Theoretical Models for Delivering Health Care

Speak Up, America! Health Care Is Our Right!

The growing number of uninsured individuals continues to be one of this country's greatest tragedies. It is perpetually an important political issue, although little is done to improve the dire situation. Part of the problem is that no one can agree on an approach to achieve universal health care coverage. The purpose of the following primer is to identify the major theoretical approaches to universal coverage, examine their advantages and disadvantages, and to briefly discuss AMSA's position on each.

Single-Payer System

Basic Concept: Under a single-payer health care system, one entity (usually the federal government) is responsible for financing basic medical costs for the entire population. Revenue is generated through taxation. The central role of the government in this system is to collect and distribute money. It does not necessarily control any of the other aspects of health care.

Advantages:

• Every individual would receive necessary medical coverage, regardless of age, health, employment, or socio-economic status.
• Health care spending would decline because centralized billing procedures would reduce administrative overhead. Consequently, a larger percentage of the cost of health care would actually be spent on patient treatment.
• Increased access to preventive care and the ability of government to purchase prescription medications in bulk would also help drive down health care costs. However, the corresponding drop in revenue for pharmaceutical companies could lead to a reduction in overall research and development, slowing down technological advancement.
• Patients can choose their physician and physicians can choose the most appropriate treatment for their patients.
• There would be a removal of profit-motive in health care. The driving force behind the health industry would be patient care and not profit maximization.

Disadvantages:

• There are many political drawbacks. Convincing lawmakers and their constituents that government should take over the financing of health care through taxation will not be easy. Also, health care could be threatened by changes in the political climate that lead to budgetary adjustments.
• A large number of private sector jobs would be lost as insurance companies would no longer be of consequence. However, many of the unemployed would be highly educated and could easily find work in another field or could be re-trained to fit the changing needs of the health care system.
• If physicians are paid based on a negotiated fee-for-service plan (as in Canada), there will be little incentive for health care providers to try and control costs.
• Erasing people's negative, and often inaccurate, perceptions of a single-payer health care system may prove to be difficult. Long lines, inefficient bureaucracy, limited choice, and sub-standard health care are just a few of the erroneous beliefs that would need to be changed.

AMSA says: AMSA believes that a single-payer national insurance system is the best solution for our current health care crisis.

Multi-Payer System

Basic Concept: Every citizen has access to health care coverage through a single-payer system. However, individuals and/or employers have the ability to purchase insurance privately.

Advantages:

• Ensures that everyone will receive health care coverage while giving people the option of remaining with their current insurance plan if they desire.
• Most of the benefits of a single-payer system would still apply. Administrative costs would decrease, physician and patients would have autonomy, and the profit-motive would be removed from the single-payer part of the system.
• Is politically favorable because it does not eliminate private insurance companies, and continues the perception of choice in health care.

Disadvantages:

• Because it incorporates single payer, it has many of the same disadvantages. These include vulnerability to the political climate, loss of private sector jobs, potential overspending by physicians, and a possible slowdown in technological advancement.
• Multi payer does not completely remove the profit motive in health care. Those who choose to pursue privately financed health care plans may be susceptible to the many problems that plague the current system.

AMSA says: Although AMSA believes that single payer is the ideal system, multi-payer universal health care is a sound alternative. However, AMSA believes that multi payer still leaves some people vulnerable to the abusive practices of private insurance companies. Multi payer may be most valuable as a step along the road to a single-payer system.

Tax Credits

Basic Concept: The government would provide tax credits to individuals to be used for the purchase of private health insurance. Depending on how the tax-credit scheme is structured, uninsured people would be able to use the tax credit to pay for all or a portion of insurance premiums.

Advantages:

• The plan is relatively simple, is easy to implement, and would not require major structural changes in the health care market.
• Because the plan is simple, does not call for dramatic changes, and relies on the health care system currently in place, it is politically viable.
• The American Medical Association (AMA), which has used its influence to block every previous attempt at universal health care coverage, supports the use of tax credits to increase health care access.
• Unlike some other plans, tax credits match the ideals of many Americans who do not believe that health care coverage should be standardized and mandated.
• Depending on the scenario, tax credits may increase patient empowerment by providing individuals with more control and choice over their health insurance.

