Texas Medical Center NEWS


Vol. 22, No. 6		April 1, 2000

The U.S. Healthcare System 2010: Problems, Principles and Potential Solutions

Excerpts from Dr. Arthur Garson, Jr.'s speech to the American College of Cardiology

The fixes promised by the health maintenance organizations have not materialized; healthcare premiums are again on the rise; hassles for patients and physicians abound; and there are now almost 45 million people uninsured-about the same as the entire population of Canada plus Australia. Problems that 10 years ago were considered to affect only isolated parts of society now are beginning to encroach on all of us. In the next 10 years, the current and accelerating trends with costs and the uninsured will become critical. Major change in the system will be required.

Any viable plan for the future needs to be based on universal coverage. The 2010 plan would guarantee an adequate level of coverage for all Americans. Healthcare coverage would be required, just as automobile insurance is. Each citizen would be enrolled in the private health plan of his or her choice; each family member could use a different plan and could change plans annually.

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Each previously uninsured citizen would receive an income-related payment (most likely a voucher) to cover the cost of the basic plan; the maximum payment would be equal to the cost of any local plan and would change with the cost of that plan.

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The 2010 plan represents a unique public-private mix that I believe the American public will find to be a much better alternative than a straight government system. For the base case covering all Americans, the model is the Federal Employees Health Benefits Plan (FEHBP): There would be a number of private health plans (with vertical integration as appropriate), each competing on quality and cost. Physicians could work for multiple plans; and there would be a mandatory point-of-service option where a patient would pay a slightly increased fee to see a physician in another health plan (for example, a cardiologist in one plan and an ophthalmologist in another).

Similar to the FEHBP, national coverage guidelines for the base case would be developed not only using cost-effectiveness criteria, but also equity and other considerations important in 2010. Regardless, the benefits package would be the same or better than Medicare benefits at the time. The cost of the benefits for the base case would be formula based with multiyear goals, aimed at a rational increase in the healthcare budget provided for the basic plans. In 2010, the coverage guidelines would be determined by an independent, non-governmental agency. Conceptually similar to the Federal Reserve, this agency would receive input from citizens as well as reports from the Agency for Healthcare Research and Quality.

Following federal guidelines, regional agencies (like regional FEHBPs or state employees plans - but for all citizens) would use data on both quality and cost-effectiveness to choose health plans and would provide a catalog of approved plans and quality data. Similar to the FEHBP, the regional agency would use federal guidelines to pay health plans; by 2010, the premium would be "severity-adjusted."

In the base case, coverage and access would be provided for all Americans. Unlike a government system, care would be delivered by private physicians in private health plans, which would compete on cost and quality.

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In today's system, individuals often find their choice in health benefits and job choices restricted. Many people find themselves locked into their jobs for fear of losing their own or their children's health coverage.

At a minimum, the 2010 plan would provide an alternative to the employer-based system. Employees who wish to opt out of the type of coverage that their employer provides could have their employer's part of the premium (which could continue to be tax deductible) sent to the regional agency. Employees could apply for a federal tax subsidy (after providing documentation of the employer contribution), probably a voucher, to cover the remainder of the base premium. This subsidy would be income related, such that those earning less than the federal poverty level would not pay for healthcare. For example, if the total adult premium was approximately $2,150 per year, the employer contribution might be $1,750 and the employee portion $400. The employee could apply for a federal tax subsidy of up to $400, depending upon income. For the unemployed, the income-related subsidy voucher would include the portion otherwise paid by employers. These individuals would then arrange for their own health insurance in the same way that they already arrange their automobile insurance.

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The 2010 plan also would end the administrative nightmares that both patients and physicians currently face. Each patient would have an electronic card (like a credit card) containing encrypted information about his or her medical history, the health plan, and any supplemental benefits to which he or she is entitled. Each time a patient visited a healthcare provider, his or her universal electronic medical record would be updated, with strict confidentiality rules. Software would incorporate what was dictated (or written) into the record and would automatically bill on a fee-for-service basis for physicians, and by diagnosis-related groups for hospitals. The plan would in turn pay automatically and on the same day - with no pre-approval.

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Obviously, guaranteeing basic healthcare coverage for all Americans - including the millions who currently lack any health insurance at all - will be expensive. National estimates for covering the 45 million Americans who currently lack insurance would be $88.6 billion in year 2000 dollars (33.75 million adults @ $2,152/year = $72.6 billion; 11.25 million children @ $1,426/year = $16.0 billion).

Over the next 10 years, a number of possible ways of paying for the uninsured will become apparent. At least four potential sources of revenue could more than cover the costs estimated in 2000; some of these will be more palatable than others:

1. Currently, the federal and state governments already pay $23.5 billion for the uninsured in non-Medicaid costs. These expenses would be redirected.

2. Hospital bad debt and charity care should disappear, although a conservative estimate would be to reduce it by two-thirds, or $17 billion (from 6 percent to 2 percent of $424 billion).

3. Insurance premiums paid by employers with more than 10 employees that currently do not provide healthcare could fund $43.9 billion.

4. The increased efficiency earned by drastically simplifying the healthcare system would also reduce costs. The automated billing by physicians and health plans, elimination of pre-approval, automated quality review and reporting without retrospective chart review, and the reduced need for compliance programs would save money. It can be argued that over the next 10 years, much will be spent to create these systems, and the savings in efficiency already will be realized.

Of course, the new system will need to capture other current healthcare spending. The current out-of-pocket individual expenses would be covered by the individual's contribution to the premium (the remainder after the income-related federal subsidy voucher). The financing of current government programs, such as those supporting state and county hospitals, would need to be included, as would current employer payments for healthcare premiums.

E-Mail: tmcinfo@texmedctr.tmc.edu
URL: http://www.tmc.edu/tmcnews/04_01_00/page_03.html