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Steve Edwards: Debate focuses more on health insurance than health care.
Steve Edwards: Debate focuses more on health insurance than health care.

Skepticism of health reform effort crosses industry lines

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Opinions on health care reform vary widely among businesses, consultants, educators and providers. One point on which they seem to be united, however, is that the measures being discussed in Washington will have far-reaching, and perhaps entirely unintended, consequences for patients, payers and providers.

Some people are highly doubtful of the reform effort, including Beverly Gossage, a research fellow with the Show-Me Institute and a consumer-driven health care advocate. Gossage, who consults with businesses and policymakers through her Lawrence, Kan., company, HSA Benefits Consulting, said the biggest problem with reform is that most people - including government representatives - don't really understand how health insurance works.

As a result, she said, their efforts are "like trying to fix a watch when you don't know how the watch works in the first place."

Others approach reform with cautious optimism, as well as specific concerns. Among that group is Steve Edwards, executive vice president and chief operating officer of Springfield-based CoxHealth. Edwards is supportive of expanding health coverage to more people, but he is concerned about how the costs of that expansion will play out for providers.

"It's a noble idea to expand coverage, and I don't think you'd find a doctor or hospital against expanding coverage," he said. "It's a trickier question around how you do it and at what cost."

Edwards noted that opinions on reform vary so widely, even within his own organization, that he speaks only for himself in assessing the reform issue.

A major concern among various players is that the reform proposed in Washington is really more focused on health insurance than on health care.

"There's health insurance reform and then there's general health care reform that actually deals with delivery of health care and cost of health care," said Gordon Kinne, president of Med-Pay Inc. Med-Pay's core business is administering health plans for companies that self-insure, but it also works with clients who insure through major carriers.

The problem with focusing on health insurance is that health insurers retain a maximum of 25 cents of each premium dollar and often much less, Kinne said. The other 75 cents or more of each health care dollar goes to the cost of care itself - doctors, hospitals, clinics, pharmacies, medical equipment, et cetera - which are largely unaddressed in proposed reform bills.

Also, Edwards noted, overall health insurance industry profits overall account for only about 3 percent of health care costs.

St. John's did not return calls seeking comment for this story.

Major issues in reform

In the current health care environment, there are three sets of problems: coverage or access to care; cost of care; and quality of care, according to Mark Rushefsky, a professor of political science at Missouri State University and co-author of "Health Policy and Politics in America."

Current reform discussion focuses primarily on coverage/access and, to a lesser degree, cost. In particular, current reform bills are targeted to increase coverage and spread the cost to more people.

But there are many unanswered questions on how it will all be paid for, and in some cases, the proposed methods of paying for care, or at least cutting costs, are unacceptable to providers.

For example, Edwards said, through the American Medical Association, doctors agreed to support reform in exchange for eliminating the Sustainable Growth Rate, which now reduces physician Medicare reimbursement from year to year.

An $829 billion reform bill sponsored by U.S. Sen. Max Baucus, D-Montana, was approved by the Senate Finance Committee on Oct. 13 in a 14-9 vote. While the Baucus reform bill eliminates SGR in the first year of the 10-year budget, it reinstates it for the remaining nine.

"That would mean a 25 percent hit to physician reimbursement," Edwards said. "It's a $245 billion savings on the backs of doctors."

Likewise, the American Hospital Association agreed that hospitals would forego $155 billion in Medicare funds as a trade off - if more people were insured, they wouldn't need the Medicare funds. But the Congressional Budget Office notes that only 91 percent of the population would be covered, leaving a worrying number of uninsured to be cared for and $155 billion less to do it.

Also, reform as currently framed does not address the incentives that drive coverage decisions and costs.

For example, for the insurer, payment of any claim is a loss, and the smaller its losses, the higher its profits. The higher its profits, the more attractive an insurance company is to investors. The bottom line is that the more care they cover, the lower their profits are, Rushefsky said.

On the physician side, doctors get more money when they provide more services, so there's an incentive to provide more services. "I know doctors don't like to hear that, but if you look at their economics literature, that's what it will tell you," Rushefsky said.

Also unaddressed is the issue of tort reform in malpractice, Edwards noted.

While the effectiveness of tort reform has been questioned, Annenberg Fact Check recently reconsidered its position on the issue and concluded that tort reform could save taxpayers $41 billion on Medicare, Medicaid and other federal spending over the next decade.

Meanwhile, for individuals, coverage mandates, community rating and guaranteed issue - included in most of the reform proposals - are major cost concerns.

These measures will cause insurers to price to the middle, Gossage said. That's a good deal for those who utilize health care the most, but it's an unfair burden for the young and healthy, she said.

The coverage mandate, driving 20 million to 30 million new customers to insurers, is the trade-off for insurers' offering the plans to all regardless of pre-existing conditions. Backing away from mandated coverage could be a deal-breaker for insurers.

How we got here

Originally, health insurance operated just like life, auto or homeowner's insurance - it was meant to cover the catastrophic and the unexpected, Gossage said. But that changed in 1943, when employers began to offer hospitalization plans to attract scarce workers in wartime America. Those first plans, purchased for about 25 cents a month, were designed to cover a portion of an employee's hospital bill, Gossage said. Over time, employers sweetened the pot, adding doctor visits and prescription drugs, and collective bargaining further enhanced the plans.

As benefits increased, so did utilization. The cost of health plans rose, ultimately reaching the point where employers turned to employees to share the burden. More recently, government mandates for covering specific procedures, such as mammograms, have added to the expense.

In the 1970s, the Carter administration proposed a uniform system of accounting for hospitals that would have allowed an apples-to-apples comparison, but the industry opposed it and it never went anywhere, Rushefsky said.

Because there is no transparency on costs, consumers cannot shop for the best deal on care. In fact, most patients find out what a procedure costs days or weeks after the fact when they receive an explanation of benefits. And without uniformity, two people can see the same doctor for the same condition and receive the same treatment, yet they, and their insurance companies, might pay completely different amounts for identical care, Rushefsky said.

The last attempt to reform health care in the 1990s resulted in widespread adoption of managed care plans as the private sector, rejecting government-led reform, attempted to rein in costs.

While managed care did restrain spending for a couple of years, Rushefsky said, it did exactly what patients and doctors feared government-sponsored reform would do: health care decisions ended up being made by bureaucrats - but in this case, private sector bureaucrats.[[In-content Ad]]

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