Affordable Health Care and Prescription Drug Benefits

By Dennis M. Kilian

The long-term viability of Medicare is dependent on slowing the growth of health care costs. We can slow escalating health care costs by promoting market competition based on service quality and efficiency.

Our choices should include managed care providers and prescription drug benefits. Also, as an impetus to change, we need a patients' bill of rights that will make health care providers accountable to us.

Universal Health Care has a nice ring to it. Everyone should have access to affordable health care. Unfortunately, today we do not have universal health care. An estimated 44 million persons in our country do not have health insurance. Many more persons who do have insurance cannot afford it unless there are large deductibles or very limited benefits. These people are not protected from disastrous medical bills when they most need it. Furthermore, after a four-year hiatus, health care costs are rising again at three times the inflation rate.

Most people would agree that affordable health care is desirable. The only question is how to go about achieving it given the large numbers of uninsured persons, inadequate health insurance, and rising costs. Should we implement a program that uses the entire budget surplus to pay for health insurance, increases the national debt, and will lead to higher taxes? Or should we take an approach that addresses the underlying problems of uninsurance, unaffordable premiums, and escalating health care costs?

I support the latter approach. A measured effort that addresses the underlying problems will provide sustainable benefits while allowing us to address other problems with Social Security, education, and national defense as well. This approach is fiscally responsible. It prepares us for the future by allowing us to pay down the national debt while we can. If the surplus disappears in the future, it provides for a better source of financing of programs such as Medicare and Medicaid, without raising taxes or reducing benefits.

People Without Health Insurance

Actually, there are not 44 million uninsured persons all the time. 44 million is a statistic that comprises about 20 million persons who don't have any health insurance at any time and about 56 million persons who temporarily do not have health insurance, usually when they are between jobs. Many of the 20 million persons who don't have health insurance are eligible for government programs that are offered today. They either don't know about the programs or they don't want the programs because of the perceived stigma attached to accepting welfare.

High Premiums and Inadequate Health Insurance

With new technologies, useful information has become more widely available. Useful information allows companies to make better business decisions. However, in the insurance industry, better business decisions do not necessarily benefit the general population. In some instances, insurance companies are able to provide services to low-risk and low-cost groups while ceasing to provide the same services to high-risk and high-cost groups. For example, some Medicare HMOs are eliminating services in small rural areas due to the high cost of providing those services.

By definition, high-risk groups include those of us who need more costly health care services. That means that in many cases the persons who need health insurance either cannot get the services they need or have to pay high premiums that they may not be able to afford. Therefore, these people end up with either no coverage or coverage that has high deductibles and limited benefits.

Escalating Health Care Costs

With 76 million Baby Boomers approaching retirement age and fewer younger people, we have an aging population. Therefore, health care costs as a percent of GDP are almost certainly going to increase. In the last year, health care costs have increased at three times the rate of inflation.

What To Do?

One way to substantially decrease the number of persons without insurance is to provide health plan portability. The number of persons without health insurance will be greatly reduced if employees are allowed to take their health plans with them when they leave their jobs. Or they could find another plan with similar benefits for the same price. Unfortunately, this is not as simple as it sounds. Tax exclusions encourage employers to provide health care benefits. Depending on their tax rates, companies pay much less than an individual would pay for the same health plan. So first we need to offer the same tax advantages enjoyed by employers to individuals.

We should own our health plans. Changing the tax rules allows that to happen. But it also means that we will be able to choose from a variety of health plans to meet our individual needs. There are many plans that are available and it is not always easy to tell which one is better. While we are accountable for the choices we make, sometimes mistakes are made with expensive consequences. To lessen the risk of bad decisions and potentially catastrophic medical bills, there need to be some limits on the choices that are available. These limits can be defined by establishing a set of minimum national standards for health benefits (including prescription drug benefits). These standards need to address what health care services the minimum allowable health insurance will pay for, how coverage and benefits will be adjusted over time, and to what extent the costs of these benefits will be borne by individual beneficiaries.

Tax exclusions will help offset high premiums for individuals and small businesses. Standards ensure that all of us will have access to adequate health care insurance. However, premiums for high risk groups will come down only if we require community ratings that require insurance companies to spread the risk across generations and geographic areas. This approach will reduce the number of persons without health insurance and help guarantee the health and economic security we have promised to our fellow citizens through Medicare.

While implementing standards and spreading the risk over a large communities should ensure acceptable health benefits at lower premiums for many persons who cannot afford it today, it does not lower the costs of providing those services. The best way to slow down escalating health care costs is to promote market competition based on service quality and efficiency.

Today, consumers do not have enough information about the difference in quality of care they can expect to receive from health care providers to make informed decisions. We need to encourage health care providers to provide information on medical errors, customer complaints, and other industry measurements that improve our ability to make meaningful choices. When consumers have the ability to make purchase decisions based on real information, it will force the health care providers to improve the cost effectiveness and quality of their services.