By Gregory VandenBosch
Health reform is on the front of nearly every newspaper and the lead on most every newscast. But, based on their coverage so far, all I really know is that the Democrats in Congress are rejoicing and the Republicans are vowing to fight it. So, in an effort to better understand what’s going on today, I thought it would be helpful to get a better idea of what happened in the past. Here’s what I found:
Health insurance in the United States is a relatively new phenomenon. The first insurance plans began during the Civil War (1861-1865). The earliest ones only offered coverage against accidents related from travel by rail or steamboat. However, the plans did pave the way more comprehensive plans covering all illnesses and injuries.
The Massachusetts Health Insurance Company offered the first group health policy selling comprehensive benefits in 1847. In 1929, the first modern group health insurance plan was formed. A group of teachers in Dallas, Texas, contracted with Baylor Hospital for room, board, and medical services in exchange for a monthly fee. Several large life insurance companies entered the health insurance field in the 1930’s and 1940’s as the popularity of health insurance increased. In 1932 non-profit Blue Cross Blue Shield offered the first group health plans. Blue Cross Blue Shield plans were successful because they involved discounted contracts negotiated with doctors and hospitals. In return for promises of increased volume and prompt payment, providers gave discounts to the Blue Cross Blue Shield plans.
The Blues, in their early days, charged everyone the same premium, regardless of age, sex, or pre-existing conditions. This was partly because the Blues were quasi-philanthropic organizations and because the Blues were created by hospitals. Therefore, they were mainly interested in signing up potential hospital patients. They were sufficiently benevolent that when Harry Truman proposed a national health-care plan, opponents were able to defeat it by arguing that the nonprofit sector had the problem well in hand. However, as private insurers entered the market they reconfigured premiums by calculating relative risk, and some avoided the riskiest potential customers altogether.
Employee benefit plans proliferated in the 1940’s and 1950’s. Strong unions bargained for better benefit packages, including tax-free, employer-sponsored health insurance. Wartime (1939-1945) wage freezes imposed by the government actually accelerated the spread of group health care. Unable by law to attract workers by paying more, employers instead improved their benefit packages, adding health care.
Government programs to cover health care costs began to expand during the 1950s and 1960s. Disability benefits were included in social security coverage for the first time in 1954. When the government created Medicare and Medicaid programs in 1965, private sources still paid 75 percent of all of the health care costs.
As health-insurance costs rose during the 1970s and 1980s—driven both by improving medical technology and by the growing inefficiencies of the health-care system—health maintenance organizations, which had been around since the beginning, began to proliferate. Like the Blues, HMOs became victims of their own success. Initially they were mainly non-profit, but as the business opportunities grew, many for-profit HMO competitors were created and, eventually they displaced many of the nonprofit HMOs. (12 percent of the market was served by for-profits in 1981; by 1997 that figure was nearly 65 percent.)
Managed care kept cost increases in check for a while during the 1990s, but eventually costs started to rise again. Today most employers are reducing or, in some cases, eliminating health-care benefits for employees
Health care reform was a major concern of the Clinton administration; however, the 1993 Clinton health care plan, developed by a group headed by First Lady Hillary Clinton, was not enacted into law. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) made it easier for workers to keep health insurance coverage when they change jobs or lose a job, and also made use of national data standards for tracking, reporting and protecting personal health information.
During the 2004 presidential election, both the George W. Bush and John Kerry campaigns offered health care proposals. As president, Bush signed into law the Medicare Prescription Drug, Improvement, and Modernization Act, which included a prescription drug plan for elderly and disabled Americans.
In February 2009, President Barack Obama signed a re-authorization of the State Children's Health Insurance Program, which extended coverage to millions of additional children, and the American Recovery and Reinvestment Act which included funding for computerized medical records and preventive services.
On March 21, 2010, the U.S. House of Representatives passed the Senate version of its health care reform bill. On the 23rd, President Obama signed it into law.
Perspective on Recent Reform Attempts:
The Affordable Care Act—otherwise known as ObamaCare—isn't the first attempt to expand health insurance coverage in America. Before Washington passed the law, a number of states took smaller-scale attempts at the job - each of which proved far more expensive than planned.
