A Socialized Health Care System Requires Population Control and Impeccable Registries

In a nationalized health care system, you need to know who is who – otherwise the system could never be able determine who is entitled. The structure depends on how the system is created and designed, but with a nationalized health care system you will be tracked by the state where you reside and how you move in a manner that is unseen in America. The nationalized health care system becomes a vehicle for population control.

If you leave the United States and are no longer a resident of the state, even if you are a citizen and might maintain a driving license, you will have to report immediately if you want to avoid the 13% health care tax. I use the number 13% as it is in Sweden to exemplify the actual tax pressure that is laid upon you for the nationalized health care.

Let’s say you moved and you do not want to pay the 13% tax for services you do not receive, can receive, or want to taken out from the tax roll. The mammoth entity has no interest to let you go so easy. You will end up having to reveal your private life – partner, dwellings, travel, money, and job to prove your case that you have the right to leave the public health care system and do not need to pay the tax. If you have to seek an appeal, your information could be a part of administrative court documents that are open and public documents. As soon as you return to the United States, you will be automatically enrolled again and the taxes start to pile up.

Public universal health care has no interest in protecting your privacy. They want their tax money and, to fight for your rights, you will have to prove that you meet the requirements to not be taxable. In that process, your private life is up for display.

The national ID-card and national population registry that includes your medical information is a foundation of the nationalized health care system. You can see where this is going – population control and ability to use the law and health care access to map your whole private life in public searchable databases owned and operated by the government.

By operating an impeccable population registry that tracks where you live, who you live with, when you move and your citizen status including residency the Swedes can separate who can receive universal health care from those not entitled. The Swedish authorities will know if you have a Swedish social security number, with the tap of the keyboard, more information about yourself than you can remember. The Swedish government has taken sharing of information between agencies to a new level. The reason is very simple – to collect health care tax and suppress any tax evasion.

It is heavily centralized and only the central administration can change the registered information in the data. So if you want to change your name, even the slightest change, you have to file an application at a national agency that processes your paperwork. This centralized population registry makes it possible to determine who is who under all circumstances and it is necessary for the national health care system. Otherwise, any person could claim to be entitled.

To implement that in the United States requires a completely new doctrine for population registry and control. In an American context that would require that every existing driving license had to be voided and reapplied under stricter identification rules that would match not only data from Internal Revenue Service, state government, municipal government, Social Security Administration, and Department of Homeland Security but almost any agency that provides services to the general public. The reason why a new population registry would be needed in the United States is the fact that lax rules dating back to the 1940s up until the War on Terrorism, and stricter identification criteria following 9/11, has made a significant percentage of personal information about individuals questionable.

If America instead neglects maintaining secure records, determining eligibility for public health care would not be possible and the floodgates for fraud would open and rampant misuse of the system would prevail. This would eventually bring down the system.

It is financially impossible to create a universal health care system without clearly knowing who is entitled and not. The system needs to have limits of its entitlement. A social security number would not be enough as these numbers have been handed out through decades to temporary residents that might not even live in the United States or might today be out of status as illegal immigrants.

The Congress has investigated the cost of many of the “public options”, but still we have no clear picture of the actual realm of the group that would be entitled and under which conditions. The risk is political. It is very easy for political reasons to extend the entitlement. Politicians would have a hard time being firm on illegal immigrants’ entitlement, as that would put the politicians on a collision course with mainly the Hispanic community as they represent a significant part of the illegal immigrants. So the easy sell is then that everyone that is a legal resident alien or citizen can join according to one fee plan and then the illegal immigrants can join according to a different fee structure. That assumes that they actually pay the fee which is a wild guess as they are likely to be able to get access to service without having to state that they are illegal immigrants.

It would work politically – but again – without an impeccable population registry and control over who is who on a national level, this is unlikely to succeed. The system would be predestined to fail because of lack of funds. If you design a system to provide the health care needs for a population and then increase that population without any additional funds – then naturally it would lead to a lower level of service, declined quality, and waiting lists for complex procedures. In real terms, American health care goes from being a first world system to a third world system.

Thousands, if not a million, American residents live as any other American citizen but they are still not in good standing with their immigration even if they have been here for ten or fifteen years. A universal health care system will raise issues about who is entitled and who is not.

The alternative is for an American universal health care system to surrender to the fact that there is no order in the population registry and just provide health care for everyone who shows up. If that is done, costs will dramatically increase at some level depending on who will pick up the bill – the state government, the federal government, or the public health care system.

