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Chapter 16

"Stormy" Johnson and the AMA

The American Medical Association (AMA) has been an advocate of universal access to health. For many years, AMA leaders saw employer provided insurance as the beginning of universal coverage, or at least as a major source of health protection for most Americans younger than 65 years of age. Many factors have changed this position.

There is erosion of employer-sponsored insurance that parallels the increasing number of people with no insurance. 85% of the uninsured are workers and their families.

Health security provided by employers is increasingly a meaningless concept: many employers exaggerate the number of "independent contractors" so that they do not have to offer insurance to many workers that supposedly work part-time, even though many toil for 40 or more hours a week.

Many employers favor "contract-work", so that the job only lasts a defined number of months or years, and then disappears, leaving the employee older and less competitive.

Many employers use exemptions, co-payments, and lists of benefits that greatly decrease coverage or may limit it to illnesses the employee is unlikely to suffer.

The cost of the employer-sponsored insurance is passed on to the employees in the form of flat wages, and to the consumers in the form of more expensive products. At the same time, the employers enjoy tax benefits that should belong to the employees.

As employers manage to reduce health coverage, more people join those obtaining health care from the government, or from nobody. These people tend to live in states with greater ethnic diversity. They are also those who are self-employed, work for small employers, or work in services and fields where they can be easily replaced.

Managed care has become the predominant mode of employer-sponsored coverage. This has created a major lack of balance between the employer's desire to save money, and the employees' will to obtain services. The result is the current existence of alliances of businesses, insurance companies and managed care coalitions fighting against health care and health protection.

"Stormy" Johnson was an AMA President recognized for not mincing words and endeavoring for immediate change. He led the AMA in proposing drastic but simple and practical changes in the way we look at health coverage.

Under Dr. Johnson's leadership, the AMA made three proposals:

1) CHANGE TAXATION: REPLACE THE CURRENT EMPLOYER BENEFIT WITH AN INDIVIDUAL EXEMPTION.

Under the current arrangement, the government subsidizes health coverage by offering a tax exemption to the employers (now mounting to about 100 billion dollars a year) and excluding the employee 's cost of health insurance from his taxable income, as long as the insurance is a benefit of employment.

This arrangement gives unfair advantages to the employers (many employees have become virtual prisoners of the employer who controls their coverage), to those in the highest tax brackets, to those with higher incomes (they can obtain more benefits), and to the insurance companies, who can negotiate with the employers without employee participation.

One of the most damaging results of this situation is medical cost inflation at the low end. Employees may have tax-deductible "insurance" for ordinary, routine, inexpensive and affordable care, but may find formidable obstacles if they try to obtain more expensive or more critical care.

The AMA has proposed that the exemption for employers be replaced with a "refundable" tax credit for individuals. Making the tax credit refundable would make sure that those with incomes too low to generate a tax liability would receive a subsidy for their purchase of health coverage

Those who have no protection would have a strong incentive to buy coverage so that they would be eligible for the tax credit.

2) ESTABLISH ALTERNATIVE MARKETS.

This proposal is a necessary corollary of the first one: monies so far channeled through the employers now become available to the individual. How will he best use them? A reasonable expectation is that there will be great incentive for the expansion of "Health-Marts", Voluntary Choice Cooperatives, Insurance Purchasing Alliances, Multiple Employer Welfare Associations, and other groups that would offer many alternatives for coverage.

The AMA has proposed several basic provisions:

The products of risk pooling cooperatives should be available to everyone.

Coverage will be portable; it belongs to the individual, and will be transferred with him from job to job.

Allow premiums to reflect risk, and allow risk-pooling cooperatives to adjust payments to insurers so as to reflect the differential risk of enrollees.

Other provisions should deal with state requirements and with extended periods of coverage, so as to avoid attempts at gaming the system or to aggravate adverse selection.

3) REDEFINE EMPLOYER CONTRIBUTIONS TO HEALTH CARE

The time has come for the employee to be the owner of his own coverage: he should select it, purchase it, and make use of it according to his own desires. (Niki Gill, an AMA delegate has expressed it thus: "you choose, buy and use it").

The AMA proposal is quite simple: the tax exemption going to the employer should be for employer-provided contributions towards the employee's purchase of health insurance.

This defined contribution would assure that the employer no longer intrudes in the employee's decisions about health care, or in his relationships with physicians and centers for medical care.

As we are writing this, Time Magazine is collecting a list of the worst 100 ideas of the century. Managing health care through an intermediary is one of them. The AMA proposals go a long way towards remedying this situation.

