2007 Princeton Health Plan
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DRAFT
12/19/07
Medicare for All
We recommend a new Medicare Part E to be all-inclusive, to insure hospital costs, physician
fees and medical needs, and prescription drugs---i.e. Parts A, B, and D of Medicare---for the 161
millions under 65 who are now insured by private insurance companies, and for the 47 million
uninsured.
Because of lowered administration costs alone, this has a minimum potential of saving $77
billion.
As an alternative, we recommend the adoption of the German health care system. (See
Attachment)
In any case, we recommend mandatory health insurance for all.
A working private/government partnership is already in place and working for 44 million U.S.
citizens in the year 2007---15% of our population---those most in need of medical care: the 36.7
million elderly and the 7.1 million disabled.
It has four components which recommend it: an administration cost of 4%; already negotiated
fees for physicians and hospitals; a single, national risk pool; and it works, with a minimum of
fraud.
A great advantage of this national, single risk pool of 44 million is that the oldest and sickest
people are included equally, and their risks spread among a large pool of people, rather than
excluded, and discriminated against by the private insurance companies, especially those with
pre-existing conditions. Better yet, their coverage cannot be cancelled.
It also has the advantage of prompt payment of claims without delaying tactics, or refusing
coverage and payment.
Comments
Dr. Thilo Weissflog wrote in the New York Times of November 20, 2007, “As a physician, I deal
with insurance companies and their reluctance to pay for indicated procedures or tests on an
almost daily basis.
“The difference between health care and other businesses is that it doesn’t deal with widgets but
human lives. Cutting your costs and increasing your profits, by denying people necessary care is
unconscionable. Until profit is removed from the health insurance industry, we will unfortunately
not see an end to these tragic
stories.”
The wife of another doctor wrote in the New York Times of November 6, 2007 “Before my
husband and I moved to Denmark in August, we were increasingly frustrated with a system in
which even people with ‘good’ insurance spend too much time begging for approval for medical
treatments. As a physician, my husband felt he was in a daily fight with midlevel bureaucrats
whose sole job was to deny care”.
“As to whether a single-payer plan has political support, it depends on whether you ask the
average person or the average politician.
“Whereas polls show that a majority of the people favor a single-payer plan, the politicians, many
of whom be beholden to the insurance industry, would like you to believe otherwise.” Peter
Hanauer, November 28, 2007, the New York Times.
“The truth is that single-payer, government-run health care has been a panacea.
“In the 40 years that I’ve practiced family medicine, I’ve found Medicare, Medicaid, the Veterans
Administration, all of them single-payer government administered health care programs, more
predictable, uniform and reliable than the for-profit health care insurance companies.
“This is better for doctors and hospitals and certainly better for the patients.
“I like one form to file, one payer, onr set of rules for everyone and the assurance that everyone
has health care coverage when patients come to see me”. Melvin H. Kirschner, M.D., the New York
Times, November 28, 2007
“Where we are unique (among countries) is in leaving most of our health system to the tender
mercies of profit-maximizing investor-owned businesses”.
(Marcia Angell, M.D., senior lecturer, Harvard Medical School; former editor in chief, The New
England Journal of Medicine; the New York Times, November 28, 2007)
“The ‘mandate model’ for reform rests on impeccable political logic: avoid challenging
insurance firms’ stranglehold on health care. But it is economic nonsense. The reliance on private
insurers makes universal coverage unaffordable.
“an inconvenient truth: only a single-payer system of national health care can save what we
estimate is the $350 billion wasted annually on medical bureaucracy”.
(David U. Himmelstein and Steffie Woolhandler, Professors of Medicine at Harvard; the New York
Times December 15, 2007)
Necessities of Life
Food, water, shelter, health care are necessities to sustain life.
In all cases in the U.S., government acts to provide them.
The governments subsidize farms raising food; they develop and run water systems; they provide
for the homeless and build public housing; the federal government has Medicaid. Local
governments have “poor houses” and nursing homes.
In New York City, the city government runs public hospitals like Bellevue and Elmhurst.
Medicare
Medicare’s administration cost of 4% handles 92 million people--- the Medicare, Medicaid, and
SCIP programs--- one third of our population.
