OK, I have been backed into a corner and will go ahead and outline my basic ideas for health care reform. These are by no means original to me, I have just collected/plagiarized/adapted them from elsewhere. I will perhaps provide links to sources and statistics as requested, but I wanted to get this out there. To respond to the most recent criticisms leveled against me, I think you will see that I am not placing my trust in government for so large an enterprise as health care. I am asking for government to create a framework and get the heck out of the way so people and the private sector can take responsibility for their own health without the current set of government created problems.
The extent to which I am seeking government involvement is as follows:
1.Eliminate the restrictions on the interstate sale of health insurance. This is a removal of burdensome regulation.Encourage states to adopt a common set of standards for a basic level of catastrophic insurance that would be portable and could be purchased from any qualified insurance company.
2.Replace 50 sets of regulation with a single set.Encourage states to adopt common regulatory standards. Drastically reducing and untangling existing regulations can not really be seen as "additional" regulation, unless you mean addition (of value) through subtraction (of quantity).
The goals of items 1 & 2 would be a much cleaner and clearer framework for a national insurance market. Repealing state laws and regulations that currently prevent insurance companies from competing across state lines would result in a lower regulatory burden, increased market opportunities (good for insurers) and increased competition (good for consumers). If not dramatically lowering costs, it would likely stabilize costs while increasing options. (Side note - As I understand it, the Ryan plan does not address this issue.)
3. Once a national market is in place,mandateencourage the purchase of "Basic" catastrophic health insurance plans thatallinsurers could sell as a commodity and/or loss leader for purchasers of additional coverage.
This would (ideally) be a portable, stand alone line of coverage, and one could switch at any time to another carrier offering a better deal, but everyone would be required to have this basic coverage. PLEASE NOTE - I am not talking about health care coverage in the sense of paying for physicals, flu shots, and your typical medical expenses. This is insurance to cover the risk of an unanticipated medical event (severe trauma, emergency surgery, stroke, organ failure, stroke, cancer, coma, etc.) that would, without adequate coverage, likely lead to destroyed life savings, massive debt, and/or bankruptcy. Most Americans would carry multiple layers of coverage, with the “basic” level being mandated, and any additional layers remaining optional. (An imperfect analogy would be car insurance, where liability coverage is mandated, and GAP, uninsured motorist, comprehensive, and others are commonly purchased additional options)
As to what gets deemed catastrophic, I share JB's concern (in the comments of the previous post) that elected/lobbied politicians would be all to meddle to the point that everything could be viewed as potentially catastrophic, so keeping the scope of any mandated coverage limited to managing the risk of personal/household catastrophe is important. The idea is to treat catastrophic coverage as a math problem, targeting the premium payment on a percentage (around 5%) of personal/household income, and providing coverage for health costs above a defined percent (15-25%) of annual personal/household income.
Do I wish there was another way? Certainly. But, as researchers, think tanks and policy makers across the political spectrum have learned (although they refuse to agree on it), a mandate of some basic form of coverage seems to be the only way to reduce “free rider” or “wait until sick to purchase” abuses.
4. Either eliminate (my preference) all tax breaks/deductions that deal with health care and health insurance, or make the tax treatment and incentives the same for all, individuals and employers.
5. Allow employers and individuals to form their own risk pools as they see fit (business networks, church congregations, Facebook groups, neighborhoods, whatever).
6. For all “extended” health insurance, repeal government mandates regarding what insurance companies must cover. Allow market variety and competition to determine what level or premiums and co-payments people are willing to pay for routine and planned medical care.
We are now talking not only about “basic” insurance coverage, but also all the “extended” health insurance, discount plans, prescription plans and health benefits that everyone should be allowed to choose and purchase on the private market. We know that currently employer health benefits are fully tax deductible, but individual health insurance is not. Not only is this unfair, it creates a burden on both employers (administration, tax prep) and employees (health benefits often overriding other job concerns). Employers can continue to offer “extended” health perks as benefits, but would not have to remain the dominant source through which they are made available or affordable. People should be free to associate in any manner they wish in order to better negotiate for themselves.
