UCSF policy expert presents recommendation for health coverage

By Carol Hyman

Harold Luft, PhD

A health policy specialist at the University of California, San Francisco has developed a strategy to provide universal health care for major and chronic illness for everyone by instituting a plan that incorporates aspects of both a single-payer model and a plan similar to a preferred provider organization, known as a PPO. 

Harold Luft, PhD, professor of health policy and health economics at UCSF’s Institute for Health Policy Studies, presents his strategy in a commentary article in the March 14, 2007 issue of the “Journal of the American Medical Association.”

“The United States spends a greater share of its gross domestic product on health care than other nations, yet more than 15.9 percent of its population lacks health insurance coverage,” he writes. Luft’s plan ensures that everyone has coverage for catastrophic illness or injury and chronic conditions, while giving people many more options than they have currently when it comes to the rest of their health coverage.

“A hybrid approach, combining universal risk pools, mandated coverage with income subsidies, and a restructured payment mechanism has the potential to improve both equity and efficiency,” he writes.

While Medicare is the prototypical single-payer model, Luft says it is fraught with problems because of the political nature of the program. “We don’t have a political system to allow a well-meaning bureaucracy to do the right thing,” he says.

Luft points to countries such as France and Germany that have coverage pools paid into by employers for health care, making the point that his proposal has worked in other places.

“In the United States, employers sponsor specific health plans, and if the premium cost is higher than employees think it’s worth or it is more than they can afford, they may opt out of having coverage,” Luft says. “But if a person who has opted out is involved in an accident that involves hospitalization and expensive surgeries and he or she has no coverage, it can result in severe hardship due to huge medical bills and shifting of costs to people with coverage.”  He says he sees a hybrid plan with a universal pool as a solution to this kind of problem.

In addition to catastrophic accidents and illness, chronic conditions account for a large portion of health care expense-around 28 percent, Luft says. Health insurance policies charge very high premiums for people with chronic illness, so voluntary coverage can be prohibitively expensive. He proposes including chronic illness to be part of the mandated coverage included in the universal risk pool.

Luft presents several scenarios for funding the pool. “Funding of the pool by a broad-based tax, as for Medicare, is preferable but may be politically unacceptable,” he writes.

He goes on to describe problems relying on a payroll tax. Ultimately, “a small mandatory minimum employer contribution could be absorbed more easily than mandating that employers purchase insurance for all employees,” he writes. “To ease the transition from the current fragmented plan-based system, employers would buy into the pool at the average cost for people in a given age or geographic category.”

He explains that this would be more attractive for firms with sicker employees; firms with healthier employees would want to join the pool because their transaction costs would be lower and the rate of increase of their costs reduced.

In addition, Medicaid funds and funds for public safety-net programs would be shifted into the fund, paying for low-income and indigent patients and eliminating the discrimination they face because such programs keep fees below the going rate, Luft says.

Costs of minor illness and injury would be covered by a plan similar to a PPO, in which a physician would choose one insurance carrier that would handle billing. By seeing how the physician operates, the carrier can determine costs that a particular physician would incur treating his or her patients.  Patients would pay variable premiums for these services, depending upon the deductibles and co-payment plan they choose and the physician’s fees and practice style, but not their own health risk, which is covered by the universal pool. 

Low-income patients would have this coverage subsidized.  Carriers would provide doctors information on efficient clinical practices resulting in better than average patient outcomes.

Luft says he believes this plan will result not only in universal coverage, but improved efficiency, as well.

“Focusing attention on patient outcomes would free clinicians and hospitals to creatively explore ways to deliver care and eliminate payers’ focus on fee constraints and micromanagement of clinical decisions,” Luft writes. And while he says the system does not purport “guaranteed savings” as do plans that focus on fee controls or those that rely on unspecified “market forces,” it is carefully crafted with a balance of mandates, competition, and information to help hospitals, clinicians and insurance carriers become more efficient and more responsive to patients.

UCSF is a leading university that advances health worldwide by conducting advanced biomedical research, educating graduate students in the life sciences and health professions, and providing complex patient care.