To the editor,
I am a retired healthcare executive living here in Somerville and the author of the book – “Dying Well Prepared; Conversations and Choices”.
There is a looming elephant in the room with this COVID 19 pandemic – our for-profit healthcare delivery network is fragile enough to fail and if not then it will need drastic action to recover on the other side. I attach a short essay on this for you which you may feel is worthy of your publication.
Regards and be well
Survival of US Healthcare Delivery
Is Covid-19 sounding the death knell for US for-profit healthcare?
Healthcare systems around the world are I erloaded under the strain of fighting COVID-19. But here in the US, our for-profit healthcare paradigm, is in danger of collapsing financially. Will it survive? And if so, in what form?
Here in the US, healthcare is a cash flow business; when the cash stops flowing, it is in trouble.
For-profit hospitals and for-profit insurance companies have extracted whatever profits they made over time and the stockholders and executives have spent the money. Health insurance companies must maintain a statutory reserve, as set by the state (risk-based capital (RBC)). There is no such equivalent requirement for hospitals but there are hospital benchmarks. Hospitals generally set aside money for future goals such as modernizing their facilities or investing in new technologies. But how quickly will these reserves drain down in the current COVID-19 pandemic.
Here’s the problem.
• The cost of salaries is increasing for healthcare workers who are working long shifts.
• The consumption and cost of consumables is rising as the headcount in hospitals rises.
• More durable equipment, such as ventilators, and PPE must be purchased.
• Meanwhile, revenue is no longer flowing in from suspended elective surgeries, once a reliable, strong profit stream.
• Uninsured patients are coming for treatment and are being treated without reimbursement.
• The speed of insurance reimbursement is slowing because of the increased load and because administrative staff are furloughed or stood down.
For the healthcare insurers:
• Healthcare insurers are being inundated with claims for tens of thousands of dollars.
• The revenue from corporate subsidies of insurance premiums is reduced as companies reduce the number of employees or close altogether.
• The revenue from insurance premiums is reduced as people are laid off and either let their insurance lapse or are unable to pay the high costs of COBRA coverage.
• The unanticipated actuarial spike in claims is tapping out sparse statutory reserves.
So, what does this mean?
The cost to provide healthcare has increased sharply and the horizon is still not in sight. We can anticipate increases in costs to continue into the foreseeable future. To keep cash outflow manageable, insurers will likely be both slow to reimburse, and will deny claims or line items on claims. As businesses fail and as unemployment grows (35 million claimed unemployment benefits through April 7), insurers will receive fewer premiums. Once their statutory reserves are drained (only 75 days reimbursement buffer for BCBS of New Jersey), insurers will be unable to meet their obligations and will become insolvent. Hospitals will face the need to provide care without reimbursement, or timely reimbursement, forcing them to deplete any cash reserves and hampering their efforts to pay their debts. Even if the Federal Government comes to their aid, many hospitals will close because of cash shortages and the timing.
Kaiser Family Foundation estimates that eventually between 670,000 and 2 million uninsured people around the country could be hospitalized with COVID-19, which could cost taxpayers upward of $40 billion.
The myth that employer health insurance is the *gold standard * is a folly when the employer is no longer in business, or the employee has been laid off.
The healthcare insurance companies that survive will increase premiums, increase co-pays and out-of-pocket maximums, and add waivers for certain health conditions to stay in business. Healthcare insurance companies are, in-fact, finance companies and the need to return to profitability will be reflected in a reduction of services. They will charge more, and the insured will have less benefits.
Looking overseas, we observe that single payer systems are better coordinated, have better-coordinated reserves, and can focus on medical care, not financial stability. Their population know they will get medical care and it will be fair. They know it will be there when needed. Now is the time for the US to look seriously at a single payer, not-for-profit healthcare system instead of the non-integrated, parchwork approach we have currently.
Now is the time for the federal government to provide security for the citizens from all attacks, not just military, but from bio-warfare and pandemics. All our defense is based on military might – aircraft, soldiers, ships, missiles, drones and guns. We need to face conventional, cyber and bio-warfare equally. To do this we need wean the nation off the false sense that the US has a good healthcare system – the most expensive and least effective in the developed world . We don’t have a real healthcare system (perhaps Medicare A and the VA only) and we need one. The World Health (WHO) ranks the US 47th in the world for health outcomes and amongst developed nations we are 11th of 11.
This is the time for Washington to lead.