Health Care Reform: A Primer

Health Care Reform: A PrimerHealth care reform is back on the national agenda with a vengeance. Obama made this a central part of his campaign platform and recently met with various insurance and medical groups to begin the lobbying and persuasion process. Over the last century, we have seen similar bursts of legislative interest every 10 to 20 years. The two most recent attempts were the Kennedy-Griffiths Health Security Program of 1970, and the Clinton Plan of 1993. The Kennedy plan would have expanded Medicare to cover all Americans, while the Clinton plan would have mandated employers to buy insurance for their employees. Both of these proposals were soundly rejected.

Typically, Americans have been reluctant to accept health care reform because, as bad as our own system seems to be, we fear jumping from the frying pan into the fire – the “fire” in this case being the dreaded “socialized medicine.” So why does the Obama administration appear to have high hopes for another attempt at universal health care? And what might such a system mean for psychiatrists? To answer this question, we have to do a quick review of the current state of our health care system.

The State of the U.S. Health Care System

The U.S. is the only developed country that does not provide health insurance to all of its citizens, and most experts agree that our health care system is “in crisis.” What does this mean? According to one leading textbook of Health Policy (Understanding Health Policy: A Clinical Approach, fifth edition, Bodenheimer and Grumbach, McGraw Hill: New York, 2008), the problem in the U.S. is a paradox of both excess and deprivation. “Deprivation” refers to the approximately 47 million people (16% of the population) who are uninsured, according to the U.S. Census Bureau. Most of the uninsured are employed full time, usually in small companies that cannot afford to cover employees’ heath insurance needs. Even many of those who have insurance are “underinsured,” meaning that they have a hard time scraping together the money to make their insurance deductibles or co-pays. In psychiatry, we often see this in patients who cannot afford the higher tier co-pays of the newer medications.

What about the “excess” part of the equation? How can there be too much health care? Because of our long tradition of reimbursing doctors and hospitals for the quantity of the service they provide –”fee for service” payments – the U.S. has developed an interventionintensive style of health care, which many researchers believe leads to unnecessary care. For example, one recent study found that elderly patients in some parts of the country received 60% more services than those in other areas, but they scored no better in measures of mortality, quality of care, access to care, or patient satisfaction (Fisher ES et al., Ann Intern Med 2003;138:273-287).

We spend more on health care than any other industrialized country – 15.3% of our Gross Domestic Product in 2006 – and yet we lag behind many of these countries in measures of health. According to the WHO, the U.S. ranks only 37th on quality of health care, and 24th in life expectancy ( rankings/healthranks.html).

The State of Insurance Coverage in the U.S.

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Of the 84% of U.S. citizens who have health insurance, the majority get it through their employers, and most of the rest are covered by two forms of government-provided health insurance: Medicare and Medicaid. Both of these programs were signed into law by Lyndon Johnson in 1965 as part of the Great Society Program.

Medicare covers people who are at least 65 or who are disabled, and is funded by a combination of payroll taxes and premiums. Medicare Part A is hospital insurance, and Medicare Part B is outpatient insurance. The program did not cover prescription medications until 2003, when Congress created Medicare Part D. Currently, Part D does not cover one of the most widely prescribed class of psychiatric medications – benzodiazepines – but after lobbying by the APA and others, in 2008 Congress voted to reverse this. (Nevertheless, Part D’s coverage of benzodiazepines will not start until January 1, 2013.)

Medicaid is health insurance for the poor, and is paid for jointly by states and the federal government. The Medicaid program is notoriously underfunded, often paying less than half what private insurers pay for psychiatric visits.

As covered in this issue’s interview with Dr. Sharfstein, psychiatry has traditionally been a second class citizen in terms of coverage and reimbursement, with limits on the number of visits and higher co-pays for psychiatric services. But this will be changing soon due to the recent passage of the Mental Health Parity and Addiction Equity Act of 2008, which requires private insurers to provide the same level of coverage for mental health as for medical and surgical treatment.

Universal Health Care in Other Countries

As political jockeying over the Obama plan heats up, you will be hearing a lot of good and bad things about health care systems in other countries. For a humorous but biased view, watch the Michael Moore movie Sicko. For a more balanced take, watch PBS Frontline’s special Sick Around the World, available for free at

Britain’s National Health Service (NHS) was created in response to the massive health care needs caused by the German bombing of British cities during World War II. As hospitals were destroyed, and as casualties mounted, the government was forced to step in to shore up the health care system and to pay doctors’ salaries. In 1948, the National Health Service was created and was essentially an extension of what had already been put in place. The NHS owns most hospitals and pays general practitioners a certain amount each month per patient seen – a form of capitated payment.

