A Commonsense Health Reform Plan
posted at 8:55 pm on August 10, 2009 by Dafydd ab Hugh
First, let’s simply list what we need; then we can propose the smallest possible reform that delivers those needs. As a general rule, we should always try the easy, inexpensive, less intrusive reforms before trying any authoritarian, patronizing, socialistic, and irreversible scheme. (Would that the Democrats in Congress believed this… or even the Republicans!)
There are about 46 million uninsured at any one moment; but only 20 million are chronically uninsured because they cannot afford insurance (the “deserving poor,” perhaps). The rest are well-to-do people who simply don’t buy insurance (often young adults who think they’re invulnerable), illegals, people who already qualify for medical assistance but don’t bother signing up — and a huge chunk of people who are simply transiting from one job to another, and will only be uninsured for a couple of months.
The only two problems that attract most people to health-care reform are insuring the chronically uninsured and lowering cost. Fix those, and everybody will be satisfied… except for irredeemable and unrepentant lefties who want equality above all — even if that means making everybody equally sick and equally miserable.
What should a really good health-insurance reform include? At the highest level, it must lower costs — not just shuffle around who pays for those costs; it must increase choice for the patient and doctor; and it must allow enough capital to flow in order to pay for quality health care (to avoid rationing, either public or private).
More specific goals
We can further break this down into a few points that we know work to promote all three goals:
Portability: You should not forfeit your plan if you switch jobs, or if you switch from being employed by a boss to working for yourself. Employer-based insurance forces many people to stay in jobs they hate, as Charles Krauthammer noted, just to keep their health insurance.
Competition: We already know the only force that can hold costs down to a reasonable level in any endeavor… competition. It’s the basis of Capitalism; it defines the market. We must increase, not decrease, the competition between different health-insurance plans.
Individual responsibility: Patients and doctors should decide treatment, not insurance companies, and especially not the government. Similarly, patients must ultimately be responsible for their own health-care decisions — which includes paying more for better care.
Universal access: (Note — not the same as “universal coverage.”) Nobody should ever be told, “Sorry, your pre-existing conditions prevent you from qualifying for any health insurance from anybody.” Insurance must be available for those willing to pay for it. Those who cannot afford it should receive aid — again, we cannot have people priced out of insurance, because that leads to using emergency and trauma-care centers as doctor’s offices.
Fix Medicare and Medicaid: Medical care for seniors and the disabled (Medicare) and for the destitute (Medicaid) should get out of the business of being monopoly health-care providers; they’re really bad at it.
No externalities: Health care should not be affected by external considerations unrelated to health care or health insurance.
Now, let’s get even more specific, and I think we’ll actually have a positive plan, not just anti-ObamaCare talking points.
Action items to achieve specific goals
The first point to understand is this: Nobody has a “right” to health care, just as nobody has a “right” to food or shelter. There is nothing in the Constitution protecting or creating such a right. If you have the right to health care, then you can compel someone else to provide it for you; but we already have a term for the idea that you have the right to force someone else to labor for your benefit: socialism.
We also already know that socialism does not work in the real world… so please divorce the false idea from your mind that health care is a right.
Various government entities have enacted legislation creating such a “right;” but that’s a different use of the word. A better way to look at such legislation is that governments conclude that it’s very bad public policy — political suicide, in fact — to allow people to die of easily treatable injuries, illnesses, and conditions; but it sounds cooler to enact a “right” than just policy… so they improperly use that word.
(I’m sure lawyers would argue that it’s just a different use of that word; but it amounts to the same thing.)
Let’s call this the First Rule of Health-Policy Political Reality: If voters have to step over dead bodies to get to the polling place, it affects their vote.
Thus the overriding concern in any health-care reform should be that we “do no harm;” that is, let’s not make things worse: Let’s not end up with more people dying in the streets or more people going bankrupt just because they get sick.
