Searching for a cure
There's no doubt health care costs are soaring - how to control them is the debate
Dr. Richard Powers, president of the Sonoma County Medical Association, has a practice in Sebastopol.
John Burgess/The Press DemocratPublished: Saturday, August 22, 2009 at 3:00 a.m.
Last Modified: Saturday, August 22, 2009 at 10:23 p.m.
Behind the heated and sometimes misguided debate over health care lies a stark reality: A $2.5 trillion national medical bill destined to swell like an economic tumor.
Unchecked, the cost of health care in the United States — already the highest in the world — will soar to $4.4 trillion in 2018, amounting to more than $13,000 a year for every man, woman and child and 20 percent of the nation's economic activity.
“We have better medicine than we can afford,” said Bob Shirrell, a Santa Rosa health care consultant.
Key issues in the debate are the public option, a government-run plan similar to Medicare; how to pay the estimated $1 trillion cost of expanded health care; and how to rein in health care expenses.
Public-option advocates point to the four-decade success of Medicare, which now covers more than 41 million elderly and disabled people. But critics note that Medicare is veering toward insolvency and that a vast expansion of the plan could cripple the private insurance industry and upset hospital finances.
The Obama administration has advocated a tax surcharge on the wealthy to pay for a public option, a prospect that hardens conservative opposition. Advocates say it's necessary to bring health care to many of the 46 million uninsured.
“Health care should be a person's right, not a privilege,” said Mary Szecsey, executive director of West County Health Centers.
Health care costs will be curbed if people take better care of themselves and get regular care, medical providers say. Getting patients and doctors involved in discussing treatment costs and options is another choice, and some say the nation may eventually ration medical care, but nothing like the alleged “death panels” that have inflamed the debate.
LOCAL PERSPECTIVES
We asked six Sonoma County residents who are involved in the health care industry — a doctor, a public health provider, a hospital administrator, two businessmen and a health care consultant — for their take on three basic issues:
1. What impact would the public option — a government-run health program like Medicare — have on health care?
2. How should we pay for the new health care plan?
3. How can we control the cost of health care?
What about public option?
What impact would the public option — a government-run health program like Medicare — have on health care?
BOB SHIRRELL, Santa Rosa health care consultant: “You ask the people on Medicare and you'll find out they're the happiest of all,” Shirrell said. Favored by liberal Democrats, the public option is regarded by some as a “back-door approach to single-payer,” Shirrell said, referring to a system that puts all health care under federal control.
He disputed forecasts of a mass exodus from private insurance if government-backed insurance becomes an alternative, noting that 60 percent of Americans get health insurance at work and many would stick with it.
An analysis by the Lewin Group, a health care management consulting firm, found that the premium for family coverage under a public option that pays for care at rates equivalent to MediCare would be 22 percent lower than private insurance rates. The firm also said that from 43 million to 131 million people would enroll in the public plan, and as many as 119 million would quit private plans. About 202 million people are currently covered by private insurance plans, the Census Bureau said.
Shirrell noted that the Lewin Group belongs to a subsidiary of UnitedHealth Group, a health care company that earned $5.3 billion last year.
DR. RICHARD POWERS, Sebastopol physician and Sonoma County Medical Association president: Medicare operates at a 6 percent overhead, compared with 30 percent for administration, profit and commissions in private insurance. A public option would would push private insurance to become more competitive, he said, and enable many of the 46 million uninsured people to get medical office care instead of emergency room treatment.
DICK CALETTI of Santa Rosa, president and CEO of Standard Structures: Wary of the cost of a public option, Caletti acknowledged it would benefit millions of uninsured people. Health care needs adjustments, like eliminating the private health practice of refusing to cover pre-existing medical conditions, but not an overhaul, he said. “Why such a radical fix?”
MARY SZECSEY of Occidental, executive director of West County Health Centers: “We should be begging for a public option,” Szecsey said, noting that Sonoma County has 60,000 uninsured residents.
Private insurers are not inclined to curb the cost of premiums, she said. “It's not their business model. Their model is that they spend as little as possible in providing care.”
DAVID PROCTOR, chief financial officer for Friedman Brothers, Santa Rosa: Establishing a public health care option should eventually keep costs in check, Proctor said. The previously uninsured would have access to less expensive preventative care rather than waiting, as now, until a health problem worsens and becomes more costly to treat, he said.
“Private employers who provide good health plans end up assuming transfer costs coming from the uninsured. Hospitals don't collect enough money from indigent care, so they end up passing that onto people who can pay, which include insurance companies and frankly employers picking up the additional costs,” Proctor said.
MIKE COHILL, Sutter Medical Center chief executive officer: Providing health care for the 46 million uninsured people is “absolutely necessary” and the private insurance industry is “its own worst enemy” for failing to do so, he said.
But major expansion of a Medicare-style system would cripple hospitals, he said. Medicare pays about 75 percent of a hospital's costs, which is “sustainable,” Cohill said, only if a majority of patients have commercial insurance that reimburses more of the costs.
