Thursday, June 18, 2009

Healthcare Compromise - The Uninsured and Problems Facing Healthcare

Although there is room for improvement in our health care system, our current path will not solve the underlying problems and the facts don’t support the proposed solutions. We need reform but we don't need the confluence of bureaucracy and regulations currently under construction.

First let's examine some facts: It seems everyone agrees there are around 47-48 Million uninsured. Of that total the White House includes 9.7 million foreigners, (Many of those illegal). And, according to the same Census report, 8.3 million uninsured people earn between $50,000 and $74,999 per year, and 8.74 million make more than $75,000 a year. That’s roughly 17 million people who ought to be able to “afford” some health insurance, (they make substantially more than the median household income of $46,326). Further dissected: A 2003 Blue Cross/Blue Shield Association study estimated that about 14 million of the uninsured were eligible for Medicaid and/or SCHIP and would be signed up automatically if they went to the hospital. Technically these people have health insurance.

All-in that leaves 6.26 million Americans who are truly without health insurance. Hmmm, Should we spend 1 trillion dollars and completely alters the health care delivery, payment, and responsibility to satisfy 2% of the entire U.S. population? Along the way should we cut physician and hospital reimbursement for care. Does anyone believe cutting compensation will improve care? That's what is proposed.

Examining the uninsured population Further; 45% of the uninsured are "temporary". It's unclear which of the above categories they fall into. However, statistics show that these 20 million “temporary uninsured” are without insurance for an average of only 4 months. Sure "temporarily uninsured" is dangerous. Many go longer than 4 months, and if care is required during the temporary period it can cause significant financial damage to families and the institutions obligated to provide their care. This point needs to be addressed. However, the current solutions don’t specifically address these problems.

The unintended consequences of the proposed solution will be enormous. To rush into a social experiment of this magnitude without every reasonable outcome fully vetted and addressed is an experiment with potentially dire consequences with little chance of doing it again - properly.

Lastly; the issue of quality of care in the U.S. verses other countries. Anyone who doesn't inherently suspect this delusion should check their pulse; better yet their gut. This propaganda is distorted information from a study performed by the World Health Organization (WHO). Since my goal is facts and solutions I will sum up the report for the otherwise misinformed. The WHO report has several major factors that contribute to country rankings. One major factor is individual financial contributions to healthcare. The scoring method benefits those countries with higher levels of social (government) contributions. The result is a penalty effect on those countries with lower government expenditure. The bottom line is it would be nearly impossible for a country like the U.S. with a "free-market" health system to score high in the overall ranking.

The report is not an analysis of care (The U.S. ranks #1 in outcomes for 14 of 16 cancer treatments) but more an analysis of social contributions towards healthcare. The method used further penalizes the U.S. for higher homicide and motor vehicle deaths which have nothing to do with healthcare delivery. Bottom line the U.S. is #1 in healthcare not so high in government financial intrusion.

Now that we have some facts let’s examine where there may be some legitimate concerns, and address some specific areas for improvement.

The problems:

Rapidly rising cost, A growing burden on individuals, families, and employers to maintain premium payments, the inability of those with health issues to get health insurance, the temporary uninsured, and the 6.2 million that may require some legitimate support and safety net.

For the benefit of society we need some way to manage this group (33M) for the greater good of society as a whole. However, the reality is that there are options available today that would resolve a big chuck of these obstacles. What we need is reasonable fine tuning to maintain relevance to the modern economic environment - Not the 1950’s environment. For one, there are high deductible health saving accounts which have not been embraced by individuals. Millions of uninsured could afford these premiums ($75-100/month for average 40 year old) yet they opt for nothing. This is just irresponsible on the part of many and it affects us all when these people (earning over 50K/year) become ill, and transfer their burden to society.

Another significant factor driving up cost is the fragmented system of regulation on our current health insurance market. Simplifying this system, providing new health technology, modernized regulatory and oversight, and standardized infrastructure including claims forms etc. would drive out significant overhead, create synergies, improve productivity, increase competition, and further drive out waste and unnecessary spending. This is the only area where we should ever see government involvement in a capitalistic society. Creating infrastructure and a platform on which capitalism can thrive. (i.e. interstate transportation system)

Next; The high burden associated with the uninsured entering a hospital/emergency room that require treatment for life threatening injuries, or other high cost healthcare. Hospitals account for these services under the indigent care expense line in there budget and make up the loss by overcharging the insured.

