Revisiting The Oregon Plan: The Future Of Healthcare In America?
Americans seem to have a difficult time coming to terms with the notion that our resources are finite. This is made obvious by the fact that we choose nine-passenger SUVs for our daily commutes, and by the incredibly naïve manner in which citizens and politicians alike debate healthcare policy. An alarming percentage of Americans seem to be under the belief that our government has the capacity to provide an unlimited array of medical services for everyone, and to do so at a cost below that of our current system of private insurance. While some form of nationalized health care is almost certainly in our future, it won’t look anything like what is being promised today.
Senator Obama wants us to believe that every American will have access to the same healthcare coverage provided to members of Congress, and that it can be paid for by raising taxes on only the top 5% of income earners. Given that the top 5% already pay over 60% of all federal income taxes, how realistic is it to expect that this small group of taxpayers can also foot the bill for what would certainly turn out to be the most expensive government-run program of all time? Faced with the impending meltdown of our Social Security and Medicare systems, are we to believe that our government can take on an even more costly program without sacrificing the quality and quantity of care currently available?
While there are diehards who still maintain that we have the greatest healthcare system in the world, the fact remains that there are far too many people who lack access to basic health services. On the other hand, critics tend to wildly inflate the actual number of uninsured Americans to bolster support for government run universal coverage. As is usually the case, the truth lies somewhere in the middle, and before we throw the baby out with the bath water, we owe it to ourselves to take a closer look at the facts.
Who Are The 47 Million?
The often cited figure of 47 million Americans without healthcare coverage is taken from a census bureau report titled Income, Poverty and Health Insurance Coverage in the Untied States: 2005. The figure of 46.577 million cited in the report is actually broken down into a number of sub-groups which require closer scrutiny before any meaningful conclusions can be drawn.
While the report does not distinguish between non-citizens who are here legally versus illegal aliens, it does count 9.5 million non-citizens among the uninsured. It is interesting to note that while non-citizens only make up about 7% of the total U.S. population, they represent more than 20% of the uninsured. Unfortunately, no distinction is made in the report between non-citizens who are permanent residents versus those who are here on a temporary basis.
The report also provides a detailed breakdown of the uninsured by race. Of the 46.577 million uninsured, over 29% are identified as Hispanic. Without a more detailed examination of the facts it is impossible to draw further conclusions, but there is ample reason to speculate that a very large number of illegal immigrants are included in the total figure. In other studies, the census bureau estimates this number to be as high as 5 million. Immigrants living and working legally in this country should certainly be entitled to the same benefits as citizens, but the idea that illegal immigrants should be granted these benefits is very difficult to support.
Another very large group included among the 47 million are the voluntarily uninsured. These are people who have the financial means to purchase health insurance and simply choose not to do so. The majority of these are young people in very good health who are betting that their out of pocket expenses for healthcare will be lower than the cost of insurance. Their choice may be foolhardy, but it is a conscious choice nonetheless, and these people should not be counted among those to whom coverage is not available. Included in the total figure of uninsured Americans are 8.3 million people living in households with incomes between $50K and $75K, and another 8.74 million with household incomes above $75K. These people represent 36.5% of the so-called 47 million Americans without healthcare coverage, and when combined with the estimated 5 million illegal aliens, these two groups make up close to half of the total.
The 47 million figure also includes a large number of people who are already eligible for existing government run insurance programs, but who for some reason have not enrolled. Included in this group are approximately 8.3 million children under the age of 18, and roughly half a million seniors over the age of 65. Many of these children would be eligible for the Children’s Health Insurance Program, and virtually all Americans aged 65 and over are eligible for Medicare. The fact that these people have not enrolled indicates a serious problem with the existing government programs, but it is not sufficient evidence to support a new one.
When most people hear about 47 million Americans without health insurance, they automatically assume that this number represents people who are permanently uninsured. The reality is that the report counts as uninsured anyone who was without coverage at any point during the calendar year. This means that anyone who changed jobs and was temporarily without coverage is counted among the uninsured. In fact, only about half of these people lacked coverage for the full calendar year. The uninsured population is not static, but a constantly changing group of people in transition through their careers and life stages. Based on a closer examination of the facts, it is obvious that the situation is not as dire as critics would like us to believe, but there are still an unacceptably large number of people who lack access to quality healthcare.
