 here.  But they did have too many uninsured – about 0.2% of the population.  The United States, by comparison has 15% uninsured. 

So the question is, What do Germans understand by social solidarity?  Minister Schmitt explained that everyone in Germany has guaranteed access to health care and everyone contributes to the financing based on their ability to pay.  Well, if that is social solidarity, where does affordability fit in?  For Minister Schmitt, if the entire system is not affordable, the social solidarity begins to break down.  

Too much of the health care debate in this country is muddled by ideology on both sides.  For many in this country, European health care sytems smack of “socialism.”  Yet, two of the defining characteristics of the German system are not real popular among progressives in this country.  The Germans have an individual mandate and they rely on insurance companies, although in Germany they give them a more accurate name, Krankenkassen, or Sickness Funds. 

Social Solidarity

But what I want to dwell on is this idea of an over-arching principle.  Even referring to an over-arching principal is an impressive starting point.  The words “social solidarity” say something about the values of the community, about people in a community looking out for one another; taking care of one another in times of need.  They are words that speak directly to the substance of health care.  What do people in health care do?  They take care of  one another.

You wouldn’t normally use words like social solidarity in other areas of human endeavor, for example auto manufacturing or banking.

So what words would we use to define an over arching principle guiding health care in this country.  Fragmented?  It is descriptive, but is it intentional?  Freedom of choice?  While much lip service is paid to those words, the reality is that in today’s managed care world, freedom of choice is constrained.  Perhaps more so than in many countries with “socialized” medicine.  In any system, there will be and, in fact, needs to be, a system of constrained choices.  And how can we salute “freedom of choice” while denying it to 55 million fellow Americans without health insurance. 

Free Market

No, the operative words can only be “free market”;  not even a “competitive market.”  In a competitive market, buyers and sellers operate (bad word choice) on a level playing field.  There is no level playing field in health care.  In a free market, there are no rules that winners don’t make.  

But what do the words “free market” really have to do with health care.  Do they have any special meaning in health care that logically makes one think of a healthier population, of people working to make and keep each other healthier?  When I mix the words “free market” with “health care”, I can’t help but come up with snake oil salesman.

During the last election, there were many yard and road-side signs that said, “Put America First” or “Country First.”  These messages don’t conjure images of social solidarity, they conjure images of self-centeredness – putting beliefs first, not people.  

I am reminded of the Peanuts character Linus, who once said, “I love mankind.  It’s people I can’t stand.”  We need signs that say “Americans First”, or “People First”, or “Country men, women and children first”.  And, please, I hope no one takes that last sentence as anti-immigrant.  I lived in Germany for two and half years.  I have experienced the health care systems in countries with social solidarity as the governing principle.  They treat foreigners better than we treat some of our fellow Americans.

How does “social solidarity” play out in Germany in more concrete terms.  One example jumps to the front.  Like this country, employers contribute to an employee’s health insurance costs.  So what happens when an employee becomes unemployed?  The state picks up the tab as part of the unemployment package of benefits.  But the insurance card does not change.  The former employee, now mere citizen, presents the same insurance card to the doctor or hospital.  The provider gets the same reimbursement as before.  Unlike this country, there is no separate state insurance benefit with separate, lower, provider reimbursements.  And they can do this and still spend half what we do for health care.

My Guiding Principal

For me, the over-arching principal is simplicity:  once and done enrollment; simplified provider reimbursements; integrated delivery systems that give patients choice without sacrificing care management; paymetns based on ability to pay.  With a simpler system, money can be spent on health care instead of in health care.  That may be a single payer system.  But as Germany seems to prove, you can have a more efficient system while maintaining multiple payers. 

Apologies to Patrick Henry

To some ideologues in this country words like social solidarity conjure un-American spectres like socialism.  With apologies to Patrick Henry, if that be socialism; make the most of it.  

It may be too much to think that a pro- active over-arching principle will precede meaningful health care reform in this country.  It is better to hope that meaningful health care reform will produce, as a by-product, something like social solidarity.  Maybe that is what the pundits are really afraid of.

