May 24, 2013
Health Care Reform by Medicare Expansion
Posted on Jun 20, 2009
By Eric W. Fonkalsrud, M.D., and Michael D. Intriligator, Ph.D.
Exploding costs, limited accessibility and uneven quality of basic health care in the United States have been highlighted as a top priority for early correction by the Obama administration1. The cost of health care represents a significantly higher proportion of national income in the U.S. than in any other industrialized nation. Medical expenses currently consume almost 17 percent of the U.S. gross domestic product, up from 13.5 percent in 19982, and now are the most rapidly escalating expenditure in the federal budget. At the same time almost one-sixth of the U.S. population is uninsured, with many others being underinsured. Market forces have been unable to restrain the downward spiral of medical care delivery or the upward spiral of medical costs.
Recent enormous financial losses posted by General Motors and many other U.S. corporations have been attributed in part to the costs of covering health benefits for active and retired employees. Such costs are not borne by companies in countries with a national health system.
When the accelerating costs of private health care insurance, estimated to be about $14,000 annually for a family of four, are passed on to the employer, large companies are at a significant disadvantage in the international marketplace, and small employers often face bankruptcy. As a result, more and more companies have shifted the growing burden of health care costs to their workers. Over the past five years companies have seen their health care spending rise some 29 percent, while employees have seen their outlays for premiums, co-pays and deductibles rise some 40 percent.
The number of uninsured Americans is increasing rapidly as unemployment figures escalate in the current economic crisis and as companies engage in restructuring layoffs. Family incomes are decreasing, and health insurance premiums are continuing their rise. Even the temporary COBRA provisions for the recently unemployed are unaffordable for a large number of people and are costly for employers.
The burden for underinsured health care is placed increasingly on county, city and charity hospitals, which are already overcrowded, understaffed and progressively underfinanced. Currently over 40 percent of the hospitals in California are financially in the red. Furthermore, routine health care, as well as the treatment of severe disease and critical emergencies, is being funneled through busy emergency rooms where the wait to be seen by a physician may be as long as eight hours.
During the past three decades, there has been a progressive transition of private health care insurance into a for-profit business with shareholders and extensive marketing expenses and increasing executive compensation that have boosted the overhead costs to well over 25 percent of consumer-provided revenues. The various marketed private health care options are so complex that even the well-trained physician often has great difficulty in interpreting the differences in patient coverage as described in the extensive brochures from each company.
The major ways that insurance companies manage risk and reduce their medical loss rates are reducing covered services, raising deductibles and co-pays, refusing to cover pre-existing conditions, and marketing to the young and healthy (cherry-picking). Some private health insurance companies have followed the pattern of the auto insurance industry, which commonly raises the premium if the policyholder is involved in an accident that is reported to the company. Similarly, patients who develop certain diseases that are expensive to treat may face increased premium charges, and in some cases companies even drop them from coverage plans.
It is increasingly apparent that all Americans should be provided with a standard basic medical benefit package, regardless of their income, employment status, health status, age or where they reside. Increasing numbers of Americans who seek health care just can’t afford it. Indeed, medical expenses have now become the leading cause of personal bankruptcies in the U.S. A current proposal in the health care debate that citizens be mandated to purchase their own medical insurance would, if put into effect, be unlikely to meet the desired goals of standard basic care. The Institute of Medicine has concluded that 22,000 people die annually largely due to lack of adequate medical insurance.
Amid the great disparity in the health care provided to Americans, President Obama has wisely and clearly stated that health costs must be reduced considerably and basic health care should be provided to all, and he regards these goals as being among his leading priorities. It is therefore discouraging that the major providers of medical care—including hospitals, physicians, nurses, clinical laboratories, and pharmaceutical, special equipment and insurance companies—have all requested, and in most cases have received, increasing compensation despite the economic crisis.
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