Tuesday, June 30, 2009

How Health Care Reform can Save Money

Health care reform is near and dear to my heart, both as a provider and as a patient. The national situation, where 40 million Americans either have no health insurance or bad health insurance, is an abomination. Under Obama, it looks like some kind of reform is going to happen now. I've been wondering about some more obscure aspects of the system.

The Senate Health, Education, Labor, Pensions (HELP) committee has released an outline of its latest proposal for for health care reform. I just found the bill on their web site. It's 615 pages, so I don't think I'll be reading it between clients. I skimmed over it, and didn't see what I was looking for.

I was specifically looking for reform of programs that have health insurance components, such as:

  • Worker's (or Workman's) Compensation insurance;
  • Motor vehicle insurance;
  • Medical malpractice insurance;
  • Homeowner's, renter's and business liability insurance; and
  • Product liability insurance.
You could probably come up with some additional examples, but these seem to be the major insurance programs. All of them deal with injuries which are attributed to the fault of another person or entity. Under these plans, medical costs attributable to the accident are not paid through the person's medical insurance. They are paid by the appropriate liability insurance company.

So, for example, a worker injured on the job is compensated by the employer for his or her injury through Worker's Compensation. Injuries from slipping on a wet floor at the supermarket are paid by the supermarket's liability insurance. An injury caused by a defective product is paid for by product liability insurance. Here's the critical thing: While the person's initial claim may be covered quickly by the insurance company, escalating costs are fought vigorously. The only thing an injured person can do is hire a lawyer.

Universal health care can reduce some of these costs, but my reading of the bill says it won't. This is a shame, because one of the goals of insurance reform is to reduce costs to businesses. Let me show how it can do this. First, as an example, consider worker's compensation:

An employee is hurt on the job. He goes to the emergency room as instructed by his employer and gets initial treatment. Then, he goes to other physicians or therapists as appropriate and takes some time off to recover. Ideally, Worker's Compensation would cover the medical costs and the lost wages.

"Ideally" is the operative word. Worker's Compensation insurance will cover the employee's claim only if they are convinced that the injury is genuine and a direct result of the employee's accident. They fight the claim if there is any ambiguity in the diagnosis or if there is any reason to suspect a preexisting condition. There is always ambiguity and there are frequently preexisting conditions, so a large number of Worker's Compensation claims end up in litigation.

The whole thing can take years to resolve. During this period, the employee is subjected to extensive harassment and intimidation. I have heard all of the horror stories, and I've heard them repeatedly. The first time you hear them, you think the person is paranoid. But then you hear the same stories again and again, and it no longer seems delusional.

For example, a person receiving Worker's Compensation benefits finds that, with no good reason:
  • The person goes to a pharmacy to refill prescriptions. The prescriptions, which were covered a month ago, suddenly aren't being covered. There's a $500.00 bill to be paid before they get their pills.
  • The monthly check covering lost wages stops coming without warning.
Frantic phone calls go unanswered until the person retains an attorney, and then magically the benefits start up again for some period of time. Then, other things start happening:
  • The person is followed and videotaped by private investigators to find evidence they're not disabled. Investigators are allowed to videotape through the person's windows and show the tape in court.
  • The person is sent to a physician, sometimes far away from their home, whose sole job is to review the claim, perform an examination, and proclaim they are ready to go back to work.
  • Hearings over eligibility for Worker's Compensation are scheduled far in the future and then continued for no good reason, often leaving the person without a check or without medical care.
  • Needed treatment is denied after a long decision-making process. Often this means that more extensive and expensive treatment, with poorer results, has to follow after the claim has been resolved.
I would rather find out that a nuclear cruise missile has been launched directly at my rectum, than to go through this. Of course, that's the point.

For Worker's Compensation companies, there is no downside to this level of harassment. The more they harass you, the more you get worn down, and the quicker you are to settle. It's expensive, but the costs are just passed on to the employer, who is reassured that they are really saving money because none of their employees are (God forbid!) getting over on them.

My experience has been that Worker's Compensation has been the worst of these systems, but this can happen anywhere when liability for medical care is involved. I've seen it with motor vehicle accidents, and have heard about it with medical malpractice and product liability cases.

We all pay for this crazy system. We don't pay it up front, and the costs are hidden, but they are there. When you buy a car, a refrigerator, or a can of soup, part of that cost covers workers compensation and product liability insurance. Similarly, when you pay your car insurance premium, part of that premium pays for health care costs for injuries others have sustained in an accident. The price you pay for food or for a swing set partly covers these costs. Your health insurance premium partly pays for medical malpractice and workers compensation for health care workers.

So here's my question: If health care is a right, not just a perk provided by your employer, why not just include the treatment of all injuries under it, regardless of origin? That way treatment is administered in a timely manner and without difficulty. There will still be litigation over lost wages, pain and suffering, and lost capabilities, but at least health care will be out of the picture.

I can hear the demagogues bellowing, "I don't want my health insurance to pay for someone else's mistakes!" Well, as I just indicated, you pay for it anyway. You just pay for it with a different check. And you pay more for it because you have legal fees attached to it. We can streamline the process and reduce costs by eliminating the adversarial system as it covers health treatment.

Will people try to run up health costs to appear more disabled than they really are? Of course they will. But however health care reform works, there will be cost controls in place to handle unnecessary treatment. Those cost controls are much less expensive than litigation.

How much less expensive is an open question. I haven't been able to find statistics on how claims break down into medical vs. non-medical payments. One site I found wanted $500 for access, so I'll leave that issue to others who have better library access than I do. I would love to hear from you if you do have that data.

By removing medical coverage from worker's compensation and various liability insurances, we reduce costs to employers and manufacturers. We have heard about tort reform for years and it is usually a code for "let's screw the little guy." This is a simple tort reform that has the potential to significantly reduce costs and will benefit the little guy at the same time. It makes our products more competitive on the world stage and that cannot be a bad thing.
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