Illegal immigrants that have arrived within the last years and make up a significant population would create an enormous pressure on a universal health care, if implemented, in states like Texas and California. If they are given universal health care, it would be a pure loss for the system as they mostly work for cash. They will never be payees into the universal health care system as it is based on salary taxes, and they do not file taxes.

The difference is that Sweden has almost no illegal immigrants compared to the United States. The Swedes do not provide health care services for illegal immigrants and the illegal immigrants can be arrested and deported if they require public service without good legal standing.

This firm and uniform standpoint towards illegal immigration is necessary to avoid a universal health care system from crumbling down and to maintain a sustainable ratio between those who pay into the system and those who benefit from it.

The working middle class that would be the backbone to pay into the system would not only face that their existing health care is halved in its service value – but most likely face higher cost of health care as they will be the ones to pick up the bill.

The universal health care system would have maybe 60 million to 70 million “free riders” if based on wage taxes, and maybe half if based on fees, that will not pay anything into the system. We already know that approximately 60 million Americans pay no taxes as adults add to that the estimated 10-15 million illegal immigrants.

There is no way that a universal health care system can be viably implemented unless America creates a population registry that can identify the entitlements for each individual and that would have to be designed from scratch to a high degree as we can not rely on driver’s license data as the quality would be too low – too many errors.

Many illegal immigrants have both social security numbers and driver’s licenses as these were issued without rigorous control of status before 9/11. The alternative is that you had to show a US passport or a valid foreign passport with a green card to be able to register.

Another problematic task is the number of points of registration. If the registration is done by hospitals – and not a federal agency – then it is highly likely that registration fraud would be rampant. It would be very easy to trespass the control of eligibility if it is registered and determined by a hospital clerk. This supports that the eligibility has to be determined by a central administration that has a vast access to data and information about our lives, income, and medical history. If one single registration at a health care provider or hospital would guarantee you free health care for life and there is no rigorous and audited process – then it is a given that corruption, bribery, and fraud would be synonymous with the system.

This requires a significant level of political strength to confront and set the limits for who is entitled – and here comes the real problem – selling out health care to get the votes of the free riders. It is apparent that the political power of the “free” health care promise is extremely high.

A promise that can not alienate anyone as a tighter population registry would upset the Hispanic population, as many of the illegal immigrants are Hispanics – and many Hispanics might be citizens by birth but their elderly parents are not. Would the voting power of the younger Hispanics act to put pressure to extend health care to elderly that are not citizens? Yes, naturally, as every group tries to maximize its own self-interest.

The risk is, even with an enhanced population registry, that the group of entitled would expand and put additional burden on the system beyond what it was designed for. That could come though political wheeling and dealing, sheer inability from an administrative standpoint to identify groups, or systematic fraud within the system itself.

We can speculate about the outcome but the challenges are clear. This also represents a new threat to the privacy and respect for the private sphere of the citizenry as an increased population registration and control empowers the government with more accurate information about our lives and the way we live our lives. Historically, has any government when given the opportunity to get power taken that opportunity and given that power back to the people after the initial objective was reached? Governments like to stick to power.

To ensure the universal health care system is designed to function as intended it, would require procedures that would limit fraud, amass a significant amount of personal information, have access to all your medical data, and also determine who you are beyond any doubt. Just to be able to determine if you are entitled or not and, track the expenditures you generate.

The aggregation of these data could also open the floodgates for any data mining within these data under the pure excuse that it would help the universal health care system to better “serve you” and lower the costs.

To lower the costs also means to identify which procedures should not be done on which type of patients as it is not viable based on the government’s interest to optimize your productivity under your life cycle. The collection of data has a tendency to look inviting and good when we start to collect it but aggregated data and personal information creates a deep intrusion in our privacy.

Posted in Uncategorized | Comments Off on A Socialized Health Care System Requires Population Control and Impeccable Registries

Who’s Paying For Health Care?

America spent 17.3% of its gross domestic product on health care in 2009 (1). If you break that down on an individual level, we spend $7,129 per person each year on health care…more than any other country in the world (2). With 17 cents of every dollar Americans spent keeping our country healthy, it’s no wonder the government is determined to reform the system. Despite the overwhelming attention health care is getting in the media, we know very little about where that money comes from or how it makes its way into the system (and rightfully so…the way we pay for health care is insanely complex, to say the least). This convoluted system is the unfortunate result of a series of programs that attempt to control spending layered on top of one another. What follows is a systematic attempt to peel away those layers, helping you become an informed health care consumer and an incontrovertible debater when discussing “Health Care Reform.”