Disadvantages:

• Using tax credits to facilitate the purchase of insurance does not guarantee that every citizen of the United States will have medical coverage. The tax credit may not necessarily pay for the entire cost of insurance or it may not be a realistic option for some.
• Because tax credits would allow the current system to remain in place, there would be no reduction in health care spending.
• The maximization of profit will continue to be a driving force in health care.
• Patients still may be restricted in choosing their physician and doctors still may be limited in treating patients in the manner that they best see fit.

AMSA says: AMSA does not support using tax credits to reduce the number of uninsured. AMSA believes that tax credits do not adequately solve the health care problems for those who are most disenfranchised. AMSA also believes that a health insurance system should be universal rather than voluntary. Voluntary systems do not work in the best interests of those who need care because they ask individuals to make decisions based on facts (such as when, or how severely they will become ill) that they cannot possibly know.

Medical Savings Accounts (MSAs)

Basic Concept: Money is placed into a tax-exempt savings account for individuals to use solely for health care. Some of the money is used to purchase a high deductible catastrophic-insurance plan. Routine or minor health care is paid for from the remainder of the savings account or out of pocket.

Advantages:

• Theoretically there should be a decrease in unnecessary medical spending because individuals would have to pay the costs of minor care out of their own pocket. This discourages people from visiting the doctor simply because their head hurts.
• Because individuals will have to pay some expenses, MSAs may encourage more health conscious behaviors in an attempt to avoid minor ailments.
• Paying some costs out of pocket will allow the consumer to have more choices in providers. This will encourage them to seek low-cost, high quality care.

Disadvantages:

• MSAs are not beneficial to lower-income individuals. Those who are disenfranchised will continue to struggle paying for out of pocket costs.
• In trying to reduce unnecessary health care utilization, MSAs discourage preventive medicine by making patients pay for routine visits to the doctor. The consequence may be rising health care costs and worse outcomes as people wait until it is too late before dealing with a medical problem.
• People are going to have to make a lot of choices on their own about health care. It may be difficult for many to make informed decisions about the cost-effectiveness and quality of care they are receiving.

AMSA says: AMSA does not support using MSAs to increase access to health care. AMSA believes that MSAs do not solve the troubles of lower-income uninsured and create greater problems by discouraging preventive medicine.

Managed Competition

Basic Concept: Employers and individuals join health care purchasing cooperatives that negotiate with private insurers offering a minimum set of benefits. Individuals choose among plans offered by their purchasing cooperative, with employers paying most of the premium. The premiums are priced the same for everyone in the plan, regardless of health status. Cooperatives serve not only to negotiate prices but also to gather relevant information for consumers about each available option.

Advantages:

• Gives individuals and small employers the same advantages that large employers currently have, making health care more affordable and accessible.
• Any attempt to increase access to health care faces many political hurdles. Managed competition's dependence on insurance companies makes it more likely that these powerful corporations will not act as a barrier.
• Because risk is spread among many individuals, the chance of any one person paying exorbitant out-of-pocket costs is greatly reduced.

Disadvantages:

• By strengthening the insurance companies' hold on the market the problems currently faced with managed care will continue. In particular, patients may be limited in choosing a health care provider, physicians will still have their hands tied by bureaucrats, and too much money will be spent on administration.
• Because they will have to accept both healthy and sick patients, there will be little incentive for insurance companies to offer high quality service or to improve technology and treatment for more expensive, unhealthy individuals. This will encourage sick patients to avoid enrolling in a plan, saving the insurance company a lot of money.
• Employers would pay for a portion of only a very basic plan. Citizens would have to pay out-of-pocket for a plan with increased services. This allows wealthier individuals greater access to better care.
• Bill Clinton tried to implement a form of managed competition that was strongly opposed in 1994. Politicians may be apprehensive about supporting a similar plan.

AMSA says: AMSA does not support managed competition because of its reliance on market forces and the private sector. AMSA believes that solutions based on profit-driven systems cannot effectively solve the nation's health care problems.