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Health Care [OA 6903] [2]
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Health Care [OA 6903] [2]
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Records of the White House Office of Speechwriting (George H. W. Bush Administration)
Carol Aarhus Alpha Files
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Originally Processed With FOIA(s):
FOIA Number:
S; 1999-0118-F
FOIA
MARKER
This is not a textual record. This is used as an
administrative marker by the George Bush Presidential
Library Staff.
Record Group/Collection: George H.W. Bush Presidential Records
Collection/Office of Origin: Speechwriting, White House Office of
Series:
Aarhus, Carol, Files
Subseries:
Alpha File, 1990-1992
OA/ID Number:
13863
Folder ID Number:
13863-006
Folder Title:
Health Care [2]
Stack:
Row:
Section:
Shelf:
Position:
G
19
2
5
4
Services of Mead Data Central, Inc.
PAGE 40
80TH STORY of Level 1 printed in FULL format.
Copyright (c) 1991 Globe Newspaper Company;
The Boston Globe
May 19, 1991, Sunday, City Edition
SECTION: EDITORIAL PAGE; Pg. A34
LENGTH: 1509 words
HEADLINE: Toward a national health plan - 1
KEYWORD: EDITORIAL SERIES US HEALTH CARE COST MEDICINE MEDICARE
BODY:
A groundswell is rising for a national health plan that would guarantee all
Americans the means to obtain medical care at bearable costs.
This is the classic idea whose time has come.
The base of support for such a plan has shifted; no longer is it limited to a
socially conscious minority that seeks better medical care for the needy. The
surge comes now from mainstream America, from middle-income workers whose health
coverage is being lost as they lose jobs to the recession. And who, in the face
of sky-high premiums, are asked to assume an ever larger share of the expense as
employers scramble to cut their costs.
Americans now understand that premiums are so high - and going higher -
because they are paying not only for their own care but also the medical bill
for everyone with no coverage and little money. Uncollectible medical bills,
so-called free care, wind up - as a hidden tax - in price increases for health
insurance. This cost - and others - can be contained only by universal coverage.
That is the telling point in support of a national plan.
Whether an entire health plan can be enacted this year remains uncertain only
because of President Bush's staunch opposition, despite the rising demand for
relief from health benefits by American business. There is no doubt that major
reform in the way health care is paid for in the United States is coming soon
- as it should. Even the staid American Medical Association now sees universal
coverage as inevitable, right and necessary.
A political middle ground
Attention is being paid the health plans of Canada and Germany, which offer
complete medical care at a lower cost than the United States, even though
millions here lack coverage. Though bits of them appear in the one being
crafted here, it is likely the US plan will be uniquely American, melding and
broadening the private and government coverage that exists. Congress lacks the
will to buy into a more efficient but foreign system.
A fistful of proposals have already been filed with Congress, and by early
June the granddaddy of them all will be unveiled. This plan, still being worked
on, has been forged over the past 18 months by four senators led by Sen. Edward
Kennedy. At this time, the plan is named Americare.
It will be presented and championed by the Democratic leadership in
Congress - in the Senate by Majority Leader George Mitchell of Maine and Sens.
LEXIS NEXIS'LEXIS NEXIS
Services of Mead Data Central, Inc.
PAGE 41
(c) 1991, The Boston Globe, May 19, 1991
Kennedy, Jay Rockefeller of West Virginia and Donald Riegle of Michigan; in the
House by Majority Leader Richard Gephardt of Missouri and Rep. Henry Waxman of
California.
The Democrats have staked out a political middle ground that would keep the
current mix of medical coverage, but fill in gaps that leave 90 million
Americans with inadequate coverage or none. Rather than court defeat, the
Democrats have veered away from the radically different, though
cost-efficient, Canadian and German systems.
The plan would build on the two basic sources of coverage - public and
private - that prevail in the United States. This clearly is the most
politically and culturally acceptable route to go.
Drastically altering Medicaid
It would essentially preserve the huge government programs of Medicare for
the elderly and Medicaid for the impoverished and nursing home patients. But it
would shore up some of the soft spots in Medicare and drastically alter
Medicaid.
Medicaid would be stripped of its demeaning status as a program for the
poverty-stricken. It would be expanded to include the disabled, unemployed and
working poor. Eligibilty and coverage would be made uniform in all 50 states,
ending the stark and cruel differences from state to state. Adequate payment
would also be required, replacing the low rates that discourage doctors, clinics
and hospitals from accepting Medicaid patients.
In the private sector, the plan would insist that employers offer health
insurance to all workers or contribute to a state pool that would obtain
coverage for them under a new government-based program. The pool would be linked
to a tax-subsidized federal fund to make health insurance affordable for small
businesses and independent workers who have been shut out of coverage because of
its high cost.
Americare also would require a decent level of coverage for everyone. The
menu of benefits would include mental health and substance-abuse services as
well as the customary medical, surgical and maternity care. Private plans would
have common rates of payment to end competition based on cut-rate benefits.
Long-term care - in nursing homes and chronic-care centers - is not part of
this initial plan. Instead, long-term care - which now costs $ 55 billion a
year, primarily funded under Medicaid on a 50-50 federal-state basis - is being
treated as a separate entity. A bill to deal with long-term care on a new set of
terms is to be introduced by mid-summer, but it may be linked to Americare
later.
Cost-containment provisions
Philosophic assumptions about cost containment permeate the plan. One is
that the cost of health care is manageable only when everyone who can do 50
pays a fair share of the bill. Another is that cost shifting, the bane of the
current system, can be eliminated only when everyone is covered and payment is
appropriate and evenhanded. One more is the belief that cost can be controlled.
LEXIS'NEXIS'LEXIS NEXIS
Services of Mead Data Central, Inc.
PAGE 42
(c) 1991, The Boston Globe, May 19, 1991
Medical costs in the US have eluded every attempt to control them. In 1991,
they will amount to $ 750 billion if research, construction, administrative
costs and health-insurance profits are included - $ 571 billion if only the cost
of personal health care 15 calculated. The US spends far more on health care
than any other nation.
Nothing has worked, says medical economist Stuart Altman, acting president of
Brandeis University. Instead, attempts to micro-manage the delivery of care have
created layers of bureaucratic red tape that add billions to the cost. Hospitals
and other medical-care providers have become expert at outsmarting cost-control
regulators.
Encouragement of competition - the widely touted "business-market" approach -
has produced nearly 2,000 health insurers, each with separate forms and
administrative overhead, and each with a plethora of plans that vary in coverage
and price. Health-claims processing has itself become a nightmare cost.
Competition has fostered cost shifting in myriad ways, such as the seeking of
discount hospital rates by one company at the expense of others and the
siphoning of healthy customers to private plans, while abandoning the
chronically sick to government programs or the charity of hospitals, which
transfer losses onto the bills of those with insurance - workers and employers.
As the Democratic leadership struggles to put the finishing touches on a
national plan, the most difficult part has been the provisions for cost
containment. Though not complete, the elements to be addressed have been decided
upon. They would:
- Virtually eliminate cost shifting, now said to account for 25 percent of
health-insurance premiums and for one-third of premium inflation.
- Reduce unnecessary care, by introducing guidelines derived from Medicare
studies that identify overused procedures which fail to medically benefit
patients.
- Minimize administrative costs in the private insurance market involving
duplicative coverage, peer review, marketing and processing costs, and overhead.
Minimize administrative costs in the delivery of health care by encouraging
computerized record keeping and bill processing, and by simplifying and
standardizing claims forms and payments under private and government coverage.
- Set a limit on overall health-care spending - a goal, a guideline or an
outright cap. As a trade-off for the limit, health-care providers and
hospitals would be released from considerable governmental red tape and
paperwork. By permitting them more latitude on how best to spend the money
budgeted for operations, the limit would exert pressure for prudence in
purchasing expensive equipment and the use of costly medical technology.
Leaving room for choice
To overcome resistance by employers to any mandated job benefit, the
Democrats' plan would leave open how much - within limits - employers and
employees would pay toward health-insurance premiums. The plan would permit
workers to pay a percentage of the premium costs but "no more than" a specified
limit. Similarly, the plan would leave room for choice in terms of deductibles
LEXIS'NEXIS'LEXIS'NEXIS
Services of Mead Data Central, Inc.
PAGE 43
(c) 1991, The Boston Globe, May 19, 1991
and co-payments to be paid by employees on medical bills. The intent is to leave
room for traditional union and management negotiations while cultivating
employer-employee cost sharing.
The United States cannot remain the only industrial democracy without a
national health plan. The issue no longer centers on whether coverage for all
Americans should be considered. It is how that coverage should be structured and
how it will be paid for. Americans are ready to be shown.
NEXT: The politics of a national health plan.
LEXIS'NEXIS'LEXIS'NEXIS
Services of Mead Data Central, Inc.
PAGE
2
1ST STORY of Level 1 printed in FULL format.
Copyright (c) The Bureau of National Affairs, Inc., 1991
BNA PENSIONS & BENEFITS DAILY
Aug. 7, 1991
LENGTH: 549 words
Health Care
SIMON INTRODUCES AMENDMENTS TO
SENATE DEMOCRATIC HEALTH CARE BILL
WASHINGTON (BNA) -- Amendments to strengthen the cost-containment
provisions, shorten the phase-in period, and lower the Medicare eligibility
age were introduced by Sen. Paul Simon (D-I11) in legislation to modify
"HealthAmerica: Health Care Act of 1991" (S 1227), the Senate Democratic
leadership's health care reform bill.
"I have applauded the efforts of my colleagues in introducing the
HealthAmerica Act, but I have also been sensitive to some of the criticisms
of the bill being made by those who see the need for stronger
cost-containment and greater involvement of the health care consumer in
development of national health care policy," Simon said in a statement
announcing the amendment.
HealthAmerica would require employers to provide health insurance for
employees or pay a payroll tax into a public insurance plan, AmeriCare.
Five Fundamental Changes
Simon's bill, "Improvements to the HealthAmerica Act of 1991" (S 1669),
co-sponsored by Sen. Brock Adams (D-Wash), would make the following five
fundamental changes to S 1227:
0 strengthen the cost-containment program by making federal expenditure
board determined rates mandatory if negotiators do not agree;
o make universal coverage take effect in slightly more than one year
after enactment rather than a five-year phase-in period;
0 allow states to opt out of the employment-based system if they adopt a
single-payer, Canadian-style program, and provide authority for incentive
grants for two states to implement such systems;
0 give small businesses greater protection from possible discrimination
against high-risk employees, strengthen their access to quality affordable
policies, and provide them necessary consumer information on how to get the
best insurance plan for their money; and
0 lower the Medicare eligibility age to 60, subject to the enactment of
revenue changes to support this modification.
Amendment Friendly To Small Businesses
LEXIS'NEXIS'LEXIS'NEXIS
Services of Mead Data Central, Inc.
PAGE 3
BNA PENSIONS & BENEFITS DAILY (c) BNA, Inc., Aug. 7, 1991
The amendments recommend several changes to address the health care
problems facing small businesses, according to Simon. His bill would require
insurers wishing to provide coverage to small businesses to provide both a
basic and a comprehensive policy. To prevent small businesses from trying to
sort through dozens of confusing policies, the Simon amendments also would
require insurers to obtain approval from the Department of Health and Human
Services to provide extra coverage.
In addition, the amendments would require HHS to publish a consumer
guidebook on standard insurance policies to help businesses choose the policy
best suited for them. It also would prevent insurers from tailoring their
benefit packages to make them attractive only to the most healthy and
risk-free employees.
"The reality is that we need major reform as quickly as possible and S
1227 is legislation that responds with improvements to our current crisis in
health care in a way that many can support," Simon said. "My amendments move
the HealthAmerica bill closer to the concept of a single-payer system."
LEXIS NEXIS'LEXIS'NEXIS
CRISIS
WHICH POLICIES ARE BEST?
HEALTH
INSURANCE
f you lose your health-
the number of times they'll pay for
force. A policyholder who becomes
insurance coverage for
doctors' visits in the hospital. Even
pregnant may receive only 50 or 60
any reason, you can
a comprehensive policy may pay for
percent of the benefit in the first
remain uninsured and
only one visit each day.
year and 75 percent in the second
take your chances, or you can ven-
Hospital-surgical policies cover
year. Not until the third year are full
ture into the marketplace for an
hospital room and board, often for
benefits paid.
individual policy. Be forewarned:
a specified number of days; treat-
Annual premiums for pregnancy
You won't find a buyer's market.
ment in intensive-care and outpa-
riders ranged from $316 at Golden
And even if you're in good health,
tient facilities; medical supplies;
Rule for a $1000 benefit to $2640 at
you may have few options.
surgeon's fees; diagnostic tests
Prudential for a benefit that would
This report will help guide you
relating to an operation; some radia-
cover the hospital stay but only
through the process. We evaluated
tion and chemotherapy; and some-
$1050 of an obstetrician's fee. (An
71 policies from 40 insurance com-
times second opinions. But they
obstetrician's services for prenatal
panies and Blue Cross and Blue
cover almost no expenses incurred
care and delivery can cost as much
Shield organizations. We rate those
outside a hospital. They won't pay
as $4500 in some areas.)
policies and list their features begin-
for a doctor's office visit to check on
ning on page 546. Before plunking
a persistent cough, or to have your
What's not covered
down $2000 or $3000 for coverage,
child's cast removed, or for any
Both major-medical and hospital-
however, you'll need to know a little
medical condition that does not
surgical policies cover only medi-
about how these policies work.
require hospitalization. Most don't
cally necessary care. Don't count on
cover prescription drugs that you
them to pay for routine physicals or
Declining coverage
Types of policies
may need outside a hospital.
other preventive services. (Some of
The proportion of
There are three basic kinds of
Generally, both major-medical
them, however, cover Pap smears,
employees in
health-insurance coverage:
and hospital-surgical policies pay for
mammograms, and well-child care.)
group health plans
Major-medical policies.
at large- and
30 days of inpatient treatment for
Nor do companies pay for cosmetic
medium-sized
These are the most comprehensive,
mental illness and substance abuse.
surgery, fertility treatment, dental
firms dropped 14
covering both hospital stays and
Some major-medical policies cover
care, hearing aids, surgical treat-
percent from 1986
physicians' services in and out of
outpatient treatment as well. If they
ment of obesity, treatment for self-
to 1988.
the hospital.
do, insurers limit the number of vis-
inflicted injuries, or procedures that
Hospital-surgical policies.
its per year or even the dollar
are considered experimental.
These cover hospital services and
amount of their payments.
surgical procedures only.
How policies pay
Hospital-indemnity and
Maternity benefits
Insurance companies compute
dread-disease policies.
All the major-medical and hospi-
the amount of your reimbursement
These policies are vastly inferior to
tal-surgical policies in our study pay
check according to their own com-
the other two types and offer very
for expenses arising from preg-
plex formulas. The amount may be
limited benefits. They are discussed
nancy complications. But with the
higher or lower depending on the
in the box on page 539.
exception of some Blue Cross and
following:
Blue Shield plans, they usually don't
What's covered
Eligible expenses. When you
cover routine prenatal care or rou-
submit a bill for a service covered
Major-medical policies typically
tine deliveries.
by a major-medical policy, the
pay for most hospital services,
If you want coverage for that,
insurer compares it with the amount
including room and board; operat-
you'll have to buy a separate rider,
it normally pays for that service. If
ing and recovery rooms; nursing
and at some companies, you'll need
the charge is lower than what the
care; and treatment in intensive-
to decide on the rider the day you
company determines is "usual,"
care units, emergency rooms, and
take out the policy. Some carriers
"customary," "reasonable," or "com-
outpatient facilities. They also pick
won't let you buy the rider later (on
mon," then the entire bill is eligible
up the tab for lab tests, X-rays, anes-
the grounds that you'll probably use
for reimbursement. If it's greater,
thesia, medical supplies, ambulance
the coverage, and they'll be stuck
the carrier will consider only a por-
services, and physicians' office vis-
with a claim). Many major-medical
tion of it.
its. Most pay for prescription drugs
and hospital-surgical policies don't
What portion the company consid-
and cover confinements in skilled-
offer riders for routine maternity
ers differs among insurers. Each
nursing facilities, if necessary, fol-
care, period.
company sets its reimbursement
lowing a hospital stay.
Riders will pay up to a maximum
level based on physicians' charges
Some policies, however, don't pay
benefit that policyholders select,
for services and procedures in your
for assistant surgeons or for stand-
usually $500, $1000, $2000, or
area. One company might choose to
by surgeons. Others won't cover
$2500. Rarely do they cover the full
reimburse policyholders based on
emergency treatment unless the
cost of a normal delivery, which
the charge that represents the 90th
policyholder is admitted directly to
averaged $4334 in 1989.
percentile for a given procedure or
the hospital. (That's to discourage
Another drawback is that compa-
service. Another might choose the
the use of emergency rooms for
nies don't pay the full benefit during
75th percentile. (For hospital ser-
routine treatment.) Still others limit
the first two years the policy is in
vices, companies pay either the
538
CONSUMER REPORTS AUGUST 1990
hospital's posted charge, the hospi-
who performs an appendectomy as
$2088 (80 percent of $2610). He or
tal's cost, or a negotiated fee.)
little as $260 or as much as $480,
she will then have to pay the
Obviously, the higher the re-
depending on the schedule the poli-
remaining 20 percent, or $522, plus
mbursement standard, the more
cyholder picks; in 1989, the average
the $390 that's not eligible for reim-
you'll receive. Unfortunately, poli-
surgeon's charge was $846 for an
bursement.
cies don't spell that out, and some
appendectomy. The policy pays as
With some policies from Blue
insurance companies were reluctant
little as $390 or as much as $720 for
Cross and Blue Shield, a policy-
to explain their reimbursement
a hysterectomy; but a hysterectomy
holder who used a "participating
standards to us.
cost an average of $1737 in 1989.
physician" would pay less. Partici-
Some hospital-surgical policies
Coinsurance. Once the insurer
pating physicians agree not to bill
work differently, paying up to a max-
determines how much of your bill it
patients in excess of what Blue
imum amount for each covered pro-
will consider, it still pays only a por-
Cross and Blue Shield pays. This
cedure or service listed in the
tion. You pay the rest. That's called
can be a significant advantage. Plans
policy. There's usually a fee sched-
"coinsurance."
with this feature are noted in the
ule for hospital room and board, one
Most major-medical policies pay
Ratings.
for surgeon's fees, another for out-
80 percent of eligible expenses,
Some major-medical policies
patient services, and a maximum
leaving policyholders to pay the
require policyholders to pay less
amount the policy will pay for all
remaining 20 percent plus that part
than the usual 20 percent coinsur-
other hospital services. This is the
of the cost not covered at all.
ance. For example, American Re-
equivalent of a hospital-surgical poli-
Suppose a physician charges
public's UltraCare policy requires
cy's eligible charge.
$3000 for an angioplasty (a cardiac
no coinsurance at all. Policies from
Amounts paid by hospital-surgical
procedure), but the carrier consid-
Bankers Life and Casualty and its
policies usually fall far short of the
ers only $2610 as an eligible
affiliated companies require none if
actual charges. For example, Metro-
expense. If the insurer pays 80 per-
policyholders select a deductible of
politan's policy will pay a surgeon
cent, the policyholder will receive
at least $5000-that is, if the policy-
PAY BY THE DAY? BY THE DISEASE?
THE WORST TYPES OF INSURANCE
The worst buys in health insurance are hospital-indemnity poli-
Family Life, a large seller of this type of insurance, would
cies and dread-disease policies. Hospital-indemnity policies pay
pay a maximum of $4100; a policy from American Fidelity
a fixed amount each day you're in the hospital. Dread-disease
Assurance would cover as much as $6210-but only if the
policies pay benefits only if you contract cancer or some other
policyholder had purchased some optional coverage. (These
specified illness.
policies may also pay an additional benefit based on the
Such policies are a profitable staple for many well-known
number of months you own the policy before you contract
insurance companies and for the American Association of
cancer.)
Retired Persons (AARP). They're sold to unsophisticated buy-
Companies also sell riders to cover such dread diseases as
ers through enticing but sometimes misleading advertising.
smallpox, polio, rabies, diphtheria, and typhoid fever. We don't
"Cash benefits of $2250 a month, $525 a week, $75 a
know why anyone would buy them, since these diseases are
day
You
cannot
be
turned
down
No salesman will call
now extremely rare.
reads a flyer for a hospital-indemnity policy from Physicians
Compared to other health coverages, these types of insur-
Mutual. "Use these cash benefits any way you choose
Get
ance are cheap. For the top daily benefit from Physicians Mutu-
extra benefits when you may need them most," promises an
al, a 45-year-old man or woman would pay about $233 a year.
ad for a policy sold by the AARP.
A family would pay $540.
The deal is simple and understandable. You get a fixed dollar
Insurers usually issue hospital-indemnity policies to anyone,
amount for each day you spend in the hospital. No complicated
whether or not they are in good health. But carriers often
deductibles or coinsurance. Trouble is, the fixed benefit is
require a waiting period before covering policyholders for pre-
skimpy to start with and grows less valuable with each passing
existing health conditions.
year.
Most companies selling cancer insurance will not, however,
At Physicians Mutual, a person can choose a daily benefit of
issue policies to people who already have cancer. Nor do they
$30, $50, or $75. AARP's top benefit is $75 for those age 50 to
usually pay benefits to anyone who is diagnosed as having the
64 and $45 for those 65 and older. But with the cost of a day
disease before the policy has been in force for 30 days.
in the hospital averaging around $800, even the most generous
These policies are no substitute for comprehensive health
hospital-indemnity plans will barely dent your bill. Further-
coverage. The price is low, but SO are the benefits. With a dread-
more, to collect the high benefits touted by some of the ads,
disease policy, you're also gambling that you'll contract one of
you'll need to be hospitalized as long as a month-an unlikely
the covered diseases. If you don't, the policy won't cover you.
prospect, since the average stay is only about seven days. Final-
Companies often market these policies as a supplement to
ly, the benefit does not change. In time, inflation in hospital
other insurance. But we don't recommend them even for that.
and medical costs inevitably shrinks its value.
The $300, $400, or $500 you'd spend for inferior coverage may
Dread-disease policies offer similarly inadequate benefits.
equal the difference in premium between a skimpy hospital-
We measured two cancer policies against a $19,774 claim for
surgical policy and a more comprehensive major-medical poli-
colon-cancer surgery and follow-up chemotherapy that we also
cy. Or it may cover the cost of taking a lower deductible on a
used to rate the policies in our survey. A policy from American
good major-medical policy.
CONSUMER REPORTS AUGUST 1990
539
CRISIS
holder pays the
Golden Rule. "You don't want first-
and only a handful of Blue Cross
first $5000 of cov-
INSURANCE
dollar coverage. It may cost $80 to
and Blue Shield plans will sell poli-
ered expenses.
take care of a $50 bill."
cies to anyone who has had heart
Other compa-
As with most insurance, the
disease, internal cancer, diabetes,
nies require poli-
higher the deductible, the lower the
strokes, adrenal disorders, epilepsy,
cyholders to pay more. You might
premium. A 45-year-old man in Chi-
or ulcerative colitis. Treatment for
find policies with a 70/30 percent or
cago who chooses a $500 deductible
alcohol and substance abuse,
even a 50/50 percent cost-sharing
for Benefit Trust Life's Tele-Med pol-
depression, or even visits to a mar-
arrangement, especially if you don't
icy would pay an annual premium of
riage counselor can also mean a
use doctors and hospitals specified
$1443. If he selected a $2500 deduct-
rejection.
by the insurer.
ible, he would pay only $839.
If you have less serious condi-
Coinsurance maximums. Most
Sometimes, for a small, extra pre-
tions, you may get coverage, but on
policies specify a maximum dollar
mium, companies will waive the
unfavorable terms.
amount of coinsurance, typically
deductible or a portion of it if you
Conditions that usually affect one
$1000 (but it can be as much as
are injured in an accident.
part of the body are candidates for
$2500 or $5000), that policyholders
Can you renew?
"exclusion riders." That is, compa-
must pay annually. After they've
nies will offer a policy, but exclude
reached that amount, the carrier
Few companies will guarantee to
coverage for those conditions or
pays 100 percent of all additional,
renew your coverage. Of those in
that body part, either for a short
eligible medical expenses.
our study, only American Republic,
period or for as long as the policy is
A few policies tie coinsurance
Benefit Trust Life, and Metropolitan
in force. If you have had a recent
maximums to the size of the deduct-
sell "guaranteed renewable" poli-
knee operation, glaucoma, migraine
ible you select. The higher the
cies. The company can raise the pre-
headaches, varicose veins, arthritis,
deductible, the lower the maximum.
mium, but it must continue your
Truth will out
a cesarean delivery, or if your child
Several policies give a break to
coverage.
When you fill out
suffers from chronic ear infections,
families. Usually two members must
an application for
Most policies, however, are now
your policy will probably carry an
each pay the maximum coinsurance
health insurance,
"conditionally renewable." The com-
exclusion rider. "Any condition that
be honest about
amount. The company will then pay
pany can refuse to renew your pol-
would produce an immediate claim
your medical con-
100 percent of all eligible expenses
icy only if it also refuses to renew
would be ridered out," says Frank
dition. If you don't
for other members who have not
all other similar policies in your
Fugiel, a vice president at Washing-
reveal all your
reached their maximums.
state. You have some protection
ton National.
health problems
Lifetime maximums. Most
because the company can't single
If you have a medical condition
and the company
major-medical and hospital-surgical
you out for cancellation. But you can
finds out about
that affects your general health-
policies cap the benefits they'll pay
still lose your coverage.
them when you file
for example, you're significantly
over a lifetime at $1-million or some-
a claim, it could
Some insurance companies use
overweight or have mild high blood
rescind your pol-
times $2-million. A few have no cap,
conditionally renewable policies as
pressure-you may get coverage,
icy and leave you
and others have a separate lifetime
a lever to force insurance regulators
but at a price 15 to 100 percent
without coverage
maximum for each illness or injury.
to grant the rate increases those
higher than the standard premium.
when you need it
A company will sometimes give
companies want. Certified Life, First
Companies in our survey told us
most.
new lifetime benefits to policyhold-
National Life, Golden Rule, and
that between one-quarter and one-
ers who have generated enough
Washington National told us they
half of all their policies carry exclu-
claims to reach their lifetime cap.
had canceled policies. In some cas-
sion riders, higher-than-standard
This is an important feature if the
es, they offered policyholders alter-
premiums, or both.
cap is low.
native coverage.
Insurers, however, are not restric-
Deductibles. Most companies
A few policies are "optionally
tive in identical ways. Washington
require policyholders to satisfy
renewable." A company can opt not
National will exclude coverage for
deductibles each year before bene-
to renew your insurance whether or
your eyes if you had a cataract oper-
fits are paid. (Some hospital-surgical
not it renews coverage for others
ation a year ago. Prudential will not.
policies have no deductibles.)
who have the same policy. Pruden-
If you suffered from migraine head-
Deductibles can be as low as $100
tial, State Farm, and Blue Cross and
aches in the past but have had no
or as high as $20,000. That means a
Blue Shield plans in Illinois, Kansas,
treatment for the last two years,
policyholder must pay the first $100
Ohio, and Oklahoma have option-
Central States Health and Life will
(or $20,000) of expenses before the
ally renewable policies. (Prudential
cover future treatment for such
company pays any benefits. Obvi-
and Blue Cross and Blue Shield of
headaches; Time will issue a policy
ously, a $20,000 deductible buys
Oklahoma at least say they won't
but exclude coverage for migraines.
only catastrophic protection.
cancel your policy if your health has
If a company rejects you, that fact
Sometimes a policy links the
deteriorated.)
will be recorded at the Medical
deductible to an illness or health
Many companies also give them-
Information Bureau in Boston, an
condition; you would have to satisfy
selves the option of not renewing if
industry clearinghouse. The next
the deductible with each new ill-
they find you have another policy
time you apply for coverage, the
ness. If the deductible is large and
that is similar.
new carrier may check your file at
you have several different illnesses,
you may never collect any benefits.
Are you insurable?
the bureau. If it finds you've been
turned down, that rejection could
Some companies no longer offer
People who have medical prob-
trigger further scrutiny of your
low deductibles. "If somebody can
lems, however minor, are second-
health.
afford to buy our product, he can
class citizens in the world of health
Even if your health is perfect, you
afford a $1000 deductible," says
insurance.
still may be a less-than-perfect risk.
John Hartnedy, the chief actuary at
Virtually no commercial carriers
In their quest for applicants who are
540
CONSUMER REPORTS AUGUST 1990
unlikely to file claims, insurance
women with fibrocystic breast dis-
medical conditions you already
companies blackball people in cer-
ease. Commercial carriers often
have.
tain occupations. Some companies
require blood tests and almost
Most policies say that a preexist-
have long lists of jobs that are unac-
always exclude coverage for
ing condition is one for which a poli-
ceptable, either for an individual pol-
fibrocystic breasts.
cyholder has received treatment or
icy or for a policy sold to employees
for which a reasonably prudent per-
in small firms. Chances are the
Preexisting conditions
son should have sought treatment
insurance company won't cover you
If you get a policy from Blue
during the previous two years. Some
if it considers your work hazardous
Cross and Blue Shield or a commer-
policies have shorter or longer
or if people in your profession are
cial insurer, you still may have to
"look-back" periods. Those are
more likely to file claims or switch
wait a year or two to be covered for
noted in the Ratings.
Continued
jobs frequently.
Better off at the Blues?
THE LAST RESORT
Historically, most Blue Cross and
Blue Shield plans took all comers
for individual health insurance,
HIGH-RISK POOLS
offering "open-enrollment" policies
that anyone could buy. Even if your
health was bad, you could count on
If you can't buy health insurance and you
Premiums are no bargain, which is not
getting a policy from the Blues.
live in one of 23 states listed below, your
surprising since policyholders in the pool
Today, only 22 of the 74 Blue
insurer of last resort is a high-risk pool cre-
will almost certainly file claims. For exam-
Cross and Blue Shield plans in the
ated for the people insurance carriers don't
ple, a policy with a $500 deductible from
U.S. still make policies available to
want. Similar to the high-risk plans for driv-
the Illinois pool will cost a 45-year-old man
everyone. But their "open-enroll-
ers who've been in accidents, health-insur-
living in Chicago $3844 a year. That's twice
ment" policies may require policy-
ance pools originated in the 1970s as the
as much as he'd pay for the most expensive
holders to pay a larger portion of
industry's alternative to national health
individual policy in our study available to
their expenses than policies offered
insurance. But only in the last few years
Chicagoans.
to those in good health. For exam-
have states begun to get serious about
ple, the open-enrollment major-med-
them.
Long waiting lists
ical plan sold by Empire Blue Cross
To obtain coverage, you usually must be
Pool policies provide decent coverage,
Blue Shield in New York requires
a state resident for at least six months (a
but they are available only to a fraction of
20 percent coinsurance for all ser-
year in some states), and must have
those who need them. CU surveyed the
vices. By contrast, its high-rated
received a rejection notice from at least one
pools last spring and found that they now
Tradition Plus Wraparound policy,
carrier (Montana and Florida require two
cover only 55,500 people nationwide. Pools
sold only to those with no medical
rejections).
in Illinois, Maine, and Oregon currently
problems, requires no coinsurance
If a carrier will insure you only at a pre-
limit the number they can insure. The Illi-
on hospital services and also offers
mium exceeding the price of coverage from
nois pool can issue only 4500 policies. The
a much lower deductible.
the pool, or if the insurance you're offered
wait to buy into the Illinois pool is now at
Most Blue Cross and Blue Shield
carries exclusion riders, you will also be eli-
least a year.
organizations now "underwrite."
gible for a pool policy in most states.
It's hard to see how the pools can meet
That is, they evaluate an applicant's
The rules differ from state to state. Illi-
even the existing need. They operate at a
health much the same way their
nois, Iowa, Minnesota, and Nebraska, for
loss, despite the high premiums. In most
commercial competitors do. They
example, allow people infected with the HIV
states, losses are covered by assessments
decline people with cancer and
virus to obtain a pool policy; South Carolina
against all health-insurance carriers doing
heart disease and sometimes issue
does not. In some states you can't get pool
business in the state. In return, some
policies with exclusion riders and
coverage if you're eligible for a conversion
states relieve insurers from part of their
higher premiums.
policy when you leave an employer group,
obligation to pay taxes on the premiums
It's hard to say whether you'll
even though the pool policy may be better
they collect.
have an easier time buying coverage
than the conversion option.
But the insurance industry is pressing the
from the Blues than from commer-
Florida, Illinois, Iowa, Minnesota, North
states to pick up more of the bill from the
cial insurers. Most of the Blue
Dakota, Tennessee, Washington, and Wis-
public purse. "We're not in the business of
Cross plans we contacted refused to
consin make Medicare-supplement policies
giving away insurance at a loss to these peo-
respond to our survey. Through
available through their pools. That's a boon
ple," says Carl Schramm, president of the
other sources, we obtained the
to the disabled under age 65 who rely on
Health Insurance Association of America.
plans sold by uncooperative Blues
Medicare but can't find insurance to fill
The 23 states with high-risk pools are:
and evaluated them along with the
Medicare's gaps.
California, Colorado, Connecticut, Florida,
others.
Pool coverage is similar to that offered by
Georgia, Illinois, Indiana, Iowa, Maine,
Blue Cross plans that do not
a major-medical policy, although benefits for
Minnesota, Montana, Louisiana, Nebraska,
exclude health conditions or charge
mental and nervous disorders, organ trans-
New Mexico, North Dakota, Oregon, South
higher premiums for them may sim-
plants, and pregnancy may be less compre-
Carolina, Tennessee, Texas, Utah, Wash-
ply refuse to sell you a policy. On
hensive. You may, however, pay more out-
ington, Wisconsin, and Wyoming. (The
the other hand, a Blue Cross plan
of-pocket than you would with a major-
pools in California, Colorado, Georgia, Lou-
might be more lenient than a com-
medical policy. Some plans require a high
isiana, Texas, Utah, and Wyoming are not
mercial insurer. Empire Blue Cross
deductible, greater coinsurance, and rela-
fully operational.) Your state insurance
Blue Shield does not require blood
tively low lifetime-benefit maximums-
department can tell you how to contact
tests to detect AIDS. Kentucky Blue
$500,000 or even $250,000.
your state's pool.
Cross and Blue Shield insures
CONSUMER REPORTS AUGUST 1990
541
CRISIS
HEALTH
To encourage ap-
premium to the highest (ultimate)
study, forcing us to turn to state
plicants to reveal all
level.
regulators to obtain necessary
INSURANCE
their medical condi-
Companies that don't use select
information on their policies, pre-
tions, some compa-
and ultimate rates spread the antici-
miums, and rate histories. (Sur-
nies waive their
pated costs of your claims over all
prisingly, some regulators made it
usual waiting periods if you have
the years you own the policy, SO
difficult to obtain the information,
disclosed all your health problems
your premiums will be more stable.
even though data filed with public
(providing the company is willing to
If you buy from a company using
agencies is usually available to the
accept you and not exclude cover-
select and ultimate rates, you may
public.) The Blue plans that
age for those conditions).
face premium increases that far
refused to answer our question-
exceed what you can afford.
naire are noted in the Ratings with
What policies cost
State insurance regulators don't
an asterisk.
The premiums you pay are based
require insurers to disclose whether
A few other insurers also declined
on your age, your sex, and where
they use select and ultimate rates,
to participate. Celtic Life, a company
you live.
SO it's often hard to know. It's a good
waging a public campaign to edu-
At Bankers Life and Casualty, a
idea, though, to ask whether a com-
cate people about shopping for
healthy 45-year-old man living in
pany you're considering uses such
health insurance, refused to shed
The wrong job
Chicago would pay $1245 a year; a
rates and to avoid their policies,
any light on its policies or selling
Occupations some
45-year-old woman, $1625; a 55-year-
especially if you plan to keep the
practices. A newcomer to health
insurance compa-
old man, $1748; and a 55-year-old
coverage for several years. One car-
nies consider
insurance, A.L. Williams, a company
woman, $1852.
unacceptable for
rier, Aid Association for Lutherans,
better known for its life-insurance
health coverage:
The premium for a 40-year-old
gives buyers in some states a choice
policies, also declined to participate.
Tree trimmers
man, his 35-year-old wife, and two
between policies with select and
A third company, World Insurance,
children would come to $3382.
Explosives
ultimate rates and those without,
claimed that if it won a favorable rat-
handlers
A few Blue Cross plans still use
and clearly points out the differ-
ing from CONSUMER REPORTS, it would
House painters
"community rates," charging every-
ences in its sales material. (Our Rat-
not have the capacity to handle all
Window cleaners
one the same premium regardless
ings include Aid Association's policy
the applications.
Heavy-equipment
of their age or where they live.
without select and ultimate rates.)
We rated the major-medical and
operators
Other things being equal, older peo-
hospital-surgical policies by measur-
Rodeo performers
ple are usually better off at a com-
Managed care and PPOs
ing the coverage and cost-sharing
Police officers
pany using community rates. A 45-
Until recently, insurance compa-
features of each against actual
Doormen
year-old man and a 60-year-old man
nies seldom questioned physicians'
Models
claims, ranging from minor to cata-
Freelance artists
living in Philadelphia would pay the
fees. But to hold down their own
strophic, filed by 25,000 employees.
Waiters
same $2192 premium at Indepen-
costs, companies have now inserted
The average annual claims for a sin-
Masseurs
dence Blue Cross and Pennsylvania
a variety of "managed care" require-
gle person in the reference group
Hospital aides
Blue Shield. But at Time, a company
ments into their policies.
totaled $1387; for families, it was
Maids
not using community rates, the 45-
As a result, you may have to ask
$3175.
Musicians
year-old man would pay only $1580;
the insurance company for prior
A policy that covers everything
Bartenders
the 60-year-old, $3375.
approval for any elective surgery.
would pay 100 percent of those
Fry cooks
With most policies, premiums
You may have to use an outpatient
amounts. Of course, health-insur-
Janitors
increase as you get older. If you buy
facility for such procedures as
Street cleaners
ance policies are not designed to
Doctors
a policy at age 40, expect the pre-
arthroscopic surgery, dilation and
cover 100 percent of claims. But the
Lawyers
mium to increase when you turn 45.
curettage, and cataract removal.
best policies pay the most.
