Public Option 1

Public Option: Optional or Necessary?

Eric S. Enright & Dianne L. Drinkard

Introduction to Health Care

Keri Stevens

November 9, 2009

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Table of Contents

I. Introduction

II. The Face of the Uninsured in the United States

III. Health Care Systems of the World

A. The Beveridge Model

B. The Bismarck Model

C. The National Health Insurance Model

D. The Out-of-Pocket Model

IV. The History of Health Care in the United States

A. Beginning to the Baylor Plan

B. The Birth of Blue Cross

C. Medicaid and Medicare

D. SCHIP and Medicare Part D

E. Our Current Quandary

V. Current Reform Proposals Being Considered

A. Obama's Plan With an National Insurance Exchange

B. The Public Option

VI. What Is the Public Option?

VII. Pros and Cons of the Public Option

VIII. Conclusion

IX. References

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Abstract

Industrialized nations around the world have found a way to ensure health care for every citizen.

In the United States, however, millions of uninsured people cannot afford to pay for their health

care. Here we provide evidence to support a public option as the best way to provide a vehicle

for all those within our shores to obtain it. We compare current world health care systems and

ours, and give a brief history of how our current system came into existence. We also discuss the

current reform proposals being considered, show the pros and cons of a public option, and show

how getting involved together can help us gain a government protected right to health care for

all.

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Public Option: Optional or Necessary?

Many industrialized countries with economies and governments similar to the United

States of America have found the ability to provide health care to all of their citizens, while

spending less money per capita on health care then the United States. With nearly 50 million

U.S. citizens without affordable access to health care, we need a government sponsored, public

option health care plan.

The Face of the Uninsured in the United States

In the United States of America there are arguments on who is uninsured and why. In

The Uninsured, an analysis written by The Henry Kaiser Family Foundation (2009) it states,

“The number of non-elderly uninsured Americans rose to 45.7 million in 2008” and of the 45.7

million “80% of the uninsured under 65 are native born or naturalized citizens” (p. 6).

That leaves 36,560,000 citizens of the United States of America uninsured. Some argue

that many can afford to obtain insurance for themselves, as “8 in 10 are members of working

families. Only 19% are in families with no one working” (James, 2009). With health care costs

raising faster than inflation and insurance coverage dropping rapidly, many employers are

unable to keep employer-sponsored insurance because of the rapidly increasing premiums. The

employers that are able to keep coverage have raised the share that employees must pay “from

$ 1,543 to $ 3, 515” (National Coalition on Health Care, p. 2).

About two-thirds of the uninsured are individuals and families who are poor (income

less than the federal poverty level of 22,025 for a family of four in 2008) or near-poor (with

income between one and two times the poverty level) (The Kaiser Family Foundation, 2009)

To this two thirds of the uninsured, the $ 3,515 employee contribution is just a portion of the

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medical expenses they would incur. There would be charges for many prescriptions, co pays,

office visits, and many other expenses. This puts the option of employer-sponsored health

insurance out of reach for many. The fact is, many families have to make a choice between

health insurance or many essential things for daily living such as food and shelter.

Not to be forgotten are the 9,140,000 uninsured non-citizens in the United States, a

number obtained by subtracting the number of uninsured naturalized citizens from the total of

uninsured (The Kaiser Family Foundation, 2009). Some argue that taxes should not help these

people, to just forget about them, but laws state that they are entitled to emergency treatment if

their situation is life threatening. If we just ignore the problem, we are burdening the hospitals

and bringing up a question of morality. Dr. Fizan Abdullah, a pediatric surgeon at John

Hopkins Children’s Center, stated "Our civilization and our nation will be judged by how we

treat our most vulnerable" (Carmichael, 2009). Don't you agree? We do.

Health Care Systems of the World

To understand how our system works, we shall explore the different health care

systems in the world, of which there are four main systems. They all have the same basic goals;

to keep people healthy, treat them when they are sick, and protect them from financial ruin.

The differences come in how they are managed and financed. In The Healing of America, a

book by T.R. Reid (2009), they are explained, we will summarize these four models here.

First there is the Beveridge Model, a single-payer system of health care, where the

government owns and finances health care to all citizens through taxes. The government owns

and operates most hospitals and doctors. The Beveridge system has general practitioners

(gatekeepers) which must give a referral for one to see a specialist. This takes away choice and

has increased waiting times. In this form, the unemployed and poor are provided the same care

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as everyone that works and pays taxes (universal coverage). Patients never receive a bill for

health care services. This is often referred to as single payer, national health services. It began

in Great Britain and is now found in Spain, New Zealand, most of Scandinavia, and Cuba.