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A column in Tuesday’s New York Times raises an issue not raised by many who opine on the bailout of the auto industry – the relationship between health care financing and the bailout.  David Leonhardt  examines the much discussed wage disparity between the unionized autoworkers and their non-union counterparts employed by foreign manufactures in the US like Toyota and Nissan.

Ezra Klein in his blog picks up the same theme.  Apparently the Republicans in the US Senate missed their helpful analysis – as did most of the talking heads on the news shows.

They make two relevant points. Most of the disparity between the wages is in legacy cost, and secondly, wages are not the significant cost driver in the cost of an automobile.  They both agree that Detroit’s troubles are not related to costs, but to their inability to design and build cars that the American public wants.

Personally, I do not think the car makers deserve all of the criticism they received; a lot, just not all of it.  Until a couple of months ago, our family had two American made vehicles in our driveway.  Their combined mileage was almost 350,000.  Our high priced foreign car cost more per year to repair than the other two combined.

But I digress. This graphic reveals yet an another example of how the inequity in health care financing distorts the marketplace.  In this graphic, Ford workers get slightly higher wages and slightly better benefits than the Japanese automakers.  The real difference is the legacy costs.  They pay more for retiree pensions and retiree health care costs than their foreign competitors.  They pay less for retiree benefits primarily because they have fewer retirees.

Thirty to fifty years ago, automobile manufacturing, in fact manufacturing in general, was much more labor intensive.  It took more workers to build a single automobile.  Thirty to fifty years ago there were no foreign manufacturers building cars in America.  

At the time the Japanese entered the US markets building less labor intensive cars, those American manufacturers already had made commitments to their workers to provide security in retirement.  The newbies hired younger workers and only recently incurred any retiree costs at all.  That is why the three dollars in the graphic says more about how long the Japanese have been in this country than it does about the difference in their retirement benefits.  

The same was true in the steel industry.  New steel companies hired younger workers, built lean, less labor intensive manufacturing facilities and carved into market share in small specialty markets.

Occasionally an executive of one of the American steel or auto companies speaks out against the system of health care financing in this country.  But their loyalty to their free market ideology trumps their commitment to the competitiveness of their own industry.

It has become  clearer to many that the reliance on an employer based system of financing health care puts those socially responsible companies at a competitve disadvantage.

I wonder how that unfair cost burden affects the decision making process of Detroit auto executives. Do they consciously build trucks and SUVs because they need the extra profit margin to cover those legacy costs?  How do health care costs affect policies about overtime or part time workers?  

America may have free market health care  but the result is a less competitive  economy.

I also wonder if, by blocking support for the auto industry, those Republican senators may have let a genie out of the bottle that they despise even more than the bailout – a single payer health care system.  If millions of workers in the auto and related companies are put out of work without health insurance will there be a rising tide of support for a single payer heath care system that they will be unable to stop?

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In my last post, I wrote that health care reform proposals need to focus on the patient side of the health care delivery system by designing systems that eliminate the cumbersome, even tortuous routes that patients must travel to enter that increasingly privileged space – a person with health insurance.

An illustrative example is the Qualified Medical Child Support Order (QMCSO).  QMCSOs apply to those children who live with one parent but the court orders the other parent to provide the health insurance.  The parent who has custody of the child is called, logically, the custodial parent.  The other parent is called, can you guess, the non-custodial parent.

Every child support agency in every county and state in the country has a bureaucracy for the purpose of enforcing and administering QMCSOs.  It does not matter why the parents are not together.  Some are divorces, but some were never married.  For a group of 25,000 Participants, my staff probably spends one to three days per month on issues related to QMCSOs.

Very little of that time is spent processing the paperwork.  Most of it is dealing with custodial parents, non-custodial parents, child support agencies (issuing agencies in bureaucratese), carriers, attorneys and other stakeholders.  In other words, our staff’s time is matched by someone else’s staff time.  I did an extrapolation to the US population.   It assumes our population is a representative sample of the general population.  By my estimate, it is costing the United States economy $100,000,000.