Pro athletes
In addition to age-related increas-
You may be required to seek second
The best policy we found, a major-
Fishermen
es, the rising cost of medical care
opinions before surgery. If you don't
medical plan sold by Blue Cross and
Railroad workers
also pushes up premiums every
follow the rules, the company may
Blue Shield of Minnesota, would
Test drivers
year or two. The premiums for poli-
reduce your benefit or increase the
pay $1230 (or 89 percent) for sin-
Car-wash workers
cies in our study increased an aver-
coinsurance and deductible you'll
gles and $2810 (or 89 percent) for
Dancers
age of 11 percent a year over the
have to pay.
Beauticians
families if you used physicians in
past five years. But premiums for
Some Blue Cross and Blue Shield
Movers
the plan's preferred-provider orga-
Zoo attendants
some policies rose as much as 40 or
plans offer Preferred Provider
nization. The worst, a hospital-surgi-
50 percent in a single year.
Organizations (PPOs). Those are
cal policy from Pyramid Life, would
groups of doctors who have agreed
Pricing tricks
have paid only $490 (or 35 percent)
to discount their fees. If you sign up
for singles and $950 (or 30 percent)
As a sales gimmick, some compa-
for a PPO and use a non-PPO doc-
for families.
nies use a pricing scheme that gives
tor, you may have to pay as much
The Ratings show what percent-
policyholders a deceptively low pre-
as 40 or 50 percent of the doctor's
age of the average annual claims
mium the first year and very high
bill yourself and also suffer other
each policy would pay after account-
premiums in later years.
penalties.
ing for deductibles, coinsurance,
When a company that uses so-
coinsurance maximums, and other
called select and ultimate rates
How we rated the policies
cost-sharing features spelled out in
accepts you for coverage, it knows
Most Blue Cross and Blue
the contract.
you're in good health and charges a
Shield organizations and a handful
Since most people want a policy
low (select) premium to reflect the
of commercial carriers sell individ-
that provides coverage for cata-
fact that you're not likely to file
ual health coverage. Twenty of the
strophic expenses, we also mea-
claims in the immediate future. But
29 Blue Cross and Blue Shield
sured how well each would pay for
as the years go on, and as you make
plans we approached for informa-
two major illnesses. One was a
claims, the company will jack up the
tion refused to cooperate with our
$19,774 claim for colon-cancer sur-
542
CONSUMER REPORTS AUGUST 1990
gery and follow-up chemotherapy.
weight to each policy's renewability
time benefit maximum, its preexist-
The other was a $49,767 claim for
features and rate-increase history. A
ing conditions clause, and coverage
care of a serious heart attack,
policy scored highest in these fac-
provided by the maternity rider.
including an angioplasty procedure
tors if it was guaranteed renewable
We could not obtain rate-increase
(see box on page 544).
and if the company's rate increases
histories or certain other informa-
A good policy is useless if the
over a five-year period were less
tion for noncooperative Blue Cross
company can cancel it, or if rate
than the medical consumer price
and Blue Shield plans or for new
increases are SO steep you can't pay
index.
policies. Where we lacked informa-
the premiums. Therefore, we gave
We also looked at a policy's life-
tion that might affect a plan's score,
BLUE CROSS AND BLUE SHIELD
ABANDONING THE MISSION
Sick people cannot buy à policy
munity rating a few years ago in favor of the kind of pricing
from Blue Cross and Blue
used by its commercial competitors.
Shield of Kentucky. The plan
Most Blue Cross and Blue Shield plans now resemble Ken-
evaluates an applicant's health
tucky's. Many have become mutual insurance companies. They've
and rejects those with such
lost their tax exemption from the Federal government, and they
afflictions as cancer, heart dis-
no longer try to provide coverage for everyone. Less than one-
ease, emphysema, and AIDS.
third still take all comers for health insurance. Of the 37 state
Competition from commercial carriers has forced the plan to
regulators responding to a CU survey, only nine consider their
turn sick people away in order to keep its premiums affordable
local Blue Cross and Blue Shield plan an insurer of last resort.
and attract new customers. At one time, Kentucky's Blue Cross
"We think the Blues in our state do a pretty good job. But
and Blue Shield plan sold as much as 90 percent of all health
everyone here dislikes them, from their subscribers to the leg-
insurance in the state. Today it sells just 30 percent.
islators," says one state insurance regulator who asked not to
The Kentucky plan, typical of many Blue Cross and Blue
be identified. "They are some of the most defensive people you
Shield organizations today, is a far cry from what such plans
can imagine. Everything we ask for is a fight."
used to be. Founded by organized medicine in the 1930s, Blue
We know what he means. We asked 29 Blue plans to send
Cross (and later Blue Shield) had two missions. The first was
us information about their policies. Only nine would do so,
to make sure hospitals and doctors got paid. The second was
forcing us to seek information from state regulators, who some-
to provide health insurance for the greatest number of people.
times couldn't or wouldn't help us. The California Insurance
For years, the Blues had a virtual insurance monopoly. In
Department told us it had no rates on file for Blue Cross of
some places, they were SO powerful that they were able to
California. When we asked the plan for a history of its rate
negotiate large discounts from hospitals and use the savings to
increases, an official told us that information was "proprietary."
carry out their mission of community service. For example,
When we asked the Washington Insurance Department to give
Blue Cross plans subsidized such money-losers as individual
us rate-increase data for the Washington and Alaska plan, the
health policies for the sick and Medicare-supplement coverage
department said it could not oblige because Blue Cross had a
for the elderly.
right in that state to keep such information a secret.
As nonprofit organizations, the Blues had certain privileges.
"As their risk pool gets creamed, there's mission schizophre-
They paid no Federal income taxes and, in many states, no
nia at the Blues," says Susan Sherry, an official at Families
taxes on the premiums they collected.
USA, a health-advocacy group. "It's the classic example of com-
"Community rating" was once the Blues' trademark. Every-
petition, and consumers are the real losers."
one in the community-large employer groups, small employer
Some Blue Cross and Blue Shield plans, mostly in the North-
groups, and individuals buying policies on their own-were in
east, still cling to the old mission. But even for them, holding
the same risk pool. They paid the same rates regardless of their
on is increasingly difficult.
age and sex, where they lived, or how sick they were.
In New York, a person no matter how sick can always get
That all began to change in the 1960s. Commercial insurers
health insurance from Empire Blue Cross Blue Shield. It won't
started skimming the best risks from the Blue Cross pool by
be the top-of-the-line policy, but it will provide some coverage.
offering lower premiums than the Blues charged. As large
Empire, which still uses community rates, can sell insurance
groups and then small ones took out cheaper policies with com-
even to people with terminal illnesses because their policies
mercial carriers, the Blues increasingly found themselves cov-
are heavily subsidized from premiums paid by large employer
ering people with health problems the commercial carriers
groups and from the savings obtained by negotiating a 13 per-
didn't want. As healthy people deserted the pool, the Blues had
cent discount with New York hospitals.
little choice but to raise premiums higher and higher to cover
Even so, Empire officials say that the discount is not large
the claims made by the sick people who remained.
enough, and that over the last few years some 100,000 people
In many areas, the plans also saw their hospital discounts
have left the pool, either going with commercial carriers or
whittled away. Some states now mandate smaller discounts and
doing without coverage altogether. The plan has had to increase
allow all insurers to receive them.
premiums on all its policies 40 to 50 percent to cover the claims
Blue Cross and Blue Shield of Kentucky, for example,
of the sick people who remain.
receives only a 7 percent discount from the hospitals. And it
"Our goal is to stay with the mission," says Eric Schlesinger,
does not subsidize individual health coverage (other than con-
Empire's chief marketing officer. "But in the end, we will have
version policies) out of the profits from other lines of business.
a community price SO high that no one will pay it, and the
At the suggestion of insurance regulators, it abandoned com-
number of uninsured will skyrocket."
CONSUMER REPORTS AUGUST 1990
543
we assigned values representing the
Blue Cross and Blue Shield plan.
hospital-surgical plan, compared
average for all plans in our survey.
The best coverage is provided by
with $1245 for the company's major-
This lack of actual information for a
a good major-medical plan. The
medical policy. But as you can see
plan is denoted by a dash in the Rat-
plans listed high in the Ratings
from the column labeled "Payout,"
ings. The plans are listed in order
require policyholders to pay very
the coverage offered by these poli-
of an overall quality index that takes
few of their medical expenses.
cies is, for the most part, decidedly
into account all the rating factors.
A number of Blue plans-in Min-
inferior to that provided by major-
nesota, New Jersey, New York, and
medical policies.
Recommendations
Pennsylvania-ranked high. People
The highest room-and-board cov-
Naturally, you want a policy that
in those states should certainly con-
erage offered by the hospital-surgi-
will pay as many of your bills as pos-
sider them. As the Ratings show,
cal policy from Blue Cross and Blue
sible, SO coverage should be your
however, Blue Cross and Blue
Shield of Maine, for example, is
first concern.
Shield organizations in other states
$276. Some of the state's hospitals
Unfortunately, there are few poli-
offer mediocre or poor policies.
have room-and-board charges that
cies for any one individual to choose
Fortunately, some good commer-
exceed $400.
from. Your options boil down to a
cial plans are widely available. Look
Hospital-surgical plans provide
policy from one of the few remain-
first at the high-rated policies
fewer benefits, and those benefits
ing commercial carriers selling this
offered by American Republic and
may not increase with the cost of
insurance or one from your local
Benefit Trust Life.
medical care. Unless the carrier lets
Maternity benefits from some of
you upgrade, the benefits you buy
the Blues were better than those
today may be inadequate if you need
CATASTROPHIC CLAIMS
offered by most commercial carri-
hospital care several years from now.
ers. Many Blue plans treat preg-
If you can't swing the premiums
nancy as an illness and pay normal
for a high-rated major-medical poli-
PERCENTAGE GAMES
benefits, which will cover most of
cy, consider reducing the premium
the cost of having a baby. But some
with a higher deductible, then bud-
As part of our evaluation of health-insurance poli-
offer maternity benefits only on
get to cover small medical expenses
cies for the accompanying report, we measured
family policies. Presumably a single
yourself.
how much each policy would help defray the actual
woman who became pregnant
If you're not in perfect health, it's
bills run up by two patients in apparent good
would not have coverage.
hard to buy coverage at any price.
health who were suddenly stricken with a life-
Some Blue Cross and Blue Shield
It may nevertheless be worthwhile
threatening illness-colon cancer and heart
plans offer a choice of a regular
to shop several carriers to see if
attack.
insurance policy and a PPO. You
they'll issue coverage with exclu-
The case of colon cancer cost a total of $19,774,
might consider a PPO if you're will-
sion riders.
including $13,471 in hospital bills and $3665 for
ing to use its doctors rather than
If you live in Alabama, Hawaii,
surgery.
your own. The PPOs offered by
Maryland, Michigan, New Hamp-
The best plan we found, from Blue Cross and
Blue Cross and Blue Shield in Arizo-
shire, New Jersey, New York, North
Blue Shield of Minnesota, would have paid about
na, Illinois, Minnesota, and Wash-
Carolina, Pennsylvania, Rhode
92 percent of the $19,774 if the policyholder used
ington and by Blue Shield of
Island, Vermont, Virginia, or the Dis-
only "preferred provider" doctors. (If the policy-
California ranked higher in our Rat-
trict of Columbia, you will be able to
holder went to other physicians, the plan would
ings than those organizations' tradi-
buy an "open-enrollment" policy from
pay up to 88 percent.) The highest-rated policy
tional insurance plans because they
Blue Cross and Blue Shield at least
from a commercial carrier, American Republic's
require their subscribers to pay less
sometime during the year.
UltraCare with no coinsurance, would have paid
coinsurance.
In Maine, the Blue Cross and
97 percent. A less generous major-medical plan,
Policies from First National and
Blue Shield organization accepts
from Washington National, would have paid 87 per-
Washington National provide good
anyone for coverage, but will add
cent of the claim. Least helpful was a hospital-sur-
benefits for catastrophic expenses
exclusion riders for three years on
gical policy from Pyramid Life. It would have paid
but fall short in other important
policies for people with various
only 49 percent of the bill, leaving the patient about
areas, such as policy cancellations
health conditions.
$10,000 in debt.
or rate increases.
If you live in one of 23 states with
The treatment for the heart-attack patient came
Note that the policy from the
a high-risk pool, you may be able to
to $49,767. It included an angioplasty (a procedure
largest seller of individual major-
purchase coverage from the pool.
to open blocked arteries) that cost $8730 in surgi-
medical insurance, Golden Rule,
There's no insurer of last resort for
cal fees, and a 21-day hospital stay that piled up
ranks near the bottom. The policy
people living in the other 15 states.
bills of $34,107.
provides only average coverage. And
Short of getting a job with a large
In this case, the Blue Cross and Blue Shield of
the company has a history of large
business or marrying someone who
Minnesota plan would have paid about 97 percent
rate increases and canceled policies.
works for one, people who are unac-
of the $49,767 claim if the policyholder used all
Once you have considered a poli-
ceptable to insurance companies are
"preferred provider" doctors and up to 95 percent
cy's coverage and other dimensions,
out of luck. They have no choice
if the policyholder did not. American Republic's
look at the premium. If two policies
under the current system but to join
UltraCare policy with no coinsurance would have
are comparable, pick the one with
the growing ranks of the uninsured.
paid 97 percent. The major-medical plan from
the lowest premium.
Ratings begin on page 546
Washington National would have paid 90 percent
Hospital-surgical plans cost less
of the claim. And Pyramid Life's marginal hospital-
than major-medical policies, but
Reprints of this report will be avail-
surgical policy would have paid only 44 percent,
they generally provide much less
able in bulk quantity. For informa-
leaving the patient to recover from a $28,000 debt
coverage. At Bankers Life and Casu-
tion and prices, write CU/Reprints,
as well as the heart attack.
alty, a 45-year-old man living in Chi-
P.O. Box CS 2010-A, Mount Ver-
cago would pay $806 a year for a
non, N.Y. 10551.
544
CONSUMER REPORTS AUGUST 1990
CONTINUING COVERAGE
WHEN YOU LEAVE A GROUP PLAN
If you leave a job, you may have two options for continuing your
thousand for COBRA coverage-but we don't recommend
health insurance short of shopping for an individual policy on
them. Unless you are very young, you're much more likely to
your own. Depending on the size of the firm you worked for
need coverage for illnesses than for accidents.
and on your state's insurance regulations, you may be able to
continue your group coverage for a short time as provided
Beyond COBRA
under the Consolidated Omnibus Budget Reconciliation Act of
After COBRA coverage runs out, or if you're not eligible for
1985 (COBRA). Or you may be able to obtain an individual
it, your next options are to take a conversion policy or shop for
policy through a process known as conversion. Both options,
individual coverage. (Unless, of course, you're covered under a
though, will usually cost a lot more than you would spend for
new employer's health plan or become eligible for Medicare.)
The law requires that every employer who normally offers
group coverage.
Because it is less expensive and generally offers better cover-
conversion policies to workers who leave also offer them to
age than a conversion policy, your first line of defense should
former employees once their COBRA benefits run out. Fifteen
states, as well as the District of Columbia, don't require employ-
be COBRA.
ers to offer conversion policies to employees who leave. They
COBRA: How it works
are: Alabama, Alaska, Connecticut, Delaware, Hawaii, Idaho,
If you worked for a business with 20 or more employees,
Indiana, Louisiana, Massachusetts, Michigan, Mississippi,
COBRA entitles you and your dependents to continued cover-
Nebraska, New Jersey, North Dakota, and Oklahoma.
age for at least 18 months under your former employer's plan.
If an insurance company terminates a group plan, employees
If you are disabled and eligible for Social Security disability
may also be out of luck. Two-thirds of the states require insurers
benefits when your employment ends, you can obtain an addi-
that cancel group policies to offer conversion options to people
tional 11 months of coverage, for a total of 29 months.
losing their coverage.
If you are insured through your spouse's plan at work and
Even when it is offered, conversion coverage is almost always
your spouse dies, you become divorced or separated, or your
inferior to what you received from your group plan. (Twenty-
spouse becomes eligible for Medicare, COBRA provides for cov-
four states require companies to offer conversion policies with
erage of up to 36 months.
major-medical or comprehensive benefits.) If you currently have
COBRA requires that you pay 102 percent of your group
major-medical coverage, a conversion policy may provide only
insurance premium. If your employer has been paying a portion,
hospital-surgical benefits and only pay up to a fixed amount
you will have to assume that cost in addition to what you were
each day for hospital room and board and surgical procedures
already paying, plus an extra 2 percent for administrative costs.
(see page 538).
Disabled people who take COBRA coverage must pay as much
For example, CIGNA, an insurer that offers several conver-
as 150 percent of the premium for the extra 11 months.
sion options to employees converting from the group policies
You can lose coverage if you don't pay the premiums, if you
it underwrites, pays only $250 for hospital room and board if
become eligible for Medicare, if your employer discontinues
an employee chooses its top-of-the-line conversion coverage.
health insurance for employees still working there, or if you
For employees in a top-of-the-line group policy, CIGNA would
join another plan.
pay most of the hospital charge, which runs considerably more
However, if you join another plan and have an existing medi-
than $250. (The average cost of a day in the hospital is about
cal condition for which that plan imposes a waiting period, you
$800.)
can still keep your COBRA benefits until they would normally
While benefits are low, the prices of conversion policies are
run out. By that time, your preexisting condition may be cov-
high, reflecting the fact that it is mostly people in poor health
ered under the new plan. But you could be without coverage
who buy this coverage. CIGNA, for example, charges a 45-year-
for that condition if your COBRA benefits stop before the wait-
old man or woman living in Chicago an annual premium of
ing period on the new policy is over.
$4736 for its most generous conversion policy with a $500
If you work for a company that has self-insured its workers'
deductible. By comparison, American Republic, the top-ranked
health coverage, you are entitled to COBRA benefits, even
commercial company in our study, would charge a 45-year-old
though such plans are normally exempt from other insurance
man in Chicago $1904; a 45-year-old woman, $2240.
Despite those drawbacks, a conversion policy may be your
regulations. If you are not eligible for COBRA because your former firm
only option if you have health problems. (Insurers must make
employs fewer than 20 workers (or is a church organization), you
these policies available to anyone regardless of their health.)
may still have some protection under state laws. If your state
If only one member of your family suffers from some medical
provides for "continuation" of benefits, you may be able to stay
condition, you may want to take the conversion policy for him
on your employer's group policy for as little as three months in
or her and try to find cheaper, individual coverage for the rest
some states or as long as 18 months in others. (Those benefits
of the family. In some states, a person with health problems
are usually not available to workers in self-insured plans.)
may be eligible for coverage from the high-risk pool, although
The following states do not have comprehensive continuation
in certain states, if you're eligible for a conversion policy, you
laws: Alabama, Alaska, Arizona, Delaware, Florida, Hawaii, Ida-
can't have pool coverage.
ho, Indiana, Louisiana, Michigan, Mississippi, Nebraska, Penn-
If you're considering buying an individual policy instead of
sylvania, Wisconsin, and Wyoming.
taking your conversion option when COBRA coverage ends, do
Some employers consider COBRA an administrative head-
your shopping well in advance. The slightest health problem
ache and may offer employees who leave a simpler alternative-
can disqualify you, and it may take time for an insurer to collect
insurance that covers them only for injuries caused in an
your medical records and decide if it's willing to issue coverage.
accident. Accident-only policies may be tempting because
Once your COBRA benefits run out, you have only 31 days in
they're cheap-a few hundred dollars a year, compared to a few
most states to sign up for a conversion policy.
545
CONSUMER REPORTS AUGUST 1990
RATINGS
Health insurance policies
living in Chicago. For a company not selling
for a single person and for a family on an
there, the premium is for the company's
average mix of claims filed by 25,000 poli-
major operating territory. Family premiums
cyholders. We used a $1000 coinsurance
Listed by types. Within types, listed in order
assume a 40-year-old husband, a 35-year-
maximum for each policy. If the policy did
of estimated overall quality, based on poli-
old wife, and two children. Premiums are
not offer this amount, we used its maximum
cies for a single person. (Family policies
given for policies with $500 deductibles. If
that was closest to $1000. Most plans re-
closely tracked single policies in overall
the company does not offer a $500 deduct-
quire 20 percent coinsurance. Exceptions
quality.) Differences of less than 5 points
ible, we show the premium for the closest
are noted in the Comments.
were judged insignificant. Companies
deductible to $500; footnotes (on pages
marked with an asterisk did not respond to
548-549) state the deductible on which the
Catastrophic claims. Measures how
our survey. Dashes indicate we could not
price is based. Premiums for maternity rider
well a policy would have paid after the
obtain information; in those cases we as-
show the cost of adding coverage for rou-
deductible was met on two actual claims
signed values representing the average for
tine pregnancies.
involving catastrophic illness-one for
all policies.
Quality index. A summary of how the
treatment of colon cancer; the other, a seri-
policy performed for a single person.
ous heart attack. A policy that scored a
.
Annual premiums. These are annual
paid more than 96 percent of the expenses
premiums for 45-year-old men and women
Payout. The percentage the policy paid
for both claims. A policy with a
paid more
Annual premiums
Policy
Men
Women
Family
Major-medical
Blue Cross and Blue Shield of Minnesota
Aware Gold (F2844) PPO
$1493
$1962
$5100
Included
Capital Blue Cross w/Penn. Blue Shield
Major Medical
1815
1815
3923
Included
American Republic
UltraCare, no coinsurance
1904
2240
5012
$608
Blue Cross and Blue Shield of New Jersey
Medallion
1843
1843
4759
5
Included
Benefit Trust Life
MMI
1794
2096
4319
Included
Empire Blue Cross Blue Shield
Tradition Plus Wraparound (LGL 3252)
2392
2392
6126
7
Included
Independence Blue Cross w/Penn. Blue Shield
Major Medical w/Plan 100
2192
2192
5159
Included
Blue Cross and Blue Shield of Minnesota
Aware Care (F2239)
658
882
2226
Included
American Republic
UltraComp
1632
1953
4333
636
American Republic
UltraCare, 20% coinsurance
1596
1877
4200
608
Blue Cross of Washington and Alaska*
Personal Prudent Buyer, Low Option 200, Wash.
1092
1092
2376
None
Blue Cross and Blue Shield of Alabama*
ALPHA Plan
1308
10
1308
3432
72
Blue Cross and Blue Shield of Illinois*
Non-Group PPO
1543
1932
4363
261
Blue Cross and Blue Shield of Montana*
Personal Choice Plan
1851
1851
4241
Included
Blue Cross and Blue Shield of Montana*
Healthy Montanan Plan
1553
1553
3554
Included
Blue Cross and Blue Shield of New Jersey
Direct Payment Supplemental Major Medical
3167
3167
6135
Included
Blue Cross and Blue Shield of Indiana*
Personal Security
1293
1374
2935
1164
Blue Cross and Blue Shield of Oklahoma*
Health Check
1764
1764
3780
Included
Blue Cross and Blue Shield of Maryland*
Personal Comp
1001
1001
2604
Included
Central States Health & Life
Individual Major Medical (569-570, 571-572)
1463
1900
3721
781
Time
24 Karat (502)
1580
1876
3854
490
Benefit Trust Life
Tele-Med
1443
1822
3878
1257
Bankers Life and Casualty
VIP V (CR-G002)
1245
1625
3382
None
Bankers Multiple Line
The Spectrum Plan (D-G002)
1245
1625
3382
None
Union Bankers
The Spectrum Plan (MM-89)
1245
1625
3382
None
Blue Shield of California*
Preferred
1952
1952
3299
None
Blue Cross and Blue Shield of New Jersey
Blue Care
1261
1261
3400
Included
Blue Cross of Washington and Alaska*
Traditional Individual in Alaska
1933
1933
4123
None
Blue Cross of California*
Personal Prudent Buyer
1680
1680
3888
3360
Blue Cross and Blue Shield of Illinois*
Non-Group Comprehensive
1838
1992
4886
None
Blue Cross and Blue Shield of Maine
Blue Alliance
1294
1294
2580
Included
Empire Blue Cross Blue Shield
Tradition Plus Comprehensive (LGL 3253)
1507
1507
3228
Included
Benefit Trust Life
MM2
1496
1751
3603
None
Blue Cross and Blue Shield of Arizona*
Preferred Care
716
716
1928
None
Aid Association for Lutherans
TotalMed It (4945)
1708
1724
4032
1860
546
CONSUMER REPORTS AUGUST 1990
Better
Worse
than 90 percent. A policy with a
paid at
cyholder's life. Conditional means that the
closed illnesses. The look-back period is
least 81 percent, and a policy with a
paid
company can cancel it along with all similar
how far back in time the insurance company
at least 75 percent of the expenses.
policies. Optional means the company can
will investigate for preexisting illness.
cancel an individual policy.
10
Available to anyone. A "yes" indi-
5
Lifetime maximum. Total benefits a
8
policy will pay over a policyholder's life.
Rate history. A
indicates that over a
cates the policy is available to any applicant
five-year period the company has raised
regardless of health status.
6
Maternity coverage. This shows the
rates on the policy less than the medical
1'1
Exclusion riders. A "yes" indicates the
quality of the maternity rider that covers
consumer price index, which averaged 7.2
company will issue coverage with exclu-
routine pregnancies and deliveries. If a poli-
percent each year over the period. A
sions for certain conditions or for certain
cy offered coverage for complications only
means that it raised rates at least 17 per-
parts of the body.
if policyholders buy a rider for routine cov-
cent a year.
erage, it scored a
It scored a
if it
12
Higher rates. A "yes" means the com-
9
offered coverage for complications without
Preexisting illness. The waiting period
pany will issue coverage but at higher
requiring purchase of the rider.
is the number of months a policyholder must
premiums for some medical conditions.
wait before coverage begins for a preexist-
ing illness not disclosed on the application.
13
7
Renewability. Guaranteed means the
Other coverage. Additional coverages
policy is guaranteed renewable for the poli-
The waiting period may be shorter for dis-
and features a policy may offer. See Key.
3
Payout
9
Preexisting illness
mo.
Quality index single
Cotastrophic claims
Lifetime moximum
Maternity I
Rate
mo. Available Extlusion 10 anyone Higher riders rates
Other roverage
Comments
1
2
4
5
6
7,
8
10
11
12
13
85 89% 89%
None
Conditional
24
3
No
Yes
Yes
a,b,c
A
800-382-2000
12
12
Yes
No
No
a,c,d
C
717-255-0820
83
84
87
None for basic policy
Conditional
81
82
68
$1-million per condition
Guaranteed
24 24
No
Yes
Yes
a,d
B
800-247-2190
80
88
88
None
Conditional
-
12 12
No
No
No
a,c,e
C
201-822-4500
No
Yes
Yes
C,G
708-615-1500
80
86
85
1-million
Guaranteed
24 24
a
80
83
82
1-million
Conditional
-
11
24
No
No
No
a,d,h
C
212-490-4757
80
83
83
None for basic policy
Conditional
12 12
Yes
No
No
a,c
C
215-564-2100
a,c,h
800-382-2000
79
76
72
None
Conditional
24
3
No
Yes
Yes
-
74
60
2-million
Guaranteed
-
24 24
No
Yes
Yes
a,d
D
800-247-2190
78
I
75
61
1-million per condition
Guaranteed
24 24
No
Yes
Yes
a,d
800-247-2190
77
-
75
82
67
1-million
Conditional
-
12 12
No
Yes
No
a,c,d
E
800-752-6663
|
75
75
60
None for hospital
Conditional
12 24
No
Yes
No
a
J
800-392-5705
-
No
No
No
a,c,h
E
312-938-7209
75
73
61
-
1-million
Optional
12 12
74
68
62
-
None
Conditional
-
12
12
No
No
No
a,c
F
406-444-8210
74
68
62
None
Conditional
-
12 12
No
No
No
a,c
F
406-444-8210
-
74
74
74
None for basic policy
Conditional
-
12
12
Yes
No
No
a,e,f
C
201-822-4500
74
82
68
1-million
Conditional
I
12
No limit
No
Yes
No
a
B,E
800-522-4075
-
Yes
No
a,c,h
K
918-560-2121
74
77
72
-
1-million
Optional
12
6
No
74
73
72
1-million
Conditional
9 No limit
No
Yes
No
a,c,d
-
800-992-2308
-
73
73
60
1-million
Conditional
12 24
No
Yes
Yes
a
-
402-397-1111
800-333-1203
73
72
60
2-million
Conditional
24 12
No
Yes
Yes
a
I
72
71
58
2-million
Conditional
-
24 12
No
Yes
Yes
a
-
708-615-1500
75
64
None
Conditional
24 24
No
Yes
Yes
a,g
I
312-777-7000
71
71
75
64
None
Conditional
24 24
No
Yes
Yes
a,g
-
312-777-7000
71
75
64
None
Conditional
24 24
No
Yes
Yes
a,g
I
214-939-0821
2-million
Conditional
12
12
No
Yes
No
a,c,d
E
800-624-5150
71
73
60
-
-
71
70
70
100,000 per year
Conditional
I
12 12
No
No
No
a,e
-
201-822-4500
71
75
60
1-million
Conditional
12 12
No
Yes
No
a
-
800-752-6663
-
Yes
No
E
800-777-6000
71
68
55
2-million
Conditional
-
6
6
No
a,c
-
71
70
56
1-million
Optional
12 12
No
No
No
a
I
312-938-7209
-
67
None for basic policy
Conditional
12
No limit
Yes
Yes
No
a,f
C,G
800-482-0966
70
72
-
70
61
59
500,000
Conditional
-
11
24
Yes
No
No
a,d,h
-
212-490-4757
69
72
60
1-million
Guaranteed
24 24
No
Yes
Yes
a
C,G
708-615-1500
69
75
62
No limit
Yes
No
a,c,h
E
-
1-million
Conditional
-
11
No
800-543-2944
69
71
60
2-million
Conditional
24 No limit
No
Yes
Yes
a,d
-
414-734-5721
547
CONSUMER REPORTS AUGUST 1990
Ratings
Continued
Annual premiums
Policy
Men
Women
Family
Matern:
Blue Cross and Blue Shield of Indiana*
Comprehensive Value
$ 928
$ 987
$2108
$1164
Blue Cross and Blue Shield of Virginia*
Personal Health Care
2044
2044
4359
Included
Blue Cross and Blue Shield of Virginia*
Personal Health Care (Healthy Virginian)
1169
1169
2454
Included
Blue Cross and Blue Shield of Florida*
Preferred Patient
1882
2085
4558
None
Blue Cross of Washington and Alaska*
Traditional Individual in Washington
1320
1320
2844
None
Blue Cross and Blue Shield of South Carolina
Mark Four
963
1292
2312
671
Blue Cross and Blue Shield of Kansas*
Afforda-Care
1208
1208
2653
Included
Blue Cross and Blue Shield of Kentucky*
BCBS 3082
765
1123
1918
Included
Metropolitan Life
Major Medical Expense Plan (FAH 15-86)
1594
2042
4030
770
Certified Life
VIP Variable Individual Protection (CER-G002)
1245
1748
3382
None
First National Life
Major Medical (MM-286)
1005
1137
2142
16
748
Blue Shield of California*
Coronet
2941
2941
4229
None
Pyramid Life
G91
1501
1863
4015
645
Golden Rule
Inflation Guard GRI-H-1.4
1805
1990
3623
316
Blue Cross and Blue Shield of Arizona*
ExecuCare
940
940
1814
None
Prudential
Pru-Med (PM-83)
1228
1584
3127
2640
Washington National
Classic Choice (AM2836)
1764
2205
3249
900
Hospital-surgical
Capital Blue Cross w/Penn. Blue Shield
Blue Cross Hospital and Blue Shield Plan 100
1579
1579
3451
Included
Independence Blue Cross Penn. Blue Shield
Blue Cross Hospital and Blue Shield Plan 100
1968
1968
4729
Included
Blue Cross and Blue Shield of Michigan*
Non-Group Option E
2004
2004
3742
Included
Blue Cross and Blue Shield Rochester*
Non-Group Basic
1016
1250
2472
Included
Blue Cross and Blue Shield of Alabama*
Non-Group
1216
1216
2966
Included
Blue Cross and Blue Shield of Oklahoma*
Health Check Basic
756
756
1848
Included
Metropolitan
Tower Hospital and Medical-Surgical Expense
1015
1162
2846
None
Blue Cross and Blue Shield of Maine
Blue Cross with Blue Shield H
1033
1033
2058
Included
Blue Cross and Blue Shield of Montana*
Essential Care Plan
814
8
814
1844
Included
Blue Cross and Blue Shield of Ohio*
Non-Group Policy w/Catastrophic Rider
1266
1266
2683
515
Blue Cross and Blue Shield of New Jersey
Direct Payment Comprehensive Hospital and
Series 14/20
1336
1336
2796
Included
Blue Cross and Blue Shield of New Jersey
Co-pp Protection Plan and Series 14/20
1992
18
1992
3439
Included
Bankers Life and Casualty
Hospital Surgical Protection (CR-G020)
806
1043
2137
None
Bankers Multiple Line
Hospital Surgical Plan (D-G020)
806
1043
2137
None
Union Bankers
Major Hospital Surgical (HS-89)
806
1043
2137
None
State Farm Mutual Automobile
Basic Hospital-Surgical 97047IL
705
853
2177
None
Certified Life
Hospital Surgical Protection (CER-G020)
806
1043
2137
None
Pyramid Life
G95
1016
1250
2472
10
645
Hospital only
Empire Blue Cross Blue Shield
Tradition Plus Hospital
839
839
1886
Included
$500 deductible on hospital services only.
$500 deductible on nonhospital only.
only; $1000 for other services.
Rates for nonsmokers.
$400 deductible.
No deductible required.
$350 deductible on nonhospital only.
$750 deductible.
$250 deductible.
$500 deductible for each condition every 3
$300 deductible for each hospital admission;
$60 deductible for each hospital admission.
years.
$500 for all services.
$300 deductible only for supplies and drugs.
$1000 deductible.
Key to Other Coverages
$250 for nonhospital services.
$200 deductible for nonhospital services.
a-Prescription drugs for home use.
$300 deductible.
Atlanta rates; $500 deductible for each
b-Preventive care for all ages.
$200 deductible.
condition.
c-Participating physicians for all families.
d-Mammography.
$200 deductible for each hospital admission.
$100 deductible for hospital inpatient stays
e-Pap smears.
548
CONSUMER REPORTS AUGUST 1990
9
Preexisting illness
3
Payout
Quality index single
Family Catastrophic claims Lifetime maximum
Maternity of
Look-beried. period, mo.
Available Exclusionnigher 10 anyone riders rates
Other roverage
Comments
Telephone
4
5
6
7.
8
10
11
12
13
2
60%
$1-million
Conditional
-
12
No limit
No
Yes
No
a
-
800-522-4075
69
74%
-
1-million
Conditional
12
No limit
Yes
No
No
a,c
K
800-553-3164
68
66
65
-
Conditional
12
No limit
No
No
No
a,c
K
800-553-3164
68
66
65
-
1-million
a,c,d,h
E
305-596-7600
68
70
62
1-million
Conditional
24 24
No
Yes
Yes
-
68
74
61
Conditional
12
12
No
Yes
No
a,d
-
800-752-6663
-
1-million
1-million
Conditional
12
No limit
No
Yes
No
a
-
800-868-2500
67
70
58
1-million
Optional
8
No limit
No
Yes
No
-
M
913-232-1622
67
70
67
-
Conditional
9
No limit
No
Yes
No
a,c,h
M
502-423-2011
67
71
68
-
1-million
Conditional
24 60
No
Yes
Yes
a
-
212-578-2211
-
65
62
51
1-million
64
75
Conditional
24 24
No
Yes
Yes
a,g
-
312-777-7000
64
None
-
65
53
1-million
Conditional
24
24
No
Yes
Yes
a
205-832-1850
64
Conditional
12 12
No
Yes
No
a,c,d
-
800-624-5150
63
65
53
-
2-million
Conditional
24 24
No
Yes
Yes
a,d,e
-
913-722-1110
63
72
60
2-million
12
24
No
Yes
No
a
-
817-297-4123
62
74
60
1-million
Conditional
51
1-million
Conditional
11
No limit
No
Yes
No
c
-
800-543-2944
61
62
-
None
Optional
24 24
No
Yes
Yes
G,H
201-802-2642
-
61
63
55
Yes
Yes
708-570-5500
2-million
Conditional
24
12
No
a
-
61
71
59
81
77
Conditional
12 12
Yes
No
No
c,d
C
727-255-0820
80
None
77
None
Conditional
12
12
Yes
No
No
c
C
215-564-2100
77
76
Conditional
6
6
Yes
No
No
C
B,L
313-225-8000
76
70
70
-
None
None
Conditional
12
No limit
Yes
No
No
f
B,H
800-847-1200
76
76
75
-
9 12
Yes
No
No
-
B,H,K
205-988-2200
71
63
66
-
None
Conditional
70
71
75
-
500,000
Optional
12
6
No
Yes
No
C
B,H
405-841-9797
-
50
Guaranteed
24
60
No
Yes
Yes
-
B,G,H
212-578-2211
68
58
none
Conditional
12
No limit
Yes
Yes
No
f
B,G,H
207-775-3536
67
55
53
-
none
Conditional
12
12
No
No
No
C
F
406-444-8210
67
59
59
1-million
-
-
a,i
B,G,I,N
216-687-7218
66
62
66
1-million
Optional
12
No limit
No
No
No
-
62
65
Conditional
12
12
No
No
No
f
B,H
201-822-4500
67
None
66
None
Conditional
12 12
Yes
No
No
f
C,H
201-822-4500
61
63
Conditional
24 24
No
Yes
Yes
-
-
312-777-7000
58
52
45
None
Conditonal
24 24
No
Yes
Yes
-
-
312-777-7000
58
52
45
None
Conditional
24 24
No
Yes
Yes
-
-
312-777-7000
58
52
45
None
45
1-million
Optional
- 24 24
No
Yes
Yes
-
I
309-766-2311
53
55
None
Conditional
24 24
No
Yes
Yes
-
-
312-777-7000
50
52
45
-
24
No
Yes
Yes
i
42
35
30
2-million
Conditional
24
B,G,H 913-722-1110
67
68
72
None
Conditional
11 24
Yes
No
No
d
B
212-490-4757
f-Participating physicians for families below
for physicians' visits.
