Gradison: health insurers cannot avoid risk - Representative Bill Gradison - Interview

Healthcare Financial Management, July, 1992 by Richard L. Clarke

The private health insurance system is not working well, but it can be changed so that insurance companies will insure risk rather than avoid risk, says Rep. Bill Gradison (R-Ohio). The ranking member of the Health Subcommittee of the House Ways and Means Committee, Gradison served as vice chairman of the Bipartisan Commission on Comprehensive Health Care (the Pepper Commission). At HFMA'S National Convention in June, he received the Board of Directors'award, an award established to honor persons or organizations who have contributed materially to the healthcare financial management field. Recently, Gradison spoke with HFMA President Richard L. Clarke, FHFMA, about rising healthcare costs, the structure of the U.S. healthcare system, and proposals for reform. Following are highlights from the interview.

Clarke: Analysts predict that healthcare spending, now at 13% of the gross domestic product (GDP), will continue to escalate and perhaps reach 20 percent in the next few years. What do you think should be done to slow the growth if, in fact, it ought to be slowed?

Gradison: I see the increased spending as having advantages as well as disadvantages. To me, it represents a societal choice that spending on health care is more important than spending on certain other things. Granted, as more is spent for health care and less for non-health care, tensions and frustrations will be created. That is not totally negative. Furthermore, it is not surprising that in a more prosperous society, a higher percentage of the GDP is spent on health care. True, we are spending more than other countries. However, I do not consider that something that must be apologized for or changed.

I acknowledge that some of the straight-line projections show health care consuming not just 20 percent, but maybe 30 percent or 40 percent of the gross domestic product. That does not make a lot of sense. That cannot go on forever. Somehow changes will have to be made in how we pay for health care.

Clarke: Many people would agree with you. But, some would say that although we spend quite a bit more for health care than other countries, we do not seem to get the same results.

Gradison: That is jumping to a conclusion that may not be based on fact. Societal factors that are at work in the United States tend to impose very heavy costs on our healthcare system, societal factors that distinguish us - and not always very favorably - from other countries. I'm talking about the homicide rate, drug addiction, obesity, alcoholism, teenage pregnancies - just to mention a few obvious factors. I have not seen a study that makes a comparison across countries that pulls those things out.

I do not know whether such a comparison would show that we are in line with other countries, but we cannot necessarily say that the healthcare system is at fault. The fault may actually he in the breakdown of the American family, the decline of our inner cities, or other factors that affect the healthcare system. It is unfair for health care alone to pick up the tab for these problems.

Beyond that, the data we use are not always comparable, particularly our data on infant mortality. The definition of a live birth is different in the United States than it is in other countries. Data regarding infant mortality differs depending on how very premature births that result in death are defined - as the death of a child, or as the death of a fetus. The definition varies from country to country. I have seen some studies which suggest that, if standardization definitions were used, our mortality rates would not be out of line with those of other countries.

Clarke: Can we learn from other countries?

Gradison: Yes, we can develop our own ideas by watching the experience of other nations. How countries evolved their own systems and how much their systems vary one from another provide important lessons. Probably the most interesting example is the Canadian system. In a way, it is very different from Britain's system. Yet presumably Canada took a good look at Britain before deciding how to configure its healthcare system. To me, that is the best example of how a system can be tailored to fit the traditions and culture of each country.

Clarke: Recently, the healthcare reform debate was raised to a new level by the President's proposal. What do you see as the strengths of that proposal in contrast to other proposals, especially the singlepayer or the pay-or-play proposals?

Gradison: The fundamental principle that separates that President's plan from others is that it is based upon the premise that people should pay what they can towards their own health insurance and that the government should assist low-income people in obtaining insurance. Another distinguishing feature of the President's plan is that it is based on the belief that the private health insurance system is not working very well, but can be changed in major ways so that insurance companies will provide risk rather than avoid risk.

These features dramatically distinguish the President's plan from others. Whatever its problems, the President's plan conceptually is far better for low-income workers than pay-or-play. First of all, it does not threaten any job loss. There probably would be some job loss under pay-or-play.