Who’s paying the bill?

The “bill payers” fall into three distinct buckets: individuals paying out-of-pocket, private insurance companies, and the government. We can look at these payors in two different ways: 1) How much do they pay and 2) How many people do they pay for?

The majority of individuals in America are insured by private insurance companies via their employers, followed second by the government. These two sources of payment combined account for close to 80% of the funding for health care. The “Out-of-Pocket” payers fall into the uninsured as they have chosen to carry the risk of medical expense independently. When we look at the amount of money each of these groups spends on health care annually, the pie shifts dramatically.

The government currently pays for 46% of national health care expenditures. How is that possible? This will make much more sense when we examine each of the payors individually.

Understanding the Payors

Out-of-Pocket

A select portion of the population chooses to carry the risk of medical expenses themselves rather than buying into an insurance plan. This group tends to be younger and healthier than insured patients and, as such, accesses medical care much less frequently. Because this group has to pay for all incurred costs, they also tend to be much more discriminating in how they access the system. The result is that patients (now more appropriately termed “consumers”) comparison shop for tests and elective procedures and wait longer before seeking medical attention. The payment method for this group is simple: the doctors and hospitals charge set fees for their services and the patient pays that amount directly to the doctor/hospital.

Private Insurance

This is where the whole system gets a lot more complicated. Private insurance is purchased either individually or is provided by employers (most people get it through their employer as we mentioned). When it comes to private insurance, there are two main types: Fee-for-Service insurers and Managed Care insurers. These two groups approach paying for care very differently.

Fee-for-Service:

This group makes it relatively simple (believe it or not). The employer or individual buys a health plan from a private insurance company with a defined set of benefits. This benefit package will also have what is called a deductible (an amount the patient/individual must pay for their health care services before their insurance pays anything). Once the deductible amount is met, the health plan pays the fees for services provided throughout the health care system. Often, they will pay a maximum fee for a service (say $100 for an x-ray). The plan will require the individual to pay a copayment (a sharing of the cost between the health plan and the individual). A typical industry standard is an 80/20 split of the payment, so in the case of the $100 x-ray, the health plan would pay $80 and the patient would pay $20…remember those annoying medical bills stating your insurance did not cover all the charges? This is where they come from. Another downside of this model is that health care providers are both financially incentivized and legally bound to perform more tests and procedures as they are paid additional fees for each of these or are held legally accountable for not ordering the tests when things go wrong (called “CYA or “Cover You’re A**” medicine). If ordering more tests provided you with more legal protection and more compensation, wouldn’t you order anything justifiable? Can we say misalignment of incentives?

Managed Care:

Now it gets crazy. Managed care insurers pay for care while also “managing” the care they pay for (very clever name, right). Managed care is defined as “a set of techniques used by or on behalf of purchasers of health care benefits to manage health care costs by influencing patient care decision making through case-by-case assessments of the appropriateness of care prior to its provision” (2). Yep, insurers make medical decisions on your behalf (sound as scary to you as it does to us?). The original idea was driven by a desire by employers, insurance companies, and the public to control soaring health care costs. Doesn’t seem to be working quite yet. Managed care groups either provide medical care directly or contract with a select group of health care providers. These insurers are further subdivided based on their own personal management styles. You may be familiar with many of these sub-types as you’ve had to choose between then when selecting your insurance.

Preferred Provider Organization (PPO) / Exclusive Provider Organization (EPO):This is the closet managed care gets to the Fee-for-Service model with many of the same characteristics as a Fee-for-Service plan like deductibles and copayments. PPO’s & EPO’s contract with a set list of providers (we’re all familiar with these lists) with whom they have negotiated set (read discounted) fees for care. Yes, individual doctors have to charge less for their services if they want to see patients with these insurance plans. An EPO has a smaller and more strictly regulated list of physicians than a PPO but are otherwise the same. PPO’s control costs by requiring preauthorization for many services and second opinions for major procedures. All of this aside, many consumers feel that they have the greatest amount of autonomy and flexibility with PPO’s.
Health Management Organization (HMO): HMO’s combine insurance with health care delivery. This model will not have deductibles but will have copayments. In an HMO, the organization hires doctors to provide care and either builds its own hospital or contracts for the services of a hospital within the community. In this model the doctor works for the insurance provider directly (aka a Staff Model HMO). Kaiser Permanente is an example of a very large HMO that we’ve heard mentioned frequently during the recent debates. Since the company paying the bill is also providing the care, HMO’s heavily emphasize preventive medicine and primary care (enter the Kaiser “Thrive” campaign). The healthier you are, the more money the HMO saves. The HMO’s emphasis on keeping patients healthy is commendable as this is the only model to do so, however, with complex, lifelong, or advanced diseases, they are incentivized to provide the minimum amount of care necessary to reduce costs. It is with these conditions that we hear the horror stories of insufficient care. This being said, physicians in HMO settings continue to practice medicine as they feel is needed to best care for their patients despite the incentives to reduce costs inherent in the system (recall that physicians are often salaried in HMO’s and have no incentive to order more or less tests).
The Government

