This article discusses the need for health care reform. The American Medical Association has devised a plan that would allow all Americans to obtain health care coverage. This article discusses that plan and advocates for physicians and patients to demand meaningful health care reform from lawmakers.
This article discusses the most important thing in one’s life: health and the health of one’s families and loved ones.
To fully understand and appreciate where society is today, the author finds it useful to recall his own childhood in Wichita, Kansas. Summertime in Wichita is hot. Not hot like Las Vegas or Death Valley, but hot like 100 to 110°, with, 90-plus percent humidity. Hot that oppressive makes the air feel like one is breathing split pea soup through a swizzle stick. What was available was a huge municipal swimming pool that was understandably a favorite of kids of all ages.
The author was able to enjoy a refreshing afternoon in the pool a couple of times, but then suddenly his mother would not allow him to go anymore. He was devastated, but her decision was not punishment. It was an act of fear and an act of love, because in those days, there was a horrible disease that afflicted people of all ages, but especially children. No one was safe. Not even the president of the United States could escape its debilitating grasp. The author will never know if staying away from hundreds of kids in that municipal pool made a difference, but he was one of the lucky children not to be stricken. Later, in medical school, however, the author took care of children in Drinker respirators. Today, many medical students have not heard of a Drinker, and certainly have not taken care of a patient using one. A Drinker respirator was known commonly as an iron lung. Nothing is more striking than a terrified, completely helpless child encased in an iron lung.
That all changed overnight with Salk’s discovery of a vaccine. Because of this medical miracle, children and their parents no longer live in deathly fear of this crippling and lethal disease.
But a vaccine to prevent polio is only the tip of a huge iceberg of medical progress. If one looks back only a short time, the medical textbooks and conferences did not mention the diagnostic prowess of CT scans, positron emission tomography (PET) scans, MRIs, ultrasounds, Doppler, and angiograms, because they simply did not exist. There were no heart–lung machines, artificial vessels, valves, pacemakers, defibrillators, or stents. Major surgery always involved big incisions. Video-assisted endoscopic procedures and robotics were science fiction rather than routine care.
The point is that health care technology in those days surrounding World War II was precious little, and physicians knew it. Yet, that great generation of physicians did what now is so rare that it seems quaint. Physicians made house calls. They cared for entire families. They did what doctors have done for centuries; they were there when it mattered, with whatever technology was available, but more importantly with caring and compassion. Patients appreciated that care, and still do today.
But something happened along the way, the endless onslaught of medical advances inevitably was accompanied by costs that rose to staggering levels, levels that became beyond the reach of many patients. Government and insurers leaped into action with promises of solutions. But they did so by insinuating themselves into the patient–physician relationship. Their promise, continued to this very day, is to “provide the best care at the lowest price.” That primrose promise prompted a heap of rules, regulations, and red tape that have been foisted upon physicians’ backs. To accomplish the goal of reduced costs, both government and insurers systematically have enacted changes designed to exercise complete control over physicians (ie, training, daily practices, what they order, what they recommend, and what they are paid). Today these infringements have become like the Medusa; one noxious serpent is cut off, only to have two others sprout up.
The result of all of these schemes has been a hodgepodge of medical care directed by a mind-numbing array of rules, and an overworked and discouraged physician workforce whose reimbursement in many cases does not even cover the costs of delivering care. In addition, the ranks of those who cannot afford care or health insurance have increased year after year.
One now hears increasingly strident cries of a “health care crisis.” The author wants to emphasize that this is not a medical crisis, because history shows not medical failure but an unprecedented record of medical progress and success. Because of medical progress, people now live much longer and with less disability than ever before. If, in fact, there is a crisis, it is not a medical crisis, but a crisis about who will pay—for the incredible medical care that today is taken for granted.
Inevitably, when costs become beyond the grasp of most people, there are calls for the government to step in and pay the bills. Such calls are heard on a daily basis. Government meddling, however, becomes more and more inadequate as the complexity of the issue at hand increases. And nothing is more complicated than modern medicine.
Government has only two extremely blunt instruments in its armamentarium: wage and price controls, and rationing. All government schemes to change health care consist of a variety of these two instruments, and neither work, primarily because government refuses to be honest with the public about what it really is doing. Instead of saying that there are real limits, promises of the best care at the lowest price continue to be the mantra.
