General Principles

Health and mental health have been major concerns of mine for at least 30 years. While I practiced law in the 70’s, both as a prosecutor and as a defense attorney, I discovered that a large percentage of criminal defendants had significant health and mental health difficulties. In fact, one of the reasons I decided to go back to school and study psychology was because I was concerned that a large percentage of the people I was representing needed counseling at least as much as they needed a lawyer. Later, as a psychologist, I discovered that a large number of people have mental health difficulties as a result of physical problems. For example, many depressed people suffer from chronic physical illnesses that have simply worn them out.

For me, the guiding principle for health care is to recognize that health care is not a commodity to be purchased, but rather a necessity for human beings. At different times in our lives we may ignore the need for health care because we are healthy and doing well, but eventually all of us will need health care. As is true with education, preventing a problem works better and is less expensive than fixing one. Thus, prevention should be a major focus of health care and Oregonians should be encouraged to live healthy lives and to obtain the checkups needed to head off significant problems. Finally, it is a basic principle and understanding of mine that society as a whole pays for health care, regardless of the mechanisms that we have set up to pay the bill. Good planning keeps the cost down, bad or no planning makes the healthcare system unfair, difficult to use and much more expensive.

Prescription Medications: The Problem

The most rapidly changing aspect of health care these days is the proliferation of powerful and useful new medications. While these medications keep many people healthy for years past the time when they would otherwise be debilitated as a result of illness, they are extremely expensive. Many ailments, such as high blood pressure and heart disease, can often be controlled for simply through the regular use of medications. The fly in the ointment particularly for older Oregonians is that Medicare does not cover the cost of prescription medications except in the hospital. For many seniors this means that the several hundred dollars a month they must spend for regular medications comes out of already tight budgets. They must often choose between medications and groceries. In the last regular session, I supported the Senior Drug Assistance Program, which would have helped low income senior citizens pay for medications. Unfortunately, because of the budget shortfall the $5 million for that program is not available.

Prescription Medications: Some solutions

Medicare coverage: The federal government must agree that out-of-hospital prescription medications will be paid for out of Medicare. Congress is currently considering such a change in the Medicare law. This will result in an increase in the cost of Medicare coverage either to taxpayers in general or as a part of the payroll tax for Medicare. It will also mean the older Oregonians who must now make the choice between medications and groceries will no longer be placed in that impossible position. There may actually be a cost savings overall because hospitalization and its costs will decline. In the last regular session I supported legislation that would have provided some funds, about five million dollars, to help the poorest of older Oregonians cover these prescription medication costs. Because of the cuts in the budget, these funds will not be available. We need to revisit this issue in the next session, unless Congress has dealt with it before then.

Prescription Formulary: There are some things that we can do about the cost of prescription medication. First, we can continue to expand the plan that has been recently attached to the Oregon Health Plan: the prescription formulary. I strongly supported and worked for the formulary because it does not limit the medications that doctors can prescribe, but it does encourage doctors to prescribe lower cost medications. This formulary approach will allow doctors to prescribe medications that are necessary, and will save the Oregon Health Plan at least seven million dollars in the current biennium.

Patent Protection: We must resist the ongoing efforts by the drug industry to increase the length and breadth of their patent rights under federal law. There is a continuing and ongoing effort in Congress by intellectual property companies (for example, Walt Disney) and by drug companies to extend the reach of patent and copyright law to make their intellectual property and medical discoveries more valuable to them and more costly to the rest of us. Increasing the length of a patent results in a huge shift of funds from poor patients or stressed medical insurance funds to the stockholders of large pharmaceutical companies. Drug companies need to be able to make a significant profit on new medications so that they have an incentive to spend the money necessary to develop newer medications. However, successful drug companies make very large amounts of money now, and extending their patents for longer periods of time is unnecessary to accomplish this goal.

Competitive Solutions: It is possible for the state or some other agency to make bulk purchases of medications through a general health alliance resulting in a reduced cost for patients, especially of commonly used medications such as those for high blood pressure and the heart. We should continue to explore these mechanisms, recognizing that they are only stopgaps, but that they do provide a way for individuals to negotiate with drug companies on a more equal footing, because every individual is joined by many others in the negotiation process. These and similar ideas are being tried around the country.

