Cost Shifting in Health Care

E. Rawson Griffin, III, M.D.,
President of Clay County Medical Society

Many years ago health insurance was pure insurance. If 100,000 people lived in an area and it cost $1,000,000 per month to provide care for all 100,000 then everyone paid their fair share and paid $10.00 plus a small administrative fee per month and everyone was covered. The cost was evenly spread out among the population, everyone was taken care of and no one suffered a severe loss. But the insurance industry figured out that all those younger people in high school and college almost never spent any money on health care. So the insurance industry started offering experience rated policies based on age, demographics, employers, etc. and those students now only had to pay $5.00 per person per month. The insurance industry had a marketing advantage and captured a healthier base of patients at lower risk and made a better profit. Problem was that the rest of the population that was older and sicker had to now pay a higher premium in order to balance the system.

Unfortunately, this experience system taken to an extreme created a system where some people couldn't afford the coverage so they went bare. Now you have an increasing number of uninsured showing up at the emergency room and hospital getting essentially free care but someone has to pay the cost so guess what, those people with insurance had to pay even higher premiums to make up for the uninsured, again forcing even more people on the uninsured roles. It becomes a self-perpetuating problem that we haven't solved yet.

Medicare to some degree was enacted to again try and balance this system, but unfortunately it did not work and only made the system more unstable. To begin with Medicare at its beginning was never funded with any beginning "seed" money or any surplus. From day one Medicare was funded with today's tax dollars and general revenue from year one. In addition, originally the funding equations used for Medicare assumed that people would go on Medicare at age 65, die at age 68, and only need the coverage for 3 years. Unfortunately as we all know people, no longer die at age 68 and there is an increasing number of people who will use Medicare until they are 100, or 35 years, which is over 10 times what was initially projected. Ad to the mix all the money that is spent and allocated towards Medicaid, workers compensation, auto accidents, and the system is clearly unbalanced and a mess.

In my opinion a viable solution is to go back to the population based systems. To many, this would be a single payer system. Maybe it is not the best way. But the basic principle here is that if you spread the cost of care out evenly amongst the entire population and everyone pays their fair share then everyone is covered and no one gets hurt.

March, 2001/ Jacksonville Medicine

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