Recent news coverage by the Small Business Times has provoked excellent debate in the Milwaukee Biz Blog about the benefits and drawbacks of the State Senate’s Healthy Wisconsin (HW) plan. This plan would eliminate the several billion dollars Wisconsinites spend on the health insurance bureaucracy, and spend it instead on direct patient care. It’ll also include those who are currently unemployed.
HW is as close to a single-payer system as we can really get, politically, and it combines staff-model health care networks (HCNs) with traditional fee-for-service (FFS) care. There are advantages and disadvantages to each approach, and at least HW will allow them to compete, which both gives patients a choice and the public the opportunity to sort out the differences.
HCNs would receive a fixed per-patient dollar amount from the state and thus have the financial incentive to keep costs low and their "spread" high. Spread is equivalent to profits in a for-profit entity, and it is simply a surplus in a non-profit entity. In both cases it allows investments in new staff and technology.
Critics complain that the flat-fee incentive can work against the patient’s best interest if expensive testing is needed because it drives up costs but not revenues. But just the opposite is true of the fee-for-service arrangement, where revenues increase at a rate faster than costs. FFS is legitimately blamed for at least some of the medical inflation because physicians are paid for what they do whenever they do it.
With FFS there is the opposite incentive to overutilize expensive testing, especially when the physician owns the lab or equipment. Overutilization can be as bad as underutilization because it can create problems that didn’t exist. Conversely, there is an incentive to underutilize when the physician is employed by a health care network. But here the so-called "market forces" will play out as patients select or deselect on the basis of perceived quality of care.
Medical mistakes often have a perverse affect as the HCN suffers losses from the additional corrective treatments while the FFS providers continue to be paid for the additional services that they themselves caused. As a result HCN’s are more likely to monitor the lesser skilled physicians.
In any event the FFS program needs to be updated. The once-effective Certificate of Need (CON) program must be reinstalled and physicians must not be allowed to self refer patients to their own testing lab. Actually, sending patients to independent hospitals worked quite well in the past, and that should be reinstituted. Alternatively there are very qualified independent labs that apply excellent competitive pressure on the entrenched health care market.
How to pay for it
By now most business leaders know that the HW costs will be borne by a 10.5% tax on the employer’s wages, which in most cases will be more than offset by the elimination of the 15% they pay for health insurance premiums today. Another 4% tax on wages is paid by the employee, which in most cases is offset by the additional coverage of vision, dental and mental parity.
But not everybody is happy with this, especially those businesses that currently provide no coverage or inadequate coverage. The Wal-marts of the world will have to step up to the plate and begin paying their fair share. Even Aurora Healthcare is high on the list of companies whose employees receive taxpayer-funded BadgerCare.
HCNs will also be required to guarantee coverage and not be able to cancel the more costly patients, which the Blue Cross plans on the west coast have been charged with doing.
Most common is the legitimate complaint by small business leaders who by necessity have sought coverage on their spouses plan, or they simply go without. Our politicians must find a solution that allows them to survive this much-needed guarantee of public health care, and the best way is to provide an offsetting small business tax break, which the Republicans should love. That can be their contribution.
Actually, when you think about it, small businesses shouldn’t pay taxes at all. They simply pass them on to the public and we reimburse them at the cash register, thus it becomes a regressive tax that affects lower income families more. That said, large corporations should pay taxes depending on factors that prompt good corporate citizenship, like the CEO-to-worker pay ratio, the ratio of local to outsourced jobs, etc.
In time I’d like to see healthcare morph into a totally taxpayer-funded service, because we are paying for it in the price of goods and services anyway. There is absolutely no reason why this should burden businesses who must compete with foreign companies that do not have health care built into their product prices. But I digress.
Suffice it to say that we should modify HW and not let the small business dilemma delay or prevent progress on fixing Wisconsin’s healthcare mess. Its exorbitant cost is driving jobs out of the state, Wisconsin companies out of business, and preventing entrepreneurs from starting new businesses. Our state’s economy can only be helped by this progressive movement.
The alternative is not pretty
Business and political leaders seem to be ignoring what will happen if we do nothing. It’s a basic rule in life that he who owns the gold, rules. And today that’s the businesses and their shareholders.
Business leaders and shareholders are now demanding change — and they own the gold so I expect they’ll get it. Those not forcing employees into high-deductible health savings accounts (HSAs) will be moving to managed care systems. Or they’ll become members of a business consortium that contracts its health care to the lowest bidder.
HSAs are decent investment tools for the young and healthy and wealthy, but they are not a useful healthcare policy for the average family. According to credible studies by the Rand and Kaiser Foundations, the high deductibles can deter care until it is more costly to treat or becomes untreatable. Mothers will opt to put food on the table before buying their blood pressure medicine, and then have a costly heart attack or stroke. Or worse, die.
Those who can afford HSAs can find other ways to invest their money, but those who can’t need a solid health care program. Unfortunately, some employers are using HSAs as a means to transfer their healthcare risk to employees, and this promises to backfire in time. HSAs cannot reasonably be melded into a single-payer plan, but that does not prevent those capable of investing elsewhere.
Business healthcare consortiums are already forming in Milwaukee, but too often they are just a hair above being uninsured when uncovered catastrophic diseases strike. Not even the insurance industry will like this solution because ultimately they won’t be needed there either. Its best option is to see Wisconsin grow and benefit from new markets.
FedEx moved on when Fax and eMail took over the overnight document delivery market, and they survived just fine. The insurance industry should take some lessons.
Doctors will not fare well either, as giant hospital chains buy up as many of the independent physician clinics as they can, specifically for their patient referrals. In either case physicians will soon become employed by a corporation and likely with lower salaries, competing more with foreign doctors, and facing higher demands for production-line efficiency. Get used to the five-minute office visit, because there’s more to come.
Nor will the hospital association like the new shareholder-managed-care system as they are beat down in prices with nowhere else to shift costs. It is not a pretty picture ahead. We need to fix it fast, and we need to fix it correctly.
The scare tactics have also begun, including the potential issue of unemployed people migrating to Wisconsin for care. This is a red herring. They already receive free health care through the Medicaid program in their own state, so waiting a year in Wisconsin would not benefit them.
Illegal immigration should indeed be dealt with, but not through the process of denying health care. Especially when many of those immigrates become employed here and will be paying for their health care, and adding to the state’s economy at the same time.
Opponents of Healthy Wisconsin like to label this a $15.2 billion tax increase, and they conveniently — no, purposely — ignore the elimination of the $17 billion corporations are now paying in health insurance premiums. That distortion, naturally, comes from health insurance companies and business associations that sell insurance to their members. Wouldn’t you know it?
And beware the dreadful words “government-controlled health care,” they are creeping upon us. In fact HW uses private health care networks, hospitals and clinics just as does Medicare and Medicare Advantage, and that "government" system is one of the most successful public-private ventures ever. Yes, its per-patient costs are higher because it almost exclusively covers seniors and end-of-lifers. But fold in the youngsters and the average is 20-30% less than we are spending today.
In the end it will be a political decision, and former Senator Joe Leean has it exactly right. The Democrats want it and the Republicans don’t, favoring their campaign war chests and the insurance industry that fills them. More importantly the voters want it, so we should see it either passed this session or a different political party in control of the Assembly in 2008. That’s called forced term limits. We need more of it.
Jack Lohman is a retired business owner from Colgate and is a founding member of www.BusinessCoalition.net. He authored "Politicians – Owned and Operated by Corporate America" and can be reached at jlohman@execpc.com.
