National Health Care Plan   2/94

by Del Meyer, MD

A national health care policy will probably be implemented during this administration in Washington, D.C. This does not preclude California from implementing its own policy prior to a national policy. We are frequently the leader in the nation. In medicine, we are frequently the parent organization to the national (e.g. the California Society for Internal Medicine is parent of the ASIM; the California Association of Medical Directors of Respiratory Therapy begat NAMDRC).

The local now defunct MIPA documented a 400% variation in what doctors spend in the evaluation and treatment of their patients. The Pennsylvania study documented a 400% variation in what hospitals charge for the same type of admission. Managed care may not have narrowed this variation even they have decreased costs.

The President's plan, the "Health Security Act" which he hopes congress will implement in this congressional term, does call for one option of a "Fee-For-Service Plan." It states that each Alliance must include among its health plan offerings at least one plan based on a fee-for-service system which may require utilization review, prior approval for certain services, but not a requirement to seek approval through a gatekeeper. This gives us a tremendous window of opportunity to serve our patients well by coming up with a fee-for-service system that will have it's own built in controls to provide the clinical incentives so that physicians and patients will direct their health care to the lowest cost basis.

A fix dollar co-pay may dampen entry into a doctor's office or hospital, but has no continuing dis-incentive for huge costs after the gate has been passed. After an admission co-payment has been made, whether the $650 for Medicare or $300 to $1000 for private insurance, there is still an incentive for excessive utilization during the remainder of the hospitalization since all additional costs are covered.

The 37 million Americans without insurance may give us some clues as to what may be saved with total private pay. It has been reported that they have a two-thirds decrease use of hospitalizations and a one-third decrease in outpatient care. There is no evidence that their health suffers.

Thus it appears that a percentage co-pay from newborn through Medicare eligibility is required to conserve health care resources. Preliminary clinical and anecdotal data suggests that a 10% co-pay to hospitalization insurance essentially prevents all unnecessary admissions and does not preclude necessary admissions and will probably save 20-30% of hospital stays. This is a significant national savings for the highest cost center in medical care.

The Medicare hospital (Part A) program could be brought into cost containment by an internal re-arrangement of the charges the recipients pay. Instead of the $650 on admission, changing it to the same 10% co-pay would simply change to about $100 a day for a standard five day $1000 per day admissions and a cost savings to the beneficiary as well as the government program.

A 20% co-pay to outpatient hospital/surgicenter/ER visits essentially prevents all unnecessary visits and procedures and does not preclude those that are necessary and will probably save 10-20% of those costs.

Similarly a 50% co-pay to all outpatient charges, whether office or home visits, outpatient laboratory, x-ray, and pharmacy charges, essentially eliminates all unnecessary visits, tests, and treatments and gets the drug bill to the lowest possible level, and will probably save 20-30% of those costs.

The Medicare outpatient (Part B) program could be brought into cost control also by a similar re-arrangement of covered costs. By reducing the covered office visits and lab/x-rays from 80% to the same 50% and increasing pharmacy coverage from 0% to 50%, the costs to the beneficiary would probably be relatively unchanged, and the government costs would be neutral, contained, and possibly even decrease.

The cost of skilled nursing facility care is difficult to project. Preliminary data indicates that a large part of this is board and room, which is not medical/nursing care. The actual skilled nursing care may be less than one hour per day. It is estimated that about 20% of SNF charges is for actual medical/skilled nursing care. This is the part that is insurable. The other 80% is the replacement cost of maintaining those that are disabled and infirmed in their usual environment and thus remains the incentive for us to care for our disabled family members.

This program could now be reasonably be extended to Medicare recipients. A 20% coverage for SNF care would be a humanitarian move by the government for those less fortunate and seriously infirmed and now a reasonable charge, since the government can rest assured with 80% patient/family responsibility, every effort will be made by the patient and his family to provide care at home.

From available insurance data, a valid premium would be approximately $85 per month for an individual, $85 for spouse, and $45 for each child through age 16 or onset of driving when the adult rate would occur. Thus a family of four would have a premium of $260 per month which would not escalate since health care inflation has been brought under control and may decrease.

This premium structure is contingent on the continuation of the Medicare program for those over 65 years of age or disabled for over two years. The cost of plumbing (e.g. coronary thrombosis, strokes) or wiring (e.g. diabetic neuropathy) or structure (e.g. cancer) cannot be insured in the aged any more than plumbing or electrical wiring or roof structure can be insured in an old building. Medicare is working and this governmental program should not be abandoned. It will work better with the above minimal changes.

The premium structure is also contingent on NO CO-INSURANCE. If one has co-insurance to cover the 10-20-50-80% deductibles, the dis-incentives no longer apply and this premium structure will not support the increase utilization. If an individual has co-insurance, the covered percentages have to decrease by at least 10%, since utilization will increase by at least 20-30%.

This plan should be implemented through the tax code. By making only the 10-20-50-80% co-pay plan tax deductible to either the employer or the individual, we would assure that every insurance carrier will offer such a plan. It would be universally used because the higher option plans would be at least twice as expensive and they would be paid with after tax dollars (non-deductible on income tax). Most individuals would opt to make the co-payments as they occur and thus conserve costs, and, therefore, personal income.

It appears that the national mandate of no additional premium for pre-existing medical conditions could be met. For a person who has diabetes or hypertension through no fault of his own, there would be no premium increase. However, since the major increase costs are due to personal self induced risk factors such as smoking, drinking, drug, and food addictions, there should be a premium surcharge for these four addictions which would keep the program financially sound. Preliminary data suggests the surcharge may be as high as 100% per addiction. (Cigarette risk could be defined as cigarettes use in the past 2 years; alcohol risk as more than two drinks a day or inebriation in the past 2 years; drug risk as drug abuse during the past 5 years, whether inhaled, ingested or injected; and obesity risk as 50% above normal weight according to social security tables.) Signed information card could be sent by the employee to the requested health insurer at the time of employment and yearly thereafter. Claims reporting would verify reliability.

It further appears that the national mandate of total portability can also be met. Non-profit Blue Cross and Blue Shield have already implemented totally individual plans. This could be assured through the state insurance department. It could simply require that all health insurance companies doing business in the state will offer the 10-20-50-80% co-pay plan and it can be continued by the individual or his employer at the same premium until Medicare eligibility occurs.

This national or state plan could be used to bring cost control to the Medicaid system by simply having all Medicaid patients pay one-tenth of the private percentage co-pay. The 10-20-50-80% co-pay plan becomes a 1-2-5-8% co-pay for the Medicaid recipient. In my anecdotal experience, having the patient pay $10 per day (1%) for $1000 per day hospital care, $20 (2%) for a $1000 outpatient surgery procedure, $2 (5%) for a $40 office call is very reasonable and would have the same costs control as the higher percentages for Medicare and private patients and not preclude care that is required. Medicaid would still pay the same as the private insurances would pay with the difference being written off. This 9% hospital, 18% outpatient surgery/ER, 45% office/lab/x-ray write off would probably be less than the current discounts given to Medicaid and manage care plans. Nursing facility care for welfare patients would be a separate issue. However, 8% of a $2,000 per month bed would be about $5 a day which even welfare patients and their families should be able to raise. The state would pay the 80% charge with the SNF writing off the 12% difference, probably less than the discounts now given.

If CMA would place this plan on a ballot as a state wide proposition and also have it introduced in the state legislature, it could be implemented and found to be a success before the national "Health Security Act" is passed. The mandate for health care reform would then disappear because it has occurred. Our patients would be the winners. And we would be professionals again because the Doctor/Patient relationship has been restored.