The American Medical Association's plan to expand healthcare coverage plays into the hands of a conservative-led movement to free employers' grip on healthcare financing.
Earlier this month, the AMA's House of Delegates rescinded support of employer-mandated health coverage in favor of tax-exempt defined contributions that would encourage employees to select and purchase their own insurance.
A key element of the AMA's plan is equal tax treatment of health coverage whether paid by the employer or by the employee. The existing employer-based system is sustained by tax breaks that apply only to employers.
According to the AMA, the plan if enacted would allow for a "natural evolution to a system where all health expense coverage may become individually owned."
It's akin to a controversial proposal being developed by Republican leaders in the House of Representatives that would overhaul healthcare financing by replacing tax exemptions for employer-purchased coverage with tax credits for individuals buying insurance. It would mandate that individuals purchase coverage.
The bill, being drafted by Republicans William Thomas of California and Jim McCrery of Louisiana, is expected to be introduced this summer. It likely will meet with opposition from unions and mixed reactions from the employer community.
The AMA plans to make a strong pitch for individually purchased coverage, both to consumers and employers. Speaking before the AMA's 475 delegates, association President Nancy Dickey, M.D., called for members to promote the policy aggressively. Delegates took home folders of background material including talking points and a generic speech entitled, "It's Stupid NOT to Keep it Simple."
Trustee William Mahood, M.D., said the plan would "put the patient in the driver's seat, with the physician riding shotgun." He added, "American medicine has not been served well by the interference of third or fourth parties."
The AMA says the plan would solve some of the frustrations of managed care. Many doctors believe employers have shoehorned their employees into poorly run plans.
To some observers, however, it's a puzzle why the AMA chose this route. Putting purchasing decisions in the hands of individual consumers could result in less money for doctors, as individuals would be more likely to fail to make payments. Said one Democratic staffer on Capitol Hill: "We could go back to paying doctors with chickens."
Stuart Butler, vice president for domestic research at the conservative Heritage Foundation, a key proponent of individually purchased coverage, said he doesn't think the AMA's proposal will be viewed as another pro-doctor initiative.
"It's not obviously in the interest of AMA members," Butler said. But he added, "It would lead to a much more competitive market, and it would mean that some of the managed-care plans would do quite well."
Not publicized at the annual AMA delegates meeting was the fact that the Heritage Foundation, a conservative policy research group, worked with AMA leadership to develop the policy.
In fact, former AMA president Daniel Johnson Jr., M.D., who is ending his 11-year tenure at the AMA, has joined the foundation as a visiting fellow. Johnson will spearhead the foundation's efforts to promote "free-market solutions to American's healthcare problems" and be its lead speaker at a policy forum on tax treatment of healthcare benefits on Capitol Hill in July.
The AMA's new policy is more of a shift that a reversal. It had supported an employer mandate since 1989, following the prevailing tide of healthcare reform, but never actively promoted the idea.
It has not taken a stand in favor of an individual mandate. Rather, it advocates a system where individually purchased coverage is the "preferred option, but where employer-provided coverage is still available to the extent the market demands it."
The AMA appears to be expanding its strategy of policing health plans through legislation, according to Butler. "They have evolved from thinking they need to make the employer-based system work," he said.
Proponents say individually purchased coverage will shift power from employers to consumers. But consumer advocates believe it will result in shifting the financial burden to consumers, as well. Reforming the tax code is likely to be a major hurdle in any effort to pass such reforms.
Ron Pollack, executive director of the consumer group Families USA, believes a consumer-based system could make a lot of sense. But he said consumer protections that aren't necessarily palatable to GOP backers on Capitol Hill must be put in place first.
"It's always been a legitimate question as to whether we should move from an employer-based system," Pollack said. "But the potential for doing real harm here is enormous."
Those preconditions include a community rating system to protect sick and disabled patients, a formula to subsidize individuals who can't afford coverage on their own, requirements that employers not drastically cut benefits, and regulation of the insurance industry to protect consumers from shady marketing.
Consumer advocates also worry that healthcare costs will increase faster than employer contributions and that consumers will skip preventive care to save money.
The AMA attempted to address those issues, although its language is weak in the view of consumer advocates. For example, it calls for a "maintenance of effort" period of one or two years during which employers would be required to compensate employees for the cash value of any discontinued health coverage.
But consumer advocates believe much stronger protections are needed because medical inflation is likely to outpace employer contributions. However, it would be difficult politically and practically to require employers to maintain a specific level of support.
Another major concern is that individuals will pay higher prices than employers, who buy wholesale.
"When individuals purchase insurance on their own they will clearly have less bargaining power than an employer, and so costs are going to escalate," Pollack said. "The lowest wage workers (are) going to be the ones left out in the cold."
The AMA's response is to promote purchasing cooperatives operated by unions, trade associations, fraternal organizations, churches and other groups. They would be excluded from state regulations regarding mandated benefits, premium taxes and small-group rating laws.
It also advocates safeguards such as a voucher system to ensure that consumers use employer contributions for healthcare.
The income issue entered the AMA's debate over tax changes that would be required to implement the plan, with some physicians preferring deductions rather than the more moderate concept of credits for individually purchased coverage. AMA leaders argued that deductions would drain the federal treasury.
In the end, delegates resolved to prefer a tax credit tied to individual income, similar to the anticipated GOP legislation. However, some physicians complained that could reduce tax benefits for high-income people.
The AMA also resolved to scrap its historic stance favoring deductibility of insurance premiums paid by individuals, providing other parts of its plan are enacted.