Advantage plans have attracted almost a
fourth of all Medicare participants, they
are still fairly new and it remains to be
seen if they will continue to offer competitive plans in the future. In any event,
it’s likely that the majority of those who
are Medicare-eligible will continue to be
covered by traditional Medicare.
The VA runs a large direct-care medical system for the nation’s veterans. The
Department of Veterans Affairs doesn’t
insure for services; it provides them.
The VA system is a comprehensive federal health care network of hospitals,
clinics, nursing homes and home health
and hospice services for qualifying veterans. Because of its size and position,
the VA has been able to reduce health
care costs, receive discounted drugs and
administer an effective national drug
formulary, and manage care without
worrying about insurance restrictions or
pre-existing conditions. In recent years,
the VA has adopted the use of electronic medical records and automated many
of its procedures. It has also installed an
error reporting system that allows for
complaints without fear of repercussions. As a result, the VA has obtained
numerous nationwide prestigious quality awards and continues to enjoy high
Health Care for the Rest of us
Over 45 million Americans, 17 percent of
those who are under age 65, don’t have
insurance during at least some part of
the year. Many others accept undesirable
jobs simply to provide health insurance
for themselves or their spouses. The
need is particularly great for those who
have retired but aren’t yet age 65. The
number of employers that offer insurance between retirement and age 65 is
low and declining.
Those who do have insurance through
employers are increasingly concerned that
they will lose that insurance if they are
laid off or their employer goes bankrupt.
Even those with job security are subject
to the reduction or elimination of benefits
by their employers. There are no guarantees as to the continuation or the design
of health benefits packages.
There are literally tens of thousands
of different plans offered through thousands of insurers and other entities.
Providers are often not sure whether a
treatment will be covered or how much
will be paid by the insurance plan. They
are also unsure of the preconditions
(such as precertification) that must be
met to assure payment.
Both providers and patients face a
plethora of different filing systems and
forms. While most insurers pay promptly
once the approved amount is determined,
there’s always a risk that the insuring
party will become insolvent and never
pay the benefit. Also, there’s often uncertainty about whether or not an individual
is currently covered by a plan.
The bargaining power of even the
largest of those entities insuring people
under age 65 is much less powerful than
for Medicare. For instance, while insurers are able to put together panels of
preferred providers, many physicians
choose to practice outside the system,
delivering care at a much higher cost.
Much or all of that higher cost is passed
on to the patient.
The direct administrative cost for the
largest insurers is at least 5 percent of
claims, and for many it’s much higher.
Because health care providers must deal
with a wide range of plans and insurers
for patients who are less than 65 years
old, it’s likely that their administrative
costs are greater than when dealing with
Choosing What’s Best for All
It’s unlikely that the country will move
to a truly socialist system like the VA,
where the federal government provides
services. We have to resign ourselves
to the fact that a level of high-quality
health care will not be delivered to anyone in this country except its deserving
veterans. Large staff-model health maintenance organizations come close to the
socialist model, but they operate in the
I think it’s clear that Medicare has
many strong advantages over the wide
mix of health plans that currently cover,
or don’t cover, those under age 65. The
primary advantage is that Medicare is
guaranteed to almost all Americans over
age 65. I also believe that extending the
single-payer approach to those under
age 65 would result in greater efficiency
at lower cost than the current plethora
of payers. The lower cost would derive
primarily from the federal government’s
ability to set payment rates and from
lower administrative expenses.
Critics have characterized aspects
of the Obama proposal as “socialist.”
This term is applied most often to the
proposal for an alternative public plan.
But critics haven’t offered any proposals
that would realistically create universal
coverage without an alternative public
I believe that we can’t attain universal coverage without an alternative
public plan. It would not only provide
guaranteed coverage to everyone, but it
would also clearly show the differences
between a public and private system, using the same pool of potential enrollees.
If the public system proves to be less
expensive and more efficient, it’s the
system that should prevail. Providing
an alternative public plan is realism, not
EDWIN HUSTEAD, a fellow of the
Society of Actuaries, is a member of
the Academy’s Communications Review
This article is solely the opinion of its author.
It does not express the official policy of the
American Academy of Actuaries; nor does it
necessarily reflect the opinions of the Academy’s
individual officers, members, or staff.