The Journal Register (Medina, NY)

October 23, 2013

LETTER: Insurance reforms would help nursing home

Medina Journal-Register

Medina Journal-Register — In the case of the county nursing home, privatization will likely cost more and provide less. Private firms have no magic bullet; they’ll have the same issues, but, in addition, will need to make a profit.

Various studies show that private firms buy into publicly run facilities and services at considerably less than their value. We recently spent $10 million on the nursing home expansion. Will we recoup that and the value of the facility if we sell it? Not likely. We’ll accept as little as $6 million. So we’ll lose out.

Privatization often costs more. Recent history offers some examples:

• Of the last Iraq War, numerous accounts showed as much as five times the expenditures, than if the branches of the U.S. military had provided the same services. Further, there was much waste. One of many accounts was in the Wall Street Journal, “Study Finds Extensive Waste in War Contracting.”

• College education provides an example of “less for more money.” The graduation rate at not-for-profit colleges is 65 percent, at public colleges 55 percent and at for-profit colleges, 22 percent. The for-profits are successful financially, often at taxpayer expense, but fail at educating.

• Efforts to partially privatize Europe’s equivalent of Social Security resulted in a 40 percent reduction in benefits. Imagine if we’d converted before the 2008 crash.     

In Orleans County’s Request For Proposals from nursing home buyers, we suggest to any firm that they could reduce costs by lowering the numbers and wages of employees. Won’t that negatively affect care quality? Lower care quality may cause more hospitalizations, at considerably more cost (shared by the county) than nursing home care.

With for-profit privatization, medical costs have increased disproportionately. Until 1983, most hospitals and medical insurances were run by private not-for-profits. Since then, for-profit firms have taken over, hundreds of hospitals have failed and insurance and tax costs have risen dramatically.

Locally, Arnold Gregory, Genesee (in Rochester) and Lakeside hospitals have failed. Public health nursing and care for chronically mentally ill have been farmed out, leaving one new and one older Orleans County building underutilized. Our multi-million-dollar nursing home complex may be next. That’s what happened to privately run homes in Niagara and Allegany counties.

One reason for high costs is exorbitant executive salaries. Stephen Hemsley of United Health Group had $102 million compensation in 2010. There are numerous examples of such extravagances. Locally, we paid an interim director $11,000 per month, much more than other county department heads.

If we sell our nursing home, we’ll still have the costs of care but little control.

One solution would be to reduce medical care costs. Statewide, currently county costs are $8 billion a year. Let’s work with the New York State Association of Counties (NYSAC) and the National Association of Counties (NACo) to reduce drug, implement and insurance costs. Many prescription drugs cost two to three times as much in the United States as in Canada and Europe. The county associations are effective pressure groups, because they’re “grass roots” and are listened to by business, state and national leaders.

Another solution: Repeal the “no bargaining” clause in the 2003 U.S. Medicare Modernization Act. The law bans the federal government from negotiating discounts with drug companies. This is equal to a $50 billion-a-year subsidy for the pharmaceutical industry.

Another solution: Pressure insurance providers to closely monitor claims. Insurance companies continue to pay out on faulty or fraudulent claims. One doctor was excluded from submitting claims, because of $1 million in bad claims. Later, the insurance company paid out to that same doctor hundreds of thousands of dollars on additional claims. The insurance companies, since they agreed to work primarily on a 15-to-20 percent margin, have little motivation — other than as responsible citizens — to monitor and prevent such claims. 

Another solution: Tort reform. The New York State Legislature can pass a law limiting medical lawsuit payouts to $250,000. Considerable savings would come from doctors’ reduced medical malpractice insurance premiums and elimination of often unnecessary testing.

With NYSAC and NACo, and our congressional representatives, we could put pressure on the insurance and drug industries to be more responsible and concerned about the future of our citizens and country.

Robert E. Golden