Wednesday, February 17, 2010

A Proposal for Bipartisan Health Care Reform

President Obama will be meeting with Republicans and Democrats from Congress next week in a Health Care Summit to discuss a bipartisan compromise on health care reform. This summit became necessary for health care reform after Massachusetts voters selected Republican Scott Brown to represent them in the Senate. Brown promised to vote “no” on the Democrat’s health care plan, leaving the Democrats one vote shy of the 60 needed to break a Republican filibuster. The parties, however, have vastly different ideas on health care reform, so is a bipartisan bill even a possibility? I think it is. Both parties have said they are willing to compromise. So, as long as each side is willing to give the other side something it wants (if you aren’t willing to do that, you’re not really compromising, are you?), a solution can be reached.

First, let us take a look at the problems with health care today, and what each party would like as part of a health care reform package.

Health Care Problems
There two main problems facing health care in the US today.

First, there are too many people without adequate health care because they are uninsured. Some claim there are 47 million uninsured, but, when you exclude non-citizens, those who can afford it but don’t buy it, those who are temporarily uninsured, and those eligible for Medicaid but haven’t applied, the actual number is somewhere between 15 and 27 million, which is still a lot who go without insurance. The wealthiest nation in the world should be able to provide coverage for everyone.

Second, health care is too expensive and the costs keep rising. There are many reasons for this, but one of the main drivers of cost increases are third party payments. Third party payments increase costs because they remove competition from the health care marketplace. When the consumer is paying, they shop around for the best service at the best price. If someone else is paying, however, there is no incentive to shop around. You go to the best available provider regardless of price. The three main third party payers in the US are employer provided health insurance, Medicare, and Medicaid.


Reform Ideas from Democrats and Republicans
Democrats are mostly focused on the first problem. They would like universal coverage and to prevent insurers from denying someone coverage or dropping someone’s coverage.

Republicans are mostly focused on the second problem. They would like to see increased competition by abolishing the tax incentive for employer sponsored health care and allowing individuals to buy insurance across state lines.

A Bipartisan Compromise?
What would allow Democrats to achieve some of what they want and Republicans to achieve some of what they want? Here is my proposal:

The tax deduction for employer provided health insurance totals about $250 billion per year. The cost of Medicare, Medicaid, and SCHIP is about $750 billion per year. If we did away with all three of these, the federal government would have an extra $1 trillion. With that $1 trillion, we could give a $3,300 voucher to every person in the US to buy their own health insurance. This means that a family of four would get $13,200, which, conveniently, is about what the average employer provided health insurance plan costs. Also, as part of this plan, everyone would be required to buy health insurance (hopefully Republicans wouldn’t object if a voucher is provided to buy the plan) and be allowed to buy from any provider regardless of which state their headquarters are in, insurers wouldn’t be allowed to deny coverage or drop coverage, and insurers would have to provide at least one plan that only costs as much as the voucher and would, at a minimum, provide for catastrophic coverage.

This plan would tackle both of our main health care problems. It would provide coverage of the uninsured, and it would bring down costs. Democrats would get some of what they want—universal coverage and more regulation of the insurance industry. Republicans would get some of what they want—more competition among private insurers and less government run programs. Insurance companies wouldn’t like the greater regulation, but they would gain a lot of new customers. A trade-off they would be hard pressed to pass up, I would think.

The plan itself isn't actually that original.  In some European nations, such as Switzerland and the Netherlands, all insurance if provided by private companies with the government paying for basic insurance for everyone.  (Shhhh!  Don't tell Republicans, they're opposed to "European socialized medicine".)

An additional benefit to this plan is that states would no longer have to pay some of the costs of Medicare, Medicaid, and SCHIP. This would help a great deal with their currently strained budgets.

One of the criticisms I anticipate is that this plan would do nothing about the disparities in care. The wealthy in the US get much better care than the poor. The critics would be right, it doesn’t deal with that problem, but every plan doesn’t have to solve every problem. Isn’t solving two problems enough? To my critics I would add, in the words of Barack Obama, don’t let the perfect become the enemy of the good.

As always, your feedback, comments, suggestions, and yes, criticisms are welcome. Please leave them in the comment section below.

21 comments:

Dan Carroll said...

