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Rep. Russo promotes universal health care plan.

The Russo proposal raises a number of issues that municipal officials, as employers and community leaders, will need to examine as NLC continues to formulate National Municipal Policy of health care reform. They include:

* Replacing the current public and private health insurance programs with a single, publicly financed plan. (Persons currently covered under Medicare, Medicaid, Champus, the Department of Veteran's Affairs health program, and other federal health programs.)

Financing options that could include: a

Financing options that could include : a new 6 percent payroll tax on employers; an increase in the corporate income tax from 34 percent to 38 percent for businesses with more than $75,000 in profits; increases in personal income tax from 15 percent-28 percent-31 percent to 15 percent-30 percent -31 percent with a top rate at 38 percent for families with incomes over $200,000; a long term care/health premium equal to the Part B premium plus $25 per month for the elderly above 120 percent of poverty; an increase in the amount of Social Security benefits included as taxable income from 50 percent to 85 percent; state payments equal to 85 percent state Medicaid effort plus an annual per capital fee of $85; and federal contributions equal to current spending on health care.

* Elimination of the current fee for service approach. Instead, providers would be paid a fixed fee determined annually at the Federal and State level. Providers would be prohibited from charging more than they received from the government.

Why Do We Need To Reform Our Health Care System? We cannot allow our health care system to continue absorbing larger portions of our GNP while pricing more and more Americans out of the health care system.

Thirty-seven million Americans are uninsured and millions more underinsured. Children are denied pediatric care; pregnant mothers are shut our of prenatal care; working parents are impoverished by unexpected health costs; and the elderly are denied access to long-term care. We rank 13th in life expectancy and an appalling 22nd in preventing infant mortality.

Our spiraling health care costs are bankrupting our businesses. Employers confront health-cost hikes of roughly 20 percent a year. They now spend almost as much on their employees' health as they earn in after-tax profits. Already Caterpillar, Chrysler, Ford, Kodak, AT&T, General Electric, and a host of other major employers are having trouble paying the bill. General Electric estimates it must produce an extra $1 billion in 1990 sales simply to cover expected increases in health costs.

This year we spent 14 percent of our GNP on health care, more than any other major industrialized nation. Without major reforms, we will spend 17 percent of our GNP on health care, $2.5 trillon, by the year 2000.

Unfortunately, a large percentage of our health dollars are spent on administrative overhead and other wastes that have nothing to do with providing quality health care. Yet, every dollar we spend on administration and waste means fewer dollars for health care, education, and investing in the public and private infrastructure so we can maintain jobs in the years to come.

How will the Russo bill eliminate waste?

The Russo bill's single-payer structure eliminates administrative waste in our health system, while the establishment of national and state health budgets provides for more efficient health spending.

A single-payer system simply replaces the multitude of public and private health insurance programs now in place with a single, publicly financed plan that covers all Americans. Because there is only one plan and one payer, money is no longer wasted on determining who is eligible for benefits, or on billing 1,500 insurance agencies and millions of consumers or on advertising, marketing and commissions. Not surprisingly, administrative costs consume just 2 percent of Medicare expenditures, compared to about 14 percent of private health insurance.

Savings are further achieved by alleviating the administrative burden on providers. Providers would be paid from one source instead of having to bill many payers. No one would have to bill many of the eligibility requirements or complicated definitions of insured services in hundreds of insurance plans. Currently, 18 percent of hospital spending is for administration and billing and close to 45 percent of gross physician income goes towards billing. Additionally, the proposal will save by emphasizing preventive service and early intervention which can avoid more costly care later on.

This proposal eliminates waste by providing for federal and state health budgets. Budgeting would allow health care planning so that facilities, equipment, and expensive technologies could be distributed where they were most needed instead of where they expect the highest reimbursement. The lack of health planning in our current system has led to, among other things, an over-supply of hospital beds, costing the U.S. at least $3.1 billion in 1990.

