Precept Employee Benefits Blog

Governor Schwarzenegger outlined additional details for his plan to fix a “broken” healthcare system in the state on Monday. In simple terms, the Governor’s proposal would require all California residents to have medical insurance, employers with 10 or more employees would be required to provide or contribute towards the cost, insurers would eliminate underwriting requirements and ensure that 85% of premiums are used for claims, physicians would also do their part by paying 2% of their gross earnings back to the state.

A Broken System – my observations

Hospitals argue that they are faced with huge deficits due to federal requirement to provide care to all who come through their doors, whether insured or not, whether legal or illegal. I feel their pain and might feel worse if I was not so annoyed by the over inflated bills they send to “illustrate” how little they get paid by insurance companies. When a single dose of aspirin is billed by a hospital at $9, it is no wonder that a $20,000 hospital bill gets reduced to a $2,500 payment.

Physicians believe that insurer reimbursement rates are too low. When amassing wealth, when is enough, enough? A few years ago my doctor informed me during a physical exam (my first visit in 3+ years) that he would no longer accept HMO coverage and that I should talk to my employer about moving to a PPO plan so he could, “get paid appropriately for his services”. Keep in mind that this physician worked four days a week and spent a lot of time on the golf course. I inquired about how much he received from a PPO plan if I never had an exam. He received nothing ($0), however he received a monthly fee from my HMO even if I did not have an exam. “Open your eyes doc; you earned more from me as a healthy HMO patient than a healthy PPO patient.”

Insurers profess there is significant medical inflation, however they have been reporting huge gains in revenue and profits during the last 5 years. One of the largest insurer stock price gains from Q1 2003 to present was CIGNA with a 150 % increase. Aetna, United Health and Wellpoint all exceeded 100% gains for the same period. That is some inflation. It almost reminds me of the oil industry.

Employers, in my observation, have the least culpability to our “broken” healthcare system. Providing medical insurance began as a way to attract and retain talent and has since grown into an entitlement. Employers have faced skyrocketing costs with watered down medical plan designs. Many employers have been forced to pass more of the increased costs on to employees. Realizing the magnitude of the healthcare crisis GM was facing, many industry professionals joked that GM was in the healthcare business and only sold cars to fund their healthcare endeavors.

Consumers in general have been reckless and irresponsible with their medical care. Many choose not to buy or spend more time researching televisions and cars than they do their own medical care decisions. For many it is of no interest until it is too late, when they are sick or injured. The industry itself has somewhat hindered consumerism by not developing tools quickly enough that make it easy to find information on physician and hospital performance. Only recently with the introduction of Consumer Directed health plans has the healthcare industry endorsed this type of consumerism.

Other factors contribute to our current “broken” condition as well. There are malpractice suits, care for voluntarily uninsured, homeless and illegal immigrants, the costs of technological advances, nursing shortages, emergency room closures, prescription drug costs, the epidemic of obesity, smoking related illnesses, sedentary lifestyles, etc.

Summary

The Governor’s plan has been publicly scrutinized by many and endorsed by few. When you consider the constituents impacted by his plan, would you expect anything less than the political rhetoric we hear on talk radio and see in print? There is no wonder drug or prescription to cure what ails the “broken” California healthcare system. It is going to take creativity, hard work and compromise.

For those that argue our current “free market” concept is the solution, WAKE UP. Those that buy insurance today are subsidizing the commitments of the federal government to provide care regardless if the patient can afford it. Uninsured patients have hospital bills dismissed for pennies on the dollar because they do not have a means to pay. You cannot have a successful “free market” with an open-ended commitment such as this.

The public criticism I will give of the Governor’s plan is that he failed to push on the federal government for reimbursement of costs associated with care provided to illegal immigrants. If the federal government refuses to enforce the border and requires us to provide care at hospitals, then the feds should pay.

Whether I agree with all aspects of the Governor’s plan or not, I commend him for submitting what others could not, a comprehensive solution that spreads the pain of reform across the entire healthcare industry.