J-Routine maternity rider offered only with family
B-No coinsurance.
policies.
some income levels.
C-Coinsurance only for certain services.
K-Routine maternity coverage is included as part
g-$50/year for preventive care per person.
D-Less coinsurance after the first year.
of policy only with family policies.
h-Well-child care.
i-Major-medical coverage after $2500 deduct-
E-If PPO doctors not used, coinsurance and
L-Maternity coverage only for delivery and hos-
coinsurance maximums are higher.
pital stays-no doctor visits covered.
ible is met.
F-30 percent coinsurance.
M-Routine maternity coverage and coverage for
j-Major-medical coverage after $25,000 of cov-
ered expenses are incurred.
G-Pays a set amount for hospital room and
maternity complications offered only with fam-
board.
ily policies.
H-Surgical-fee schedule.
N-No maternity coverage even for complications
Key to Comments
I-Pays set amount for all services for each day in
unless rider is purchased.
A-Coinsurance on hospital and $10 copayments
the hospital.
549
CONSUMER REPORTS AUGUST 1990
William Raspberry
Health Care Giveaway
The reason for America's health care crisis,
count and let the employee pay the first
of Rooney's proposal. Since it would involve
Pat Rooney insists, is not) that medical care costs
$3,000 of his own medical bills.
changing the tax code (to permit employees to
too much but that we spend too much on it.
The remaining $1,500 of the employer's
pay their doctor bills with untaxed cash and
The focus on the cost of medical care, he says,
contribution would bei used to purchase an
also to accumulate tax-free savings), provi-
leads to proposals for imposing limits on what
umbrella group policy that would pay 100
sions would have to be made for employees
doctors and hospitals can charge, which medical
percent of medical costs after the first $3,000.
whose companies did not offer the plan, or for
procedures can be authorized (and by whom) and
(Two-thirds of all medical spending at present
people temporarily out of work
other attempts to put a lid on medical bills.
is under $3,000 per family.)
As clever as the Rooney proposal looks
Rooney, who is head of the Golden Rule
It's a little like a deductible auto insurance
(Rooney says he borrowed major chunks of it
Insurance Co. says it possible to bring down
policy, except the employer provides the mon-
from others) it looks even better when com-
employer-subsidized health care spending-
ey for the deductible amount
pared to the "play or pay" idea being advocat-
perhaps even bring it down dramatically-
But here's where the scheme gets interesting.
ed in Congress. Under that idea, employers
without tinkering with the cost of individual
Any of the $3,000 that doesn't get spent on
(including small and marginally profitable com-
medical procedures.
medical bills belongs to the employee. If, for
panies) would either "play" by buying health
He'd do by giving the individual worker an
example, he has no medical costs for three years
insurance for their employees or else "pay"
incentive to forgo unnecessary medical treatment
running, he winds up with $9,000 to do with as
with an 8 percent payroll tax to cover the cost
and to shop for the best value in cases where
he pleases-whether to buy a car, make the
of Medicaid. The consequences, says Rooney,
treatment is necessary. Here's the proposal:
down-payment on a house or finance a European
would include unemployment (as some em-
"Give each worker an allowance for medical
vacation-with no tax liability until the money is
ployers simply couldn't afford the extra costs)
care that represents, say, two-thirds of the [per
withdrawn for some non-medical use.
and a mushrooming Medicaid, as more and
capita] money the employer is now spending for
health care. Tell them that any of that money
The relevant point is that it would have the
more employers found it cheaper to "pay" than
they don't spend on health care is theirs to
effect of containing medical care spending, now
"play." But Medicaid pays only about half a
rising at the rate of some 17 percent a year-in
physician's normal charges-a tolerable ar-
keep-permanently. Then buy them an umbrella
insurance plan for the really big medical bills that
part because there is little incentive for individual
rangement as long as only a tenth of the
might come up: costs like injury from a bad auto
policyholders to keep the costs down.
patients are on Medicaid. But what happens
accident or heart bypass surgery or the prema-
To see why this is so, Rooney suggests,
when the Medicaid proportion grows? Will
imagine that employers issued grocery credit
more and more doctors refuse to take Medic-
ture birth of a child.
"Then watch the cost of medical care drop."
cards that paid 80 percent of an employee's food
aid patients-as many already do?
Rooney, who was in Washington (from Indi-
bill after a $100 deductible and 100 percent after
Rooney acknowledges that his proposal
anapolis) last week to pitch his idea to staff of
the first $5,000. His prediction: "Grocery stores
could have one unfortunate side-effect: Some
the Office of Management and Budget, offered
would stock only the highest-priced food because
people would be so seduced by the prospect of
an example of how it could work.
that is all the employees would want to buy. Why?
an employer-provided bank account that
An employer making annual premium pay-
Because they'd be spending someone else's mon-
they'd forgo needed medical attention in or-
ments of $4,500 per employee family (the
ey. And that is why we spend so much on medical
der, say, to buy a car.
national average for medium-size cities)
care in the United States.
Says Rooney: "So? I have a car. Don't you?
would, under Rooney's scheme, put $3,000
There are other details, less exciting but no
Why should we deny anyone else the right to
into each employee's medical care bank ac-
less vital to the economic and political viability
make that choice?"
WPOST- 1/15 A23
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8
23RD STORY of Level 1 printed in FULL format.
Copyright (c) 1990 The New York Times Company;
The New York Times
April 19, 1990, Thursday, Late Edition I Final
Correction Appended
SECTION: Section B; Page 10, Column 3; National Desk
LENGTH: 1441 words
HEADLINE: HEALTH;
Hurdle for Preventive Medicine: Insurance
BYLINE: By ELISABETH ROSENTHAL
BODY:
At a time when physicians are increasingly likely to recommend preventive
health measures from mammograms to cholesterol checks, patients are often faced
with the discovery that insurers will not pay the bills.
Although the effectiveness of screening and counseling has now been proved in
many areas, the insurance industry is still taking its first tentative steps in
the field.
''One of the major dilemmas of a doctor trying to incorporate preventive
services into practice is the payment issue,' said Dr. Robert Lawrence,
chairman of the Division of Primary Care at the Harvard Medical School. ''It
costs nothing for a physician to order a mammogram, but if the patient is stuck
with a large out-of-pocket expense, she won't come back for the next one.'
Private health insurers generally do not cover preventive medical services:
immunizations, counseling about smoking and weight loss, and screening tests
like mammography to detect silent disease. The chief reasons private insurance
companies give are the difficulty of pricing services like counseling; the fact
that insurers see their role as covering costs of disease, not routine health
care, and the rising cost of insurance to consumers as more patients seek
screening tests.
'A Ludicrous Conspiracy'
Medicare, the Government insurance program for the elderly and disabled, is
prohibited by law from paying for preventive measures other than those
specifically mentioned in the Medicare Act. The only one currently covered for
all elderly is the vaccine against pneumococcal pneumonia; PAP smears to screen
for cervical and uterine cancer will be added on July 1.
With such erratic coverage, experts say most preventive care in this country
is financed by what one called ''a ludicrous conspiracy'' between doctors and
patients. ''On the requisition the physician puts down 'breast lump' or 'rule
out cancer, and then the onus is on the third-party payer, Dr. Lawrence said.
'You have to perjure your record routinely to do right for your patient.'
Insurers defend their circumspection, saying that reimbursing a patient for a
mammogram is akin to paying a car owner for an oil check. ''The traditional
nature of insurance . - car insurance, homeowner's insurance is to pay for
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(c) 1990 The New York Times, April 19, 1990
unpredicted events,' said Stan Carson, director of the Center for Corporate
Public Involvement, a branch of the Health Insurance Association of America and
the American Council of Life Insurance. 'Prevention is not that.
Traditionalists still say we shouldn't cover it.''
But now, driven by consumer pressures and legislative arm-twisting, many
insurers are rethinking that position.
Uncertainty Over Economics
To attract health-conscious customers, a very few insurance companies now
offer modified plans that will cover screening tests for a slightly higher
premium. 'Any time we provide new services, that raises the cost,'' said Mr.
Carson, who thinks insurers should move into the prevention field. ' 'We're still
trying to figure out the economics.
In the last two years more than half the states have enacted legislation
requiring insurers to reimburse patients for routine mammograms, which generally
cost more than $100, as part of new or renewed policies. Several bills pending
in Congress would add the test to Medicare as well.
One in 10 American women will get breast cancer, and early detection through
mammography and physician examinations dramatically enhances the chance of a
cure.
The current pressure on insurers springs in large part from a new legitimacy
enjoyed by preventive medicine. In 1984 the Federal Government recruited dozens
of health experts to form the United States Preventive Services Task Force and
charged it with surveying the rapidly accumulating literature on hundreds of
preventive measures.
The panel's final report, issued last summer, endorsed a complex schedule of
periodic PAP smears and mammograms, regular blood pressure and cholesterol
checks, vaccinations for the elderly and counseling.
' ' The task force report was a significant milestone for preventive
medicine,' said Dr. Gordon De Friese, director of the Health Services Research
Center at the University of North Carolina, a member of the panel.
But traditional health insurance provides little for outwardly healthy adults
and critics say this focus allows avoidable conditions to flourish and kill.
'A Terrible Shame'
''It's a terrible shame that the two big guns of cancer screening,
mammography and sigmoidoscopy, are often not covered,' said Dr. Daniel Miller,
director of the Strang Clinic in New York, who has tried to interest insurers in
early cancer detection for a decade. For example, sigmoidoscopy, inspection of
the lower colon with a lighted tube, can find precancerous lesions or early
cancer when no symptoms are apparent.
Representative Mary Rose Oakar, an Ohio Democrat who has championed the cause
of mammography, complains that insurance pays for strokes caused by high blood
pressure but not for routine blood pressure checks; for cocaine addicted babies,
but not drug treatment for pregnant women. ''Our national strategy is
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(c) 1990 The New York Times, April 19, 1990
painfully remiss,' she said. 'We do it all backwards.
Experts say health maintenance organizations (H.M.O.'s), which market full
service care under one roof for a set fee, are the only places where patients
regularly obtain preventive services as part of normal coverage. A growing
number of preferred provider organizations, in which patients obtain discounted
care by visiting only the group's pool of doctors, are also marketing
prevention. But many consumers avoid these ''pre-paid'' plans because of the
restrictions they impose.
For traditional insurers, who reimburse by ascribing a dollar value to each
service, prevention poses thorny problems. ''Insurers have a hard time figuring
out how to pay for the fuzzy things we feel are so important, like counseling,'
Dr. De Friese said. ''They're much more enthusiastic about immunizations, which
have a beginning and an end. The Preventive Services Task Force report
recommends that doctors periodically advise patients on numerous subjects, from
seat belts to exercise to smoking cessation.
Using Business Judgment
Another source of reluctance is cost. 'Insurance companies have to be
actuarially responsible and when they do estimates, it is not always clear that
this is a good business proposition,' Dr. De Friese said.
Although preventive efforts avert serious diseases and their costly
consequences, the saving is often offset by dramatic rises in use of those
services. More patients visit the doctor and, thanks to a heightened level of
awareness, there is more diligent following up on problems that are unearthed.
I 'Prevention may still be a sensible investment, but what it offers is lives,
not a solution to the medical cost problem,' said Dr. Louise Russell, an
economist at Rutgers University and an expert in the field.
Both private and governmental insurers are making fledgling efforts to pay,
but coverage is often patchy. Since state legislatures moved in to force the
issue two years ago, many insurers now cover mammograms.
In 1988, the Blue Cross and Blue Shield Association of America issued
guidelines for covering preventive services to its 74 member organizations. To
date, less than a quarter of the plans are known to offer preventive coverage,
almost always by hooking clients into affiliated prepaid plans.
Mammograms for Under $50
In the public sector, the short-lived Medicare Catastrophic Health Care
Act, which was repealed last year, included coverage of periodic mammograms for
up to $50. Congress is now scrutinizing several bills to allow some payment for
the test. A small number of radiologists offer screening mammograms for under
$50, since they are simpler than those done to evaluate suspected cancers.
For the poor, the biggest share of prevention dollars disbursed through
Medicaid are reserved for children. Even cholesterol and blood pressure testing
are not covered for healthy adults.
Both government and private insurers have pilot projects under way to
determine the effectiveness and costs of covering prevention.
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(c) 1990 The New York Times, April 19, 1990
Insurance professionals seem startled by the push to take on the new
preventive role. And if there is blame to be laid for their initially sluggish
response, they say it must be shared with the companies that buy insurance for
employees. ''It's not as if the insurance industry is standing with its arms
folded saying 'no!' Mr. Carson said. 'We respond to the market and if
employers tell us they want preventive coverage, it'll be there.
CORRECTION-DATE: April 20, 1990, Friday, Late Edition - Final
CORRECTION:
A chart on the Health page yesterday about preventive health procedures
misstated the recommended frequency of mammograms to detect breast cancer for
women over 50. It is one to two years, not every two years.
GRAPHIC: Table showing who covers preventive procedures
SUBJECT: MEDICINE AND HEALTH; PREVENTIVE MEDICINE; TESTS AND TESTING;
IMMUNIZATION AND IMMUNITY; HEALTH INSURANCE
NAME: ROSENTHAL, ELISABETH
TITLE: HEALTH PAGE (NYT)
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PAGE 2
21ST STORY of Level 1 printed in FULL format.
Copyright (c) 1990 The New York Times Company;
The New York Times
July 5, 1990, Thursday, Late Edition - Final
SECTION: Section A; Page 1, Column 1; National Desk
LENGTH: 2292 words
HEADLINE: HEALTH: Cheating on Insurance;
Insurers Say Growing Fraud In Health Care Costs Billions
BYLINE: By ELISABETH ROSENTHAL
BODY:
Most of the expectant couples who turned up for the delivery orientation at a
hospital in Southern California two years ago were thrilled when an
administrator told them, over coffee and doughnuts, that the hospital would
offer a discount on their care.
Although most insurance contracts require patients to pay 20 percent of
medical fees, the hospital planned to accept the 80 percent insurance
reimbursement and then charge the patients for only a portion of the remaining
bill.
But one prospective father was not happy with the arrangement Ronald Lang,
an insurance fraud investigator. He recognized the tempting offer as a practice
known as 'waiver of co-payment,' which insurers say bilks them of revenue by,
in effect, overstating actual fees.
''I'm usually a quiet guy, but I was really angry,' Mr. Lang recalled in an
interview. ''I stood up and said, 'Are you aware that this could be considered
fraud and of what you are doing to the cost of health insurance in this
country?' Everyone was booing. Even my wife told me to just sit down.'
A Growing National Practice
For these couples, the hospital's plan probably seemed like a boon and a just
reward for their rising insurance premiums. To insurers like Mr. Lang, who works
for the Principal Financial Group, based in Des Moines, it was yet another vivid
demonstration that health insurance fraud has become something of a national
practice. And now insurers are beginning to fight back.
Insurance companies estimate that private and government insurers paid $60
billion last year for claims that were fraudulent or abusive, payments they say
increase the cost of insurance for everyone. This spending amounts to 10 percent
of the $600 billion national health care budget.
Some of this money paid for useful medical care that was simply not covered
by insurance policies. But insurers say they should not have to pay for care
they have not contracted to provide.
Members of the Health Insurance Association of America, an industry group,
investigated 19,600 cases of fraud last year, an increase of almost 60 percent
since 1987. The increase, they say, reflects both more fraud and intensified
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(c) 1990 The New York Times, July 5, 1990
detection efforts.
'The Tip of the Iceberg'
James L. Garcia, director of the health insurance tracking unit at the Aetna
Life Insurance Company, said there was evidence that 3 percent of the nation's
doctors routinely committed outright fraud.
''But what we know about is probably the tip of the iceberg, he added. ''It
is awfully difficult to detect since our main source of information is the
patient, who often doesn't recognize the billing as fraudulent and who will
approach his doctor first if there are questions.'
Some of the fraudulent acts are obvi-ous thievery, like surgeons' billing for
operations they never performed. But some are common billing practices in which
doctors and patients are willing co-conspirators. For example, a doctor may list
'cough' rather than ''smoking cessation'' as the purpose of an office visit 50
the patient's insurance company will pay, or falsify the date on which a service
was performed so that it will fall within a policy's coverage dates.
'Insurance fraud is on the rise, and filling out insurance forms has become
an area of intense gamesmanship,' said R. James Guzzi, chairman of the
insurance industry's National Health Care Anti-Fraud Association, who is an
executive at the Travelers Companies. ''To the degree that patients go along
with it, we all end up paying.
In the last five years insurance companies have initiated ambitious campaigns
to ferret out offenders, complete with computerized fraud detection systems and
toll free telephone lines for patients to report their doctors' transgressions.
They concede that it has been difficult.
'Many patients feel: 'Why are you harassing my doctor? He's just trying to
be nice to me, said Dr. Mark Lachs, a Yale University internist who is
studying health insurance fraud. 'There's really a spectrum of activity from
well-intentioned actions to outright fraud.
And doctors bristle at the scrutiny. 'Insurers have adopted a junior G-man
approach, said Dr. Lonnie Bristow, a board member of the American Medical
Association. ''Physicians attempt to act with honor and integrity in the best
interest of their patients. That insurers suggest other motives is a despicable
cheap shot. I don't know of any doctor who had engaged in insurance fraud,
although I am sure there must be one somewhere.'
The Diagnosis
Naming Ailments To Fit the Rules
Many doctors acknowledge that minor deception is commonplace. It is sometimes
necessary, they say, to squeeze money out of tight-fisted insurers who too
frequently balk at paying for recommended treatment, including preventive
services.
''If a patient needs a mammogram to screen for cancer, you put 'breast lump'
on the form, said Dr. Robert Lawrence, an advocate of preventive health care
who is chairman of the department of medicine at Cambridge Hospital in
Massachusetts. ''You're forced to perjure your record to do right for your
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(c) 1990 The New York Times, July 5, 1990
patient.
A physician from Kansas who spoke on the condition of anonymity called it ''a
game. He said: ''You know the guidelines; you have to have one symptom from
Column A and two physical findings from Column B to have a prostate operation
approved. So if I think a patient needs the surgery, I make sure those things
are mentioned in my chart, and the paperwork sails through.
But insurers say fraudulent practices are often used not to benefit the
patient, but as a business ploy. Weight-loss and smoking clinics that advertise
'most insurance covers'' are immediately suspicious to insurers, Mr. Garcia
said, adding: ''In most cases, insurance doesn't cover these things. We often
find they fabricate a diagnosis, like high blood pressure.
Mr. Guzzi of the National Health Care Anti-Fraud Association estimates that
besides outright fraud, up to 25 percent of physicians may engage in practices
that are abusive, although not technically fraudulent: scheduling visits that
are of limited benefit, for example. Or an ear, nose and throat specialist might
charge for a complete exam and then add a charge for looking down the throat
with a mirror.
Patients who agree to have insurance checks sent directly to their health
providers may not see or scrutinize insurance statements.
The Bill
When 'Forgiveness' Is Marketing
Among the many fraudulent and abusive practices condemned by insurers,
forgiveness of co-payment has become the most controversial.
Most private insurance policies, as well as Medicare, require a patient to
pay part of his medical bill, usually 20 percent. Although only 14 percent of
the cases investigated by the Aetna fraud unit last year involved forgiveness,
insurers suspect the practice is often unreported and probably epidemic. In a
poll commissioned by Aetna in 1989, 23 percent of the respondents said their
doctors had waived a co-payment in the last year.
Insurers are disturbed by the practice not only because it is a breach of
contract, but also because they rely heavily on co-payments as a device to
curtail casual or unnecessary medical visits.
''I understand why they're worried,' said Dr. Lachs, the Yale internist. A
patient who has a mildly annoying condition like bunions might seek treatment in
a clinic that advertised free services,' using the forgiveness of
co-insurance, he said. ''Here, the crime is not victimless: the forgiveness led
to over-utilization, and premiums will reflect that.
In addition, insurers say that money lost by waiving co-payment is often
recouped by claiming higher rates. ''You know and I know that the hospital
doesn't really just absorb the 20 percent loss,' said Jan Meisels, deputy
director of the Health Insurance Association of America. 'Those revenues will
be gained in some other way and other bills will be inflated.
Studies of California dentists have shown that those who routinely forgive
co-payments set their base fees 25 percent higher than other dentists and
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(c) 1990 The New York Times, July 5, 1990
perform dramatically more elective procedures, like full mouth X-rays and
crowns.
Action by Legislatures
Insurers insist that if a physician intends to forgive a co-payment he is
ethically, and perhaps legally, required to report that fact on the claim form
he submits; the insurer would then reimburse 80 percent of the discounted fee.
For example, if an office visit officially cost $100, the insurance company
would consider the true fee $80 and reimburse $64.
At least a few state legislatures as well as several health organizations
agree. In Colorado, any health professional who waives co-payment in more than
25 percent of cases or who advertises ''free medical care for patients with
insurance'' is subject to criminal prosecution. This year the Florida Department
of Insurance declared that any health provider who had agreed to forgive
co-payment before rendering care had to report that fact or be liable to legal
action.
After some major debates in the mid-1980's, the American Dental Association
now considers undisclosed forgiveness of co-payment to be ''overbilling'' and an
'ethical impropriety'' that may be cause for revoking a license.
But organized medicine defends the practice. ''If a doctor chooses to forgive
a co-payment, that's between him and his patient, said Dr. Bristow, the A.M.A.
board member. ''It's an age-old principle of medicine for physicians to consider
a patient's ability to pay to reduce or forgive charges.'
In California, legislation regulating forgiveness of co-payment has been
blocked by medical societies and hospital groups, Ms. Meisels said.
The Motives
From Innocuous To Outright Sinful
Dr. Lachs said his studies showed that doctors' motives in committing fraud
range from saintly to sinful. ''As a doctor, I had previously considered
something like forgiveness to be an innocuous billing practice that
well-intentioned providers used to benefit indigent patients, and sometimes this
is true, he said in a recent interview. ''But the practices are also being
used regularly to defraud insurers and as a marketing technique.'
Experts say potentially fraudulent billing practices designed to insulate
patients from medical charges are particularly rampant in areas where there is
an oversupply of doctors or where prepaid plans like health maintenance
organizations have squeezed traditional private practitioners. Patients covered
through these arrangements receive free or discounted care by agreeing to visit
only doctors and hospitals designated by the insurers; health care providers
who do not take part often find that their business suffers.
A hospital in Florida is challenging that state's new prohibitions on
forgiveness of co-payment, contending that it is a legitimate discounting plan.
But experts worry that in an age of ''creative'' billing, physicians who play by
the rules will be placed at a competitive disadvantage.
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PAGE
6
(c) 1990 The New York Times, July 5, 1990
Dr. Lachs said that as insurers crack down on fraud, they would be wise to
consider the motivation for the crime. ''They shouldn't be going after the
family practitioner who forgives co-payment for an old lady who can't afford her
medicine if she pays the bill,' he said, adding that if they did, she might end
up in the hospital at the insurers' expense because she could not buy her
medicine.
The Response
Finding the Guilty: A Major Challenge
Although doctors are skeptical, insurers say they are not interested in
prosecuting the Robin Hoods of medicine who occasionally fiddle with the system
for a poor patient's benefit. Instead, they want the physicians who routinely
falsify claims to increase their profits.
But finding the guilty parties has proved a major challenge. In addition to
special telephone lines, insurance companies are using computers to scrutinize
piles of claims for patterns that suggest foul play. The system identifies
claims submitted for care on dates that were weekend days or holidays, or notes
a large number of bills from a doctor on a single day.
Even so, patients remain crucial -and reluctant - informers. ''Fraud probably
often goes unreported,'' Dr. Lachs said, ''because the bond between the patient
and his doctor is stronger than that between the patient and his insurer.'
Insurers express frustration over their efforts to get offenders punished.
Only five states have specific laws dealing with false claims in health care
that subject practitioners to civil and in some cases criminal prosecution;
generally, these prohibit advertising fraudulent practices rather than the
practices themselves. The states are Connecticut, Massachusetts, Michigan, Ohio
and Washington.
Health care providers may also be tried under mail fraud laws, since false
claims are transmitted through the mail.
''It's difficult to get these cases prosecuted, said Mr. Garcia, the Aetna
official. ''It's a white-collar crime, and prosecutors don't take them on
because the dollar loss in each individual case does not meet their minimum
requirement.'
Last year 323 health providers were convicted in cases involving private
insurance fraud, and 138 for fraudulent activities involving Medicaid and
Medicare, a number that has grown with each succeeding year, said Richard
Kusserow, inspector general of the Department of Health and Human Services, who
is responsible for uncovering fraud in the Medicare and Medicaid systems.
Dr. Lachs said: ''Right now there's no good data on the breadth of the
problem. To me the million-dollar question is, What percentage of the care is
delivered under benevolent and what percentage under malevolent pretexts?''
Aetna Life & Casualtyd(Aetna Life Insurance)
GRAPHIC: Photos: James L. Garcia of Aetna Life Insurance Company says there is
evidence that 3 percent of doctors are routinely committing fraud (Steve Miller
for The New York Times); Dr. Mark Lachs, researching improper claims, finds that
doctors' motives range from good intentions to outright fraud. (Bill Burkhart
LEXIS'NEXIS'LEXIS'NEXIS
Services of Mead Data Central, Inc.
PAGE 7
(c) 1990 The New York Times, July 5, 1990
for The New York Times); graph showing the percentages of the various types of
fraud on insurance claims (source: Health Insurance Association of America) (pg.
B7)
TYPE: A special report.
SUBJECT: MEDICINE AND HEALTH; SURVEYS AND SERIES; HEALTH INSURANCE; FRAUDS AND
SWINDLING; DOCTORS
NAME: ROSENTHAL, ELISABETH
GEOGRAPHIC: UNITED STATES
LEXIS'NEXIS'LEXIS'NEXIS
PAUL CRAIG ROBERTS
countability declines: Anytime ac-
T
he Democrats are gearing
up to ruin health care for all
National's health's
countability declines, malpractice
of us for the sake of a minor-
rises. The budgetary pressures
ity who are uninsured. True
from rising malpractice expenses
to form, the Republicans will re-
will force government to limit mal-
spond by supporting a less costly
risky side effects
practice claims and leave patients
version of socialized medicine.
more exposed to substandard health
care.
The problem with national health
There will always be those who
insurance is that it puts medicine on
will argue that substandard care for
the federal budget where it must
all is better than no care for some.
compete with organized interest
S&L
This same claim can be made for
groups for its share of spending
BAILOUT
everything - housing, clothing and
against Social Security, education,
education. It is not impossible to or-
government pension benefits, agri-
ganize societv. around the lowest
cultural subsidies and everything
common denominator. Generally,
else.
that is what happens when private
Initially, the results may seem to
BUDGET
GUESS
responsibilities are socialized. The
WHO
DEFICIT
be an improvement in the distribu-
20th century has been dominated by
tion of health care, but soon budget
big government ideology, and every
pressures and unlimited demand for
conceivable scheme has been tried.
care force medical benefits to be ra-
Where can we point to any success?
tioned. The ultimate effect is to stifle
the private provision of health care
and to reduce the proportion of GNP
CONGRESS
What has government made work
better? The answers to these ques-
tions make powerful arguments
spent on health.
SENATE
against turning our health over to
SALARY
ACID RAIN
Tb contain health costs and to dis-
INCREASE
LEGISLATION
the government's care.
tribute health care more evenly are
Private insurance and Medicare
the two motives driving the push for
have sharply driven up the cost of
a national health plan. Invariably as
medicine. When the costs are shifted
experience has shown, national
to third parties (insurance compa-
health systems contain costs by
ABOR?
COLORADO GAZETTE TELEGRAPH
nies and the government), neither
skimping on the latest medical tech-
consumers nor providers of health
nology and equipment and by creat-
ers at the expense of more compe-
tors never get to know their patients,
care have any incentive to contain
ing long waiting lines for access to
tent doctors. The net effect for the
and patients never get to know their
costs.
expensive operations and long-term
majority will be to reduce the access
doctors. Consequently, health care
The sharp rise in health care
hospital care.
to health care along with its quality
suffers.
costs that has resulted from these
Uniform pricing standards lower
in order to improve the access for a
The idealism that often accompa-
efforts to expand coverage has re-
the quality of medical care by subsi-
minority. This definition of fairness
nies the initiation of a national
duced the access of the poor to
dizing mediocre health care provid-
is arbitrary and has no special ethi-
health service soon dissipates as ev-
health care. Providers can no longer
cal basis. National health systems
eryone's frustrations mount. If pri-
afford the charitable services that
also make the doctor-patient rela-
vate practice is still permitted, those
they once made available. Unless
Paul Craig Roberts, an economist
tionship more impersonal and bu-
who can afford it soon desert the
steps are taken to restore elements
at the Center for Strategic and Inter-
reaucratic. Rationing does not allow
state system, leaving less articulate
of individual responsibility for
national Studies, is a columnist for
a patient to choose his or her doctor
and influential patients at the mercy
health care, costs are destined to
The Washington Times.
or even to have the same one. Doc-
of bureaucratic medicine. Thus, ac-
rise while standards decline.
WTimes
10/16/91
P.
F1
thoug
NEWS YOU CAN USE
half
nies
the
medic
Coverage denied
Travel
Inc
the
many
ple, BE
Your treatment was expensive. Now comes the battle over the bill
major
Hisket
ance
F
or 20 years, Lorraine Hiskey's
"Insurers are using the experimental la-
cent of medical care is inappropriate or
The
twice-monthly migraine bouts so
bel more and more as an excuse not to
unnecessary or uses technology not yet
wheth
immobilized her that she could do
pay for well-accepted treatments," says
proven effective. But that's only half the
techno
little else, she says, but "wait for the
Lee Mortenson, executive director of the
tale. The primary aim of most insurers is
not part
pain." Then last year, fed up with taking
Association of Community Cancer Cen-
to trim costs. "If we paid for everything,
tal-ai
one painkiller after another to no avail,
ters in Rockville, Md. "Patients are suf-
premiums would go through the roof,"
loon-ti
she let experts at the Michigan Head-
fering because of it."
says John Cova, director of medical tech-
urinary
Pain and Neurological Institute in Ann
Trimming costs. Insurers say they are
nology assessment at the Health Insur-
tate gla
Arbor try a new approach. The doctors
only trying to protect patients from un-
ance Association of America.
$1,500
hospitalized Hiskey for eight days and
necessary medicine and improve the
Consumers caught in the middle of
it appe
gave her intravenous infusions of the
overall quality of care. Indeed, most ex-
the health-care coverage struggle are be-
Cand
antimigraine drug dihydroergotamine,
perts agree that between 15 and 25 per-
ginning to fight back-and win. Al-
ticularl
which constricts the blood ves-
sels in the head. The treatment
worked: In the past year, the 55-
year-old Arlington, Va., resident
has had only three migraine
headaches. But her battle is far
from over. Hiskey's insurer, Blue
Cross/Blue Shield of Virginia,
has refused to pay her $6,500
medical bill, claiming her treat-
ment was "experimental" and
us not covered.
Although presidential candi-
di
ES and Capitol Hill pols have
focused attention lately on the 35
million Americans who have no
health coverage, insurance com-
panies are also drawing increas-
ing fire for stingily refusing to
cover some expenses for the ma-
jority of Americans enrolled in
private health plans. In the name
of "managed care" and "utiliza-
tion review"-buzzwords for the
way insurers monitor the proce-
dures doctors perform-insurers
and employers routinely deny
coverage for medical care
deemed experimental, unproven,
unnecessary or inappropriate.
The trend affects everyone
from migraine sufferers like His-
key to heart and cancer patients.
A recent Gallup survey of 200
cancer doctors, for example, re-
vealed that 1 in 8 of their patients
did not get the doctor's preferred
treatment because insurers re-
fused to pay. In another survey,
220 of 289 cancer doctors polled
said that insurance denials had
increased in 1990 over past years.
Fighter Brenda Miller saed her insurer after it wouldn't pay for her breast-cancer treatment, which
the insurer clair
80
U.S:NEWS & WORLD REPORT, DECEMBER 9, 1991
U.S.NEWS &
though no hard numbers exist, about
ter director Mortenson says cancer doc-
half of all appeals to insurance compa-
tors spend an average of five hours a
nies to overturn a denial are decided in
What is and isn't acceptable
week arguing with insurance companies
the patient's favor, says James Cross,
over coverage denials. Many of the con-
Most insurers won' pay. for treatments
medical director of claims payout at The
troversies arise when doctors use che-
they deem experimental or unneeded.
Travelers in Hartford, Conn.
motherapy drugs approved as a weapon
Here's a sampling of procedures
Inconsistencies from one insurer to
against one form of cancer against oth-
the next testify to the problem and spur
er forms of the disease. It is perfectly
many consumers to press on. For exam-
legal and frequently done, but insurers
ple, Blue Cross/Blue Shield plans in a
designate many such "off-label" treat-
majority of states would have covered
ments as experimental.
Hiskey's bill. In fact, the Blues and insur-
Cancer cures. Patients such as Brenda
ance giants like Aetna, Prudential and
Miller, a mother of three who lives in
or
The Travelers frequently disagree on
Portsmouth, N.H., suffer the conse-
yet
whether to pay for newly developed
quences. Miller's doctors told her that
the
technologies. Aetna, for example, will
her best chance of surviving advanced
is
not pay for views as experimen-
breast cancer would be to bombard her
Frozen out. Most insurers reject in
new procedure that uses a bal-
body with large doses of chemotherapy
vitro fertilization claims.
loon-tipped catheter to open a blocked
drugs before receiving a bone marrow
ech-
urinary tract in men with enlarged pros-
transplant. But New Hampshire Blue
ROUTINELY COVERED
isur-
tate glands. But The Travelers covers the
Cross/Blue Shield refused to pay for the
Laparoscopic surgery. A less inva-
$1,500 procedure, citing studies showing
$100,000-plus procedure, calling it ex-
sive way to repair hernias or remove
of
it appears to work in some patients.
perimental. In fact, most Blues plans
the gall bladder or appendix through
be-
Cancer treatment has become a par-
and major insurers generally cover the
tiny incisions.
Al-
ticularly bitter battlefield. Cancer cen-
combined treatment when it is used
Endometrial ablation. Less radical
against advanced leukemia or
than hysterectomy; done to stop ex-
lymph-system cancer. Miller
cessive menstrual bleeding.
sued, and a state Superior Court
Clozapine. An anti-psychotic used
judge in September ordered
to treat extreme schizophrenia.
Blue Cross/Blue Shield to pay-
Transcervical balloon tuboplasty. A
at least for now its full share of
tiny balloon is inflated inside the fal-
her medical bills pending the
lopian tube to clear blockages.
outcome of a lawsuit. Courts in
Prenatal screening. Testing of
five other states have similarly
pregnant women for sexually trans-
sided with breast-cancer patients
mitted diseases.
seeking the costly treatment in
OFTEN QUESTIONED
the last two years.
Lawsuits should be a last re-
Coronary angiography. Series of X-
sort, however, when it comes to
rays that detect blockages in arteries
fighting your insurer. A direct
that feed the heart.