So let’s get to the main points…
Portability means just that: The abililty to carry your insurance with you wherever you go. This divorces insurance from the employer and attaches it to the individual… meaning you don’t have to worry about getting new insurance if you change jobs, become unemployed, or become self-employed. (Which we should encourage as many people to do as can swing it; that’s the future of the wealth creation in civilized countries… more market Capitalism, less corporate feudalism!)
But how do we do this? The easiest way I can think of is to use tax incentives to prod employers to offer defined-contribution (DC) health-insurance plans; that’s where, in addition to offering ordinary group insurance, they also offer a plan where they subsidize your private insurance payments up to a defined amount, or a percent of your salary — paid directly to you.
That insurance would be your personal insurance; if we also make it easier for companies to create group plans that are not bound to employment (see “Competition” below), the DC plans can be group plans as well. And of course, since it’s your decision, you can pick anything from a gold-plated plan that covers everything (abortion, sex-mutilation surgery, psychiatric care, weight loss, massages) to a minimalist health-savings account (HSA) plus catastrophic care — or anything in between. Or you can choose to have no insurance at all, if you post a big enough HSA-style bond to satisfy the minimal requirements of the First Rule.
The benefit to you is that, since you own the insurance, if you move from one job to another, that company will also likely have a DC option — so you can keep the same policy if you like it. Then it’s simply a matter of money: The new job will pay more or less, counting both salary and the specific health-insurance contribution; but that makes it easy to compare one job offer to another.
If you become self-employed, you pick up the premiums yourself, if you want to keep the plan; you don’t have to go insurance-shopping unless you want to. And if you become unemployed, but you have savings, you can pay the premium yourself until you get a new job — which gives you a good incentive to get off your keyster and pound the bricks. (If you’re destitute, there will be local, state, and federal assistance programs — First Rule, and all that.)
A defined-contribution (DC) option is also cheaper for the company, since they no longer must pay to administer the plan for that employee… a staggeringly huge savings. This frees up more capital for the company to offer higher defined contributions in order to lure better employees. Some companies might offer nothing but DC plans.
(Note: employers would have fewer employees in their traditional plans, since some would be in the DC plan; this might increase the rates for those plans. But the relaxed group rules would allow employers to join with other employers to still get good group rates for their traditional plans.)
In theory, the rule of competition should be this: Aside from force or fraud, any insurance company can offer anyone any plan it wants. The First Rule of Health-Policy Political Reality requires us to add one more “aside” — no Mike Tyson plans that look pretty but fold at the first punch. In political language, that means three requirements:
- No insurance company should be able to force people onto its plan, including by “slamming” — switching people without their knowledge, as long-distance phone companies used to do;
- No insurance company shall be allowed to use fradulent inducement to trick people onto its plan, and all insurance-company promises shall be enforceable in a court of law — with damages if they fail to live up to them;
- Nobody shall be “blacklisted” (banned from the insurance pool because of pre-existing medical conditions) or “redlisted” (offered a plan at so exhorbitant a rate that it’s de facto blacklisting). Everyone must have access to at least some reasonably affordable medical insurance plan.
Note that you cannot satisfy requirement 3 merely with a “government option,” because that violates the basic law of competition: The existence of choice.
In practical terms, that means:
- Lift the ban on interstate sale of insurance policies. Let anyone buy insurance from anywhere in the United States… or perhaps in the world, provided the company meets the national requirements for solvency and honesty. (The feds should maintain a database of companies that are acceptable options.)
- Do everything possible to encourage insurers to allow easy creation of group plans along lines other than employees of the same company… say, club membership, trade or technical organization membership, alumni of some university, church-synogogue-mosque membership, subscribers to a magazine or newspaper, and so forth. Any large group should be able to get group rates better than individuals buying insurance entirely on their own.
- Remove the perverse tax disparity between employer-paid health insurance and self-paid health insurance. Krauthammer suggests taxing employer-paid benefits and rebating that money to the employees for their own insurance; but I dislike getting the government involved. I’d rather just allow every filer to separately deduct the amount he pays for health insurance, even if he doesn’t itemize.
