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Lessons From Abroad: Mandatory Insurance Creates Powerful Health Plan Cartels

I attended a conference entitled, “Lessons From Abroad for Health Reform in the U.S.” at the Kaiser Family Foundation on March 9th in Washington DC. The event was sponsored by the Galen Institute and the International Policy Network, both of whom are politically rightward-leaning non-profit organizations.

I wasn’t sure what to expect from the conference, and assumed that speakers would offer a blend of pluses and minuses culled from Canadian and European healthcare reform experiences. I have to say that the pluses were hard to come by – and that the minuses were so provocative that I have decided to repeat them here for you, and let you make what you will of them.

Switzerland – Lessons About Insurance Mandates

Dr. Alphonse Crespo, an orthopedic surgeon who practices in Lausanne, Switzerland, described what sounded like the utter decimation of a perfectly good healthcare system. He said that in the 1960s Swiss healthcare was decentralized and quality-oriented. The government provided subsidies for health insurance for the poor, and subsidized public hospitals who took care of the poor and/or uninsured at a 50% rate. Overall, according to Dr. Crespo, Swiss healthcare was efficient, effective, and had high patient satisfaction ratings.

In 1994, socialism came into vogue and reformers called for a redistributive model of healthcare, with centralization of infrastructure and electronic medical records systems that would be compatible with those in use by other European countries. Mandatory insurance was introduced, which shifted disproportionate power to third party payors. The payors focused primarily on cost containment measures and profitability, rather than expanding access to quality care. Regional hospitals were forced to merge with larger ones or else shut down. Wait times increased, lengths of stay decreased, and there was an increase in “critical incidents” (i.e. medical errors) by 40%.

In 2002 the health insurers decided that “more doctors result in higher costs” and successfully lobbied for a cap on the total number of physician licenses, so that in order to practice medicine, a physician would need to take over the practice of a retiring physician or one who died.

In 2008, the third party payors attempted to legislate their ability to decide which physicians could practice within the healthcare system, and which would be excluded from coverage. This did not sit well with patients, and they voted for “freedom of choice” in a referendum on the issue. Fortunately, they blocked the insurer move to ban certain physicians from insurance coverage. Unfortunately, the insurers succeeded in forcing a reduction in reimbursement for basic laboratory testing by 20%, thus forcing physicians to close their labs and send samples to a centralized location.  Apparently physicians are planning to strike in Lausanne and Bern next week over this issue.

Dr. Crespo argued that the unforeseen consequence of the move to compulsory insurance was the emergence of a powerful cartel of health insurers without any apparent cost savings, and a measurable decrease in care quality. In fact, Switzerland’s healthcare system rapidly plummeted from 4th place in the Euro Health Consumer Index, to 8th place over the course of a few short years.

He concludes:

“Once cartels have entrenched themselves, there is no easy way to dislodge them. Americans should think twice before opting for compulsory insurance, unless they believe that cartelized and rationed healthcare is really in the best interest of patients.”

**You may view materials from Dr. Crespo’s lecture here.**

In my next post I’ll review what the Canadians had to say about their healthcare system.

Grace-Marie Turner: Should Congress Expand Health Insurance To Cover All Children? No

Some thoughts to chew on from Grace-Marie Turner:

But expanding SCHIP to cover all children would be a mistake, for four reasons:

1. First, Congress should make sure poorer, uninsured children are covered first. At least two-thirds of uninsured children already are eligible for SCHIP or Medicaid but aren’t enrolled. If SCHIP were expanded to cover children in higher-income families, their parents would rush to the head of the line to get the taxpayer-subsidized coverage. When a “free” government plan is offered, it’s nearly impossible to resist. Poorer children would be left behind as states focus on enrolling higher-income kids.

2. Second, expanding the program would “crowd out” the private insurance many higher-income kids already have. Hawaii offers proof. Earlier this year, the state created a new taxpayer-financed program to fill the gap between private and public insurance in an effort to provide universal coverage for children. But state officials found families were dropping private coverage to enroll their children in the government plan. When Gov. Linda Lingle saw the data, she pulled the plug on funding. With Hawaii facing budget shortfalls, she said it was unwise to spend public money to replace private coverage children already had.