The time for rose-colored glasses, meaningless promises, and half-hearted measures has past. The American Medical Association (AMA) has—for more than a decade—urged the conscience of America to act. The AMA, comprised of physicians of all ages and all specialties, cannot do it alone, which is why physicians are taking their national call for America to America.
Recently, the AMA launched the Voice for the Uninsured Campaign, a multiyear effort designed to promote awareness, spur voters to action, and culminate with the passage of legislation to bring real reform to the health care delivery system. The AMA plan will expand coverage for the uninsured, increase access to care, and make certain that all Americans have access to medical insurance. Of equal importance is that the AMA plans to make certain that those who now are insured will not lose their insurance if they become ill, if they move, change jobs, or are laid off.
Over the next year, the AMA will be on the campaign trail—not with any one candidate—but with all of them, and with patients and community leaders in the chambers of commerce, rotary clubs, lions clubs, economic roundtables, and anywhere and everywhere else physicians can visit.
The reason is simple; in addition to the 47 million uninsured —one in seven Americans—and the vast majority of Americans who are insured and fear losing that insurance, need physicians to step up and make a difference. Why does the author think that this can succeed? Simply because unlike government, insurers, and employers, physicians have the most potent instrument in their medical bags, their patients’ trust.
In the coming year, physicians need to harness that trust and urge their patients to demand action from the candidates. Not just the ones parading on CNN, but the ones patients meet with at their local town hall. Call them up. Tell them that next November—when patients go into that voting booth, there need to be three simple questions in the front of their minds:
- 1.
Where do the candidates stand on the health care issues facing the nation?
- 2.
What are they going to do about it?
- 3.
Will they support and enact the AMA plan for reform?
The debate today is not about whether all Americans should have health insurance and access to a physician, but how to get there.
Who are the uninsured?
The US Census Bureau tells that there are 47 million uninsured Americans (ie, 47 million Americans who in general are living sicker and dying younger than those with health insurance). According to the Institute of Medicine, a lack of coverage costs 18 thousand needless deaths a year. Yet four out of five uninsured are in families that have at least one employed person.
Being uninsured produces a level of stress and insecurity like few other life circumstances. And everyone pays. The United States spends nearly $100 billion annually to provide health services to uninsured patients. And each year, physicians routinely contribute $20 billion in charity care. They also write off another $20 billion as bad debt. This is inefficient, inconsistent, and inexcusable.
Why is this happening? Between 2001 and 2007, premiums for employer-sponsored health insurance increased 78%; in 6 years, the author doubts physician income increased 78%. Employers able to offer health insurance decreased from 69% in 2000 to 60% in 2007. Fewer than half (45%) of small-sized businesses (three to nine workers) offer health insurance. To put it simply, they cannot offer what they cannot afford.
Given these staggering numbers, the AMA has come to the conclusion that the candidates’ back and forth of sound bites and warring policy theories need to be replaced by concrete steps and definitive action.
For that to happen, voters must demand that their candidates have a plan, and voters must keep that plan in mind when they decide who their candidate will be. Patients want their physician’s best diagnosis and treatment. The AMA wants candidates to make certain that they also go to the nations’ doctors to get the best treatment plan. This is not a choice that can wait much longer.
How did we get here?
The employment-based medical insurance system arose out of the wage and price controls that were imposed by the government during World War II. This was done in an attempt to prevent rapid escalation of manufacturing costs related to the war effort. Also, government allowed employers to offer health insurance and other nonwage benefits in lieu of wage increases. Employers thus could use offerings of these benefits to attract employees, who were in high demand during the war. Subsequently, the Internal Revenue Service (IRS) ruled that employer costs for employee health insurance could be excluded from taxable compensation for the employee. That IRS ruling still stands, although it is obsolete for today’s population, because it has had the pervasive consequence of encouraging job lock, which keeps people in their jobs because they cannot obtain health insurance on their own or may not be able to when they switch jobs. Job lock is squarely at odds with today’s more mobile and flexible workforce.
