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The next step in incremental health reform: affordability

From the November 1996 ACP Observer, copyright 1996 by the American College of Physicians.

By Kathleen Haddad

By admission of both political parties, future efforts at health care reform must be accomplished in stages. The Democrats learned their lesson with their 1994 attempt to reform health care; in response to pre-campaign criticisms by the Republicans, they admitted that "we bit off a bit more than we could chew." The Republicans, meanwhile, demonstrated that they can compromise—and take some of the credit—when it comes to politically feasible reforms like those offered by the Kassebaum-Kennedy insurance reform legislation, which passed this summer.

Now that the Kassebaum-Kennedy bill has been passed, affordability is the next step on the road to incremental change.

Clearly, legislative action is needed. Despite recent declines in the rate of health care inflation and slowing increases in health care premiums, the underlying problems of declining affordability and access have worsened. While various surveys show health care costs for employers rising just a percent or two, health care costs for employees have jumped dramatically. For example, a Foster Higgins survey of medium and large employers shows that the employee share of premiums for families enrolled in PPOs rose nearly 50% in just one year.

At the same time, employer-sponsored coverage continues to decline. A Lewin Group study projects the portion of non-elderly population covered by employer-based insurance will drop to 52.2% in 2002, compared to 56.6% in 1995 and 61.4% in 1989.

To address these problems, President Clinton has proposed helping laid-off workers finance COBRA continuation coverage. Bob Dole suggested expanding Medicaid coverage during one of the Presidential election debates. Democratic Congressional leaders proposed "Families First," a plan that would use the private sector to cover children. And Gov. Howard Dean of Vermont is promoting an initiative called Dr. Dynasaur, a program that would further expand Medicaid to cover uninsured children.

In addition to incremental reforms in the private sector, next year's Congress will also attempt Medicare reform. The current rate of spending in Medicare is clearly unsustainable. By 2004, Part A (hospital) spending will triple and jump to $300 billion. Income to the Part A Trust Fund, however, will see little growth, and it will go broke by the turn of the century. Similarly, the current rate of spending on Part B (largely physician services, financed by premiums and the federal treasury) is also unsustainable, with ballooning deficits predicted after the turn of the century.

Health and Human Services Secretary Donna Shalala has taken an incremental approach and proposed reimbursement cuts of about $100 million in fees to doctors, hospitals and providers of home health and durable medical equipment. She has also proposed appointing a bipartisan commission to solve long-term solvency problems, which are expected to worsen in 2010 when the baby boomers become eligible.

It's difficult to predict exactly how the 105th Congress will handle the Medicare issue. Many of these problems stem from inefficient and out-of-date administrative policies; ACP's Health and Public Policy Committee has developed a detailed policy position paper, under review by the Board of Regents, addressing changes needed in Medicare benefits, utilization and reimbursement.

Congress will take a lesson from last year's political and budgetary battles, which burnt both parties, and embrace moderation when it comes to incremental health care reform. This conservative approach, along with constituents' worries over private insurance affordability, may compel the 105th Congress to move forward, particularly with private sector reforms.

Despite the magnitude of the problems in our health care system, there is reason for hope. Congressional approval of the Kassebaum-Kennedy insurance reform bill has opened the door for further private sector reforms. However, supporters of universal coverage probably need to accept that movement toward that goal will be slower than we would like, and passage of even incremental reforms will require continued advocacy.

Kathleen Haddad is Senior Associate for Policy and Communications in ACP's Washington, D.C., office.

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