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New Jersey to Consider Health Plan to Cover All

Stanley Feld M.D.,FACP,MACE

It is refreshing to know that the politicians in various states are becoming aware of the need to do something to help the uninsured. However, most are doing it the wrong way by maintaining a model of insurance that continues placing patients in a passive position dependent on a third party payer. The only thing that will Repair the Healthcare System is to place potential patients in a responsible position for their care and ownership of their healthcare dollar. The government should make appropriate rules and then get out of the way. They should then modify the rules so no stakeholder has an advantage over another.

New Jersey is the most recent state to try to adopt mandatory universal coverage even though the state is reeling from financial problems.

A bipartisan group of legislators unveiled a proposal on Monday that would require all residents to have health care coverage within three years. New Jersey is reeling from financial problems, and the country appears headed toward a recession, the plan would avoid adding to the budget and would instead try to redistribute federal and state dollars in a more efficient way.”

It would be a nice trick if they could do it in the present payment system. You will recall Massachusetts budget has increase 85% from the baseline in 1 year.

“About 1.4 million of New Jersey’s residents — or nearly 1 in 5 — do not have health insurance. To bridge that gap, State Senator Joseph F. Vitale, a Democrat from Middlesex County who is chairman of the health committee, recommended that the state focus first on enrolling more children in the existing NJ Family Care program for families who earn as much as 350 percent of the federal poverty level, or about $74,200 for a family of four.”

The fact that states are beginning to recognize that hard working people earning over the federally defined poverty level of $20,000 a year can not afford healthcare insurance and are not eligible for federal or state aid is encouraging. All should review Moises and Medicaid. Additionally President Bush has refused to expand federal coverage to families with income greater than the obsolete 1955 definition of poverty.

“Then, Mr. Vitale said, the state would focus on cutting costs while establishing a self-financed plan, run by the state, to provide individuals with health insurance at affordable rates on a sliding scale.”

Self finance healthcare insurance has been adopted by many large and small companies. These companies saw a way of avoiding ERISA regulations and decrease their healthcare costs for employees. County governments in Texas formed an association to provide self funded healthcare insurance to its county employees. Both private corporation self funded and the Texas Association of County government healthcare costs have continued to escalate. This model was destined to fail because they outsourced the administration of the coverage healthcare insurance coverage to the healthcare insurance industry. The price of the insurance the next year is based on their medical cost experience for the previous years. The control of those cost are still determined by the healthcare insurance industry. They have not created a system of coverage in which patients have incentives to reduce healthcare costs.

“The insurance would be required, not an option: Residents would need to prove they have health insurance, similar to the way drivers must obtain auto insurance.”

How can this be enforced?

“ It would be financed, Mr. Vitale said, by using small surpluses in NJ Family Care and Medicaid.”

This is the same mistake Massachusetts made. Medicaid reimbursement to providers is small. A large proportion of the indigent are not covered by Medicaid .The indigents’ income can not exceed the federal poverty level of $10,000 year to receive Medicaid coverage. I suspect most of the federal and state funded Medicaid dollar are spent on the states’ bureaucracy.

“An additional contribution would be made by revamping the costly and much-maligned system of Charity Care, under which the state reimburses hospitals for costs associated with caring for the poor, often in emergency rooms.”

We have only to look at what happened in Massachusetts. When the state was forced to exempt citizen from the insurance mandate the safety net hospital use increased. The hospitals’ cost escalated while they were receiving less from the state for charity care because the money was shifted to the mandated universal healthcare insurance system. I suspect the same thing would happen in New Jersey.

“New Jersey’s plan would be similar in that the responsibility for obtaining the insurance would rest with residents and would expand existing state and federal health insurance programs. But unlike Massachusetts, New Jersey would use a single plan administered by the state rather than requiring individuals to buy such a plan in the private market.”

This is exactly what should not be done. The state bureaucracy will not compete with itself to be innovative. It will simply reduce reimbursement to providers and decrease access to care. A competitive environment must be created with appropriate rules made by the government so the healthcare insurance industry competes for individual patients’ healthcare dollar. The result will be to create a cheaper and better healthcare insurance product.

“While most of our members provide health insurance, those that don’t have consistently said the cost is what is preventing them from purchasing insurance,” said Jim Leonard, a vice president with the New Jersey Chamber of Commerce. “This initiative will make health insurance more affordable.”

This is an empty statement. There is no evidence that creating another government run bureaucratic system will make health insurance more affordable. It might cost the citizen less in the short run but more in taxes or restrictions to access of services or both. The New Jersey plan will reduce the responsibility to employees and increasing the costs to businesses in state. The result could be to drive business out of the state.

“But some unions and consumer groups reacted tepidly, saying it could prompt employers to drop health insurance plans.”
“Of grave concern is the proposal’s underlying policy that seeks to shift the cost of coverage away from a shared responsibility between employers and employees,”

This is exactly what will happen. I think the State of New Jersey has to go back to the drawing board to avert a state economic disaster.

The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.

  • Mike

    Dr. Feld I continually see healthcare professionals and bloggers discussing the many woes of our current healthcare “system”. I have penned a few words myself. A common theme seems to be that those in areas of influence keep turning to the insurance aspect of healthcare as a means to mitigate costs.
    Frequently I wonder what would happen if the many layers of healthcare were pealed back to expose the real cost of providing health related services. How much of today’s healthcare equipment, consumable supplies, etc. actually cost what is being charged? What is the mark up? Are we buying the proverbial $600 hammer that only cost $2.00 to manufacture?
    Looking towards the insurance aspect of controlling costs seems to be misdirected. Insurance is purely a means of reimbursement or payment for goods and services. It would seem that to allay the hypertrophying costs of healthcare we as a nation must look at what goes into the cost of healthcare and look for solutions at that point – the front end, not the back end – insurance.
    Finally I think you would agree that the rise of healthcare insurance is a byproduct of healthcare costs in general. Insurers have decided to take the lead now and regulate their out of pocket expenses by developing “never lists” and generally increasing premiums to the point that companies are dropping health benefits and individuals are foregoing coverage due to cost. Healthcare is being sacrificed for shelter and food for many. I believe it was Albert Einstein that said the definition of insanity “was doing the same thing over and over and expecting a different result”. Seems to be somewhat apropos in today’s healthcare arena.

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