As is evident, today’s workers are extremely mobile. This, in the system of employment-based health insurance, means that coverage changes often. This is complicated by the fact that like others, employers did not anticipate the rise in health care costs. This reality became apparent decades after employment-based coverage had become an entrenched worker expectation. Old bargaining agreements that covered everything medicine had to offer were based on the days mentioned previously, when everything was precious little.
How did we get here?
The employment-based medical insurance system arose out of the wage and price controls that were imposed by the government during World War II. This was done in an attempt to prevent rapid escalation of manufacturing costs related to the war effort. Also, government allowed employers to offer health insurance and other nonwage benefits in lieu of wage increases. Employers thus could use offerings of these benefits to attract employees, who were in high demand during the war. Subsequently, the Internal Revenue Service (IRS) ruled that employer costs for employee health insurance could be excluded from taxable compensation for the employee. That IRS ruling still stands, although it is obsolete for today’s population, because it has had the pervasive consequence of encouraging job lock, which keeps people in their jobs because they cannot obtain health insurance on their own or may not be able to when they switch jobs. Job lock is squarely at odds with today’s more mobile and flexible workforce.
As is evident, today’s workers are extremely mobile. This, in the system of employment-based health insurance, means that coverage changes often. This is complicated by the fact that like others, employers did not anticipate the rise in health care costs. This reality became apparent decades after employment-based coverage had become an entrenched worker expectation. Old bargaining agreements that covered everything medicine had to offer were based on the days mentioned previously, when everything was precious little.
What does the American Medical Association think needs to be done?
To this day, the government continues to subsidize the purchase of health insurance by excluding expenditures on health insurance from an individual’s or family’s taxable income, but only if insurance is obtained through an employer. Usually that includes only that portion of the premium paid for by the employer. It makes little sense that the self-employed can deduct 100% of their insurance costs while no tax break is given to individuals who purchase their own health insurance, or to workers whose employers do not offer coverage.
The AMA has represented America’s physicians since 1847, and it has been involved directly with patients and health care policy ever since. The AMA’s experience and research give it insight on starting toward a solution. The AMA can and should take the lead in informing every American and every potential political leader about its plan to ease the burden.
AMA members have studied and visited countries with different health care systems around the world. It is crystal clear that today, no country and no system in the world are immune to the problems of rising costs, increasing and aging populations, and a concomitant lack of political wisdom and will. The twin tsunamis of technology and demography do not respect national boundaries. Everybody seems to have an answer, but these answers are usually little more than a simple list of laudable goals. Invariably, the means to achieve those goals often wither under close scrutiny. Legislators routinely meet their Waterloo when they attempt to fund these Utopian plans. This is why the AMA plan is based on clearly articulated principles that should be used for anyone who wishes to develop a plan to reform the health insurance system. The main elements of our plan are: individual ownership, tax reform, insurance reforms, and medical liability reform.
Ownership
The centerpiece of the AMA plan is that each person must own his or her personal health insurance policy. It makes absolutely no sense for an employer, the government, or any other outside party to claim this ownership. Individual ownership means that the policy will stay with the patient. This guarantees portability. Each person can, and should be able to purchase a health insurance plan that fits his or her specific needs. Next, ownership must be separated from payment. If an employer decides to cover all or part of the premium, that is acceptable, but the employer would not own the policy. For those who, for whatever reason, cannot afford coverage, the government would provide assistance through tax credits or vouchers that could be used only for the purchase of health insurance, but government also must not own the policy.
Tax Reform
The current tax treatment of employment-based health insurance also needs overhaul. As noted previously, under the current system, an employer’s expenditures on health insurance are not considered to be taxable income to the employee. There are no similar tax benefits for anyone who does not receive insurance through an employer. This inequity should be replaced with refundable and advance-able tax credits that apply to all individuals who purchase health insurance.
