Can Obama Help Texas Health Care Woes?

7. November 2008 by Tony Magana.

Perhaps the most ignored but relevant issue of the past decade has been health care insurance.  Not since 1965  when President Lyndon B. Johnson signed into law the act which created Medicare has there been any substantial changes in the organization and distribution of health care in the United States.  For those under the age of 65, the health insurance system has remained a private system which in Texas has been dwindling severely.

Texans pay  lower premiums than many states. “Health care costs in Texas are slightly below the national average for the individual consumer, but so is overall quality and performance. A single premium employer plan costs an employee an average of $617 compared to the national average of $723, with an employer contribution of $3,491 compared to the national average of $3,268. Employees pay less than the national average for family premiums (25% compared to 24%) of the total cost with employers also contributing less (75% compared with the national average of 76%). The state spends a total of approximately 103 billion per year .” according to the Insurance Research Organization.

However, the Central Medical Foundation of Texas reports that Texas now has the highest rate of uninsured of the all states. In addition, the threshold at which the most common public assistance for health care for those under age 65, Medicaid, has one of the strictest guidelines for any state.  To qualify for Medicaid in Texas, yearly income must be below $4,822 which is less than half that required in Florida ($10,000). According to the U.S. Census Bureau and other sources, only about 48% of all Texans have job based health insurance. Only 31% of businesses with 50 or less employees offer health insurance to their workers.  At least 24% statewide are uninsured and it may exceed 50% in some areas such as the Rio Grande Valley.

To recover costs of the uninsured to hospitals it has been estimated that anywhere from an additional $1500 to $2000 dollars must be added to the overall premium for families who are insured.  This is further exacerbated by the rapid population growth of 12.7% in Texas over the past 2 years which has primarily consisted of Hispanic immigrants most of whom remain uninsured. Unfortunately it is now estimated that over 21% of health care costs in Texas are due to illegal aliens.

The new President, Barack Obama,  has promised to bring a new health insurance system that will reduce the costs of health insurance by $2,500 per year.   Here is a summary of his plan taken from his campaign website:

Obama Health Plan

Under the plan, if you like your current health insurance, nothing changes, except your costs will go down by as much as $2,500 per year.

If you don’t have health insurance, you will have a choice of new, affordable health insurance options.

Make Health Insurance Work for People and Businesses - Not Just Insurance and Drug Companies.

• Require insurance companies to cover pre-existing conditions so all Americans regardless of their health status or history can get comprehensive benefits at fair and stable premiums.
• Create a new Small Business Health Tax Credit to help small businesses provide affordable health insurance to their employees.
• Lower costs for businesses by covering a portion of the catastrophic health costs they pay in return for lower premiums for employees.
• Prevent insurers from overcharging doctors for their malpractice insurance and invest in proven strategies to reduce preventable medical errors.
• Make employer contributions more fair by requiring large employers that do not offer coverage or make a meaningful contribution to the cost of quality health coverage for their employees to contribute a percentage of payroll toward the costs of their employees health care.
• Establish a National Health Insurance Exchange with a range of private insurance options as well as a new public plan based on benefits available to members of Congress that will allow individuals and small businesses to buy affordable health coverage.
• Ensure everyone who needs it will receive a tax credit for their premiums.

Reduce Costs and Save a Typical American Family up to $2,500 as reforms phase in:

• Lower drug costs by allowing the importation of safe medicines from other developed countries, increasing the use of generic drugs in public programs and taking on drug companies that block cheaper generic medicines from the market
• Require hospitals to collect and report health care cost and quality data
• Reduce the costs of catastrophic illnesses for employers and their employees.
• Reform the insurance market to increase competition by taking on anticompetitive activity that drives up prices without improving quality of care.

The Obama-Biden plan will promote public health. It will require coverage of preventive services, including cancer screenings, and increase state and local preparedness for terrorist attacks and natural disasters.