Positron emission tomography.
personal appeal is the best initial
PET scans can spot heart disease
strategy. Learning exactly why
and compute blood flow.
coverage was turned down is the
Heart-bypass surgery. Bypasses
obvious first step, and by law in-
blockages of the heart arteries.
surers must tell you. Your doctor
Hysterectomy. Removal of uterus;
should then be able to clarify why
often challenged when less-drastic
the denied service was per-
measures can be taken.
formed. Many denied claims
Back surgery. Done to treat
stem from a doctor's or hospital's
slipped disks or persistent back pain.
failure to file the necessary pa-
perwork or to properly justify
RARELY COVERED
what actions they took. In such
Lithotripsy for gallstones. Sound
cases, a letter of explanation
waves are beamed at gallstones to
from your doctor to the insurer
pulverize them.
may suffice. An increasing num-
Adrenal-tissue transplants. An ex-
ber of companies are self-in-
perimental treatment for Parkinson
sured, however, meaning that
disease that involves transplanting
they fund their own health-insur-
tissue to the brain.
ance plan but hire an insurance
Bone marrow transplants. Often
company to administer it. At
denied specifically for ovarian, breast
such firms, the final word on an
and brain cancers.
insurance appeal legally rests
In vitro fertilization. A test-tube so-
with the employer, not with the
lution when conception is difficult.
insurer; a sympathetic boss may
Artificial heart. Typically. denied
reverse the denial.
when used as a permanent replace
The latest wrinkle in the in-
ment.for. a diseased heart
USN&WR- data: Major insurers
which!
the insurer claimed was experimental.
surance game is utilization re-
U.S.NEWS & WORLD REPORT, DECEMBER 9, 1991
81
JEFFREY
NEWS YOU CAN USE
tional Insurance Consumer
Organization wrote Virginia's
view. Firms hired by employ-
insurance commissioner on
ers or insurers screen what
Lorraine Hiskey's behalf in
procedures or treatment doc-
June and has yet to get a re-
tors recommend for employ-
ply. Insurance commissioners
ees based on medical neces-
also lack legal bite. Employ-
sity. Denials stemming from
ers who are self-insured, for
a utilization review usually
instance, operate totally out-
b
occur during the preauthori-
side state insurance regula-
zation process, when a health
tions. Still, a letter of com-
plan requires patients to
plaint to an insurance
check with the insurer before
commissioner's office can't
S
being hospitalized or under-
hurt. Some state and local of-
going costly procedures. In
fices are more aggressive than
some instances, though, you
A
others, and there's always the
may not find out until after-
chance that an official warn-
ward from your doctor that
tro
ing or rebuke from the state
coverage was denied by a re-
Aches. Insurers won't cover Lorraine Hiskey's migraine cure.
to your insurance company
view firm. In either case, you
will tip the balance your way.
yo
can appeal. There's a stumbling block,
Pharmacopeial Convention's The Com-
Suing insurers for payment may be-
however. A doctor may be able to find
plete Drug Reference ($39.95) to learn
come more common as health costs con-
out generally why coverage was denied
if the drug is listed as an accepted but
tinue to rise and insurers become even
but not the specific criteria the review
still technically unapproved treatment
more tightfisted. When tens of thou-
firm used, since those companies tend
for your condition. Consumer groups
sands of dollars are on the line, a legal
Val
to consider such information propri-
such as the National Insurance Con-
battle requiring a lawyer often makes
high
etary. The best that patients can do is
sumer Organization, (703) 549-8050, or
sense. But small-claims courts will hear
the
have their doctors justify to the review
the Center for Medical Consumers,
insurance cases involving disputes of less
cob
firm and the employer why the treat-
(212) 674-7105, can help provide other
than a few thousand dollars, and many
nitu
ment was necessary.
background material.
have been sympathetic lately to people
ban
Flexing your muscles. A doctor's word
Doctors may also suggest that you
with dire or terminal illnesses who seek
dre
alone won't carry that much weight,
contact your state's insurance commis-
experimental or unproven treatments.
tal t
however, when an insurer denies your
sioner to help fight a denial. Most insur-
In today's climate, it's dangerous to as-
firn
claim because a treatment is deemed
ance commissioners' offices are chroni-
sume that even the most routine health
said
experimental. Clinical studies published
cally understaffed, however, and simply
service is covered. Making a practice of
me
in respected medical journals may
can't cope with the wash of appeals. Cali-
checking in with the insurance company
goa
strengthen your case, as will evidence
fornia's insurance commissioner gets an
in advance, no matter what care you are
equ
that other insurers cover the treatment.
average of 4,000 written complaints a
receiving, could avoid a lot of heartache
mal
A denial involving off-label use of a
month and has a staff of 50 to try to
later on.
mir
drug warrants checking with indepen-
address them. About two thirds don't get
7
dent sources, such as the United States
answered for 30 days or longer. The Na-
BY STEVEN FINDLAY
ban
nes
vey
PARTIAL PAYMENTS
surpass insurer averages A
be able to justify the charges
the
doctor charging 10 to 30
to the insurer. If that fails,
sma
Recouping your losses
percent more than usual
many doctors will waive the
yea
might waive the balance,
contested balance
suf
though a hospital usually
Bits and pieces. To boost
cap
C
ritics call it nickel-and-
reasonable charges. Aetna,
won't A physician who
revenue, some doctors and
am
diming; health insurers
for example, usually won't pay
charges even more than that
most hospitals and clinics
sm
claim they re merely trying to
a surgeon more than $1,075 to
may inspire you to look
break down major procedures
will
keep premiums out of the
repair a hernia. But about 15
elsewhere for medical care
into small parts and bill each
fan
stratosphere and stay solvent
percent of medical bills
Is it needed? Insurers don't
part separately. That raises
ing
Either way, these days
exceed Aetna's reasonable
want to pay for 'unnecessary'
your coinsurance, but there
we
insurers don't want to pay any
level, and its policyholders
care, and the necessity of
isn't much you can do about
sou
more of your medical bill than
must pay the difference- as
many procedures does raise
it. Such 'unbundling also
ver
they have to, which may be far
well as coinsurance, the
real questions. But you may
increases the risk that the
fan
less than you think you
patient's 20 percent share of
want to challenge any
insurer will reject or only
pre
deserve to get. Here's how to
the covered cost under most
reimbursement that requires
partly pay for individually
age
bridge the gap
plans. Your doctor or hospital
you to pay 15 percent or more
billed items Again, a fair
sm
Defining "customary." In
should let you know up front
of the total on top of the
in
doctor or clinic should absorb
traditional fee-for-service
what the charges will be,
coinsurance. The insurer
the extra expenses if you
4a
health plans, insurers
especially for major
should fully explain the
never got a good explanation
we
reimburse doctors and
procedures or tests A doctor
partial payment to you, and
of the extent and costs of
md
hospitals for customary and
should know if the charges
your doctor or hospital should
al
individu tests or procedures
ves
the
82
U.S.NEWS & WORLD REPORT, DECEMBER 9, 1991
U.S
The Promiscuous World of Pro Sports
WAYS TO
CURE THE
CAR
Nation
TIME/NOVEMBER 25, 1991
COVER STORY
Cost of a Bufferin tablet for a patient in a
psychiatric hospital: $3.75.
Price of a modified radical mastectomy:
$7,900.
One day's intensive care for a crack baby:
$2,000.
A 50-minute session with an élite psycho-
therapist: $160.
Delivery of a baby by Caesarean section:
$7,500.
Americans spend $23,000 a second on
medical care, more than $2 billion a day,
$733 billion a year. That is nearly twice
what they spent seven years ago, including
Millions of Americans have no medical
annual increases of 10% during the past
two years. For the Federal Government,
coverage, and costs are out of control. Here
medical costs have become the fastest-
growing major item, increasing at more
are 10 ways to fix what ails us.
than 8% annually at a time when inflation
is only about 5%. For corporate America,
By JANICE CASTRO
with reality, where bureaucracy and paper-
health care has become a crippling ex-
work have no limit, where a half-hour ton-
pense. General Motors laid out $3.2 billion
here are two kinds of prices in
sillectomy costs what an average worker
last year, more than it spent on steel, to
America today: regular prices
earns in three weeks. The prices, like the
provide medical coverage for 1.9 mil-
and health-care prices. The
system that issues them, are out of control.
lion employees, dependents and re-
first kind seems to follow some
Examples:
tirees. Unchecked, the U.S. med-
sensible laws of supply and de-
Annual dose of human growth hormone
ical bill will more than double
mand. But America's medical bills are
for a child with a severe deficiency: $20,000.
in the next 10 years, to
something else. They flow from a surreal
Coronary bypass surgery for a 50-year-
$1.6 trillion, crowd-
world where science has lost connection
old man: $49,000.
ing out spending
FEVERISH
GROWTH
Percent change
since 1980
CONSUMER PRICE INDEX
FEDERAL
1980
1981
1982
1983
1984
1985
1986
1987
988
for other urgent needs. "Health-care costs
have created an American state of siege,"
says Florida Governor Lawton Chiles. "It's
going to break us."
Suddenly health care is becoming the
litmus test of American politics. It was a
central issue in this month's senatorial race
200%
1991
in Pennsylvania. Little-known Democrat
estimate
Harris Wofford, who called for a health-
193%
care plan that would cover all Americans,
easily defeated former Governor Dick
Thornburgh. As the 1992 presidential cam-
paign gathers steam, every Democratic
candidate is putting universal health care
at the top of his agenda. While Nebraska's
Bob Kerrey proposes a comprehensive
plan that would require substantial new
taxes, others, including Bill Clinton and
Tom Harkin, are fashioning less costly ap-
proaches that emphasize preventive care.
150%
Says Harkin: "We don't have to spend a
nickel more. We just have to spend it
smarter." Congressional Republicans,
sensing that the White House is moving
too slowly on the issue, offered their own
plan earlier this month to provide basic
care for uninsured Americans.
How did America's health care slip into
such a critical condition? It's all so para-
doxical. We're the medical miracle work-
ers. We're the picture of health. We live
decades longer than we did before. We've
estimate
harnessed the body's natural defenses with
107%
antibiotics, defeated plagues and diseases,
100%
learned how to make spare parts for almost
every organ except the brain.
We got what we wished for, a medical
miracle system-but all its perilous side ef-
fects too. Medicine's amazing new tools
have made decent health care a rich man's
privilege, too expensive for the working
poor and even many middle-class people.
Moreover, America may be shackling its
1991
economy by investing too much in one in-
estimate
dustry. The U.S. currently devotes 12.3% of
63%
its gross national product to health care, up
from 9.4% in 1980. At this rate, within 20
years Americans will be spending a third of
50%
all their resources on medicine. Says Daniel
Callahan, the director of the Hastings Cen-
ter in Briarcliff Manor, N.Y.: "We have let
ourselves be seduced by the idea that there
is no such thing as enough health care."
0%
1989
1990
1991
estimate
35
Nation
VAST
RESOURCES
CAN STAVE OFF
DEATH: at
LOUIS
Columbia-
Presbyterian in
New York City, a
leading research
hospital, an
elderly patient
rests in the
recovery room
after receiving a
heart transplant.
Yet we accomplish less and less. Doctors
into a gridlock of powerful constituencies:
may waste more than $100 billion a year on
giant corporations, doctors, hospitals, insur-
1. THE BASICS
overzealous testing and unnecessary sur-
ance companies and the highly organized se-
About 1 out of 9 American working
gery, among other things. Insurance compa-
nior-citizens lobby. But popular opinion
families, a total of 37 million people, has
nies say patients, hospitals, doctors and
may break the impasse. In a TIME/CNN poll
no health insurance at all. Most of the un-
thieves are cheating them out of $60 billion
of 1,000 adults surveyed by Yankelovich
insured are the families of workers in small
or more. Meanwhile millions of Americans
Clancy Shulman, 91% said that "our health-
firms that do not offer such coverage.
are starving for care in the midst of plenty.
care system needs fundamental change."
Among the uninsured are an estimated 8
Doctors have migrated away from rural ar-
Most of those polled, 75%, said costs are
eas across America, leaving families in
million American children growing up
much higher than they should be, and 83%
without adequate medical and dental care.
dread fear of the tractor accident, the heart
said they would cut costs by limiting doctors'
attack, the sudden illness. Another prob-
About 17% of all Americans suffering
fees. Two-thirds said health care is a right,
lem: the health-care system devotes SO
from diabetes and high blood pressure are
and 70% said they would be willing to pay
much of its resources to last-minute mir-
going without treatment, according to
higher taxes to ensure that all Americans
Robert Blendon of the Harvard School of
acles that it neglects the more mundane
have coverage. Last week the National
Public Health.
realm of preventive medicine, where many
Leadership Coalition for Health Care Re-
terrible illnesses could be halted sooner or
Medicaid is supposed to insure those
form, a group of big companies and labor
avoided altogether. "We have to rearrange
who cannot pay for coverage, with each
unions, put forth a proposal to require all
state making that determination accord-
how the dollars are being spent and refocus
employers either to provide health insur-
ing to its own means test. But even this vo-
them on earlier stages of illness," says Jeff
ance or to pay a new 7% federal payroll tax
Goldsmith, a health-care adviser to the ac-
racious state-and-federal system-which
to fund public coverage.
counting firm Ernst & Young.
cost $2.3 billion in 1967, the first full year
The U.S. can do a much better job with
Americans used to take health care for
after it was launched, and now costs 69
the money it is spending by balancing com-
granted. But now they can see the cracks in
times as much-can barely afford to help
passion with realistic notions of what can
the system-and those gaps scare them.
40% of the poor. In 1980 the figure was
be done. It is not possible to offer unlimit-
The prospect of an additional 30% in-
65%. As hard-pressed states have found it
ed medical care to everyone, nor fair to
crease in medical costs next year has
increasingly difficult to pay for the pro-
cushion the well-to-do with vast public-
prompted many employers to cut their
gram (they put up 68% of the total mon-
health-care subsidies while millions of
work force, reduce health benefits, or both.
ey), they have tightened eligibility stan-
American children and their parents go
At the same time, insurance companies are
dards. As a result, more and more
without. It's time for a cure.
raising premiums to nigh unaffordable lev-
working Americans earn too much money
On the following pages, TIME looks at
els. Millions of workers are terrified of los-
to qualify but too little to afford care. In
10 of the most important problems in the
ing their coverage.
Alabama a family of four cannot qualify
American way of medical care. Here are
Until now, attempts at reform have run
for Medicaid if it earns more than $16,584
some suggestions on how to fix them.
a year.
36
TIME, NOVEMBER 25, 1991
SOLUTION: Establish a universal health-
care plan covering basic preventive treat-
ment for all Americans who cannot pay for
their own insurance. Nearly two-thirds of
Oregon's Value Judgment
the 500 senior executives surveyed last
summer by the consulting firm Noble
Lowndes said they support such a plan. To
V
irtually every state in
the U.S. is struggling
help pay for it, Congress should eliminate
to find ways to seal up in-
the $53,400 income cap on the payroll tax
creasingly leaky health-care
that funds Social Security. While this
systems. Hawaii was one of
would sharply increase payroll taxes for the
the first to strive for uni-
wealthiest, such a change represents a
versal coverage and now
FOR TIME
more equitable way of apportioning the
reaches 98% of its resi-
burden, which now falls more heavily on
dents. Florida, New York,
lower-income workers. Removing the cap
Michigan, Maine and Wis-
would provide an estimated $25 billion in
consin subsidize health-in-
new funds for the universal plan. Congress
surance coverage for some
should then shift the entire federal Medic-
of their poorest citizens.
aid budget to the universal-health pro-
South Carolina sponsors
gram, which would give it a generous $115
house calls for pregnant
billion in its first year.
women. Alabama uses its
To control costs, care must be deliv-
school clinics to provide
ered through tightly managed private sys-
prenatal care. Despite this
tems, such as a network of health-mainte-
kaleidoscope of experi-
Doctor and patient, 2, at a county health center
nance organizations (HMOS) or cost-
ments, no one state can
conscious doctors and hospitals that
claim to have solved all its problems.
provide moderately-priced services. Pa-
tients must have a financial stake in making
The newest and broadest attempt to improve access and contain costs is taking
sensible use of the system. They would
place in Oregon. The state is asking the U.S. government to approve changes in
benefit based on their ability to pay; de-
Medicaid rules to provide a limited list of medical services to all people below the
poverty level, regardless of their current Medicaid status. A companion law in Ore-
ductibles and co-payments would sharply
gon's comprehensive health plan requires all employers to provide health insur-
rise as one's income increased. High-cost
medical procedures would be closely
ance for full-time employees and obliges insurance companies to renew those poli-
screened for their anticipated value in ex-
cies without excluding individuals considered too risky. The state also guarantees
tending life and health.
that doctors and hospitals are reimbursed for their services but makes them justify
their purchases of costly medical diagnostic equipment.
The centerpiece and most controversial feature of the plan is a list of 709 medi-
cal conditions and their treatments, ranked according to their seriousness and the
2..MEDICAID
likelihood that treatment will restore the patient to long-term good health. Actu-
aries estimate that state and federal Medicaid money will pay for treatment of ev-
The fastest-growing spending program
eryone suffering from the first 587 conditions on the list.
in the U.S., Medicaid will dispense $158
billion in federal and state funds this year
In effect, Oregon is promising to provide universal coverage in exchange for a
system of financial triage. A child will get a liver transplant; a chronic alcoholic will
to provide health care to 27.3 million
not. An AIDS sufferer will get treatment in the early stages of his illness but in the
Americans. Costs are careering out of con-
terminal stages will get only "comfort care." The plan would not pay for so-called
trol. Medicaid pays for half of all nursing-
heroic measures, such as expensive life support for babies born after less than 23
home patients-or 250,000 Americans-at
weeks of gestation and weighing less than 500 g (1.1 lbs.). Nor will it pay for self-
an average annual cost of $34,000 a person.
Medicaid also looks after the 158,000 se-
curing ailments-now covered-like the common cold, food poisoning, sprains
verely impaired crack babies born every
and simple diaper rash. And, of course, the patient who needs spinal disc surgery,
No. 588 on the list, may be out of luck.
year ($1.8 billion a year), the 35,000 AIDS
Oregon's list is not without critics. The Washington-based Children's Defense
victims who have run out of money, the
Fund is actively lobbying against the Medicaid waiver needed to put the plan into
poor single mothers and pregnant teens,
the hardest-pressed Americans.
effect. Says CDF director Sara Rosenbaum: "We don't understand why the state's
poorest children have to give up literally life-and-death benefits for the sake of this
It doesn't do a very good job because
social experiment."
the rules governing the delivery of care are
But many Oregonians are in favor of it. The pecking order of conditions was ar-
unrealistic and wasteful, often requiring
hospitalization, for example, where out-
rived at with the help of marathon discussion sessions that were organized by Ore-
gon Health Decisions, a public interest group, and held in each of the state's 36
patient treatment would suffice. Moreover,
counties. But agreement on values does not guarantee fiscal manageability. "We're
many doctors refuse to treat Medicaid pa-
tients because of rock-bottom reimburse-
all together on this, but for many different reasons," says Amy Klare of the Oregon
ment and the snarl of bureaucratic rules.
AFL-CIO. "Business will fall off if the plan's too rich. We'll fall out if the plan's too
The program is also a sitting duck for
weak." Ellen Pinney, executive director of the Oregon Health Action Campaign,
thieves because of poor administration.
wonders whether coverage will be maintained at the initial levels. "Over time," she
Medicaid pays billions in fraudulent insur-
contends, "the ability of the state to fund an adequate plan will be constrained."
State officials admit that some changes are certain to take place in 1993, when
ance claims for nonexistent patients.
treatments for mental health and chemical dependency are added, as well as cover-
SOLUTION: Shut it down. Medicaid pa-
age for senior citizens and the disabled. Then somebody with condition No. 587
tients can receive better care, and the fed-
may no longer qualify. But if the plan works, virtually every Oregonian will be as-
eral contribution would be better spent,
sured live. decent primary care, and that is a goal with which every community could
under the simplified universal plan pro-
-By Edwin M. Reingold/Salem
posed above.
TIME, NOVEMBER 25, 1991
37
Nation
LEVIN-PHOTO RESEARCHERS
HOUSE CALLS
MAKE ALL THE
DIFFERENCE: in
Mississippi a
visiting nurse
checks up on her
homebound
elderly patient.
Without such
help, he might
face the trauma of
moving to a
nursing home for
care, at
considerably
greater cost.
3. MEDICARE
tion, subsidies should be more carefully ra-
mitted daily in labs, hospitals and doctors'
tioned when it comes to extremely complex
This $110 billion program-which
offices to inflate the costs of care, often un-
and costly medical procedures for very old
started out 26 years ago-with a budget of $5
der the guise of doing patients a favor by
patients. "Most of the elderly would prob-
billion-was designed to provide decent
circumventing cumbersome insurance reg-
ably accept that idea," says Dr. Perry Staf-
care for the elderly. But the program gives
ulations. Some doctors and dentists give
ford, a surgeon at Bethesda Naval Hospital
the same benefits to those who are well-off
patients inflated bills in exchange for
in Maryland. "It is usually their families
as to the elderly poor. Though the elderly
slightly higher than normal fees. The pa-
who have this tenacious hold on anything
do pay some of the costs-and staunchly
tient collects his own kickback in the form
that will prolong life. It is hard for people
resist bearing more of them-nearly 90%
of a bigger insurance refund. Some hospi-
to see that at some point, you are prolong-
of Medicare funds come from payroll taxes
ing death, not life."
tals and doctors bill for treatment they did
on workers. As a result, the burden falls
not provide. In a survey of Aetna Life &
partly on laborers who have no health in-
Casualty customers, 4 out of 10 consumers
surance of their own and may have trouble
said their doctors had cheated insurance
making ends meet.
4. FRAUD AND ABUSE
companies.
The burden on younger Americans is
Physicians also have conflicts of inter-
How does an insurance company know
growing more onerous as the U.S. popula-
est that contribute to vast waste, reformers
whether a patient really got the care for
tion ages, bringing with it the responsibility
say. In a study released in August, Florida
which it picks up most of the tab? Doctors
of caring for millions of elderly with enor-
officials reported that doctors owned 93%
and hospitals are on the honor system, but
mously expensive medical needs. There are
of the diagnostic-imaging centers sur-
some of them cheat. Fraud may account
now about seven Americans under the age
for as much as $75 billion of annual U.S.
veyed, 78% of the radiation-therapy cen-
of 65 for every person over that threshold,
ters, 60% of the clinical labs and 38% of
health-care expenditures, according to the
compared with 11 to 1 in 1960. One of
the physical-therapy and rehabilitation
National Health Care Anti-Fraud Associa-
those younger Americans is unemployed,
tion. Last June California officials uncov-
centers. Miami doctors prescribe MRI scans
and two are children. That leaves about
(cost: $800) and various lab tests about
ered the biggest single medical fraud to
four workers to support each elderly
date, a $1 billion rip-off carried out by
twice as often as doctors in Baltimore,
American. And one of those doesn't even
thieves operating clinics on wheels. Investi-
where very few own the equipment. Lab
have his own health insurance.
charges are more than twice as high at fa-
gators say the clinics offered patients free
cilities owned by doctors.
tests and exams, then used their insurance
SOLUTION: To slow its runaway growth,
information to generate a huge number of
return the program to its original goal: tak-
SOLUTION: Tougher enforcement. In-
fake bills. In a similar scam in New York
ing care of people who need financial help.
City, a doctor billed Medicaid for $50,000
surance companies and public authorities
People who can afford to pay more for
should pool information on fraud via com-
worth of lab tests for a single patient.
their own health care should do so. In addi-
puter networks. At the very least, this
Innumerable smaller crimes are com-
would prevent thieves from simply repeat-
38
TIME, NOVEMBER 25. 1991
A DESPERATE
RACE FOR HELP
WHEN NO
DOCTOR IS
NEAR: hit by a car
in a remote area
of central Texas,
an eight-year-old
boy is rushed to a
helicopter for a
trip to the nearest
emergency room.
Instead of a risky
45-minute
journey by road,
the chopper can
get him there in
eight minutes.
their crimes later in fresh territory, as
wasteful use of medical resources. With-
any now do, thanks to lax record keeping
how tired he is. The only thing is, he's
out a family doctor to keep track of their
program administrators. In addition,
working too darned hard."
overall health, people are left to find their
ysicians and hospital officials must po-
Pelli's emotional commitment is all the
way through a costly medical system ache
e their own ranks and blow the whistle
greater because his patients are his friends.
by ache, often seeking high-priced help
dishonest billing practices. Stricter po-
Not long ago, a young woman in town was
where the skills of a generalist would
ting will cost more, but it should pay for
fatally injured in an auto accident. Recalls
more than suffice.
many times over.
Pelli: "I couldn't revive her. All the time I
At the same time, doctors should be re-
was trying, I could hear her two young chil-
SOLUTION: Federal money pays for half
aired to disclose to patients their invest-
dren, her husband and her parents crying.
of graduate medical education. Redirect as
ents in testing centers and laboratories,
It was just heartbreaking." Says selectman
much as 50% of that $3.6 billion federal
doffer an alternative in which the doctor
Ray Beaulier, who doubles as the town
contribution to students who aim to prac-
pes not have a financial interest. (That
mail carrier: "Roger is as close as you can
tice primary medicine.
toposal has already been recommended
get to the old country doctor."
Expand a three-year pilot project au-
the American Medical Association's
As an additional incentive for doctors
thorized by Congress last year. The pro-
buncil on Ethical and Judicial Affairs.)
who have already finished school, waive
gram provides up to $50,000 in matching
taxes on the first $40,000 in income for
funds for communities that finance medi-
those who treat patients in designated ne-
cal education for physicians (cost of train-
glected areas. Expense to the U.S. Trea-
DISAPPEARING DOCTORS
ing: about $75,000) as well as other medical
sury: approximately $9,000 a year for an
More than 570,000 physicians practice
professionals. This plan was prompted by
unmarried doctor with no dependents. As
the experience of Dr. Roger Pelli. A resi-
edicine in the U.S. today, almost double
well as being worthwhile in itself, this in-
dent of Ashland, Me. (pop. 1,800), a town
number 20 years ago. Yet huge
vestment in basic medicine would also
without a doctor, Pelli promised in 1982 to
eas-18 counties in Texas alone-have
produce other kinds of savings by pre-
care for the people in the Ashland area if
The. Rural America, like many inner cit-
venting unchecked chronic disease and
they would help send him to medical
is facing a crisis in primary care. Com-
producing healthier and more productive
school. Six lócal towns raised $15,000 a
unities need about 35,000 more general
citizens.
inctitioners, according to most esti-
year for his education. Today Pelli takes
care of 3,000 people scattered over the sur-
ites: Doctors typically prefer more lu-
tive practices as specialists and sur-
rounding area, making house calls, han-
ons (who can earn more than $300,000
dling everything from chain-saw injuries
6 PHYSICIAN COMPENSATION
and cardiac arrest to births and vaccina-
ear, compared with the average family
Back when doctors were paid out of pa-
actitioner's income of $96,000). The
tions. Says Ashland town manager Nancy
tients' pockets, there were natural brakes
ortage of general practitioners leads to
Farris: "He's always there, and he always
on the amount of medical service pre-
greets his patients with a smile, no matter
scribed and the charges levied. For one
TIME, NOVEMBER 25, 1991
39
Nation
MODERN
by many HMOS, which chan
MIRACLES, FOR
group-insurance plans an ann.
THOSE WHO CAN
al fee for treatment and product
AFFORD THEM: a
often dramatic savings. Treatin
radiology
40 million Americans last yea
technician gives a
HMOS cost an average of $2,68
CAT-scan test to a
BANK
per person, 17% less than th
patient. Such new
$3,214 cost of traditional inden
technologies save
nity plans, according to a surve
lives but also
conducted by the Foster Higgin
dramatically
consulting firm. Doctors bour
increase the cost
by such strictures would still
of care. Lacking
free to earn extra income
insurance, many
treating other, higher-incom
Americans must
patients in private practice.
make do with less
help.
7. UNNECESSARY CARE
Fear of malpractice lawsui
drives doctors to perform man
extra procedures to prote
themselves against accusation
of negligence. The A.M.A. est
mates that defensive medicin
adds $21 billion to the U.S.
health-care bill every year. Oth
er experts, including former U.S
Surgeon General C. Evere
Koop, believe the cost is seven
times that high. Some reformer
think juries in malpractice case
share the blame by punishin
doctors not only for shodd
practice but also for their huma
limitations. "Medical care is no
always successful," says Aetna
Kelly. "But that doesn't meal
the doctor should have to pa
huge awards for pain an
suffering."
Then again, many doctor
and hospitals overtreat patient
simply because they have a blam
check to do so under many
surance programs. As much
20% of all medical procedure
thing, doctors knew their decisions could
charges by establishing maximum fees for
and treatment is completely unnecessar
devastate a family's finances. And patients
hundreds of surgeries, tests and proce-
contends Dr. Robert Brook, director
who paid their own bills yelped at high
dures. But the medical establishment is
health sciences for the Rand Corp. Cost
prices. But concerns over costs diminished
winning the accounting war. Some doctors
the waste: $132 billion a year. Aetna est
over the past 40 years as vast insurance
attend seminars on "creative billing,"
mates that as much as 30% more ($198 bi
pools were created through company
learning how to describe medical treat-
lion) is discretionary care that may no
benefits plans and the huge Medicaid and
ment in terms that will yield the highest
solve the problem under treatment.
Medicare systems.
prices. A $2,900 gastrectomy, the removal
Rand studies have found that in som
Under the circumstances, insurance is
of all or part of the stomach, can be billed à
regions of the country as many as 44%
like a blank check. Research has shown
la carte as several procedures for a total of
coronary bypass surgeries and 64% of at
that doctors paid in fee-for-service pro-
$6,900. When auto-repair shops or lawyers
tery-clearing carotid endarterectomie
grams order 50% more electrocardiograms
do that, we call it padding the bill. Doctors
were either unnecessary or highly ques
(about $27.50 each) and 40% more X rays
call it "unbundling." Some maintain that
tionable. In a separate review for the
($62 for a frontal-lateral chest X ray) than
they do it in the spirit of Robin Hood,
Philadelphia Professional Standards Re
physicians in managed-care groups. Says
overcharging people with good insurance
view Organization, Dr. Allan Greenspa
Edmund Kelly, group president of Aetna:
in order to charge less for the treatment of
found that about 25% of heart-pacemal
"The problem with our medical financing
poorly covered patients.
er implants performed in the Philade
system is that most doctors get paid for do-
phia region were inappropriate. Man
ing things to people, not for keeping them
SOLUTION: Managed care. Providers of
doctors challenge such findings, arguin
healthy."
group insurance should insist that doctors
that it is better to err on the safe side.
Medicare and insurance companies
treating their patients be paid salaries or
In the same vein, some extremely ex
have tried to make sense of medical
flat fees. Such a system is already employed
pensive technologies are used even befor
40
TIME, NOVEMBER 25, 1991
A SMALL TOWN'S
sands of dollars in health-care coverad
BEST FRIEND:
that their companies provide for them.
Ashland, Me., had
no doctors until
FOR TIME
SOLUTION: Reduce the corporate write
Roger Pelli
off for medical costs. And impose a tax
decided to fill the
employee health benefits at a moderal
need. Says he: "I
rate for well-compensated workers.
get a great deal of
satisfaction from
LODGE
really helping
10.WASTE
people. I am
somebody here,
The U.S. has more than 1,500 differen
not just another
health-insurance programs, each with
car on the road."
own marketing department, complet
forms and regulations. Doctors, nurses an
clerks are buried in the paperwork needel
to keep track of whom to bill for every asp
rin tablet. It's a massive waste of time. U.S
health-care providers will spend as mucha
$90 billion this year on record keeping, ad
cording to a Harvard study.
it is clear that they're needed. That may
64.5% capacity. To fill their beds, some
SOLUTION: Standardize insurance fees
be the case with at least one new biotech
hospitals buy physicians' practices and
Maryland did so 20 years ago. Partly as
drug, Centoxin, which is available on a
then pay the doctors under so-called cen-
result, the cost of a hospital stay at top
limited basis to treat hospital-acquired in-
sus-based compensation, which is geared
rated Johns Hopkins in Baltimore, which
fections that can cause fatal septic shock
to the number of patients the physicians
was 25% above the national average bd
(estimated cost: $3,800 a dose). Trouble
send to the mother ship and the number
fore the system was put in place, is no
is, since the condition can kill so quickly,
of procedures they perform. Some hospi-
7% below the average. Louis Sullivan
doctors will have to decide whether to ad-
tals pay doctors in other ways-through
the Secretary of Health and Human Ser
minister the drug before they are sure the
honorariums or appointments to hospi-
vices, proposed a national plan earlie
patient needs it.
tal boards-as a reward for referring
this month to standardize health-insur
patients.
ance forms. If his program is carried out
SOLUTION: For malpractice cases, cap
by the end of the decade, American
noneconomic awards for factors like pain
SOLUTION: Remove the more blatant
could save as much as $20 billion a year
and suffering at about $250,000. California
conflicts of interest governing the relation-
Just as important, eliminating wastefu
placed a limit on such awards in 1975, and
ships between doctors and hospitals. Out-
paperwork would leave doctors an
it now has some of the lowest malpractice
law census-based compensation for doc-
nurses more time and resources to carl
premiums in the U.S. One reason: ambu-
tors. Require physicians to disclose- their
for patients.
lance-chasing lawyers have less incentive to
financial relationships with the hospitals to
bring questionable claims.
their patients.
Cleaning up the health-care system will
Another wise investment: devote more
Companies as well as federal and state
be an epic adventure in compromise. N
research to finding out which procedures
programs should encourage doctors to re-
one wants to give up his share of medi
and drugs are most effective. If doctors can
fer those patients who do not need the full
cine's glittering promise, whether it come
be supplied with better, consensual guide-
range of hospital services to less costly out-
in the form of pills or paychecks. But the
lines about what works in treating various
patient clinics. Simple fractures, for exam-
problems won't wait: health care ha
ailments, they will feel less pressure to do
ple, often can be treated in this way. Pay
emerged as the most important domesti
things on a just-in-case basis. They also will
doctors and hospitals less for clearly waste-
issue of the '90s. "At some point," say
be better protected against unwarranted
ful practices.
Missouri Congressman Richard Gephard
litigation. It is important, though, that such
Eliminate tax subsidies for underused
"no one will be able to afford health care
standards be viewed as guidelines, rather
and obsolete hospitals. Together with the
We have got to act."
than rules that might impinge upon a doc-
discipline of managed care and physician
While no treatment manual for Amer
tor's best sense of what a patient needs.
disclosure requirements, this change will
ican medicine should focus purely on
"Judgment is an important factor in medi-
help weed out vestigial institutions so that
price, controlling costs is critical. If the
cine," says Dr. Robert Heyssel, president
taxpayer support for health care can be put
medical experts are right, the U.S. coul
of the Johns Hopkins Hospital. "Doctors
to better uses.
save at least $200 billion a year simply b)
disagree all the time about whether a ca-
curbing fraud and unnecessary practice
rotid endarterectomy or a coronary bypass
We know where the problems lie. Doin
will offer a patient the best shot at recov-
9.FAIRNESS
something about them is at the very leas
ery. There are no absolutes around these
our moral duty and is profoundly in ou
things."
Taxpayers, even those who have no in-
self-interest as a nation. Depriving mil
Finally, set maximum reimbursement
surance, spend an estimated $84 billion a
lions of Americans of health care
levels for high-cost pharmaceuticals. Drug
year to subsidize medical care for mostly
wrong. Wasting billions of precious medi
firms are among the most profitable in the
middle- and upper-class Americans. That
cal dollars on paperwork, dead-end pro
U.S. And $3,800 a dose is too much.
is because companies can write off every
cedures and outright theft is stupid. Un
dollar they spend on health care as a busi-
dermining the health of our workers and
ness expense, which may help explain why
children for lack of political gumption
8. THE HOSPITAL GLUT
corporate America did so little to contain
suicidal. It is time to make the har
the costs until they got out of hand. At the
choices.
-With reporting
America has too many hospitals. On
same time, employees who enjoy generous
Mary Cronin/New York, Barbara Dolan/Chicag
average, U.S. hospitals are operating at
benefits plans pay no taxes on the thou-
and Hays Gorey/Washington, with other bureaus
42
TIME, NOVEMBER 25. 1991
THE
In the U.S., the ticket to health care is insurance. If you
nia's insurance counseling program. "Most of these peo-
are in good health and have a well-paying job with a
ple are three paychecks away from disaster."
large firm, chances are you have a ticket, and your
The health-insurance crisis is a fairly recent phenome-
employer pays for it. But if you work for yourself, have
non. At the beginning of World War II, few Americans
a low-paying job, or are sick, chances are you'll have to
owned a health-insurance policy. As recently as 1965,
pay for the ticket yourself-if you can buy one at all.
most had coverage only for hospital stays. The health-
Tickets are becoming harder to get. Between 31 mil-
insurance system as we know it today evolved in the
lion and 37 million people have no health insurance,
1960s and 1970s. Under that system, workers came to
either because they can't afford it or because insurance
expect their employers to supply medical coverage for
companies refuse to sell them a policy at any price.
them, with employers and employees splitting the cost.
Others lose their tickets. People who once had insur-
That worked well for a while. More workers had
ance may suddenly find themselves without it when
health insurance, and their coverage broadened to
employers discontinue health-care coverage or go out of
include doctors' visits, prescription drugs, and even
business; or when insurance companies cancel policies
treatment for mental illness. But now the system
or become insolvent.
stitched together over the last 50 years is unraveling,
Millions more have no protection against a cata-
and people are being deprived of needed health care.
strophic illness. They may have some insurance, but
In this, the first of a two-part report, we look at why
lack coverage for the very conditions that will one day
people lose their health coverage, and we rate the major-
require unusually heavy expenditures.
medical and hospital-surgical policies that are available
"If the employed population knew how vulnerable they
to individuals-a temporary remedy for some people.
were, they'd be up in arms demanding national health
Next month we will examine some possible cures for
insurance," says Bonnie Burns, a counselor with Califor-
the health-insurance crisis.
WHO LOSES IT? WHAT HAPPENS?
eople without health
People without health insurance
A Roper poll has found that the pro-
insurance include men
may not get medical care. One mil-
portion of Americans going to doc-
and women who work
lion families each year try to obtain
tors in any one month has fallen to
for small businesses, the
care when they are sick, but cannot
a 15-year low.
self-employed, part-time workers,
afford to pay for it. Even if they are
Women are particularly at risk.
young people just starting their
not ill, people without insurance
Uninsured women are much less
careers, the disabled, the divorced,
postpone preventive care until more
likely than insured women to have
and those taking early retirement
costly treatment is necessary-or
screening tests for breast and
but still too young for Medicare.
until it's too late.
cervical cancer or for glaucoma. If
Some of the uninsured are also
Two-thirds of all people with
they are pregnant, they often do
poor. Medicaid, the Federal and
hypertension fail to have their dis-
without prenatal care. Some five mil-
state program that covers medical
ease controlled, largely because
lion women between the ages of 15
expenses for the indigent, currently
they can't afford medications. Half
and 44 are covered by private
pays the bills for only 38 percent of
of those with hypertension haven't
health-insurance policies that don't
the nation's poor.
seen a doctor within the past year.
include maternity coverage.
CONSUMER REPORTS AUGUST 1990
533
Crisis: Delayed care
John Andrusyshyn worked in a
Nevada casino. Three summers ago,
he noticed a mole growing on his
chest, but said nothing about it to his
family. He could not afford to pay
another bill, so he put off seeing a doc-
tor. Andrusyshyn was not eligible for
insurance from his employer until he
had been at his job for a year; he
couldn't afford his own coverage on
the $880-a-month he was bringing
home to support his wife, Karen, and
two children, Laura and Nikolai (pic-
tured at right).
Several months went by before
Karen insisted he go to a doctor.
Because dermatologists in Reno were
booked up, three more months
passed before a doctor examined him.
By then, the mole had ulcerated, and
Photos: CYNTHIA JOHNSON
John was so desperate for treatment
he paid for the visit with a bad check.
The diagnosis was a malignant melanoma that
Lack of prenatal care translates
Cost-shifting accounts for about
was already coursing through his body. By the
into babies who are too small when
one-third of the increase in insurance
time he underwent surgery, he was eligible for
they are born and babies who die
premiums, which are rising as much
insurance from the casino. But Karen had to
soon after birth. The U.S. trails 23
as 50 percent a year. The cost of medi-
scrape together $56 a week to pay his share of
other nations in the percentage of
cal care-which is increasing two to
the premiums, forgoing food and other necessi-
babies born with an inadequate
three times faster than the rate of
ties. The policy covered the hospital bill, but not
birth weight and ranks 22nd in the
inflation-is responsible for the rest.
the $4000 surgeon's fee. On John's medical
rate of infant mortality, behind such
records, doctors noted: "Patient has no money;
countries as East Germany, Spain,
Unaffordable premiums
we'll do the best we can."
and Singapore.