It’s Not Insurance At All
What we call health insurance in this country has been transformed into something that doesn’t much resemble insurance in the truest sense of the word. According to Webster’s, insurance is defined as follows:
The act, system, or business of insuring property, life, one’s person, etc., against loss or harm arising in specified contingencies, as fire, accident, death, dismemberment, or the like, in consideration of a payment proportionate to the risk involved.
The key phrase here is “proportionate to the risk involved”. When we purchase automobile insurance, we expect that a 17 year old driver will pay a substantially higher premium than a 37 year old, based on the actuarial evidence that the younger driver represents a higher risk. Smokers and non-smokers pay dramatically different rates for life insurance for the same reason. The same concept holds true for insurance on our homes and businesses. The higher the risk an individual policyholder represents, the higher the premium they will pay for the same coverage. This is the fundamental nature of insurance.
For some reason, when we discuss health insurance in this country, we tend to forget this basic concept. We have no problem with the idea that we should pay varying rates based on risk for other forms of insurance, but when health insurers apply the same standard, they are vilified. In many cases, they are also forbidden by statute to price risk according to actuarial evidence. When lawmakers require insurers to ignore pre-existing conditions and other risk factors, the result is higher premiums for everyone to cover the additional cost of the higher risk policy holders.
One of the common elements of virtually every healthcare reform proposal is a requirement for universal participation. This means that the 17 million young, healthy and voluntarily uninsured would be required by law to purchase health insurance coverage whether they want it or not. This is not because these young healthy people are endangering themselves by failing to purchase health insurance. These people represent the lowest actuarial risk of any group, and the premiums they would be required to pay are intended to offset the cost of higher risk participants. The only way that universal coverage can be remotely feasible is by mandating universal participation.
A problem already faced by many government-run health plans is that those who can afford better quality care will purchase services outside of the system from private providers. When physicians can earn more money by treating fewer patients outside of the system, the quality and quantity of services available to those who rely on government provided healthcare is diminished. Hillary Clinton was well aware of this problem when she crafted her ill-fated 1994 plan, and one of the most controversial aspects of the Clinton plan is that it would have effectively outlawed the private practice of medicine on a fee for service basis. This seems like a draconian measure, but if the goal is to provide truly equal access to health care services for all Americans, it is probably unavoidable.
The Reality Of Rationed Care
Healthcare is a finite resource, and this basic fact cannot be overlooked if we wish to have a meaningful debate over national policy. Private insurers offer varying levels of coverage depending on what their customers are willing and able to pay. Under a nationalized plan, this would not be the case. While there is no practical reason that such a multi-tiered plan could not work, it would never be politically feasible to implement. With this in mind, any nationalized health care system would require some rational method of allocating limited resources to ensure universal access to essential services. Politicians would never call it rationing, but that is exactly what it would be in practice.
Under a nationalized plan, politicians and bureaucrats will be forced to make difficult decisions regarding the allocation of healthcare resources. These will be the same kind of decisions that private insures are vilified for making every day. The simple fact that a treatment exists for a given condition does not mean that the resources are available to administer it to everyone who wants it or needs it. Those people who believe that universal coverage will mean unlimited access to an unlimited array of medical services are in for a rude awakening.
When faced with the choice between vaccinations for thousands of children, or a single organ transplant operation, someone will have to decide which expenditure provides the greatest aggregate benefit. The emotionally charged nature of life and death decisions will complicate these choices, but ultimately the choice must be made. The key to a successful and economically viable universal system will be the mechanism by which limited resources are allocated.
Revisiting The Oregon Plan
Perhaps the most notorious scheme devised thus far for allocating healthcare resources in this country is the Oregon Health Care Plan. Beginning in 1987, the state of Oregon dramatically reformed the funding mechanism for Medicaid by attempting to create a purely rational method of allocating treatment resources based on cost benefit analysis and statistical ranking of various treatment & outcome scenarios. The plan was both praised by supporters and reviled by detractors for it’s unemotional technocratic approach.
