Physician Patient

Health Care Reform Article to Star Tribune

March 6, 2006

Dear Star Tribune Editor,

The March 6 Opinion Exchange features an article by state Senator Becky Lourey proposing that we cover the poor with MinnesotaCare and that we “ask” insurers to limit administrative expenses; on the opposite page is an editorial poking holes in Bush’s health care proposals. I believe these two articles illustrate how limited our thinking has become in addressing a problem that is both a calamity for thousands of Minnesotans and a major drag on our economy.

Consider what needs to happen if we are to truly address the cost and accessibility issues of health care. Most (but not all) of us would agree with two premises about how to reform health care. The first is that the private sector does a better job than the government in providing services; the experience of countries like Canada and England shows that the cost of government-financed health care is rationing and limited access to quality care. The second is that we need to find a way to cover everyone; having tens of millions of Americans without access to basic health care coverage is unacceptable and should not be allowed to continue.

A solution to the health care crisis based on these premises must have two parts: a method of paying for services that rewards quality and reasonable cost, and a system to assure that every citizen has the financial resources to obtain the health services he or she needs. Neither of these elements work very well in our current system.

The problem with how we pay for health care services is that usually we don’t pay for health care services! Rather, we rely on insurance or government programs to determine what providers should be paid and then we pay copayments, coinsurance, deductibles, premiums and taxes. Market economics have taught us time and again that efficiency and responsiveness is maximized when there’s competition for customers; but for competition to exist, the customer must pay.

Academic studies have estimated that about one third of everything that is spent on American health care is for administration; the vast majority of this is due to our third party payment system. Providers are forced to provide services that fit into the codes that will be reimbursed, making them less responsive and flexible in meeting patient needs, and they need complicated administrative systems to bill and collect reimbursement. If we paid directly for our health care services, providers would not just be price competitive, as the Star Tribune editorial observed, but would also be more responsive to our needs and have much lower administrative costs.

The second issue is making sure that everyone has the financial resources to afford health care. For the most part, we should not do this by using insurance; insurance is an appropriate way to pool risk for the unpredictable and unaffordable, but it is otherwise terribly inefficient and costly. We also shouldn’t be providing our elderly and poor with defined benefits coverage (like Medicare and Medicaid), instead we should provide them with financial assistance as necessary for them to afford care. To understand why this change is necessary, think about how wasteful and inefficient the food stamps program would be if, instead of giving stamps to purchase foods, we had the poor go to the grocery store, pick out what they want, and then have the grocer collect payment from the government. Of course, this would dramatically reduce the choices, options and quality of the food we would find at the grocery store, cause conflicts between customers who want steak and grocers who want to give hamburger, and also dramatically increase administrative overhead – yet this is exactly how our current health care system works!

The key is allowing people to save and prepare for their future health care needs, while providing needs-based tax deductions, tax credits and financial assistance to those without other means to pay for care. As for health insurance, it should be like life, disability or long-term care insurance: owned by the beneficiary, permanent (not one year at a time), with benefit payments directly to the policyholder.

This may seem complicated, but it is desperately needed. It is disturbing when the best debate is a lame suggestion that we ask insurance companies to reduce administrative costs and that we expand costly government programs, along with a misinformed critique of consumer-driven health. If we really want to address health care reform, some bold and comprehensive ideas need to be put on the table.

David Allen
5710 Mt. Normandale Drive
Bloomington, Minnesota 55437
(952) 835-2009
dwallen@mn.rr.com

David Allen is a health care management consultant, President of the Minnesota Physician-Patient Alliance, and Chair of the Platform Committee for the Independence Party of Minnesota. The views in this letter, however, are his own.

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