Principles of a Sound Health Care Financing System

There are some competing philosophies relative to health care.  It is important to understand the fundamental philosophies:

a)            Same health care for all.  This is the “Equality Principle”.  Although our constitution does not grant a right to health care, we have the ability to amend our constitution and/or laws and regulations.  This principle is appealing from an equity point-of-view.  Its disadvantages are cost and possibly resulting in a lower level of care for all.

b)           Same threshold for all; allow people to buy more health care.  This is the “Rising Tide Principle”.  It provides a safety net, but allows people the individual right to purchase more health care.  It is appealing in terms of individual rights and stimulating more health advancements.  Its disadvantage is that people who can afford to purchase additional health care may not support what others consider to be an adequate threshold.

c)            No threshold.  Supporters of this “Libertarian Principle” note that the constitution does not provide health care guarantees, so none should be instituted.  It maximizes freedom but results in the greatest disparities in health care.

There may be other philosophies.  Below, I’ve laid out what I think are key aspects of a sound national health program.  Certainly there are some aspects with which people might disagree.  But I think it is important that the country consider these principles and make careful decisions which reflect them unless they are consciously rejected.

Claude Thau, 913-403-5824; cthau@targetins.com

Characteristics of a Good National Health Program

1. Permitting death with dignity is critical.  I have seen estimates that 30%-50% of health care costs occur in the last six months of life, which experts say is very different than what occurs in countries with nationalized health care.  People who don’t want such care should not be forced to have it.  Fear of losing control over their lives has led many seniors to commit suicide while in good health.  If they knew that they could control what would be done to them if their health deteriorated, they would not feel the need to commit suicide while healthy.
2. People who can afford it must have significant personal financial responsibility for their health care.  We waste lots of money when people think they’re getting something for nothing and have no incentive to review or manage their costs.
3. People who truly cannot afford health care should get a threshold level by direct health care services or by insurance.  We confuse the issue of whether people are receiving health care with the issue of whether people are insured.
4. Incentives should exist to live a healthy lifestyle (not smoking, no drug abuse, not drinking to excess, maintaining healthy weight, exercising, complying with medical instructions, eating a nutritionally-balanced diet, etc.).  Such incentives may include lower deductibles or contributions or higher maximums for those who practice wellness.  Actuarially, this simply levels the playing field.   For example, obesity costs us $117 billion/year in health care costs, not counting the additional costs in the workplace for absenteeism, other insurance (life, LTCi), etc.  Our sedentary lifestyle appears to be a major contributor to our increased health care costs compared to other countries.
5. Incentives should exist for preventive care (such as annual visits to the dentist and eye doctor) and use of non-pharmaceutical solutions.  For example, the Midwest Center for Stress and Anxiety (www.stresscenter.com) helps people relieve anxiety without medication or commercial psychotherapy.  The “Breathe-Right” nasal strip is an example of a low-cost, low-tech, but highly valuable product, which improves the quality of sleep inexpensively, thereby improving health and productivity.  Physical and mental exercises can improve our bodies and mind.
6. It is critical to have accurate, comprehensive, transparent accounting and cost projections.  A loss of tax revenues is a cost that cannot be ignored.  Too often the costs of our programs are hidden.   Cost transfers are a hidden tax.  A system of “checks and balances” seems necessary to maintain this principle.
7. Clearly an aging population and medical advances will continue to fuel a huge increase in health care costs no matter what we do.  We should acknowledge these costs no matter how we choose to pay for them.  Funding on a “Pay as You Go” basis means that our payments will increase dramatically over time.  If each generation is required to cover its own costs, their payments will explode as they age and likely be considered to be unaffordable.  Asking future generations to pay for our care is an extreme form of “taxation without representation”.  The alternative t o “Pay as You Go”, pre-funding, requires that reserves be established to recognize future liabilities.
8. To make intelligent decisions, people must know the cost of their health care and the alternatives and costs of alternatives.  Consumer-driven health care works; the question is how best to apply it.
9. Aggregating entities can negotiate lower health care costs.  The government can do so (e.g., Medicare) and other sponsors can do so (e.g., insurers or employers).
10. A key method for negotiating lower costs is to limit the number of providers so that participating providers obtain more business.  Plans should also be able to exclude providers based on quality of service.  “Any willing provider” laws protect providers from competition.  It may be desirable to create standards for health plans to assure that adequate service provider coverage exists across the plan’s foot-print (as opposed, for example, to having one doctor for every 5000 square miles), while still allowing a plan to negotiate lower price by delivering an increased patient load.  If an employer offers more than one plan, foot-print requirements should apply across those plans, not separately for each one.
11. Unfortunately, strong controls on fraud are necessary in our society.
12. It is important to continue development of electronic health information and communication systems to reduce costs and improve care.
13. A threshold health care program should not cover items that are not medically necessary.  For example, cosmetic surgery should not be covered unless it involves a major life-affecting issue.  I also think that procreation services should not be covered.
14. We owe more service, including cosmetic surgery, to our wounded soldiers, regardless of how one feels about our wars.
15. People should not lose their right to insurance because they change or stop employment.  Once insured, they should be able to continue to be insured at the same level continuously.
16. On the other hand, people should not be able to move from uninsured (or minimally insured) status to insured status whenever they wish.  Allowing such a shift at any time encourages people to be uninsured until they need care.  No insurance-based system can survive on such a basis.  That’s why many countries require mandatory purchase of insurance.
17. We must limit the adverse impact of lawsuits, while retaining accountability.  Fear of liability encourages expensive unnecessary treatments and tests.  Lawsuits cause liability insurance premiums to explode.  Punitive damages assessed against health providers could be used to offset the cost of health care; winning a liability lawsuit should NOT make someone extraordinarily rich like winning a lottery.  Plaintiffs should be responsible for the cost of lawsuits they lose, at least if the judge or jury determines that the lawsuit was frivolous.
18. We might want to limit cost of a public health care program to some degree.  Are we going to separate all Siamese twins?  Will we give everybody organ transplants?
19. Health care innovation does a lot of good but costs a lot of money.  If we want it to continue, we need to assure that the health care system does not overly discourage it.  Patent laws are necessary to encourage pharmaceutical companies to invest in research and accept the inherent risks in their business.  We should measure such innovations here in the USA and elsewhere so we can track the impact of our programs.
20. Controlling immigration might be significant in controlling costs.  Immigrants can be a source of low-cost care providers.  On the other hand, free or inexpensive high-quality health care can encourage illegal immigration.  Limiting emergency health care for illegal aliens is difficult to enforce because of uncertainty as to status and fundamental beliefs that we should not stand-by and watch people die if we can help them.
21. Permitting abortion is unpopular with many, but unwanted children may increase our health care and other costs.
22. Some health-related issues should presumably be controlled outside of the health care system.  For example:
1. If we don't protect our environment, we'll suffer health losses.  It is my impression that we are getting a lot more leukemia and other conditions among young children, which I suspect are environment-related.  Birth weights are lower in smoggy areas. 
2. Improving our educational system is critical.  More educated people seem to incur lower health care costs on an annual basis (they may incur higher health care costs over the course of their lives because they live longer).  They are more knowledgeable and can afford better diet, care, etc.  Better schools will also develop more health care professionals which would improve service and reduce cost.
23. A national health program should not extend to care for pets, but could cover the cost of pets for medical reasons (i.e., “Seeing Eye” dogs).
24. We should control the risk that insurers profit by declining justified claims.  One approach, the Independent Review process that facilitates appeals, seems to work well, but should be monitored to ensure that it satisfies the need without increasing cost inordinately.  Another possibility would be to separate the insurer from the claims adjudication process.

