Health care is our most daunting fiscal challenge. Much of the information that I have relied upon for these essays on health care is from four recent reports appearing in the McKinsey Quarterly, a publication of the leading management consulting firm McKinsey & Co.: “Three imperatives for improving U.S. health care; Why Americans pay more for health care; Health care costs: A market-based view; and Overhauling the U.S. health care payment system.”

I have also referred to an excellent eight-point plan for health care reform authored by Rick Jackson, the chairman and chief executive of Jackson Healthcare, headquartered in Alpharetta. The plan is available on the Jackson Healthcare Web site for those interested. I am also indebted to my former primary care physician, James N. Brawner III, and to my current primary care physician, W. Cody McClatchey, for background information and points of view from within the medical profession. Responsibility for the conclusions I have drawn from all that I have read and heard is mine alone.

The 2008 annual report of the boards of trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance trust funds estimated that the total unfunded future obligations of the Medicare program are $36 trillion. The U.S. health care system currently consumes 16 percent of our gross domestic product and is by far the most expensive in the world. McKinsey concluded that Medicaid (the health care plan for the poor) “will soon consume up to three-quarters of any new tax revenue in several U.S. states, in effect crowding out spending on nearly all other social programs.” If current trends in health care spending in the U.S. continue to 2080 it is estimated that health care spending would consume more than half of our GDP in that year. It is obvious that we must find a new and better way to provide for our health care needs.

It would be impossible to address adequately in one or two essays the many issues involved in resolving the health care issues facing our nation. There are a few points that it may be useful to discuss here. The first is that most doctors with whom I have discussed the situation believe that a single-payer program would be substantially preferable to the current confused and complicated insurance-based system. The doctors are tired of dealing with the insurance companies and bearing the cost and difficulty of dealing with them on behalf of their patients. They also see the insurance companies as an unnecessary and expensive link in the chain of service. For the purposes of this discussion it is very important to note that about half of our health care is already delivered to us as a part of government's payment system (Medicare, Medicaid, veterans' health care, military health care and federal employees).

A serious possible problem with a single-payer system is that if the system does not properly compensate the various participants, the system could become badly dysfunctional. Indeed, many physicians think that the single-payer system that we currently have already is dysfunctional. Among other things, they believe that the current Medicare fee schedule undervalues office time spent in examining and evaluating patients and overvalues procedures and facility fees.

The McKinsey studies see the cost of health and insurance administration as one of the three principal reasons for excess U.S. health care costs. They note that in 2006 the U.S. spent in this category $486 per capita ($91 billion in aggregate), which was twice the per capita expense of France, which had the second-highest per capita spending on health care administration in the world. The U.S. amount was nearly five times the average of the other countries in the Organisation for Economic Co-operation and Development (OECD). The members of the OECD are the 30 most economically developed countries in the world, including the United States, most of the European community, Canada, Mexico, Japan, Australia and South Korea. The McKinsey studies found that “these higher costs largely reflect the diversity and number of payers as well as the multistate regulation of the U.S. health care system,” which created “additional costs and inefficiencies in the form of redundant marketing, underwriting, claims processing, and management overhead.”

The U.S. health care system processes $1.9 trillion of payments a year and inefficiently consumes more than 15 percent of each dollar spent on health care. In comparison, our retail sales payment system costs about 2 percent of each dollar spent. The cost to the health care system of bills, claims, payments and bad debts add up to more than $300 billion a year.

“The crux of the problem is a mix of high transaction costs and the lack of an efficient way to make consumer-to-provider payments,” according to the McKinsey Quarterly. The report continues: “The cost and complexity of consumer billing and collections are onerous, especially for physicians' offices, where the dollar amounts per visit are relatively small and success rates for payment of the post-insurance balance is often low. As a result, physicians and hospitals typically collect only about 50 percent of this balance—and only 10 to 20 percent of self-pay patients. Across the sector, this adds up to almost $60 billion in bad debt annually.”

In my own case as a practicing lawyer on Medicare and with a good supplemental plan, the confusion and headaches are tiresome and time consuming. The Medicare part of the process works reasonably well. With respect to the supplemental coverage, sometimes the doctors' offices fail to process the supplemental claims, and/or send their bills before they have received the supplemental payments. Often it is not clear from the doctors' bills if the supplemental coverage has been accessed. Then there are the fusses with the insurance company over what is covered, what is not, and the extent of the coverage. Sometimes the medical service provider doesn't send the claim to the insurance company for six months or a year, in which cases the insurance company denies the claim and so do I. Although the law prohibits medical service providers participating in Medicare from billing their patients for fees in excess of the total Medicare allowed amounts, some bill the excess anyway, and some collect it.

Larry Summers, the former secretary of the Treasury and president of Harvard University and now the director of the National Economic Council, has noted that “insurance mechanisms will become less and less feasible as more and more tests that individuals can use to predict their health care status become available. Some form of more collective approach will be necessary.” In short, if it is known what terrible disease you are going to have, it will be difficult to impossible to get any, and only at a very high cost.

In any event, anyone who has tried to identify the most cost-effective Medicare supplemental insurance plan or pharmacy insurance program knows it is a more complicated process than most of us can handle. The numerous alternatives and the multiple plans are next to impossible to digest and it is very difficult to compare their stated costs and benefits.

Some folks say that a single-payer system would be “socialized medicine,” but there are big differences between a single-payer system and a national health service that employs all medical care providers and owns and operates all health care facilities, including hospitals. The first does not require the second. Under a single-payer plan doctors would still find their own jobs and develop their own practices. They won't be employed by the government any more than they are now, and they wouldn't be assigned jobs and locations as with a national health service. Hospitals would continue to operate as they do now as well. Although almost one-half of our health care payment system is operated by the government (Medicare, Medicaid, Children's Health Care, Veterans Administration and federal employees health coverage), only the VA program has been effectively nationalized.

President Barack Obama's health care reform plan contemplates preserving the current private insurance/employer-based plans and the cost of managing and administering those plans. I think the better alternative is to shift the entire payment program to a federal government-based single payer plan because so much of our existing payment program is already run by the government, and is working a lot better than the insurance based program that covers the other half. We should concentrate our efforts on making the plan cost-effective and fair to all of the various participants, including patients, doctors, nurses, hospitals and other medical service providers. This will not be an easy task, but then neither is the management of our existing haphazard, makeshift system. And no single approach will be perfect.

Michael H. Trotter, Special to the Daily Report