Ways to Reduce the Cost of Health Insurance

[PHIMG]

Ways to Reduce the Cost of Health Insurance for Employers, Employees and their Families

Health, Employment, Labor, and Pensions Subcommittee Hearing
United States House of Representatives
Committee on Education and Labor
April 23, 2009

Testimony of David U. Himmelstein, M.D.

Mr. Chairman, members of the Committee. My name is David Himmelstein. I am a primary care doctor in Cambridge, Massachusetts and Associate Professor of Medicine at Harvard. I also serve as National Spokesperson for Physicians for a National Health Program. Our 15,000 physician members support non-profit, single payer national health insurance because of overwhelming evidence that lesser reforms will fail.

Health reform must address the cost crisis for insured as well as uninsured Americans. My research group found that illness and medical bills caused about half of all personal bankruptcies in 2001, and even more than that in 2007. Strikingly, three quarters of the medically bankrupt were insured. But their coverage was too skimpy to protect them from financial collapse.

A single payer reform would make care affordable through vast savings on bureaucracy and profits. As my colleagues and I have shown in research published in the New England Journal of Medicine, administration consumes 31% of health spending in the U.S., nearly double what Canada spends. In other words, if we cut our bureaucratic costs to Canadian levels, we’d save nearly $400 billion annually — more than enough to cover the uninsured and to eliminate copayments and deductibles for all Americans. By simplifying its payment system Canada has cut insurance overhead to 1% of premiums — one twentieth of Aetna’s overhead - and eliminated mounds of expensive paperwork for doctors and hospitals. In fact, while cutting insurance overhead could save us $131 billion annually, our insurers waste much more than that because of the useless paperwork they inflict on doctors and hospitals.

A Canadian hospital gets paid like a fire department does in the U.S. It negotiates a global budget with the single insurance plan in its province, and gets one check each month that covers virtually all costs. They don’t have to bill for each bandaid and aspirin tablet. At my hospital, we know our budget on January 1, but we collect it piecemeal in fights with hundreds of insurers over thousands of bills each day. The result is that hundreds of people work for Mass General’s billing department, while Toronto General employs only a handful — mostly to send bills to Americans who wander across the border. Altogether, U.S. hospitals could save about $120 billion annually on bureaucracy under a single payer system.

And doctors in the U.S. waste about $95 billion each year fighting with insurance companies and filling out useless paperwork.

Unfortunately, these massive potential savings on bureaucracy can only be achieved through a single payer reform. A health reform plan that includes a public plan option might realize some savings on insurance overhead. However, as long as multiple private plans coexist with the public plan, hospitals and doctors would have to maintain their costly billing and internal cost tracking apparatus. Indeed, my colleagues and I estimate that even if half of all privately insured Americans switched to a public plan with overhead at Medicare’s level, the administrative savings would amount to only 9% of the savings under single payer.

While administrative savings from a reform that includes a Medicare-like public plan option are modest, at least they’re real. In contrast, other widely touted cost control measures are completely illusory. A raft of studies shows that prevention saves lives, but usually costs money. The recently-completed Medicare demonstration project found no cost savings from chronic disease management programs. And the claim that computers will save money is based on pure conjecture. Indeed, in a study of 3000 U.S. hospitals that my colleagues and I have recently completed, the most computerized hospitals had, if anything, slightly higher costs.

My home state of Massachusetts recent experience with health reform illustrates the dangers of believing overly optimistic cost control claims. Before its passage, the reform’s backers made many of the same claims for savings that we’re hearing today in Washington. Prevention, disease management, computers, and a health insurance exchange were supposed to make reform affordable. Instead, costs have skyrocketed, rising 23% between 2005 and 2007, and the insurance exchange adds 4% for its own administrative costs on top of the already high overhead charged by private insurers. As a result, one in five Massachusetts residents went without care last year because they couldn’t afford it. Hundreds of thousands remain uninsured, and the state has drained money from safety net hospitals and clinics to kept the reform afloat.

In sum, a single payer reform would make universal, comprehensive coverage affordable by diverting hundreds of billions of dollars from bureaucracy to patient care. Lesser reforms — even those that include a public plan option — cannot realize such savings. While reforms that maintain a major role for private insurers may be politically attractive, they are economically and medically nonsensical.

http://edlabor.house.gov/documents/111/pdf/testimony/20090423DavidHimmelsteinTestimony.pdf

Hearing:
http://edlabor.house.gov/hearings/2009/04/ways-to-reduce-the-cost-of-hea.shtml

[demodonkey]

1. We need single payer!! Obama pay attention please.

K&R

[panAmerican]

2. I like all those ideas; but I'd like to hear more about reducing the cost of care as well

Right now, most advocates of single-payer whom I've heard on the radio or read online, don't really address reducing the costs charged.

