Solving the Health Care Riddle | submitted by Don Higgins

Health care reform is sure getting a lot of attention these days. Everyone seems to want to throw out or “fix” the current system. I support health care reform, but now President Obama is calling for health insurance reform. My health insurance is not my health care, and I don’t understand how people, including our legislators, keep getting that mixed up. Insurance is nothing more than a way to finance health care. It does not create an unlimited pool of money to pay claims. Insurance premiums simply reflect the cost of health care claims. To reduce health insurance premiums, you must either reduce the cost of health care, or reduce the amount of health care a person can use. Sounds a bit like rationing, doesn’t it?

Before diving off the deep end, it might be a good idea to look at what is working and which parts are not.

Wisconsin was ranked #1 in health care quality by the Federal Agency for Healthcare Research and Quality. In Wisconsin, Medicare pays an average of $6,978 ($6,416 in Madison if you’re counting) per senior enrolled. The national average spent by Medicare is $8,304. This is according to your government and their “plan.”

In Wisconsin, over 92% of the population currently has health insurance. That includes the homeless, low income, elderly, and the wealthy. And remember, 100% have access to health care if needed.

The four HMO’s headquartered in Madison provide 60% of the south-central Wisconsin population with health insurance. From the latest financial reports on the insurance commissioner web site for the four HMO’s combined: One dollar of premium = 92 cents in paid claims + 7.8 cents for administrative costs + 0.2 cents for operating profits. That’s right. Profits are less than one percent! How long could your business operate on that margin?

Why the numbers? Because we need facts and not just emotional stories to know if we really have a crisis. What this does tell you is this — the private sector has done a pretty decent job so far. Is it perfect? No! But it is a heck of a lot better than everybody thinks.

The government’s numbers are too big and can be mind boggling. I know they are to me. The Fed CBO estimates the cost of the proposed health care reform, which has not even been defined for you and me, at just under $1 trillion over 10 years. The goal is to cover everyone and there are an estimated 50 million uninsured. That is $2,000 per uninsured person each year. That doesn’t seem like enough to cover it, does it? I wish I could get my coverage for $2,000 per year. What will it really cost?

A public health plan is supposed to be the solution too. Let’s take a peek at that. The government-run Medicare program is currently the largest health care payer in this country. How does our government control Medicare’s costs? Well, that is easy. They simply cap what they will pay for services or raise taxes. Ask the hospitals and doctors what Medicare pays for their services. It will be between 50% and 70% of the true cost. Where does the rest go? It gets shifted to others with private insurance. Your insurance premiums are $1,200 higher than they should be for each insured person — every year — as a result of this shift in costs! That is a hidden tax, pure and simple, that no one gets to vote on.

Has anyone ever seen the government building where Medicare processes all their claims? No, because they use the private health insurance companies to handle all the claims. Now do you really need to create another government bureaucracy to compete with those same insurance companies? The government relies on the systems and expertise created by the private sector insurance companies. How long will that last if they are competing?

No one seems to talking about what drives the costs. We all have a responsibility in this too. It is estimated that a staggering 70% of health care costs can be affected by our lifestyle. As a population, we don’t take very good care of ourselves. We eat too much, we don’t get enough physical activity, and we rely on medications to “fix it” and make us feel better. Diabetes, cholesterol, heart disease and some cancers are easily traced back to how well we do or do not take care of ourselves.

Does the government have a role in this? Sure, the government can have a role, but not as a competitor. Any time one side is both competitor and referee, it is an unfair competition. The state and federal governments already regulate insurance. The government can create a more level playing field through regulatory changes, promoting research and development, providing assistance to low income folks.

What are some of the solutions?

Requiring people to buy health insurance is an interesting idea, but I am not sure how you really accomplish that. Through taxes or penalties? Maybe. Will the penalty be large enough to encourage people to buy insurance or can they still wait on the sidelines until they have a health issue? That hardly seems fair.

Insurance simply cannot cover everything either. We need to be responsible and take care of the little things ourselves. “Little things” could be the first $2,000 in claims. Otherwise, it is just too costly. I saw a new car with several bumper stickers supporting government health care and one that read, “My car has better insurance than I do.” Does it? I bet they had at least a $500 deductible per accident. And who pays for preventive maintenance and normal repairs? Not their car insurance! An old commercial for motor oil showed a mechanic holding the oil can. He said, pay me now or pay me later, either way is fine with him. The message — a little preventive maintenance will eliminate a lot of problems later on. Your health is much the same — take care of yourself now or pay for it later in life.

Market “exchanges” are being touted too. Right now you have trained, licensed, and regulated agents selling and servicing the policies that are available to the public. First, agents advise people of the most appropriate types of plans for them. Second, agents are the client’s advocate and the person they turn to if there is a problem with a claim or other aspect of their policy. Where will you turn when a problem with your coverage arises, and you bought it on the Internet?

Doctors and hospitals currently get paid for each procedure they perform, with no guarantee of success. Should this be changed, based on medical outcomes and quality? Just trying to get a price for a procedure from your doctor or hospital is a daunting process. There are steps already being taken in these directions and more can be done.

We could let the government assume the risk for large claims. For example, any claims over $100,000 could be re-insured or pooled in a government program. The banking industry has the FDIC, but they still allow banks to operate freely (not so much today). Would you really want to see a government run bank?

Group insurance is already guarantee issue with no pre-existing exclusions. If a person has to move from a group plan to an individual policy, that could be guarantee issue without pre-existing limitations. Pricing would still need to be modified, within an acceptable range, like the group markets.

There is no single answer to this complex issue. There are steps being taken in the right direction, by employers large and small, medical providers, and insurance companies. Wellness incentives, integrated health care delivery, quality measures, electronic records, pricing transparency, and a little government oversight all need to come together to help us solve the health care riddle.

Submitted by Don Higgins,

Higgins Insurance Group, LLC