7. Mandate that health care providers have pricing for all basic services and procedures in plain sight and available upon request.
8. Encourage Health Spending Accounts (HSAs) that allow people greater freedom to make their own decisions on health care.
Put the price mechanism back into the health care market! This is perhaps the greatest sign that the current health care market is completely broken. People, especially those without “extended’ health coverage, are smart enough to make better decisions on quality and cost. It is incredible to think how much less Americans would spend on health care if they only had the choice, yet so few actually know the itemized or total cost of their last doctor's visit. Hint, it was A LOT more than anyone’s co-payment.
9. Enact serious Medicare and Medicaid reform and/or dismantlement.
10. Provide a safety net to this new system for those that can not afford it.
It is my position that if steps 1-8 were in place, several things would happen naturally as a result of human choice and market forces. First, the current level of health care spending by Americans would stabilize/decline as a much greater level purchasing decisions (of both coverage planes and health care services) would be placed in their hands to self-ration based on need, value, and return on investment. Second, the cost of services and insurance coverage will stabilize/decline. Giving individuals the ability to shop online for the doctor in town with the lowest prices (#7), and among insurance companies from across the country with the best rates (#1&2) enhances competition and choices.
Restoring basic functions such as supply and demand and price competition to the heath care industry are critical not only because our society will benefit from fewer bankruptcies (currently over 50% of bankruptcies are prompted by medical costs), increased access to care and lower costs of those services, but because we need to avoid the coming apocalypse of insolvency for Medicare, Medicaid, and Social Security.
Estimates range widely, but just using middle of the road numbers, current spending on Medicare, Medicaid and SCHIP is about $700B. To get to JB’s statistic of the US Government paying for over 50% ($1.2T) of all US health care expenditures ($2.4T), you have to add the active duty military Medical Corps and the Veterans Administration, along with a few other smaller programs. An important purpose of any meaningful health care reform should be reduce the government’s overall expenditures. Logic dictates that if everyone in America had “basic” catastrophic coverage, purchased in the private market, that private insurance would cover a much greater percentage of higher cost health care than it does today, reducing the government’s role as payer of last (or first) resort. And with a more prominent role for HSAs, individuals could also purchase a greater share of routine health care on a more open, price-sensitive, market.
Still, there are those that can not afford even the “basic” coverage or have much left over to fund a HSA. So how do we get from here to there?
First, I would favor a government plan that subsidizes the purchase of the “basic” catastrophic coverage outlined above for those that can not afford it. Current catastrophic insurance plans run from $1,200 per person to $3,000 per family. Basically, under may plan, any household making less than $60k would be expected to pay 3-5% of their income with the government making up the difference to purchase a plan. Again, using round numbers (and from 2006), there are about 70 million households that make less then $60k, so the government would step in and make up the difference between each of these household’s 3-5% contribution and the amount needed to purchase a “basic” plan. The cost would be a estimated $105 billion dollars. This is not an insignificant amount, but the question is whether this would reduce the government’s current annual outlay by at least the same amount, and hopefully by much more, whether we use the $700B (w/o military and vets) or $1.2T (with both) number. If so, we have achieved a form of universal coverage for a break even cost or better. I don’t have the resources to run definitive numbers, but I find it impossible to believe that is all medical costs above 20% of every household’s personal income were absorbed by the private market, from age 0 to dead, that government expenditure wouldn’t go down at least 15%. I am hopeful the savings would be great enough that a drastic overhaul and/or dismantling of Medicare and Medicaid becomes more politically viable.
