Background of the Colorado Draft Bill for Single Payer Health Care

The enclosed bill was written to follow a single payer model and to tailor it specifically for the state of Colorado. Understandably, there is a lot of fear generated over the idea of a single payer system. This paper and this bill were written to address and to help alleviate those fears.

To most Americans, a single payer system at its best translates into a giant Medicare-type bureaucracy and at its worse into socialized medicine. A single payer system could be either one of those, but this proposal is neither .

In its purest sense, "single payer" is just that -- one entity that oversees the financing of health care. There are numerous countries around the world that follow this model, yet they all do it differently and independently with their own unique solutions. In fact, right here in the United States, we have several different single payer models -- all of which have their own virtues and short comings. These programs include: Medicare, Medicaid, the Indian Health Services, the Veterans Administration, and the military. In fact, the military is truly socialized medicine.

We have before us the unique opportunity to review what is good and what is bad in single payer systems, to assimilate that information, and to forge a truly sound, just, viable, and sustainable health care system. This program can achieve that.

There are four basic components to any health care system:

coverage and benefits.

financing.

delivery of care and infrastructure.

governance.

The problem with our current health care system is that it is so fragmented and there are so many different players involved with the regulation and the financing that there is absolutely no way to effectively contain cost or reduce the burden of administrative overhead.

The balloon analogy of market pressure is probably the simplest but most effective way to describe trying to control cost within this fragmented system. When you squeeze on one end, it just bulges out on the other. Effective cost containment is nearly impossible, so what happens is essentially effective cost-shifting.

In contrast, this proposal will enable us to universalize and integrate all four basic elements of our health care system in such a way that it will provide equal and universal access and protect patient choice while maintaining the autonomy of physicians and hospitals in an atmosphere of cost containment and quality. All of this can be achieved while also being accountable to the people.

Let's examine the four basic areas in-depth.

1. Coverage and benefits.

If you read the enclosed bill, Title 1 is fairly straightforward. It provides universal and equal access to the system with the benefits as outlined in Section 102. Although there is good evidence and support behind the reasoning to eliminate deductibles and co-payments, it is a minor point and certainly open for discussion. With the recent debates over immigration, another point is eligibility. How long should one be a resident of the state before being eligible? It's worth noting that we already are paying for the uninsured as it is under the current system.

2. Financing.

In the enclosed bill, Title II creates a trust whose funds are separate from the general state budget. This insulates those funds and prevents the legislature from using them (or abusing them) as a political football. They must be used for health care. The funding of this trust is well outlined in Section 201. Of course, the role of the 208 Commission consultants will be to calculate the financial feasibility of this proposal. Worth mentioning, the economists that I have conferred with have calculated that we can easily pay for this program and have a sustainable mechanism for future cost containment if we were to do the following:

Administer a state payroll deduction of approximately 8 percent to go into the trust, in which some or all could be contributed by the employer.

Place into the trust all current federal and state money that currently goes to Medicare, Medicaid, Veterans Administration, etc., along with the current money being spent on health care for city, county, and state employees.

Initiate a 0.25-0.5 percent sales tax to be put into the trust.

Increase the duties on alcohol and tobacco (to offset the increase in health care expenditures due to their detrimental effects on health) and place those in the trust.

With the savings that would be derived by eliminating excessive profit-taking, dramatically reducing administrative bureaucracy, and promoting preventive medicine, we can easily pay for this program and have a sustainable mechanism for future cost containment -- a cost containment mechanism which is now impossible to achieve.

Of course, critics will be quick to point out that this will cause an increase in taxes -- and they're right.

However, for the first time in history, we will be creating a system in which a small increase in taxes will be offset by a huge financial savings for all collectively and individually (for example, a family of four now pays on average nearly $9,000 a year in insurance premiums) and will remove the oppressive burden of health care financing from the business sector.

Critics have also pointed out that, in the era of big government reduction and keeping business in the private sector as much as possible (which has been a mandate of the electorate), initiating a program of this magnitude will only serve to expand government bureaucracy, insulate the public from "personal responsibility," and suppress innovation.

Actually, this program will be a "consumer-driven" system in the truest sense and foster innovation, not suppress it.

Along with that, the health care system will once again become a true service industry to the people.

Imagine with me for just a moment having privatized, profit-driven fire and police departments. The result -- millions who cannot afford coverage, racial inequality, innocent people dying everyday, businesses reducing their work force to maintain the capital to keep up their protection money, private departments refusing to upkeep their infrastructure in poor, unprofitable neighborhoods, thus shifting that burden to government. Sound familiar?

