Healthcare Should Be Nonprofit

July 22, 2005
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The most recent government estimate reveals that the United States will spend nearly $1.92 trillion on health care this year, or about $220 billion more than the $1.7 trillion the nation spent two years ago.

But a bill introduced in the U.S. House earlier this year by Michigan Congressman John Conyers Jr. claims that it can cut that growing expenditure in its first year by about $60 billion to $280 billion, plus provide insurance to every American, including the 45 million who are without coverage under the current system.

Conyers, a Democrat from Detroit, plans to accomplish the cost savings and coverage expansion by extending Medicare to all citizens through a private health-care system that would feature public insurance.

"Ours is not a government-run program, though; the system still remains private. It's just that the insurance is public," said Joel Segal, a legislative assistant to Conyers, in a telephone interview from the nation's capital.

Although the system would be private, it wouldn't be for-profit. And it would be a single-payer system. But that doesn't mean that the current crop of insurers would be completely forced out of the health-insurance business. If they became nonprofits, or made their health division a nonprofit, they could be in the system.

"Under Medicare, the insurance companies are hired out to do reimbursements. Under the bill, we leave that kind of open, but we'd like to see them hired to do reimbursements," said Segal.

As for providers, like Health Maintenance Organizations, the bill lets consumers continue with their current doctors and hospitals, as long as the organizations are nonprofit.

"Nonprofit means that you can't have stockholders. Stockholder-based medicine is why we don't have everyone insured and why it's the second-leading cause of bankruptcy, and why Chrysler, GM and Ford are cutting payroll because they can't afford the cost of health-care insurance," said Segal.

"Under our bill, doctors would make about what they're making now. The negotiations with the Medicare program would start them off at what they're making now. We'd let the physicians kind of determine their salary range, not the government," he added.

So where is the opposition to H.R. 676, the United States National Health Insurance Act, going to come from?

"The insurance companies," said Segal.

According to Weiss Ratings Inc., which reviews stocks, insurers have a good reason to battle the bill. The nation's HMOs earned a profit of $10.2 billion in 2003, up by 86 percent from 2002. The $5.5 billion margin the HMOs had in 2002 was 34 percent higher than the $4.1 billion profit the companies had in 2001. And for the first three quarters of 2004, Weiss reported their earnings were up by 34 percent from the same period in 2003 to $8.9 billion.

Another opponent to the bill is likely to be the pharmaceutical industry. The legislation calls for buying drugs in bulk, like the Veterans Administration does, and that means less revenue for the drug sellers. But Segal doesn't see the drug companies as being as strong an adversary to the bill as insurers are likely to be.

"They'll fight it. But under our proposal they're still going to make mega profits. Would these be mega, mega, mega, mega profits? No, but they'd still be mega profits, because under our bill the system would still be private," he said, adding that Conyers was adamant about keeping the system profitable for those involved.

A 25-member committee made up of economists and physicians helped Conyers put the bill together. Segal said 13,000 physicians back the legislation and the bill has 50 co-sponsors. It is sitting in the House subcommittee on health and will likely stay there until another 50 co-sponsors are found in order to give it a hearing.

"Conservatives should really love our bill. Thirteen thousand doctors love our bill and they're not flaming liberals, either. Conservative physicians like our bill because they want to control their decisions on health care and they can't do that right now," he said.

If Congress doesn't act on the bill, Segal felt state lawmakers could create a universal, single-payer and nonprofit system for Michigan by following Conyers' legislation and cut the cost of health insurance for the state's employers. Maine is in the process of doing that now.

Segal told the Business Journal that the average U.S. employer spends about $2,600 each year to provide coverage for each employee. Under the Conyers' bill, he said, that premium would drop to $1,150 a year to cover an employee that earns $30,000 a year.

"Their costs are going to be dramatically cut, I guess by about half," he said. "It makes good sense (to change) if you're paying for health insurance based on someone who wants to make a profit and pay off stockholders. Once you start paying off stockholders, that is when the inflationary spiral goes up."    

Not Quite Nonprofit

The bill introduced by Congressman John Conyers Jr. proposes to shave at least $60 billion from the nation's annual health-care tab in its first year. Part of that saving would come from a lower administrative cost, as Medicare traditionally has an overhead of around 5 percent.

In contrast, the cost to administer the current private health insurance system reached 31 percent in 2003 — the highest it's been in the last 20 years. From 1986 to 2003, administrative costs grew by 395 percent to $421 for each enrollee. The most rapid growth occurred from 1987 to 1990 when these costs rose by 125 percent over four years from $71 to $160.

The following chart lists the current system's administrative cost from 1986 to 2003 for each person covered.

Year      Cost                Year      Cost                Year      Cost
2003 $421 2002 $360 2001 $301
2000 $259 1999 $240 1998 $216
1997 $220 1996 $224 1995 $220
1994 $217 1993 $208 1992 $169
1991 $159 1990 $160 1989 $141
1988 $97 1987 $71 1986 $85

Source: The Henry J. Kaiser Family Foundation, Private Health Insurance Administrative Costs Per Person Covered 1986-2003, 2005

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