- Guarantee everyone a range of plans from gold-plated to minimalist. This would mostly be covered by lifting the ban on sales; but states might want to ensure that employers offer a DC-option, to ensure that employees aren’t locked into a single group plan.
- Create an “assigned risk” system, similar to automobile insurance, so that every company that offers insurance must accept a certain number of customers who they know in advance are going to cost them money. The insurers will raise their rates accordingly; but competition will keep such raises to a minimum.
The individual-responsibility mandate below will increase demand for insurance, causing upward pressure on rates; but the increased competition causes downward pressure to compensate. There is no way to guess which will “win”… but even if rates go up, it won’t be anywhere near the $1.5 trillion to $3 trillion for government-controlled health care.
- Every person legally residing in the country must be able to demonstrate that he or she has the financial resources not to be an undue burden on society.
In practical terms, this means every person must be covered by some sort of plan — whether it’s a typical insurance plan, an MSA plus catastrophic care, or a big, honking MSA of at least as much as a normal plan would pay in a person’s lifetime. (Health care for illegal immigrants is a matter for a different post, and would surely have to be part of comprehensive immigration reform.)
Per the Constitution’s grant of powers, the mandate should be enforced by the states, who in turn would be goaded by the threat of loss of federal medical revenues — Medicaid, Medicare, and so forth.
- Patients, no matter how poor, must bear some portion of the cost for every treatment they get.
This gives every patient a financial incentive to ask, “Is this test or treatment really necessary?” That question will be answered in dialog between the patient and his doctor, with the patient taking into account what his insurance plan covers.
- Government should neither mandate nor forbid treatment or tests.
If your insurance doesn’t pay for it, then it doesn’t pay for it. Don’t like it? Get a better policy.
- Doctors should be at risk of losing their licenses to practice medicine if they engage in medical malpractice. But tort reform would prevent minor errors from turning into a Lotto ticket for the patient… or more likely, for his John-Edwards-clone attorney.
This should eliminate “defensive medicine,” where doctors order medically unnecessary tests for no purpose other than to stave off a lawsuit if a known and disclosed potential risk causes injury or death. It will also dramatically reduce the cost of medical malpractice insurance, which can cost individual doctors hundreds of thousands of dollars a year, and hospitals and suchlike tens of millions.
Old Doc Krauthammer suggests eliminating medical-malpractice suits altogether, offering instead a pool of money for patients who are injured by faulty medical care, the amount to be decided by a panel of medical experts.
But again, I disagree; I would rather allow such suits, but make the test such that a patient can only recover damages if the doctor used an unapproved treatment without disclosing that fact and the risks inherent in it; or if the doctor delivered substandard care in a treatment, whether approved or not, regardless of any disclosures.
Further, I would ban expert testimony from witnesses hired by either side; the court should hire the expert witnesses from a pool of such, and they should be paid the same no matter which side they end up taking. Maybe give each side a couple of peremptory expert-witness challenges, like they have for jurors, so they don’t get stuck with a doctor obviously biased one way or the other.
As above, we need an “assigned risk” category for patients with serious pre-existing conditions, similar to what is already done in group plans. In addition, we must maintain some system for helping veterans, the elderly, the disabled, and the destitute obtain insurance, if they cannot afford it.
All of these reforms combined will signficantly reduce the number of deserving poor who are chronically uninsured and underinsured.
Fix Medicare and Medicaid
Those dependent upon state or federal help for medical care should receive the same choice and opportunity as those on any other insurance plan; yet Medicare and Medicaid have proven that federal government is fundamentally incapable of administering an insurance plan. Costs have skyrocketed as treatment nosedives; recipients are treated like dirt and given no options; and care is rationed, either overtly or covertly.
So let’s change the whole Medicare model. Instead of thinking of the programs as insurance policies, directly contracting with doctors and hospitals for treatment, let’s start thinking of program recipients as if they were in the same insurance-category as federal or state employees. (We include here other government insurance entitlement programs, such as SCHIP.)