While political pressure prevented the plan from ever being implemented in its purest form, the original Oregon Plan is a model that deserves serious consideration as we debate healthcare policy on the national level. It is based on the fundamental recognition that in order to provide the greatest benefit to the greatest number of people, we must allocate our healthcare resources based on cost and effectiveness. In order to do this, we must somehow filter out the purely emotional factors surrounding treatment decisions.
While most current state and federal healthcare programs attempt to keep costs under control by manipulating eligibility requirements, the Oregon Plan takes a completely different approach by limiting the array of medical services offered based on cost effectiveness and statistical success rates. This enables the state to offer essential medical services to a much larger population. The trade-off is that wildly expensive treatments and those with low aggregate success rates are not offered.
The original plan was designed by a commission that was organized to study treatment cost and benefit data on over 10,000 medical conditions. The commission prioritized these condition/treatment pairs and came up with a ranked list of 709 services that would provide the greatest aggregate benefit to the population of Medicaid recipients. The idea is that the Oregon legislature controls the overall cost of the program by drawing a line in the list, and only those services above the line a funded.
There are many excellent articles available detailing the specifics of the Oregon Plan, so I will not attempt to go into further detail here. For more information on the subject, try here and here. What I do suggest is that anyone interested in the subject of nationalized health care should study the original Oregon Plan and become familiar with the rationing mechanism. It’s clearly not perfect, but it may well be the best attempt to date to rationalize the allocation of medical resources. When we finally move beyond political posturing, there’s a good chance we will end up with a national program that looks a lot like the Oregon Plan.
Chris,
First of all, this is a very well-considered and skillfully written piece – good job. :)
I agree with the general thrust of your post, i.e., that “universal health care” is a mirage and that in practice, what will have to be implemented is something along the lines of the Oregon Plan, with its attendant limitations. You’re absolutely right that we Americans are pathologically averse to facing the truth that the resources available to us are finite. Not to stray too far off-topic, but we have conditioned ourselves to be consumers with a taste for – nay, an expectation of instant gratification. This tendency is exploited by shrewd advertisers and marketers every day, and right now it is being played to with abandon by both of the major parties’ presidential nominees.
However, I would like to interject something into your statistical analysis of the 47 million uninsured number. By your reckoning, I’m not sure if I would fall into the group that you call “the voluntarily uninsured” or not. I bear some of the statistical symptoms you ascribe to that segment: I’m relatively young (37), I’m in generally good overall health (more on that in a minute), I reside in a household with a total annual income of $50-75K, and I have the financial means to purchase at least your average individual health insurance plan.
The problem is that health insurers won’t sell me a policy at any price – not even the skimpiest number of benefits, and not even at their highest deductibles. I am too great an insurance risk – or, in actuarial parlance, “uninsurable.” As I said, I am in generally good health: I’m an off-and-on marathon runner, don’t smoke, and have no family history of cancer or heart disease. However, I was diagnosed more than a decade ago with clinical depression and Adult ADD. In order to function without impairment, I am on a maintenance program of 4 medications which I take daily.
I had health insurance through a job with a large company. I was laid off in early 2007, but kept up my coverage through COBRA. Then I got a new job with a small office, and a misunderstanding occurred. The new job “provided medical benefits,” which I took to mean group health insurance; as it turned out, it meant “go buy yourself an individual plan, and the company will pay your premiums.” That’s when I found out that I can’t buy myself an individual plan – and believe me, I tried every health carrier and insurance agency under the sun.
Bottom line: there’s nothing voluntary about my uninsured-ness.
That’s a little bit of a blanket statement, especially considering that the Obama health care plan does not mandate participation. It requires that children be covered, but it does not require that they but covered by the national plan – parents/guardians may choose to have kids covered under an existing family/group policy.
I have another point that I want to address, but I have to be somewhere pretty soon, so I’ll have to get back to this. So till then, my compliments again on your substantive, astute treatment of this subject.