The U.S. Government pays for health care in a variety of ways depending on whom they are paying for. The government, through a number of different programs, provides insurance to individuals over 65 years of age, people of any age with permanent kidney failure, certain disabled people under 65, the military, military veterans, federal employees, children of low-income families, and, most interestingly, prisoners. It also has the same characteristics as a Fee-for-Service plan, with deductibles and copayments. As you would imagine, the majority of these populations are very expensive to cover medically. While the government only insures 28% of the American population, they are paying for 46% of all care provided. The populations covered by the government are amongst the sickest and most medically needy in America resulting in this discrepancy between number of individuals insured and cost of care.

The largest and most well-known government programs are Medicare and Medicaid. Let’s take a look at these individually:

Medicare:

The Medicare program currently covers 42.5 million Americans. To qualify for Medicare you must meet one of the following criteria:

Over 65 years of age
Permanent kidney failure
Meet certain disability requirements
So you meet the criteria…what do you get? Medicare comes in 4 parts (Part A-D), some of which are free and some of which you have to pay for. You’ve probably heard of the various parts over the years thanks to CNN (remember the commotion about the Part D drug benefits during the Bush administration?) but we’ll give you a quick refresher just in case.

Part A (Hospital Insurance): This part of Medicare is free and covers any inpatient and outpatient hospital care the patient may need (only for a set number of days, however, with the added bonus of copayments and deductibles…apparently there really is no such thing as a free lunch).
Part B (Medical Insurance): This part, which you must purchase, covers physicians’ services, and selected other health care services and supplies that are not covered by Part A. What does it cost? The Part B premium for 2009 ranged from $96.40 to $308.30 per month depending on your household income.
Part C (Managed Care): This part, called Medicare Advantage, is a private insurance plan that provides all of the coverage provided in Parts A and B and must cover medically necessary services. Part C replaces Parts A & B. All private insurers that want to provide Part C coverage must meet certain criteria set forth by the government. Your care will also be managed much like the HMO plans previously discussed.
Part D (Prescription Drug Plans): Part D covers prescription drugs and costs $20 to $40 per month for those who chose to enroll.
Ok, now how does Medicare pay for everything? Hospitals are paid predetermined amounts of money per admission or per outpatient procedure for services provided to Medicare patients. These predetermined amounts are based upon over 470 diagnosis-related groups (DRGs) or Ambulatory Payment Classifications (APC’s) rather than the actual cost of the care rendered (interesting way to peg hospital reimbursement…especially when the Harvard economist who developed the DRG system openly disagrees with its use for this purpose). The cherry on top of the irrational reimbursement system is that the amount of money assigned to each DRG is not the same for each hospital. Totally logical (can you sense our sarcasm?). The figure is based on a formula that takes into account the type of service, the type of hospital, and the location of the hospital. This may sound logical but often times this system fails.

Medicaid:

Medicaid is a jointly funded (funded by both federal and state governments) health insurance program for low-income families. Eligibility rules vary from state to state and factors in age, pregnancy, disability, income and resources. Poverty alone does not qualify an individual for Medicaid (there is currently no government-provided insurance for the American poor…despite the fact that almost all first world countries have such a system…enter the current health care debate) but is a significant factor in Medicaid eligibility. Each state operates its own Medicaid program but must adhere to certain federal guidelines to receive matching federal funds (you may be familiar with California’s MediCal, Massachusetts’ MassHealth and Oregon’s Oregon Health Plan due to their recent media coverage). Medicaid payments currently assist nearly 60 percent of all nursing home residents and about 37 percent of all childbirths in the United States.

