The Coming Of Zerocare

It would be naïve to think that we are not going to see Obama and his Democratic majorities impose a form of National Health Care (NHC) as early in this term as he can.  We will most likely see this just prior to the 2010 Congressional elections in an effort to keep his majorities by "buying" the votes of non-tax-paying citizens but before the system collapses under the price tag of whichever format he chooses.

Current Government Participation

To understand fully the implications of the information to follow, one has to appreciate the role the federal and state governments currently play in the delivery of healthcare to Americans.  It can be summed up with an analogy: Government is the organized crime of healthcare.

Some will consider that statement unfair, but it is easily supported with financial data throughout the country.  Medicare is a massive program that was begun by Lyndon Johnson in the mid 1960's, but which succeeding administrations, Republican and Democratic alike, have expanded to broaden coverage from hospital and physician coverage entitlements to even include pharmaceutical needs.  Currently, Medicare represents approximately 17% of all federal spending.

The program is funded by a payroll and self-employment tax of 2.9% withheld from all employed Americans under FICA.  Medicare has additional premiums for eligibility which are stratified from $100 per month up to $310 per month for high earners.  Additional deductibles are imposed for various forms of care. 

In return the Federal government imposes fee schedules on providers, hospitals and covered professionals that participate and limit the amount that can be charged by those that do not participate in the programs.  These fees are supposedly determined by the cost of providing care under complex and often inane formulas created by federal functionaries and academics.  They cover costs for neither group, with hospitals underfunded by approximately 18% less than their true cost of service.  Physician losses are less but increasing.

In spite of this underfunding, Medicare has been running a deficit and will continue to do so in spades as increased demands are made on the system by retiring baby boomers and with the collapse of industrial retirement plans that currently fund co-pays and deductibles along with many extras.

Medicaid is a cooperative venture between each individual state and the federal government created under Title XIX of the Social Security Act.  Each state establishes a program to care for the poor, children and the elderly who become eligible by means testing.  Essentially in exchange for the right to establish standards the federal government reimburses states for approximately 55% of their cost to provide care for enrollees.  Each state program is unique and all states participate.  Almost all underfund the provider, often paying as little as twenty percent of Medicare.

As time has passed and funds became short, the federal government has imposed more and more regulations related to "quality" which have dramatically increased the cost to participate by hospitals and providers.  Most of the current quality incentives such as "Pay for Performance" and "Never Events" are designed to decrease the government's responsibility for payment predicated on the ridiculous assumption that a perfect human specimen is being provided to receive care under their programs.  Professional providers finding the cost of delivering care less than their reimbursement are opting out in ever greater numbers.

Hospitals on the other hand are essentially stuck in participation.  Many states require participation in their programs as a condition of licensing while others require each hospital to operate an Emergency Room, subjecting the hospital to regulation under EMTALA, a federal program.  Boutique or Specialty hospitals operate in a few states, many with sham Emergency Rooms.  Hospitals are having increasing difficulty covering the services required by the regulators who don't pay their own bills.

The only option left for hospitals is to cost shift to a decreasing base of payers.  In 2007, at Lee Memorial Health System we were forced to shift $117 Million dollars to cover government underfunding in a system with 1500 beds, a 60% Medicare/Medicaid admission rate and only 32% insured/self-pay to make up the difference.  This represents around $800 per bed per day to be made up by the insured.  This hidden tax on the sick has become economic suicide, not a business plan.

Obama's Choices

When examining the bigger picture there are only two systems which can be adopted to provide universal care:  the Canadian or the Exclusive System features restriction or prohibition of access outside the system; and the European system, whereby the government operates a State system but a parallel second private pay tier has been allowed (and often encouraged) to bleed off those that do not want to receive care under the state, primarily due to inordinately long wait for access to sophisticated levels of care.

Irrespective of which method is chosen, funding must be expanded to pay the bill.  Naturally any new tax will not be called a "tax" and will not appear until after the 2010 elections.  We should anticipate every effort will be made to shift the cost to business and therefore to the consumer in a ruse to spread the true cost and pain as hidden taxes. 

Under either system utilization will have to be controlled.  This is really just a form of rationing and we should foresee the first rationing will take place for expensive and sophisticated capital investment and access to elective hospital care.  Elective is a government definition here: you might be completely crippled and unemployable but your knee or hip replacement is "elective" to the functionary that looks only at health budgets while ignoring the loss of productivity and cost of disability.