Second, in order to promote HSAs, I would like to consider in greater depth a possible government match of HSA contributions for low and middle income households that would function much the same way of a company-matched 401k. Just a thought. I would like to see the cost to benefits numbers on such a program. Whether we are talking a 10% match for everyone up to a certain amount, or a greater (up to 25%?) match for targeted incomes, I would like more research on ways to encourage savings.
Is this welfare and redistribution? Sure, but I dare say it is less welfare, less redistribution, and would be loads more effective than the current patchwork of bloated government programs we are currently wasting money on. Are there other steps that I think can and should be taken? Sure, but I don’t know enough to have a definitive opinion on them, and I think the steps above would be a good first start. That said, I’ll leave you with a couple more suggestions that get thrown around a lot that would likely be worth considering.
11. Encourage a greater number of medical schools and enrollments. (Break up the AMA monopoly?)
12. Look as reform medical malpractice and tort laws. (Negligence should come at a price, but where are the limits?)
8 comments:
Justus,
I disagree with you on a few points, but before I get into that, I have a question for you: Do you believe that health insurance is a right or entitlement for each U. S. citizen?
(You probably already addressed this question in this thread or a previous weblog, so please excuse my ignorance.)
I do not view health insurance as a right or entitlement. I also do not think it is a right or entitlement to have others fight and die for my personal benefit. That said, most think that our society has on the whole benefited from having a well-trained, full-time military. In much the same manner, I am looking past rights and entitlements on this issue, and focusing on net benefits.
The question in my mind is this: Given the federal government's current spending on health care ($1.2 trillion per year), is there a way to reduce overall costs and keep our country from going insolvent while actually increasing the scope and quality of health care access in this country?
In answering this question, I am less interested in maintaining a hard-line political ideology than on almost any other issue. While I certainly think the ideas outlined above are consistent enough with my views in other areas to be seen as steps in the right direction towards reducing and/or eliminating the country's dependency on bloated Medicare, Medicaid, VA, and other government-funded programs, as well as reducing regulatory burdens, there still remains an important government role. That is because, to me, and from everything I have read, there seems to be a strong net social benefit to managing our country's health care risks.
Well stated.
I agree with you on anything having to do with eliminating restrictions and giving consumers greater freedom to make their own choices. The only restrictions I would like to see is government protection from fraud--which you include in your idea.
Mandating a "basic" package just doesn't sound or feel right. Who mandates? By what standard? And what happens if I, as a consumer, do not want to purchase the "basic" package? What happens to me or the company with which I am dealing if we come up with a package that best suits me, but does not meet the "basic" minimum?
Mandate pricing: YES! But this has more to do with fraud.
I am not in favor of a "government plan that subsidizes the purchase of the 'basic' catastrophic coverage." That sounds like entitlement to me. That is to say, if you are poor, then you are entitled to the basic plan.
Personal story: I did not have health insurance until I began working fulltime at 22. When I broke my collarbone at 13, my mother worked two jobs to make those medical payments. Whenever any of us became sick, we went outside and played until we got rid of the cold. If we were too sick to even get out of bed, then my parents bought the basic cold and flu medicine, and we drank that b*tch like a lush at Bullwinkle's Saloon. Total for over-the-counter medicine: $4.64. Even when I began working fulltime, I did not visit the doctor much. I took care of my own illnesses, for the most part. And when I do visit my doctor, I ask him more questions than an immigration officer does to a 7-11 clerk. The doctors appreciate the fact that I ask questions. They don't like it when I look for a second opinion.
Personal responsibility, that's my motto.
While I agree that the fact that each state has its own insurance laws is burdensome, I'm not sure that Congress, the Executive or any administrative agency has constitutional authority to act in this area. It would likely be a violation of both Article I and the 10th Amendment. In all honesty, I'm surprised the conservatives haven't pursued a line of attack on the health care bills based on Constitutional challenges and the threat of protracted litigation. I personally think it is the strongest (and most logical) political argument the conservatives have - perhaps they are saving it in case a bill gains any further traction.