3. Third, putting many millions of children on a government program will quickly lead to restrictions on access to care. A young boy died in Baltimore not long ago from an untreated tooth infection, even though he was enrolled in SCHIP. Few dentists can afford to take SCHIP patients because the program’s reimbursement rates are so low. The boy’s mother couldn’t find a dentist to see him. In Massachusetts’ move toward universal health coverage, more people have insurance, but they are finding that physicians’ practices are often filled, with waiting lists for a new patient appointment at 100 days and counting. Putting more children on SCHIP will add to the program’s financial pressures, making it harder for poorer kids to get care.


4. Finally, government insurance means that politicians and bureaucrats, not parents, make decisions about the care children receive and about what services will or will not be covered.

The Cost of Universal Coverage: Can We Afford It?

I don’t subscribe to many newsletters, but the Galen Institute’s Health Policy Matters is always a provocative read. Here’s an excerpt from this week’s newsletter:

Incoming White House Chief of Staff Rahm Emanuel said this week that universal coverage will be an early, top priority of the Obama administration.

But where is the money going to come from to pay for these massive reform agendas, which were developed before the meltdown of Wall Street, the $700 billion rescue package, and a projected $1 trillion deficit?

The Obama plan is estimated to cost an additional $100 to $160 billion in the first year alone, yet the president-elect made fiscal responsibility a big part of his campaign platform. If the White House is going to extend the plan to mean universal coverage, the bill will be even more expensive.

Mr. Obama also will be facing the huge flood of red ink in Medicare, with the program starting to run out of money in 2017, about the time a second Obama term would end.

It’s impossible to make predictions in the current topsy-turvy political and economic climate, but these power political power centers, fiscal realities, and the urgency of other issues, including Detroit’s looming bankruptcy and an unstable geo-political climate, make these dreams of sweeping health reform a major challenge.

Mr. Obama will likely use the pending expiration on March 31 of the State Children’s Health Insurance Program (which will be renamed) as a vehicle to expand health coverage to all children and possibly even enact his mandate for children’s coverage. That probably means funneling more money to the states through Medicaid since they must pay part of the costs.

After SCHIP, Congress will take the lead on major health reform legislation from there.

We need to remember that 82% of the American people are happy with their own health care and only a minority is willing to pay higher taxes to get to universal coverage. Also, the employer mandate is a new tax, and it is going to be especially difficult to impose during the economic crisis. And can we really tell people who have lost their jobs that now, in addition to everything else, they are going to be forced to buy health insurance?

Hawaii Learns Tough Lession: Free Childrens Health Insurance Program Abused By Wealthy Parents

Fascinating commentary on human nature. Thanks to Grace-Marie Turner at the Galen Institute (this excerpt is part of an article published in the NY Post today):

HAWAII just had a vivid les son in health-care economics, learning that if you offer people insurance for free – surprise, surprise – they’ll quickly drop other coverage to enroll.

As a result, Hawaii is ending the only state universal child health-care program in the country after just seven months.

The program, called the Keiki (Child) Care Plan, was designed to provide coverage to children whose parents can’t afford private insurance but who make too much to qualify for other public programs (such as Medicaid and Hawaii’s State Children’s Health Insurance Program). Keiki Care was free for these gap kids, except for a $7 office-visit fee.

But then state officials found that families were dropping private coverage to enroll their children in the plan. “People who were already able to afford health care began to stop paying for it so they could get it for free,” said Dr. Kenny Fink of Hawaii’s Department of Human Services.

In fact, 85 percent of the children in Keiki Care previously had been covered under a private, nonprofit plan that costs $55 a month.

When Gov. Linda Lingle saw the data, she pulled the plug on funding. With Hawaii facing budget shortfalls, she realized it was unwise to spend public money to replace private coverage that children already had.

Yet Lingle is facing a political firestorm in the state from critics who say that she’s denying children health insurance – notwithstanding the fact that children in Hawaiian families earning up to $73,000 a year are eligible for Medicaid…

The Hawaiian debacle should also be a caution to Barack Obama, who wants to mandate that all children have health insurance. This would plainly not only require penalties for those who didn’t comply but also new programs to help parents get their children covered. The risk of crowd-out will be great.

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