Bill,
Thanks for taking the time to share your thoughts. It sounds like you really are one of the people who falls through the cracks. I’ve worked for several very small companies that were not able to provide health insurance benefits for their employees. I think one of the most important things we need to do in this country is re-examine the link between employment and health insurance. Our lifelong need for medical care should not be dependent on our fleeting relationships with a series of employers. It made sense when workers routinely spent their entire careers working for the same company, but those days are long gone.
Chris
Hey Chris,
Back to finish up my other thought… I agree with your point that the Obama Plan’s proposal to fund itself through increased tax revenue drawn from the top 5% tax bracket seems incomplete at best. The plan (pdf version here) refers to additional self-funding by driving down the cost of treatment and slashing the current system’s administrative overhead. Sounds reasonable, but how doable these kinds of things are is a question I lack the expertise to answer. Plus, since we are smack in the middle of presidential-campaign-promise-making season, I keep grains of salt handy as a key critical thinking tool.
As you’ve probably surmised, I am an Obama supporter. That said, I aim to always at least find out what both candidates’ relative proposals are on key issues, even if I suspect that I already know which way I’ll vote. Upon looking at the McCain health care proposal, I must say I can’t find anything that seems like more than brief lip service to addressing a predicament like mine.
The centerpiece of the McCain Plan is a tax credit of $5000/family – or in my case, $2,500 per individual – for me to use to go out and buy myself a health insurance plan. Thud. This wouldn’t help me at all, since insurers won’t sell me a policy at any price. Digging further into his plan I did find more specific stuff, but unfortunately nothing that inspires much confidence:
OK, it’s nice that he cares. So how, specifically, is he going to help me get insured?
So, he’s essentially saying that he’s going to hand off the problem to the States. He describes the Guaranteed Access Plan as “a best practice model that states can follow” – that doesn’t sound like a guarantee to me, that sounds like an optional guideline.
Also, having access to coverage is one thing, but being able to pay for care is another. On that point, his plan continues:
*Sigh*. These kinds of risk-pooling organizations already exist. They’re called Discount Programs. I know this because I’m in one, in lieu of actual insurance coverage (my membership card even says, in all caps and on both sides, “This is not insurance”). The best that can be said of such programs is that they are better than nothing. Think bare-bones, rock-bottom HMO plan, except with higher monthly premiums, fewer included office visits to FAR fewer kinds of doctors, and a much smaller pool of providers. I have to pay for my weekly therapy sessions entirely out of my own pocket. The real killer is the meager discount of only 5-10% on prescriptions, and not all drugs are covered. My meds end up costing me about $500 a month.
Another thing about this smells funny, too. Like his proposals on most other issues, McCain’s overall health care plan emphasizes the free market and individual choice (tax credits for health care consumers, etc). So when Mr. Free Market talks about setting up a nonprofit organization to liaise with insurance carriers and states, the effect is like a dog says “moo” (I better be careful here in the perilous land of animal metaphors, ha ha). It’s like, “Whose tune are you trying to sing here?” Makes me look sideways, anyhow.
Anyway, I’ve written quite a bit here. I could go on to talk about how the Obama plan is much more concrete and commits specifically to measures that would enable me to have actual insurance. Or about how McCain’s Nonprofit States-and-Carriers-Discount-Program-Redux thing flies in the face of the established model by which insurers pool risk in order to set premium prices. But I’m tired, and you and your readers are probably tired of reading my words by now. I can’t even cross-post all this on my own blog… because my name isn’t really Bill. Going public with the details of my health insurability might not come back to haunt me, but with things as they are there’s no way I’m going to chance making it even harder to get myself insured.
So to wrap it up, I wrote partly because your post mentioned an aspect of Obama’s plan but didn’t include anything about the McCain alternative. Preference for one candidate or the other aside, I think you and I agree that both campaigns recognize Americans’ desire to be assured of medical coverage that they can afford. They tempt voters with the appealing but illusory promise of universal coverage. Cynic that I am, I have to come to fully expect presidential candidates to promise more than they can deliver. All we can do is sort through the details critically and decide for ourselves. Speaking of cynicism, part of your conclusion jumped out at me:
I hope you’re right about “when,” as opposed to “if.”