The higher the price tag for insur-
Soon afterward, the Andrusyshyns traded in
Shifting the cost
ance, the more people who go with-
their mobile home for a '62 Airstream trailer plus
out it. Firms with fewer than 100
$1500 in cash, borrowed a credit card from a
When the uninsured are able to
workers employ about one-third of
relative, and headed for Canada where John was
obtain health care, everyone pays.
the work force in the U.S., but only
born. As a Canadian citizen, he was entitled to
Each year thousands of people are
about half of them offer health
free medical care. In Montreal, doctors tried vari-
dumped into emergency rooms of
insurance to their employees. Small-
ous cancer treatments, including brain surgery,
public hospitals because private
business owners say they have
which he could not have paid for in Nevada. But
hospitals don't want patients who
enough trouble staying afloat with-
treatment came too late. Last fall at the age of
can't pay.
out assuming the heavy burden of
54, John Andrusyshyn died.
In 1988, unpaid hospital bills
health-insurance premiums.
"Had we had the medical care available in
totaled more than $8-billion, up 10
Even when employers do offer
Nevada like we have here, he would have said
percent from the previous year. To
coverage, not all their employees
something to me," Karen says. "A little thing like
recoup the costs of unpaid care,
take it. The Service Employees
an early diagnosis could have added four or five
hospitals and doctors simply raise
International Union, whose mem-
years to his life. That would have meant a lot to
their fees to those who do pay-pri-
bers are hospital workers, janitors,
this family."
marily the private insurance carri-
and government employees, found
ers and the Federal government.
that 48 percent of its low-wage mem-
Such cost-shifting drives up the
bers were offered insurance but
price of insurance, resulting in even
turned it down because they could
more people who can't afford cover-
not afford the premiums. In 1987,
age. In New Jersey, for example,
25 percent of the uninsured worked
every hospital bill now carries a 13
for very large employers, most of
percent surcharge, reflecting the
whom offered health insurance.
hospital revenue lost to unpaid bills.
People who want coverage and
That, in turn, feeds into higher
must buy it on their own have little
insurance premiums.
choice but to pay what the insur-
534
CONSUMER REPORTS AUGUST 1990
ance company demands. In many
vey found that employers now spend
instances, that can mean thousands
an average of $2700 annually to cover
f dollars each year. And premiums
each employee. In many cases,
continue to rise dramatically.
employers are shifting some of those
Consider Stephen Beidner, a part-
ever-increasing costs to their work-
time worker at a California winery.
ers by requiring them to pay a
When he first took out a policy with
greater share of the premium and a
a company called Consumers
larger portion of their medical
United Insurance in 1985, he paid
expenses through higher de-
Crisis: Benefits end, costs don't
$912 a year. By 1989, his premium
ductibles and copayments. Other
had jumped to nearly $3600.
companies, such as American Air-
David Curnow, 47, was a partner in a San Diego
Last year, after Beidner had arthro-
lines, try to reduce their insurance
law firm. One Saturday, while riding his bicycle, he
scopic surgery for a knee injury, the
bill by refusing to cover preexisting
was struck by an uninsured motorist. After two
company hiked his premium a whop-
health conditions for new employees.
months in intensive care, Curnow emerged a
ping 93 percent to $6900. After Beid-
In 1984, Hewitt Associates, a ben-
quadriplegic, paralyzed from the chest down.
ner protested, the company reconsid-
efits consulting firm, found that 37
His law firm had self-insured its employees'
ered his case and let him raise his
percent of large employers paid the
health coverage, agreeing to cover the first $7500
deductible from $100 to $1000. His
full premium for their workers. By
of a worker's claim, and paying premiums to an
new premium: $2177 a year.
1988, that figure was down to 24 per-
"excess-risk carrier" to cover the rest.
cent. In 1984, 53 percent of large
After the first $7500 was paid, the carrier
Less coverage for many
firms paid all hospital room-and-
refused to pay its share of Curnow's bills. Months
Beidner is hardly alone in having
board charges for their workers; in
passed. Doctors, hospitals, and companies pro-
to settle for less coverage. Spiraling
1988, the figure was 29 percent.
viding necessary medical supplies dunned
premiums also affect millions of
Curnow for payment.
people whose employers provide
Losing coverage
Eventually the carrier paid most of Curnow's
their health insurance.
About half of all large- and medi-
bills, which totaled nearly $250,000. But he is still
One major employee-benefits sur-
um-sized firms try to trim their
waiting to be reimbursed for the services of the
home-health aide he needs every
day. The third-party administrator
handling his case told him those
services were covered, but so far,
the cost-some $1500 each
month-comes out of his pocket.
Curnow has another problem-----
how to pay for his continuing medi-
cal bills when insurance benefits
from the law firm run out. If he
doesn't work again, his disability
will eventually qualify him for Medi-
care. But he will still have no insur-
ance for services Medicare doesn't
cover. Nor will he be able to buy
any. Companies usually don't sell
Medicare-supplement policies to
the disabled under age 65. If he
goes back to work, he must find a
job in a large law firm whose insur-
ance company doesn't require
employees to be in perfect health.
If he opts for a conversion policy
from the company now insuring
employees in his old firm, he will
have to pay $6000 a year.
"How many sick and disabled
people do you know who can afford
to pay $6000 a year for health
insurance?" he asks.
CONSUMER REPORTS AUGUST 1990
535
insurance outlays by self-insuring.
claims. Because the administrator
bankrupt. Stroup went ahead with
They invest the money they would
may be the local Blue Cross plan,
the transplant because the firm han-
otherwise spend on premiums and
employees may think that Blue
dling Maxicare's affairs approved
pay employees' claims directly
Cross (or some other insurer) is
the procedure and agreed to pay for
when they arise.
actually underwriting their coverage.
the antirejection drugs he would
The Employee Retirement
Little do they know that the loop-
need following the operation.
Income Security Act (ERISA)
holes created by ERISA can leave
After the bankruptcy filing, Blue
exempts these self-insured plans
them without insurance if things go
Cross and Blue Shield of Ohio took
from state insurance regulations
wrong.
over Maxicare's subscribers. Stroup
meant to protect consumers. For
If the employer goes out of busi-
assumed that his $12,000 annual
example, employers may not have
ness or drops the coverage, employ-
drug bill would be covered for the
to offer certain coverages, such as
ees could be out of luck.
rest of his life. But Blue Cross had
care for newborn children, or pro-
other ideas. It offered Stroup, who
vide for continuation of coverage
The woes at HMOs
had turned 65, a Medicare-supple-
when employees leave.
When a health maintenance orga-
ment policy that covered his drugs
Employers hire a third-party
nization closes its doors, the people
only after he paid a $2500 deductible
administrator, or TPA, to handle the
who received medical care there
and $1000 in coinsurance.
may also be left uninsured.
Stroup and his wife must now pay
Established as alternatives to tra-
some $7000 a year for insurance
ditional insurance policies, HMOs
premiums and drugs out of their
provide a variety of prepaid health
$10,000 income from Social Security
Crisis: Unaffordable premiums
services to their members Unfor-
disability. They expect their $60,000
tunately, a number of HMOs have
life savings to be depleted in 3½
Lloyd Pudiwitr owns a TV repair shop in Bakers-
fallen on hard times.
years.
field, Calif. He has seven full-time employees
Several states don't require con-
and one part-timer. For years, he paid half the
version policies or continuation of
Clinging to coverage
premium for his employees' health coverage. But
coverage for members whose HMO
Millions of Americans have yet to
by the end of 1988, the premiums had become
has gone out of business. Even in
lose their insurance but could at any
so high he could no longer afford to pay his
states that do, HMO members have
time fall victim to an insurance com-
share. "It's one of those things that could break
no assurance that their new cover-
pany's business practices. As health-
you," he says. His employees now pay the entire
age will be anything like the old.
care providers continually raise
cost of their coverage.
They may well find themselves
their fees and pass on the higher
Like many small employers, he changed carri-
assuming a greater portion of their
cost of medical care to insurance
ers every few years, searching for the lowest pre-
medical expenses.
companies, the companies respond
miums. Two years ago Pudiwitr, who is 55, had
Consider what happened to
by insuring fewer people. People
a heart attack, and the wife of one of his employ-
Samuel Stroup. A former home-
who must buy coverage on their
ees, lan Sutherland (pictured in background),
improvement salesman in Akron,
own and workers in small firms feel
had cancer surgery.
Ohio, Stroup underwent a liver
this pinch the hardest.
When his present carrier, American Western
transplant. at the same time that
Insurance companies are not
Life, sent a renewal notice last summer,
Maxicare, his HMO, was going
charities. Their goal is to make a
Pudiwitr's monthly premium
had jumped from $272 to
$543, and the premium for
Sutherland doubled from
$421 to $842.
Luckily, Sutherland turned
65 and became eligible for
Medicare, but he still must
pay $450 a month for his
wife's coverage. Pudiwitr has
a long way to go until Medi-
TOPS®
care pays his bills, and he
doesn't know what he'll do
when his premiums rise
again. "It's almost to the point
where I can't afford it. If it
doubles again, there's no
way I can pay $1000 a month
for health insurance," he
says. "I didn't have any idea
this would happen to people."
536
CONSUMER REPORTS AUGUST 1990
Crisis: Locked in
Kay Nichols, a fitness counse-
lor at a Gainesville, Fla., health
club, is in the pink of health
except for glaucoma, an eye
disease that can cause blind-
ness if not treated. Not long
ago, her employer wanted to
switch insurance carriers to
take advantage of lower premi-
ums. When the health club
found another insurer, the
agent told Nichols that she
would not be covered, even
though her glaucoma is under
control.
Nichols looked into a conver-
sion policy from her present
profit, and they can increase their
employers and employees to find
company but found she would have to pay $6000
odds of success by insuring good
other insurance. And that may be
for six months of coverage for her family. She
risks who are unlikely to have
impossible.
tried Blue Cross, but its policy would have
health problems. Competition
excluded coverage for glaucoma.
among carriers for the healthiest
No coverage for the sick
When her employer learned of her plight, he
risks has become cutthroat.
Companies insuring small groups
decided to keep the current policy despite its
In large businesses with many
require employees and their depen-
higher premiums. "If the premiums get phenome-
employees, it doesn't matter if some
dents to meet tough health require-
nally high, they can't keep the policy just for me,
employees have serious medical
ments, just as they do for
and 1 understand that," Nichols says. At the same
conditions. The risk they pose can
individuals buying policies on their
time, she realizes she has a problem that won't
easily be spread among the healthy
own. No carrier wants to insure
go away. "Maybe I don't want to stay with this
workers. But in a small group with
employees and dependents who
company the rest of my life," she says. "It makes
few employees, insurance compa-
have had heart attacks or cancer.
me worry."
nies cannot collect enough in premi-
They will either exclude them from
Nichols is 38.
ums to pay the claims of those who
the policy or decline to insure the
are sick. So the rules for insuring
group altogether. Sometimes a sin-
workers in small businesses are
gle employee with a serious disease
more rigorous.
is enough to earn a rejection slip for
Insurers use a controversial
the whole group.
five weeks, she needs a lifesaving
scheme to insulate themselves from
Increasingly, insurance compa-
infusion of antibodies that costs
risk. They offer to insure employees
nies are turning down people with
about $2400.
in a small firm (usually those with
far less serious health conditions
The firm's Blue Cross policy has
fewer than 25 workers) at a "low-
than cancer or heart disease,
been paying most of the bills. But
ball" premium for at least the first
excluding everyone except those in
as a result of those expenses, the
year. If members of the group expe-
perfect or near-perfect health. "We
cost of coverage has risen sharply-
rience costly health problems in the
don't want to buy a claim," is how
both for the firm, which pays the
second and third years, the carrier
one company official puts it.
premiums for its employees, and for
tosses the firm into a pool with
Many people who become ill
the employees, who must pay the
other groups whose health-care
while they are working may find
premiums for their dependents.
costs are high and jacks up its pre-
themselves without insurance when
"When I was given my review, I
miums as much as 200 percent.
they leave the security of their
was told I might look around to see
By placing firms into several "rate
employer's policy. Indeed, many are
if I can find another job," Turner
tiers," insurance companies can bid
held hostage to their current job
says. "They intimated that if I did
for the healthiest groups with rock-
just to keep their insurance.
leave, it could lower the cost of their
bottom premiums. But employers
Susan Turner (not her real name)
insurance."
and their employees who have had
knows how vulnerable a person can
If Turner leaves her job, it's
serious health problems are stuck
be. Turner, who asked us not to
unlikely her daughter will ever
with their present insurance carrier;
identify her, earns $19,000 as a sec-
again have coverage. And there's no
they can't move to another because
retary for a small accounting firm in
way she can pay for the monthly
no other company is likely to take
Texas. Her daughter, who's now 20,
infusions herself. "Without the med-
them at any premium. Worse, the
was born with an immune defi-
icine, my daughter dies. That's the
present carrier may decide not to
ciency disease that makes her sus-
black and white of the situation,"
renew the group's coverage, forcing
ceptible to infections. Every four to
Turner says.
Continued
CONSUMER REPORTS AUGUST 1990
537
policy
Fall 1991
Number 58
$4.50
Conservatism's Growing Pains
Edwin J. Feulner Jr.
Why Communism Failed
Adam Meyerson
Is Japan. Our Enemy?
Seth Cropsey
Reclaiming the Culture
Heather S. Richardson
Canada's Patient Patients
Edmund F. Haislmaier
Food Fight on Capitol Hill
Robert Rector
The Loneliness of the Black Conservative
Clarence Thomas
13
0
74470'65831
3
NORTHERN DISCOMFORT
The Ills of the Canadian Health System
EDMUND F. HAISLMAIER
C
harles Coleman was 63 years old when his doctors
ported a Canadian-style system, including 60 percent of
told him that, unless he underwent coronary bypass
conservatives and 62 percent of those with household
surgery, he might die. In the four months that followed
incomes exceeding $50,000. Legislation now pending in
his diagnosis, Coleman's surgery was postponed 11 times;
Congress and several state legislatures would, if enacted,
doctors at Toronto's St. Michael's Hospital cited a bed
replicate the Canadian health system in the United States
shortage in the Intensive Care Unit (ICU) as the cause
or in particular states. But in reality, the Canadian system
of the delays. At one point, Coleman waited in the
is far less attractive than it appears at first glance.
hospital 13 days before being discharged without
Before examining why this is so, it is necessary to first
surgery.
dispel some basic misconceptions many in America hold
Although the surgery was finally performed, members
about the Canadian system.
of Coleman's family said that the long ordeal had so
weakened him that he had become "a broken man" who
Similar Provincial Plans
had lost his will to live. He died eight days after his
To start with, the Canadian "national" health care
surgery.
system is not national in the sense of being funded or
This sad case, although dramatic, is not remarkable
administered by a central government. The system is
in Canada, where the health care system has been fully
actually a collection of separate, although very similar,
nationalized for the past two decades. In a 1989 cover
provincial systems. Each of Canada's 10 provinces and
story entitled "Sick To Death," the Canadian news
two territories administers its own universal health plan
magazine Maclean's described Coleman's case, as well as
and pays for most of its costs. Historically, the role of the
numerous other examples of a national health care
Canadian federal government primarily has been to
system in crisis. Dr. Phil Gold, then-chief physician of
provide partial financing of the provincial health systems
Montreal General Hospital, complained, "I'm living
and to set broad structural guidelines to which the
from hand to mouth and waiting for disaster each day
I
provincial plans must adhere if they are to receive federal
don't know when someone will die for lack of a bed or
financial support.
the proper equipment."
Those national guidelines were developed over
Yet, in spite of its flaws, the Canadian system is the
several decades, leading to the establishment of similar
very model frequently proposed as a solution to the
systems in all Canadian provinces by 1971. In 1984, the
health care problems in the United States. Proponents
federal guidelines were revised and consolidated in the
of this view contend that the Canadian system provides
Canada Health Act, which forms the basis of the current
access to health care for all its citizens at a lower cost
system. Under this act, provincial health plans are
than in the U.S., and with the same or better quality.
eligible for partial federal funding if they meet the
Furthermore, they claim, a U.S. version of Canada's
following five requirements:
system could retain the freedom of choice currently
Universality. The plan must cover all residents of the
enjoyed and valued by Americans, while hospitals and
province under uniform terms and conditions. For new
physicians would be free to practice medicine with less
residents, the waiting period prior to entitlement must
interference or oversight from government regulators
not exceed three months.
than many providers face today.
Portability. The plan must provide continuous
Presented this way, it is perhaps no surprise that
coverage for residents who are temporarily absent from
Canada's system looks quite attractive to many
the province and for individuals who move to another
Americans. Indeed, it registers considerable support in
province until they qualify for that province's plan.
U.S. public opinion polls, far exceeding support for the
existing system. According to a recent Wall Street Jour-
EDMUND F. HAISLMAIER is a health care policy analyst at The
nal/NBC News poll, 69 percent of voters polled sup-
Heritage Foundation
32
Policy Review
Comprehensiveness. The plan must cover all hospital
financed by the provincial plans on the basis of "global
and physician services deemed "medically necessary" by
budgets." This means that each hospital negotiates each
the federal government. Other items can be covered at
year with the provincial plan for its total (global) operat-
the discretion of the provincial plan under terms set by
ing budget for the coming year. The money then is
the provincial government. Such discretionary items in-
disbursed to the hospital in periodic, lump-sum install-
clude: outpatient services provided by non-physician
ments throughout the year.
practitioners (such as basic dental and eye care, prescrip-
Most of a hospital's capital budget, used for acquiring
tion drugs, physical therapy, and chiropractic services),
new equipment or facilities or upgrading existing ones,
and non-medically necessary services or amenities (such
also is provided by the provincial government. This
as cosmetic surgery or private hospital rooms).
budget is kept separate from the hospital's operating
Accessibility. The plan must provide all residents with
budget. While hospitals may, and usually do, raise private
reasonable access to care without financial barriers, such
as out-of-pocket costs, and provide reasonable levels of
compensation to physicians.
Public administration. The plan must be operated and
administered by a nonprofit, public authority account-
The Canadian system appears
able to the provincial government.
Prior to the 1984 act, provincial plans could charge
to provide universal health
patients user fees for services, although these were
generally quite low and did not cover actual costs.
insurance coverage at a lower
Moreover, doctors were permitted to charge patients
more than the fixed reimbursements provided by the
cost than our present system,
provincial plans, a practice known as "extra billing." In
which leaves 31 million
1983, extra billing was estimated at CN$100 million, or
0.3 percent of Canadian health spending; this figure is
Americans uninsured.
equal to approximately CN$4.00 per capita. The act
effectively ended such pràctices by stipulating that
federal payments to provincial plans would be reduced
by the total amount of any user fees and extra billing
funds for capital expansions through bonds or dona-
paid by patients for the federally required basic services.
tions, those funds are controlled indirectly by the provin-
Since 1987, all provinces have eliminated user fees, and
cial governments as well. If the authorities do not agree
extra billing is illegal throughout Canada for the basic
with a planned capital outlay, they will refuse to provide
services. Provincial plans, however, may still set user fees,
the additional funds in the hospital's operating budget
or limit coverage, for any additional services they cover.
needed to staff or operate the new facilities or equip-
ment. Thus, in practice, the provincial plans use the
Doctors Self-Employed
operating budget to limit the ability of hospitals to
While the Canadian federal and provincial govern-
expand or offer new services. By exercising their "power
ments control the financing of health care, they do not
of the purse" in these ways, the provincial governments
directly control or manage the delivery system. Most
seek to control total health spending. In the delivery of
physicians are self-employed and are paid on a fee-for-
health care, however, doctors and hospitals still retain
service basis according to fee schedules periodically
considerable discretion to run their facilities and treat
negotiated between the provincial governments and
their patients as they judge best.
physicians' associations.
Finally, the Canadian system is not, as many in the
Similarly, most Canadian hospitals are in private
United States assume, universal in the sense that it covers
hands, although virtually all of them are operated on a
all medical care or health spending. Nor, in fact, are
nonprofit basis. Out of a total of 1,243 hospitals, only 61
nationalized health systems in other countries universal
(or fewer than 5 percent) are operated on a for-profit
in this sense either. Of total health care spending in the
basis by private owners. These do not participate in the
United States, 42 percent is funded through federal,
provincial plans, and as a result their patients must pay
state, and local governments. The share of Canada's
all costs directly out-of-pocket. Most of these hospitals
health spending funded through its federal and provin-
are really nursing homes. Another 49 hospitals are
cial governments is 74 percent. This point is worth noting
owned and operated directly by the federal government
because virtually all proposals to replicate the Canadian
to serve patients in programs such as those for veterans,
system here would, in fact, significantly exceed the scope
defense personnel, immigrants, and prison inmates.
of the current Canadian system, entailing government
The remaining 1,133 hospitals are "public," meaning
funding of 90 percent or more of U.S. health spending.
that they operate on a nonprofit basis, participate in their
respective provincial health plans, and serve the general
Mythology of Cost Control
public. Of these, 57 percent are privately owned by either
What its U.S. proponents find most attractive about
religious orders or secular voluntary organizations, with
the Canadian system is that it appears to provide univer-
the remaining 43 percent owned by provincial or
sal health insurance coverage at a lower cost than our
municipal governments.
present system, which leaves 31 million Americans unin-
The operating expenses of all public hospitals are
sured.
Fall 1991
33
When figures for both countries' real per capita
Canadian Health Care Spending
health spending are converted into the same currency,
Per Capita as a Share of U.S.
they show that Canada has consistently spent about 75
Spending Per Capita
percent of what the United States spends on health care,
both before and after the introduction of universal
Percent
government funding in Canada. Why this disparity exists
100
is a matter of some speculation. What is clear, however,
80
is that the introduction of a government-financed health
60
system in Canada generated no measurable change in
the real rates of Canadian health care spending relative
40
to that in America.
20
Perverse Results
0
89
71
73
75
77
79
81
83
85
87
67
While Canadian federal and provincial governments
Year
have failed to control the growth of health care spending
by any meaningful measure, their attempts to do so have
Comparison made in constant 1981 dollars using OECD purchasing power
generated perverse results. This is due to how the system
parity exchange rates. Source: Edward Neuschler, "Canadian Health
pays doctors and hospitals.
Care: The Implications of Public Health Insurance" (Washington, DC: The
Ironically, the same payment methods that cause the
Health Insurance Association of America, June 1990).
problems are-viewed by many as one of the system's most
attractive features because of the freedom they allow
Canada's net per-capita health spending remained at
75 percent of America's both before and after the start
both patients and providers. Patients may choose from
of Canada's national health system in 1971.
any doctor or hospital participating in the provincial
plan. Although doctors and hospitals must accept
In the early 1960s, before Canada moved to a national
government fees or budgets, they are free to manage
system, it was spending a slightly higher percentage of
their facilities and practice medicine as they see fit,
its GNP on health care than was the United States,
without the detailed oversight and stifling bureaucracy
roughly 6 percent versus 5.5 percent, respectively. After
that characterizes the U.S. Medicare, Medicaid, and
1971, however, when the main elements of Canada's
private insurance systems, or even some other national-
system were introduced in all provinces, costs began to
ized systems.
diverge, with Canada spending considerably less of its
In contrast to some other nationalized systems that
GNP on health than its southern neighbor. In 1989 U.S.
pay doctors flat salaries or a fixed annual amount per
health care spending was 12 percent of its GNP. In
patient, a Canadian doctor is paid a fee for each service
contrast, Canada's health care spending was only 9 per-
provided, with the schedule of fees negotiated annually
cent of its GNP.
by the provincial government and the provincial medical
The simple conclusion, drawn countless times from
association.
these data by experts and laymen alike, is that Canada
The problem, however, is that in any fee-for-service
significantly limited the growth of health care spending
system where patients do not purchase care directly, or
once the government took control of health care financ-
even buy their own health insurance, there is no financial
ing. This leads to the assertion that the United States
reason for them to question physician decisions. This
would achieve similar results if it adopted a Canadian-
leaves doctors free to compensate for reduced govern-
style system. In fact, however, this simplistic comparison
ment-set fees by increasing the volume of services they
of relative health spending as a percentage of GNP is
provide. According to a recent article in the Mas-
misleading, and the popular conclusions drawn from it
sachusetts Institute of Technology's Technology Review,
are invalid.
Canadian provinces cut physician fees by 18 percent
A closer examination of health care spending in both
between 1972 and 1984, but doctors' total billing claims
countries between 1967 and 1987, the most recent 20-
rose by 17 percent during the same period. When
year period for which data are available, shows why this
Quebec froze medical fees from 1972 to 1976, causing a
is so. Between 1967 and 1987, real (inflation-adjusted)
drop of 9 percent in their real-dollar value, doctors
per capita health care spending increased at an average
increased their billings by 8.3 percent. Similarly, in spite
annual rate of 4.58 percent in Canada, versus 4.38 per-
of a 1984 freeze on medical fees in Alberta, the
cent in the United States (both figures are in local
province's doctors increased their incomes by 12 percent
currency). But GNP growth was, on the average, higher
that year. "Hit with a fee cut, doctors simply see more
in Canada than in the United States during the same
patients and provide more services," the MIT report
period. Between 1967 and 1987, again measured in local
concluded. Most of these services are unnecessary and
currency, Canada's real per-capita GNP grew 74 percent,
simply push up health care spending needlessly.
while the real growth in U.S. per-capita GNP was only
38 percent. Canada, in short, has done no better than
Obsolete Equipment
the United States in controlling the growth of health
Confronted with this new problem, at least one
care costs, but our northern neighbor's health care/GNP
province, Quebec, has responded by placing limits on
ratio has remained lower because of its more rapidly
the amount it will pay individual doctors each year-
rising GNP level.
strongly discouraging them from providing additional
34
Policy Review
treatments. But it is hard to see how this differs, in
growing, even very slowly, in your head."
practice, from simply making doctors salaried employees
The most serious consequence of hospital global
of the government.
budgeting is the outright denial of medical care it en-
Other Canadian provinces are now either considering
courages. To stay within budgets, hospitals have resorted
or introducing similar changes. Some are also looking
to closing beds for part of the year or limiting the
at adopting U.S.-style utilization review and control
number of operations they perform. Yet at the same time,
methods. But each of these trends will increase
while Canada has only a 5.2 percent higher rate of
bureaucracy and drastically curb-the vaunted clinical
hospital admissions than does the United States,
freedom of Canadian doctors.
Canadian hospitals, compared with their U.S. counter-
Canadian doctors and hospitals see their clinical
parts, have: 29 percent more beds per 1,000 population;
freedom restricted in other ways, particularly as a result
a 27 percent higher bed occupancy rate; a 52 percent
of global budgeting for hospitals and government con-
longer average length of stay rate; and, 63 percent more
trols over hospital spending on capital improvements.
patient days per 1,000 population.
Many Canadian hospitals were built in the 1950s and
1960s. But since the nationwide health system was put
Longer Stays
into place in 1971, hospitals have found it increasingly
What are all these people doing in hospitals? To some
difficult to obtain the funding they need to replace
extent, the lack of alternative outpatient care in Canada
obsolete or worn-out equipment or facilities. In essence,
forces many individuals to enter hospitals for services
Canada's hospitals have been living off their existing
that would be provided in a doctor's office or clinic in
capital for 20 years, and more of them are gradually
the United States. But more significantly, hospital ad-
exhibiting the obsolescence and decay found in many
ministrators, under a global budget, have a strong incen-
British National Health Service hospitals.
tive to keep patients longer rather than serving more
The provincial governments also sharply restrict the
patients with shorter hospital stays.
availability of medical equipment outside of hospitals,
Imagine you are the administrator of a U.S. hospital.
forcing doctors to conduct most procedures in a hospital,
The more beds you fill, the more revenue you receive,
where they can be both more closely monitored and
which means the more profit you generate. If the hospi-
controlled. This practice produces perverse results as
tal is a for-profit one, some of that profit will go to
well. "The dramatic shift to outpatient diagnostic testing
expanding services, and some will go to stockholders. If
and outpatient surgery that has taken place in the United
it is a nonprofit hospital, all the extra funds can go to
States has not been replicated yet in Canada," observed
Ed Neuschler, of the Health Insurance Association of
America, in his study of the Canadian system. "For ex-
ample, all Canadian computerized tomography (CT)
"The best way to stretch a
scanners are located in hospitals and, in Ontario, this
has been made a legal requirement. Keeping major
fixed hospital budget is by
medical procedures in hospitals, which are under their
direct budget authority, allows provinces to better
keeping sick people out and
manage total costs by controlling supply." In other words,
to control physician practice patterns and patient
healthy people in."
demand, Canada forgoes the potential cost savings and
quality improvements these new outpatient technologies
would otherwise generate in a true free market.
expanding services. In either case, your board of direc-
These practices also have an adverse effect on patient
tors will be pleased.
care. For example, magnetic resonance imaging (MRI)
However, the people paying the bills (usually the
machinery is now widely used in the United States in the
insurance companies) want you to treat patients quickly
treatment of joint, spinal, and neurological disorders;
and then, as soon as possible, send them home or
over 2,000 MRI machines exist in U.S. hospitals, clinics,
elsewhere to recuperate in a less costly setting. These
and diagnostic centers. But Canada possesses only 15
conflicting pressures push you to make the hospital a
MRI scanners, and all of these are located in hospitals,
more efficient treatment center with short patient stays
making these tests much more difficult to obtain. This
and a high turnover rate. But now imagine that, instead,
calls for tough decisions on the part of doctors, who must
you are the administrator of a Canadian hospital. Your
decide what constitutes a priority case for MRI screening.
budget is fixed by the government, and treating more
"A person with a quickly progressive paralysis qualifies
patients won't bring you any more revenue. Instead, it
as an emergency and promptly obtains a spinal scan to
will simply eat up your budget. Furthermore, treating
determine the source of the problem. But patients await-
patients with costly illnesses will consume your budget
ing operations for brain tumors or confined to bed by
even faster.
ruptured disks are considered to be merely urgent and
You certainly won't look like a competent manager to
wait one to six weeks," a recent New York Times article
your superiors if you use up your entire budget before
reported. One physician at Jewish General Hospital in
the end of the year. On the other hand, if you don't
Montreal put the dilemma in graphically personal terms:
treat any patients, you won't use up your budget-but
"These people are watched very carefully, but imagine
you won't look competent either. How do you respond
being 30 years old and sitting around with a brain tumor
to this very different set of conflicting pressures?
Fall 1991
35
them go to a bathroom." At the same time, at New
Brunswick's Moncton Hospital, "some patients are kept
in hallways and even closets, while a total of 2,300 people
were on the waiting list for surgery last month."
In April 1989, one Ontario paper reported, "There
are currently 1,600 people in Ontario waiting for heart
surgery and the list is steadily increasing." The same
month, another Ontario paper published the news that,
"Kitchener-Waterloo Hospital will be closing at least 43
beds, laying off or cutting back the hours of at least 70
staff members, capping the hemodialysis program, and
discontinuing lens implant procedures at the hospital."
From the Winnipeg Free Press came the report in July
1989 that, "Doctors and nurses at Brandon General
Hospital lashed out yesterday at bed closings that have
left 91 patients, including cancer victims, waiting up to
Canada possesses only 15 MRI scanners, which are
six weeks for urgent surgery. Most of the patients have
widely used in the United States for diagnosing joint,
cancer of the breast, large bowel, or lungs, chief of staff
spinal, and neurological disorders.
Dr. Michael Taylor said. He blamed the funding woes
and bed closings on a Health Department policy intro-
To start with, you know that when patients enter a
duced by the former government that forbids deficit-
hospital, regardless of their condition, most of the cost
financing and forces hospitals to balance their budgets."
of treating them comes from providing expensive medi-
On September 14, 1989, the Toronto Sun reported,
cal services in the first day or so. After that, they use
"The Princess Margaret Hospital has announced it won't
fewer medical services and more of the hospital's much
accept new cancer patients requiring radiation treatment
cheaper "hotel" services. So the answer presents itself.
for a six-week period starting September 30 to clear up
Avoid admitting patients who are costly to treat, unless
a 300-patient backlog." Last year the Edmonton Journal
of course it's a life-threatening emergency, in which case
stated, "The only hospital doing cardiovascular surgery
turning them away is going to look very bad indeed.
in northern Alberta now has 210 adults and children on
Instead, admit less costly patients, treat them, and then
keep them in the hospital. As one doctor put it, "The
best way to stretch a fixed hospital budget is by keeping
sick people out and healthy people in."
The U.S. political structure is
Such practices inevitably produce both full hospitals
and long waiting lists for major medical care. If com-
fundamentally unsuited to
plaints are then raised about waiting lists to enter the
hospital, the administrator can credibly claim that he
effectively administering a
does not have enough funds to meet the demand. He
then will either receive more money from the provincial
national health system like
government, or he will have effectively bucked the prob-
lem up the chain of command to his political superiors.
that in Canada.
The administrator wins either way. Indeed, this practice
of lengthening patients' stays is so common that
Canadians have dubbed such long-stay patients "bed
blockers," meaning they are blocking someone else's
its waiting list. The average wait is six months, although
access to a hospital bed.
some people have been waiting as long as a year, said a
hospital spokesman."
Maple Leaf Drag
Yet in spite of these problems, the system remains
As with any nationalized health system, when un-
extremely popular with the general Canadian public.
limited demands for perceived "free" care collide with
Indeed, opinion polls show that most Canadians believe
limited government budgets, shortages result and more
their system is without rival. But increasingly that
people must take a number and wait for treatment. The
popularity is derived not from any inherent virtues of
resulting problems and horror stories have provided
the system, but from the inevitable calculus of political
much grist for the press.
economics. As in other nationalized systems where
The same Maclean's article that related the story of
money is eliminated as the means of allocating goods
heart patient Charles Coleman also reported: "Hospitals
and services, the Canadian system increasingly allocates
in some cities have had to institute unusual, and some-
health resources on the basis of votes, not on the basis
times humiliating, economic measures. Patients in the
of need. For the lucky majority who are reasonably
maternity ward of Toronto's North York General Hospi-
healthy, they will continue to find ready access to routine,
tal are required to bring in their own pillows, while
low-cost medical services. But for the unfortunate
elderly patients in some Montreal hospitals are being
minority with serious conditions, they will increasingly
kept in diapers because nurses do not have time to help
be expected to take a number and wait.
36
Policy Review
$190 Billion in New Taxes
uninsured in the United States has led many to seek
If all of this is not enough to dissuade U.S. policy-
universal health insurance coverage through a national-
makers from instituting a Canadian-type system, the
ized system. Yet the real goal should be to provide all
projected costs definitely should be. While several
Americans with adequate medical care. Health insurance
detailed analyses of the cost of adopting a Canadian-type
is only one of several means of achieving that goal, and
system in the United States have recently been con-
many times it is not the best means.
ducted, they only confirm what quick, back-of-the-en-
Rather than instituting a government-run system of
velope calculations yield. Present -U.S. health spending
universal health insurance, Americans should pursue
is over $600 billion per year, of which the federal, state,
reforms designed to ensure that all citizens have access
and local governments account for 42 percent, or rough-
to adequate medical care. Such reforms should have two
ly $250 billion. Thus, expanding the total government
fundamental objectives:
share to the 74 percent found in Canada would neces-
First, to empower consumers by giving workers and
sitate about $190 billion per year in new government
their families direct control over the money used to
spending. Expanding the government share to around
purchase their medical care and insurance, thus unleash-
90 percent or more, as would occur under most pending
ing market forces and consumer choice to control health
legislation to adopt the Canadian system, would push
care costs and bring efficiency to the system.
total new government spending into the $300-billion-per-
Second, to restructure existing health care tax policies
year range.
and government programs to provide the poorer and
Economists Gary and Aldonna Robbins have es-
less healthy members of society with the extra purchasing
timated that funding such a total health care nationaliza-
power they need to obtain necessary medical care and
tion program would require either: Increasing the
insurance in a freely functioning market.
combined employer-employee payroll tax from its cur-
Pursuing reforms based on these principles offers the
rent rate of 15 percent to 29 percent; raising income tax
best hope for America to create not only a better and
rates across the board by 14 percent; or, imposing a new
less expensive health system, but also a system that
national sales tax of 10 percent.
achieves the goal that has eluded Canada: affordable
Furthermore, the U.S. political structure is fundamen-
access to medical care for all its citizens.
tally unsuited to effectively administering a national
Indeed, perhaps the ultimate irony of the Canadian
health system like that in Canada. Unlike other countries
system is that it is evolving into what Canadians sought
with nationalized systems, the United States does not
to avoid: a two-tiered system. While all Canadians have
have a parliamentary system of government. The U.S.
system not only separates the executive and legislative
functions, but even within the legislative arena con-
gressmen and state legislators more closely represent the
Canada's system serves well
narrower interests of their constituents, have much more
power to alter legislation, and are much less subject to
the majority who are
party discipline than are their parliamentary colleagues
in other countries.
reasonably healthy. But
Because of these significant political differences, any
national health system in America likely would quickly
people with serious conditions
degenerate into pork-barrel politicking and legislative
micro-management. Indeed, one does not have to look
will increasingly be expected
to obsolete military bases, farm subsidies, public works
programs, or dubious research projects to find examples.
to take a number and wait.
There is already one graphic example in the U.S. health
care system of what would happen nationally with a
Canadian-style system: namely, the medical system run
by the Department of Veterans Affairs. That system
access to health insurance, fewer of them are receiving
labors under chronic budget problems, and constant
access to needed medical care.
restrictions and special-interest requirements imposed
As the problems in their health care system grow and
by Congress. In fact, congressional interventions have
deepen over the coming decades, Canadians may even-
kept any obsolete V.A. hospitals from being closed over
tually find themselves turning toward market-based
the past 26 years.
reforms of the kind now being instituted in the older
national health systems of Britain and Sweden.
