workers stay with their employer-based coverage while
more of the healthier workers move to a public plan. And
the exodus of younger and healthier populations from an
employer’s pool would likely drive up the costs of the
employer plan, for both the employer and beneficiary alike.
The likely destabilization of group risk pools that could
well result raises the question of whether employers would
continue to offer health insurance to their workforce.
Another key issue is the cost impact a public plan
option will have on all Americans, particularly in this
economic climate. If Congress creates a public health plan
option for the under- 65 population, privately insured
people will be forced to bear significant indirect costs due
to its existence because of cost-shifting, or the “hidden
tax” imposed when providers of medical care adjust the
prices they charge to private insurance companies in
order to offset losses from partial or non-payers. These
losses are primarily attributable to uncompensated care
costs and declining reimbursements from Medicare and
Medicaid, and they have a significant impact on private
health insurance premiums. A recent Milliman report
estimated that annual health care spending for an average
family of four is $1,788 higher than it would be if
Medicare, Medicaid and private employers paid hospitals
and physicians similar rates, with total provider
reimbursement unchanged.
The ideal solution for this would require that providers
be reimbursed at the same level they are commercially for
all public plans. Given the changing nature of commercial
provider contracts, this may not be possible for public
programs, but efforts to equalize payments would go a
long way toward resolving the payment disparity and
would provide significantly greater payment and premium
stability for providers and employers and their employees.
NAHU’s final concern regarding a new government-run
public plan option is such a plan’s long-term fiscal and
actuarial sustainability, which is already a significant issue
with the federal Medicare program. From the 2008
Trustees’ Report, Medicare's liabilities are expected to
exceed revenue dedicated to paying for the program by $36
trillion over the next 75 years, and the trust fund that pays
for hospital services is expected to go bankrupt in 2019.
Total Medicare spending is projected to more than triple as
a share of the national economy, rising from 3.2% of GDP
in 2007 to 6.3% in 2030, 8.4% in 2050, and 10.7% in 2080.
Federal individual income tax collections amount to only
about 8. 5 percent of GDP. Covering just the increase in
Medicare spending expected by 2030 would require a 36%,
across-the-board individual income tax hike.
By contrast, there are very few industries in the United
States that are as heavily regulated as private health
insurance markets. Private health insurance markets are
subject to stringent actuarial and solvency standards,
standards that a government-run public plan option is
unlikely to be held against, if the experiences of Medicare
and Medicaid are any lesson. This is not to say that health
insurance markets cannot be improved upon through
government reforms to enhance access, affordability and
consumer rights but, whether through the federal
government or state governments, there are myriad laws
and regulations that address a range of standards and
requirements that currently oversee health plans and
health insurance.
Cost Containment
NAHU applauds government leaders and others who
have put forward comprehensive reform proposals, even
when we disagree with their proposed solutions. There is
no doubt that changes are needed, but changes must begin
by addressing the true underlying problem with our
existing system: the cost of medical care. The reality is that
consumers pay for all health care costs in one of three
ways: through taxes, health insurance premiums or out-of-pocket expenditures. If the cost of health care becomes too
great, the method of payment no longer matters – the
country and its people will be bankrupt and/or unable to
access care.
Constraining skyrocketing medical costs is the most
critical – and vexing—aspect of health care reform. It is the
key driver in rising health insurance premiums and it is
putting the cost of health care coverage beyond the reach
of many Americans. There is no one magic answer to
health care cost containment and there are many reasons
health care costs are skyrocketing. Addressing this massive
societal problem requires a multitude of comprehensive
actions by individual citizens and elected officials.
However, NAHU has identified some key health care
cost containment mechanisms that should be included in
any national comprehensive reform effort. First among
them is wellness promotion. Unhealthy behavior and
lifestyle choices are two key factors in the increased cost of
health care. Research shows that behavior is the most
significant determinant of health status,
1 with as much as
50% of health care costs attributable to individual
behaviors such as smoking, alcohol abuse and obesity.
Furthermore, the Centers for Disease Control and
Prevention estimates that 75 cents of each U.S. health care
dollar is spent on treatments for patients with one or more
chronic condition (such as heart disease, asthma, cancer or
diabetes). These diseases are often preventable, and
frequently manageable through early detection, improved
diet, exercise and treatment therapy.
We believe that the first step by government should be
by example, and that all federal and state governments
should be required to incorporate wellness and disease-management programs into medical programs for