Insurance and Costs

It is economic reality that the medical costs of every member of our society will be paid for in some manner or another, whether people pay for it directly themselves, have insurance to cover it, or we as taxpayers pay for it. When people have medical emergencies they will go to the hospital, they will be treated, and the cost of the treatment will either be paid from outside of the hospital system or will be absorbed in other costs of the hospital. When the hospital has to absorb the cost of treatment, it means the hospital has to increase its fees for those who can pay. At least 20 percent of the cost of medical insurance is for the “cost shift” to pay for health care for those with no coverage or other means to pay. Hospitals and health care professionals must set their charges high enough to pay for services to those who can pay and also to cover those who cannot. Once we recognize that all medical costs are paid for in some manner, then the question becomes, How should we pay for medical costs, what is the appropriate way to do it, the fair way to do it, and how can we keep administrative costs as low as possible?

Additionally, we know that at least 30 percent of all medical costs are related to the cost of the administration of the insurance and reimbursement industry. Huge bureaucracies have been built up by the industry itself and in every health care office for the purpose of administering the insurance system (not providing medical care). Every insurance company has its own separate requirements; many require individualized forms and different kinds of information to be supplied in order for a doctor or a hospital to be reimbursed for the medical services that have been rendered.

How to reduce Insurance Costs: First, find a way to cover the 400,000 Oregonians who are currently without insurance and are not covered by the Oregon Health Plan or Medicare. These include many children who should be receiving preventive care, but instead receive only haphazard care because they don’t have insurance. If the “cost shift” that I referred to above ended because everyone was insured, the insurance costs for every individual would decline by approximately 20 percent. Additionally, if the procedure for applying for reimbursement were standardized and only information that was essential for that purpose was furnished to insurance companies or the Oregon Health Plan, the cost of administration would decline significantly. These two items might result in a savings of as much as 40 percent on individual health care coverage, or group health plans. Recognize, of course, that the 400 thousand uninsured Oregonians will continue to incur the cost that they have, but that it can be paid for in a more appropriate way, either through an appropriate tax system or through some other system that makes our expenditures explicit. Because these costs are planned for in a fair system, more preventive and early health care will be provided for our children and the elderly. The currently uninsured will be healthier, more able to learn and work, and less costly to care for.

Support Competition

Finally, many parts of Oregon have higher costs for medical services than in high cost of living cities such as San Francisco, Los Angeles, or Seattle. Why is that? The primary reason appears to be the lack of competition in health care in Oregon. It is important for us to understand the mechanisms that are useful in encouraging competition in health care, in making sure that our procedures for reimbursement are as efficient as possible, and encourage choice of doctors and hospitals so that competition will keep costs down. Wherever there is a real or natural monopoly of goods or services, the cost of those goods or services tends to increase. We need to make sure that the systems that we use for regulation of the medical industry encourage competition and help the low-cost provider succeed so that costs can be held down.

Conclusion

Our guiding principle for health care must be that every Oregonian has a right to health and mental health care, including preventive health care. Prevention also reduces costs in the long-term and increases the capacity of individuals to work and enjoy their lives, a positive good for the economy as well. Our systems must encourage efficiency and effectiveness so that all Oregonians can obtain the services they need. Under the current system, costs are hidden and disguised as something else. Costs are born unequally by businesses, individuals, and taxpayers. Reforming the system so that medical care costs are fairly handled will go a long way towards reducing and clarifying those costs.

If the choices for reforming our health care system were easy we would already have made them. I will continue to work hard and provide leadership for the task. As we increase efficiency and fairness in our health care system Oregonians will live healthier, happier lives, and be more able to contribute to our families, our society, and our economy. Together, we will make Oregon a place where every family can live its dreams.

If after you read this short paper you have specific ideas or questions for me, please call my office, 484-5119, email me at phil@philbarnhart.com or write me at PO Box 12181, Eugene, Oregon 97440.