As spectacular failures go, it's hard to do worse than Tennessee. This early state attempt to dramatically increase health coverage, dubbed TennCare, started off promisingly. In 1994, the first year of its operation, the system added half a million new individuals to its rolls. Premiums were cheap—just $2.74 per month for people right above the poverty line—and policy makers loved it. The Urban Institute, for example, gave it good marks for "improving coverage of the uninsurable or high-risk individuals with very limited access to private coverage." At its peak, the program covered 1.4 million individuals—nearly a quarter of the state's population and more than any other state's Medicaid program—leaving just 6 percent of the state's population uninsured. But those benefits came at a high price. By 2001, the system's costs were growing faster than the state budget. The drive to increase coverage had not been matched by the drive to control costs. Spending on drug coverage, in particular, had gone out of control: The state topped the nation in prescription drug use, and the program put no cap on how many prescription drugs a patient could receive. The result was that, by 2004, TennCare's drug benefits cost the state more than its entire higher education program. Meanwhile, in 1998, the program was opened to individuals at twice the poverty level, even if they had access to employer-provided insurance. In short, the program's costs were uncontrolled and unsustainable. By 2004, the budget had jumped from $2.6 billion to $6.9 billion, and it accounted for a quarter of the state's appropriations. A McKinsey report projected that the program's costs could hit $12.8 billion by 2008, consuming 36 percent of state appropriations and 91 percent of new state tax revenues. On the question of the system's fiscal sustainability, the report concluded that, even if a number of planned reforms were implemented, the program would simply "not be financially viable." Democratic Gov. Phil Bredesen declared the report "sobering," and, rather than allow the state to face bankruptcy, quickly scaled the state back to a traditional Medicaid model, dropping about 200,000 from the program in a period of about four months. Though the state still calls its Medicaid program TennCare, Bredesen's decision to scale back effectively shut the program down. In 2007, he told the journal Health Affairs, "The idea of TennCare, as it was implemented, failed."
Maine took a different route to expanding coverage, but it also resulted in failure. In 2003, the state started Dirigo Care, which, it was promised, would cover each and every one of the state's 128,000 uninsured by 2009. The program was given a one-time $53 million grant to get things started, but was intended to be eventually self-sustaining. It wasn't. In 2009, the year in which the program was to have successfully covered all of the uninsured, the uninsured rate still hovered around 10 percent—effectively unchanged from when the program began. Taxpayers and insurers, however, had picked up an additional $155 million in unexpected costs—all while the state was wading deeper into massive budget shortfalls and increased debt. The program has not been shut down, but because expected cost-savings did not materialize, it's been all but abandoned. As of September 2009, only 9,600 individuals remained covered through the plan.
Then there is the Massachusetts plan, the model for ObamaCare. The state's health care program has successfully expanded coverage to about 97 percent of the state's population, but the price tag may be more than the state can bear. When the program was signed into law, estimates indicated that the cost of its health insurance subsidies would be about $725 million per year. But by 2008, those projections had been revised. New estimates indicated that the plan was to cost $869 million in 2009 and $880 million in 2010. More recently, the governor's office announced a $294 million shortfall on health care funds, and state health insurance commissioners have warned that, on its current course, the program may be headed for bankruptcy. According to an analysis by the Rand Corporation, "in the absence of policy change, health care spending in Massachusetts is projected to nearly double to $123 billion in 2020, increasing 8 percent faster than the state’s gross domestic product (GDP)." The state's treasurer, a former Democrat who recently split with his party, says that the program has survived only because of federal assistance. Defenders of the program argue that it's not really a budget buster because the state's budget was already in trouble. But for those worried about ObamaCare's potential effects on the federal budget, that's hardly comforting. The Congressional Budget Office (CBO) has warned that, without significant change, the U.S. fiscal situation is "unsustainable," with publicly held debt likely to reach a potentially destabilizing 90 percent of GDP by 2020. The CBO scored ObamaCare as a net reduction in the deficit, but those projections are tremendously uncertain at best. As Alan Greenspan warned last month, if the CBO's estimates are wrong, the consequences could be "severe".
No comments:
Post a Comment