Alternatives to the Canadian Plan
Then again, the crisis may be nearer at hand. As
There is a lesson in the Canadian experience that
Ontario kidney specialist Adam Linton told the New York
Americans should take to heart.
Times in April, "We have not yet had to kill anyone by
In reforming our own system, we should avoid con-
not providing dialysis or a transplant, but the issue is at
fusing means with ends. All the attention focused on the
a flash point."
Fall 1991
37
THE WALL STREET JOURNAL FRIDAY, OCTOBER 18, 1991
A15
Canadian Health Care Is a Model for Disaster
VANCOUVER-An important issue in
source of the Canadian problem with medi-
fast cereals, bread, etc. "Okay," Gal-
has been 174,518 person-days lost per
the current debate over Canada's constitu-
care-monolithic, centralized control-is
braithians concede, "but health care is dif-
year.
tion is the maintenance of "national stan-
seen south of the Canadian border as the
ferent.'
Buried in these figures is the 17,day
dards" in the social programs which have
source of great savings. In fact, according
Well, maybe it is. But duplication has
nurses strike which effectively shut down
become a hallmark of Canadian citizen-
to results presented in the New England
the indisputable benefit of ensuring that if
the health-care system in the province of
ship-at least since 1971 when Canada's
Journal of Medicine and graphically illus-
one source of supply is withdrawn, others
British Colombia during 1989. And one par-
Medicare came into full effect. In 1991,
trated in the PBS special, "Borderline
are there to replace it. As we have been
ticular case from that strike, of 35-year old
against the backdrop of an impending
Medicine," half the difference between the
discovering in Canada, this concern for
insulation worker George Yetman, reveals
health-care crisis, it may be easy for
cost of health care in Canada and in the
continuity is not a theoretical proposition.
the human tragedy of this system-wide
American observers to look enviably at the
U.S. is the cost of administering the two
As the monopoly supplier of health-care re-
friction.
Canadian system. Certainly the mythology
health-care systems.
sources, the government is also the effec-
Mr. Yetman had been referred for
associated with our health-care system and
Canada; with its single provider, has
tive monopoly employer of health-care per-
quadruple bypass surgery in March of
other national programs is important in
only one paper trail associated with a pa-
sonnel. Accordingly, it periodically must
1989. He sat on the waiting list for three
synthesizing the Canadian identity and sus-
tient's meandering through the medical
negotiate collective agreements with the
months, only to find that others with
taining the notion that we in Canada have
maze. The patient has no invoices to
almost entirely unionized health-care sec-
"emergent conditions". joined the waiting
achieved the kinder and gentler society
check, no bothersome forms to fill out and
tor, including fee schedules with physi-
list ahead of him as the nurses strike
about which U.S. citizens can only
is generally not involved in the financial
cians and other providers of covered serv-
closed the already overwhelmed cardiac
dream.
process associated with the diagnosis and
ices.
surgery capacity. During the slowdown
At the moment the federal Canada
treatment of his illness. The physician is
Some times these negotiations go
and strike, Mr. Yetman watched the list
Health Act ties federal funding for Medi-
paid on the basis of a single report to the
smoothly and there are no interruptions of
grow from 400 to 800 before arranging to
care to a set of rules including prohibition
health department or medical services bu-
have his bypass surgery in Detroit, Mich.
reau and the hospital receives its payment
It was estimated that
Indeed, according to an article in the Au-
The Americas
in the form of a global budget for the year.
gust 28 edition of the Journal of the Ameri-
The net result is that in Canada only 0.1%
12 to 20 patients in the
can Medical Association, the "solution"
of the national income is used to adminis-
By Michael Walker
adopted by the B.C. government to clear
ter the health-care system. In the U.S., on
queue had died waiting for
up the bottleneck caused by the strike was
the other hand, 0.6% of the national income
to arrange for 200 bypass surgeries to be
is spent to administer the system and an-
operations.
done in Seattle, Washington. Although Mr.
of any user fees or coinsurance payments.
other 0.63% is expended by the physicians
Yetman was operated on in the U.S. and
Provincial governments have fought these
and hospitals in complying with the re-
health-care services. With increasing fre-
survived, the Provincial Cardiac Society
provisions which have become part of the
quirements of insurers.
quency, however, the negotiations do not
estimated that 12 to 20 patients in the
constitutional debate concerning provincial
The solution is clear, tout critics of the
go smoothly-in part because the govern-
queue had died waiting.
autonomy. Medicare boosters fear that this
U.S. system. Simply eliminate all of the
ments involved are finding it very difficult
The current constitutional debate in
decentralization of power will eventually
wasteful paper-shuffling and the 37 million
to keep the lid on health-care costs without
Canada reflects that fact that Canadians
lead to fragmentation of and, horrors, the
U.S. citizens who are currently without in-
putting them in direct conflict with health-
want a more decentralized, competitive
"Americanization" of the Canadian health-
surance can be covered. They further as-
care providers and support staffs.
federation because the current centrally
care system. They, including the socialist
sert that the wasteful paper-shuffling re-
The extent of the friction and its rate of
controlled system is too brittle and insuffi-
parties that are likely to rule in three prov-
sults from competition among alternative
increase can be measured by the number
ciently responsive to the need for economic
inces as a result of elections this month,
suppliers, which serves no useful purpose.
of days health-care workers lose due to
rationality or the differing needs of the
want the new constitution to centralize con-
It is the multiplicity of suppliers that is at
strikes and lockouts. Recent compilations
provinces. The developments in the health-
trol over health care and everything
the root, of the problem. Eliminate the du-
by the Fraser Institute show that whereas
care sector are illustrative of the unantici-
else.
plication and you eliminate the cost.
there were no strikes and no days lost in
pated problems centralization can bring It
The notion that the U.S. mode of health
Attentive readers will recognize this ar-
the first five years of our Medicare pro-
is questionable under the circumstances
care poses even a tiny threat to Canadian
gument from another Canadian export,
gram, there were an average of 14,000 per
whether the U.S. should look to Canada for
practicé will come as a surprise to those
John Kenneth Galbraith. They may wish to
year in the second five years ending in
solutions to health-care problems.
who have been touting the Canadian sys-
test its validity by imagining all the waste
1980. By 1985, this had more than doubled
tem as the solution for the U.S.'s health-
and duplication that could be eliminated
to 31,920 person-days lost per year. In the
Mr. Walker is executive director or the
care woes. Moreover, it is ironic that the
from the markets for automobiles, break-
most recent five-year period, the average
Vancouver-based Fraser Institute,
By Spencer Rich
a quarter to get them down to the
2000
Washington Post Staff Writer
levels in place in Canada.
Cost under a
1999
BY RICHARD FURNO-THE WASHINGTON POST
If the current system were to
The United States would save
continue in effect and health costs
Canadian type
$241 billion on health-care costs
rise to 17.5 percent of gross do-
the first year and $4.2 trillion over
mestic product by the year 2000,
system
1998
the next decade if it switched to a
health costs in that year would be
Canadian-style national health in-
$1.96 trillion in nominal dollars (not
surance system, according to an
adjusted for inflation), they calcu-
A SCENARIO FOR SAVINGS
TRILLIONS OF DOLLARS SPENT NATIONALLY ON HEALTH CARE
1997
SOURCE: "A National. Health Plan In the U.S.", Economic and Social Research Institute
economic study released yesterday.
lated.
The savings over the decade
But if a Canadian-style national
1996
would be about equal to the entire
health insuance system spending
U.S. economy in 1991, the study
8.7 percent of GDP annually were
found. Business firms would be
put into effect, the costs in the year
1995
2000 in nominal dollars would be
. IDEAS & FINDINGS
just under $1 trillion ($972 billion),
1994
instead, they said.
Business
as usual
among the big winners, the study
found, because their health-insur-
Over the decade of 1991 to 2000,
the shift to a Canadian style system
1993
ance outlays would be less.
would result in savings of $5.5 tril-
NOTE: Not adjusted for inflation
The study, the latest entry in the
lion in dollars not adjusted for in-
growing debate over how to re-
1992
flation, which would be $4.2 trillion
structure the U.S. health system to
in inflation-adjusted dollars.
provide insurance for all and cut
The study concluded that busi-
1991
costs, was commissioned by the
ness firms would save about $136
$2.0
Robert Wood Johnson Foundation
billion a year in gross health insur-
and carried out by the Economic
ance premiums and similar health
and Social Research Institute, head-
outlays for their workers, but much
ed by health economist Jack Meyer.
of that would be eaten up by taxes
This report challenged us to de-
on added profits, and addition of
termine whether the benefits of our
nonhealth benefits for workers.
current health care financing justify
Even so, it calculated, employers'
its sharply rising costs," said Mey-
net share of total savings would be
er Relentless growth in health
$512 billion in real 1991 dollars
care spending is increasingly claim-
over the decade.
ing resources that could be used to
Under a second scenario, which
meet other vital human needs."
the authors said is probably more
Meyer and his colleagues looked
achievable, the study calculated
Study Finds Rx for U.S.
how much would be saved if it were
In Canada Health Plan
In Decade, Savings Calculated in Trillions
at potential savings under a scenar-
io that called for the United States
assumed that the current system
to use a Canadian-style system and
would increase spending to 16.1
spend no more than 8.7 percent of
percent of gross domestic product
gross domestic product, Canada's
over the decade and that a Canadi-
current figure. Under "business as
an-type system adapted to U.S.
usual," they calculated the current
needs would cost 13:1 percent of
U.S. system, which costs 12.8 per-
the gross domestic product.
cent of gross domestic product,
Under this scenario, savings
would rise to 17.5 percent by the
would be $1.3 trillion in nominal
year 2000.
dollars over the decade, or $1 tril-
Meyer and his colleagues, Sharon
lion in 1991 dollars for the 10-year
Silow-Carroll and Sean Sullivan,
period.
assumed that the government
The study, the authors wrote,
would reduce costs by cutting ad-
"shows that the potential short-
ministrative and paperwork costs as
term and long-term financial sav-
a result of having a single insurer,
ings from containing health care
holding down the use of amenities
spending are great. And it chal-
like private and semi-private rooms,
lenges us to determine the benefits
and slowing up the addition of new
from continuing along a path of un-
machinery and technology. About
restricted spending growth, and
$28 billion in savings would come
decide whether they are worth the
from reducing doctor fees by about
cost."
Services of Mead Data Central, Inc.
PAGE 13
1ST STORY of Level 1 printed in FULL format.
Copyright (c) 1989 National Journal Inc.;
National Journal
July 15, 1989
SECTION: REPORTS; Health; Vol. 21, No. 28; Pg. 1792
LENGTH: 5061 words
HEADLINE: Taking Care of Canada
SERIES: This is the first of two articles on Canada's health care system. The
second article will analyze the issue of whether elements of Canada's system
might be adopted by the United States.
BYLINE: BY JULIE KOSTERLITZ
DATELINE: TORONTO
HIGHLIGHT:
As America agonizes about soaring medical costs and the millions who lack health
insurance, Canada's system illustrates the prospects and pitfalls of universal
coverage.
BODY:
Canadians can't help betraying their amusement. All of a sudden, a nation
that has played permanent understudy to its self-absorbed neighbor to the south
is in the limelight. Congressional delegations, economists and journalists are
flocking north to look at its health care system.
William L. Roper, the White House deputy assistant for domestic policy, was
here, Canadians tell you. So were Reps. Fortney H. (Pete) Stark, D-Calif., and
Willis D. Gradison Jr., R-Ohio, the chairman and ranking minority member of the
Ways and Means Subcommittee on Health. The American Association of Retired
Persons set representatives, and just the other day, it was The New York Times
and Sen. Dave Durenberger, R-Minn.
For the benefit of Americans who can't make the trip, some Canadians find
themselves subject to command performances at conferences and hearings in
Washington. "At first, Mohammed came to the mountain," joked Martin Barkin,
Ontario's deputy minister of health. "Now, they want the mountain to go to
Mohammed."
The Canadian system isn't new: The basics have been in place for about 20
years. Nor is the American flirtation with national health insurance new; it
has been going on for at least that long. "Interest in Canada seems to come and
go every five years," said Graham W. S. Scott, chairman of an Ontario health
policy group.
What has tuned the spotlight on Canada this time is a mounting sense of
crisis in the American health care system. A large and growing number of
Americans lack health insurance - the estimates have ranged from 31 million-37
million. And the federal government and, increasingly, big business, worry that
galloping health care costs could break the bank.
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Canada, by contrast, not only offers all of its 25 million citizens
comprehensive health insurance, but it does so at a far lower cost than the
United States pays. In 1987, Canada spent 8.6 per cent of its gross national
product (GNP) on health care; the United States spent about 11.2 per cent.
Moreover, life expectancy and other key health indicators look pretty similar in
the two countries. Actually, Canada does better than the United States in
certain areas -- it has lower infant mortality rates, for example.
What makes all this tough to ignore is that this is a country not too
dissimilar from our own. There are, of course, important social and political
differences. But in many economic and cultural aspects, as well as in
demographic and medical trends, they are close enough so that -- if you somehow
forgot that Canada has its Francophones and that its Anglophones say "aboot"
when they mean "about" -- you could, for a moment, forget you'd left home.
Inevitably, some American policy makers are asking how Canada makes its
health care system work -- and whether a similar system would work in the
United States. Congress already is starting to move on a proposal to change
medicare payments to physicians by using cost controls loosely based on the
methods of some of Canada's 10 provinces.
Not all Americans gaze north admiringly, however: Organized medicine looks
askance at the controls placed on doctors and hospitals and has reacted sharply
to the prospect of Canadian-style reforms in medicare. The American Medical
Association (AMA) has launched a campaign to call attention to shortfalls in
Canada's system, replete with newspaper advertisements and prepared remarks for
Members of Congress to read into the Congressional Record. Rep. Butler Derrick,
D-S.C., was one of several who sided with the AMA's view, telling his colleagues
on June 20 that Canada's system has brought "growing waits for necessary
surgery, degrading conditions for elderly hospital patients and an intrusion
into the physician-patient relationship."
The conservative Heritage Foundation in Washington sent journalists a copy of
a cover story in the Canadian newsweekly Maclean's on 63-year-old Charles
Coleman, who died shortly after a heart operation in a Toronto hospital; the
operation had been postponed 11 times. Stuart M. Butler, Heritage's director of
domestic policy studies, wrote that the lesson from Canada is that
government-run systems result in "diminished and rationed health care
resources.'
"Canadian-style" medical care thus means, to some Americans, an equitable and
economical system, but to others, a welfare state run amok.
ACCEPTING LIMITS
Seen up close, the Canadian system is a good deal more complicated than
either description would imply. To begin with, Canada's is a joint
federal-provincial system that varies greatly by province. For another, it is,
like the U.S. system, accommodating to an era of fiscal austerity.
How well the system functions depends, not surprisingly, on whom you talk to.
Nevertheless, from more than a dozen interviews with government officials,
physicians and hospital administrators, and talks with consumers in two
provinces -- Ontario, which is, in many respects, representative of trends
throughout Canada, and Quebec, considered by many to be on the cutting edge of
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health care reforms certain themes emerge:
*
Canada has decided to ration medical care according to need rather than by
income or work status, as the United States has done by default.
* Universal coverage is a widely cherished and politically untouchable
feature of the health care system here.
*
The presence of a sole payer for health care, the government, is key to
the country's ability to restrain cost growth.
The government has held down the rise in health care costs by restricting
doctors' fees and the availability of health care providers and some services,
institutions and high technology medical equipment. Because there's only on
payer, the system spend substantially less on administration and advertising
than the U.S. health care system spends.
The system doesn't always function smoothly; nor does the reality always
match the rhetoric. Rationing according to need, for example, is anything but Plt
science, and suspected failures -- especially fatal ones -- make instant
headlines. And even though a government monopsony may be an effective agent of
cost control, it can and has caused considerable rancor among physicians in some
areas.
"Right now you have a bitter profession and a government that's indifferent
to out bitterness," said Ted Boadway, director of health policy for the Ontario
Medical Association (OMA).
Indeed, fiscal austerity by the Canadian federal government and some
provincial governments and rising health care costs have produces a lot of
finger-pointing. Left-wing critics, health economists and provincial officials
tend to blame doctors for providing too many unneeded services and resisting
change. Doctors blame "an entitlement mentality" that, they say, leads to
public overuse of the system. Doctors also accuse government of making
politically popular but economically untenable promises and then scapegoating
doctors and hospitals when the promises can't be kept.
Even so, all parties respond to the notion of limits with a degree of
cooperation and foresight that is unusual by U.S. standards.
"We take the approach that we're all in this together," said Ruth L.
Collins-Nakai, a pediatric cardiologist in Edmonton, Alberta, and a past
president of Alberta Medical Association who serves on a new provincial task
force on the future of health care. "Parts of the health care system
fighting amongst themselves is not going to solve the problems. "And Ontario's
Barkin said, "There's almost a consensus on the direction changes should take
between government, providers and citizens."
Roughly, the new conventional wisdom is that the bottlenecks in the system
aren't caused by a shortage of money but by an inappropriate allocation of
resources to high-tech medicine and institutions. Better accounting and more
research are needed to track how money is spent and what results it gets, the
thinking goes, and there's a shift in emphasis -- from state-of-the-art medical
and institutional care of the sick and injured to disease prevention and social
welfare, economic and environmental policy. There's also talk of more
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community involvement in health care decisions and better public education on
the costs and consequences of health choices.
If the research and cost-accounting part of this strategy parallels, and
perhaps copies, American thinking, the "alternative health strategies' part may
sound vague and idealistic to American ears. But Canadians insists that such an
integrated approach is both tangible and vital, and many of the provinces have
set up high-level commissions that are translating that approach into specific
plans for the future.
Whether such changes can alleviate glitches in the system is anyone's guess.
But given the extreme popularity of their universal, tax-financed health care,
Canadian policy makers would rather face up to tough choices about how much care
can be provided than restrict anyone's access to care. During consideration of
Canada's free-trade agreement with the United States last year, when Canadians
briefly and mistakenly thought their health care system might have to be
dismantled, opinion polls showed a whopping swing against the agreement.
Americans shrink from the notion that care must be rationed; Canadians don't.
It's not a questions of whether either country must ration, they say, but rather
how it is done. Canadians aren't shy about telling you that for all its
shortcomings, their system represents the higher road.
"In Canada, when they thought one person did not get cardiac surgery in a
timely way, that's front-page news," Barkin said. "In the U.S., when 37 million
people don't get care, that's a small column in the back of your newspapers.
Today's [newspaper] tells me you're even picking and choosing which ambulances
you'll receive at an emergency department and which you'll send off somewhere
else, like a scene out of Franz Kafka."
CONTROLLING COSTS
It all started in the western province of Saskatchewan just after World War
II. After federal-provincial discussions of a possible national health
insurance system went nowhere, that province in 1946 decided to forge ahead on
it own, offering province-wide universal hospital insurance. Three years later,
British Columbia and Alberta followed suit. In 1957, the federal parliament
passed a law that made possible federal contributions to such plans, and by
1961, all provinces had qualifying plans.
Saskatchewan was the standard-bearer again with outpatient medical care,
introducing the first universal medical care insurance program in 1962. Once
again, the federal government picked up on the innovation, agreeing in 1968 to
share costs for such programs. By 1972, all provinces had qualifying plans.
"There was a certain social conscience that said, 'Gee, if they [another
province] can do it, how can we not do it?'" said S. Vickery Stoughton, an
American who is president of the Toronto Hospital Corp., which runs Toronto
General Hospital and Western Toronto Hospital.
Under the federal-provincial system, the federal government sets basic
standards, contributes about 37.4 per cent of the funds for the system and
leaves the rest of the financing and decision making to the provinces. The
federal standards hold that provincial plans must cover all essential medical
service, encompass everyone, make services reasonably accessible and be portable
--- that is, cover Canadians when they travel or move.
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Those features have endeared the system to Canadians. But it is the system's
apparently superior ability to control cost that has riveted U.S. attention. In
the mid-1960s, shortly after Canada's universal hospital insurance program got
underway, both nations spent about 6 per cent of GNP on health care. In the
two decades since, Canada's health care costs have risen by only about 3
percentage points as a share of GNP, while American expenditures as a percentage
of GNP have nearly doubled, according to the Organization for Economic
Cooperation and Development (OECD).
And here's another set of figures that has caught America's interest: In
1986, the United States was spending $ 1,926 per person for health care,
according to the OECD, or about 41 per cent more than Canada's figure of $ 1,370
(U.S.).
How do they do it?
For starters, some health care economists say, Canada saves a bundle on
administrative costs because, unlike America, it doesn't have payment systems
run by hundreds of insurance companies as well as by federal and state
government programs, each with its own rules.
"There's a feeling that because of multiple payers, there's a duplication in
effort," said Roberta J. Labelle, an assistant professor of economics at the
McMaster Health Sciences Center in Hamilton, Ontario. "With a single payer,
there are economies of scale."
Any American who has ever labored over a health insurance form, trying to
figure out which expenses would be covered, couldn't help but admire the ease of
doing the Canadian paperwork --- it's about a simple as using a credit card.
That ease also means sizable savings. Nearly 15 per cent of U.S. health
expenditures goes for administrative costs, while in Canada, the figure is only
2-3 per cent, Labelle said.
Having the government run the insurance system also does away with the need
for insurance company advertising and the charges that the companies tack on to
reap a profit.
Canada also controls costs by keeping a tight grip on spending by hospitals
and doctors. Hospitals in Ontario, which consume about 44 per cent of the
province's health budget, receive a "global budget" to cover their costs. This
budget, first established in 1969, is updated yearly to inflect general
inflation --- not medical inflation, which is typically much higher.
To stay within limits, "we've had to reallocate resources internally,"
Stoughton of Toronto Hospital Corp. said. For example, he said, in Ontario, the
average hospital has about two full-time staff members (or the equivalent in
half-time staff) per patient on a given day. Few American hospitals operate
with fewer than four full-time staff members per patient per day, he said.
The Ontario government also limits the availability of hospital beds: The
number of acute-care beds per 1,000 people has dropped from 4.2 in 1976 to 3.4
at present, Labelle said, although many beds have been shifted to other uses,
such as long-term care. AS a result of the limits, and the increased use of bed
for patients requiring chronic care, she said, Ontario's occupancy rates run
about 94 per cent, compared with the U.S. average of 60 per cent.
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Access to big-ticket, high-tech medical equipment - -- for example, magnetic
resonance imaging that allows doctors to see detailed images of cross-sections
of the body, and lithotripters, which use shock waves to crush kidney stones -
is also carefully controlled. Not only does government make sure that most
sophisticated technology is confined to hospitals, it also exerts control,
primarily through hospitals' operating budgets, over how many such machines
there can be in the province and which hospitals can have them. In the United
States, such decisions are made largely by individual hospitals seeking a
competitive advantage in the marketplace and often lead to a proliferation of
high-cost machines generating a lot of business -- much of which is arguably,
unnecessary.
In Canada, hospitals have "no financial incentive to go out for all this
stuff," Stoughton said. "I have a global budget. If I don't have [extra
business]. I save money, and I look financially. Our doctors spend time on
that technology at another institution, and we refer [patients] there
It
works."
As the sole purchasers of health care, Canada's provincial governments have
much greater control over spending for physician services than U.S. insurance
companies and the U.S. government have.
American doctors can charge whatever the traffic will bear, though they may
run the risk of after-the-fact challenges from insurance companies. American
doctors also face tougher restrictions under the federal medicaid program, which
serves some of the poor, and the medicare program for the elderly and disabled.
But, unless a doctor agrees to accept medicare's approved fee as payment in
full, the doctor can and often does ask elderly patients to pay the portion of
their charges that medicare won't pay.
The system is vastly different in Canada. In Ontario, which is
representative of many provinces in this respect, the provincial medical
association and the government negotiate the sum of money available for
physicians' services. Once that's set, the medical association sets doctors'
fees.
Under the terms of Canadian law (and, since 1986, Ontario law), doctors are
prohibited from charging patients more than the government will pay - a
practice known as "extra billing." That restriction prompted an unsuccessful
strike by Ontario physicians that resulted in continued hard feelings between
doctors and the provincial government. In the meantime, provinces are also
moving to limit the number of new physicians entering medical practice, on the
theory that if there are more doctors, the will simply drum up more business for
themselves. In British Columbia, an attempt to deny new physicians the billing
numbers they needed to get government payment was struck down by the courts.
But in Ontario, the government has already moved to limit the number of students
graduating from medical schools as well as the number of residency positions for
certain kinds of specialists in Toronto hospitals. Other provinces also are
experimenting with controlling the supply of doctors. (See box, this page.)
QUEUING FOR CARE
Canada's system is not without its problems. Even though medical care costs
Canadians a smaller share of the nation's GNP than Americans pay, the cost are
eating up an increasingly large share of government spending.
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In Ontario, one of the wealthier provinces, health care has risen from 27
per cent of the provincial budge in fiscal 1978 to an estimated 33 per cent in
the current fiscal year. The provinces' financial burden has also grown as the
federal government, which has its own financial problems, has tightened the
formula that set its contributions for health care.
Having government pay for health care makes it technically easier to
control cost growth, but not necessarily politically feasible. Already,
provincial governments' clampdowns on hospital spending have contributed to
sporadic shortages of beds: Some patients must lie on stretchers in hospital
hallways or do without some minor, but noticeable, amenities -- Maclean's said
some maternity patients had to bring their own pillows, for example.
The clampdowns also have resulted in waiting (or queuing, as Canadians say)
for certain kinds of nonemergency care. In Ontario, the most-publicized
bottlenecks have been in cardiac surgery, where waits of several months are not
uncommon. Cardiac surgery, of course, varies in type from the life-saving to
the nominally life-enhancing, and in theory, the highest priority is given to
those in greatest need.
But the queue doesn't always function perfectly. That, for instance, was the
message trumpeted by newspaper headlines when Coleman died last December.
Whether the postponements caused his death, which occurred a week after surgery,
is a hotly debated matter. But there's no question that the case stirred public
passions.
In the aftermath of that case, Ontario increased the province's cardiac
surgery capacity and set up a special committee to investigate better ways to
coordinate the way all doctors select high-priority candidates for surgery. "We
clearly did fall behind on cardiovascular surgery, and we're now quickly moving
to bring that back up to standard," Barkin said. "But that was no a deliberate
withholding of funding because we wanted to have a queue there, it's because we
couldn't respond fast enough to certain changes in practice patterns." There's
nothing wrong with queues for nonemergency care, Barkin said, 50 long as they
don't get too long.
Provincial governments also have learned that as in the U.S. medicare
program, even when doctors' fees are limited, over-all costs can skyrocket if
there are no controls on the number of services that doctors perform.
After extra billing was banned, for example, "doctors' cost [in Ontario]
leaped by a quarter of a billion dollars in a year and half," said Scott, who
was the province's deputy health minister under the Conservative government
before the Liberals came to power in 1985. "My own personal theory is that
doctors felt they had to be more entrepreneurial to make money," said Scott, a
Toronto attorney who is chairman of a government-OMA task force on medical
services. Doctors also began billing patients privately for services that had
been free but weren't specifically covered by national insurance, he said.
As the volume of services has continued to push up Canada's total cost for
medical service, provincial governments have taken a tougher stance with
doctors. Ontario has begun insisting that unexplained increases in the volume
of services offered count against doctors in future fee negotiations.
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The new course has been bumpy, at best. Last year, the negotiating process
broke down in disputes over that concept, and the government unilaterally set
the increase. Now, the two sides are trying to hammer out a new process for
deciding future fees.
In the meantime, anecdotes circulate about some wealthy Canadians who don't
want to wait for treatment heading over the border to hospitals in Buffalo,
N.Y., or to the Cleveland Clinic in Ohio. There are also tales of physicians
who have packed it in and moved south.
But there's general agreement that these instances are relatively few. In
Toronto, people remember the brilliant children's plastic surgeon who moved to
Texas in the wake of the failed strike. "He could turn the most
horrible-looking monster creations into quite pleasant looking children," Scott
said. "But he would turn you away at the door if you didn't have his fee over
and above what [government] would pay."
"He was a real superstar," Stoughton said. "The U.S. system is an enormously
rich system, and real superstars can be well accommodates. We don't lose a
lot."
Furthermore, Canadians confess that they're terrified of falling ill or
having an accident while visiting the United States, for fear they'll be refused
care or be bankrupted by expenses that exceed what their insurance will pay.
They talk about loading up on private health insurance for travelers before a
trip south, showing the same anxiety that Americans might have about getting
sick in Mexico.
CHANGING THE EMPHASIS
The budget crunch and the development of pressure points in the system have
given some ammunition to the Canadian system's critics. Conservatives and some
physicians in both the United States and Canada see the problems as the
inevitable outcome of a welfare-state mentality.
"When I went into practice, people were grateful [for doctors' services] to
the point that they would bring me goods as a sign of gratitude," said the OMA's
Boadway, a former family practitioner. "Over the past 20 years," he said,
"there's been a cultural shift and people began to say, "I'm entitled to,
I demand to, and I will go' [to get medical care]. So people make more demands,
and they do come to the doctor's office more."
Left-wing critics reverse the formulation. "What's wrong with the Canadian
system is not the lineups and the Canadian system is not the lineups and the
queues, or that this is what happens when government runs things," said Michael
Rachlis, a Toronto physician and co-author of a controversial book, Second
Opinion (Collins Publishers, 1989). "The problem is physicians' clinical
decision making which really gums up rational allocation of resources in
the social policy area."
Many of the arguments in Rachlis's book are echoed in less-combative terms by
officialdom. "The primary determinants of health are social policy, wealth and
personal choice," Barkin said. People mistakenly attribute too much benefit, he
said, to medical and hospital care, "to aorta coronary bypass, artificial hearts
and all that kind of stuff that is glamorous and high-tech but doesn't buy you
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a lot of population health.
In fact, poverty may account for more ill
health, and the correction of poverty may account for more good health, than all
of the expenditure on our total health care system."
After several blue-ribbon government panels came to some of the same
conclusions about the need for the same conclusions about the need for a major
shift in emphasis, Ontario Premier David Peterson set up the Premier's Council
on Health Strategy, made up on 7 cabinet ministers and 24 outside
representatives, to translate those goals into concrete actions. "We believe
there is sufficient money in the system now to have effective, well-managed
[care], but we need to put different incentives in place, around how hospitals
are set up and funded, about how physicians are paid, around where people are
cared for, and different ways of organizing care," said Marilyn H. Knox,
executive director of the council.
In May, the council's first big report set out health goals for the province.
It has the rhetorical gloss typical of government reports everywhere, bu the
council says its lofty goals come with specific targets: making sure that 75 per
cent of all health and social services are available in French in
French-speaking communities, for example, and boosting the number of community
health centers in Ontario by 50 per cent - and doing both by 1995. And, Knox
said, the provincial government has made health a top priority. It also issued
a technical report with some controversial recommendations on how to restructure
the incentives in the current hospital-payment and physician-payment systems,
and it proposed more experimentation with alternative delivery systems,
including some modeled on American health maintenance organizations.
The province has also launched a joint task force with the OMA, headed by
Scott, to tackle some of the thornier issues of medical-practice guidelines and
the cost-effectiveness of expensive new drugs and technologies. Unlike many
such groups, Scott said, this one decided against letting narrowly focused
experts set the guidelines, and instead brought in a varied panel of experts. A
striking result, Scott said, was that the group's recommendations on cholesterol
screening were far more conservative than those produced by a U.S. National
Institutes of Health "consensus conference." The American group advocated mass
screening for cholesterol problems. The Ontario group found, Scott said, that
"not only was mass screening not justified, [but] that if you compare the cost
of mass screening per life saved, bypass surgery is cheaper." In fact, the study
found, if the U.S. guidelines were followed in Ontario, they could add $ 1
billion to the province's $ 11 billion health budget.
"That's enormously instructive when one talks about health care costs, to
think that something as minor as high cholesterol, which really is minor despite
all the hype -- it's a joke relative to smoking, for example, and heart disease
-- could cost as much as 1/11 of the entire health care bill," Scott said.
SUPPORTING THE SYSTEM
Whether the onslaught of initiatives will forestall a financial crisis or
severe service cutbacks in the Canadian system remains to be seen.
Ironically, although they disagree on the roots of the system's problems and
on solutions, both the critics on the Left, such as Rachlis, and mainstream
physicians at the OMA worry that reforms could run afoul of public expectations.
"Let's assume you had the best preventive system in the world," Boadway said.
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"People still get breast cancer and appendicitis. The threat is, we can't look
after the people who still get ill
that we will be expected to do a job
with the level of care and excellence people have come to expect and have a
right to expect, and we won't be able to do it."
Rachlis blames the problem on public misinformation. "The public doesn't
believe what the experts claim they know," he said. "While the experts say that
at the margins, the next dollar put into physicians' services has much less
influence on health than money put into other areas, the public believes that
unless we're putting every last penny of their tax dollars into hospitals, that
we'll all by dying like drought-stricken Ethiopians.
But even though the public's reaction to reform may be the big unknown in the
future of the system, the public's support for universal, tax-financed health
care is in no doubt.
"As Canadians, we've chosen to have a universal system, and any time there's
talk about making changes to it, we will see the consumer groups rising up and
being quite clear about what they think about it," Knox said. "It's something
that's really quite sacred here."
The notion that consumers might be more sensitized to the cost of health
care if they had to pay a share themselves has no political constituency.
Indeed, the Ontario government has moved twice in recent years to further
protect the public from out-of-picket expenditures: in 1986, when it outlawed
extra billing by doctors, and this year, when is abolished premiums for the
universal outpatient care program in favor of a payroll tax on the province's
employers.
Knox, like most of those interviewed, argued that requiring payments would
create unacceptable barriers to care and undermine the concept of universality.
"Yes, people appreciate costs when they pay them themselves, but when they don't
get service, they also rise up and understand," she said. "It's a difficult
one, but one point we're at here is that universality is not in question. The
medicare system will be here, and we're not wanting to get into a two-tiered
system where those who pay can get a different level of access from those who
cannot."
GRAPHIC: Picture 1, no caption; Picture 2, All Canadians are entitled to
health care, but the system's in flux. Julie Kosterlitz; Picture 3, Ontario's
Graham W. S. Scott, Americans are looking north again. Brigitte Cavanagh;
Picture 4, Cardiologist Ruth L. Collins-Nakai, Julie Kosterlitz; Picture 5,
Toronto physician and author Michael Rachlis, Julie Kosterlitz; Picture 6,
Ontario Medical Association's Ted Boadway, a former family practitioner, Since
Canada adopted its program, people are demanding more medical care. Brigitte
Cavanagh
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2
5TH STORY of Level 1 printed in FULL format.
Copyright (c) 1989 National Journal Inc.;
National Journal
July 22, 1989
SECTION: REPORTS; Health; Vol. 21, No. 29; Pg. 1871
LENGTH: 4792 words
HEADLINE: But Not for Us?
SERIES: This is the second of two articles on Canada's universal health
insurance system and whether elements of that system might be adopted by the
United States. For the first article, see NJ, 7/15/89, P. 1792.
BYLINE: BY JULIE KOSTERLITZ
HIGHLIGHT:
Although Canada's health care system appears to offer some better alternatives
to the pitfalls of the U.S. system, most U.S. experts say such a system wouldn't
work here.
BODY:
Tell President Bush he needn't bother creating a kinder, gentler America,
because it already exists: It's called Canada.
So goes the joke told these days among our neighbors to the north.
But as Americans study Canada's universal, tax-financed health insurance with
an eye to reforming the U.S. system, health care experts on both sides of the
border say the truth behind the quip makes wholesale adoption of a
Canadian-style system here highly unlikely, at least anytime soon.
Social reformers in the United States, where at least 31 million people lack
health insurance, envy the universality of the Canadian system. Washington
policy makers and some large private employers have taken note of the
comparatively low cost of the Canadian system: About 8.6 per cent of Canada's
gross national product (GNP) is spent on health care, compared with 11.2 per
cent here.
But for all the Canadian system's appeal, there are a host of subtle but
profound societal and political differences between the two nations.
"It is a different country," said William L. Roper, the White House deputy
assistant for domestic policy and a former head of the Health Care Financing
Administration, which runs the medicare and medicaid systems. Roper, who
visited Canada in January, said, "We have a common language, but there are
important differences in values and cultural systems, and we must recognize
that."
Aside from obvious differences, such as Canada's smaller population, its
provincial system and its parliamentary government, there is a deeper
difference: The U.S. emphasis on individualism and mistrust of government
contrasts sharply with the Canadians' stress on the collective good and on
government as its agent.
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Canadians insist that the key to their success comes from having a single,
universal health care system, controlled by the provincial governments. Many
American experts, however, argue that solutions to our problems must be found
within the current framework: a quasi-free-enterprise system in which various
government, corporate and individual purchasers of health care use a wide
array of health care providers, from health maintenance organizations (HMOs)
to solo practitioners to for-profit hospitals.
Some argue that the American approach is superior and that the creativity and
innovation that set it apart should be preserved. Others call it merely a
concession to political realities here. "You can make a powerful argument that
we'd be better off with a Canadian-style system, but the intellectual logic
is almost disjointed from reality," said Lynn M. Etheredge, a private health
care consultant with some health insurance clients. "You can't put it
together politically; there are far too many economic interests with a stake in
the growth of the U.S. health care system."
As for the solutions, however, there is little precision and scant consensus.
A variety of policy makers have expressed interest in the notion of "managed
competition," in which the government provides incentives for all purchasers of
health care to contract with lean and efficient organizations, such as HMOs
and their variants. But no one seems certain exactly how this might come about
and how it would work.
Most concede that even an improved free-market system would probably not
provide the same universality or control of costs that the Canadian system
provides. Americans, they insist, aren't willing to accept the sacrifices this
would entail.
FRAGMENTED SYSTEM
Few U.S. experts familiar with the Canadian system will deny that it has some
attractive features. Beyond the universality of access and the cost control
features are less obvious ones - some defying American stereotypes about
national health insurance.
