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CaPA on NPR's Marketplace


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- CaPA member Jeoffry Gordon, MD, MPH, San Diego, read on Marketplace on National Public Radio

As an employer and a family doctor, I have an intimate familiarity with problems in the financing of medical care. David Frum’s March 7th suggestions for changes in the medical marketplace to implement Republican policy are wildly off base. Private health insurance is the name of the problem, not the solution.

In a simple sense, insurance companies exist to pool individual risk to manage the high and potentially catastrophic risk of the cost of a serious illness, as well as to facilitate easy access to preventive services which are valuable both to the individual and the community. In essence, they simply collect relatively small amounts of money (called premiums) from one set of people to pay for the services of another set of people (called providers). The federal Medicare program does this with a small overhead of about 5% and covers all eligibles. Good private health insurance companies spend only 80-85% of collected premiums - revealingly called the “medical loss ratio” - on actual medical care and omit to cover some 47 million American citizens.

In aggregate, on a national level, this diverts some $400 billion of paid premiums away from the provision of medical care. This amount almost equals the total budget of the Pentagon and would be sufficient, if reallocated to medical services, to cover all the uninsured. The private health insurance industry is estimated to spend $10 billion a year on programs to restrict or deny payment for medical services requested or provided by doctors and other health care providers. In the federal Medicare “Advantage” program the government must pay a 10-19% subsidy over average ordinary Medicare payments to induce private insurance companies to enter the senior market. As currently structured, Medicare Part D (the new prescription drug program) is substantially more costly and complex in the effort to put it in the private insurance market than to fold it into traditional Medicare. Incredibly, the current Massachusetts reforms which Mr. Frum praises are projected to cost some potential enrollees (all of whom are expected to be financially strapped) as much as $500 per month in premiums and still leave them with limited benefits and potentially $2000 a year in out-of-pocket expenses.

This will not work. Mr. Frum’s call to improve the medical market is misplaced. The cost and inefficiency of maintaining the current market-based system is huge and horribly inefficient. Simply put, medical care should be provided through a single payer public system similar to what we use for schools, libraries, and fire departments, or through a Medicare-for-all type mechanism.