A Commitment to Fiscal Responsibility: Barack Obama will pay for his $50 - $65 billion health care reform effort by rolling back the Bush tax cuts for Americans earning more than $250,000 per year and retaining the estate tax at its 2009 level.

This is a bold plan that mostly deals with reforming the health insurance industry.  There is no doubt that making health care more efficient may result in more efficient spending of monetary resources. On the other hand as we have reported previously there is no evidence that preventative care will ever save money although it does improve quality of life which is a worthwhile goal.  In addition, if it is true that there is a large segment of the population not currently getting the care they need then the additional burden of increasing the overall enrollment by 50% will create additional costs.

The real issue for Americans I think is in controlling the out of pocket costs that an unexpected illness can bring to a family.  Expecting middle income wage earners to pay tens of thousands of dollars to treat a cancer or injuries from an accident which also is usually associated with a loss of ability to work status is no longer acceptable.  Health care costs most be “front-end loaded” by making health insurance premiums mandatory upon everyone who works, not optional,  and beginning early in their work history so that the work force as a whole builds up financial reserves which will negate the need for out of pocket costs for catastrophic illness.

Another question is whether private providers of health care such as hospitals and insurance companies are really more efficient than a public system? As a former consultant to major corporations I saw their ability to cherry pick markets and niches very successfully adversely affect many times public hospitals and others who served key public health needs. Hospitals and doctors have tremendous costs to meet in their yearly expenses, which drive them to alter their practices to maximize their income potential instead of focusing on the overall public health benefit.

Another major cause of cost inflation in American health care is replication.  Every physician paying for secretaries, waiting rooms, transcription and every hospital paying for special diagnostic machinery they use once a day with sometimes four hospitals on a street corner each having the same machine leads to higher costs.  The normal rules of supply and demand do not apply because there is potentially an inexhaustible demand for services and the patient is not concerned with costs if he is insured.  Finally, replication leads to too many “jacks of all trade” and “masters of none”.  At best what happens is hospitals and doctors get good at what they do often for maximum income but may have less good outcomes at things that are less rewarding or uncommon.  We need to diversify hospitals and providers more than we do now and also consolidate the infrastructure of the health care system. This may mean you have to wait longer at the doctor’s office or travel farther sometimes but it is a worthwhile trade-off.

Health care without any regulation runs the risk that essential unprofitable medical services will not be offered or be substandard in the current health care system.  Texas has too many hospitals with redundant services leading to higher costs. In the intense competition to cherry pick for those special procedures like cardiac catheterization which result in greatest hospital profits other things such as diabetes out-patient well care and pediatric care (the most unprofitable field in medicine) suffer.

Physicians and hospitals should not be paid according to how many of what type of procedure they do or what type of illness they treat.  Antitrust laws and malpractice law make it difficult for physicians to associate and share resources that would allow cost savings such as sharing offices, equipment and personnel. Over half of all medical administrative personnel are necessary to deal with documentation and payment issues rather than patient care.  Appropriate peer review and fraud review could be done in a different way that does not involve the expensive micromanagement approach currently used by insurance companies more to add administrative costs to their profits than to improve health care.

For areas like South Texas which has a mostly uneducated and uninsured worker base there are special challenges.  The success of new health care system may finally depend upon finding the right formula to allow small business workers to be insured without crippling the ability of small business to function. For the good of the economy as a whole and to preserve the chance of employment for this vulnerable group in our society the only real option will be substantial subsidies.  However I would suggest that the source of funding for these subsidies would be better if it were coming from things like sin taxes on tobacco, alcohol, motorcycles, candy, and fast food to name few than just on increased tax rates for the rich.

The national unemployment rate is 6.3% and the local unemployment rate in the Rio Grande Valley is approaching 8%. Most of this workforce finds it’s best chance for employment with very small businesses that traditionally offer no benefits.  In the current system if they tried to offer benefits they could not survive.

If Obama can bring about a major change in the health insurance system which preserves small business and at the same time insures their workers he will do more to guarantee America’s future than any other economic reform.

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