There is a negative. It is subsidized by federal tax money---
$167.5 billion in 2006, which pays for 75% of the costs of the medical portion, Part B---$2,800 per
enrollee---; as well as subsidies for insurance companies that write Medicare “Advantage”
policies, and those affording drug coverage, Part D.
The federal agency, the Centers for Medicare and Medicaid Services (CMS), is the largest
purchaser of health care in the United States, serving over 92 million Medicare, Medicaid and
SCHIP beneficiaries; for a total net outlay of $517.185 billions, i.e. over half of the monies for
hospital and physician fees.
Hospital Costs, Part A
Part A, for hospital costs, is financed by a 1.45% wage tax each on employees and employers,
and is forecast to continue to be in surplus until 2018.
Physicians and Medical Needs, Part B
Part B, for physician’s fees and medical needs like wheelchairs, laboratory fees, etc. is financed
by a monthly premium of $93.50, or $1122 for participants. This is what is subsidized by tax
money, and to break even the premium should be raised to $4,000, the per capita costs for
Medicare Part B.
The total cost per person for a Medicare enrollee for the year 2007 with full coverage is $13,122
as follows:
* Part A Benefits- Hospitals $4,600
* Part B Benefits- Medical $4,000
* Medigap Insurance- $2,000
* Prescription Drug Premiums $ 480
* plus deductibles and co-payments, for a minimum total cost for an
enrollee of $11,080
Federal Subsidy for Insurance Companies
offering Drug Insurance or
“Advantage” policies $2,042
Total: $13,122
The source of monies for these per person Medicare costs is:
Part A Income- Hospitals (FICA) 2.9% $4,600
* Part B Income Insurance Premiums Medical $1,200
Federal Government tax revenues $2,800
* Medigap Insurance- $2,000
* Part D Income Prescription Drug Premiums $ 480
Federal Subsidy for Insurance Companies
offering Drug and “Advantage” Insurance $2,042
Total: $13,122
* This cost, to an enrollee, totals $3,680 for full coverage
If the Medicare benefits cover the costs for the sickest patients, then the per person expenses
for the healthiest people---those under 65---should be substantially less.
In fact, private insurance companies are charging on the average $3000 per person for those
under 65, $10,122 less than the Medicare costs of $13,122.
If Medicare were to offer individual policies to all under 65, because of its lower administrative
costs of 4% as opposed to 20-30%; using a savings of 16% of $3000, the cost for this Part E policy
would be $2520, a savings of $480. For a family of 4, the savings would be $1920.
Prescription Drugs, Part D
Part D, for prescription drugs, is subsidized by the federal tax payers for $49 billion a year
through subsidies for the insurance companies offering drug insurance. One reason for this is to
reimburse the insurance companies for their enrollees’ costs when their drug costs go beyond
the “doughnut” threshold.
Normal insurance industry practice is to spread this risk through reinsurance.
There are only 24 million enrolled out of 44 million, for a per capita subsidy of $2042 to the
insurance companies. Many of the balance of 20 million are covered by their employer’s drug
plans.
Congress mandated that this drug plan can not negotiate for lower prices for its 44 million
person pool, like Medicaid and the Veterans Administration do. Rep. Henry Waxman, chairman of
the House Oversight and Government Reform Committee, estimates that if Medicare administered
Part D, there were be savings of $10.7 billion a year.
Another reason for using tax monies is to subsidize the so-called Medicare “Advantage”
insurance policies (which include a Part D component), issued by private insurance companies.
There are 7 million persons enrolled in these “Advantage” programs. The federal payment
averages $9000 per person, which includes a markup of 12%.
Moreover, these “Advantage” policies seem to be a problem. Senator Max Baucus criticized the
“unscrupulous tactics of some plans”. Their administration costs are 20-30% because of sales
commissions and marketing.
Humana, the second largest health insurer in the U.S., expects to earn a profit of $1.28 billion this
year from Medicare, mainly from the Advantage program. (NYT 12/5/07)
William W. McGuire, the former chief executive of UnitedHealth, the nation’s largest health
insurer, has been asked by the Securities and Exchange Commission, to return $616 million to
settle claims related to back-dated stock options. (NYT 12/7/07)
Total National Health Care Costs
In 2004, health care costs in the United States were 16% of the Gross Domestic Product; $1.9
trillion.
In 2003, health care costs in the United States were nearly 16% of the Gross Domestic Product,
and were $1.7 trillion.
