Pay Attention to the Health Care Debate: It Can Restructure Your Company

Companies that offer health insurance plans to their employees—and that covers most power companies—need to focus on the current congressional debates about national health insurance plans and on the potential outcomes of whatever is eventually adopted. Much of the sound and fury over the Obama (and congressional) plans last summer was bogus, kicked up by folks who want to sink the administration—much as the ill-designed Clinton health care plan in 1993 nearly derailed that Democratic administration.

But the intelligent opposition to various plans and approaches was not entirely political carnival, and the specifics are important. They will be played out in detail as the year comes to an end, when Congress will likely adopt some form of reform.

Noise and Obfuscation

President Obama’s speech in September to the joint session of Congress dispelled the more apocalyptic August angst about “Obamacare.” The bogus “Death panels,” insuring illegal aliens (we won’t insure them, but we will treat them when they are sick or injured, and we will all pay for that), and “rationing” by government bureaucrats were all phony-baloney stuff.

In particular, the complaint of “rationing” raised by opponents was entirely irrelevant. As any manager of a company health care plan knows, rationing is what private insurance companies do routinely. They ration by income, prior condition, the cost of procedures, and the insurance company’s bottom line—all of which affect the costs of company health care plans. The doctrine of preexisting conditions, long employed by health insurance companies, is classic rationing, as a way to prevent costs and preserve profits.

The ranters about “socialized medicine” didn’t understand that about a third or more of all Americans already get their health insurance through the federal government in the form of Medicare, Medicaid, the Veterans Administration, the Indian Health Service, the military system, the Federal Employees Health Benefits Plan (including members of Congress), and the State Children’s Health Insurance Program (SCHIP). The complaint that federal bureaucrats will be making health care decisions ignores that profit-driven insurance bureaucrats now routinely make health care decisions about what the plan will cover and the doctor can do. These are not often medical decisions.

I’m a Medicare recipient, so I benefit from “socialized medicine.” Republicans, in the form of a totally cynical Republican National Committee chairman Michael Steele, now say they want to protect me from any reforms (meaning price increases or benefit reductions) of Medicare, because, in part, Medicare is irrational and inefficient. Huh? I heard Steele on a National Public Radio interview; he was simply offering incoherent partisan bafflegab.

Real Issues

But there are real issues about how the costs of reform might be distributed, and whether companies will have to alter the way they design their plans. Specifically, really generous health plans (so-called Cadillac plans, although that GM brand is suffering) to union labor, management, and executives, are in the gunsights of the reformers. It’s hard to see how either management or labor can defend them, although labor unions are making a big push to prevent taxing these top-of-the-line health insurance policies. It’s possible that the most generous company-provided plans, whether offered to employees or company executives, will be taxed in some form or another. Pay attention.

Also, it’s likely that employers will face some sort of insurance coverage mandate, either through law or regulation. If you already provide health insurance, take a look at your plan in the context of the congressional plans, not just in terms of what your insurer has in mind for the future. If you don’t offer universal coverage to employees, start factoring in what that kind of coverage might cost.

Every power company human resources manager with authority over health care for employees should consult the new book by former veteran Washington Post foreign correspondent T.R. Reid, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. Reid and his family lived for years in other developed countries and partook of their health care systems. Reid set off several years ago to examine the realities—not the Washington political sound bites—of how health care works in the major developed countries of the world—the U.S., the U.K., France, Germany, Canada, Japan, etc.—as well as some up-and-comers such as Taiwan, Singapore, and South Korea.

Reid identifies three basic models of health care:

• Bismarckian (based on the model developed in Germany in the 19th century by Otto von Bismarck), which uses the private sector to distribute health care but doesn’t allow for-profit insurance (that was the original U.S. Blue Cross/Blue Shield approach).
• The Beveridge model, best characterized by the United Kingdom’s National Health Service, where the government directly pays doctors and owns hospitals. Citizens essentially shell out nothing for health care (that’s what most experts mean by “single payer,” although the term is imprecise).
• The out-of-pocket” paradigm, typical of third-world countries, where health care is a matter of who has money to pay.

The U.S. health care system, argues Reid, consists of all of the models, without a coherent, organizing vision. Medicare (thanks to longevity, my health care plan) is Bismarckian, and remarkably similar to the French, German, and Canadian health care systems. The system for U.S. federal employees—including members of Congress—is similar, involving lots of choice of private plans, a federal payer, but no opportunity to deny coverage. In the private sector, most folks get covered by employer/employee-financed plans, through many private insurance companies.

In the U.S., the poor get coverage from Medicaid, another government-run plan, offering comprehensive insurance to those below the poverty line, with customer choice, although many doctors and practices are not taking Medicaid patients. SCHIP is a variant of Medicaid, but for kids of folks who make too much for Medicaid but not enough for private insurance.

The U.S. health care system for American Indians and for military veterans is the British Beveridge model: The government offers total coverage (in the case of the Indian Health Service, cradle-to-grave coverage) at no cost to patients. The docs work for the Department of Health and Human Services and are salaried. Most analyses of these systems give them high marks, although when I worked in the Public Health Service (the National Institutes of Health) in the early 1970s, there were gripes that doctors who worked for the Indian Health Service were second-raters who couldn’t make it in private practice. I never saw any evidence of that.

Then there is the system for those who can’t afford their own health insurance, don’t work for employers who offer it, and aren’t poor enough to qualify for Medicaid. That’s the third-world system, and our system for the uninsured (mostly folks who work but don’t have on-the-job insurance and can’t afford individual plans, or choose not to buy health insurance). In this paradigm, you pay what you can and depend on the kindness of strangers (charities, taxpayers, those with private insurance and, ultimately, taxpayers and the insured) to pick up the rest of the bill. This model provides substandard, emergency room care and nothing remotely approaching preventive medicine.

According to several government and private-sector studies, that leads to tens of thousands of preventable deaths each year for folks in the U.S. who succumb to treatable illnesses. The sick in this category lack means to pay for health care when it is needed. They eventually get treated. That treatment often is too late. We, the insured, including the insured employees of power companies, or the taxpayers, eat those costs, which are passed on to our health insurers and end up, invisibly, in our medical bills.

This third-world approach drives up the costs for the insured and for their company-based insurance providers. There is no free lunch. We do not have a system that denies health services to the working poor (nor should we), only one that discourages them from using it. When they do use health services, our hodge-podge system spreads the cost to the insured and their insurers (and employers).

A Perverse System

T.R. Reid makes a fundamental point: The U.S. health care system—the only one in the developed world that does not recognize health care as a basic citizen right—has large economic incentives against preventive care and major imperatives to drive up costs and rates for the insured and reduce employee productivity. Employers should be concerned that the current system takes workers off the job, rather than keeping them at work, where they produce value for the company. That’s a perverse outcome.

For human resource managers attempting to get a grip on health care issues, Reid’s book is required reading now, as the political debate over national health insurance reform proceeds in Congress and, later, in the courts. Reid lays out in clear prose just how other countries deal with health care needs (and, in his case, with a bum shoulder), how they control costs (most don’t do a good job, and neither do we, in spades), and what makes sense for a rational, compassionate U.S. policy that will rest on the decision the developed world has already embraced: Universal health care is right for all citizens.

As a business proposition, universal health care along the lines of any of the models Reid has described, other than the U.S. system, makes sense. The current U.S. hodge-podge system subjects employers to unpredictable and ungovernable costs. That’s bad management and bad for business. We can do better.

The book is T.R. Reid, The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care (New York: The Penguin Press, 2009), available in a Kindle edition from Amazon.com.

—Kennedy Maize is MANAGING POWER’s executive editor.