freedoms diminish as the welfare state grows. The price of more and more public programs is less and less private freedom."4 References 1. "Performance of the Social Security Administration compared with that of Private Fiscal Intermediaries in Dealing with Institutional Providers of Medicare Services," Comptroller General of the United States, General Accounting Office, September 1975. 2. "An Analysis of Medicare Administrative Costs," Social Security Bulletin, August 1974. 3. "Health Insurance Administrative Costs," Ronald J. Vogel and Roger D. Blair, Social Security Administration, November 1975. 4. Caspar W. Weinberger, speech before Commonwealth Club of San Francisco, July 21, 1975. VI. MULTIPLE CHOICE IN HEALTH CARE BENEFIT PLANS Private health insurance plans which today protect most of the population fall into three general categories: 1. Basic Protection-insurance against the costs of ordinary hospital care, surgery, and physicians' services. 2. 3. Catastrophic Protection-includes high-benefit level basic plans, Such other special forms of coverage as dental expense insurance, In addition to these medical and dental expense plans with their wide range of benefits, insurance companies also offer disability expense insurance policies which help replace earnings lost because of disability. Private health insurers-including insurance companies, Blue CrossBlue Shield, and other types of organizations-have devised so many types of benefit plans because they have encountered so many kinds of needs among groups and individuals. In an area as personal as health care, with its infinite variety of problems, conformity is what people require least. The public interest is best served by enabling consumers to choose among alternatives the protection best suited to their individual needs. Health Insurance in Perspective The purpose of health insurance is to provide protection against economic loss. At first, policies were simple and merely provided replacement of income for disability resulting from accidents. The first liberalizations came in the form of expanded coverage to include specific diseases. The most striking developments began in the 1930s. Prior to that time, limited hospital and surgical benefits were generally included as incidental benefits to disability income policies. In the 'Thirties these benefits became available under separate reimbursement contracts. Further changes followed, stimulated by competition and evolving social and economic needs. Among the more important historical factors contributing to the growth and diversity of health care benefits plans were the following: 1. Restrictions on wage increases during World War II stimulated the growth of group insurance. Providing benefits in lieu of wage increases became a common practice. Group insurance is now considered a part of the total compensation package. However, employers' compensation practices are not identical and flexibility in tailoring benefits to fit each situation is an important attribute of group insurance. 2. Following World War II, the U.S. Supreme Court ruled that health insurance was a part of the collective bargaining package. The process of negotiating health insurance benefits for groups with different needs virtually guarantees that a variety of benefit packages will result. Innovations developed in group insurance have naturally been adapted to individual insurance. Examples are maternity benefits, dental care, preventive medicine and transplant surgery benefits. 3. Progress in medical care brought with it increasing complexity and costs, all of which served to stimulate the demand for broader coverages and higher benefit levels. Major Medical Expense Insurance, first introduced in the early 1950s, became, and remains, the fastest growing form of health insurance protection. New types of plans proliferated, from dental expense to vision care. Coverages for senior citizens expanded rapidly (though after the enactment of Medicare they became generally restricted to supplementary benefits). Policies for people with physical impairments became increasingly common. And benefit plans increasingly began to pay for treatment of alcoholism and drug addiction, mental and nervous disorder, and voluntary sterilizations and abortions. These developments have demonstrated the responsiveness of health insurers to changing social needs. 4. Though the biggest growth has come in group insurance over the years, individual insurance also has met important needs by supplementing group coverage benefits where necessary and providing essential protection for those not under a group plan. 5. Geographic variations in both the costs of health care and in state statutes and regulations regarding coverages make flexibility in policy provisions inevitable. Assistance in Selecting Coverages To select a group benefit plan best tailored to needs, the employer can draw upon the services of employee benefit experts. Individuals can be counseled by qualified insurance agents to help them choose a policy suitable to their particular requirements. In all cases, whether for a group or on an individual and family basis, the multiplicity of coverages permits real choices for consumers in consultation with these available experts. The Future Outlook The passage of a program of national health insurance will clearly bring a greater degree of uniformity in health insurance benefit provisions. The purpose will be to assure equal access to health care for all citizens. This is desirable to the degree that uniformity does not become excessive and thereby stifle innovation and experimentation. The best approach, long advocated by the private health insurance business, would be to establish Federal standards for comprehensive health care benefits. Within this framework, private health insurers could continue to underwrite and administer flexible health care insurance plans that best satisfy the wide range of consumer needs shaped by social, economic and geographic variables. VII. NATIONAL HEALTH INSURANCE: SHOULD PATIENTS SHARE THE COST? Whether patients should participate in paying for the cost of health care services they receive is one of the most controversial aspects of the national health insurance issue. Many years ago doctrinaire conservatives argued for the abolition of all health insurance on the ground that it undermined incentives for economy and wasted scarce health care resources. Today an equally doctrinaire position demands that all health care be provided "free." Other leaders, well versed in the problems of Medicare and Medicaid, recognize that any "free" system, if adopted, would impose heavy needless costs and still not provide the desired effect of access to adequate medical care for all. Indeed, the demand generated by the promise of "free" care would actually restrict access and, by virtue of the pressure on providers, diminish the quality of care. This view was aptly expressed by Dr. Sidney Garfield, the founder of the Kaiser system, who stated: "It should be clear that the cause of today's medical crisis has been the inexorable spread of free care throughout our population. The effect is an expanded and altered demand that is incompatible with the existing sick-care delivery system, wasting its medical manpower and threatening the quality and economics of the service it renders. "It is grossly unfair to blame that effect on the medical profession. The delivery system functioned fairly well with fee-for-service under which it evolved. It became unbalanced and a so-called 'non-system' under the impact of the poorly planned legislation of Medicare and Medicaid with its elimination of fees, and that result should not surprise anyone. Picture what would happen to air transportation if fares were eliminated and travel became a right. What chance would you have getting anyplace if you really needed to? Even the highly automated telephone service would be staggered by removal of fees and necessary calls would become practically impossible. The change from 'fee' to 'free' would disrupt any system in the country, no matter how well organized, and this is particularly true of medicine with its highly personalized sickcare service." 27 In general, a health insurance plan can either provide payment for 100% of covered expenses or it can contain mechanisms designed to require some degree of cost sharing by the insured individual. Such arrangements include: 1) 2) Deductible provisions, which require the patient to pay all Coinsurance provisions, which require that the patient pay Copayment provisions, which require that a fixed sum, typically a small one, be paid prior to the rendering of any In many countries around the world, national health care programs have been operating for a number of years. What has been their experience? As reported by the Social Security Administration's Office of Research and Statistics: "Virtually all countries with national health schemes provide for at least a small degree of cost sharing by the patients, usually introduced on the assumption that over-utilization can be discouraged by such charges. "As a result, the patient either pays a part of the cost of services to the provider or to the social security agency; or, alternatively, he may receive less than full reimbursement for expenses incurred. Even under the direct provision method, with its emphasis on basically free medical services to the whole population, patients are generally required to pay a small fixed fee per medical treatment, prescription, or day of hospitalization."2 Cost-sharing arrangements are flexible and a system can be designed within a national program to achieve a variety of objectives. For example, to protect families against out-of-pocket costs which would prove to be an economic hardship, an income-related maximum limit should be established for cost sharing. Under the national health insurance program supported by the insurance business (the Burleson-McIntyre bill), no self-supporting families would have out-of-pocket expenditures in excess of $1,000 per year for covered expenses; and for low-income families, the out-of-pocket limit would be as little as $100. What are the advantages of cost sharing? First, cost sharing would reduce the total cost of a national health insurance program both by reducing the administrative costs and by fostering prudent use of covered services. |