“Estimated costs for 2007 are $2.3 trillion, twice as much on a per capita basis as any other
country.
“But the health of those in America is not appreciably better than that of people in other
industrialized countries. Most of which offer government-run care systems”.
(The Morning Call, Allentown, Pa. December 18, 2007)
There are five major components of health care costs---hospitals, physicians, prescription drugs,
dental care, and long term nursing care; all naturals to be covered by insurance.
However, a drawback of a private insurance-financed system is the millions of dollars spent on
lobbies---700 in Washington, D.C. alone---plus many more in each of the 50 state capitals---by
these insurance companies, hospitals, doctors, nurses, drug companies, etc. to maintain the
status quo.
In addition, all of the above are spending millions of dollars on marketing expenses---television,
radio, newspapers, magazines, direct mail, billboards, you name it.
Neither this industry-wide lobbying nor marketing effort directly benefits the patients, only those
promoting themselves.
These activities add at least 10-20% to the national health care bill.
Of the total health care costs, $629 billion---37%---, was for non-physician services and non-
hospital costs, i.e. prescription drugs, dental, long term nursing home care, etc.
Physicians accounted for $374 billion, for an average cost of $422,611 for the 884,974 doctors in
2004, or 22% of the total health expenditures. Estimating the number of doctors in 2003, it would
be 869,080 (853,187 in 2002; 884,974 in 2004 averages 869,080. Figures from the AMA); for an
annual cost of $430,340 each.
Hospitals accounted for $522 billion, or 30.7%.
Administration Savings
Private insurance companies have marketing and advertising costs not incurred by Medicare.
Salesman commissions range from 10-20%. Advertising media include television, radio,
newspapers, magazines, direct mail, billboards, etc.
Fraud
The General Accounting Office (GAO) has estimated that 10% of medical costs are due to fraud.
Reducing the number of payers would reduce the opportunity for fraud.
Who Pays for these Health Care Costs ?
Of our 300 million population, 92 million are enrolled in Medicare, Medicaid and SCIP for $187
billion of federal tax dollars.
47 million are not insured; meaning that the balance of 161 million are covered by private
insurance companies.
Recommendation: a new Part E for Parts A, B, and D
For those under 65
It has been estimated that the premium cost of these 161 million people covered by private
insurance companies averages $3000.
We recommend that those privately insured be offered the standard Medicare benefit
package. In as much as Medicare administrative costs are 4%, and private insurance
administrative costs are at least 20%, this new Part E coverage would save $480 per person.
This has the potential of saving $77 billion.
It would also eliminate the denial of medical claims, as well as rejection of issuing an insurance
policy.
This would also create a nation-wide insurance pool of potentially 161 million persons, more
than adequate to spread the risks. The 47 million uninsured would be eligible for this insurance,
and thus a part of this pool.
Social security insurance covers the entire national risk pool of 300 million people for disabilities
and old age pensions.
Physicians control the cost of health care through their own fees, their writing of prescriptions
for drugs, for tests and lab work; their recommendations for hospital admittance and for surgery,
physical therapy, etc.
Either we create a system that supports their decisions, or we continue with the current system
of questioning their professional judgment in order to avoid paying for needed care.
As it is, Shannon Brownlee, senior fellow at the New America Foundation, writing in her book
“Overtreated” says “We spend between 20% to 34% of our health care dollars on care that does
nothing to improve our health.”
“Doctors and hospitals typically depend on how much they do, on the volume of work for their
income, and they are the gatekeepers who decide when work needs to be done.
“Hospitals that don’t use the fee-for-service model, like those run by the Veterans Health
Administration, are already getting better results for less money.”
(David Leonhardt, the New York Times, December 19, 2007)
Alternative
As an alternate to creating a new Part E for persons under 65, i,e, “Medicare for All”, we
recommend the German model, i.e. negotiated doctor’s fees of 3.5 times the average blue collar
workers, and a resulting 11% of their GDP as opposed to our 16%; a savings of 5% of our GDP.
We are enclosing a description of the German system from our 1993 white paper.
Mandatory Insurance
At present those insured are paying a compulsory surcharge to pay for the costs of treating the
uninsured. This is especially noticeable in the ridiculously high per diem hospital charges.
