Tuesday, December 1, 2009

Tort Reform and Health Care Reform: The Real Need is Insurance Reform

Let me start this by saying I am not sure that either party if right or wrong. I do need help in understanding why neither seem to be willing to address the real problem. I guess that is the point of this entry. I need help understanding it all, because obviously I am missing something. I encourage responses here, because I want to know what I am missing.

Let me start with the tort reform push from the Republicans. In a recent speech by Sen. John McCain, he stated that one of the main problems with the health care reform plan is the lack of any significant medical malpractice reform plan. Now there are many torts out there, but the only one that seems to really matter is the specific tort of medical malpractice. I recently received a emailed photo from a client that voiced a similar sentiment painted on a van driven around Washington, D.C. Everyone blames trial attorneys for the need for tort reform. The arguments in support of tort reform center on two main points. The first is that attorneys file so many frivolous lawsuits that the insurance companies are forced to defend, resulting in higher premiums to health care providers that are then passed on to patients through higher health care costs. A side argument to this is that many doctors will go on to practice in states with tort reform due to these costs and leave non reform states with a lack of providers. The second argument, which I had not heard before reading excerpts from Sen. McCain's speech, is that the fear of suits force health care providers into practicing defensive medicine, resulting in unnecessary tests and procedures to avoid lawsuits, thus driving up the costs of health care.

Conversely, trial lawyer groups (one of which I am a member) argue that there is no correlation between tort reform and lower malpractice insurance premium to the health care providers. The former American Trial Lawyers Association (which Sen. McCain singles out in his speech) also points out that when caps are placed on the recovery for patients severely injured by medical negligence, these injuries can often result in permanent damage that require a lifetime of extensive treatment that would often not be fully covered by the limited damages. Those in favor of tort reform will point out that the attorneys are also opposed to proposed limits in attorney's fees in these cases, producing a conflict, but ignore the question of who will pay for the excess cost of treatment for these injured persons if not the malpractice insurance. I do not mean to imply that either side is right on this issue. I am merely trying to illustrate the arguments as I understand them. If I am misunderstanding this issue, I encourage someone correct me on this.

On the other hand, we have the health care reform package that is now being proposed by the Democrats. The argument here is that so many people cannot afford health insurance that they are forced to go without resulting in great financial hardship in the case of illness. I do not think anyone argues that this is not a huge problem facing our nation. The arguments against the proposal are that it will be hugely expensive and result in more taxes and national debt and that the plan is rushed and not well thought out.

I have two major concerns with this plan myself that I do not have enough information about and that seem to be receiving little attention. The first is the effect that mandatory coverage will have on small businesses. If small businesses are required to obtain coverage for their employees, what happens when the business cannot afford the coverage. This seems destined for me to cause job cuts and maybe even closure of businesses. The loss of jobs would worsen the seemingly worsen the economy. If uninsured persons have no jobs, the coverage concern is not remedied and the problem becomes compounded. The second concern is that the proposal may result in higher health care and insurance costs. Insurers will have a mandatory market and they can charge what they want. Policies can and will be watered down to provide minimum coverage that really will not provide any helpful coverage. Providers will have no motivation to keep costs low knowing that someone will pay for the service. Again, I do not mean to imply that either side is right on this issue. I am merely trying to illustrate the arguments as I understand them. If I am misunderstanding this issue, I encourage someone correct me on this.

Regardless of who is right in respect to the issues above, I believe both sides are missing the point. The only persons or entities that benefit from both proposals (tort reform and health care reform) are the insurance companies. In both proposals, the individuals are the ones that stand to suffer (the injured patient in tort reform and the employer who cannot afford coverage or the person who gets an expensive plan that covers nothing). The health insurance companies benefit because everyone has to be covered, so their market increases. These companies will also be plan administrators for any governmental plans, so they profit there as well. On the tort reform side, the medical malpractice insurers benefit. They keep charging premiums at whatever levels they wish, because the providers cannot afford not to have coverage, but they get to limit what they have to pay out. Either way the insurance companies' margins grow while their responsibilities shrink.

The common theme in both of these debates seem to be to help the insurance industry at all costs with "solutions" that can have detrimental effects on the public. The tort reform debate insists that the purpose is to lower premiums, a premise that has not been supported by the effects in states that have tort reform, but certainly will lower the payout responsibilities of insurance companies. The insurance companies do not lower premiums but pay out less, thus obtaining greater profit. In the health insurance reform debate, the health insurers will have more customers with mandatory coverage and can charge whatever they wish. Further, they will continue as third-party administrators of any governmental care plans. The results will be like mandatory auto coverage limits, high premiums with minimum limits that are often insufficient to satisfy the needs of the customers. With high deductibles I anticipate will be like the recent Medicare prescription plans, the insurance companies will sell more policies but structure coverage so that they do not have to pay any more out. Those that need coverage now will likely still only receive minimal or insufficient policies that merely take money out of the patients pocket to pay insurance that could have been spent on bills in the first place and still leaving significant out of pocket expenses.

The question that I ask is thus with all of the regulation of the individuals (limits on the injured persons for tort reform; expense on the customer and small business employers for health care reform), where is the regulation on the insurance industry to mandate quality coverage and limit premiums? Also, would cheaper insurance not allow greater access to the medical care in the first place? Why should we support either of these plans that help insurance companies like AIG when their executives receive large bonuses and buy outs accompanies by record governmental bail-outs?

The reason for this question is from limited understanding of medical billing. Doctors charge a rate for a test or x-ray or procedure or whatever. The doctors have to make their living and they have to pay their staff and run their offices. All of these factors go into setting that price. I understand that. However, they also know that a certain portion of those patients have no insurance and are likely not to pay. The doctors also have to live by the terms of the health insurers. The health insurers discount the charges that the doctors are able to charge for a specific procedure. The insurance companies dictate these charges, thus the doctors are required to offset these charges to those that have no insurance. No control of this practice by the health insurance company has resulted in higher health care costs for the uninsured to protect the insurance company bottom line.

Control over the insurance companies can lead to real health care reform and tort reform. Arguments that these plans help the general public without addressing this control is just a waste of breath, waste of tax dollars in coming up with these plans, and waste of time in coming up with a real solution. How long must we wait until a real plan comes forth?