Under the AMA’s proposed system, employer contributions to health insurance would be reported as taxable compensation. Individuals would be given health insurance tax credits that would be subtracted from their directly from their tax bills. All others would similarly be able to apply for a tax credit arising from their expenditures for health care insurance. The AMA believes that expanding health insurance coverage through the use of tax credits should be guided by the following principles:
The size of tax credits should be related inversely to income. Those who have lower incomes of necessity need greater subsidies than those who have higher incomes. Targeting subsidies toward those who otherwise most likely would be uninsured conserves budgetary resources.Tax credits should be contingent on the purchase of health insurance, so that if insurance is not obtained, the credit is not provided. This principle provides a strong incentive for people to obtain health insurance voluntarily. Individuals and families could receive tax credits whether they obtain their health insurance through employment or elsewhere.
Tax credits should be refundable. This means that those who have low incomes would receive a check or voucher from the government to be used only for purchasing health insurance, and this would apply when they owe less in taxes than the value of the tax credit. Those who have higher incomes would use their tax credits to offset their tax liability.
Tax credits or vouchers should be available in advance for those who have low incomes. Tax credits should be advance-able so that those who have low incomes, and those who cannot afford the monthly out-of-pocket premium costs, would be able to purchase coverage without waiting for the year-end tax reconciliation process.
The size of tax credits should be large enough to ensure that health insurance is affordable for most people. Tax credits need to be large enough to empower virtually all individuals to obtain and maintain a basic health insurance plan. At the lowest income levels, the credit must approach 100% of the premium.
The size of tax credits should vary with family size to mirror the pricing structure of insurance premiums. In general, tax credits should mirror the pricing structure of health insurance premiums for individuals and families, with premiums for family policies being less than the sum of premiums for individual members.
Tax credits should be fixed-dollar amounts for a given income and family structure. To encourage individuals to be cost-conscious and to discourage overinsurance, the size of credits should be independent of the actual cost of the plan chosen by the patient.
The size of tax credits should be capped in any given year. The preceding principle calls for tax credits to be fixed-dollar amounts. If tax credits nevertheless are designed to vary with the price of insurance, the credits should be capped to prevent overnment-subsidized overinsurance.
Tax credits for families should be contingent on each member of the family having health insurance. In the absence of this requirement, individuals might game the system by purchasing coverage only for themselves and not their healthy children, waiting to seek coverage for the children only when they experience a need for health care. This principle ensures maximum coverage.
Tax credits should be applicable only for the purchase of health insurance, and not for out-of-pocket health expenditures. This principle limits the tax credits to the purchase of health insurance coverage, including health savings accounts. Allowing tax credits to be used for an unlimited array of out-of-pocket expenses could encourage inappropriate use of health services.
A system of income-related, refundable tax credits come close to providing health care coverage for all Americans, particularly once a mechanism is in place to give the refundable credit in advance to those who earn too little to pay income tax.
The AMA tax credit approach is a targeted and incremental approach. The AMA believes tax credits that must be used to purchase private insurance are preferable to public sector expansions as a means of providing coverage to the uninsured. Because AMA members pragmatically recognize there are finite resources, the AMA supports implementing individual tax credits for the purchase of health insurance for specific target populations such as low-income workers, low-income individuals, children, and the chronically ill.
In addition, the AMA also supports innovative state-based demonstration projects, including, but not limited to, implementing income-related, refundable, and advance-able tax credits.
Individual Responsibility
The AMA plan supports individual responsibility. AMA members believe in the strengths of the free market, not in a free lunch. Currently, everyone pays inflated premiums because of the costs associated with treating the uninsured, and these inflated premium rates constitute an additional barrier to coverage, not only for the uninsured, but for those who accept the responsibility to provide coverage for themselves and their families.
The AMA supports requiring individuals and families earning greater than 500% percent of the federal poverty level (FPL) ($51,050 for individuals and $103,250 for a family of four) to obtain, at a minimum, coverage for catastrophic health care and evidence-based preventive health care—a basic health care policy. There should be tax implications for noncompliance. Those who conscientiously provide for themselves and their dependents should not be penalized by the potentially costly medical treatments of those who have the ability to purchase health insurance coverage but remain uninsured. It is important to recognize that individual responsibility with tax implications for noncompliance is distinct from an individual mandate, which implies that the failure to obtain coverage could result in criminal penalties.
