Congressional Bills Will Not Address Rising Health Care Costs, Expert Warns

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Robert B Leflar, University of Arkansas

FAYETTEVILLE, Ark. – A University of Arkansas law professor and national health policy expert says reform bills making their way through Congress will do little to control rising health care costs.

“Like a football punted on the moon, U.S. health care spending’s upward trajectory shows no sign of reaching apogee,” says Rob Leflar, professor of law at the University of Arkansas in Fayetteville and the University of Arkansas for Medical Sciences in Little Rock. “In 1980 we spent 9 percent of gross domestic product on health care. Today it’s more than 16 percent. No wonder President Obama called it ‘the biggest threat to our nation’s balance sheet.’”

The two health insurance reform bills passed by the House and Senate, however, offer little in the way of cost controls.

“Most anyone willing to inspect content would find plenty to like about the two bills,” says Leflar. “But they’re mainly about expanding access to care to Americans who lack it now. There’s not a strong focus on finding cheaper ways to provide high-quality care.”

To make sense of the current debate, Leflar emphasizes that any health care system consists of two parts – delivery and financing. Delivery systems range from government-run health care, such as National Health Service in United Kingdom or the Veterans Administration system in the United States, to a free market system in which doctors and hospitals act as unregulated entrepreneurs. In between are systems in which doctors are salaried by private health care institutions, as in the Mayo Clinic model.

Delivery systems’ payment arrangements strongly influence the volume of services and can also impact quality, Leflar says. Payment can take the form of fee-for-service – the traditional method, which encourages excessive volume – or payment for performance, which places more of a focus on quality.

“The bills Congress is considering would launch some experimental payment reform initiatives,” Leflar says, “but it will be quite a while before they make any significant dents in overall spending.”

The centerpiece of the bills is proposed changes not to delivery but to financing rules, to help everyone afford health care. Both bills end discriminatory insurance practices based on health status, such as coverage rejections for preexisting conditions and unaffordable premiums for high-risk patients. Both bills expand the public Medicaid program to cover the near-poor – those with incomes up to about $30,000 for a family of four. Both bills provide tax credits for premium costs to many middle-class Americans with incomes up to about $80,000 for a family of four.

Insurers would have to offer an easily understood selection of coverage levels. The Senate bill provides for four tiers: bronze (“minimum essential” benefits), silver, gold and platinum. The House bill has three tiers. Interstate sales are allowed.

Medium and large employers would be required to provide coverage for their employees. Small employers – those with fewer than 100 employees – would be exempt, or subsidized if they provide coverage.

Everyone would be required to have at least “minimum essential” coverage, except for religious objectors and a few other narrowly defined groups. This could be public (Medicare, Medicaid, veterans care, etc.), employment-based, existing coverage or coverage bought through state- or regionally-operated “exchanges.”

Exchanges are key new institutions. They would certify and rate health plans, present insurance alternatives in standardized format through Internet portals, enroll individuals and take applications for subsidies. Essentially, the exchanges would be organized marketplaces for insurance policies, in which consumers choose between competing plans, a sort of Travelocity for health insurance. Exchanges can negotiate prices with insurers, as in the House bill, or require insurers to justify premium increases, as in the Senate bill.

Debate rages about whether exchanges should offer a public option, and if so, whether states should be able to opt in or opt out. This debate, Leflar stresses, is more about symbolism than about the practical delivery of health care.

“Advocates of the public option see it as symbolic of America caring for all its people,” Leflar says. “Many hope the public plan would outperform private health insurers, which are criticized as responsible for abuses, and cause them to shrivel. Opponents of the public option, on the other hand, view it as symbolic of bureaucratic big government encroaching on individual freedoms. In fact, if enacted, the public option is likely to be no big deal either way.”

The Congressional Budget Office estimates that of 31 million newly covered Americans under the Senate bill, only 3 million or 4 million would likely choose public option insurance. The reason: higher premiums. Although public health insurance, such as Medicare, would be more administratively efficient than private insurance, since it would not engage in underwriting, the Congressional Budget Office predicts the public plan would likely enroll people with greater medical needs and limit services less aggressively. Higher costs mean higher premiums.

Absent a public option, Leflar says, private insurers would still have to cover those with greater medical needs.

“A nationwide majority supports the idea of a public option,” he says, “but even among Democrats it’s only the seventh-highest priority. No politician should have to die on the public option sword.”

None of these proposed changes will significantly stall or decrease national health care costs, Leflar says, and this reality will force lawmakers to return to the reform discussion in the future, when tough decisions will have to be made on matters related to basic systems of health care delivery. It is within these systems that the real causes of rising health care costs – medical underwriting and patient risk selection by the insurance industry, payment based on volume rather than performance, providers’ fear of medical malpractice liability, and conflicts of interest due to the fact that those who make the decisions don’t pay for them – can be found.

By far, the American health care system is the most expensive and yet least efficient system among industrialized nations. Key health indicators demonstrate that year to year, citizens of these nations – Japan, Canada, the United Kingdom, Germany, the Netherlands, France and others – are healthier, yet in 2004 only two of the nations – Canada and France – spent even half the amount the United States spent per capita on health care for its citizens.

According to the Institute of Medicine, almost one-third of U.S. health care spending goes to waste – duplicative tests, unnecessary or ill-advised procedures, procedures to repair mistakes, billing and administrative inefficiencies. American hospitals now have more personnel working on billing and documentation than providing direct patient care.

“We will not see real, thorough change until Congress, medical providers and the nation as a whole address the problem of medicine for money rather than health care for the patient’s benefit,” Leflar says.

Rob Leflar is the Arkansas Bar Foundation Professor of Law.