The second is the Bismarck Model, a multi-payer system of health care, where

employers and employees split the cost of insurance through payroll deductions. The insurance

companies, often called " sickness funds", are mainly non-profit, private, and must provide

coverage to everyone, regardless of health, age, or income. They are strictly regulated by the

government, and thus can provide cost control similar to a single payer system. In this system,

everyone that works pays a percentage of his or her income to a health insurance plan that the

employer matches. This is done to ensure affordability for everyone. If you have no income the

government pays for your insurance. In this model, hospitals and doctors are private, and there

are no restrictions on a choice of doctor. Primary care physicians do not have to refer a patient

to a specialist, so access to health care is universal, and a patient may go to any doctor they

choose and the insurance must cover the bill. This system began in Germany and is now found

in France, Belgium, Netherlands, Japan, and Switzerland.

Third there is the National Health Insurance Model, which employs parts of both the

Beveridge and Bismarck models. It has private hospitals and doctors, but the insurance is

government run and each citizen must pay through income taxes for the insurance. The

government is able to control costs by being their own non-profit insurance company,

negotiating very low prices for service. This system is a single-payer system, and is found

mainly in Canada. The primary care doctors are gatekeepers, as the government requires a

referral to see a specialist. This makes for long wait times to see a doctor and takes away the

freedom of choice of doctors.

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Last is the Out-of-Pocket Model, which provides health care to people who can pay

the entire cost out of pocket. There is no government involvement, and most citizens with this

system have no access to health care. It is found in many poorer nations such in Africa, India,

China, and South America where many citizens never see a doctor their entire life.

These four health care models are found in variations in every country in the world.

While none are perfect, they are being transformed by each country to improve the health of its

citizens. The United States is unique in that it has a multi-payer system that incorporates all

these models.

For the elderly, the disabled and children of recipients of TANF funding, it is much

like the Beveridge Model, with the government exercising much control over who can be

treated for what, and how much providers get paid. The government exercises total control

over this group. For the working middle and upper class group, our system would most

resemble the Bismarck Model, except that other countries that employ this model have a plan

to cover everyone, and do not make a profit. In some ways, the U.S. also resembles the

National Health Insurance Model as well, as the working pay into health care (Medicare)

which is paid by the government to private providers. Last, but certainly not least, and the

group we are concerned with the most, is the working poor, who cannot afford the high cost of

health insurance premiums and must go with the Out-of-Pocket Model, getting care in an

emergency, but having to pay the bill out of their pockets, or the costs being absorbed by the

hospitals, raising the total cost of health care for everyone. How did this come about? We will

now explore the history of health care in the U.S. and how it became the behemoth it is today.

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History of Health Care in the United States

Before 1929, most people in the United States paid for health care out of pocket to

private hospitals and doctors. With new medical technology and understanding of disease,

treatment became more effective and advanced, which led to much higher costs. This put

health care out of reach for most. In Delivering Health Care in America, a book by Leiyu Shi

and Douglas A. Singh (2008), it states:

Private health insurance began as a prepaid plan at the Baylor Hospital in 1929. For a

predetermined fixed fee per month, Baylor, and subsequently other hospitals, started

providing inpatient services. Thus, the financial structure of the first health insurance

plan was based on capitation…within a few years, the insurance function was taken

over by the Blue Cross Commission (pp. 338-339).

The Blue Cross Commission became the Blue Cross Association. Its primary goal was to make

hospital care more affordable. In the 1930s Blue Shield was added to provide affordable

patient care outside of the hospital. The Blue Cross /Blue Shield insurance program began as a

private, non-profit insurance company; they charged everyone the same, regardless of age or

health. The success of Blue Cross/ Blue Shield prompted for-profit insurers to enter the market.

The for-profit health care insurers are what most Americans use now, and they make a

profit mainly by covering the people who are the healthiest and ignoring the sickest, also

known as "cream skimming" (Shi & Singh, 2008, pp 235-236). They charge higher premiums

for age, gender, health status, and pre-existing medical conditions. The success of the for-profit

insurance agencies eventually pushed Blue Cross/ Blue Shield to become for-profit as well

(Shi & Singh, 2008, p. 98). This system kept gaining in popularity, with more and more

employers offering health insurance.