Bill,
Thanks again for sharing your thoughts. Like you, I am highly skeptical of any promises made during a campaign season, and for that reason I have not bothered to study the specifics of either of the candidates proposals in much detail. Until one of them is actually elected and puts forth a real proposal, we won’t have any details worth studying. If any legislation ever actually passes, it will likely bear no resemblance to their campaign promises.
My original purpose in writing this article was not to take sides in a political campaign, but to point out the economic realities that any nationalized health care system must address. The people who believe that universal coverage will provide botox and boob jobs for everyone are going to be in for a very big disappointment.
I’m curious to know whether you have any reliable data on how many people like you fall into the category of uninsurable? If my wife were to ever change jobs, she would certainly be included in that group. She actually had two heart attacks at the age of 40. She is fully recovered now and is otherwise in perfect health, but we are exceedingly fortunate that she is one of the few Americans who has worked for the same employer for her entire career. Otherwise our entire family would be without coverage.
Chris
Chris,
All plans, including private insurers, nationalized management (UK, Canada), Medicare and VA Benefits basically rely on “reactionary treatment” of disease and injury. This is the most costly portion of medical treatment. Very few ever offer weighting to “disease prevention and lifestyle management” which is cheaper, but a chronic expense. The current insurance systems target early deaths because it is the most cost effective way to manage high expense treatments. However, what business fails to realize is that the longer more people live and remain productive the more tax we can pay into the system. For any program like the Oregon Plan, Medicare or private independent insurance to work the public needs to accept the fact that we are ultimately responsible for our own health. If we expect to be careless and live poorly, we should expect to pay severely to get relief.
It seems self-evident to me that a tax-funded system of medical care can indeed work. The fact that America is a larger system than the UK, for instance, doesn’t mean a thing – the only difference might be that the bureaucracy required to handle it might grow, but since the nation is already divided into a number of smaller entities – the states – that is not a valid objection.
At any given time, only a subset of the population will be needing active medical care. Most people get along great for many years on end without requiring any sort of medical intervention short of checkups to verify that that is the case. Obviously, if the entire population funds the healthcare system on a continous basis through taxation, there is money enough to run it and provide everybody with quality care without having to say “Ok, you can get care, but you over there can just go home and quietly die, sorry.”
The problem, however, is that the current system is a profit-making one. As soon as you introduce a profit motive, that will become the end goal of the system – not providing quality health care, but ensuring maximum gain for the maximum number of middlemen. Currently, that is the health care insurers, but also the health care providers and drug companies that have jacked prices up to ridiculous levels across the board. US citizens are paying several times more for the same drugs alone as other nations – and the reason they do is because of the current system being milked for everything its worth.
I fail to see how anyone thinks it is fair or even sane to have a system where citizen A pays in money into the system, then insurance company B siphons off a large part of that and calls it profit and medical care provider C gets a fraction of that money to provide health care to citizen A and others like him. What in the name of heaven is party B doing in that equation in the first place? It seems self-evident that a party with no profit-making motive, merely a cost-management one – which most likely means civil servants of some kind – handle the money management. Keeping costs down is an entirely different beast than callously sucking money out of the system to fund record-breaking profits, the way the insurance companies do today.
Essentially this too is a sign that the current American system of rampant capitalism is broken. It is failing just as badly as communism did, and for the same reason – it doesn’t adequately allow for the fact that people are scum, and always look out for number one. It is the natural thing for humans to do, and they will do it – and that needs to be recognized and be tempered by laws and regulations made by legislators who understand that fact.
I don’t personally think it is a bad thing if someone makes an obscene profit on selling luxury goods (by which I mean anything above and beyond basic clothing, basic shelter, basic food and healthcare) but some things – things the entire population will need without exeption throughout their lifetimes – should be funded by taxation. Healthcare is one of those things, as are roads, public utilities, law enforcement and fire safety, among other things.
Those of us already fortunate enough to live in nations run by those principles can only look at American health care and goggle in amazement that people will accept that. I mean, something is severely wrong when what is purportedly the wealthiest nation on earth is now the biggest beneficiary of help organisations that were set up to provide emergency health care to people in third world nations…
[...] If you have the time and you want to feel your way around the edges of the massive health care crisis facing the United States, then read this post by Chris Berry. [...]