Last Friday, Sen. John McCain, R-Ariz., cast the deciding vote along with Republican moderates Susan Collins of Maine and Lisa Murkowski of Alaska to once again defeat the Senate GOP’s efforts to repeal the Affordable Care Act.
In the aftermath, the hope of meaningful healthcare reform seems remote with such a polarized, partisan Congress. However, there are fundamental principles that should apply: The percentage of covered American lives should increase (not decrease) and healthcare coverage should be more affordable (not less) while creating a sustainable business model for insurers (including Medicare and Medicaid), the pharmaceutical industry, physicians and healthcare providers/systems.
Why are covered lives so important, and why should America pursue the ultimate goal of 100% healthcare insurance coverage rather than the “freedom from obligatory coverage” that seems to have politicized the healthcare reform movement in the last decade?
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Health insurance is more affordable if everyone participates
In any population of covered lives—be it Medicare, Medicaid or commercial coverage—the rate of spending forms a pyramid, with the top 1% of people (with life-threatening diseases and injuries) making up 23% of the total spend and the top 5% (with multiple chronic diseases) making up almost 50% of the total spend. The healthy 50% of the population, which spends very little (less than 7%), makes up the base of the pyramid and provides the premium payments that enable the top 5% to receive care.
This is the same way that automobile coverage works. Everyone is obligated under state law to participate, and individuals with a safe driving record compensate for the few individuals with a poor record and enable them to obtain coverage so that if there is an accident, there is coverage to pay for innocent victims.
Insurers divide these groups into high- and low-risk pools, with the low-risk pools diluting the cost of high-risk pools so that coverage is affordable for everyone. But imagine if everyone in the low-risk pool “opted out.” First, insurance companies could not afford to provide high-risk coverage, and most people who needed it could not afford to purchase it. This would leave most people uncovered and exposed to the financial and clinical risk of an unexpected, life-threatening illness or injury that can occur at any time.
That is why we need a public and private insurance system. The public system (Medicare/Medicaid) is a safety net for high-risk individuals who cannot afford coverage, and the private system (e.g., Anthem, Aetna, Blue Cross, etc.) is for those working individuals and their families who wish to purchase additional coverage with more features and benefits.
When individuals lose coverage, they risk dying from unexpected, life-threatening injuries or illnesses. Although the Emergency Medical Treatment and Labor Act requires that emergency departments treat everyone regardless of ability to pay, life-threatening illnesses require much more than emergency stabilization (e.g., chemotherapy, radiation, interventional procedures etc.). The average individual cannot afford the out-of-pocket expense of these, which can run as high as $50,000 to $100,000 annually.
Thus, increased uncovered lives equals higher costs for everyone and a higher morbidity (complication) and mortality (death) rate in our country.
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Everyone pays for uncovered lives
Next time you visit your local community hospital, you should ask healthcare administrators what their charity care and bad debt rate is and how they pay for it. If they are honest, they will tell you, you do that through cost shifting. What is cost shifting? It is paying $2,000 for a CT scan that costs the hospital $300 per unit volume to do. It is paying $500 for a medication that costs the hospital $25. It is paying an emergency medicine charge of $600 for a physician who gets paid $200/hour by the hospital, including benefits.
In other words, since any economic entity cannot afford the significant percentage of charity care (inability to pay) and bad debt (unwillingness to pay), it shifts that liability to the consumer through higher rates. Some organizations cost shift to the tune of more than 500%: Each individual who pays covers the costs of four other people who cannot.
It is interesting that while Americans are indignant about being forced to purchase obligatory healthcare coverage, they seem oblivious regarding the invisible cost shifting that has occurred for decades and without anyone’s consent.
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The average working American is one serious illness away from personal insolvency
Healthcare is now the No. 1 cause of personal bankruptcy among working Americans. The average American family has approximately 90 days of cash on hand, which means that following removal of all paychecks, the average family would only have enough assets (including life savings, mortgage and retirement) to cover their costs for three months. An unexpected, life-threatening illness such as cancer can have a devastating impact on a family’s finances and place people in terrible conflict by having to choose between their family’s economic security and a person’s ability to survive.
If we truly believe in national security, then economic security should be high on that list because families who lose a key earner have difficulty surviving—and often inadvertently become dependent on entitlements for survival, which costs everyone more.
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Health is the great economic stimulant
You cannot work when you are unhealthy. Ask any large employer, and they will tell you that the costs of presenteeism (coming to work when ill and not being able to do your job) are even greater than the costs of absenteeism (not coming to work at all). Medicaid should go back to its roots of providing healthcare coverage while helping to get individuals and families back on their feet with vocational counseling/training and healthcare coaching. Healthcare accounts for not only the greatest cost to our economy ($3.2 trillion) but also the greatest potential boost to our economy through higher employment of skilled workers, who add economic value and tax support to the system. Thus, a viable healthcare system for all has an economic value that must be calculated into any healthcare reform strategy.
We can do better
Meaningful healthcare reform will only be possible with more covered lives and more affordable coverage in a business model that is sustainable for all economic entities and stakeholders. The unfortunate trend of Democratic or Republican cabals negotiating secretly into the night is not a constructive model for change. It will only continue to divide the nation and fail to create the type of healthcare system that the country desperately needs.
Jonathan H. Burroughs, M.D., MBA, FACHE, FAAPL, is a certified physician executive and a fellow of the American College of Healthcare Executives and the American Association for Physician Leadership. He is president and CEO of The Burroughs Healthcare Consulting Network and works with some of the nation's top healthcare consulting organizations to provide "best practice" solutions and training to healthcare organizations.