[area51]

3. To the Greatest Page with you.

It would help our economy and save lives to transition to single-payer healthcare.

[nichomachus]

4. I was waiting in line at the pharmacy the other day and saw a sign

that said "We accept over 5,000 prescription plans."

I was flabbergasted -- 5,000 different plans to deal with?

[demodonkey]

5. Goddammit-was called today by a collection agency demanding I pay an ambulance bill for my mother...

...I spent nearly two hours on the phone dealing with it. Turns out the ambulance company never submitted the bill to her insurance, instead they just went after me via the collection agent.

Enough of this shit. We need simplified, single payer healthcare and we need it now. And it needs to include ambulance, therapy / long term care for the disabled, mental health, eye care, and dental care. With what this nation pays in health costs we could have this if we cut the insurance crap and paperwork.

Obama and the Dems PAY ATTENTION. We WON. Get this done and do it right. Quit caving to the GOP and "health insurance" interests!

[puebloknot]

6. Preventive care, education about diet and exercise and stress reduction.

Simply encouraging Americans to adopt a healthier lifestyle would be a help. Help, I said, not coerce.

And paying for legitimate alternative methods like acupuncture, chiropractice and massage, herbal treatments.

[eridani]

7. Not much, considering that only 5% of the population accounts for half of all health care costs

We should do all those things you mentioned because they will dramatically improve quality of life for society as a whole. However, however much clean living the healthy majority does, this is not going to have much of an effect on expenses, which are inflated mostly because of our idiotic private insurance system.

It's like fire protection expenses. You are not very likely to have a fire, but since you could, you have to share the cost of maintaining the fire department. Teaching people to wire their houses correctly, not store oily rags in the basement, and not let their kids play with matches are very good things. However, you still need a fire department, and you still need to pay property taxes for it.

[puebloknot]

8. You're speaking to a former insurance agent here. I agree.

A new idea has crept up of late that we, the young people, shouldn't have to pay for all those fat old people who drink and smoke. But we, the older people, shouldn't have to pay for all that drug and alcohol rehab expense.

It's a dumb argument. The whole idea of health insurance is shared risk.

Last night on Bill Maher, Howard Dean started trying to discuss the matter of lifestyle choices being a big part of why people are so unhealthy, and was promptly shouted down by an ethics "expert." People get sick, and people need to be able to see a doctor. But in the mix, we would do well to try to educate young people, early on, to eat properly and get exercise.

You are correct that private insurance companies are a cancer growing on the body politic, and they need to go. I'm not holding my breath.

[eridani]

10. It's important to understand the underlying resentment here

Usually stuff like this comes from people who are not public employees, and who are not old enough or poor enough to get subsidies for health care. They often can't get insurance themselves, yet they pay the bills for a lot of other people's insurance. They resent that, as they bloody well should!

I confront this head on, tell them their anger is justified, and point out that they and everybody else are already paying enough to pay for health care for ALL.

[puebloknot]

15. Excellent point, and one I didn't consider when writing.

Yes, there are many people who are subsidizing others through taxes who may or may not be doing anything to justify receiving such benefits. But even if they are, the inability to get health insurance is a national disgrace. Insurance companies operate strictly for the bottom line, and the health of the people be damned.

A single payer system would cure most ills (of the insurance system in the country). And Dennis Kucinich has made the point over and over that we're *already* putting out the money to take care of the whole country, but we're spending it foolishly.

Years ago, a friend from another country pointed out to me that it was insane that America could not seem to organize itself to take care of its citizens' health problems -- something she pointed out was a right and not a privilege in any civilized country.

[SmileyRose]

9. didn't see in time to R but here's a kick

I've been a proponent of Medicare for all but I am reading more and more articles like this, and conversations with doctors (my husband has been in deep medical crap for 7 months) that makes me realize a complete overhaul that takes private insurers out of the equation is the only thing that will work.

[Delphinus]

11. Amen!

Single payer, universal health care, HR 676 NOW!

[ASUliberal]

12. It seems obvious that even in a for-profit system like ours, preventative care is the answer

But the ultimate answer is universal health-care with preventative care being the primary factor.

[lefthandedlefty]

13. Everyone just stop buying health insurance

force them out of business,then the government will have no other choice than provide single payer health coverage.Paying for it would be simple take what ever is need from the military budget.They have over 500 billion to spend each year.

[area51]

14. Kick. (n/t)