We have to remember that medicine is a service industry, and that promoting profit-taking as a driver of the system is a gross perversion of -- and not the answer to -- what medicine is all about.

3. Delivery of care and infrastructure.

One of the great positive aspects of this proposal is that physicians, hospitals, pharmacists, and durable medical goods vendors will stay in the private sector.

Physicians and hospitals will be reimbursed at the same rate for the same procedures no matter who walks through their door -- despite geography, population, rural versus urban, or wealth. It will actually allow providers to start competing in the areas that they are supposed to excel in -- patient satisfaction, quality measures, and outcomes.

In contrast, under the current mechanisms of reimbursement, we do have competition, but it is what I refer to as "competitive avoidance". It is a perverted twist of the free market system that we as Americans pride ourselves in. Physicians and hospitals are constantly concerned about quality of care issues, but those concerns unfortunately are directed at those who can pay for those services and not necessarily at those who need them. This works well when you are marketing widgets, but not when you are fighting disease and trying to save lives. As a result, providers find themselves maneuvering toward contracts and neighborhoods to increase their exposure to patients who pay well while "competitively avoiding" those who don't. The policy of emphasizing consumer-directed health care and high deductible plans while trying to expand already poorly-reimbursed government programs, such as Medicaid, will only work to exacerbate this perversion of our so-called free market.

Regarding infrastructure, this bill addresses both the over- and underutilization of infrastructure. Clinics and hospitals many times strive to invest in infrastructure such as CT or MRI machines not because of need, but because of image, convenience, or profit. As a result, an excess of highly-reimbursed infrastructure frequently develops. Under normal market conditions, one would expect this to drive down the cost. However, just the opposite occurs. As our ability to do more in medicine increases, so does the cost of the technology. In order to pay for that technology, we must increase its utilization. This, in turn, increases the demand and expectations from the public, which begins to view these various hi-tech procedures as standard of care. Many times this cycle occurs without good data to support it. By having a single governing board (which we shall discuss shortly), we can apply sound science and geographic need to hi-tech procedures to prevent its over-utilization simply for the sake of profit without limiting necessary access. This will equate to a huge savings within the system.

Another place that requires reform is in the way that physicians practice medicine. By centralizing billing and reporting, clinical data and outcomes can be truly objective and used to change clinical practice in a way that is more cost effective and beneficial to the community. A single governing board that is accountable to the people will also be able to discuss the truly thorny ethical issues within a democratic platform and help provide general guidelines to physicians that will not only benefit individual patients, but society as a whole.

Under our current system, insurance companies use clinical data to protect their profit margins, pharmaceutical companies use it to promote their sales, physicians use it protect their practices, and the government uses it to save tax dollars. And all of these special interests many times become diametrically opposed to one another. The real loser ends up being the consumer -- caught somewhere in the middle. The standards of care need to be the standards of care for everyone. Sound science with consensus needs to drive the system. Profit must take a back seat. The only way to achieve that is by moving to a single payer system.

The bill also provides for a single statewide formulary. The advantages to this are numerous. It will cause pharmaceutical manufacturers to compete against each other and to prove not only clinical but fiscal benefit of new drugs to the community. With the state purchasing medications in bulk for 4.5 million lives, the savings will be enormous. It also will help physicians in their prescribing patterns by choosing medications based on efficacy as well as cost and removing the pressure to prescribe based on marketing. It will also eliminate the overhead and administrative burden currently placed on physician practices trying to keep up with as many as 27 formularies or more and all their different regulations, which does nothing but increase the cost of doing business in medicine and frustrates the consumer. By standardizing prescribing options, it also allows medical students the opportunity to understand the symbiotic relationship between cost and efficacy, and hopefully that concept will remain with them through out their career.

With the system acting as a central clearinghouse, it will allow huge savings through bulk buying and will allow the distribution of those medications through local pharmacies. This, in turn, will keep the money within the Colorado economy and maintain the continuity of care and personal attention of local pharmacists that are so desperately needed, especially with the elderly.

