Response to AMA's Health Care Reform Proposal
Response from the American Medical Student Association to "Voice for the Uninsured," the AMA's proposal for healthcare reform.
In late August, the American Medical Association (AMA) released a plan detailing its agenda to reduce the number of uninsured people in the United States. The following document discusses the shortcomings of the AMA plan and why it will not solve the healthcare crisis and cannot provide all Americans with affordable, quality healthcare.
The AMA plan is divided into three parts:
- Enable uninsured individuals and families to purchase coverage of their own choosing.
- Make subsidies available - via tax credits or vouchers - to those who cannot otherwise obtain health insurance.
- Foster market reforms that encourage the creation of innovative and affordable health insurance options.
- Encouraging everyone to purchase private health insurance, despite the fact that insurance does not equal quality, affordable health care for all.
- Issuing federal subsidies in order to help individuals purchase private health insurance.
- Removing regulations on the insurance industry that protect vulnerable individuals.
The theoretical underpinnings of the AMA plan involve market-driven reform, in which competition among the health insurance companies will supposedly lead to reduced healthcare costs that will be passed on to consumers. To this end the AMA encourages the initiation of publicly-funded tax credits that would enable low income families to purchase private health insurance products from private health insurance companies.
The American Medical Association's proposal is misguided. It does not focus on providing access to healthcare, rather, it emphasizes the expansion of insurance coverage. The two are not the same. Private insurance companies have a fiduciary responsibility to their shareholders, not to patients or providers. Under the AMA's proposal they would continue to deny claims and raise premiums, in order to maximize profits. There is also no evidence that competition in the financing of health care has led to decreased costs and increased access or quality of care. Additionally, increased government aid in this context would serve only to put more money into the pockets of the private health insurance system, without lowering healthcare costs or increasing quality of care. Given that consumers will be required to pay high deductibles and co-pays, significant barriers to access will be left in place. Thus, while the AMA proposal helps many of the 47 million uninsured gain health insurance, it does nothing to increase their quality of care, nor does it address the rising cost of healthcare. Instead, it will increase the profits of an inefficient private health insurance industry.
Specifically, the AMA proposes:
Encouraging everyone to purchase private health insurance, despite the fact that insurance does not equal quality, affordable health care for all.
It is unrealistic to believe that every individual will have access to healthcare by purchasing private health insurance. In contrast to the proposal made by the AMA, health insurance does not equal healthcare access; insurance companies frequently offer plans that require large co-payments and deductibles. This helps insurance companies cut down the medical loss ratio by creating an incentive for individuals to avoid care. However, individuals postponing their doctor's visit may then wait until they are very sick before seeking care. In addition, according to a 2004 Rand study, chronically ill people were found to cut their medications between 8 percent and 23 percent when their copayments were doubled. 1 Besides health-related consquences, high deductibles and co-pays impose a significant financial burden on the insured sick. According to a 2005 study by Harvard Researchers, 50 percent of all bankruptcies filed in the United States were partly the result of medical expenses; 75.7 percent of those bankruptcies were filed by individuals who were insured at the onset of their illnesses. 2 Therefore, private health insurance coverage is not synonymous with healthcare access, as care is not guaranteed even when insured. By promoting the purchase of private health insurance coverage while failing to address the issue of access, the AMA proposal will not result in affordable, quality health care for all. According to a 2007 Consumer Reports article, 29 percent of people who had health insurance were "underinsured," meaning that they often postponed medical care because of costs. This article also states that 43 percent of people with insurance said they were unprepared to cope with a costly medical emergency over the coming year. This results from the fact that comprehensive insurance plans are no longer affordable for median income families. The only plans which these families can afford offer reduced benefit options that negatively impact accessability.
Issuing federal subsidies in order to help individuals purchase private health insurance.
Although tax credits appear to make health insurance more affordable by reducing an individual's tax liability, according to a 2005 CBO background paper, credits provide little financial incentive for families in the lower tax brackets. 3 Tax credits will also increase the flow of public funds away from the people they are meant to serve and towards the private health insurance industry. This industry not only increases profits by denying care, but also wastes money in large overhead costs; costs which are usually 15 to 18 percent of expenses compared to the modest overhead of under 5 percent for public programs. Thus, through this proposal the AMA would shift more public money into private hands, without an equivalent public benefit. On an industry level, there exists a natural conflict between profits and access to quality healthcare. The AMA's plans to regulate the industry on the one hand, while removing regulations on the other will result in a healthcare system that is neither comprehensive nor affordable, but in one that is cumbersome, less efficient, and more expensive for all of us.
Removing regulations on the insurance industry that protect vulnerable individuals.
The AMA plans to make healthcare universal by loosely regulating health insurance companies. However, the group has not specified that health insurance companies must be prohibited from denying healthcare coverage to individuals based on pre-existing health conditions. As the private health insurance industry strengthens under the organization's proposal, coverage and care will be denied to individuals, and there will be little regulation of an industry which has consistently undermined doctor's ability to practice medicine. Restricting the limitations that insurance companies currently set is not effective; individuals must be guaranteed healthcare coverage from the moment they are born until the day they die. This aspect of the AMA proposal also will not lead to affordable and quality healthcare for all, as not every individual will be able to purchase health insurance. Instead, the AMA is allowing health insurance companies to take advantage of vulnerable individuals and to continue to selectively offer coverage to the individuals that will cost less to cover. Under the AMA proposal, insurance companies will have the freedom to deny coverage to individuals who do not qualify for public programs, but still are so sick that their insurance premiums are more expensive than tax credits would cover. Therefore, this policy is directed toward benefiting health insurance companies, not the uninsured.
Overall, the AMA proposal is vague and open-ended. It does not address key health care issues such as prohibiting insurance companies from denying coverage based on pre-existing conditions or reforming Medicare to allow for the Department of Human and Health Services to negotiate on the cost of prescription drugs. This proposal fails to improve and expand the successful elements of our current healthcare system, such as Medicare, Medicaid, the VA system, and S-CHIP, which ensure healthcare for many millions of Americans with an overhead of under 5 percent. Instead the AMA supports the inefficient health insurance industry which has not proven effective. The AMA also does not address the factors responsible for our overly expensive healthcare non-system. If our goal is to create a system that provides affordable, comprehensive, quality healthcare for all, then this plan proposed by the AMA is not the solution.
- Goldman, Dana, "Pharmacy Benefits and the Use of Drugs by the Chronically Ill," Journal of the American Medical Association, Vol. 291 No. 19, 19 May, 2004.
- Himmelstein, et al, Health Affairs, Feb. 2, 2005 DOI: 10.1377/ hlthaff.w5.63
- Auerbach, David, "The Price Sensitivity of Demand for Nongroup Health Insurance," Congressional Budget Office, August 2005.