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This new system provided no coverage for the poor or elderly, and was not affordable

to those whose employer did not offer insurance. This led to Medicaid and Medicare in 1965, a

type of insurance financed by the government through taxes, for the elderly, disabled, and the

very poor (Shi & Singh, 2008, pp. 207-216). These programs helped achieve the highest rate of

access to healthcare the United States had ever seen, but there are still 45.7 million uninsured

in the United States (Henry J. Kaiser Family Foundation, 2009). In more recent days, the State

Children's Health Insurance Program (SCHIP) began in 1997 to cover children under 19 that

would otherwise not have any coverage, due to the parents earning too much to qualify for

Medicaid (Shi & Singh, 2008, p.219). Also, part D of Medicare began in 2006 to assist the

elderly with the prescription costs (Shi & Singh,2008, pp.112-113). So children from poor

families and seniors are covered, but how about the rest of us? We must rely on employer-

sponsored or private health care plans, or pay out-of-pocket for our health expenses. With a

failing economy, many face job losses and loss of their insurance, unless they are lucky enough

to be able to afford COBRA to extend their coverage up to 18 months until they find work and

another plan. Many have been out of work that long already, and job losses continue. So what

of us? President Obama has proposed a plan to reform health care policy, but the details are

being fought out between political parties while many of us are facing acute illnesses such as

the pandemic of the Swine Flu, and chronic illnesses such as Rheumatoid Arthritis and Heart

Disease, which we cannot afford to treat. What is this plan? More importantly, will it be

sufficient to cover all Americans who need care, and will it reach us in time?

Current Reform Proposals Being Considered

Obama's plan includes a national insurance exchange, plans to increase competition in

the health care delivery market, to increase quality and access to care, while cutting costs in its

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delivery (Barack Obama and Joe Biden's plan to lower health care costs and ensure

affordable,accessible health coverage for all, 2009).

What is an exchange? Simply put, it is a warehouse of sorts for the various public and

private plans in existence, and is designed to provide consumer choice, and inspire competition

in the market. It could be a state-wide or nation-wide exchange, a nation-wide being the

strongest option for competition while increasing efficiency and lowering costs (Klein, 2009).

The largest issue by far, as of late, is the idea of a public option, but what is it? We will now

examine it, and our need for it in health care reform.

What is the Public Option?

The public option is a government sponsored health care plan much like the private

insurance plans now in existence, that people can purchase to pay for health care. How this

plan should be run and funded is still being debated, and there are several options for its

implementation. It could be funded solely by those who buy into the program, otherwise

known as self-sustaining, or it could be federally subsidized by taxes. There also is an option

for a state-run program, with each state setting the guidelines for its implementation. Another

option being debated is an option that would only be implemented as a "trigger effect", which

is to say that it would not be implemented at all unless the private insurance companies could

not keep their costs down or cover the many citizens with pre-existing conditions. In that case,

it would trigger the plan to be implemented (Torrey, 2009).

Who would benefit from such a plan? A public plan would benefit several groups,

mainly those who cannot already take advantage of an employer-sponsored plan, those with

pre-existing conditions which exclude them from most private insurance plans, and young,

healthy persons, who would find a cost-effective way to purchase insurance. In our current

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system, health insurance is voluntary, so those who purchase it are more likely to be the ones

who use it most, which keeps costs rising. Many professionals and officials believe that all

working individuals should be required to purchase insurance to keep costs lower. Their belief

is that by having more younger, healthier people in the plans, the burden is shared for the costs

of those already aged or with chronic conditions that require costly services, and it will help

the younger paying individuals as they age and need more services in the future, at a lower

cost. They believe it spreads the cost more effectively across the board (Torrey, 2009).

The Pros and Cons of the Public Option

The Pros of a Public Option

of a Public Option

Lower Premiums

There would be more people paying

into the program, which would drive

premium prices down (Torrey,

2009).

No Profit Margin or Tax Liability

Plan funds would have federal or state

funds to pay for them, therefore would

not require rate hikes to increase

profitability, as governments

are non-profit entities. Also, because

they would not make a profit from

premiums, they would not be

subject to taxation (Torrey, 2009).

The Cons of a Public Option

Private Insurance Companies Would Go

Out of Business

With such a large, profitable group to

compete with, insurance companies fear

they could not afford to keep providing

current levels of service to their

customers and still pay their investors

(Torrey, 2009).

Lower Payments to Providers

Some physicians now refuse to take

Medicaid patients because they do not

get reimbursed enough for their services

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from the government. With another

public program, they worry that they

Bargaining Power

Insurance companies would have to

compete with public funded programs

for customers. Having a large group to

contend with would force private

companies to keep the cost of premiums

down, and give customers better deals to

stay competitive (Torrey, 2009).

Portability

A public option would make it possible

for an individual to change jobs or move

and keep their insurance coverage.

Depending on whether it is federally

or state funded, one could go anywhere

in their state or the country and stay

covered with this type of plan (Torrey,

2009).

will receive even less payment for

services. (Torrey, 2009). Not all doctors

enjoy high wages, some rural doctors

make just enough to get by.