Now by standards of the health economy that is not a lot of money.  For example, to cover the uninsured you would need to add three more zeros to that number by some estimates.  To build a hospital you could easily spend five times that amount.  On the other hand, my estimate is conservative because I am counting only the time I see.  I will not pretend to know how much time is spent by child support agency staffs, lawyers, judges, and other stakeholders in the process.  How much time is lost to work as both sides of this parental equation battle this out away from work.  Dare we pump that number up to a billion dollars?  And let’s not forget the time invested by lobbyists, legislators, and regulators.  A billion dollars may not be far fetched.

If you think, per chance, that I exaggerate this bureaucratic imbroglio visit the Department of Labor (DOL) web site on the subject.  They list the following other stakeholders in the process:

• Employee Benefits Security Administration -
• Office of Child Support Enforcement -
• Centers for Medicare & Medicaid Services –
• National Child Support Enforcement Association –
• The Eastern Regional InterState Child Support Association (ERICSA) and the Western InterState Child Support Enforcement Council (WICSEC)
• Each State has a child support enforcement agency. Sometimes this agency is located in the State attorney general’s office, but it is frequently found as part of the State’s department of social or human services.

And what do we get for this billion dollars – eligibility to enroll a child in a health insurance plan.  It does not include the cost of the actual coverage — only the cost to put the child’s name on the roster of eligible participants in a health plan.  After that come the premium bills.

But wait, even that eligibility is circumscribed.  Eligibility only if the non-custodial parent is eligible for health insurance; and can enroll children in the health insurance program; and meets the withholding limits established by the various states.

But here is the kicker.  There is no requirement that the child, once enrolled, has effective coverage.  More than half our membership is enrolled in HMOs.  A child living with a custodial parent outside the service area of one of the HMOs effectively has no coverage.  The non-custodial parent is not required to switch to a plan that would cover the child where he or she lives.  Given the adversarial nature of these proceedings, it is not surprising that some non-custodial parents will make no effort to change their coverage for the benefit of the out-of-area child.

Fortunately, we find most non-custodial parents are eager to provide the coverage for their child.  We have had situations where the custodial parent will not cooperate with our office in any way for fear that the non-custodial parent will learn more about the child, than the custodial parent is willing to reveal.  And it is these sad and difficult situations that usurp the most staff time.

This is one more example of spending money trying not to spend money on health care, one more example of the game of Old Maids that has become the story of health care financing in the US.

There has to be a better way.  I endorse an eligibility system, what I am calling a patient delivery system, which is not tied to employment or to income.  An eligibility system that is determined by membership in the community – however the political process wants to define that word community.

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Since November 4th, interest in health reform proposals has understandably intensified.  I like to flatter myself that this blog might make a small contribution.  But I do have a day job and so the horn I blow here only has one note; if we simplify the system we can find the money we need to cover the people without health insurance and increase product satisfaction among all stakeholders.  

I am not a policy wonk who views the health care system wonderfully distilled through the glorious abstraction of statistics; nor am I encumbered by practical politics.   I view the system from the bottom looking up.  I have a stake in the present system, but that stake is poorly represented in these musings.  I am a gatekeeper to the health care maze.  In my ideal world there would be far less need for the work I am doing.

I know from daily encounters just how daunting that maze is for people needing care.  I tend to demonize piece rate physicians who are too quick to deny care rather than trust the maze.

So when I read others who write about health care reform I look for my theme.  On Sunday, November 23, 2008, the Washington Post published an opinion piece by Shannon Brownlee and Ezekiel Emanuel, 5 Myths About Our Ailing Health-Care System.  The authors are right on target with four of the five myths that they debunk.  They drive home the point that we are paying a lot of money for our health care, that we are paying a lot of money for not particularly good health care, that we really are paying the price through premiums, taxes, and lost wages, and that Americans are ready for a change.

