Private Sector Meeting Public Need?

December 22, 2003
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GRAND RAPIDS — The highlight of the new Medicare law is its drug prescription benefit for seniors.

But the bill’s spotlight may very well swing the onus for the future of the nation’s health care system from the government to the private sector.

“I think there should be opportunities and options for private companies to address a public need, so I’m inclined to favor that option,” said Chuck Zech, president of Kent Health Plan, a private, not-for-profit provider of coverage.

“But where the private sector cannot, or chooses not to address a public need, there certainly needs to be a safety-net arrangement through the public system to address public need,” he added.

The legislation is expected to steer at least $125 billion over the next decade to the health-care industry and U.S. businesses. The new law provides:

**Direct payments of $70 billion and tax breaks of $16 billion to employers who maintain benefits and drug coverage for retirees.

**Subsidies worth $12 billion to private insurers that offer basic health insurance.

**Subsidies worth $25 billion to hospitals with 75 percent of that going to rural locations.

**Cancellation of a Medicare payment decrease to physicians worth $2.5 billion over the next five years.

But the law doesn’t contain measures to lower, limit or control consumer drug prices as other nations do. In fact, according to a Newsday report, the law reduces the ability to leverage lower prices by dividing Medicare beneficiaries into hundreds of regional pools instead of putting them into a national pool.

In addition, the Center for Responsive Politics reported that the pharmaceutical industry gave more than $60 million in campaign contributions the past three years, with roughly $45 million of that total going to Republicans. And the industry added that it has spent $37 million on lobbying efforts this year.

An analysis done by Goldman Sachs said pharmaceutical revenue should rise by 9 percent — or $13 billion — because of the new Medicare law, which limits foreign drug competition and brings millions of new customers to the industry.

Zech felt that allowing the private sector to fill a public need was a good thing. But he also felt that allowing localities to have a vital role in meeting that need was better.

“My own notion would be that it would be excellent if we had organizations similar to Kent Health Plan all over the country, particularly in urban areas. Then we would have, as we do here, local development, administration and control of our community’s response to the needs of low-income people,” said Zech.

One option is some municipalities have created local health care systems via government, local insurers, businesses and providers in an effort to better control cost and care. Doing this has immunized these systems from outside costs, such as malpractice awards in other areas a regional or national insurer has to pay, and made treatment decisions a local issue.

“It think, again, this is an example of options that may work in certain communities,” said Zech, who spent 33 years in the health insurance industry. “I think the key for whether a local option works, whether it’s private or public, is how inclusively the community was involved in program development, if not also administration.”

But for the next decade or so, much of the responsibility for the nation’s system will fall to private firms. And how these companies handle that task could very well determine the health of the nation’s citizens for generations to come.

“Unless we allow the private sector the opportunity to address this public need and unless the private sector responds with enthusiasm, there will be national health care. So we ought not complain about national health care if the private sector cannot or will not respond in creative ways, even in their local communities,” said Zech.

“Then the only alternative is going to be national health care, in my opinion.”    

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