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I wish to comment on the LBJ Hospital CEO Mike Gerstenberger’s presentation in a recent American Samoa Chamber of Commerce meeting, as reported by the media.

The CEO explained and discussed the new LBJ facility fee schedule slated to go into effect later this month; and cited the vast gap in national health expenditure per capita (NHE) between the US and the territory of American Samoa- $7700 and $461 respectively.

Further, the CEO reminded the audience of the LBJ’s mission “to provide patient focused, high quality, cost effective comprehensive care” for the people of American Samoa.  Somehow this mission statement is being interpreted to mean “to deliver the same quality of care to residents of AS like any other hospital in the US”, thus the poor CEO was tasked (perhaps by the board) to perform miracles and deliver $7700 worth of US health care in AS with $461. Hence the proposed new fee schedule, if I follow the CEO’s explanation correctly.

I have been writing about the need to amend the free medical care law thus I can understand the current effort by the LBJ management to adjust the fee schedule given the well documented circumstances of non-payment of the LBJ subsidy hence the further loss of Medicaid funding. However, citing the aforementioned NHE differential to explain the proposed increased facility fees is problematic for these reasons.

First, there’s nothing in the LBJ’s mission statement obligating LBJ to provide the US standard of care for residents of AS. It would be a ludicrous proposition as the US NHE of $7700 is $2 or $3 thousand greater than the AS per capita income. A more appropriate analysis would be a comparison between AS and other US territories, Pacific island countries, or communities in the developing world.

Second, in a study of 30 industrialized countries — OECD or Organization of Economic Cooperation and Development countries — the US incurs the most expensive NHE yet the US finds itself in the lowest quartile in terms of life expectancy, and its general health status is notably not superior to its peers.

The findings attribute the high NHE to higher prices of care in the US (with fewer doctor visits and fewer hospital beds), readily accessible technology, and greater obesity. This discrepancy between US health care investments and health care results is the basis of the Affordable Care Act (ACA); and it would pay AS health care dividends to review and where applicable adopt best practices from these other countries, not the pre-ACA US model.    

When asked about health insurance as a health care financing tool, the LBJ CEO didn’t think health insurance would work in the territory due to the very poor health status of AS people and the limited size of the pool (our population of 68.4 thousand, if you believe the World Bank, or 55.5 thousand, if you believe the 2010 Census), which renders a risk pool for the territory high-risk-heavy. 

This means the health insurance premium for people in the territory would be higher than those paid by people in the states- more than $400 per month per person- according to the CEO.

I agree with the CEO-the cost of stateside major medical insurance is cost prohibitive. The average annual premium of such policies as stated by the CEO is about the same or more than the AS per capita income. But I am concerned about the message the CEO is sending the public and policymakers as suggested by the media’s coverage of the CEO’s opinion with regards to our work as included in the Coverage for All in American Samoa (CAAS) report.

First, the standard US medical insurance the CEO referred to and the pre-pay self-insurance we proposed are two different instruments based on two different cost structures, although they are similar in the sense they are risk pools.  

The cost of a standard US medical insurance policy is a function of the above mentioned US cost drivers (high prices, technology, obesity)and based on the profit motive (where sick people are discriminated against).

Our proposed plan is a public plan (akin to plans found in developing countries and community-based plans found in the US) based on subsidized health care at LBJ and purports to assist LBJ customers defray LBJ fees (not off-island care) through the convenience of pre-payment, and not intended to turn a profit in the sense of private plans (people with pre-existing conditions are not excluded). 

In our assessment, the high high-risk content of our risk pool is not a relevant factor as to whether or not risk sharing should be employed. It is the convenience of payment and efficiency of transferring an unknown costlier catastrophic risk of an illness or accident into a smaller known financial risk of a monthly premium. Of course, we’d welcome a pool that’s skewed towards the healthy end but we as a territory should not wait until that happens, if possible.      

Second, the people of the territory (most of which are low income earners and families) are willing to pay their share of their health care but prefer an easier method of payment that a pre-pay self-insurance would provide according to surveys we conducted. In other words, risk sharing or pooling mobilizes resources people are willing to pay for their health care.  

Third, Word Bank and US Aid studies in developing countries show notable correlation among risk sharing or pooling (insurance), access to health care, and improved health outcomes. Critical in the economic and social development of AS is how healthy its human capital stock is; in this regard, the territory’s policymakers need to give pre-pay self-insurance as a financing tool the serious consideration it deserves, beyond the casual deliberations by the health committee of the House of Representatives in 2009 and 2010.

Fourth, without a viable risk sharing plan in place in the territory, people have had no choice but to purchase supplemental hospital insurance (often being marketed as regular health insurance) and accident insurance from Florence Saulo & Associates (FSA), formerly an agent for AFLAC. 

Because claimed benefits are paid directly to beneficiaries and not LBJ, it is hard to tell how much of these FSA paid claims end up in LBJ coffers. It appears the Insurance Commission’s office does not keep records of insurance information in the territory, but it is safe to say premiums being collected on these supplemental hospital and accident policies are not petty cash.

We estimated in 2006 that at least 75% of people who purchase supplemental hospital insurance earn $11 thousand or less per year and pay an average of 8% of their wages on these policies. We further estimated that no less than $2 million per year goes into these types of plans. That is not cheap, especially when you consider the limited benefits these plans offer. But what choices do people have?

The political clout wielded by FSA is quite influential, and I had the opportunity to witness such power first hand when the FSA president and CEO and I (along with other insurance companies representatives) were invited to provide testimony on a House bill on health care financing in a House Health Committee hearing in 2010, the last session of the Fono before elections. The House representatives I had worked with on the bill made the proverbial 180 degree turn, and the bill was never discussed again to this day.

Thus I find the LBJ CEO’s generalization with respect to health insurance as reported by Talanei problematic in that it’s sending the wrong message, at the most critical of times, to policymakers, some or many of who are not blessed with the political backbone necessary to place needed health care legislation.

By expressing my opinion on this matter, I wish to start or continue an informative and constructive open dialogue among key health and health care stakeholders (including the general public) to help address challenges faced by the territory.

It isn’t realistic to expect the Fono to solve the LBJ problem in a 45-day session. It would be time well invested, however, if the Fono utilizes this last session to set the foundation on which the next Fono and administration can move forward.