4. Governance and administration.

The final area to cover is described in Title III of the enclosed bill. It is here that the crux of this program lies and where this and other reform proposals distinctly separate. In the bill, the governing board of the Colorado Health Services (CHS) is comprised of representatives from across the state who are either directly or, in this proposal, indirectly (through appointment by the elected state senators) accountable to the people. A similar comparison would be the Board of Regents for the state's universities. There are several reasons why this board is so important and why its configuration must be so carefully guarded. We've already mentioned its role in overseeing utilization of infrastructure, a statewide formulary, and addressing ethical issues.

But the primary reason is to give consumers a voice and a choice in their health care. In our current system, consumers have limited, if any, impact. High deductible plans and health savings accounts do not guarantee consumer control or choice or even, in fact, access. Health savings account consumers may have limited personal control of their own health care spending, depending on their own health status and disposable income. But, ultimately, consumers have no control over health care inflation. The system is too complicated. There are too many variables and too many players with self-interest. Consumers and the providers who practice equitable medicine do not have a free market.

The only free market that exists in health care today is the way that the insurance and pharmaceutical industries do business -- and their business is to make a profit, not fix the health care industry. I'm not attacking them or blaming them -- this is America, the bastion of capitalism. But, until we remove the profit motive from at least the financing of health care, we will not be able to fix the system. Applying the rules of Wall Street economics to the financing of health care is like trying to get an ostrich to fly. On the surface, it appears that it should work. After all, it is a bird, it has feathers, and it has wings. But no matter how hard you try or how fast you make that ostrich run, it just ain't gonna fly.

So what does all that have to do with a governing board? Simply this -- for the first time, consumers will actually have a say in how much is spent and how it is spent. There will be a mechanism available for all interested parties to have input -- including consumers -- to discuss benefits, budgets, and ethical issues on a democratic platform. This is truly consumer-driven health care.

But what about personal fiscal responsibility? This is a question of two opposing philosophies. Either way, the consumers' pocketbooks will be directly affected. But, only one philosophy allows the consumer's choice to make a difference.

In the philosophy to tweak the current system, consumers are directly affected by increases in annual insurance premiums and ever-rising personal deductibles while still paying taxes to support Medicare and Medicaid -- all in an environment of out-of-control health care inflation in which the consumers have minimal, if any, impact. In other words, they can't do anything about it.

In the alternate philosophy, which is the basis for this proposed bill, consumers do have a voice and they choose as a community through a vote or through the governing board to increase their own taxes or restructure their own benefits, which, in effect, is true consumer-directed health care.

Let's expand on these two very different philosophical approaches to reform. Society – and, more specifically, the Senate Bill 208 Commission -- must grapple with choosing one of these two paths:

Do we continue down the road of tweaking our so-called market-driven system? If so, society must understand that there will always be a small group of people who will receive everything that health care can provide, a larger segment of the population who has poor or no access to it, and the rest of middle class America who are somewhere in the middle and will continue to struggle in a system driven by a motivation of profit and cost-shifting. It's worth noting that, as health care inflation continues to spiral, more middle class Americans will fall into the segment who has poor or no access to the system.

Or, do we muster the courage necessary to embark in a new direction in which we all share in the burden of cost and responsibility and all patients are treated equally and have access to a minimum standard of acceptable care? The more one understands health care, the more one understands you cannot have it both ways.

That's why this Blue Ribbon Health Care Reform Commission is so important. Its role is not to pick one option and say "we're done". Rather, its role is to give several options with their pluses, minuses, and financial (not political) feasibility to the Legislature and, in effect, to society to debate. That's why it is also so important that a single payer model be a part of the options presented and why this bill written specifically for Colorado is such a good platform for beginning the discussion.

As far as this proposal goes, another primary reason why the governing board and its configuration is so important is to protect the interests of the people. By providing for a member from each state senatorial district appointed by that district's senator, the board members are insulated to a certain degree from any single interest that could unduly threaten or influence the board. It also gives equal representation across the state. With the board convening on a quarterly basis, it provides the platform of accountability to the people and the transparency so necessary to keep the system sustainable.

There are some who may argue that this makes the board too large and unwieldy. Certainly, the size of the representative regions and the size of the board are open to debate. But, the concept of having the system accountable to the people must remain intact to ensure its success.

In conclusion, these are the arguments and the thought processes behind the major points of the enclosed bill. I hope that the Commission finds them useful and gives serious consideration to the single payer concept as a viable option in our search for the answer to our current health care dilemma.

If I can be of any assistance to the board in answering questions on this or any other proposal, I am happy to avail my expertise to your service.

For the good of our state and in your service,

C. Rocky White, MD