According to the General Accounting Office, the United States would save more than $67 billion a year in administrative costs alone under a single-payer system. This is more than enough to provide health care to the uninsured, improve coverage for the insured and eliminate co-payments and deductibles for everyone.

How will the Russo bill contain costs?

The Russo bill contains costs by reimbursing providers on a prospective basis --global budgets for hospitals and fee schedules for health care providers--by establishing national and state health care budgets and national expenditure targets.

Health care providers are usually reimbursed on a retrospective cost basis -- providers are paid what they charge. This does not necessarily mean they overbill in order to boost their earnings, but it does mean that there is no incentive to control costs, and. In fact, that there may instead be an incentive to over prescribe those services.

Prospective payment can avoid these problems. Under the Russo bill, providers are paid a fixed fee for an episode of illness (fee schedules), for overall treatment of a particular patient during a given time period (capitation), or for treating an entire population (global budgeting).

Prospective payment encourages providers to become more efficient because they know they must stay within the predetermined rate. In addition, the budgets under the bill would act as expenditure targets, so that if the budget for a service were exceeded, the Secretary could lower payments for that service the following year.

However, prospective payment can only make providers more efficient in a single-payer system. Despite previous attempts by the federal government and other payers to control costs through prospective payment, health care inflation has risen by twice as much as general inflation over the past decade. Health care inflation will continue at this rate because our current system provides no mechanism to control it. When one payer tries to contain health care costs, providers simply shift these costs to others. Only a single-payer system can effectively control medical inflation and promote greater efficiency among providers because it prevents providers from shifting costs.

Other countries (Canada is most often cited) have contained costs by controlling reimbursement. Detailed analysis of trends in Canada and the U.S. have identified prospective global budgets for hospitals and negotiated fee schedules for physicians' services as major reasons for lower spending in Canada.

When reporting on the effect of these cost-containment provisions if applied to the U.S., the General Accounting Office (GAO) claimed that they would, "significantly constrain future growth of U.S. health spending, leading to substantial cost savings." The Congressional Budget Office corroborated this view in testimony before the Ways and Means Committee saying that, "legislation that provided for global prospective budgets for hospitals, expenditure targets for physicians, and caps on overall spending within the system...could result in substantial reductions in the rate of increase of health spending. No other health reform plan can achieve the cost savings of single-payer.

Why doesn't the plan provide for cost-sharing to control patient


Critics of single-player say the plan would only work if it imposed high cost-sharing to prevent consumers from over-utilizing the system and driving up costs. But the United States already has the highest level of cost-sharing among all industrialized nations, yet it is the only country that has been completely unable to control costs. As the Congressional Budget Office (CBO) explains, cost-sharing is relatively ineffective at controlling costs because consumers lack the medical knowledge about alternative treatments and their efficacy and therefore will follow their doctor's recommendations. Other countries with national health care programs, such as Canada and Western Europe have controlled health costs far better than the U.S., yet require only negligible cost-sharing. Cost-sharing is both inappropriate and unnecessary to control costs under a single-payer system.

What is not covered?

Services which are not traditionally covered medical services are not covered under this plan. This would include over-the-counter drugs (aspirin, cold medicine), items such as bandaids, thermometers, home and community based services for people who don't meet the 2 ADL (activities of daily living) test, mental health services in excess of the 45-day impatient, 20 visits outpatient limit, care not determined to be medically appropriate, certain types of cosmetic surgery and items such as physical for purposes of litigation, obtaining life insurance.

The Secretary of HHS would determine which medical services and items not specified in the bill should be covered. It is the intention that hearing aids, eyeglasses, prosthetics, and other types of durable medical equipment.

How will this plan improve the quality of care?

The plan would apply the outcomes research and practice guideline provisions recently incorporated into Medicare to the entire national health care system. These provisions include research into the quality, effectiveness, and appropriateness of medical care.