Most of the uninsured (89%) have incomes below 500% of the FPL. AMA support for requiring that these individuals and families obtain coverage is contingent upon implementation of a system of refundable tax credits or other subsidies. All the pieces must fit together in a coherent whole rather than a politically popular, but practically unworkable proposal that may garner applause lines now but later languish as yet another platitude to earn votes rather than drive honest reform and true coverage.
Insurance Reform
Patients should be able choose their own doctor, their own hospital, and the insurance coverage that meets their specific needs and that they can afford. The AMA believes that a working health system enables individuals not only to own and but to also be able to choose their health insurance plan. Currently, only one in six companies that now offer health insurance offers their employees a choice of plans. Under the AMA proposal, individuals, rather than employers, would choose the kind of coverage they want, whether through an employer or not. Patients could keep or change their plan regardless of where they work. This, in turn, would increase competition and innovation in the health insurance market, resulting in better choices for everyone.
The AMA is working to reform the market by eliminating insurance company interference and regulatory/legislative meddling. These factors hamstring physicians’ ability to provide care, and employers’ ability to provide affordable insurance options.
The AMA plan relies on common sense and the free-market. That is how business works and what has made America the greatest economic engine in history. It’s largely how life works. This is where insurance reform should begin.
Facilitating Market Innovation
Empowering people with tax credits and freedom of choice will transform today’s health insurance markets. The new system will make health plans more responsive to patients and stimulate the development of new forms of insurance that better meet the wide range of needs of individuals and families. Patients desperately need more options and competition rather than fewer and fewer giant health insurance monopolies. The current system operates like the iron lung in which the patient is hopelessly encased. AMA members believe their most vulnerable patients, and nation, deserve much better.
The development of large diverse insurance pools that evenly distribute risk is imperative for the fair pricing of various plans. The federal government and Legislators understand this extremely well and have created the Federal Employees Health Benefit Plan (FEHBP) to cover their own health insurance needs. The FEHBP offers the widest choice and best pricing available today. There is no reason why similar choices cannot be made available to all citizens. The key is to repeal a myriad of rules and regulations and to encourage large, actuarially sound pools to which individuals can be assigned according to their individual level of risk. This is not rocket science, but is extremely important to keep any patient from being priced out of the market, or of becoming uninsurable. Alternative means of pooling risk such as small group purchasing alliances also should be considered.
The AMA supports the development of health insurance markets that offer a wide range of coverage options that enable individuals to choose what is most appropriate and beneficial without government or industry interference. Nationwide sales and strengthened Internet-based vendors also would help to increase choice and decrease premiums. Such sales also would discourage huge variations that now occur because of individual state mandates. The AMA recognizes that for markets to function properly, it is important to establish fair ground rules; however, the huge number of state and federal health insurance market regulations has created as many problems as it has solved. Regulations intended to protect high-risk individuals typically have backfired by driving up premiums and leading a disproportionate number of young, healthy individuals to go without coverage. The AMA believes that a more rational regulatory environment would:
- •
Assist high-risk individuals without unduly driving up health insurance premiums for the rest of the population (ie, actuarially sound pools, plus individual assistance if needed)
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Give individuals incentives to be insured continuously to eliminate the pervasive fear of becoming uninsurable or gaming the system by only seeking coverage when sick
- •
Enable rather than impede private market innovations such as health savings accounts (HSAs), health reimbursement arrangements (HRAs), other forms of consumer-driven health care plans, defined contribution plans, and new forms of coverage
In particular, the AMA believes there should be greater national uniformity of market regulation across health insurance markets, regardless of type of submarket (eg, large group, small group, individual), geographic location. or type of health plan.
AMA members also believe that state variation in market regulation should be permissible as long as states demonstrate that departures from national regulations would not drive up the number of uninsured, and as long as variations do not unduly hamper the development of multistate group purchasing alliances, or create adverse selection. In short, limited state variation in market regulation should be permitted if the impact on the cost is not significant and does not make coverage unaffordable.
Risk-related subsidies such as subsidies for high-risk pools, reinsurance, and risk adjustment should be financed through general tax revenues rather than through strict community rating or premium surcharges. Strict community rating should be replaced with modified community rating, risk bands or risk corridors, and by the formation of large actuarially sound risk pools. By allowing some degree of premium variation to reflect individual factors, modified community rating strikes a balance between protecting high-risk individuals and the rest of the population.