Hey Napp! Good post - good ideas. I've seen similar ideas floating around. One issue: the incentives. It doesn't eliminate the third-party payor problem: the incremental cost of health care is paid by someone else, thus consumers are incentivized to go for the most expensive care available. This is the key cost problem with our health care system. The Europeans address it by imposing cost controls (rationing/limiting health care and/or increasing wait times), something that would be very difficult to do in the US political system. In general, that is the problem with the recent legislative proposals: they do nothing to address the cost issues.

A variation on your proposal would be a combination of universal high deductible catastrophic care (administered by Medicare), HSA's with annual government cash deposited, a flat payroll tax, and a transition payment for the elderly.

Napp Nazworth said...

Dan,

Thanks for your feedback. I think expanding HSAs is a good idea and should be part of a reform plan. The way I imagine it, if you find a plan that costs less the the voucher, the rest could go into a HSA to pay co-pays, deductibles and such.

As far as not addressing the 3rd party payer problem, the voucher is provided by a 3rd party, but the consumer can still shop around for the plan that best fits their needs and offers the best value. So wouldn't that negate the 3rd party payer problem? Plus, the plan does away with the most of the current 3rd party payers.

Jim said...

Given one major a priori .. it's a reasonable proposal.

I'll address the assumption in a moment but will first offer a correction on the expense side.

While it's certainly true that third party payment for medical SERVICES removes the "immediate financial pain" from the consumer and therefore increases demand, it is by no means the only, or even major driver in rising health care expenditures. For that, you can lookon the supply side to the huge mark-up on pharmaceuticals and on healthcare insurance itself.

As much as these companies like to cry about the high cost of medical services, they are among the most profitable companies on the planet .. and they drive the largest lobbies in the US as well as ad campaigns convincing MANY that it's the cost of services which drives the expense-side problem.

Likewise, the administrative costs of maintaining billing and followup systems to submit properly formatted claims with company-recognized coding .. yes, it can vary with EACH insurance company and they DON'T have to tell practitioners which codes are accepted first ... adds HUGE admin expense to the service supply-side.

Regarding the "a priori" I mentioned .. this is the 900 lb gorilla EVERYONE ignores .. so don't feel too bad..;-).

It's the DEMAND-side that is creating the problem .. and it's going to get worse if we don't start addressing it.

I'm not referring to increased demand due to third party payors here. I'm referring to the demand imposed by the simple fact that Americans have become incredibly unhealthy .. and are spending LOTS of their money on hoped-for miracle cures versus taking simple steps to "fix the majors".

One simple example: $60 BILLION dollars annually in fad diet programs alone!

Incredibly, the public health education in the country is so poor that folks don't know their major risks and DEFINITELY don't know there are simple steps they can take to completely or nearly completely eliminate them.

It won't really matter what we do about the supply-side costs if we don't address the core problem: Americans are too unhealthy and there are not enough dollars to cover their anticipated needs, no matter how reasonably cheap they are.

I'm getting ready to start a website with this in mind...name suggestions would be appreciated. The focus is providing information, etc. that will take advantage of proven but little-known research to address the key areas driving healthcare demand costs in the US.

Amazingly, only ONE of these can easily save between 80-100 billion dollars ANNUALLY .. and can take effect in as little as 5 weeks.

Let's stop focusing on the "Them" and start encouraging and informing the "Us."

Quiz question: do you know ther number one health risk in America and the world? It's also the #! cause of doctor and ER visits.... and did you know it's easily treatable without meds?

Cheers!

BTW, the Europeans are facing the same problems and have recognized that HSA's and two tier systems won't address future needs ..

Dan Carroll said...

Napp,

As I understand it, a voucher for a health care plan would simply buy health care similar to the way we buy it now. It is an improvement, because having my employer buy it is stupid, but the basic structure is similar: prepaid health care. There is also the issue of government mandates (state governments mandating coverage of any procedure anyone could invent). And they say we don't yet have socialized health care.

Jim,
Clearly, the administrative cost of health care is huge and complex, but that is precisely because our system is so needlessly complex.

Americans are indeed unhealthy - if one adjusts for lifestyle, our dysfunctional health care system produces better results than the much vaunted European systems.

As far as the profitability of health care companies, only drug companies would be classified as "highly profitable", and many of them are facing extinction by way of patent expirations over the next few years. Margins and ROI on health care insurance companies are not even above the median of American industry. This is typical of any industry that gets significant reimbursement from government (governments are generally arbitary and capricious when it comes to money).

btw, I'm not sure the Europeans have figured out anything. The Europeans are just better at accepting what they are given, rather than demanding more.