Amazingly, as costly new medical technologies have come into use over the past 50 years, relatively little has been done to measure their real effectiveness. Many analysts believe the United States has overinvested and overused some technologies. Hospitals competing for market share have installed equipment that stands idle much of the time or, even worse, is being used without good medical justification to generate reimbursement from insured patients. The fundamental patterns of investment in the United States have been distorted by differences in insurance coverage. There is no incentive to invest in preventive care if the health benefits are high but reimbursement is uncertain. There is every incentive to invest in high technology if health benefits are uncertain but reimbursement is assured.

Groundbreaking research has produced evidence of resources squandered in practices ranging from unnecessary hysterectomies to superfluous lab tests. Studying a sample of heart-bypass operations, researchers at the Rand Corporation concluded that 14 percent were inappropriate and 30 percent were "questionable". Eliminating this waste in medicine would save both lives and billions of dollars. The practice guidelines and outcomes research provided in the bill would go far to eliminate this waste.

Quality would be further improved by establishing a separate budget for capital expenditures. This allows the state to distribute funds for capital improvements in a rational manner, and eliminates incentives for wasteful and duplicative capital spending. Excess hospital beds costs the U.S. at least $3.1 billion in 1990. Moreover, quality is improved when providers perform procedures frequently. Studies have found that a greater concentration of surgery in fewer hospitals tends to lower mortality rates.

What would the bill mean for the average citizen?

There would be no paperwork, no gaps in coverage, and no barriers to care. The government would become the sole health insurer. Consumers would simply show their health care to receive a covered service and would be completely free to choose their health provider. Everyone would be entitled to the same benefits and these would not change when a person changed jobs or moved to a different state. Consumers would pay for their health insurance through the tax system. At least 95 percent of consumers would spend less on health care under this bill than they pay now.

Would managed care plans continue?

Payment options are flexible. The Secretary of Health and Human Services (HHS) or state administrator may choose alternate forms of reimbursement to encourage innovative forms of health care delivery such as HMOs or PPOs. Any such health plan would be reviewed by the State advisory boards and would be subject to public comment.

Would This System Lead To Rationing?

Some people fear that a single-payer system would lead to health care rationing. The truth is that the United States already rations care. According to the Journal of the American Medical Association, doctors treat uninsured persons differently that they treat insured persons. The uninsured are less likely to be given routine diagnostic tests, less likely to undergo key surgical procedures and more likely to undergo key surgical procedures and more likely to die during their stay in the hospital. This study illustrates that the U.S. rations care in the cruelest way imaginable, based on the ability to pay.

It's true that countries with national health care systems perform fewer expensive, high-technology services such as cardiac surgery, magnetic resonance imaging, and lithotripsy. However, these lower rates are probably more appropriate. There is overwhelming evidence that a significant proportion of the American health care dollar is spent on unnecessary tests and procedures. The General Accounting Office found that inappropriate use of surgical procedures ranged from 14 percent to 32 percent. Many common procedures, such as Caesarean section deliveries and coronary artery by-pass surgery, are often used without producing any medical benefit for the patient.

This bill would grant every citizen equal access to all aspects of health care. Medical care would depend on a professional assessment of medicine need rather than on insurance status.

Would There Be Long Lines For Treatment?

Many have heard horror stories of waiting lines for elective procedures in countries with national health programs. For the most part, these stories have been greatly exaggerated. The U.S., however, has its own horror stories. Americans being treated in hospital emergency rooms, particularly big cities, often wait hours for critical care. Some people are routinely turned away from private hospitals and forced to travel to public hospitals.

These "economic transfers," estimated that 250,000 annually in the U.S., often result in serious delays in treatment, cause long-term harm, and have cost some patients their lives. Finally, millions of uninsured or underinsured Americans can't even get in line to bet medical services and devices they need.

People in other countries with national health programs do not wait for critical care. The delays that have been reported typically reflect management or scheduling problems rather than chronic shortages of facilities.
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Author:Russo, Marty
Publication:Nation's Cities Weekly
Date:May 11, 1992
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