Hospitals “rely on the commercial plans to offset the (financial) shortfall from government programs,” he said.
Who is going to pay?
How should we pay for the new health care plan?
BOB SHIRRELL: The Obama administration said two-thirds of the $1 trillion cost of the public plan would come from eliminating waste, fraud and abuse in Medicare and Medicaid, and one-third would come from taxes on the wealthy. “It never works,” he said, predicting that the plan's expenses would exceed income. The proposed tax surcharge of 1 percent to 5 percent would “just put us back” to the income tax rates in place before the Bush administration's tax cuts, Shirrell said. Would he pay it? “You bet,” he said.
DICK CALETTI: He questions the idea of paying for a public option with an income tax surcharge on the wealthy at the same time Medicare is expected to run out of money in 2017. “I don't think the arithmetic works out,” he said. “I don't think you could cover the cost of a public option with taxes people would stand for.”
Forty years of business experience, with every new project exceeding its cost estimates, convinces Caletti that the $1 trillion cost of a public option will escalate.
RICHARD POWERS: A government subsidy will be needed initially, but in the long run — about 10 years — improvements in the nation's health will reduce costs.
A savings from the lower premiums under the public plan will be realized in two or three years, he said.
DAVID PROCTOR: Paying for health care coverage for all Americans wouldn't be prohibitively expensive if it was spread fairly. For instance, employers should be required to provide health care benefits whether employees work full or part time.
"Look at all kinds of different employers that deliberately structure their employment policies to lower their health benefit costs," Proctor said.
Another critical element in making health care reform work is limiting malpractice lawsuits, Proctor said.
MARY SZECSEY: Taxes will pay for the public plan. “We have a responsibility as a community to take care of people who are less fortunate,” she said.
How can costs be controlled?
How can we control the cost of health care?
DICK CALETTI: Standard Structures, which manufactures laminated wood products for heavy construction, has seen the monthly premium for employee health care soar from $159 in 2001 to $297 now, an 87 percent increase in eight years. “I'd like to think we're getting that much more productivity from having healthy people,” Caletti said.
The current premium is 7.3 percent of his payroll, which Caletti said is “not too prohibitive.” A larger burden, he said, is the collective cost of taxes for workers' compensation, Social Security, Medicare and unemployment.
The furor over “death panels” was hyperbole, but Caletti said it reflects the need for “practical decisions” about the cost of health care at the end of a patient's life. (For two decades, care in the last year of life has represented more than one quarter of Medicare's budget, the Rand Corp. reported.)
A drawback to all government-run health plans, Caletti said, is that they isolate the patient from cost considerations. “People don't know what their health care costs,” he said.
MIKE COHILL: The hospital administrator agrees that patients are “disassociated” from the cost of health care. Those without insurance can go to an emergency room and receive thousands of dollars of free care, while those costs are transferred to insured patients.
Rather than invent a new health system, Cohill said the nation should establish a “minimum health care benefit” that would become the cheapest plan. “We've got the cart before the horse,” he said.
Health care also may have to rationed, he said. “Everybody can't have everything they want,” he said. “That's what Americans are used to.”
BOB SHIRRELL: Inflation and innovation are driving health care costs upward (at more than 6 percent a year). For example, the latest prostate cancer radiation therapy equipment costs $1 million.
Medicare and the public option, if it comes, eventually will need to curb treatment costs by establishing “best practices” that define efficient and effective care, Shirrell said. Medicare now pays for whatever treatment people get, he said.
Providing nearly universal health care will cut costs significantly, Shirrell said. An uninsured sick person who shows up at an emergency room could require $3,000 worth of care, compared with a $90 office visit to a clinic that has the patient's history, previous tests and X-rays, he said.
The insurance industry and political conservatives are fanning fears over the public option proposal, Shirrell said, prompting a reaction against major change.
“That's what the health insurance industry wants,” he said.
DAVID PROCTOR: Friedman Brothers, a Sonoma County-based home improvement store chain, provides health, dental, vision and other benefits to 270 of its 320 employees. In the past year, premiums on those plans have soared by 20 percent, adding to a decadelong run of annual double-digit increases, Proctor said.
With health care costs continually rising, smaller companies such as Friedman Brothers face difficulty negotiating lower rates with insurers because they have fewer employees over which to spread the risk, he said.
“I actually think comprehensive health care will help stabilize the rate base,” Proctor said.
MARY SZECSEY: Regular checkups, breast cancer tests and other preventative measures add up to major savings, Szecsey said. Every dollar invested in prevention saves $4 to $5 in costs of treating major illnesses, she said.
“We are really looking at models of care that support people making good decisions about their health and taking care of themselves,” Szecsey said.
RICHARD POWERS: “Just going to a public option and a system that covers everybody probably would not cost more than we're already spending in the long run,” he said.
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