The following guest post is penned by Lisa Korin, Graduate Student, Masters of Public Health, Johns Hopkins University Bloomberg School of Public Health.

Barack Obama’s grassroots organization, Organizing for America (OFA), called for a series of health reform kick-off meetings on June 6 (coincidentally my birthday), to brainstorm ideas on the public option notion and plan a healthcare day of service for June 27. I attended a meeting at a stranger’s home that I found on the OFA website.

As the attendees went around the room sharing their healthcare stories, it quickly became apparent that most everyone at the meeting was for a single payor system, in which there is only one public payor for all, and not interested in discussing the Obama plan that was to be the meeting’s purpose. The prevailing belief was that – if insurance companies don’t exist and there is a single payor, it will resolve all of our health woes.

As someone who worked for a private payor at the time, I was not only of a different opinion but also appalled when asked if my company would sponsor a blood pressure screening at the day of health service event we were to plan (at which there would be propaganda promoting a single payor system).

Following the meeting, I wrote the following letter to the event organizer:

Dear Organizer,

Thanks for letting me participate at your meeting Saturday. I found it quite interesting and thought-provoking. I had come to the meeting thinking it would mostly be about promoting the Obama plan, which includes keeping private sponsors of health coverage and adding a public option that may increase health care insurance access and affordability. The group that gathered Saturday seemed to be more in favor of a single, government-based, payor option that is not the Obama plan though.

As I’m not clear what type of literature and promotion would be distributed at the health service event, it would seem to me that it is not strictly in favor of the Obama/Organizing for America ideals. That said, after a few days of digesting some of the dialogue and reading through some of the literature distributed at the meeting, I’m not quite sure the payor I work for would be an appropriate sponsor for the blood pressure screenings at the health service day event. In fact, there seemed to be quite a bit of animosity toward the insurance industry amongst the group – would you agree?

As an account executive in the insurance industry, I appreciated hearing Saturday about some of the troubles people have faced with private insurance and recognize that the current system works well in some ways and lacks in others. At the same time, I couldn’t help but notice the limited understanding of the health insurance industry that perpetuated around the room. As I sat and listened to some opinions that differ from my own – if I may – I wanted to say a few words about the health insurance industry, and, if you feel it’s worthwhile, please share with the group.

The health insurance industry exists as a means to finance health risk, the thought being that a carrier can negotiate more affordable health coverage than an individual or group could pay for or negotiate on their own. Providers need insurance companies to bring members/patients to them (who may not otherwise afford to pay for services), and the insurance companies need health care providers to participate in their networks in order to attract individuals and employer groups to purchase health coverage plans. And yes, like other organizations, a financial margin needs to be produced in order for the insurance company to exist; if there was a 100% dollar for dollar pass through on every insurance premium dollar to pay claims, the insurance company would not exist and therefore, the negotiated discounts, etc. would not exist. (Please note I am oversimplifying this.)

Part of my job has been delivering and explaining annual insurance renewals to employer groups, associations, brokers, consultants, and a number of other types of parties. Having delivered renewals to groups ranging in size from sole proprietor groups of 1 to 500 person companies, I can tell you that 80-90% of every insurance premium dollar goes toward paying claims! Let me say that again: 80-90% OF EVERY INSURANCE PREMIUM DOLLAR GOES TOWARD PAYING CLAIMS!!!

As a result, it seems to me that eliminating insurance companies on its own does nothing to make health care more accessible and affordable. The same health care costs exist whether or not the insurance companies exist. In fact, I read an article once that described health care costs in and of themselves as the “cake” and insurance as the “icing”, which I think is a good analogy. The question then becomes what is being done to curb the rising costs of health care – that is, the rising costs of “cake ingredients” (and that is the area I am interested in studying at Johns Hopkins).

Currently, health care comprises 18% of GDP and that number is expected to rise to 30% in the near future if reform is not passed to affect aspects of health care costs such as:

• the chronically unhealthy (I’m sure I don’t need to elaborate on the number of people with Type II diabetes, high cholesterol/blood pressure, etc. or those who smoke, are overweight, do not exercise or maintain a healthy lifestyle, etc.)
• provider malpractice insurance costs/”defensive medicine” (i.e. physicians ordering more tests than may be needed in order to protect themselves from being sued)
• the aging population (people are thankfully living longer, and there are costs associated with this trend)
• health care technology and innovation costs (i.e. the R&D costs pharmaceutical/biotech companies need to recoup when launching a drug/biotech product to market)
• medical errors (technology to help prevent costs billions of dollars to implement on a widespread national scale)
• fraud/abuse (e.g. doctors falsifying diagnosis codes on claim submissions, patient identity theft, etc.)

All of the previously mentioned aspects are the “cake;” insurance is the “icing” that packages and finances all of it. I’m not clear how the single payor system in and of itself would do anything to curb the “cake ingredient” costs. The only difference between the current system and a single payor system that I see is that you and I, employers, etc. would be taxed heavily to continuously support the upward spiral of increasing costs. (Please correct me if I am wrong on that last point.)

Obama’s principles for health reform provide for “what can we do to increase accessibility and affordability?” of health care. I personally am for however greater health care accessibility and affordability can come about.

The Centers for Medicare & Medicaid Services (CMS), the government agency that runs Medicare and Medicaid, and from which a single payor system would be modeled, is hardly staying solvent and is due to run out of money in the coming years. I fear for what would happen if all the health care dollars for the rest of the population were in the hands of the government alone rather than in a free market or private/public payor combination environment. In addition, CMS is already the largest payor in the nation, and as they have reduced reimbursement rates continuously over the years, private payors have followed suit. Nevertheless, private payors’ reimbursements’ remain overall higher than CMS’, thus helping keep a number of health care providers in business. Needless to say, I fear for provider reimbursement rates if a CMS-like entity is the only payor.

By the same token, services private insurance companies deny or require prior authorization for today seemed to be an issue many of the meeting attendees shared. Having a single payor does not mean such services would then be automatically covered. In fact, if the single payor denies health service, there will be nowhere else for that individual to go to get it covered. (i.e. there will be no competitor in which a different policy could be purchased that may cover the service).

Those are a few of my thoughts – hopefully they didn’t come through too harshly but in understandable terms. I have also attached the Economic Case for Health Reform report released by the Obama administration last week as it lends credence to many of the points noted above.

I welcome any responses, rebuttals and/or questions. If not, I understand that as well and enjoyed participating in Saturday’s group.

Sincerely,
Lisa

This entry was posted on Thursday, July 2nd, 2009 at 8:32 am and is filed under Health Reform, Insurance, Policy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.