A Single-Payer System Might Emerge

Many people fear government

intervention in individual affairs, and

dislike the idea of a single-payer system

run by the government. The introduction

of a public option would cause many to

choose that option, and many believe it

may well be the first step towards a

government-run, single-payer system in

the U.S. (Torrey, 2009).

The pros clearly outweigh the cons in this case, as the points against the public option are

weak. For one, some countries (Canada, Great Britain, Germany) that have a Universal Health

Plan also have some private insurance plans available to supplement the public plans, suggesting

that a public plan will not put private insurers out of business (Shi & Singh, 2008, pp. 24-26).

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Also, the point that many physicians fear lack of reimbursement seems to be ill-founded as well,

as a majority of physicians support the public option (Henry J. Kaiser Family Foundation, 2009).

The final point against the public option is that it would lead to a single-payer system, which

politicians fear more than the general public. They speak of long waiting times and loss of

choices in Universal Health Care, but those of us who are uninsured or underinsured usually wait

until it is too late to be treated until it is an emergency, and then we have no choice in the matter

at all. Talk about wait times and choices! The fact is that the majority of the general public, as

well as many providers support a single-payer, Universal Health Care Plan (Neale, 2008).

Conclusion

It is now clear that as long as we take care of both patients and providers in health care

reform, a public option is necessary. A measure of a country is how they take care of their

citizens; it is a moral issue. In most industrialized countries, all citizens are created equally in the

health care arena, and though patients must often wait for treatment of non-emergency

conditions, the rich and poor wait an equal amount of time. This suggests a solidarity between

people that America apparently does not share. It takes a true moral commitment to serve the

citizens of a nation and succeed in developing a health care system that encompasses all persons,

regardless of status in the community (T.R.Reid, 2009). How can each of us assist in

accomplishing our task to provide dignified health care for all? The answer lies in GETTING

INVOLVED in the process, ensuring that proper health care reform happens. By contacting our

legislators on the local, state, and federal levels (by voting, phone, e-mail, rallies, etc.), we will

show them by sheer numbers that we stand together in solidarity (a word well known worldwide

but seldom heard in America) to obtain a public option in health care, not just today, but

ongoing. We must come together to fight for a common cause, and make certain all of us are

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assured a government protected right to good health in our quest for life liberty, and the pursuit

of happiness, rights which are already guaranteed by our constitution.

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References

Barack Obama and Joe Biden's plan to lower health care costs and ensure affordable, accessible

health coverage for all. (2009). Retrieved October 16, 2009, from

www.barackobama.com:

http://www.barackobama.com/pdf/issues/HealthCareFullPlan.pdf

Carmichael, M. (2009, October 30). For kids, being uninsured can be a killer. Retrieved

November 7, 2009, from www.newsweek.com:

http://blog.newsweek.com/blogs/thehumancondition/archive/2009/10/30/for-kids-being-

uninsured-can-be-a-killer.aspx

Henry J. Kaiser Family Foundation. (2009). The uninsured, a primer. Menlo Park, CA: The

Henry J. Kaiser Family Foundation. Retrieved November 6, from kff.org:

http://www.kff.org/uninsured/upload/7451-05.pdf

Henry J. Kaiser Family Foundation (2009, September 16). Poll: majority of doctors support

public option. Retrieved November 6, 2009, from www.medicalnewstoday.com:

http://www.medicalnewstoday.com/articles/164083.php

James, R. (2009, October 14). Which Americans are uninsured? Retrieved October 14, 2009,

from Time.com: http://www.time.com/time/health/article/0,8599,1930096,00.html

Klein, E. (2009, July 29). A market for health reform. Retrieved November 6, 2009, from

www.washingtonpost.com:http://www.washingtonpost.com/wp-dyn/content/article/

2009/07/28/AR2009072802114.html

National Coalition on Health Care. (2009, September). Health insurance costs. Retrieved

October 12, 2009, from the National Coalition on Health Care:

http://www.nchc.org/facts/cost.shtml

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Neale, T. (2008, June 20). Nationwide protests support a single payer healthcare plan. Retrieved

November 6, 2009, from www.medpage.today, com:

http://www.medpagetoday.com/PublicHealthPolicy/HealthPolicy/9889

Shi, L & Singh, D. A. (2008). Health services financing. Delivering health care in America: A

systems approach (Fourth ed.). Sudbury, MA: Jones and Bartlett

Reid, T.R. (2009, September 12). No country for sick men. Retrieved November 5, 2009, from

www.newsweek.com: http://newsweek.com/id/215290/

Torrey, T. (2009, October 21). Public option health insurance pros and cons. Retrieved

November 5, 2009, from www.about.com: Patient Empowerment:

http//patients.about.com/od/healthcarereform/a/publicoption.htm