Friday, March 26, 2010


The following is a revision of the initial plan posted in September and includes more information on how past legislation has created the problems we are facing today. 

 As a Certified Nurse-Midwife with 35 years experience in the American health care system, I have a very different perspective than do politicians on what is needed for effective health care reform.    The new reform bill is, at best, misguided.  The usual suspects, doctors and the costs generated by the amazing advances of the last several decades, have not made health care and health insurance unaffordable and restrictive for many Americans.  Government regulation has.
 Over the last several decades, third party payers, either the government or managed care insurers, sanctioned by government regulation, have taken control over virtually every act of routine health care.  The massive bureaucratic control and the billion dollar profits for managed care insurers have added on tremendous cost to medical care with absolutely no benefit for health.  At this same time malpractice litigation was escalating along with multi-million dollar jury awards and the defensive medicine this engendered .  Probably half of the total expense of American health care is generated by these add-on costs, yet they seem to be permanently off limits as far as reform is concerned.    Instead, these unnecessary costs have been used as justification for the  slow but steady path toward a government takeover of the actual  practice of medicine, now dangerously close, which  threatens the  availability of major advances now,  and further innovation in the future.

The sound-good initiatives  forced down the throats of physicians and their patients, currently being touted as better care, are euphemisms for rationing care. These limits are not only unnecessary but dangerous.   Good physicians rely on their training, education, judgment, and experience, and the appropriate evidence as it may or may not apply to each patient, not on the initiatives currently being pushed by the Obama-Pelosi- Reid government.   Presented as “quality care” they are subterfuges meant to transform the entire US medical system into a beacon of third world care

 The issues of cost reduction and control of care are now intertwined.  Appropriate resolution for one allows resolution of the other.  The government intervention that created the quagmire we are in today is clear and deliberate.   First, the "right" for a tax exemption for health care insurance to be given only to employers is based entirely on the 1942 Revenue Act   .
allowing a tax exemption for health insurance only to employer based plans.  It could be amended to simply allow the same exemption to individuals and to then allow any conglomerate of individuals or small businesses to form the large groups needed for the reduced premiums based on shared risk.   This could have and should have been amended 20 years ago.  It would take a three sentence bill to accomplish. 

Next, until the early 1970’s health insurance meant a major medical indemnity policy and a choice for some coverage for outpatient care.  In 1973 the Health Maintenance Organization Act, passed by Congress and signed by Richard Nixon, required employers who provided health insurance to also offer a managed care plan that covered all health care, apparently to start the ball rolling toward government controlled health care ( some say it was Ted Kennedy’s pet project and was signed by Nixon to appease the Left)).  These plans, at first not for profit, were heavily subsidized by the government until the premiums were so much less expensive than any other plans that employers essentially started to offer only managed care options.   However,  before the liberal dream could be realized, the concept of total care was co-opted by private managed care insurers who were soon making billion dollar profits on every act of medical care by  forcing large fee reductions from hospitals and physicians, sanctioned by government regulation ( McCarran-Ferguson), and controlling access to care.  The  2500 page manifesto just passed by Congress might be considered an effort from the Left  aimed at taking back control from managed care insurers. 

For  Americans who want to control their own health care the precedent of this 1973 legislation requiring employers to offer a managed care plan may hold the solution.  Turn the tables and require employers to include an Independent Option Plan (IOP).  This alternative would allow employees to select  a  Major Medical  Indemnity Insurance policy, completely separate  from any other type of health care insurance or health care savings, along with an account for funding all ambulatory and preventive care, and any out of pocket expense incurred by inpatient care.  The employer contribution would be the same whether for a managed care plan or the IOP (currently about $7000 annually for an individual managed care plan).  This same option should be available to everyone without employer coverage, probably with a tax credit for low income Americans.  We all must remember that everyone of us is potentially someone without employer coverage.