In 2007, the average British general practitioner made $154,000, a combination of basic government salary plus optional fee for service care such as vaccinations and blood pressure monitoring. Basic medical care is excellent, but when it comes to specialty care, long wait lists are common. People of means can purchase private insurance to get preferential treatment, but they still have to pay taxes to support the NHS. The NHS controls health care costs by controlling salaries and by rationing expensive medications and procedures. For example, the cancer drug Avastin is not offered by the NHS, because it costs about $100,000 a year and it only prolongs life by a few months in most cases ( Patients can obtain the drug in Britain, but they have to pay for it out of pocket. In psychiatry, NHS does not cover the anticholinesterase drugs for mild dementia, a decision that has also been controversial.

The Canadian health care system is similar to Britain’s in that the government uses taxes to cover medical care for all its citizens, but Canadian doctors are paid according to a fee-for-service model rather than by salary. Canada’s system is often criticized for long waits for non-urgent procedures and MRIs, but psychiatrists in Canada have dream jobs. Psychiatrists can see patients as frequently as they feel is necessary, and can do as much psychotherapy as they want, and are about as well paid as their U.S. counterparts. No wallet biopsies, no authorization forms, no billing hassles – just write your patient’s health insurance number and the service code, send it to the government once a month, and you get your check.

The Obama Plan

While there are some differences between the plans in the UK and Canada, they are both “single payer” systems, meaning that the government funds and administers health care, avoiding the myriad of insurance companies, HMOs, PPOs, IPAs, and other institutions that we deal with in the U.S. While the Obama proposal is not yet entirely clear, it is not a single payer system. Instead, it builds on the current system by allowing everyone to keep their current insurance. How would this lead to universal health care, you ask? Through a combination of mechanisms, including mandating employers to provide health insurance, providing tax credits to the poor, forbidding companies from disqualifying people for pre-existing conditions, and creating a new public insurance that would be similar to Medicare except that people under 65 could purchase it.

This plan is a little like the plan recently passed in my home state of Massachusetts, which now requires every resident to purchase health insurance, and punishes those who don’t with tax penalties. In 2006, when the law was passed, about 600,000 state residents were uninsured; that figure has since dropped to about 70,000 ( 03/16/health/policy/16mass.html?_r=1& hp). But whether the state will be able to afford the program in the future is not clear.

One prominent organization, Physicians for a National Health Program, ( is critical of the Obama plan because they believe that a single payer plan is crucial. They are pushing a “Medicare-for-all” plan that would automatically include all citizens. Physicians in hospitals would receive salaries, while outpatient doctors would be salaried or paid on a fee-for-service basis, depending on their practice type.

The Controversies

One of the truisms of medical economics is that a dollar spent on medical care is a dollar of income for someone (Marmor T et al., Ann Intern Med 2009;150:online version). Thus, any proposal that decreases spending or that changes how money is spent is certain to spark battles. Single payer plans essentially eliminate the private health insurance business, which is anathema to that industry. In addition, government payment would likely be more equitably distributed across specialties, a prospect that thrills many psychiatrists but is less promising to surgeons and other high-paid specialists, whose incomes would likely drop under government plans. Drug companies are also wary of health care reform, because most proposals involve efforts to negotiate lower prices for medication.

If the debate that surrounded the ill-fated Clinton plan is any indication, two issues in particular will come up endlessly over the next few months.

1. Waiting lines and rationing. Foes of single payer plans point out that waiting times for elective surgery and diagnostic procedures are longer in Canada and the UK than in the U.S., though the waiting times have been decreasing in the UK recently. On the other hand, waiting times for primary care doctors and emergency room visits are greater in the U.S. than in most countries with comprehensive health care.

2. Bureaucracy and “government control.” Both the Canadian and UK systems are controlled by the government, raising the concern of faceless bureaucracies, endless red tape, and the inability to choose one’s doctor. However, many private U.S. insurance plans limit patients’ choice of physician, and bureaucratic “waste” is actually higher in the U.S. than in other countries. Single payer plans spend little on marketing, utilization review, and billing. In the U.S., an estimated 31% of all health care spending goes toward insurance-related administrative costs; in Canada, the administrative costs are estimated at 16.7% (Woolhandler S et al., NEJM 2003;349:768-775).

In summary, we are ready to embark on a national conversation about whether to join the rest of the international community and guarantee health care to all citizens. As in the past, stakeholders on all sides of the debate will be showering us with their favorite array of “facts” to support their positions. Educating ourselves will be our best defense against deception.

Health Care Reform: A Primer

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This article was published in print 4/2009 in Volume:Issue 7:4.

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APA Reference
Psychiatry Report, T. (2013). Health Care Reform: A Primer. Psych Central. Retrieved on September 18, 2020, from


Scientifically Reviewed
Last updated: 12 Sep 2013
Last reviewed: By John M. Grohol, Psy.D. on 12 Sep 2013
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