Insured individuals also should be protected by guaranteed renewability. Allowing a fair degree of individual premium variation at the initial point of enrollment, along with guaranteed renewability, will encourage individuals to maintain their coverage. Guaranteed renewability would protect individuals from losing coverage or being singled out for premium hikes because of changes in health status.
Furthermore, insured individuals wishing to switch plans should be subject to a lesser degree of risk rating and pre-existing conditions limitations than individuals who are newly seeking coverage.
Limited reunderwriting of insured individuals who switch health plans would provide additional and powerful incentives for individuals to obtain and maintain coverage when healthy. In addition, guaranteed issue regulations should be rescinded. Guaranteed issue and community rating can backfire, especially when paired together. Attempts to lower premiums for high-risk individuals can raise premiums of low-risk individuals, reducing their enrollment and, thereby, driving up average costs and premiums. Finally, the regulatory environment should enable rather than impede private market innovation in product development and purchasing arrangements. There is such a thing as reasonable regulatory oversight, even if it rarely is seen or practiced. The AMA offers the following guide:
Legislative and regulatory barriers to the formation and operation of group purchasing alliances in general, should be removed.
Benefit mandates should be minimized to allow markets to determine benefit packages and permit a wide choice of coverage options.
Any legislative and regulatory barriers to the development of multiyear insurance contracts should be identified and removed.
The AMA proposal is well-suited to incremental changes. Although the impact of revising the tax treatment of health insurance expenditures will be profound, the status quo or timid tinkering will lead only to the shifting of unconscionable cost to future generations. The AMA believes that individually owned health insurance, accomplished through fundamental changes in the current tax and individual insurance market systems, would provide the best opportunity to reverse the growth in the number of the uninsured, while increasing the health plan choices of all Americans.
The AMA proposal for health system reform fundamentally is concerned with all Americans, including those at the lowest income levels who are the most likely to be uninsured today. This plan builds upon the strengths of the current health care system and institutes reasonable reforms to correct its weaknesses. It places ownership in the hands of the individual, equalizes the tax treatment of premiums regardless of who pays, and assists those who for whatever reason are unable to pay for themselves. It contains insurance reforms that will spread risk on an actuarially sound basis, encourage competition, reduce expensive mandates, and reduce costly monopolistic behavior by insurers. Most importantly, it will begin the process of removing government and insurers from their current position between the patient and the physician.
Antitrust Reform an Important Part of Insurance Reform
The final insurance reform that is needed is to define and strictly enforce antitrust laws for insurers. The past decade has witnessed the emergence of huge for-profit health care insurance companies. These have resulted from largely unregulated mergers—more than 400 in the last 10 years. Such mergers have allowed the resultant megainsurers to increase premiums to patients, decrease reimbursement to physicians, and to record obscene levels of profit and executive pay. The American economic system depends upon an environment that spurs competition. Nothing is more anticompetitive and anti-American than a monopoly, and these huge monopolies must go.
Medical Liability Reform
The issues discussed previously represent critical pieces in the struggle to reform the United States health care system. But any true reform must include reform of a dysfunctional medical liability system that has become a national disgrace.
Every physician—from the urologist to the orthopedist, the pediatrician to the pathologist, the obstetrician to the heart surgeon—is too familiar with the specter of a medical liability lawsuit. Too often it just does not matter that physicians provide the best care humanly possible. Not all patients will be satisfied, and not all outcomes will be ideal. But that does not mean anyone made a mistake.
Unfortunately, the nation’s liability system does not distinguish between poor outcomes, honest, unforeseen mistakes, and negligent practice. To be clear: If there is negligence, conscientious physicians are the first to demand that the patient should receive fair compensation. If there is no negligence (and here the author talking about knowing the difference between a bad outcome and a negligent one), then the physician should not be subject to a lawsuit that not only will cost tens of thousands of dollars to defend, but costs the physician priceless time away from his or her practice, patients, and family. The nation also would save as much as $126 billion if liability reforms, including a $250,000 cap on noneconomic damages, were in place nationally. Everywhere that tort reforms, including caps on noneconomic damages have been enacted, improved access has followed.
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