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Posted: September 29, 2009

Five low-cost solutions to health care reform

It's much easier than politicians would have you believe

James J. Scholl

My father and grandfather were insurance executives who dedicated their careers to assisting as many people as they could in obtaining affordable insurance coverage. I viewed their efforts to help people protect their families and futures as an honorable way to be of service, and I've spent the last 30 years proudly following in their footsteps in my own career as a benefits broker.

In recent weeks, the debate over health care reform has turned to health insurance reform. But isn't the goal to reduce costs and provide universal coverage for all Americans? If so, what in the world are they doing in Washington? Why do we need to spend $800 billion to only cover part of the 50 million uninsured, while we continue to watch costs escalate?

This problem is much easier to solve than our politicians would have you believe. Here are five straightforward solutions that will provide health care for all Americans, reduce costs by over 45 percent and require very little additional federal or state funding:

1. Pay the Doctors, Reduce System Fraud - This year, Medicare and Medicaid spending will exceed $900 billion dollars. On May 20, Harvard Professor Malcolm Sparrow testified before the Senate Judiciary Committee, stating, "The units of measure for losses due to health care fraud and abuse in this country are hundreds of billions of dollars per year. We just don't know the first digit. It might be as low as $100 billion. More likely two or three. Possibly four or five."

At the same time, Medicare and Medicaid underpay doctors and hospitals. Studies show that hospitals lose about 18 percent on Medicare and Medicaid because government programs underpay providers by about 25 percent. To make up for underpayments, doctors and hospitals need to charge individuals with private insurance 15 percent more than they would pay otherwise. This government cost-shift adds $1,788 per family in additional annual premium costs.

If the state and federal government stopped fraud and abuse in Medicare and Medicaid, the amount saved could be used to completely eliminate the cost shift to private plans.

2. Reduce the Cost of Malpractice Insurance - By far, one of the greatest costs to our health care system is the volume of unnecessary procedures performed for the sake of defensive medicine and the time physicians and nurses need to spend documenting their daily work to protect them from lawsuits.

In their paper "Radical Prescription," Peter Weiss, MD, and Martin Meyer Weiss, MD, say the cost of unnecessary yet legally-warranted, defensive medicine takes up to 9% of total national health care spending. Others place the figure much higher, at 20 to 25 percent, when you include the time doctors and nurses spend documenting medical files.

The smaller part of malpractice reform, approximately 5 percent, is the cost of lawsuits, settlements and higher malpractice insurance premiums. Comprehensive medical malpractice reform would reduce health care costs by a minimum of 15 percent and as much as 25 percent. Taxpayer savings in the form of lower premiums and lower costs of government programs would be at least $375 billion annually.

3. Uninsured... No Problem - Thirty-two percent of the uninsured earn over $50,000 per year and another 34 percent of the uninsured are currently eligible for a government sponsored program but have not signed up. Fourteen percent are only temporarily uninsured because they changed jobs, recently graduated or had some event where they lost their health coverage. That leaves 20 percent of the uninsured, or approximately 11 million people, who are long-term uninsured of which half are undocumented workers.

We can help those who are between jobs or cannot afford coverage with a premium subsidy. The recently passed stimulus bill provided a 65 percent COBRA subsidy and has been very effective at helping those who lost their jobs. A premium subsidy would allow people to retain the coverage they have or purchase any coverage they choose.

We can also expand Federally Qualified Health Centers (FQHCs). There are some people who will never purchase insurance or sign up for a government program. With thousands of FQHCs located across the United States in both urban and rural areas, they are able to provide low or no-cost primary health care with the help of federal grant money. These health centers keep the uninsured out of emergency rooms and provide good health care for people without insurance.

If we assisted those who cannot afford coverage with a premium subsidy and provided access to health care for uninsured people through FQHCs, we would eliminate the problem of the uninsured.

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4. If You Want It, You Can Get It - Forty-five states have guarantee-issue insurance programs in place to allow people to purchase insurance coverage, even if they have a pre-existing medical condition. But in five states, including Arizona, Nevada, Hawaii, Delaware and Georgia, no matter how much money you have, you cannot purchase health insurance if you have a pre-existing medical condition. These states must be required to develop a safety net insurance program so that anyone who wants insurance will have access to it.

5. Unleash Consumers - People who buy coverage directly from insurance companies or who receive medical insurance through their employer need to be more involved as consumers.

They need choices when they purchase their coverage. Choices should include different types of managed care options (HMO vs. PPO), with a range of premiums and how much financial exposure they can reasonably accept, just like we all do when we buy other types of insurance or other consumer goods or services.

They need cost transparency in their care options to provide financial incentives in determining the best care at the lowest cost. Expanding consumer-driven plans like Flexible Spending Accounts (FSAs), Health Savings Accounts (HSAs) and Health Reimbursement Arrangements (HRAs) will provide additional incentives to engage people so when they seek medical care, they will be more efficient with their money in how and where it is spent.

Other key cost drivers of health care are unhealthy behavioral and lifestyle choices. Research shows behavior is the most significant determinant of health status, with as much as half of health care costs attributed to smoking, alcohol abuse and obesity.

According to the National Center for Health Statistics, 30 percent of adults (more than 60 million Americans) are obese and the problem is worsening. Obesity has risen by 10 percent in the past decade and the trend is now being observed among American children.

Other sources show that smoking is responsible for approximately 7 percent of total U.S. health care costs. These behaviors lead to many serious chronic health conditions such as cancer, diabetes, heart and cardiovascular disease.

People with these conditions often look to medical treatment or drugs to fix their problems rather than adopting healthy lifestyles to curb them. While we can't completely eliminate the effect of unhealthy behaviors, through wellness programs, education and disease management, we are seeing changed behavior and significant reductions in premiums.

Engaging consumers financially and behaviorally could reduce medical costs by as much as 15 percent because fully-engaged consumers will be more conscientious about how they purchase medical care and understand how their lifestyle choices affect costs.

They will ask questions like "Why does health care cost so much?" "Is the treatment needed?" and "What is the best care for the lowest cost?" It creates a more efficient health care marketplace and reduces health care expenditures.

Medical insurance is expensive because medical care is expensive, and people go without coverage because of its cost or they don't think it's a good value until they end up in the emergency room without it. If we significantly reduce the cost of care, premiums will be more affordable, allowing more people to be insured.

With these five steps, we can reduce costs by over 45 percent. If we can achieve half that amount, we would make great strides toward solving the problems of access to affordable medical insurance.

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James J. Scholl, CLU, CHFC, is a member of the Colorado State Association of Health Underwriters and owns Scholl Associates/BOSSupport in Greenwood Village. He can be reached at 303-770-5050 or

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Readers Respond

James, some very good thoughts and ideas. However,how do we get Comgress and the administration to move forward on these when the insurance lobby and those with interests in profits and stock prices block efforts for chante? If we've allowed this much fraud and incompetence in the system so far, who's going to make it turn around and clean up? Universal coverage is a critical piece to improving the system. A national goal for improved health via exercise and diet needs to be preached at all levels as well, or the change in behavior will not occur. Also, how do you deal with the less frequent major malpractice events in terms of the victim getting financial support to correct the problem (if possible)? Banish the physician and medical team from practicing and the Feds pony up the care money? By Trey on 2009 09 30

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