We do not question the necessity of requiring universal auto liability insurance, even though there
the insured pay a surcharge for the uninsured through “uninsured” and “underinsured”
coverages.
We recommend the adoption of John Edward’s idea that when a person files their federal income
tax return, they must submit proof that they have health insurance.
Similarly, when a person goes for medical care, they must show proof of insurance, or be
enrolled on the spot in our proposed Medicare Part E.
----------------------------------------------------------------------
Attachment: the German Program (1845 and 1910 A.D.)
Current German Program
(France and the Netherlands have similar programs)
* Life-long medical care for all its citizens
* Pays for hospital, doctor and dental care, and a sickness
benefit after a 6 week waiting period.
* Mental health services program weak
* Serious shortage of nurses. Complaints about low pay and
low status
* Long-term nursing home care and home care being improved
* Paid prescription drugs. "Reference" prices established
for drugs, which are solely available from privately operated
pharmacies.
* Doctors paid by fee-for-service, fees negotiated annually
by program.
* 1147 statutory compulsory not-for-profit medical insurance
companies guarantee provision of comprehensive coverage to all
insureds (90% of population). Plan over 100 years old (1845 and
law of 1911. Called "sickness funds".
This large number of sickness funds makes for unwieldy ad-
ministration.
* Also have 42 private health insurance plans which 10% of
the population has chosen based on over $36,000 annual income and
occupational status. Plans reimburse physicians and hospitals at
twice the negotiated rates.
* Large companies have created their own sickness funds
(self-insured)
* Paid for by a fixed %age of employees' gross income, plus
an employer contribution. Combined rate was 12.8 in '89
* Premiums of unemployed paid by Federal Labor Admin. in
2/3's of cases, or local welfare agencies in 1/3rd.
* Premiums of retired persons paid by their pension fund as
a flat %age of the pension, based on the national average of
working persons' payroll contribution.
Only covers 40% of care of pensioners. Retired persons
remain members of their sickness fund, which subsidizes the dif-
ference.
* Federal government has responsibility for health service
professions, statutory health and accident insurance, doctor's
fees, hospitals, pharmacies and medicines, social security and
welfare medical care, protection of patients, medical research.
* System operates within strict framework of federal and
state regulation
* Since '77 have enacted cost-containment laws and some
cost-sharing by patients
* 17 regional associations of ambulatory care physicians
monitor their patterns of service, negotiate annual fee-for-
service rates, provide to their members disability and survivors
insurance, subsidies for underserved areas
* 90% of ambulatory care physicians prohibited from treating
patients in hospitals
* Most hospital-based physicians (salaried) prohibited from
treating ambulatory care patients
* Physician procedures given a "point value" on fee schedule
rather than monetary value
* Patient presents physician with a "treatment voucher", and
doctor notes thereon the services provided. Physician bills own
regional association quarterly
* One clerk in the regional association office per 10
physicians reviews and pays claims. Administration cost = 2.5%
* 1 doctor per 357 persons (ratio nearly lowest in world)
* Average net income for doctors before taxes = $100,000 =
3 1/2 times earnings of blue collar workers
* 11 hospital beds per 1000 persons. Rates negotiated on a
flat per diem charge
* 26 medical schools (all public institutions) with 12,000
graduates a year, 40% women.
(U.S. has 126 medical schools and 16,000 graduates a year)
* Most students' costs paid by government. Admissions and
perforance testing prescribed by law
-------------------------
Uwe E. Reinhardt, economics professor at Princeton University
specializing in health issues reported to favor the German plan.
* Sickness funds cost 5% of gross domestic product in '89
Total health care cost was 8.2%
Sweden's rate was 8.8% of gross domestic product,
France's rate was 8.7%,
Canada's rate was 8.7%,
Japan's rate was 6.7%,
Britain's rate was 5.8%
--------------------------
'89 Health care disbursements breakdown:
Germany U.S.A.
Hospitalization 31.5% 38.4%
Physicians 17.5 18.9
Maternity 2.1 ---
Preventive 3.8 ---
Drugs 15.6 8.2
Loss of income 6.6 ---
Medical appliances 6.0 1.8
Dental care 9.8 5.1
Administration 5.8 5.0
Funeral 1.0 ---
Sources: New England Journal of Medicine, 2/14/91 and 6/13/91
Embassy of the Federal Republic of Germany