American health care has evolved into a decentralized public and private health care bureaucracy with a trio of venders in medicine, private insurance companies and government agencies. In other sectors of the economy, bills tend to be a two party transaction between a customer and a vender, but seldom so in health care. One illness or injury starts a billing shuffle through separate bureaucracies at physicians offices, hospitals, laboratories, clinics, PPO’s, IPO’s, but also private insurance companies, independent billing agencies and separate bureaucracies at Medicare, Medicaid, Social Security, Workmen’s Compensation and the Veterans Administration.
The bloated bureaucracy we have today started growing during the Eisenhower administration when the medical profession decided to build and expand the private health care insurance system as a way to reduce the pressure for national health insurance. In the early 1950’s insurance companies started marketing group policies in large numbers and defined their own risk pool through the work place.
During this period the companies realized they did not want high risk individuals like the disabled, heart, diabetes, or arthritis patients with preexisting conditions, or the elderly and retired. People without jobs or money to pay for insurance were another of the unwanted groups. When political pressure developed to expand coverage to the unwanted, Congress had to overcome the opposition of the medical establishment.
The American Medical Association was founded in 1847 so it was already well organized to oppose any plan that did not allow fee for service medicine as part of private enterprise. Even during the depression era when patients were unable to pay their bills, the AMA opposed government funded health care. They supported prepayment or private insurance plans like Blue Cross and Blue Shield, but opposed proposals for health care coverage where the government would have a role or regulate their charges.
Some of the unwanted groups proved to be politically strong enough to get expanded coverage, but the political compromises created separate programs with separate bureaucracies. In the public realm we have Medicaid, which is health care for the unwanted poor. Medicaid is a federal program with federal guidelines and bureaucracy but it is administered through 50 state bureaucracies. The law includes authority for the states to customize their programs and their bureaucracies.
The public realm also includes health care for the unwanted elderly and retired, which is Medicare. Medicare is a federal program with a Federal bureaucracy, but it is administered state by state with 50 state administrative contractors processing claims. Medicare does not cover an entire bill so private insurance companies sell Medigap policies to millions which means one hospital visit or one physician visit can generate two bills and brings action at multiple bureaucracies.
Difficulties with the Medicare billing system brought Congressional modification in the early 1980’s. Congress decided that medical venders should be responsible for filing Medicare claims rather than patients. At that time they instituted the Assignment billing system. Under assignment if medical venders accept the Medicare payment amount, meaning accept assignment, they receive rapid payment directly from Medicare. If they wanted to charge more they would file the claim but request larger payment from their patient and the smaller Medicare amount would eventually go to the patient.
Using the new system required a delicate judgment by medical venders and some extra bill collectors in the bureaucracy. Will the patient have the money and the willingness to pay? If the vender does not accept assignment and then cannot get full and timely payment from their patients, collection can take lots of staff time or bills may have to go to collection agencies. For anyone who has worked to decipher an Explanation of Medicare Benefits form it should be easy to understand the need for extra bill collectors for the bureaucracy.
Medicare is just one of the partial and bureaucratic solutions to health insurance. Since health care for those younger than age 66 assumes employment those who lose their job lose health insurance. Congress responded with legislation for another program known as COBRA that allows the unemployed to buy their group health insurance at group rates, but only for 18 months. The time limit assumes the unemployed will find more work with health insurance.
Since jobs that pay low wages, or jobs that use low skills, do not always include health care the working poor are left out. Medicaid covers the poor but with strict limits on income and assets. The limits are so low that many families with children and income above the Medicaid limit are without health insurance. Congress responded with legislation known as SCHIP (State children’s health Insurance Program) as a Medicaid supplement with more bureaucracy to cover children of parents without health insurance, but not their parents.
Workmen’s compensation, which is really health care for people injured on the job, operates under federal guidelines through 50 state bureaucracies, but the states allow private companies to write the insurance so it also supports jobs in private companies and independent insurance agencies. Military veterans have a separate health system, which supports another bureaucracy. Disability coverage supports bureaucracy through the Social Security Administration and several specialty programs passed by Congress for black lung and brown lung disease.
Millions of Americans accept the health care their employers negotiate for them, or the health care determined by Congress with no other choice when charges for individual health care mysteriously skyrocket. Unlike electric bills or phone bills that go to a person, bills in health care pass between separate bureaucracies in medicine, government or one or more of the 3,639 private sector health insurance establishments.
Private insurance companies do not provide health care and do not have the information they need to write insurance policies without getting it from the health care industry that does. Private insurance companies do not provide any actuarial services in health care that the health care industry cannot do for itself. Insurance work can be done within the health care industry.
Splitting the health care and insurance functions builds separate bureaucracies and generates additional transactions where both sides have the incentive to mislead or trick the other. The health care industry wants to receive bigger payments; the insurance industry wants to make lower payments. Two bloated bureaucracies tussle over money while the insured patient becomes the pawn in the middle.
If medicine and insurance needs were combined into regional or metropolitan health care providers setting their own premiums, then millions of transactions would be eliminated, along with the perverse incentives to overcharge, underpay or deny coverage. If the health care industry was organized with its separate components brought together into comprehensive health care providers, the insurance industry would be unnecessary. It amounts to a redundant component in American health care.
You may recognize the combination I just mentioned as an HMO, or health maintenance organization. Many Americans have the idea, aided by the health insurance industry, that health maintenance organizations restrict choice or might deny treatment when the truth is these people have no choice but to accept whatever coverage corporate America or the Congress decides for them.
America’s health care should be organized into HMO like providers just as we organize our public schools. With education people live somewhere and that somewhere is in a school district. Families with school age children can send them to the school in their district.
District health care would only require that providers offer health care to district residents like the public schools, but district residents could shop for something they like better in other districts just as health care providers could be allowed to offer better coverage to residents outside their district. Providers can be public or private, which would introduce cost saving incentives and competition currently absent from health care.
ObamaCare expands health care to more people, which makes it better, but apparently millions will still be left out. It does nothing to control costs or bureaucracy. Every American who receives health care from an employer accepts a generous tax subsidy denied to those left out. Tax rates have to be higher to cover the subsidy, which guarantees those who do not have employer health care subsidize those who do. I cannot think of any ethical principle that supports this practice.
Will American health care ever be what it could? Will it even get better? The answer I suppose is “blowin’ in the wind.”