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Under the Knife: Getting Serious about Health Insurance Costs

The next presidential election may not hinge on issues of war, or the environment, or even Social Security, but another issue even closer to the every American’s standard of living -- the strangulating yoke of medical costs, especially healthcare insurance.

Franklin Roosevelt said, “The test of our progress is not whether we add more to the abundance of those who have much; it is whether we provide enough for those who have too little.” I’ve placed that quote on my desk as we struggle with providing health care insurance for the employees at Juniata College, where I am president.

Our case is illustrative of what every institution, public and private, must endure. And, what millions of individuals face every month. Right now, there is no way out except selecting the best of several worst solutions every year. From General Motors to the smallest business in town, we’re all facing this crisis that will become crippling if Congress and the President don’t tackle it within five years.

Right now, there is no way out except selecting the best of several worst solutions every year.

About two years ago, our college faced several straight years in which our bill for employee insurance skyrocketed 25 to 30 percent each year. To keep costs down we were facing decisions we did not want to make -- raising deductibles, reducing or eliminating coverage. Rather than biting a noxious financial bullet, we decided to self-insure. Explained simply (and believe me, nothing about insurance is simple), we provide a pool of money out of which our insurance claims are paid. We also hire a third-party firm to handle the paperwork.

Today, our administrative costs to process claims are holding steady at 15 percent of our total costs, compared to administrative costs that seesawed between 25 to 30 percent every year. It is painfully clear that we must rethink the patchwork healthcare insurance system in the United States – a system that denies access to about 43 million Americans and is unnecessarily complicated, yet is the most expensive system in the world.

Instead of gritting our teeth and taking money away from our priorities to pay ever-rising insurance bills, I propose a solution.

Our health care system should be based on: a universal catastrophic health insurance plan for every American; a universal medical policy for every American; a new approach to malpractice issues; and a system that encourages medical research and healthy lifestyles.

Our employees, like the majority of Americans, worry about the possibility that a catastrophic disease will wipe out their life savings. A national catastrophic health plan, offering identical benefits for every person, will help us to understand our own coverage and substantially lower the ultimate cost of the plan.

Americans pay a heavy price for having access to thousands of different plans. For example, the New England Journal of Health estimated that $300 billion is spent annually to administer healthcare plans. Three million people (roughly triple the 854,000 doctors in the U.S.) are employed in handling claims. A simplified plan offering the same catastrophic policy greatly reduces the cost of handling claims. Every individual, regardless of age or health, gets the same policy at the same price, ensuring further savings.

Today, many healthy individuals do not purchase catastrophic insurance because they don’t think they will need it – at least not now. Under this plan healthy individuals would pay a small price today to be covered at a relatively lower price later in life.

A new universal medical plan would provide coverage for every employee and his or her family through the employee’s employer, including all part-time and occasional workers. Here are the advantages.

First, no employer in the United States should gain an advantage by ducking the cost of basic healthcare insurance or by hiring part-time employees to avoid the cost of insurance. Second, the cost of a universal medical insurance plan lessens because fewer people will be employed in handling claims and every employee must be covered. Third, the cost will be shared between the employer and employee through a formula (including deductibles) that encourages annual physicals and preventive medicine.

All federal and state health insurance support programs will be redesigned to assist low-income individuals and families to purchase these national programs and to provide continued coverage for those who are unemployed. Again, costs go down because managing the plan at all levels will be substantially reduced. All government agencies in the United States will also be required to enroll their employees. Perhaps if Congress and the President are covered by this plan it will get the attention it needs!

To further reduce the cost of insurance, I propose a regional medical court-- a three person panel comprised of a doctor, an attorney and a private citizen--- will rule on each malpractice charge. Individuals can take their case to court if they disagree with the medical court’s decision but all decisions will be made available to future judges and juries.

In the long run, holding medical costs in line requires cures for catastrophic diseases such as cancer and chronic diseases such as Alzheimer’s. Federal funds and private donations should be focused on finding a cure for the most expensive of these illnesses. No medical system, however, can adequately cover a population that ignores its own health. We must work together to find ways of informing everyone about the risks of an unhealthy lifestyle. Those who don’t smoke, wear seatbelts (or helmets), eat healthy diets, maintain a healthy weight and get regular medical checkups are far more likely to live longer lives.

Most doctors and nurses will tell you that they entered the health professions to help people, not to fill out insurance forms or battle frivolous malpractice claims. By changing the system, individuals will be more willing to enter the health professions. Since the baby boomer generation is moving into a time in their lives when they will require more medical care and given that nearly half of today’s physicians are soon to be retired baby boomers, we must change our system soon.

Thomas Kepple is president of Juniata College in Huntingdon, Pa.