 A Major Medical policy should cost about $1800 a year, allowing  $5200 for the IOP account. Employees could contribute  to the accounts  with no limits until the maximum was met. This account, meant to eliminate a third party payer from routine health care, should be the sole property of the insured, is tax free, can accumulate to a generous maximum (perhaps $100,000), must be invested in safe instruments, with compounding interest,  and can be carried over after retirement to cover out of pocket costs of Medicare, including home care.  Funds remaining after death can be transferred to the IOP Accounts of survivors or taxed to subsidize  a high-risk fund.   Individuals could also have the option to pay ten or twenty dollars a month into a high risk fund to cover heavy expense prior to adequate time for accumulation or are low income with no employer contribution.  The table below demonstrates how funds can accumulate.  If accounts could be started for newborns a contribution of $25 a month (not tax exempt), would yield $11,000 by age 20. 

The IOP offers many benefits.  It allows security in the event of job loss.  It allows choice of practitioner and hospital.  It allows the patient to choose care based on his or her individual needs and without risk of rationing. The IOP simply bypasses the third party payer for outpatient care without need for any other legislation.  Not everyone will select this option but  for those who do, cost can be controlled within the context of ongoing first world medical care.

Released from the fee reductions imposed by managed care and supported by government (Mccarran-Ferguson) physicians who wish to could return to private practice.  The physician-patient relationship  would be re-established without referrals or policy limitations.  Patients could be treated based on their individual status, not on the findings of an irrelevant study or whether enough lives would be saved to warrant the cost.

The add-on costs could literally disappear as every act of routine medical care no longer involved billion dollar profits for managed care insurers, costly billing fees, and salaries for multiple layers of bureaucrats.   Alternative dispute resolution could be an option for those choosing significant fee reductions in exchange for a guarantee of just and generous compensation for a preventable bad outcome, in lieu of hoping for a hypothetical multimillion dollar jury award. Costs would then be further reduced as both patient and physician would be spared from the practice of defensive medicine. Individuals, paying out of their own accounts might consider a less expensive medication that worked as well as the much more expensive one advertised on TV. 

The same option should be available to those without employer insurance with a 12 month open enrollment period for the indemnity insurance  which would allow for preexisting conditions and  with the same tax exemption as given to employers. 

The Republicans in Congress are wrong to consider a tax exemption for health insurance as spending.  Health care is not a right but it is a need.  In a free society needs are not taxed.  When the citizens are taxed to the point they can’t take care of their own basic needs it is no longer a free society when the Constitution was amended in the second half of the 19th century to allow a national income tax, the individual exemption was comparable to $52,000 in today's dollars). The Left depends on dependency.  A Democracy depends on the strength of its citizens.   
The IOP also does not require the Republicans in office to take on any of their special interest financial supporters they seem to be fearful of offending. They are simply bypassed without any need for further legislation.   No one needs to challenge McCarran-Ferguson. That being said, Democracy has thrived in the United States by securing the ability of every citizen to be independent.   Anti-trust legislation has been essential to achieving that.  If the Republicans are not willing to take any risk on lost campaign contributions in order to achieve the reform necessary to assure high quality health care to the citizens, then maybe we do need a Tea Party.        

The simple alternative proposed here may put a big dent in the hopes and dreams of proponents of  government controlled health care.  President Obama believes that Americans want the United States to be more like Europe.  He needs to brush up on his history.  The Europeans liked Europe.  They stayed.  We left.    


1. Based on Individual Insured working from age 22 to 62
2. Contribution of $100 a month at 6%compounding interest (many Americans with an employer provided fund and minimal outpatient expense could save as much as $400 a month to invest in their IOP).
3. Results based on today’s dollars. 

YEARS OF ACCUMULATION                       AMOUNT
($100 a month)

5                                                                        $7000
10                                                                   $16,500
15                                                                   $29,000        
20                                                                   $46,500
25                                                                  $69,700
30                                                                 $101,000
35                                                                 $143,000        
40                                                                 $200,147

John and Mary each have an employer funded managed care plan with a $7000 premium. They switch to the IOP.  Each pays $1800 for the indemnity policy, John spends $500 on outpatient care and Mary, $2500 the first year.  The following year John spends $1500 and Mary $2000.  After two years, even without any compounding interest, they would already have $14,300.

However, John and Mary could be seriously injured in an auto accident their first year on the plan.  All their hospital care is covered by the indemnity policy but they have $25,000 in outpatient costs.  Their IOP this first year only gives them $10,400 so they owe $14,600.  Some solutions:  the government could create legislation allowing them to borrow from their IRA and pay back as time goes on or borrow from a shared risk fund.  

No comments:

Post a Comment