That aside, I find it lamentable and disgraceful that our federal government already spends 1.4T on health care expenses while many living below the poverty line (including children) have severely restricted access to even basic health care unless their condition is so threatening that the Hippocratic Oath overrides financial considerations. I believe we will ultimately be judged, individually and as a nation, for how we treat the poor. Professor is at least partly right: there is much to say for OTC and home remedies, but sometimes there are also conditions that are far more serious and can only be treated by a medical professional. And I admire your mother's in working two jobs - I fear that kind of commitment and diligence is, sadly, a relic from a bygone era.
I also commend Justus for synthesizing a coherent proposal. Its easy to criticize someone else's proposal; it is far more difficult to actually step out there and propose something which will undoubtedly receive withering criticism. In Georgia, there are two Senators that should, in theory, be receptive to such a proposal. However, the distance between the theoretical and actual is... well, significant.
Dr. RosenRosen, I'm no attorney, let alone constitutional scholar, but it seems to me that for as often as it is invoked and abused, the commerce clause (Article I, Section 8, Clause 3) would indeed grant federal power to facilitate a national insurance market. Thoughts?
Professor, I agree that routine illness and health care so be up to the responsibility of individuals, families, and other private institution whenever possible. But, as Dr. RosenRosen pointed out, there may be instances where OTC or even regular outpatient treatment is not sufficient. I likewise applaud your mother's efforts in paying your medical bills (aren't moms amazing?), but replace that broken collarbone with leukemia (as a 11-year old friend of mine had to endure), and you are looking at medical bills that quickly approach $500k. In the post I preferred to talk about catastrophic plans in terms of percentages. A $20k medical bill should be more affordable to a family that makes $250k a year (where no insurance may be required) versus a family that makes $20k. The purpose is not to have the government get into the minutia of what procedures "basic" plans cover, but the % of annual income at which they kick in. I threw out 20% above, meaning if a family making $60k/year has a $40k unplanned medical bill resulting from a medical catastrophe, they would be responsible for paying the first $12k (still a lot), but the catastrophic insurance would kick in, pay the balance, and hopefully help that family avoid bankruptcy or years of stifling debt. This after all, was the original purpose of insurance, to manage risk, not to pay for every runny nose or fever (as you point out).
Without getting too deep into first semester Con Law and thus revealing why my grade in Con Law is still the source of some embarrassment, the interstate commerce clause applies only to interstate activities (think of activities that cross state lines like trucking, etc.), but not to intrastate activities like setting up a corporation or providing insurance. The interstate commerce clause is a particularly brilliant innovation in the Constitution as it limits the federal government but also anticipates that there will be conflicts between and among states that requre federal action.
Thus the constitutional argument against allowing the feds to set up a federal insurance law would be that this action would open the door to federal legislation regarding corporation formation, and further encroachment of states sovereignty. However, perhaps legislators can find a way to incentivize states to enact a uniform law of insurance. Legislation is frequently written this way so that federal funds are used as the carrot to "encourage" states to enact state laws that achieve federal policies. The most common example is the fact that every state has a drinking age of 21 - this is because in the 1970s or 80s, a federal highway law specifically stated that states would be denied highway dollars if they did not change the drinking age 21, all under the guise that younger drinkers are more likely to make the poor decision to drive while intoxicated. Thus, when you want to mess with the internal affairs of a state, you have have to be an interstate hook to get the desired intrastate action. But, legislators are smart - they can figure out a way to make this happen...
Festina lente.
Justus,
I see your point. I just disagree with the forcing of the government's hands down my pocket just to pay for someone else's catastrophes. I support just about everything else in your plan.
My dad had TWO strokes within 10 years of each other in the 80s. His bills amounted to over $300,000 (in the 1980s). He knew that he only had to pay any amount he could in order not to be taken to court. So he decided that $5/mth is all he could afford. To this day, he is still paying $5/month toward that bill. He currently has no health insurance.
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