Health care reform poses dilemma
In the closing days of the health care reform debates, the White House raised its rhetoric against the insurance companies and repeated demands that these corporations end their practices of rate hikes and coverage denial for those with pre-existing conditions. As this took place, the unfolding crisis at adultBasic — one of Pennsylvania's state insurance plans for the poor — serves as a good illustration of the paradoxical and infeasible nature of this dual mandate in our free-market health care system.
Earlier this month, adultBasic announced that it will have to almost double the monthly premium for 2,400 state residents on its waiting list — from $313 to $600. The plan was created in 2002 to cover Medicaid-ineligible adults between the ages of 19 and 65 years with incomes less than double the federal poverty line. It currently has 39,000 enrollees who pay a monthly premium of $36 and over 390,000 people on its waiting list to whom it offers the same insurance coverage at the much higher premium.
To give a brief background of health insurance: Private health insurance plans were first developed in the late 1920s to meet the rising cost of hospital bills. These plans, known as Blue Cross, were soon followed by Blue Shield plans in the late 1930s to help cover the cost of physician services. At its inception, private health plans abided by the principle of community rating, meaning that people with different levels of health risk — a healthy schoolteacher in his late-20s and a chain-smoking coal miner in his mid-50s for example — would be paying the same monthly insurance fee. The core purpose of this type of health plan was to allow health care to be distributed in a manner that was based more on need than ability to pay.
As commercial insurance companies were launched to compete with the Blue Cross/Blue Shield plans, these commercial companies started following the principle of the less redistributive experience rating, whereby different health risk groups would pay different fees. So the coal miner in our last example would be paying significantly more than the schoolteacher would because of his higher health risk. As can be expected, the healthier individuals were drawn in by these lower fees and left in droves for these commercial plans, leaving the Blues with the bulk of the high risk patients and little means to pay for their excess health costs. Soon afterwards, even the Blues had to abandon community rating in order to survive the competition. The overall impact of this shift in principle was that those at highest health risk in this country were least able to afford the care that they needed, or were denied coverage altogether.
The only feasible way to tackle the problem of coverage denial for those with pre-existing conditions is to have the rest of the non-denied, healthier enrollees chip in for the higher costs incurred by this high-risk group. Whether this is fair is a matter of personal opinion, but the reason that many insurance companies currently deny coverage for individuals with pre-existing conditions is that the opposite course of action would result in fee increases to the rest of the enrollees, which would cause an exodus of relatively healthy individuals to other plans that choose to continue the status quo.
The adultBasic situation illustrates the financial burden brought on by following this opposite course of action. Since members on the plan's waiting list can sign up for no-contract, high-premium coverage at the time of their choosing, most opt to do so only around the time that they are sick, leading to a rise in fees for everyone else enrolled in the waiting list plan. As the rate increases kick in, the "healthiest" portion of this sickly group will subsequently drop out, leaving the waiting list plan with sicker people incurring higher average medical bills. This will in turn lead to even more fee increases in the near future. As Joel Ario, Pennsylvania's state insurance commissioner, put it bluntly, "This is very likely going to send us into a death spiral."
So will the recently passed health care reform legislation — which makes it illegal for insurance companies to deny coverage due to pre-existing conditions — be the magic pill that accomplishes the president's dual mandate concerning health insurance? It would indeed take care of the coverage denial problem by 2014, but the increased financial burden posed by these new high-risk enrollees will likely be paid for through cost-shifting to the healthier patient base.
At the same time though, the extension of health coverage to 32 million more Americans along with the provision of specific measures such as annual check-ups for Medicare patients will make preventive services more accessible. This in turn will save money in the long run by cutting down on the astronomical costs associated with emergency room visits and hospital stays. The problem remains that the largely private, profit-driven health insurance environment in our country will ensure that most of these savings never get passed on to the plan holders.
Is there a way to halt this health insurance Catch-22? As a matter of fact, there is. A single payer system of universal national health insurance would by nature cover everyone and adhere to community rating. The increased financial burden of the high-risk patients would still be distributed among the rest of the American population, but, similar to the bill that recently passed, the increased access to preventive services will decrease costs down the road. However, in contrast to the previous system, these savings will actually get passed on to the American people as the non-profit nature of this "Medicare-for-all" system will keep insurance rates steady in the long run through the elimination of profits and pandering to shareholders. Indeed, this will truly allow us to ensure that future generations are not left picking up the tab for the costly treatments of preventable diseases.
Some will surely cry foul and denounce this as "socialized medicine" that will wreak havoc on the health care in our country. They will also point to the long queues for elective surgeries in Canada and the United Kingdom, countries where this type of insurance system is currently in place. Call it what you may, but it is this very system that has consistently shown better results at much lower costs. According to the 2009 CIA World Factbook, the life expectancies in Canada and the United Kingdom are 81.2 years and 79.0 years, respectively. Despite spending twice as much per capita on health care as either of these two countries, the United States can still only boast of a life expectancy of 78.1 years.
A single payer system is the solution to the president's health insurance dual mandate. Unfortunately, this option was a non-starter in Washington. At least the recently passed health care bill takes us a big step in the right direction.
Bo Wang is an Ernest Mario School of Pharmacy fifth-year student and president of the Pharmacy Governing Council.