MrsM said...

First I'll admit that I didn't read the other comments, so sorry if I am repeating ideas.

In my opinion there are some problems with your plan. If we mandate that everyone have health insurance and that insurance companies be unable to deny coverage, the costs will skyrocket. The $3300 that you propose to give people will be practically useless as insurance companies raise their costs to match the financial demands of covering people with long term and/or expensive illnesses. As the cost of insurance goes up, the cost of the medical services themselves are bound to follow as they always do, making it so that the balances left after insurance pays will be even more costly.

The second problem I have is not so much with the plan as with the suggestion that compromise is ideal. Why should we compromise? So that the government can "get things done"? Why is it the governments job to do these things? I think it is MUCH better for them to do nothing if they can't do anything right.

There is a popular perception that it is the government's job to keep the American people happy and healthy-that people have a "right" to entitlement programs and other government sponsored programs. However as far as I can tell, all our rights boil down to is the ability to live unmolested and unfettered by government powers, so long as you do not interrupt another person's ability to live as freely as you do.

I just can't see how the Constitution can be construed to provide people an unalienable right to pocket tax money for their own health and welfare.

As far as I'm concerned there is no legitimate reason to further compromise the small government ideals of the Constitution, and so the only legislation that I will support are those which would repeal previous poor choices and make a step back toward minimalist government.

Napp Nazworth said...

MrsM:

By itself requiring insurance companies to deny coverage would increase premiums. This is because people would just wait until they were sick to get insurance. This is why the individual mandate is a necessary component. With the individual mandate, you're increasing the risk pool, thus driving costs down. Plus, people couldn't just wait until they got sick to get covered.

Regarding compromise, it's not so much that it's ideal as necessary. If we lived under an authoritarian system, we wouldn't have to worry about it. Even a parliamentary system, where you can have party government, compromise is less necessary. But we have neither. Our founders designed a system where you need broad support to pass legislation. So, my proposal is in the spirit of what might be possible with the system we live under.

MrsM said...

I wasn't trying to suggest that we require insurance companies to deny people, but rather that we allow them to complete their own risk assessments in order to cut their costs. Preventative care is certainly helpful on a personal level, but the cost of being forced to take on let's say even one HIV patient (whose medication alone has a retail cost of almost $13000)would eat up any savings from the preventative care of another person and then some. Preventative medicine is not the financial savior that politicians believe it is-The New England Journal of Medicine reported on this saying that "Although some preventive measures do save money, the vast majority reviewed in the health economics literature do not."

I believe that the reason broad support was required for action is because the Founding Fathers wanted to hinder the government from over-legislating the people. Obviously if there was overwhelming support for something legislation could be passed, but the government does not need to be acting on every single issue-and creating a system where it is difficult to pass new laws gives us some assurance that they won't be butting into our lives where they don't belong.

As I said before, they don't belong in health care. It is not the government's job, or the people's right, to create tax payer funded entitlement programs-so it is in fact this spirit of disinclination to compromise that is protecting us from government over reach(whether that was the intention or not)...so while I am very very skeptical of the two party system we currently have I can appreciate that they are unintentionally preserving liberties with their pig-headedness.

Napp Nazworth said...

I know that preventative care does not lower costs. It has to do with the fact that when you help people to live longer, they cost more in the long run. I'm not exactly sure how preventative care entered the discussion b/c it's not part of my proposal.

The only thing I would require the voucher to cover is catastrophic care. Whether it includes preventative care would be up the the private insurers and their customers to decide.

The problem right now with taking the do nothing approach is that it will bankrupt our country. The projected growth of Medicare and Medicaid is unsustainable. So something will have to be done, and whatever that something is will have to be bipartisan.

MrsM said...

That was my mistake-I was trying to read your response on two hours of sleep. I can see now that you said "increasing the risk pool" not "decreasing risks" which is what I took as preventative care. Sorry about that!

As far as "increasing the risk pool" goes that is just newspeak for thievery. I am young and healthy-if I decide that the cost/benefit incentive to have health care does not make it worth my while I should not be forced into the health care system so that the government can legally pick my pocket.

As far as the country going bankrupt there are three issues I have.

One-the government is spending too much-is the solution to increase their budget? If my teenage daughter spent all of her allowance, should I give her more? Of course not. If the government wants money it should be forced to make cuts-cuts which would, as a consequence, probably close several unconstitutional government institutions, so that's a win-win.