Often thought of as centralized and rigid, national health insurance in
Canada leaves most basic health policy decisions to provincial governments.
"Their system is more federal than our," said Rep. Willis D. Gradison Jr. of
Ohio, the senior Republican on the Ways and Means Subcommittee on Health.
"There are substantial variations from province to province." At the same time,
strong federal requirements of universal, comprehensive and portable coverage
guard against the vast state disparities in coverage and eligibility in the U.S.
medicaid program.
With most of Canada's health care financing and public health issues
concentrated in relatively few hands at the provincial level, the provincial
governments can, and increasingly do, take a more comprehensive approach to
health care policy than the United States does.
In this country, payment decisions are not only divided between government,
employers and individuals, but are also fragmented between different levels of
government: Washington is responsible for medicare, the program for the old and
disabled, and shares responsibility with the states for medicaid, which
primarily covers the poor. Beyond that, cities and counties typically finance
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a variety of public hospitals and clinics for those who fall through the cracks.
Even at the federal level, the approach is fragmented. In Congress,
different aspects of health care fall to different committees, which jealously
guard their turf and tend to act independently. Within the bureaucracy, the
Public Health Service is responsible for both advanced scientific research and
more basic disease prevention and health promotion, and the Health Care
Financing Administration not only administers medicare and medicaid but tracks
broader health economics issues. The two operate like giant ships passing in
the night.
The Canadian system's comparatively simple administration also belies part of
the popular image of national health insurance as more bureaucratic and
intrusive than a free-market system. American physicians and hospitals, for
example, complain about the growing gantlet of insurance, HMO and government
rules that they must negotiate.
"The positive thing in the Canadian system is that you don't have to
distinguish patients according to payer class," said Robert A. Berenson, a
Washington internist who was an assistant director of the Domestic Policy Staff
in the Carter Administration. In the United States, he noted, "every payer is
looking after their own interests, so it makes sense from their own standpoint.
But, taken in the aggregate, it's crazy-quilt mess."
With multiple payers, "its's a real problem to practice medicine," he said.
"You're continually caught in the middle. My malpractice insurance company
makes me go to seminars or they'll cancel my insurance. The seminars tell me to
suspend my clinical judgment and order tests so they'll know I have all the
documentation. Simultaneously, the HMO's penalize me for ordering these same
tests. Insurance has exclusions for preventive and routine care, which makes no
sense from a medical standpoint,
and patients expect me to lie on their
behalf' 50 that they can get such care paid for by insurance, a demand that
"sets up weird ethical problems."
Just as bad, he said, is the lack of portability of employer health plans.
"Time after time, it has happened that because a patient's job has changed, I
might not be their doctor anymore. People moving across the system is not good
medicine and has to have significant transaction costs," he said.
Canadian physicians agree. "We probably have more freedom" than American
physicians do, said Ruth L. Collins-Nakai, an Edmonton (Alberta) pediatric
cardioilogist, "because in the States, you have all those third-party [insurance
plans] breathing down their backs."
Hospitals face some similar problems. The American Hospital Association, for
example, has said that the typical hospital in the United States must already
contend with 45 regulatory institutions. And though many hospitals are making
out quite well in the brave new world of entrepreneurial health care, others
are struggling. Many inner-city hospitals, for example, are overloaded with
medicaid and uninsured patients other hospitals won't take - often the sickest
of the sick.
Canadian doctors and hospitals say they appreciate not having the problems
their American counterparts face in contending with the uninsured and poor who
cannot pay their bills. "I worked in [Boston] and had great difficulty
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turning away sick kids" who lacked insurance, Collins-Nakai said. "I couldn't
do it."
Having government administer the program would also take some of the heat off
employers, which insure about 136 million workers and dependents who are
increasingly alarmed by the rates of increase in the costs they face. Adding to
workers' sense of urgency 15 their new awareness of the huge and long-hidden
costs of health insurance promised to retirees in years past. Part of generous
early retirement packages meant to help trim payrolls, these promised health
plans for retirees under age 65 have become a major cost item. Just how major
has been driven home by a recent Financial Accounting Standards Board decision
that will require companies to list these costs on their balance sheets at the
time they're promised -- not merely as they're paid.
Employers, slow to confront costs, have been scrambling to catch up. In the
meantime, they complain that they are subsidizing the uninsured, the small
businesses that hire them and even the tight-fisted government programs.
And, having already seen their early efforts at cost containment fall short,
companies are beginning to recognize that future solutions will have to be
tougher. "Our prior cost-containment fall short, companies are beginning to
recognize that future solutions will have to be tougher. Our prior
cost-containment efforts worked only for a short term," until providers found
the loopholes in the system, said Joseph W. Duva, corporate director of employee
benefits for Allied-Signal Inc., a New Jersey-based manufacturer of aerospace
and automotive equipment that recently launched an aggressive new health care
cost-control program. "If companies have gone through the process we have, they
would recognize they have to change how they deliver care."
MAKING A DIFFERENCE
But if the Canadian system appears to offer some better alternatives to the
various pitfalls of the American system, American experts almost uniformly argue
that such a system wouldn't work here.
Canada is different, they say. It has just a fraction of our population and
10 provinces to our 50 states, which presumably makes a universal health care
system easier to manage.
The Canadian form of government is also different. Parliamentary politics at
both the federal and provincial levels makes for a greater unanimity of purpose
in government than does the American system of separation of powers between the
executive branch and the legislative branch -- which itself has a fractious
bicameral structure. In the Canadian system, when one party has a majority of
seats, "you can pass a law faster than anything I've ever seen," said W. Vickery
Stoughton, and American who for the past eight years has been president and
chief executive officer of Toronto General Hospital, which recently merged with
Western Toronto Hospital.
The parliamentary system also insulates rank-and-file elected officials from
special-interest pressures to a greater degree than the U.S. system does.
Interest groups, "instead of lobbying individual members [of Parliament], are
more likely to go to the cabinet ministers," said Steve Clarke, senior legal
specialist in American-British law at the Library of Congress. Unless the
government collapses, Canadian elections are held only once every five years,
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and campaigns, which last a few weeks at most, are financed publicly and are
subject to expenditure limits, Clarke said.
That's no small point, say those who doubt that a Canadian-style system would
work here: There are large, entrenched and well-financed interest -- hospitals,
doctors, the insurance industry and a whole network of workers and suppliers -
that could be expected to resist a system in which government pays the piper and
calls the tune.
These groups not only exert influence in Washington but also have economic
roots that sink deep into the American economy. "We have a health sector that
is very large and very economically oriented -- very entrepreneurial," said
health consultant Etheredge, who noted that "16-17 per cent of the expansion of
GNP comes from the growth of the health sector. Hospitals are the largest
employers in most metropolitan areas. U.S. health care is the eighth-largest
economy in the world, with $ 500 billion a year in revenues, [and] the health
sector is lots larger than the whole Canadian economy."
There is also the multibillion-dollar health insurance industry to contend
with even though the business has not been very profitable in recent yeasr.
In Canada, no private insurance can compete with the government plan. Although
the government works through nonprofit intermediaries to administer claims, as
the U.S. medicare program does, there is nothing like the private insurance
industry that exists here. Nor, Canadians say, is there anything like the kinds
of administrative and advertising costs the economy incurs in dealing with
diverse, mainly for-profit insurers.
"To make their system work, the Canadians had to outlaw private [health]
insurance," Grandison said. "We're not going to do that in this country
It's not even on the table."
Having instituted their system in the mid-1960s, American nalysts argue, the
Canadians also didn't have to contend with the kind of heightened public
expectations about medical care that exist in the United States today. "The
diet [of health care consumption] of the Average American consumer is much
different now than it was then," Carl J. Schramm, president of the Health
Insurance Association of America, said.
In fact, it's an article of faith here that neither providers nor the public
would accept the trade-offs implicit in a system of universal, tax-financed
care, such as the waiting lists for elective surgery that have sprung up in
various provinces.
Those who make that argument are unmoved by a recent study of public opinion
polls by Robert J. Blendon, chairman of the health policy and management
department at the Harvard University School of Public Health, showing that a
greater percentage of American than Canadians are unhappy with their national
health systems and that Americans by a large margin prefer the Candian system to
their own. Those results, the White House's Roper argues, reflect responses to
loaded question.
"Can you imagine people settling for waiting a month for surgery when they
get so angry at waiting an hour to see the doctor?" asked Thomas R. Reardon, a
Portland (Ore.) physician who has visited Canada several times as a member of
the Physician Payment Review Commission, which advises Congress on medicare
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physician-payment issues. "Canadians have a less-demanding, more-European
culture," he said. "They don't have to have everything yesterday."
Of course, these critics acknowledge, the 31 million or more Americans
without health insurance and the financial means to buy it already face waits
for care or forgo it altogether if they can't afford it. But that concern
doesn't evidently rank as high on America's list of pet peeves. "We do ration
health care in this country by[tying it to individuals' financial] resources,"
said Reardon, a member of the House of Delegates of the American Medical
Association (AMA). "We're the only Western nation in the world that hasn't
solved the problem of universal access. It's a me-oriented society -- 'I have
mine, let them get theirs.' "Rationing care to the rich, the middle class and
the poor alike won't fly here, he said. "If they can buy it, they do not want
to be told what they can't have."
American analysts also say a Canadian-style system would men an end to some
innovations the U.S. system makes possible -- benefits Canada has gotten for
free. "They benefit from having us across the border, because we can do the $&D
and they can use it," Roper said. In a Canadian-style system, he added, "there
are some significant things we would forgo - innovation as to health care
delivery systems, such as HMOs, and to the extent that we constrain spending too
tightly, we'd constrain technological innovations."
U.S. critics of the Canadian system also contend that it has its own set of
problems and that these are about to get worse as Canada faces fiscal
challenges. Bed shortages may grow more acute, and old hospitals and equipment
may face obsolescence. A recent decision by the Ontario provincial to abolish
patient premiums in favor of an employer payroll tax, they note, has some
businesses hopping mad. "I think a lot of us have rose-colored glasses on as we
look north," Schramm said. "We don't see a system that is facing the same
pressures WE are and the kinds of limitations that may obtain there."
"Canada can't continue to run the way they are," said Sen. Dave Durenberger,
R-Minn., who visited Toronto in June. "The system is breaking down now."
Stoughton disagrees. Critics have long predicted the system's demise, he
said, "and it hasn't gone to pot yet."
A MATTER OF TRUST
But perhaps the biggest reason a Canadian system wouldn't work here. U.S.
analysts say, is American's abiding mistrust of their government. Although the
government has been on the cutting edge of health care cost containment,
critics argue that in a universal system, if push came to shove, it would
succumb to public and special-interest pressures for more spending. "Government
won't have the will to tackle the problems" of curbing costs, Schramm said.
Variations on the theme are echoed elsewhere. Although they concede that the
Canadian system appears to offer doctors and hospitals less hassle and more
stability, American doctors and hospitals don't trust their government to run
the system. "I used to be a knee-jerk liberal who thought it was a great idea,
but I've seen how government does the medicare program, and I see mindless
bureaucracy," Carter White House aide Berenson said. "If you expand that three
times over, I'd be very worried about it."
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Hospitals are likely to take a similar view, especially because many of them
are still making out quite handsomely.
"Ten years ago, we really felt like hospitals were public utilities,"
Etheredge said. "That psychology has changed quite a bit, and most are now
independent businesses," and despite the attendant hassle, "most of them would
still prefer to be free to be entrepreneurial."
Hospitals and doctors are also uncomfortable with the idea of collective
bargaining with the government. The Canadian system, in which provincial
medical associations bargain with provincial governments, is anathema to
organized medicine in the United States. And U.S. physicians don't necessarily
want the medical associations representing them. "I wouldn't trust the national
or state medical association with my proxy," Berenson said, noting that the AMA
claims only 50 per cent of doctors as members.
Employers also share this mistrust of government. Despite their panic over
burgeoning health care costs, employers have historically eschewed any
government proposals to control physician and hospital costs. In 1983, for
example, when Sen. Edward M. Kennedy, D-Mass., and Rep. Richard A. Gephardt,
D-Mo., proposed a system that would limit the amount any health insurance
program would have to pay hospitals, not one company stepped forward to endorse
the plan, a congressional aide recalled. Nor have employers raced to endorse
Kennedy's more recent bill (S 768) that would require all employers to offer
health insurance, although the plan would arguably address the concerns of big
companies that many smaller employers have been getting a free ride at their
expense. (The Senate Labor and Human Resources Committee narrowly approved the
bill on July 12.)
"If they were being at all rational, all payers [employers and the
government] would be on one side and providers on the other," Etheredge said.
"That's never happened in the political debate in the U.S. The business
community, for its own ideological reasons, has been on the side of providers.
Whatever the problem, they say, governmetn regulation can't be the solution. So
[business keeps] fighting for the right of providers to continue to rip them
off. At least they're paying the price of their principles."
A few companies, primarily automobile manufacturers such as Chrysler Corp.
and Ford Motor Co., have begun broaching the idea of national health insurance,
but so far, the calls have been limited. Furthermore, critics say, troubled
automakers have a particular self-interest: They have a higher-than-average
ratio of retirees to active workers and, having overpromised benefits to their
retirees, now want to shift the costs to the public and other employers. "It's
Chrysler's second bailout," Schramm said.
Most employers believe that they can solve their problems better on their
own. "Everyone's capable of doing it in different ways, I submit,"
Allied-Signal's Duva said. "Even smaller companies can do a lot, although they
may not be able to get the same financial terms we did. I think limiting how
[companies] do this to any one way is incorrect. I think generally speaking,
the private sector can do things more cost-effectively," although managing
health care costs might be an exception, he said.
Canadians don't share Americans' deep mistrust of government or their
go-it-alone mentality. "When I came up here," Stoughton said, "the thing that
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struck me was that there's a social conscience in this country that says, 'We
value the collective good over the individual.' Canadians trust government, and
it's part of the social fabric of this country. That kind of societal attitude
must have made it easier to introduce a universal health care system, and it
has become the most popular social program in this country, bar none."
LOOMING CRISIS
Behind the arguments, however, is a palpable ambivalence among Americans.
The same people who argue that neither health care providers nor the public
would accept the strictures of national health insurance go on to tell you that
the current system doesn't work well and that something has to give. "We need
to take one lesson from the Canadians," Roper said. "We need to get serious."
But there's scant agreement on how to tackle the twin problems of access and
cost control. In the past six months alone, at least a half-dozen groups have
unveiled alternative proposals for accomplishing this. In January. The New
England Journal of Medicine actually featured two different plans: one, by
Physicians for a National Health Program, a national organization of about 1, 250
doctors based in Cambridge (Mass.) Hospital, called for a Canadian-style system
of health care budgeting; the other, by Alain Enthoven and Richard Kronick of
the Stanford University Graduate School of Business, would oblige employers to
pay 80 per cent of health costs of all full-time workers and require government
to act as "public sponsors" or brokers for the care of eery one else.
Many politicians, business executives and health care providers maintain
that the two goals can be achieved incrementally by building on the present
system. Most care could be privately financed and managed, but government's
role would be expanded to provide incentives to business to expand coverage of
workers and manage costs better. Government would also have to broaden
subsidies for those who have no other access to health insurance.
Roper, Durenberger and Berenson are among those who still express hope in the
cost-cutting incentives of competition and in alternative health plans, such as
HMOs, which receive a flat fee per patient to manage all their health care
needs. "If, in the U.S., doctors were willing to group up and take on the
provision of care, and the payment system rewarded them for that, that's our
control mechanism that's the way we can get the market to work in this
country," Durenberger said.
Government would have to police the market, Berneson said, to make sure that
the savings "were based on performance" and not achieved by skimming off the
healthier patients.
Stoughton, however, is dubious. "I was educated in the University of Chicago
MBA program, which is extraordinarily free-market-oriented, but I've always felt
that trying to apply economic principles to social programs didn't quite fit,
and it doesn't," he said. "Unfortunately," he added, in the health care
arena, "competition does not work."
In the meantime, some of the changes already under way are not unlike the
constraints that analysts have been saying Americans would never accept.
For example, the powerful vested interests in the health care system are
losing some of their unrestricted power. Since 1983, the medicare program has
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imposed substantial regulation on hospitals land is now in the process of
overhauling the way it pays doctors. In fact, the legislation to institute"
expenditure targets" that would put the brakes on year-to-year increases in
medicare spending on physicians is modeled loosely on the approach taken by some
Canadian provinces.
Just as significant, Congress has established three agencies to advise it on
hospital, physician and, most recently prescription drug payment policy that
have come to serve as intermediaries between the care providers and the
government. "What's interesting is the extent to which [these agencies] have
become the American institutions for negotiating," Etheredge said. "They are,
in fact, becoming very influential."
Some large private employers are also demanding and getting concessions from
insurance companies and providers. Over time, as more large employers have
turned to self-insurance for health benefits --- about 60 per cent are now
self-insured -- the insurance industry has dropped much of its risk-taking
function and become either a claims administrator or a sort of watchdog for hire
to review employees' use of health care with an eye to trimming waste.
Perhaps even more telling, employers are putting restrictions on employees'
unfettered use of insured health care. The constraints are perhaps not as
draconian as the several months' wait for elective surgery that patients face in
Canada, but they are often unpopular in their own right. At Allied-Signal,
where the new cost control plan includes financial incentives for employees to
use approved physicians, Duva acknowledged that there were "some initial rough
edges from an employee acceptance standpoint."
It is not clear that even these efforts will have the desired result -- for
the companies or for the economy. Duva, though optimistic about the results of
the new cost containment plan for Allied-Signal's 44,000 enrolled workers, notes
that it doesn't include most of the company's 21,000 unionized employees or any
of its 50,000 covered retirees, who are the heaviest users of health care.
Even if many large companies succeed in trimming their costs, some skeptics
believe that in a system with multiple payers, the costs will turn up somewhere
else - in the parts of the system that are unregulated, or in the bills of
those payers that don't have much market clout.
"You can't go at this piecemeal, and that's what's going on," Stroughton
said. "The federal government's approach is, Let's do a little on managed care,
and let's have some competition in the system. But,
if you don't fence
the system in, the smart providers out there are going to take advantage of all
the leaks."
Employers and the government admit they're worried. "Personally, as I 52e
it, this is the last hope of corporate America if we want to keep [ health care
coverage] in a private setting," Duva said of the latest generation of employer
cost containment efforts. "We have three-five years' time."
Gradison said he is "pessimistic in one sense. History suggests we're
criss-oriented, and I don't think there's public awareness that there's a
health care crisis right around the corner." An immediate sign, he said, are
the hospitals threatening to shut down money-losing trauma units, which, along
with emergency rooms, tend to have a high percentage of uninsured and
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low-income patients.
"Some people say, 'Let's give hospitals money for their trauma units,' but
that misses the larger point," Gradison said. "I hope it doesn't take a crisis
to force action, but it might."
GRAPHIC: Picture 1, Private health care consultant Lynn M. Etheredge, John
Eisele; Picture 2, no caption; Picture 3, Joseph W. Duva of Allied-Signal Inc.,
Richard A. Bloom; Picture 4, Toronto hospital chief W. Vickery Stoughton,
Brigitte Cavanaugh; Picture 5, Health Insurance Association's Carl J. Schramm,
Americans expect much from medical care. Richard A. Bloom; Picture 6, Sen. Dave
Durenberger, R-Minn, Richard A. Bloom
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2ND STORY of Level 1 printed in FULL format.
Copyright (c) 1989 National Journal Inc.;
National Journal
July 15, 1989
SECTION: REPORTS; Health; Vol. 21, No. 28; Pg. 1795
LENGTH: 590 words
HEADLINE: Caring for Quebecois
DATELINE: QUEBEC
BODY:
The old walled city here is home to Canada's first hospital, Hotel Dieu de
Quebec, an imposing stone structure built in 1689 and still in business. Three
centuries later, Quebec Province, set apart from the rest of Canada by its proud
emphasis on its French language and legacy -- and by its relative poverty -- is
still known for its firsts in the health area.
It is, for example, the only province that sets limits on physicians' gross
incomes. The current limit for general practitioners is about $ 164, 000
(Canadian). The province strictly limits the number of medical school
admissions. It controls licenses for immigrant doctors, a policy that sparked a
hunger strike recently by 20 immigrant doctors who were denied licenses. It
also uses a carrot-and-stick approach to get doctors to practice where they're
needed. Medical students who try to practice in doctor-packed Montreal get only
70 per cent of the standard fees.
Quebec also runs 154 local community service centers, where doctors work on
salary, designed to improve access to care in poor communities for people who
might otherwise show up in hospital emergency rooms for minor ailments or bounce
from doctor to doctor. The centers offer a wide variety of services for the
elderly, teenagers, the homeless and AIDS patients.
Quebec was also the first to launch a high-level commission to examine the
future of health care. In April, the province unveiled a radical blueprint
based on the commission's recommendations. Instead of separate boards of
directors for each hospital, clinic and nursing home and community service
center, the plan advocates regional boards to govern such institutions. Only
members of the public -- no health professionals -- would serve on the boards.
Quebec's health care system evokes the same polar reactions in Canada that
the Canadian system as a whole evokes in the United States. "Quebec has been in
the forefront in doing innovative things in health care, = said Ruth L.
Collins-Nakai, a pediatric cardiologist in Alberta. And, with per capita
health care costs at $ 1,472 (Canadian), Quebec is well below the national
average of $ 1,525. (A Canadian dollar is now worth about 84 U.S. cents.) But
Quebec also has some severe problems, such as long waiting lists for hospital
beds and for specialized care. Some physicians regard Quebec as the medical
equivalent of purgatory. In 1986, Quebec's doctors in private practice earned
about $ 84,000 (Canadian), after expenses but before taxes, compared with
physicians' national average earnings of $ 97,000. Doctors who approach the
quarterly income limit sometimes shut their offices for a few weeks.
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J. Edwin Coffey, an obstetrician and spokesman for the Quebec Medical
Association (QMA), likens the system to socialism and says the government should
control or subsidize health care only for the poor. "I could care less" about
health care spending as a percentage of gross national product (GNP), he said.
"The only question," he said, "should be, what amount am I willing as an
individual to spend from my personal GNP?"
Others say the QMA represents a rear guard and note that the group has been
bypassed by the government, which negotiates fees directly with two physicians'
unions - -- something the QMA is trying to challenge in court. "When the system
first came in, it was an anathema to doctors, a cancer on society," said Saul
Panofsky, director of the St. Louis du Parc community care center in Montreal.
"Now, 95 per cent of them accept it."
GRAPHIC: Picture, Quebec's J. Edwin Coffey, What about personal GNP? Julie
Kosterlitz
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1ST STORY of Level 1 printed in FULL format.
Copyright (c) 1991 The New York Times Company
The New York Times
April 30, 1991, Tuesday, Late Edition - Final
SECTION: Section A; Page 1; Column 1; National Desk
LENGTH: 3471 words
HEADLINE: Canada's National Health Plan Gives Care to All, With Limits
SERIES: The Price of Health: Third of Five Articles
BYLINE: By ELISABETH ROSENTHAL, Special to The New York Times
DATELINE: TORONTO
BODY:
Since a heart attack in 1989, Len Quesnelle has had a dozen tests to study
the blocked arteries of his heart, spent weeks in intensive care because of
chest pain and finally, in March, had a triple bypass.
He has seen his share of doctors and hospitals, but he has never received a
bill, paid a health insurance premium or filled out a health insurance form.
Although the price for his recent surgery, calculated in American dollars, was
$14,000, he paid less than $200, for telephone calls and renting a television.
Comprehensive Health Insurance
As a citizen of Canada, Mr. Quesnelle is a beneficiary of one of the world's
most comprehensive health insurance programs, the Canadian national health plan,
which uses tax money to provide medical care to everyone at no charge.
But during his 18-month ordeal, Mr. Quesnelle often had to wait weeks for
tests and treatment, and he almost had a second heart attack in the three-month
wait before his surgery. Such delays, typical in Canada for certain costly
procedures, would be considered imprudent, if not malpractice, in the United
States.
At a time when some 33 million Americans lack insurance, the Canadian
health care system serves as a taunting reminder that with a few compromises
it is possible to provide quality care for everyone, and for less money. In
Canada there are few machines to blast apart kidney stones, but no women go
without prenatal care. There is no Mayo Clinic, but there are also no emergency
rooms teeming with people who cannot afford a family doctor.
'Embarrassment to the U.S.'
"Canada is an embarrassment to the United States," said Vickery Stoughton,
an American who is the president of Toronto Hospital.
But a majority of Americans, accustomed to receiving the most advanced
medical care in an instant, without regard to price, may not be embarrassed
enough to accept Canadian-style compromises.
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About the time Mr. Quesnelle had his surgery in Toronto, William Beagle had
elective bypass surgery at Buffalo General Hospital, across Lake Ontario from
Toronto. For a nine-day stay he received more than 50 bills totalling more than
$50,000, each of which he submitted with a claim form to Metropolitan Life,
which paid all but $18.
Since his case was complicated and would tie up his surgeon for an entire
day, Mr. Beagle waited a long time for his operation by American standards: 10
days. The Toronto Hospital looks the same as any prestigious urban American
center: computers in every room, transplant patients in intensive care units,
even the same antiseptic smell hanging in the halls. But the health care
structure behind the facade could hardly be more different.
Every Canadian, rich or poor, is promised equal access to doctors and
hospitals through provincial insurance plans that cover nearly all medical
expenses. With the flash of a red-and-white card, patients can obtain everything
from nutritional counseling to lung transplants. Patients select their family
doctors, and doctors for the most part order whatever tests they like, without
the paperwork required by insurers that eats up a growing share of American
medical costs.
Despite the governmental largess, Canada spends an average of 30 percent less
per person on health care than the United States, for a stable total of 9
percent of the gross domestic product. The American level reached 12 percent of
gross domestic product in 1989 and continues a relentless climb.
To make sure the country lives within its allotted means, the Canadian
Federal and provincial governments control hospital operating budgets with an
iron fist and doctor's fees through bargaining with provincial medical
associations. To rein in costs, the government limits the number of specialists
who are trained, limits purchases of expensive equipment and restricts costly
procedures like open heart surgery to a few university hospitals.
New Things Come Slowly
To get the most for its money, the system is slow to offer expensive new
machines and procedures, waiting until their medical value is solidly proved -
and, critics say, proved again.
And so the price of universal access is a degree of inconvenience and delay
and, in fast-changing fields, sometimes settling for last year's treatment.
Typical is the case of Albert Palmer, a 72-year-old farmer from Scarborough,
Ontario. He waited from January to April for an operation to improve the blood
supply to his feet, which had become agonizingly painful whenever he walked.
Though there was no great danger, he had to endure the pain and supervise
planting of his pea fieds from a chair.
While the quality of care remains generally high, Canada's health system is
showing signs of distress. Doctors predict that a barrage of expensive new
technologies and an aging, sicker population will strain finances in the coming
decade, leaving patients with longer waits, outdated technology, and even overt
rationing.
"The only way you can afford universal health care is to run everything
like a VW, which in the end gets you from place to place" said Dr. Alan
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Hudson, surgeon-in-chief at Toronto Hospital who will become its chief executive
in July. "The problem is we try to run everything as almost a Cadillac. As
medical costs rise, we can't afford it."
Satisfied Patients
Canadians Say System Is the Best
If patient satisfaction is the measure of good medicine, then the Canadian
system is a resounding success. Ask a Canadian whether he uses the national
system, and you get a perplexed pause. Of course he does: medical care outside
the system is virtually outlawed. But more than that, Canadians are convinced
the system is without rival.
"You don't want to wait when you're in pain, but there's no other choice,"
Mr. Palmer, the farmer, recently said. Far from threatening a malpractice suit,
he added what is almost a Canadian refrain. "But I waited because this is the
best medicine in the world."
Asked if he had ever considered going to the United States for treatment,
Joseph Breglia, a 53-year-old Toronto lawyer who has been battling leukemia for
five years, replied simply, "Not even a thought." Even wealthy Canadians who
could afford to cross the border for treatment rarely do it.
Doctors who have worked in both countries say Canadians generally shrug off
the system's inconveniences in a way that Americans would not.
"Canadians are used to peace, order and good governance - we probably seem
like a dull lot," said Dr. Donald Wigle, a Toronto cardiologist. "Americans go
for life, liberty and the pursuit of happiness. I don't think they would put up
with the waits."
Administrators at American hospitals agree. "If we can't provide bypass
surgery in a timely fashion our patients will say goodbye and fly to Pittsburgh
or Cleveland," said John Friedlander, president of Buffalo General.
Doctors Satisfied With the System
Like their patients, Canada's doctors are generally satisfied with the
system, though there have been bruising battles with the government over fees.
Doctor's charges for services are a good deal lower than what is charged in the
United States, particularly in the surgical specialties, but because
administrative costs and malpractice premiums are also much lower, most doctors
earn salaries comparable to those of their American counterparts.
"I never have a problem recruiting internists," said Dr. Arnold Aberman, the
chief doctor at Toronto Hospital. "That might not be true if I was recruiting
cardiac surgeons since no one in Canada earns $3 million a year.
"Once you accept the limitations of the system, it's a pleasant place to be,"
he said.
Doctors send the government a list of patient visits each month and a few
weeks later receive payment. Lawsuits are very rare, in part because Canadian
lawyers must work for a fee rather than a share of malpractice settlements and
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patients cannot sue for punitive damages.
Statistics also speak well for Canadian medicine. On average, Canadians live
longer than Americans, and Canada has a lower infant mortality rate.
'Never Having Your Hand Tied'
While Canada has little of the extreme poverty seen in American inner
cities, its health statistics also reflect the good basic care enjoyed by
everyone, including services like cholesterol checks and prenatal testing that
are frequently not covered by insurance in the United States and that the poor
often cannot afford.
"The overwhelming good thing about this system is never having your hand tied
by the patient's financial status," said Dr. Lorne Becker, a family doctor who
recently returned to practice in his native Toronto after 10 years of working in
the United States. "It's a relief not having to fight with patients to get
mammograms because they cost too much."
To promote access the Government maintains a ratio of general doctors to
specialists of about four to one, as opposed to the one-to-one ratio in the
United States.
But while basic care is good, it is rarely elaborate and the Canadians are
generally less aggressive about monitoring and treating chronic conditions. For
example, American doctors advise cholesterol testing for everyone over the age
of 20 and treat patients with levels above 200. Canadian doctors test only those
with other risks for heart disease and do not pursue further testing or
treatment unless the level is over 265.
Canadian doctors say that medical studies support their low-key approach, but
in their world of strictly budgeted resources, cost is always in the background.
Some Limitations
Delays and Travel, Travel and Delays
If Canada is generous with the basics, it is stingy with high technology.
Delays, travel and waits for cutting-edge treatments are intentionally built
into the system, like speed bumps in a road, to make sure people proceed in
health care deliberately and to prevent runaway use.
Except in cases of dire emergency, Canadians wait for weeks to months for a
wide variety of expensive procedures, including advanced radiology scans, heart
bypass and brain tumor operations and the destruction of painful kidney stones
with a sound wave machine called a lithotripter. The supply of specialists and
equipment for such procedures perpetually lags just behind demand.
"Everything is accessible to everyone, but not always accessible enough,"
said Dr. Irving H. Lipton, a cardiac surgeon in Toronto, a pile of X-rays on his
desk from patients awaiting surgery.
He now has 54 patients in line for a cardiac bypass, 14 of whom he considers
urgent. Such patients are frequently having chest pains at rest and often must
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wait in the hospital until surgery. Ideally, he says, he would like to
accommodate the urgent patients in one to two days, but realistically the wait
will be one or two weeks. Patients for whom the surgery is elective wait three
or four months.
Calls Pleading for Patients
Canadian surgeons also lament the scarcity of advanced diagnostic equipment,
particularly magnetic resonance imaging devices, the $2 million M.R.I. scanners
that have transformed the treatment of brain, spine and joint disorders in this
country. There are 15 M.R.I. scanners in all of Canada, and 2,000 in the United
States. The United States has more than 10 times more per person.
Dr. Walter Kucharczyk, a radiologist who runs the M.R.I. scanner at Toronto
Hospital, fields telephone calls every day pleading the cases of patients and
loved ones, a task that he says "stinks."
A person with a quickly progressive paralysis qualifies as an emergency and
promptly obtains a spinal scan to determine the source of the problem. But
patients awaiting operations for brain tumors or confined to bed by ruptured
disks are considered to be merely urgent and wait one to six weeks.
"These people are watched very carefully, but imagine being 30 years old and
sitting around with a brain tumor growing, even slowly, in your head," said Dr.
Ben Freedman, an ethicist at the Jewish General Hospital in Montreal.
Little Time for Elective Cases
Dr. Kucharczyk rarely finds room for elective cases, like patients with
severe headaches or knee injuries, who would be scanned for good measure in the
United States. "They wait a year and at that point, either the patient's better,
had surgery or dead," he said.
Since high technology and specialty care are concentrated at a few centers
scattered around the country, sick Canadians must be ready to wait and then
travel, or travel and then wait. Kiki Margaritas, a 53-year-old patient from
North Bay, Ontario, who has breast cancer, is spending April at the Princess
Margaret Hospital in Toronto, 200 miles from home, so she can receive radiation
treatments. The government pays her bus fare and the cost of a room at a
residence for patients next to the hospital, but her family cannot afford to
visit.
Not surprisingly, the long lines sometimes lead to charges of favoritism. Dr.
Wigle said those with "influence and affluence" frequently jump to the top of
waiting lists.
"There's a black market for medicine," Dr. Kucharczyk said. "People who have
influence in the ministry or friends at the hospital get different treatment."
The Effect of Lists
Delays Bring Little Harm
In the vast majority of cases, the delays and inconveniences probably do no
long-term harm, Canadian doctors agree. Mrs. Margaritas waited two months
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between her mastectomy and the start of chemotherapy. Such a gap would be
unheard of across the border, though, and could theoretically make the
difference between a relapse and a cure, said Dr. Kyu Shin, a cancer specialist
at Roswell Park Cancer Institute in Buffalo.
In theory, people who run into trouble go to the front of the line, but
"absolutely, people die on the waiting lists," said Dr. Lipton, the Toronto
heart surgeon. Dr. Wigle, the cardiologist, has a patient who had a major heart
attack while waiting for bypass surgery. Although he survived, his heart muscle
was so damaged that he is now on another waiting list, this one for a heart
transplant.
Driven by the the need to make money, American hospitals survive by doing
more operations and ever more tests; driven by the need to conserve their fixed
finances, Canadian hospitals stay afloat by doing less.
As one of the few cardiac surgeons serving the extended Toronto region with a
population of six million, Dr. Lipton would like to perform more operations at
the end of the day to erase the backlog, but cannot because the hospital cannot
pay overtime to the operating room staff except in emergencies.
Things Done Quickly in U.S.
If Dr. Lipton needs to perform emergency surgery, he frequently has to take
a less sick patient off the day's operating list. Contrast that with the United
States: "Nights, weekends, we can always twist someone's arm and do another
case," said Dr. Thomas Lajos, a surgeon at Buffalo General. Flexing his
technological muscle, at 5 P.M. on a recent Friday he called to request an
M.R.I. scan. It was done that night.
To many doctors, even more worrisome than the inconveniences is the fact that
newer technologies and equipment are sometimes simply unavailable.
Dr. Hans Messner, a cancer specialist and chief of the bone marrow tranplant
program at Princess Margaret Hospital in Toronto, says he would like to be able
to use growth factors in his leukemia patients undergoing marrow transplants.
These genetically engineered compounds have been shown to reduce the length of
hospital stays and improve survival for the risky procedure. In the United
States, they have crossed the boundary from experimental and have become state
of the art.
"The government is reviewing the data, but there is significant inertia since
these things are very costly," he said.
In the operating room, surgeons say that they are frequently using older
equipment than their American collegues and, in intensive care, new gadgets come
once a decade rather than every other year. Although Toronto Hospital has the
biggest lung tranplant program in the world, it has not yet been able to buy a
fiberoptic bronchoscope, a device inserted through the mouth to transmit perfect
pictures of the lungs. Even many community hospitals in the United States have
one.
Considering Cost
Doctors Calculate The Risks Closely
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Canadian doctors have learned to consider cost in their medical decisions,
something that many experts say will have to happen in the United States.
Dr. Messner, the cancer specialist, knows his budget will allow him to do
only about 55 bone marrow transplants in the coming year. At $100,000 each, he
says he will devote this resource to the patients most likely to survive.
"You learn to be frugal," he said. "If I filled my beds with patients who had
only a 10 percent chance of survival, at the end of the year I'd have only 5
left. So instead I fill them with patients who have a 60 percent chance and end
up with 35."
When waits become too long, doctors and patients often decide to make do with
more primitive and accessible technologies. For back surgery, when an M.R.I.
scan is unavailable this means a test called a myelogram, which involves
injecting dye into the spine. It is uncomfortable, complicated by allergic
reactions and requires a hospital stay.
Desperation Drives Patients South
And when desperate, Canadians have a final option: to go to the United
States, whose hospitals have served as a convenient pressure valve. The Canadian
system generally pays American hospitals for care it cannot reasonably provide,
although patients must get prior approval.
In a typical case, last year when James McGillis of Burlington, Ontario,
developed excruciating pain from a kidney-stone blocking his bladder, he was
sent to a private center in Buffalo to have the stones pulverized because the
single lithotripter in Ontario was solidly booked. When the delays become
unacceptably long even by Canadian standards, Ontario has paid for coronary
bypass operations in Detroit and M.R.I. scans in Buffalo to give the health
ministry time to juggle its resources.
Although Canadian doctors often wish for a new high-speed bone drill or a
second scanner, some experts say that technical plenty in the United States does
not always lead to better care, just to more care, while basic needs go wanting.
"Its nice to have a lithotripter in Outer Snowshoe, but that money comes from
somewhere else," said Dr. Adam Linton, a kidney specialist in London, Ontario.
The travel required by centralization of certain procedures makes treatment
inconvenient, but also more assured in quality, he added.