That means the programs should function not as insurers, but as employers offering a range of private plans… with one caveat: No federal, state, or local government should be allowed to offer anything other than a defined-contribution (DC) option to Medicare or Medicaid recipients.
Why that constraint? Because if government could pick a private insurer and offer that plan, the opportunities for corruption and mischief would be irresistable. (The VA could continue to offer its own primary care, but long-term care should be put on the same basis as Medicare and Medicaid.)
As George Will wrote back in June — referring to the “government option” in ObamaCare, but applicable to Medicare and Medicaid today:
Assurances that the government plan would play by the rules that private insurers play by are implausible. Government is incapable of behaving like market-disciplined private insurers. Competition from the public option must be unfair because government does not need to make a profit and has enormous pricing and negotiating powers. Besides, unless the point of a government plan is to be cheaper, it is pointless: If the public option conforms to the imperatives that regulations and competition impose on private insurers, there is no reason for it.
So we do not allow the government to be in the business of directly contracting with care providers. Rather, the plans would pay directly to a private or group insurance plan chosen by the recipient; the amount paid would be calculated to cover most (say 80%) of a typical, low-end insurance policy.
Thus a recipient could simply accept that low-end plan and pay only a very small amount in premiums, plus whatever co-pay is required; or he could pick a more robust plan, pay somewhat more for the premiums, but have better coverage. And in every category of plan, the recipient would have a large number of carriers from which to choose.
This should minimize both corruption and government intrusion and coercion, while capping government spending on several so-called “entitlement” programs — Medicare, Medicaid, SCHIP, the VA, and so forth. This reform alone would save hundreds of billions of dollars every year.
“Externalities” are consequence of economic activities that are experienced by unrelated third parties; but I’m using a slight redefinition of that term: economic activities not directly related to health care that affect its cost. I mean to include such economic activities as filing warrantless lawsuits, the cost of malpractice insurance, politicized government mandates for insurance coverage, bizarre tax disincentives for insurance, and so forth.
As a general rule, such externalities should be removed whenever they are discovered; let the insurance market be affected only by its natural components — doctors, patients, the amount of coverage sought, medical research and technology, and so forth.
Imagine if people could sue restaurants for selling food that doesn’t taste as good as it looks — and were winning millions. Fantasize that it begins mandating that every restaurant must offer at least twelve vegan dishes on its menu, even if nobody ever ordered them. Suppose that the sales tax rate at restraurants was doubled for parties larger than two people. Do you think that might artificially inflate the cost of eating out and deform the market?
In addition, any reform bill should eschew unrelated amendments — such as porkbarrel spending (say, money for Lockheed Martin to build 200 more F-35 Lightning IIs), more stimulus funds to ACORN, a vehicle for globaloney nonsense like
Cripple and Tax Cap and Trade, banning trans-fats from restaurant menus, and so forth. If these programs are worthy, then put them in their own, separate bills; don’t try to piggy-back them onto health-care reform!
And that’s it!
I believe these changes would give us tremendous savings; would ensure that everybody, or as near as makes no difference, is insured; and it would do so without squashing the greatest health-care delivery system in the world beneath the invisible foot of the State, without taking choice away from the American people, and without running deficits so big it’s almost impossible to visualize them and what they mean. (A $1.8 trillion deficit means that every family of four “involuntarily borrowed” an additional $24,000 this year… but Barack H. Obama spent it all.)
Much of this is in the GOP plan, available — with a great deal of hair-tearing, tooth pulling, and a lot of time on your hands — from their website; but it’s not as succinct and easily understood as here. (I think it’s left over from John S. McCain’s presidential run last year.) And I’ve also added a lot more specifics, such as encouraging “defined contribution” health-insurance plans.
Really, once you break the problem down, it’s not that tough to come up with solutions that are both more plausible than ObamaCare and less dangerous. Where are the elected Republicans? Why aren’t they out there pushing a unified alternative health-care reform very like this one?
Your guess is probably better, and less charitable, than mine.
Cross-posted on Big Lizards…
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