How are the bills paid?

We now understand who is paying the bill but we have yet to cover how those bills are paid. There are two broad divisions of arrangements for paying for and delivering health care: fee-for-service care and prepaid care.

Fee-for-Service

As we mentioned briefly while discussing PPO’s, in a fee-for-service structure, consumers select a provider, receive care (a.k.a. “service”) from the provider, and incur expenses (a.k.a. “a fee”) for the care. Deductibles and copayments are also required as previously discussed. Pretty simple. The physician is then reimbursed for their services in part by the insurer (i.e. a private insurance company or the government) and in part by the patient, who is responsible for the balance unpaid by the insurer (the return of the unanticipated medical bill despite your overpriced insurance). Again, the major downfall of the fee-for-service approach is that medical professionals are incentivized to provide services (and by this we mean any and all services they can legally request or must request to be protected legally), some of which may be nonessential, to increase their revenue and/or “C.Y.A.” (revenue that has steadily decreased as insurance companies continue to lower the amount they pay medical professionals for their services).

Fee Schedule

A fee schedule operates in the same way that Fee-for-Service does with one exception: instead of using the “usual, customary, and reasonable” amount to reimburse medical professionals, states set fees to be paid for specific procedures and services. The reimbursement is very low ($.10-.15 on the dollar) and barely covers the actual direct cost of providing the care. Physicians may chose to opt into the plan or not (starting to see why a doctor might not be so excited about this plan?). Would you sign up to be paid 10 cents for every dollar you charged for your work? Try the insurance reimbursement approach next time you go out to eat. We’ll come bail you out of the Big House if things go awry. What happens when the insurance system does this? You get the Wal-Mart approach to medicine (high volume, low quality). Not the kind of heath care we recommend.

Pre-Paid

Pre-paid health care? Like a phone card? Not exactly–but close. The pre-paid system evolved out of the insurance company’s desire to share its risk ( a.k.a “pooled risk”) with health care providers. Essentially, they wanted the doctors to have some skin in the game. In the pre-paid system, insurers make arrangements with health care providers to provide agreed-upon covered health care services to a given population of consumers for a (usually discounted) set price-the per-person premium fee-over a particular time period. What does that mean? It means that Dr. Bob gets paid, say, $30 per month to take care of Joe the Plumber including his blood work and x-rays. If Dr. Bob spends less than that caring for Joe, he makes money. If Joe is sick every month and needs lots of tests and follow-up visits, Dr. Bob could lose money caring for Joe. The set monthly fee paid to the doctor for taking care of a patient is set up on a per-member, per-month (PMPM) rate called a “capitated fee.” The provider receives the capitated fee per enrollee regardless of whether the enrollee uses health care services and regardless of the quality of services provided (not a good thing in our book). Theoretically, providers should become more prudent and subsequently provide services in a more cost effective manner because they are bearing some of the risk. Often times, however, less care is provided than is needed in hopes of saving money and increasing profits. In addition, physicians are incentivized to cherry pick the youngest and healthiest patients because these patients typically require less care (i.e. they are cheaper to keep healthy). We like that doctors are encouraged to keep patients healthy but we have to worry about the ways in which they are being encouraged to reduce costs (as little care as possible?). Again, the incentive system falls short and encourages providers to act unethically.

The Take Home Message:

Health Care in the United States today is complex and messy at best. The layers on top of layers of failed attempts to correct the system continue to encourage the wrong behavior in both patients (out of fear of medical bills) and providers (out of fear of bankruptcy). We have yet to provide every American citizen with medical care (something that goes without saying in most 1st World countries…even Cuba has it!). We spend more money on caring for our citizens than any country in the world yet we continue to lag behind in terms of national health outcomes. We think it’s safe to say that we’re not getting the best bang for our buck. The ultimate solution? We wish we knew. Only time will tell where the system goes from here. Our goal: to help you better understand the system as it stands today in hopes of developing a more effective, efficient, and comprehensive system for the future. Are you with us?

References

1. Levey N. Soaring cost of healthcare sets a record. Los Angeles Times. Feb 4 2010.

2. McKenzie J, Pinger R, Kotecki J. An Introduction to Community Health, 6th Ed. Jones and Bartlett Publishers. 2008.

3. Bodenheimer TS, Grumbach K. Understanding Health Policy. 5th Ed. Lange

Posted in Uncategorized | Comments Off on Who’s Paying For Health Care?