And treatments are unavailable to many citizens of the United States for
other reasons. Studies have repeatedly shown that black Americans benefit from
high technology like heart bypass and cancer treatment far less often than
whites, for example. Uninsured patients, or those on Medicaid, often can wait
months for an elective M.R.I. scan or even a general check-up.
Pressure on System
Canada's Costs Are Soaring Too
Despite the Government's efforts to control costs, in Canada as in the United
States the press of soaring medical prices and ever-better, more costly
technology threatens to tear the system apart.
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Although Canadians demand the best in health care, they are reluctant to
pay more taxes for it. Already the southbound Peace Bridge from Ontario to
Buffalo is crowded with shoppers driving to avoid sales taxes totalling 15 per
cent, which have been driven up in part by health expenses.
Hospitals striving to offer advanced treatments on limited budgets have been
increasingly forced to make unhappy compromises. "When a hospital is given a
budget and starts to run out of money it has no choice but to cut services,' Dr.
Linton said.
Hospitals Sometimes Close Beds
For many hospitals, the simplest solution is to close down beds, a drastic
measure in a system already running at capacity. Other hospitals have limited
the number of joints an orthopedist may replace or the number of patients who
may be on dialysis.
So far, that has resulted mostly in delays being a little longer or travel
distance greater.
"We have not yet had to kill anyone by not providing dialysis or a
transplant, but the issue is at a flash point. Dr. Linton said. "We are running
out of maneuvering room financially."
Indeed, as costly new machines and drugs are proved to treat a wide range of
maladies, doctors wonder how the system will afford them. Some provinces are
considering charging fees to patients, and other provinces are experimenting
with health maintainence organizations like those being promoted in the United
States.
"People look at Canada and think we have a panacea," Dr. Wigle said. "We do
not. We both have to learn from each other."
GRAPHIC: Photos: Struggling against leukemia for five years, Joseph Breglia said
he had never considered going to the United States for treatment. Janet Young
attended to Mr. Breglia's blood treatment in an outpatient clinic at Princess
Margaret Hospital in Toronto.; Although the Canadian Government pays her bus
fare and cost of a room next to the hospital, Kiki Margaritas must travel 200
miles to receive radiation treatments. (Photographs by Mike Groll for The New
York Times) (pg. A16)
Graphs: Health spending as a percentage of gross deomestic product in the U.S.
and Canada from '60 to '89 (Source: George J. Schieber and Jean-Pierre Poullier,
'Health Affairs') (pg. A1); 'Gauging Health Spending' shows spending per person
in U.S. and Canada from '60 to '89 (Source: George J. Schieber and Jean-Pierre
Poullier, 'Health Affairs) (pg. A16)
TYPE: Series
SUBJECT: MEDICINE AND HEALTH; SURVEYS AND SERIES; HEALTH INSURANCE; RATES;
FINANCES; NEW MODELS, DESIGN AND PRODUCTS; DOCTORS; HOSPITALS
ORGANIZATION: TORONTO HOSPITAL (ONTARIO)
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NAME: ;ROSENTHAL, ELISABETH
GEOGRAPHIC: CANADA; UNITED STATES
LEXIS NEXIS'LEXIS'NEXIS
THE WASHINGTON POST
FRIDAY, FEBRUARY 7,1992 A23
THE FEDERAL PAGE
Health Industry Lobbyists Boost President's Plan
ance Association of America
By Gary Lee
(HIAA), has already launched a lob-
A HEALTHY HISTORY OF DEBATE
Washington Post Staff Writer
bying battle against a national
While many inside and beyond
health care system and for a more
moderate adaptation of the current
A'
the start of the century, a di-
1945: FDR, elected to a fourth
the Beltway may be confused about
verse group of advocates includ-
term, promised to deliver a strong
1964: President Lyndon B. Johnson
what President Bush's new health
system.
ing the American Medical
health message to Congress, but
and Rep. Mills reached a compro-
care plan means for them, Wash-
With their support among GOP
Association, the Socialist Party and
died. President Harry S. Truman
mise. The aged would be taken
ington health care lobbyists know
lawmakers assured, the corporate
President Theodore Roosevelt, began
adopted the idea, and backed a
care of by Medicare and a new fed-
where they stand.
lobbyists are developing a strategy
calling for government-paid health
plan similar to the Wagner-Murray-
eral-state Medicaid plan would
Corporate and insurance industry
to shore up Democratic support. To
insurance for all Americans. A long,
Dingell bill. A hot national debate
cover more of the poor. Poorer
lobbyists, such as Pamela Bailey, a-
do so, they have expanded their
often fierce series of battles ensued,
ensued. The American Medical
states, like Mills's Arkansas, bene-
spokeswoman for Healthcare Eq-
staffs and cornered some of the
swinging between populist calls for a
Association launched an expensive
fited from a disproportionate share
uity Action League (HEAL). favor
best-known Democratic public re-
strong government role in health
public relations campaign and
of the federal dollars.
the very kinds of moderate reforms
lations executives in Washington.
care and calls for a private, free
labled the Truman plan "socialized
Bush espoused in the administration
AETNA Insurance for example, has
market approach.
medicine." The AMA then warmly
1965: Congress enacted both
hired Jody Powell, a former adviser
Here are some milestones in the
embraced private, voluntary health
Medicare government coverage for
plan released yesterday. "It's a very
insurance programs like Blue Cross.
the elderly and Medicaid, despite
strong plan," said Bailey, whose lob-
to President Jimmy Carter and now
debate:
The Truman effort got lost amid the
AMA opposition. They went into ef-
bying coalition represents 340 in-
a partner in the public relations firm
Korean War effort.
fect in 1966.
surance companies and businesses.
of Powell and Tate. HIAA commis-
1910-1919: Bills were in-
"It provides the basis for us to solve
sioned Carter Eskew, a communi-
troduced in several state
FIRST TO INTRODUCE A HEALTH CARE BILL
1974: With millions of
this country's health care prob-
cations firm often used by Demo-
legislatures to cover work-
Americans still uncov-
ers and dependents in
lems."
cratic candidates, to help devise a
ered, President Richard
state-administered plans fi-
Consumer groups such as Public
M. Nixon proposed a
public relations strategy.
nanced by employers, em-
Comprehensive Health
Citizen or Citizen Action, on the
The situation isn't quite the same
ployees and taxes. The
Insurance Program
hand, say Bush's plan is an in-
for those who favor a Canadian-
idea was originally backed
(CHIP) to mandate or
liate response to the soaring
style health plan. When Bush out-
by the American Medical
order most employers to
and other problems of the na-
lined his plan in Cleveland, Citizen
Association, then doctors
cover their workers.
tion's health care system. "It will
Action, for example, sent several
and medical societies
around the country forced
Sen. Robert F.
Sen. James E.
Rep. John D. Dingell
Under the system, pa-
neither control prices nor provide
dozen people to demonstrate
the AMA to reverse its
Wagner (D-N.Y.)
Murray (D-Mont.)
Sr. (D-Mich.)
tients would pay both a
greater access," said David Him-
against it.
modest deductible before
melstein, a Harvard professor and
Though their tactics may be dif-
stand, and the idea died.
any coverage and 25 percent of all
leading advocate of nationalized
ferent, both sides are seeking the
1950: Lacking support for a federal
bills, limited to a maximum annual
1933: The American Hospital
medicine.
ear of Sen. Lloyd Bentsen (D-Tex.),
health plan, advocates of govern-
liability. Mills and a new player,
Association endorsed a new plan,
Bailey, and other corporate lob-
who as chairman of the Senate Fi-
ment health insurance began to
Sen. Edward M. Kennedy (D-Mass.)
Blue Cross hospital insurance. The
AMA attacked the plan as "half-
think of covering the elderly as po-
endorsed a similar but more gener-
byists, have reason to be enthu-
nance Committee will play a lead-
siastic. The details of the Bush
ership role on pending health care
baked," but private health insur-
litically salable, and a foot in the
ous plan. Democratic and
legislation, and presidential hopeful
door for later universal plans.
Republican support was weak or
plan include most of the proposals
ance, the kind most Americans now
Truman's Federal Security Agency
split for either plan. Mills lost cred-
that insurance industry and cor-
Sen. Tom Harkin (D-lowa), who has
have, was born.
head, Oscar Ewing, talked of mak-
ibiity when he became involved
porate leaders pitched in meetings
yet to outline a specific health care
with a dancer named Fanne Fox.
1935: President Franklin D.
ing 60 days' hospital care a year
with White House and congres-
plan.
part of Social Security.
Watergate distracted Nixon's and
sional leaders in recent weeks:
They are also attempting to sell
Roosevelt endorsed the principle of
the nation's attention; and nothing
proposals to give uninsured Amer-
their plans to a public beyond Con-
compulsory national health insur-
1953: President Dwight D.
happened.
ance but did not ask Congress to
icans tax credits and reduce doc-
gress.
Eisenhower killed all efforts at a
adopt it.
tors' malpractice premiums. The
Last October, Common Cause re-
government plan, unsuccessfully
1991-1992: With ever more millions
Bush and corporate health care
leased a study showing that medical
proposing measures that would
uninsured, health care returns to
1943: A Democratic trio-New York
blueprints also flatly reject a na-
and insurance industry political ac-
Sen. Robert F. Wagner, Montana
strengthen private health insurance.
the front burner. More than 30 bills
are introduced in Congress. Most
tional health care system struc-
tion committees gave over $40 mil-
Sen. James E. Murray and
;
1958: Sen. Robert S. Kerr (D-Okla.)
take one of four approaches: Tax
tured after the Canadian system,
lion to members of Congress.
Michigan Rep. John D. Dingell
Sr.-introduced the first Wagner-
and Rep. Wilbur D. Mills (D-Ark.),
credits and vouchers, with encour-
or a "pay or play" plan under which
To help polish its public image
chairman of the House Ways and
agement for managed care such as
businesses would either pay for
and get its message across to a
Murray-Dingell national health in-
health care for their workers or
surance bill. It called for a payroll
Means Committee, sponsored the
health maintenance organizations;
broader audience, HEAL has hired
Kerr-Mills plan giving states modest
pay or play, under which employers
pay a special tax for government-
Burson Marsteller, one of world's
tax on employers and employees,
matching federal funds to care for
must either provide health insur-
sponsored health care.
leading public relations firms. With
and government-paid doctors. The
bill was introduced in some form
the aged poor. With backing from
ance or pay into a government fund
Flush with apparent success in
Burson's help, HEAL recently held
for the uninsured; stronger private
every session for 14 years without
the AMA and Republicans, the
helping mold Bush's plan, corporate
a conference for journalists at the
ever making it to the floor of either
measure passed.
health insurance; or universal, gov-
lobbyists now are undertaking an
National Press Club and ran a full
ernment-administered health care
house, yet keeping the issue alive.
all-out bid to get it-or a close fac-
page ad in USA Today costing ap-
1960: Sen. John F. Kennedy hit the
as practiced in Canada.
(Dingell's son and successor,
simile-enacted. HEAL, whose
proximately $60,000. "Everyone
Democratic Rep. John D. Dingell Jr.
presidential campaign trail promis-
membership includes the influential
knows that we need health care re-
(D-Mich.) introduces a similar bill
ing care for the elderly financed
with an increase in the Social
U.S. Chamber of Commerce, the
form," it said. But "we cannot afford
each session.)
Security payroll tax.
National Federation of Independent
to scrap the current system for a
-Compiled by by Victor Cohn
inesses and the Health Insur-
costly new federal bureaucracy."
Details of Health Care Plan Filter Out
Bush Would Rely on Tax Credits, Private Insurance Reform
By Spencer Rich
would allow states to expand the
preexisting health conditions; and
Washington Post Staff Writer
number of low-income uninsured
minimize risks to insurers through
persons covered by existing Med-
insurance pooling systems such as
The basic shape of President
icaid programs or newly created
the "assigned risk" system now
Bush's still unreleased plan to solve
state programs. The uninsured
used for auto insurance.
the nation's health care crisis be-
could then obtain coverage either
To help middle-class taxpayers
came clearer yesterday as details
through the state programs or
pay for insurance, the proposal
began filtering out from administra-
through use of the vouchers.
would make it easier for individuals
tion officials and other sources.
The vouchers would be paid for,
with incomes up to $60,000-and
The plan rejects the two favorite
in part, by imposing a per-capita
families up to $80,000-to take
Democratic solutions-national
ceiling on the annual growth of fed-
federal income tax deductions for
health insurance and a federal re-
eral matching payments to the
health insurance premiums.
quirement that all employers pro-
states for each Medicaid enrollee.
The malpractice insurance sys-
vide health insurance to their work-
The cap would allow a state's Med-
tem, which some argue encourages
ers-in favor of expanding cover-
icaid matching funds to grow by the
waste by prompting doctors to
age through tax credits and reform
annual national inflation rate plus
practice "defensive medicine,"
of the private insurance market.
some additional amount, perhaps
would be altered to reduce lawsuits.
The Bush plan is expected to in-
2.5 percent.
The use of HMOs and other
clude these key elements, phased in
According to the theory, this cap
forms of managed care would be
over five years at a federal cost of
would not only hold federal spend-
encouraged to contain costs.
about $100 billion:
ing growth down and provide mon-
Studies of which medical treat-
Federal "refundable tax credits"
ey for the tax credits, but would
ments are the most effective would
for low-income Americans, which
also encourage the states to enroll
be completed.
Secretary of Health and Human
their Medicaid patients in HMOs
Senate Majority Leader George
Services Louis W. Sullivan said yes-
and other managed-care programs,
J. Mitchell (D-Maine) said that on
terday would work in practice as
which are thought to control costs
the basis of what is known, the Bush
"payment vouchers." The credits
better than traditional payment
plan is "a non-solution
It will
would be worth up to $1,250 for a
methods because the insurer care-
do nothing to control costs, and
single person and $3,750 for a fam-
fully monitors waste and overuti-
does not appear in the brief sum-
lizations.
ily below the poverty line; smaller
mary available so far to provide in-
To broaden access to health in-
amounts would be available to per-
surance coverage for all Americans.
surance for individuals and workers
sons with incomes up to 50 percent
The president has yet to tell us
whose employers do not provide it,
above the poverty line. The unin-
what it will cost and how he pro-
the administration would seek a
sured could use the vouchers to
poses to pay for it."
wide variety of changes. The Bush
obtain insurance from private com-
Sen. Edward M. Kennedy (D-
plan would allow small firms to band
Mass.) said the proposal "flunks the
panies, subject to certain conditions
together in purchasing pools to get
two basic tests of real reform—
which would be monitored by state
insurance more cheaply and easily;
they refuse to guarantee coverage
governments.
guarantee that anyone who wants
for all Americans and they pay only
According to administration
to buy insurance can purchase it,
lip service to control health care
sources, the federal government
and cannot be excluded because of
costs."
WPost 1/30/92 A11
FRIDAY, JANUARY 31, 1992 A19
DRIP
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Beep
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U.S. HEALTH CARE
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clink
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BY TOLES FOR THE BUFFALO NEWS
Jessica Mathews
Health Care: Drawing the Lines
The State of the Union address and Speaker
boom generation-now one-third of the popula-
Thomas Foley's response clearly drew the battle
tion-reaches old age. The youngest of them will
lines on health care. The Democrats want a system
be 65 in less than 20 years.
that will cover everyone, with the government as
Technological advance: in medicine in the past
the provider of last-or, if necessary, first-resort.
few decades has been spectacular and shows no
The president hopes merely to make the present
signs of slowing. More diseases can be screened
system marginally less chaotic and perhaps (the
for, diagnosed and treated, more body parts re-
details have not been made public) slightly more
paired or replaced, more genes identified and
affordable for a very few.
manipulated. For every new drug, instrument or
The Democrats are right to insist that 35 million
procedure that can do the same job at lower cost,
working Americans with no coverage shames us all.
there are many that do the job better but at higher
The Republicans are right to believe that govern-
cost and several more that do a new job.
ment-managed health care could well mean lower
There is no end to this if we continue to believe
quality care at higher cost, as it has in the Veterans
that medical "need" is the sum total of what is
Administration and the military.
possible. Ethicist Daniel Callahan points out that "we
Before a national debate on health has even
do not think of people 100 years of age as needing
begun, we have split, seemingly automatically,
artificial hearts. But we should know that if an
along a predictable partisan divide. That is a
effective heart is eventually developed and someone
tragedy because it masks the real issue, which both
will die without it, then there will be a need for it." As
parties have sidestepped. Until that issue is joined,
instruments continue to get smaller, optics better,
all reforms will fail.
the immune system deciphered and harnessed and
The crux of the matter is that modern medicine
the human genome fully mapped, the possibilities
can deliver more health care than any society can
become, if not infinite, at least nearly so.
afford. Unlike any other economic sphere, there
That leaves us with the absolute necessity of
are no inherent limits. We can squeeze out greed
rationing care, of ruling out some progress as
and waste, even cure the administrative nightmare
unaffordable and of separating needs from possibili-
that passes for our payment system, but as other
ties. We ration already without admitting it by
countries that have already done all that know, it
spending without limit on anyone who makes it
will not be enough. In order to control exploding
inside the system and leaving out vast numbers at
medical costs, we will have to decide how much of
the bottom.
what kinds of health care we can afford. Call it
Former Colorado governor Richard Lamm, a long-
rationing, allocation, or making choices, it will be
time student of health care, recently took a world
painful but is unavoidable.
trip to compare medical systems. He found America
Growth in medical costs of 12 to 13 percent per
unique. "As people are turned away from admission
year means that costs double every six years and
rooms, massive resources in other parts of the
triple in less than a decade. Administrative reforms
hospital are spent on patients for whom there is no
could produce substantial one-time savings, but
happy outcome. America has the best technical
they will not change the underlying trends. With
health care, yet the cruelest and least ethical health
health care now consuming 14 percent of GNP, up
care delivery system in the developed world."
from 7 percent in 1970, we cannot afford to deny
The choices we Americans must face have little
the real issue for much longer without lasting
to do with whether you are a Democrat inclined to
damage to the economy.
use government to solve a crying public need or a
Without imposed limits, medical costs are driven
Republican sure that will only make bad worse. The
skyward by biology, demography and technology.
choices are linked to the two parties' relative
The human lifespan isn't precisely known, but it is
concern for those in the middle and bottom of the
finite. As mortality falls-whether through healthi-
economic scale, but they transcend even that differ-
er living, preventive medicine, or treatment-peo-
ence. They have to do with deciding how to
ple live longer. A person over 75 uses 10 times the
sensibly and humanely care for the terminally ill
medical care of a 40-year-old. In this sense, a good
and how to rule out some very expensive and
health care system, by creating an older population,
marginally, or even clearly, effective procedures.
is inevitably the victim of its own success. (Some
They have to do with how much health care we
believe that ultimately it may be possible to slow
think we can afford. None of the answers fits in a
aging, compressing its infirmities into fewer years
campaign sound bite, but this is, the time to begin
before death, but this remains a theoretical hope.)
posing the right questions.
The process is well advanced in the United
States. Today, those over 100 are the fastest
The writer, vice president of World Resources
growing age group, those 85-100 the second-fast-
Institute, writes this column independently for
est. The effect will be magnified as the huge baby
The Post.
A14 FRIDAY, FEBRUARY 7, 1992
THE WASHINGTON POST
President's Plan Elicits Many Questions, Gives Some Options
By Malcolm Gladwell and Spencer Rich
Could the subsidies and vouchers
How would the plan affect those who
HINs than they would have been able to each
actually solve the problem of the un-
the costs of insurance evenly across young
Washington Post Staff Writers
already have insurance?
Insured?
of the member companies individually, be-
and old, healthy and sick.
What is distinctive about the Bush ad-
In two ways. First, many Americans lose
cause the costs of administering a large plan
The Bush administration predicts that
are much less than the costs of running many
Would the plan curb skyrocketing
ministration's plan?
over five years the plan will reduce the
medical coverage when they switch jobs.
health care costs and how much would
numbers of uninsured from 34 million to 4.9
This is because many insurers refuse to cov-
small plans separately.
it save?
Unlike Democratic congressional proposals
million. Others are less optimistic.
er "preexisting conditions" -illnesses they
How would the plan affect individu-
The only specific cost-saving device is a
for a "play-or-pay" system or a single nation-
had in their previous jobs. The Bush proposal
als who aren't in an HIN?
Karen Davis, a health economist at Johns
proposed curb on the growth of Medicaid
alized program, the Bush plan relies heavily
Hopkins, points out that only 28 percent of
would prohibit this practice.
One simple proposal would allow a person
spending, with the goal of holding annual
on existing institutions and free-market eco-
uninsured Americans have incomes below the
Second, the plan also would make it ille-
to give a credit voucher to an employer,
budget increase to the rate of inflation plus
nomics, it includes a series of targeted struc-
poverty line, and thus would qualify for the
gal for an employer to exclude from cover-
who could supplement it and buy coverage,
perhaps 2 percent within a few years.
tural reforms and a specific set of proposals to
largest assistance benefits. And even for
age employees who suffer from certain ex-
or refer the worker to a place where a pol-
The administration estimates that a va-
make health insurance more affordable for
them, the subsidy would only be partial: The
pensive illnesses, such as AIDS.
icy could be purchase.
riety of stategies will change incentives in
the working poor and middle class.
cost of a year's health insurance coverage for
How would the Bush plan affect
Another way would be for the worker to
the health system and eventually save $394
How do the financial assistance pro-
a family of four averages just over $5,000.
small businesses?
give his voucher to Medicaid. Under the
billion over the next five years and $1 tril-
grams work?
That means a family making $10,000-
plan, states would have the option to expand
lion by the end of the century.
which qualifies for the full $3,750 credit-
Substantially. The plan attempts to en-
Medicaid coverage to all those eligible for
The plan would accomplish this, the admin-
For those with incomes near the poverty
would- still have to find $1,250 in after-tax
courage small businesses that do not current-
vouchers, which means that all persons up
istration argues. by encouraging of growth of
line, the plan would provide credit vouchers
cash to pay for insurance.
iy offer health insurance, or that are suffering
the poverty line with no health policies
"managed care" systems in which doctors and
redeemable at health insurance companies.
The higher an insured person's income.
from high premiums, to band together and
would be guaranteed Medicaid coverage.
hospitals have a direct financial stake in hold-
For single people making $5,600 or less, the
the less effect the plan has. Consider a family
form what are called "health insurance net-
Or. of course, the individual could use the
ing down the amount of money they spend on
voucher is worth $1,250. For couples under
of four making $20,000. In their 15 percent
works" (HINs). These networks, which would
voucher to obtain a policy.
patients. The plan would also strongly pres-
$10,000, it gives $2,500. For families under
tax bracket, even the full $3,750 health tax
be administered by a union, a trade group or
sure states to use managed care in adminis-
$14,300, it give $3,750.
credit would be worth about $563. They still
a board made up of the member companies,
How would the plan affect the way
insurance companies do business?
tering Medicaid and to push for its use
These vouchers would be certificates
have to come up with about $4,437 to pay for
would then go to a health insurance company
throughout the state's health system.
$5,000 worth of medical insurance.
and negotiate for group coverage.
Carl Schramm, president of the Health
that could be picked up at a state unemploy-
In addition, the plan lists a series of spe-
"That's not going to be enough to help
The chief incentive to the formation of
Insurance Association of America, a trade
ment benefits office or some other state-
cific options to cut costs.
designated agency. The higher the income,
you afford insurance," said Davis.
HINs is to level the playing field between
group for the health insurance industry,
The administration also proposed: re-
That $5,000 premium rate, of course, is
small and big companies. Currently large
calls this part of the Bush proposal "radical."
search on the effectiveness of various treat-
the less the voucher amount-up to 150
companies are able to insure themselves,
percent of the poverty line. Then the
an average. In some rural areas, the credit
Under the present system, insurers based
ments; reduction of paperwork by using
paying health premiums to an in-house fund
might well be enough. But in the District,
their premiums for each company they insure
"smart" health insurance ID cards for com-
voucher system would stop and a tax-deduc-
from which they pay for claims. This allows
for example, the small group rate for a fam-
on the amount of money that company spent
puterized payments and more uniform bill-
tion credit system would start. Individuals
them to escape certain costly regulations,
ily in which the parents are 40 years old is
on health care during the previous year. A
ing and coding systems; increased preven-
making up to $50,000 could deduct up to
such as state laws requiring that they offer
$7,872 per year. For a 40-year-old single
small company with one or several employ-
tive care; and various changes in malprac-
$1,250 of the cost of health-insurance pre-
various expensive benefits, state laws limit-
man, a year's coverage is $2,808.
ees who became very, very sick, for example,
tice laws designed to discourage doctors
miums on their federal income tax filings.
"For poor families, a tax credit of $1,250
ing their ability to negotiate lower prices
would face huge increases in its premium
from practicing "defensive medicine" for
Couples making up to $60,000 could deduct
from hospitals as well as local taxes on insur-
per individual is a cruel hoax," John J.
costs for the next year, and might not be able
fear of being sued.
up to $2,500, and families making up to
ance premiums.
Sweeney of the Service Employees Inter-
to afford insurance at all. By the same token.
Marilyn Moon. a heatth economist with
$80,000 could deduct $3,750.
The plan would give those same advan-
national Union said.
a company that employs mostly young and
the Urban Institute. said she felt the sav-
Before taking the deduction, an individual
tages to an HIN currently held by a self-in-
healthy people would have much lower than
ings estimates were "soft" and "optimistic."
"I would guess that this would cut the [to-
would have to subtract from the total cost of
sured company.
average health insurance premiums.
In theory, several economists said, pro-
tal number of] uninsured in half," said Mark
insurance any amount paid by an employer.
In addition, the plan assumes that HINs
The Bush plan would gradually move away
viding health insurance to those who are
Pauly. a health economist at the Wharton
would flourish because workers could use
For example, a family of four with an an-
from that system toward what is called a
currently without it would eventually re-
School in Philadelphia. "The part that is
nual income of $50,000 pays $3,750 for in-
their vouchers or their tax credits to help pay
"community rating," which is based on large
duce the health insurance premiums of ev-
questionable is: What is it going to do for
for insurance, making a network more afford-
pools of people who live in the same state.
surance premiums, of which $1,000 is paid
eryone else, because hospitals would no
the uninsured who aren't that poor?
I
able than it would be if the full cost had to be
Insurers would be required to charge every
by an employer. The family could deduct the
longer have to recoup the money they lose
think you will need more than just tax
borne by employers. Also, insurers will be
insured person in a given "community"
difference-$2,750.
on the uninsured by charging higher prices
breaks of that magnitude."
able to offer far cheaper insurance to the
roughly the same premium price, spreading
to those with insurance.
Panel member Larry Atkins, a
"I don't get any sense of urgency
Social Security specialist who for-
out of reading these recommenda-
merly worked for the late Sen. John
tions," said Ball. Karen Ignani of the
WPost
Heinz (R-Pa.), said that among the
AFL-CIO said she favored having
12-3-91
panel's 13 members, there are "no
the council adopt some guidelines
more than four votes" for any one of
for national debate, such as endors-
the 10 plans.
ing the concept of a cap on the
But the panel does appear ready
growth of health spending (without
to recommend a series of substan-
necessarily specifying what the cap
tial incremental changes in the cur-
should be).
rent system that officials said could
Steelman agreed that the report
help 22 million people. These in-
language should sound more ur-
clude:
gent, but said demonstration pro-
A health insurance system open
jects in various states would "start
to anyone under 22 in a given area
the ball rolling" toward exactly the
and not covered by Medicaid or pri-
kind of negotiations Ball wants. In
vate insurance. The premiums
addition, she said, it would be "ab-
would be related to income and lo-
solutely criminal to hold back" on
cal schools, which is where most of
the various practical steps "to help
those eligible will be found, would
people now" while there is no na-
be used as central locations to make
tional consensus on a large-scale
THE WASHINGTON POST
the insurance available.
fix.
School-based preventive-care,
Health-Care
primary-care and dental health clin-
ics for all children from infants
through grade school, whether en-
Panel Lacks
rolled in the school or not. Low-in-
come children would be subsidized.
Costs would be paid in part by
Consensus
charging Medicaid or the individ-
ual's private policy, if he or she had
one.
Reform of malpractice insurance
By Spencer Rich
and the small-business health insur-
Washington Post Staff Writer
ance market.
A Social Security advisory panel
Creation of 250 more community
headed by Deborah Steelman, a for-
and migrant health centers, and
mer policy adviser to President
new programs to counter infant
Bush, is having a hard time deciding
mortality.
what to reflection of the tre-
State experiments with some of
mendous financial and ideological
the 10 broad health-system plans to
conflicts over revisions of the
see how well they work.
health system.
Robert Ball, former commission-
The panel began in 1989 with
er of Social Security and a leading
high hopes it could craft an overall
adviser to congressional Democrats
solution to the problems of 34 mil-
on the issue, sharply attacked the
lion people without health insur-
idea of undertaking demonstration
ance. But yesterday's meeting
projects that might stall national
made clear that the committee-
action instead of trying to work out
which includes Democrats, Repub-
a compromise on a large-scale sys-
licans, health professionals, union
temic reform. He also criticized re-
officials and insurance executives-
port language suggesting that the
is deadlocked over any comprehen-
"window of opportunity" to fix the
sive plan for overhauling the na-
current system may be as long as
tion's health care system.
seven to 10 years.
Not a single member of the panel
expressed any optimism that when
votes are taken later this month, a
significant majority of the panel
would recommend any of 10 com-
prehensive sample plans its staff
has drafted. Those plans range
from a national health insurance
plan beloved of many liberals to a
"free-market" system in which all
people get tax vouchers from the
government and use them to buy
their own plans.
MAGIC JOHNSON, AIDS, AND BLACK AMERICA
DECEMBER 2. 1991 $2,95 .
Managed health care scams : Does Cuomo give good phone? Post-nuclear families
WASP AGONY
John Updike
on the secret life of
John Cheever.
Camille Paglia
on the Presbyterian report
on human sexuality
48
49140
0
787445
1
ism. The Washington Post would not have given credence
to the stories in any other section of the paper. A car-
toonist is not immune from such standards of journalis-
WHITE HOUSE WATCH
tic veracity. Mr. Trudeau, whose cartoons are often
brave and sassy, has this time gone too far. He should
have left the Quayle story where he found it: in his file
marked "Too Good to Check."
T HOSE WERE THE DAYS:
RUDE HEALTH
By Fred Barnes
September 5, 1966
mayers b.
T
WO years ago President Bush wandered into the
Roosevelt Room as his aides were meeting with a
LB5
group of conservatives. Columnist M. Stanton
Evans was talking about soaring health care
costs, and the president politely told Evans to continue.
MEMORANDUM FOR MARVIN WATSON
Evans warned that rising costs would cause rationing of
FROM:
Bill Moyers
health services. And this would allow Democrats to "dem-
agogue for national health insurance unless the White
House came up with market-based reform." Evans soon
This is to request a subscription in my
realized that neither Bush nor his aides had the slightest
interest in the subject. "From the president's expression,
name to The New Republic. I have found this
body language, and lack of response to these remarks,"
magazine very useful in research work and,
Evans wrote later in Human Events, "I might as well have
been discussing binomial theorem or the mineral her-
therefore, would like to receive a copy each
itage of Zimbabwe."
Bush is interested now. Even before the November 5
month.
victory of Democratic Senator Harris Wofford in Penn-
sylvania, Bush had begun to take health care seriously.
Last summer the issue was turned over to budget director
Richard Darman, a sure signal something was up. The
S
health care package Darman develops will be unveiled in
NAP, CRACKLE, AND POP:
the president's State of the Union address next January
or soon thereafter. The problem is that Bush, like Repub-
Women as Colleagues Can Turn Men Off
lican Richard Thornburgh in the Pennsylvania Senate
race, appears grudging and reactive-because he is
The Wall Street Journal, October 29
grudging and reactive. "We don't do anything in a timely
way," complains a White House official. "If we did, we'd
At Work, Sexual Electricity Sparks Creativity
have a domestic agenda." On the domestic side Bush
(same day, same paper)
never misses an opportunity to miss an opportunity.
Bush had a chance to seize the health insurance issue
(thanks to Keith Danish, Leonia, New Jersey)
in 1989, 1990, and 1991. Several months into his admini-
stration, Secretary of Health and Human Services Louis
O
Sullivan decided to explore the issue. He assigned then
KLAHOMICIDE: A couple of papers have reported
Deputy Secretary Constance Horner to the job. That fall
the bizarre case of Oklahoma death-row inmate Ben-
the White House took over, putting Horner in charge of
jamin Brewer, who was nearly snuffed in his cell under
the administration's working group on health care. The
the provisions of an obscure "frontier" law. The 80-year-
group met monthly to develop options. Every six weeks
old ordinance stipulates that the county sheriff has the
Horner conferred with Darman, domestic. policy adviser
authority to execute a condemned prisoner if no legal
Roger Porter, and John Sununu, the White House chief
reason exists for further delay. The exact means of dis-
of staff. But nothing happened. The White House
patching the prisoner, however, are left up to the law-
wanted to contain the issue, not pursue it.
man, and theoretically could include anything from
It took six weeks of lobbying by Horner and a handful
shooting him in the head to reading long passages from
of others to get three sentences in Bush's State of the
The Golden Bowl. In Brewer's case, the sheriff was on his
Union speech in January 1990. The president said Sulli-
way to the penitentiary when a state appeals court
van would lead a "review of recommendations on the
stayed the execution.
quality, accessibility, and cost of our nation's health care
system. I am committed to bring the staggering costs of
DECEMBER 2, 1991 THE NEW REPUBLIC 9
health care under control." Of course the review Bush
cal appeal." Not enough, though.
referred to had begun the year before, and Sullivan
Though Darman is intrigued by the Heritage plan, the
wasn't really in charge of it.
White House has turned to the less-sweeping second
Why was the White House so reluctant? The reasons
option, incremental reforms to reduce the cost of health
are chiefly political. Republicans, including the Bushies,
insurance and expand coverage. Horner's working
regard health care as a Democratic issue. The judgment
group produced a ten-point package that includes tax-
was also made that whoever went first with a health insur-
incentives, deregulation of barriers to managed care, a
ance package would be sharply criticized for it. "The goal
cap on the tax exclusion for group benefits, a tax credit
was not to go first," says an official. Besides, if Bush went
for each child, and expansion of Community Health
first, Democrats would quickly outbid his proposal.
Centers. The market-oriented package doesn't foreclose
There was fear that Sullivan, whom the White House
a Heritage-like insurance program later. "There's noth-
regarded as politically unreliable, might jump the gun by
ing in it that's antithetical to moving to Heritage over
talking up a comprehensive insurance coverage. To avert
time," says a White House aide. It addresses what Bush
that, the White House seized the issue. One other con-
aides think is the real source of public anxiety about
sideration nagged the White House: a fear of being
health coverage: not lack of national health insurance,
attacked as callous for ignoring health care problems.
but gaps in the current system. The package doesn't pro-
The working group gave the White House something to
vide insurance for everyone, but it makes it easier for
cite, according to a Bush aide, as "visible activity on
small businesses, individuals, folks out of work or in
health care."
between jobs, and the poor to buy insurance. My guess is
that Bush will propose something like the ten-point plan
T
he politics of health care changed in; 1991. By
next year, presenting it as a giant step toward his freshly
summer Darman had concluded that:some pro-
minted vision of universal, high-quality health care.
gram was likely to emerge from Congress in the
It might work. Bush doesn't deserve to escape trouble
early 1990s. This meant a Bush package had to
after dawdling so long. But politics is unfair. A presiden-
be put together. Still, the health issue hardly gripped the
tial proposal, tardily but relentlessly advocated, may pre-
White House. "I can't explain how unengaged people
vail. The Bush plan has an added political plus. It leaves
are until there's a live political necessity to get engaged,"
Bush plenty of what GOP consultant Mike Murphy calls
says an official. The Wofford win and a New Jersey refer-
"shooting room." He's free to attack Democratic plans as
endum created the necessity. Wofford harped on
socialized medicine, which will require higher taxes and
national health insurance, insisting that if a criminal is
more Washington bureaucracy. Thornburgh tried that,
guaranteed a lawyer then every sick person should have a
but too late. Bush can start early. Roger Ailes, get ready.
right to a doctor. Wofford's election was hardly a man-
date for national health insurance, but it confirmed pub-
lic anxiety about health care coverage. So did the non-
binding referendum in New Jersey, which passed by a
THE
PRESS
4-to-1 margin in a Republican landslide. It called on Con-
gress and the president to enact "a national health care
program" with universal coverage and "minimal out-of-
pocket expense to taxpayers."
The White House perked up, but didn't panic. "At the
end of the day, people know the health care issue is
MARIO'S CALLING
dwarfed by the economy," says a senior White House offi-
cial. "There's panic and paralysis here on the economy.
There's concern and movement on health care." Bush is
By Jacob Weisberg
eager to avoid the fate of Thornburgh, who offered too
little, too late on health care. Thornburgh ignored Wof-
ford's health insurance theme until the closing days of
the campaign. Then he zinged it as "untried, untested,
D
ave Hepp decided to try the direct approach. At
the outset of "Stateline," his live, viewer call-in
show on New York public television, he asked
radical, and costly." Thornburgh's own health care plan
Mario Cuomo whether he was running for pres-
consisted of proposals to spur competition, hold down
ident. The governor said he had been thinking about it,
costs, and expand Medicaid.
was assembling facts, and would complete the process of
Bush has two options. They aren't new. One plan, pro-
deciding as soon as possible.
moted by the Heritage Foundation, would require all
Hepp pressed the question. "I've talked to a lot of civil-
Americans to have health insurance and create a refund-
ians-not insiders, not politicians-who tell me that
able tax credit to help them pay for it. This was favored by
they're angry about this, tell me that they're frustrated,
Horner when she headed the working group (she's
tell me that they think you're kind of
"
White House personnel chief now). At a Heritage forum
"About what? Angry about what?" Cuomo snapped.
in 1990 she said: "A health financing system that puts
"They think you're playing a game with them."
control into individual hands, and so broadens individ-
"See, I don't believe you, actually, Dave."
ual choice, is, I think, going to have considerable politi-
"Actually I have talked to a lot people about this."
10 THE NEW REPUBLIC DECEMBER 2, 1991