Two-Of course the country is going bankrupt, we're printing monopoly money. Stopping the printing of unbacked money would lower the costs of EVERYTHING. That is something that Congress has the power to do...but of course they won't. Which brings me to number three:

Three-The government puts healthcare on the chopping block for a reason, and that reason is to make an emotional plea to the citizens of this country for a budget increase. The truth is there are a lot of government programs that they COULD be paring down, but instead they choose healthcare (and, usually, education) because they know that people are sympathetic to these causes. The government is preying on our sympathies for money.

I see no reason to give in-eventually they will cut the money they need from elsewhere simply because they want to avoid a national bankruptcy that would make them "look bad" during reelection.

Napp Nazworth said...

Just a couple points, MrsM. My proposal would not increase spending, plus it would get rid of 2 of the 3 programs that are the cause of our impending financial disaster.

I understand the opposition to the individual mandate from a personal freedom standpoint. But isn't that mitigated by the fact that you would be given a voucher to buy the insurance? So it doesn't have to cost you anything.

MrsM said...

It would not increase cost directly, no-but just as car insurance prices went up as they were mandated, health care prices will only get higher once you are required by law to have it.

To your other point, you can't mitigate the fact that state regulation of the health care of private citizens is unconstitutional. To offer me a voucher is an appeasement tactic-here, don't be mad...we saved some for you! Have a cookie.

This often works, because most people are only too happy for the government to create programs that give them something, but I don't want anything from the government-every "gift" they give you is actually a deal with the devil; trading more of your personal rights and responsibilities for some shiny new toy they've given you.

The problem is, eventually all of their toys break (Social Security comes to mind) or become harsh overlords (like the whole 'national security' system with all of their increasingly militant offshoots) but freedom and self sufficiency, while very difficult at times, never get old or tyrannical.

Napp Nazworth said...

It's not entirely clear whether or not it's unconstitutional. Parts of the Constitution is quite vague. This is definitely a gray area. So, it would be up to the Supreme Court-the arbiter of what the Constitution says.

MrsM said...

Correct me if I'm wrong, but it seems pretty clear that this is unconstitutional. The tenth amendment states that powers not given to the federal government or prohibited to the people are reserved for the states respectively and the people. The power to mandate and control health care was not given to the federal government, nor was it prohibited to the people, so it seems obvious where the control on this issue should lie [and it's not with the feds].

Napp Nazworth said...

Article 1, section 8 says that Congress has the power to "provide for the general welfare," "regulate commerce among the states," and pass any law "necessary and proper" to do the above. Whether that means Congress has the power to mandate insurance coverage is open to interpretation. So, ultimately, SCOTUS would have to decide.

MrsM said...

The necessary and proper clause says that Congress has the ability to make laws necessary to carry out the powers already laid out by the Constitution. To say that this clause supports the creation of NEW government powers is "artful interpretation" at best.

As far as the general welfare clause in Section I Article 8, it gives Congress the power to SPEND MONEY for the general welfare, but does not allow them the power to legislate for that reason-that right is reserved to the States via the 10th Amendment.

Also, as far as the commerce clause, it is clear that it allows the regulation of interstate commerce not state by state/nation wide regulation of business practices.

Lastly, I have a problem with "Supreme Court interpretation". Supreme Court judges are just as political as the presidents who appointed them and we cannot rely on them to "interpret" the Constitution, or they will "interpret" it out of existence. The Constitution is clear and concise exactly as it is. Written in layman's terms, it is not meant to be reinterpreted, but rather for court cases to be interpreted by it.

Think of the Constitution as a decoder ring, not a larger version of PTA rules.

Napp Nazworth said...

I never said that the necessary and proper clause allows for the creation of new powers. I specifically mentioned it in conjunction with the general welfare and commerce clauses. It can make any law "necessary and proper" to carry out the general welfare and commerce clause.

Clear and concise? The Constitution is clear and concise about some things. It tells us clearly and concisely that the length of term for a senator is 6 years, for instance. No room for interpretation there. But, there are other parts that are quite vague. "General welfare", for instance. There is nothing clear or concise about that. That could mean many different things to many different people. Also, you said "commerce" means only interstate commerce. Why? It doesn't say "interstate" anywhere. Again, it is open to interpretation (and your interpretation is not how it has been interpreted, btw).