The final factor is addressing the reality of the "truly uninsured". The burden (financial or otherwise) regardless of whether they are temporary, illegal, foreign, or have sufficient income - they must be dealt with. A real solution does not ignore reality nor should it jeopardize 250 million people to fix the problems of 6 million.


The following solutions will control cost, minimize lose expose, lower premiums, provide catastrophic coverage for every American, and create an environment of affordable health coverage to nearly every American with minimal added cost to existing insured individuals or business. What follows is a 21st century, free market based, U.S. world leadership solution.

1) A system that insures displaced worker for up to one year. Most individuals look at COBRA through the lens of unemployment and conclude that it’s unaffordable. Of course they do; they’re unemployed. Employers should be required to provide some minimum level of health insurance for 12 months after unemployment. After year 1 the displaced employee could choose to buy at least the minimum coverage in that employer group for an unlimited time frame. Result, they are able to stay in that group as long as premiums are paid!

The minimum standard coverage would include some preventative and basic health care. i.e. 2 doctors visits annually plus some diagnostic coverage benefit. I would limit this coverage to $500-$1000 per recipient or family member. This would keep people going to doctors and minimize future catastrophic needs. Also it gives the unemployed or those doing other work access to a group health plan. Anyone who has at least one job in life would have coverage as long as someone paid a reasonable premium. The second part of the minimum requirement would be catastrophic coverage over $100,000 to the $250,000 threshold. Individuals could have the option to purchase “gap” coverage to fill in between $500 and $100,000 if they choose. Once employed again the individual would be transitioned to the new employer group and responsibility transferred.

2) We need a National health Insurance Regulatory Agency so insurers who provide policies over several states could meet ONE regulatory requirement that would be recognized by all states. I would make this requirement significant in areas of financial capitalization, loss reserve, as well as other necessary standards. It should be as tough or tougher as any state so that there is no “systematic risk” in the event of one national provider failure. Essentially, it should be tough enough to almost eliminate the possibility of failure. This would create an environment in which national plans would emerge strengthening competition and reducing cost. Large insurance plans would not have to contend with 50 regulators, and regional providers that can do things better on a local level would remain and drive out cost on a regional level. An insurance "exchange" as is currently being discussed would be a sufficient alternative.

3) The burden of the uninsured on hospitals, and other providers. I would impose an off budget, segregated, “Lock box” type trust fund that could not be borrowed from EVER. A small tax on wages would provide for catastrophic coverage over a $250,000 threshold for every American. Since this would be a separate tax on income (over federal poverty level) it would force every worker into the system including wage earners with sufficient income to afford some coverage but do not. These individual currently skate by increasing risk and cost to the system and every other insured American.

As these individuals are forced into the system, at least they have coverage above 250,000. Hospitals are relieved of the burden of losses above the 250k. The catastrophic burden is shared by every Americans and foreign workers. Those currently insured are rewarded when the artificial inflation of services is reigned in and provider loses are mitigated. This will result in some reductions in health insurance premiums, offsetting at least some portion of the tax paid. Additional premium reductions would occur since most insurance policies cover up to 2 million, 5 million, or more. Those who currently have health insurance would see further premium reductions as the liability above 250K is transferred from insurance companies to the trust fund (could be phased in once the trust fund is in place). The total tax to those already insured would in theory could be offset in time by the savings. But I’m not banking on 100% return. Their will be technology cost but the added costs will be borne predominately by those who can afford the coverage in the first place but choose to ignore the need.

Additional benefits: relaxed underwriting standards, (insurer would be more willing to accept some riskier applicants since exposure is limited). This expands the availability of reasonably priced health insurance for those with preexisting conditions and/or elevated risk profiles.

“Cost control” - The government could create a reimbursement rate for services provided above the catastrophic amount controlling expenditures at the high end. This would be applied to high cost treatment and procedures only. An area where we could realistically apply responsibility over a group for the treatment and healthcare of one. The plan could (And should) include BONUSES for quality of care, outcomes, and other health performance criteria that many advocate.

