A few weeks back I sent the following thoughts on health care reform to my family:
I've tried in vain to find an article or opinion that matches my views regarding healthcare reform. So, I suppose I have to take the time to compose my own essay on the subject. This isn't too long; here's the outline:
- What are the problems with healthcare?
- How does the President's proposal attempt to address these problems?
- What do I suggest?
What are the problems with healthcare?
I grow tired of pundits who repeat “we have the best health care in the world” as if there were nothing that needs fixing. Anyone who knows a married college student, who is self-employed or who is acquainted with their HR director knows that we have serious problems. As I see it, here are the most pressing problems:
Healthcare costs are skyrocketing: As premium increases have rapidly outpaced inflation most employers can no longer cover the whole cost. My employer and I split a premium that could nearly pay for a new car every year. This rate of increase is unsustainable.
The biggest factors contributing to increasing costs are the following:
- Lawsuits and liability driving high costs of malpractice insurance.
- Physicians defensively ordering tests and procedures that would be unnecessary in a less litigious environment.
- Bureaucratic insurance claims processes that account for 25% to 50% of the cost of treating patients.
- Pharmaceutical companies driving demand for newer and more expensive drugs by pushing information to physicians, lobbying for treatment standards and direct-to-consumer advertising.
- An enormous increase in the number of treatable diseases.
Many find it impossible to obtain reasonable coverage: The option for catastrophic insurance has evaporated. The few plans that apply to students or the self-employed are either too expensive or offer too little coverage to be useful. The number of patients relying on Medicaid or charitable care keeps growing.
How does the President's proposal attempt to address these problems?
The centerpiece of the bill is the “public option,” a government-run health insurance policy offered as an alternative to private health insurance. The theory is that if a lower-cost alternative is available, private insurance companies will be forced to lower their premiums in order to retain their customers. The public plan would also offer a policy at reasonable cost to those who are excluded by existing options.
The trouble with this proposal is that it does little to reduce the actual costs of providing healthcare. If healthcare costs remain high then insurance premiums must also remain high. Some of the president's spokespeople have promoted the public option as a method to “break the monopoly” of existing health insurers. With dozens of existing insurers large and small there certainly isn't a monopoly. And if there was one, the right approach would be to use antitrust law. Consumers and HR directors have put great pressure on the insurers to keep premiums down and yet premiums continue to rise. This can only mean that the actual cost of health care is rising consistently across all insurers.
The only way a public option can offer the same benefits for lower cost than private insurers is if it is subsidized or receives some preferential treatment under the law. Private insurers cannot compete with artificial advantages like these. Therefore they would be driven to bankruptcy leaving the public option as the only option.
To be fair, the president's plan does include some cost-saving measures such as centralizing and standardizing medical records and attempting to streamline the claims process. However, I don't think these will save enough to overcome the cost of a new government bureaucracy. The records proposals also raise serious privacy concerns.
What to I propose?
The focus of a proper reform process needs to be cost reduction. By its nature this eliminates any programs that add government offices, staff or oversight. That's because government is always less efficient than the private sector. So, we start with the requirement that any reform has to be budget-neutral as far government spending is concerned.
That limits government action to regulatory changes. Here's what I suggest:
Tort Reform: It has been estimated that lawsuits and liability defense account for 20%-30% of the cost of healthcare. We can't eliminate malpractice suits entirely but a ceiling should be put on that liability. Alternatives to lawsuits, such as public record of physician performance, could be used to maintain physician oversight while reducing the number of malpractice suits and the size of the awards.
Restore the Catastrophic Insurance Option: There aren't any proper catastrophic insurance policies available. Such a policy would only kick in when medical costs exceed some, relatively large, deductible. I have read that this has gone away due regulations making catastrophic insurance illegal but, unfortunately, I don’t have a good reference. Regardless, regulations should be changed to restore this option.
Make Health Savings Account Legislation Permanent: A health savings account is a tax-free savings account that can only be applied toward healthcare. HSA's are usually combined with catastrophic insurance. The HSA covers normal health care needs and the catastrophic insurance picks up in bad cases. This reduces the costs of healthcare in two ways. First, the consumer becomes aware of health care costs and is more selective in determining what procedures, drugs or tests are to be performed. Second, insurance claims only have to be filed in big-ticket situations thereby reducing the paperwork costs both at the provider's office and at the insurance company.
HSA laws exist but they haven't caught on very well because the backing insurance is too expensive. Also, existing laws are set to expire and companies aren't interested in investing in programs that may disappear.
Eliminate Group Health Plans: An insurance company should be required to offer the same plan to all customers regardless of their employer or other group membership. This would level the field for the self-employed, students and so forth.
Create an Electronic Claims Submission Standard: Much of the cost of processing insurance claims is dealing with different processes and standards at each insurance company. A consortium of insurance company representatives should create a standard format and process for electronically submitting claims.
Create an Independent Source of Drug Information: The pharmaceutical lobbies drive the dissemination of treatment information to physicians and patients. An independent evaluation would offer unbiased information leading to greater use of lower-cost treatments. Since I've precluded government funding for such an option I suggest that it would be funded by a consortium of insurance companies (that are motivated to reduce costs).
Variations on most of my proposals exist in some of the bills being considered. There's still hope that a proper healthcare reform package can be assembled. But this will only happen if our politicians are willing to ignore the lobbyists, set aside their personal agendas and serve the people who elected them.