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©2000 Munoz and Eist, The People v. Managed Care


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	Chapter 16 "Stormy" Johnson and the AMA

	The American Medical Association (AMA) has been an advocate of universal access to health. For many years, AMA leaders saw employer provided insurance as the beginning of universal coverage, or at least as a major source of health protection for most Americans younger than 65 years of age. Many factors have changed this position.

	There is erosion of employer-sponsored insurance that parallels the increasing number of people with no insurance. 85% of the uninsured are workers and their families.

	Health security provided by employers is increasingly a meaningless concept: many employers exaggerate the number of "independent contractors" so that they do not have to offer insurance to many workers that supposedly work part-time, even though many toil for 40 or more hours a week.

	Many employers favor "contract-work", so that the job only lasts a defined number of months or years, and then disappears, leaving the employee older and less competitive.

	Many employers use exemptions, co-payments, and lists of benefits that greatly decrease coverage or may limit it to illnesses the employee is unlikely to suffer.

	The cost of the employer-sponsored insurance is passed on to the employees in the form of flat wages, and to the consumers in the form of more expensive products. At the same time, the employers enjoy tax benefits that should belong to the employees.

	As employers manage to reduce health coverage, more people join those obtaining health care from the government, or from nobody. These people tend to live in states with greater ethnic diversity. They are also those who are self-employed, work for small employers, or work in services and fields where they can be easily replaced.

	Managed care has become the predominant mode of employer-sponsored coverage. This has created a major lack of balance between the employer's desire to save money, and the employees' will to obtain services. The result is the current existence of alliances of businesses, insurance companies and managed care coalitions fighting against health care and health protection.

	"Stormy" Johnson was an AMA President recognized for not mincing words and endeavoring for immediate change. He led the AMA in proposing drastic but simple and practical changes in the way we look at health coverage.

	Under Dr. Johnson's leadership, the AMA made three proposals:

	1) CHANGE TAXATION: REPLACE THE CURRENT EMPLOYER BENEFIT WITH AN INDIVIDUAL EXEMPTION.

	Under the current arrangement, the government subsidizes health coverage by offering a tax exemption to the employers (now mounting to about 100 billion dollars a year) and excluding the employee 's cost of health insurance from his taxable income, as long as the insurance is a benefit of employment.

	This arrangement gives unfair advantages to the employers (many employees have become virtual prisoners of the employer who controls their coverage), to those in the highest tax brackets, to those with higher incomes (they can obtain more benefits), and to the insurance companies, who can negotiate with the employers without employee participation.

	One of the most damaging results of this situation is medical cost inflation at the low end. Employees may have tax-deductible "insurance" for ordinary, routine, inexpensive and affordable care, but may find formidable obstacles if they try to obtain more expensive or more critical care.

	The AMA has proposed that the exemption for employers be replaced with a "refundable" tax credit for individuals. Making the tax credit refundable would make sure that those with incomes too low to generate a tax liability would receive a subsidy for their purchase of health coverage

	Those who have no protection would have a strong incentive to buy coverage so that they would be eligible for the tax credit.

	2) ESTABLISH ALTERNATIVE MARKETS.

	This proposal is a necessary corollary of the first one: monies so far channeled through the employers now become available to the individual. How will he best use them? A reasonable expectation is that there will be great incentive for the expansion of "Health-Marts", Voluntary Choice Cooperatives, Insurance Purchasing Alliances, Multiple Employer Welfare Associations, and other groups that would offer many alternatives for coverage.

	The AMA has proposed several basic provisions: The products of risk pooling cooperatives should be available to everyone. Coverage will be portable; it belongs to the individual, and will be transferred with him from job to job. Allow premiums to reflect risk, and allow risk-pooling cooperatives to adjust payments to insurers so as to reflect the differential risk of enrollees.

	Other provisions should deal with state requirements and with extended periods of coverage, so as to avoid attempts at gaming the system or to aggravate adverse selection.

	3) REDEFINE EMPLOYER CONTRIBUTIONS TO HEALTH CARE

	The time has come for the employee to be the owner of his own coverage: he should select it, purchase it, and make use of it according to his own desires. (Niki Gill, an AMA delegate has expressed it thus: "you choose, buy and use it").

	The AMA proposal is quite simple: the tax exemption going to the employer should be for employer-provided contributions towards the employee's purchase of health insurance.

	This defined contribution would assure that the employer no longer intrudes in the employee's decisions about health care, or in his relationships with physicians and centers for medical care.

	As we are writing this, Time Magazine is collecting a list of the worst 100 ideas of the century. Managing health care through an intermediary is one of them. The AMA proposals go a long way towards remedying this situation.

"Stormy" Johnson and the AMA