I would allow providers and hospitals to balance bill (up to 15%) and opt out of the catastrophic coverage system altogether (not likely since they would be exposed to loses when any uninsured presented in their emergency room and they were mandated to provide service) ALL group and individual “comprehensive” plans would have to include excess charges. However “Gap” plans (one that paid up to the 250K cat coverage) would not. These plans would only be available as HSA accounts and would include a minimum ($50/month) HSA contribution. The trade off here is the HSA contribution would belong to the specific individual but could only ever be used for healthcare. This is the trade off for purchasing individual coverage without the “excess” coverage feature. Theoretically the HSA owner would be saving for catastrophic expenses that went into the "excess" dimension. The insured would have the option to purchase these hybrid HSA plans or purchase plans that included the additional excess coverage.

I would find ways to stimulate HSA account use and expand premium tax deductions to individuals. The employer provided version requires users to spend down these accounts each year. This is Dumb. If we allow HSA plans (like the individual purchased version) to accumulate over years. Then (under new reform) the 20 somethings forced into the system with HSA could accumulate 10's of thousands of dollars in the 20's and 30's which could be used later in life as health care needs become more likely. As many have stated when individuals use there own accounts they spend more wisely. Having ownership of a plan from the age of 18 or 21 would keep people involved. This could be used for health care not covered under catastrophic plans, or other low cost high deductible options. Later in life it could be used for individual or family healthcare and eventually it could be applied toward LTC premiums after age 55. That would solve ANOTHER problem facing the U.S. healthcare system. ultimately we have created an environment were everyone pays in something, everyone gets out something and everyone has some level of affordable healthcare insurance. No government intrusion necessary.

Similar to our current environment HMO’s and other insurers would still negotiate reimbursement of excess charges above the 250K catastrophic limit. This would look similar to the way private plans negotiate and reimburse providers under Medicare.

Although the “excess” billing option creates an environment of complexity to this solution it allows some sensible variations in pricing and regional cost variations. At the same time it does not create a system that encourage providers to “excess bill” and individuals to avoid the coverage. The result may be some high end clinics, hospitals and providers, but this is no different to the environment present in the current hospital and provider system. Some providers will always be better than others. The major difference would be some might have the insurance coverage to pay the excess bill were others would be responsible to pay some out of pocket or get treatment from another high quality provider.

In a later phase I MIGHT require all insurers to cover all applicants at a maximum of 2x the base rate. Or create some sort of high risk pool. This would make health care coverage attainable to those remaining high risk individuals. I would only consider this after 5 years and the impact of phase one of the health care reforms I have proposed is evaluated. The other option is a High risk reimbursement for those who have been denied coverage from 2 of more insurance providers. They would pay 2x the base rate from a provider of their choice and the government would kick in the balance necessary for the provider to take in the previously denied applicant. (Details on this portion another time)

Many readers might retort that I overlooked items such as Malpractice Insurance and caps on lawsuits. I trust you I did not. Certainly these are issues that need addressing but healthcare reform should not be confused with other reform. We must find common ground and that sometimes means shrinking the area to be covered.

The bottom line for Americans...Cuts to Medicare. Seniors should be outraged! Taxes on Premiums, Families should be outraged! Penalties (taxes) on business hurting the heart of the countries economic engine. Everyone should be outraged! Obama lied to us about taxes. He is going to wipe out economic growth and bankrupt this country. Wake up America. This plan will not solve any of the challenges facing the health care industry. It we be just another tax hike that we were assured would not occur. 1st the cigarette tax, next, the proposed energy tax, and now the healthcare tax. You can be sure that there will be some hidden and some not so hidden taxes paid by every American. Don't believe that some Voodoo savings over there will pay for this new program over here. They are misleading you. These are mostly outright lies and deception because they don't want you to know the truth.

Before we continue on any such reform we should keep a few simple principles at the top of any government reform package including healthcare:

1) Do No Harm
2) Improve the system for everyone in it. Society should provide a safety net, but it should be simple and just - No excessive burden on any class.
3) Minimize government involvement (infrastructure, regulatory platforms, and technology platforms are the role of government - Not biased competition) If you don't understand the hidden costs of government involvement you're in over your head - Read this next.
4) Find Common Ground – Horse trading does not work in Politics. Effective legislation can only be accomplished when we find areas of agreement and commit to legislation directed to specific areas on which there is agreement.

Responsible government means specifically defining problems, outline solutions, and analyze every reasonable outcome. There needs to be sufficient time for review before instituting reform. 30-60 days seems rational time for debate and analysis. Anything less is irresponsible. The current rush into new programs is our governments attempt to cloak what is happening from the public. It is a disgrace, and the public is lazily culpable for allowing this to occur.

The absence of these principles is destroying our great country.