Throughout this, there will be an encouragement to expand primary care while restricting access to anything sophisticated or expensive.  Primary and preventative care as forms of cost savings are myths, as frankly these are of little use in an aging population.  We spend one third of our budget now on individuals who are in the last three months of their life with terminal incurable illness.  The government has a vested interest in having the end of life take place at an earlier date once their productive years are over and they become a negative financial entity on the books for healthcare, Social Security and nursing homes.

Examine the rationing we currently witness in the United Kingdom.  Government panels decide that drugs available widely in the USA are not cost effective for prolonging life for various cancer victims.  Hospitals receive global budgets whereby they are reimbursed not on productivity but on cost.  Certain staffing levels are funded, capital is allocated, a fraction of depreciation is reimbursed and supply costs are restricted.  This actually makes hospitals less productive, for they receive the same budget irrespective of length of stay. Recuperation in hospital is saves them money compared to the expense of turning the bed twice as often.

Going Exclusive

This approach will not work in America for multiple reasons.  We have an aging physician provider base and already have shortages in key specialties due to the ill-informed central planning of the Clinton era governmental meddling in medical education.   General surgeons are in short supply.  Many specialists that could leave hospital practice have done so by restricting their practices to ambulatory procedures.  Retirement of even a few more will have a major impact on some areas and others will refuse to work under the system.

The major beneficiaries of the Exclusive System would be those operators of medical tourism to Mexico, Canada, the Bahamas, Cuba, Brazil, India and Europe.  The whole concept of exclusive care is frankly not viable on either financially or, most importantly, politically.

Two Tiered Care

Clearly this is the only financial and political option available to government.  It has many of the features of the Exclusive System as applied to funding of hospitals, but allows the individual to seek high quality care privately and immediately outside the system at no cost to the government plan.  Clearly, government has a vested interest in driving patients from their system to the private system thereby lowering the overall expenditures for their program while maintaining the income from the tax base. 

To do this they have to ensure there is a significant gap between systems by sacrificing quality (budget restrictions) and restricting access (waiting lists).  The six months wait with a headache and mandatory Neurology consultation to obtain an MRI translates into any reasonable human going to the private sector to purchase this service tomorrow.  Chronic chest pain will put most rational people placed on a one year waiting list to a state funded hospital into a heart hospital or institute immediately rather play cardiac roulette.  Death on a waiting list is cost effective, but not recommended for the individual.

Clearly the system will encourage seeking alternative unfunded care which will unlock a whole new system and series of mandates.  Providers will be required to provide a certain percentage of their efforts under Zerocare as a condition of licensing, otherwise certain specialties would be entirely unavailable.   Companies will contract with providers to keep their employees and their families healthy and insurance companies will seek opportunities to provide boutique care.  In Spain, about 15% of the population has non-government health insurance.

This is very bad news for hospitals in America unless their facilities are such that they can opt out of the government system, shed their Emergency Rooms and ICU's, thereby cherry picking the most profitable specialties.  It will not pay to provide high acuity private care or care for chronic illness, all of which will be dumped on the Government funded facilities.  This obviously will widen the quality and access gap.

Hospitals with foresight will begin the planning now.  They will align with members of their medical staffs and will design any capital investment and facilities development to be able to be budded off into private partnerships with providers and even insurance companies.  If hospitals are shut out of participation either by failure to plan or by regulation they will slowly die on the vine.

Just a Huge New Tax

The creation of Zerocare is really just an enshrining of an already government-created cost shift into one where the "rich" are forced out of the system in favor of the groundlings.  Zerocare will codify and sponsor mediocrity, condoning waste and inefficiency which is a hallmark of any government enterprise.  The "rich" will pay twice for the same care they receive now, but the rest of the population will actually receive less care than currently received under the single tier system.  Like Canadians and Europeans, as the system deteriorates slowly, so too will expectations.

Villains by necessity will have to be created to whom culpability can be shifted.  We just witnessed this in the Government sponsored melt down of the economy with the failure of the congressionally mandated subprime mortgage market.  The blame will fall on the private system, not the creators of this mediocrity, the Kennedys, the Franks and the Dodds. 

Thomas Sowell summed it all up best in Vision of the Anointed, when he stated: "It is easy to be wrong and persist in being wrong, when the costs of being wrong are borne by others."  Unfortunately when this all becomes clear it will be too late to recover.

John D. Donaldson, MD, FRCSC, FACS, FAAP is a pediatric otolaryngologist, and past chair, Board of Directors, Lee Memorial Health System