2000 Pages and Counting

Limestone Caves Phuket, Thailand - photo by JoAnn Sturman

Scott Sturman
fliesinyoureyes.com

“The only task governments perform consistently well is spending money.” 2nd Lt. W.R. Priskna 1973

I cannot remember reading a novel over two thousand pages long, but in a matter of months the Democrats have written health care reform legislation whose size dwarfs War and Peace. The tome is a morass of complicated rules which attempts to control every aspect of health care from the cradle to the grave. Yet not surprisingly and despite the seemingly rigorous detail of the plan, the solution is flawed. Only feeble efforts are proposed to enact meaningful tort reform and direct individuals to seek healthy lifestyles. These glaring oversights define the philosophical bridge dividing professional politicians and the citizens they represent. No where in the liberals' reform debate does one find an alternative where the consumer of health services is preeminent.

Both private and government insurance programs are the primary causes of exploding health costs. In insulating the patient from the economic realities of using health care services, no effective mechanism is in place to control costs. Services are offered independent of financial repercussions. Until patients have primary control over expenditures, costs will continue to escalate.

There is a strong correlation between the cost of health services and the use of insurance to pay for them – a simple fact that is ignored in the current health care debate. Ironically, all recently proposed solutions are driven by the use of expanded insurance services to pay for health care. Since 1965 a strong correlation between the cost of health care and the use of insurance can be demonstrated. In 1965 44% of health care was paid from out-of-pocket sources, while 35% relied on private and federal insurance. In the mid 1980's total health costs and the use of insurance to pay for it began to accelerate upwards. By the mid 1990's the slope of these curves inclined steeply upward and continued until the present time. By 2006 12% of expenditures were paid out-of-pocket while 80% were reimbursed by federal, state, and private insurance sources. An excellent summary of these statistics can be found in the Rand Corporation's report:

http://www.randcompare.org/current/dimension/spending

Rather than introduce a two thousand page law which enlarges the scope of institutions that are responsible for the surge in health care costs, consider a document 1% of its size bereft of mandates and focusing on the patient as the final arbitrator of health expenditures. The vehicle which can deliver affordable care is the Health Savings Account (HSA) model which restores an out-of-pocket mentality to the payment system. Inherent within the HSA is a necessary feedback mechanism whereby the patient spends cash money from their account for medical supplies and services and assumes an element of financial risk in the decision process. The HSA is funded with pretax dollars by the individual or employer and is linked to a high deductible catastrophic insurance plan whose primary purpose is to protect against large, unpredictable expenses but not as a source of payment for day to day needs. Patients are intimately involved in the gamut of health care economics - bargaining for services, electing to use generic as opposed to higher priced drugs if there is no appreciable difference in efficacy, deciding whether an emergency room visit is appropriate if they can wait to see their doctor in the office, taking an active part in preventative medicine, and dealing with scores of other health related issues.

The HSA is funded on a annual basis. If funds are remaining at year's end, then they are rolled over into the next year without penalty. At their discretion account owners are permitted to invest account assets without a tax burden on profits. At age sixty-five the fund rolls over into an IRA to be used for other retirement expenses.

Life expectancy in the United States rose from forty-seven years in 1900 to seventy-four years in 2000. These advances are in large part due to preventative medicine: vaccinations, improved sanitation, healthy diets, moderation of alcohol consumption, and smoking abatement. Although smoking rates in the country have dropped, some of the dramatic gains in longevity are being eroded by the health risks associated with obesity. By 2020 it is predicted 45% of all Americans will be obese. The added cost due to diseases associated with this preventable problem will reach the billions of dollars. Compounding the problem are government sponsored food stamp programs which allow recipients who are already at high risk to purchase any food product irrespective of its caloric content or nutritional value. (www.fliesinyoureyes.com Feeding Obesity). No amount of cajoling or public service announcements will reverse the trend. The HSA model which places an element of financial risk into lifestyle choices is the only direct link between practicing sound preventative medicine and receiving an immediate tangible benefit for doing so.

Well intended social programs invariably become larger and more expensive than originally intended. Medicare is a case in point. As part of Lyndon Johnson's Great Society program, Medicare was signed into law in 1965. At that time the Part B premium was $3 per month. In 1972 the program was expanded to cover disabled persons under 65, patients with end stage renal disease, and some physical therapy, chiropractic services, and speech therapy. The Supplemental Security Income (SSI) program was added for the elderly and disabled poor who automatically became eligible for Medicaid. By 1984 federal employees, including the President, members of Congress, and the federal judiciary became covered. More coverage of services ensued and by the year 2000 the Part B premium had risen to $45.40 per month.

Just this week the Senate proposed expanding the number of Americans eligible for Medicare by lowering the age limits for coverage. Despite dire warnings about the program's oppressive costs which may put Medicare in further jeopardy, the Democratic leadership seems intent upon providing universal health care at any cost. If Medicare's forty-four year experience provides any lessons, it is the expense of mammoth federally run programs always will exceed the optimistic projections of politicians who advocate them.

By 2008 Medicare insured 45 million people. The program deals with an array of patient populations including a small subset who use most of the services. The dilemma concerns the moral responsibility to properly care for the elderly without bankrupting the system.

* One percent of the population consumes 30 percent of the country's health care expenditures – nearly half of these are elderly.
* About 30% of Medicare payments are expensed in the last year of life;
* 12% of all Medicare payments are made in the last month of life
* 10% of Medicare patients account for 70% of the Medicare budget.
* 44% of Medicare patients die in hospital, but there is a vast difference between states: 20% in portions of the West and Northwest but 50% in the South and East.
* The percentage of Medicare payments made in the last months of life has changed little as technology has advanced.

The HSA model can be applied to Medicare as well as private patients. With ever increasing costs and an aging population the health delivery system is destined to implode into a mire of rationed care. When the system reaches over capacity patients will lose many of the options taken for granted and the access to timely care. To avert this unpalatable scenario they must be willing to help manage their own health expenses in order to restore the system to solvency. Waste and the potential for fraud are inherent with government run programs and divert tens of billions of dollars away from patient care. The 2008 federal budget for Medicare and Medicaid was $682 billion or 23% of all federal expenditures. It is conceivable to imagine government agencies dispensing this astronomical sum but quite another matter to assume it is done in a prudent fashion. Until patients routinely examine their explanation of benefits rather than deposit them in the waste basket, there will be no effective manner to check abuse. History provides valuable lessons, and it clearly demonstrates the over reliance on insurance has put us into this mess.