I take issue with myth #3 – we would save a lot of money if we could cut the administrative waste of private insurance.  The authors don’t think much of that notion.  Since administrative complexity, and consequently costs, is my central theme, I need to take issue with the authors on this one.  The authors argue that if the private sector were to spend on administration what Canada spends, the potential savings is only $120 billion.  That’s not enough to cover the cost of covering the uninsured, they assert.  In addition, it would only be a one-time savings. 

First, $120 million is well within the cost range most often cited to cover the uninsured.  If not enough, it is certainly close enough.  Covering the uninsured is a major motivation for politicians.  There may be lots of reasons to reform health care, but only this one will move politicians to act.  If there is savings to pay for that coverage, that is additional motivation for political decision makers.

Second, the savings is not a one-time savings.  The savings recurs with every health service that is now billed to a private payer.  I fail to see how the authors can argue otherwise, unless they fail to understand just how duplicative the current bureaucratic maze is.

The authors’ argue that administrative costs are not a major driver of health cost inflation.  True, but those costs pay for administrative services that add little value to population health and add considerably to the inflation of frustration experienced by both patient and provider alike.  

My real beef is that they limit themselves to administrative savings from private insurance.  They ignore the savings from government programs.  Government programs do tend to have much lower administrative costs than the private sector, even lower than the benchmark 15% number used to generate the $120 million administrative savings mentioned earlier.

There are just too many government programs.  And the government programs intersect with the private programs and other government programs in too many confusing and complex ways.  See, for example, my discussion of our program’s encounter with the Veteran’s Administration.

The authors argue rightly on myth #4 – health care reform is going to cost a bundle – that a better organized delivery system will produce greater savings than any administrative savings.  But to achieve the long-term benefits of a better organized health care delivery system, we need better organized patient delivery systems and better organized payment delivery systems.  

The ideal is a system that enrolls people once and payment flows from a single source to those delivering care.  That is admittedly an ideal, but meaningful reform proposals need to keep that target in mind and not layer even more programs, regulations and bureaucracies over top of the current system.

So, to Ms. Brownlee and Dr. Emanuel I maintain that cutting administrative waste to save money is not a myth; it is a necessary first step toward a more efficient delivery system.

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Every health care reform proposal attempts to offer some relief for small businesses.  According to the National Federation of Independent Businesses (NFIB), small businesses create 2/3 of American jobs, yet half of the uninsured are in small businesses.

Look at President-elect Obama’s health care proposal on his campaign’s web site.  The first two items:  

• Require health insurance companies to cover pre-existing conditions so all Americans regardless of the health status or history can get comprehensive benefits at fair and stable premiums.
• Create a new Small Business Health Tax Credit to help small businesses provide affordable health insurance to their employees.

What’s remarkable about these proposals is that we are still discussing them.

Let’s look at the second item – a tax credit for small businesses.  In my opinion, it is a mistake to separate the small business market from the individual market.  Almost every small business starts out as a solo enterprise.  How many creative ideas never come to market because the would be entrepreneur is afraid to go without health insurance?

Yet we don’t make it easy.  Anyone who has ever itemized deductions has experienced the limits on the deductibility of health insurance costs.  There is also something called a section 105 deduction that you can learn about elsewhere.  Yet business owners can deduct the full cost of their medical insurance.  I would welcome an explanation that justifies this disparity, or at least explains the politics to me.

The real nut is the first item.  That we allow insurance companies to only insure healthy people is the greatest tragedy of American health care.  This is called medical underwriting.   Jonathan Cohn in his book, Sick, has a wonderful chapter on this stain on American health care.  

That there is a logic to this is further example of the Alice in Wonderland character of American health care.  Unlike home or auto insurance, there is no requirement that people have health insurance.  So insurers will naturally expect those in the market for health insurance to need it more than others.  The best way to protect their profits – and they are in business to make a profit – is to not insure sick people.

The way around this is a combination of mandates and risk pooling.  If everyone is required to have health insurance, there is a greater likelihood that healthy and sick people will be spread evenly among all insurance companies.  Some sort of risk pooling could serve as a backstop for insurers with a disproportionate share of sick people.  Unfortunately most risk pooling proposals act as a dumping ground for severely ill people.