Also, I don't see how you get that the general welfare is only when Congress spends money. Why would you interpret it that way?

MrsM said...

The general welfare clause in Article I Section 8 says in it's entirety:

"The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;"

It's seems pretty clear this is for monetary purposes only...they shall have the power to collect money (taxes, duties, imposts, excises) to provide for the common defense and general welfare of the US. That is a financial statement, and has nothing to do with creating powers, departments, or agencies. I cannot see how it could be interpreted to mean anything else.

The commerce clause states in its entirety:

"[Congress shall have the power] To regulate commerce with foreign nations, and among the several states, and with the Indian tribes;"

Among the several states, not within the states. It also includes this phrase between two examples of commerce with other independent entities, showing us further that the power for Congress to regulate commerce comes in when the commerce is between two or more independent states (be they the US as a whole and a foreign state, the US as a whole and the Indian tribes, or New York and Georgia).

I'm really not seeing interpretative leeway there either.

The fact is that people misuse the "interpretive powers" of the court to try to fit the Constitution into their own political box, however the reality is that the Constitution is quite clear and concise requires requires no interpretation.

Napp Nazworth said...

I think you make a good argument regarding the general welfare clause. But you still have the necessary and proper clause that refers back to general welfare and the rest of section 8. The courts have relied upon this to say that Congress has implied powers.

Regarding the commerce clause, it never defines commerce. If the Constitution were clear and concise, it would have stipulated what, exactly, that clause gives Congress the power to do. Health care is related to commerce. Our companies have to compete with foreign companies and their health care costs make that difficult. So, regulating health care is related to commerce. This is just one possible interpretation. One could also go with a more narrow interpretation of commerce. But it is open to interpretation, because the Constitution is vague on that point.

MrsM said...

The Necessary and Proper clause, like I mentioned before, gives them power to act on behalf of responsibilities that had ALREADY been granted by the Constitution not to interfere into subjects which have not been given to them. This is stated, expressly and clearly, when it says "for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States". If it's not in there, they can't use the Necessary and Proper clause to give themselves the right to meddle in it-that both contradicts the often ill-used N&P clause and the 10th Amendment which also expressly states that all rights not given to the Feds belong to the states and to individuals.

I just don't see how this can be interpreted any other way. It has been USED other ways, but just because something is possible doesn't make it right or correct.

As far as the commerce clause-why should they have to define commerce? It's a plain word with a common meaning that hasn't changed in centuries. It means the trading/bartering of goods and commodities on a large scale with foreign nations (that's foreign trade) and different parts of the same nation (that's domestic trade). That's what it meant when the Constitution was written and I'd lay dollars to donuts that's what the dictionary says today.

To say that they didn't "define commerce" is really just an excuse-and by insisting that the Constitution should have split hairs down to every single last trade arrangement legislators convince themselves they can create a magical loophole for all of Congress to fit through.

It still bottom lines at the fact that the Constitution is in plain English. It was written for the layman, and distributed amongst the People with the expectation that ANYONE could read it and understand it, and it is only people's insistence on "interpreting" it [to match their political agenda] that has created the majority of the problems in our system to be begin with.

Napp Nazworth said...

When the Constitution says that Congress has the power to regulate commerce among the states, what exactly does this give Congress the power to do? Safety inspections? Set wages? Set prices? If the Constitution were specific, it would have a lot more detail. Instead, it is left open to interpretation, which is the job of the Supreme Court.

MrsM said...

First-I like what you've done with the place =)

Second-It is obvious that the commerce clause is clearly telling us that Congress has the right to regulate how things are bought and sold between states. This would include things like taxes (since that is directly involved with how things are bought and sold) but would not include wages or safety inspections (which are private business matters).

I just don't buy that the Supreme Court is required (or even allowed) to interpret the Constitution itself. The Supreme Court's job explained Article III Section 2 explicitly:

"The judicial power shall extend to all cases, in law and equity, arising under this Constitution, the laws of the United States, and treaties made, or which shall be made, under their authority".

All cases arising....it seems very obvious that they are not to be interpreting the Constitution but rather that they are to take NEW cases that arise UNDER the Constitution's power and interpret THEM to decide whether or not THEY fit the Constitution. There is a small but very meaningful difference between the two.

The Constitution is a contract between the federal government and the American people and it can be no more 'interpreted' than my husband's employer could 'interpret' his union contract. It is what it is, and if they want to change it they can go through the proper channels or forget about it.