Background info:

80 doctors worked 22 hours to separate Siamese twins born to a Mexican family which came to the USA on a 15-day tourist visa 7 months prior to the operation.

Unhealthy Lifestyles in US Contribute to More Expensive Health Care

One of the more likely focus areas for the political season in the next year will be health care. It has already surfaced as a major point of interest and contention and all the candidates will be waving banners with their own solutions. This will also be a period of a lot of myths and misperceptions. One of the assertions is that the European system is so much less expensive for recipients because the system is fundamentally state run in many countries. There may or may not be elements of truth to this but another factor that is not getting the attention deserved is the general state of health and fitness in the US. The average American spends about $6,000 annually on health care and that is about twice what is spent by the average European. A big part of that difference may be attributable to the fact that Americans are more obese, smoke more, endure more stress and are generally less physically active. This lack of attention to health and fitness may cost between $100 and $150 billion each year.

Analysis: Ten of the most common chronic diseases were studied in both Europe and the US and the Americans were worse off in all ten. These include diabetes, hypertension, arthritis, heart disease, high cholesterol, chronic lung disease, asthma, osteoporosis, cancer and stroke. The two factors that seemed to contribute most to the higher incidence of problems in the US were obesity and smoking and it is the former that is growing at exponential rates. In the US over a third of people are obese (33%) while in Europe the percentage is just 17%. In the US 53% have smoked at some point in their life while in Europe the percentage is 43%. In both regions the rate of smoking has been declining but in both Europe and the US the rate of young people smoking has started to increase again. The bottom line in terms of health care is that Americans are not taking care of themselves and are essentially “too fat and lazy” as the lead researcher on the project points out. -CK

The