Small business groups also see salvation in Association Health Plans.  This is little more than an effort to gain some advantage to the programs they are already marketing.

One reason why little progress has been made on this issue is that the interest groups are conflicted.  The NFIB and the Chambers of Commerce represent small businesses.  They also augment member dues by selling health insurance to their members.  In addition, they represent insurance companies and insurance agencies.  

What may be in the interest of the entire small business community is undermined by these narrower interests.  The narrower interests are able to prevail because they all share a myopic knee jerk loyalty to a free market ideology.  Ideology trumps practicality.

Again simple is better.  A single plan for each geographic region can enroll both individuals and small businesses.  It would spread the risk evenly, reducing costs for all.  Health care dollars could be spent on health care, not marketing and medical underwriting.  

Linking premiums to income is a radical idea to some, but there are businesses who charge their employees for health insurance based on their income.  Why can’t it work in the public space?  A tax credit only makes sense for someone who is making money.  It does little to help the small business who has yet to show a profit.

If there is to be a solution for small businesses, policy makers will need to listen directly to those small businesses without insurance and not those who purport to represent them.  And certainly not Joe the Plumber!

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Instead of focusing on Joe the Plumber and his tax phobia’s, perhaps the presidential candidates should talk to Jesse the Artist and ask him or her about health insurance.  On Sunday, October 19th, I visited the Bethesda Row Arts Festival in Bethesda, Maryland.  I did just that.  In a very unscientific survey, I talked to a number of the artists about their health insurance.  

Why should anyone else be interested in artists?  Because they are small business people.  They are also very creative.  It is this creative entrepreneurship of small businesses that candidates like to support because it is the economic engine  that drives the American economy.

Artists as Small Businesses

I was curious whether health insurance was a barrier to entry for these artists.  Two of the artist referred to a study (but could not name the source) that 83% of artists had health insurance.  That was consistent with my own unscientific study. I talked to close to 20 people.  Only three had no health insurance.  But, on the other hand, only three paid for their own health insurance.

Perhaps they asked the wrong question.

How did the others get their insurance?   Two reminded me just how careless my methodology was.  Each artist’s booth had a sign on the outside identifying the artist and where they were from.  On two occasions I was drawn into the booth by the art work.  So when I popped my question about health insurance, I hadn’t noticed the sign that indicated they were from Canada.  They thought it a rather silly question.

The others fell primarily into three categories.  They were retired and were among the few very retirees with employer based health insurance.  They had spouses that worked and carried the artist on the employer coverage.  They were veterans with coverage with the Veterans’ Administration (VA).

One person was a dependent on his ex-wife’s employment based plan – something that most plans (and the tax rules) do not allow.  But in addition, he had VA coverage and was a few months away from turning 65 and becoming eligible for Medicare.

Almost all agreed that it was an issue that they took very seriously.  One of the artists who had his insurance from his employer’s retiree health plan, admitted that he was fortunate.  He also confessed to paying for health insurance for two of his children, one was unemployed and the other was starting a small business.

These Artists as Atypical Small Businesses

Although this small sample is instructive, it likely does not represent either artists or small businesses.  It is mostly successful artists who exhibit at shows like this because they know they can sell their work.  To what extent did good health and/or good health insurance allow them to advance their careers?  

Two of the people who admitted to buying their health insurance also conceded that they only recently have been able to afford it.  I remarked to one that she was fortunate that she had no serious health issues.  ”No,” she said, “that’s another story.”   Several of the artists reminded me that artists frequently work with materials that are toxic making health insurance even more important.

But unlike other small businesses, artists rarely compete on price.  If they did, those who paid for their health insurance would be at competitive disadvantage.

Support and Encourage Small Business

Small businesses provide the creative energy and initiative that drives the economy forward.  Now, when the economy is in the tank, is the time to rejuvenate the economy by providing affordable, easily accessible health insurance to all Americans.  Let the entrepreneurs bloom!  Artists won’t be the only ones to benefit.