Saturday, September 26, 2009

Health Care Reform - A Viable Solution

I have written in some length about the issues of the U.S. healthcare system and have attempted to cut through some of the rhetoric. You can read the preamble to this solutions only article at Healthcare Reform Compromise. For now a healthcare solution that is understandable and summarized in just a few short concepts. (Not 1,000 or so pages)

The following concepts specifically address the major issues facing the U.S. health delivery system. I have defined the major categories as: 1) Cost control 2) Minimize provider loss, 3) Reduce Insurance premiums 4) Provide catastrophic coverage for every American 5) Create an environment of affordable, manageable health delivery 6) Minimal added cost.

What follows is a 21st century, free market based, leadership solution. It is a foundation for a real solution, a place I believe many of us can agree.


1) A system that "Insures displaced workers" 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 a minimum level of health insurance for 12 months after unemployment. After year 1 the displaced employee could choose to buy the minimum coverage in that employer group for an unlimited time frame. Result, an individual will always have access to a group plan as long as premiums are paid. No pre-existing condition discrimination, and this specifically addresses the problem of the temporary uninsured and uninsurable.

The minimum standard coverage would include 2 parts: First, some preventative and basic health care. i.e. 2 doctors visits annually plus some diagnostic coverage benefit. This minimum required employer coverage would provide health insurance to roughly $500 per recipient or family member. This keeps the unemployed going to doctors and minimizes future catastrophic needs. 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 transferred to the new employer group and responsibility reassigned. (This would only apply to groups over some predetermined level i.e. 50 members) This would give 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 the premium was paid.

2) Minimize provider loss/Catatrophic Coverage for Every American: Specifically addressing a major burden on hospitals, and other providers by the uninsured. This is one of the major issues driving up the cost for the insured. 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 bring every worker into the system including those wage earners with sufficient income to afford some coverage but skate by without health insurance. These individuals currently add cost by increasing risk, and utilizing expensive ER services for care. Those who have insurance end up covering this added cost with inflated cost of care, and higher premiums. This concept would be a positive revenue mechanism by bringing in those who currently pay nothing. (Specifically those 17 million who earn over $50,000/year but do not buy health insurance)

Important: Those currently insured will be rewarded as their new tax will be significantly offset by the reduction in their health insurance premiums. This will occur as the artificial inflation of services is reigned in, provider loses are mitigated, and the cost to insurance companies is reduced. With no risk above 250K insurers will be able to lower premiums 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). Note: Most insurance policies cover up to 2 million, 5 million, or even have unlimited benefit limits.

The total tax to those already insured would be offset - in time - by the savings. I'm confident this would be close to neutral in cost for those currently insured and it could exceed 100% offset as the added costs are borne predominately by those who can afford health insurance in the first place but choose to ignore the need.

As the individuals who ignore health insurance are brought into the system they can still avoid other coverage but the high burden they place on the system will be mitigated. Their newly captured tax pays for catastrophic coverage, and hospitals are relieved of the burden of losses above the 250k. In addition catastrophic costs and shared by every American and more important; Every foreign workers, illegal workers, and those irresponsible Americans earning sufficient wages but not contributing are integrated into the system.

Additional Results: 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. This point further addresses the uninsured however many would eventually become tied to some group plan. (above)

3) We need A National health Insurance Regulatory Agency so insurers who provide policies over several states could meet ONE regulatory requirement recognized by all 50 states. Large insurance plans would be overseen by 1 regulator instead of contending with up to 50 regulators in every state they do business. Regional providers that can do better on a local level would remain to drive out cost on a regional level. This would create an compettitive environment in which national plans would emerge strengthening competition, reducing overhead, exploiting synergies, and exploiting internal technology and infrastructure. This would ultimately reduce insurance cost. I can foresee consolidation potentially reducing options for individual so I would forbid any consolidation that would reduce the number of choices in any given area below 5 or more.

I would make the financial requirement significant in areas of capitalization, loss reserve, as well as other necessary standards. It would and should be tougher than any state so that there is no “systematic risk” in the event of any national provider failure. Essentially, it should be tough enough to almost eliminate the possibility of failure.

An insurance "exchange" as is currently being discussed would be a sufficient alternative but I don't believe it will work. It is irrational to allow New Yorkers to buy insurance in Georgia or Indiana. How will an insurer be regulated in NY that may be based in Tennessee? It seems like it adds more – not less – bureaucracy, but I am open to suggestions.

4) “Cost control”: (The ugly and anti-free market dilemma) - 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. It has been demonstrated that this is an area where we could realistically apply responsibility over a group of multiple providers (Physicians, hospitals, and pharmaceutical providers) for the package treatment and healthcare. (Although not necessary.) The plan could 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/or 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 plans would have to include excess charges. However, “Gap” plans available to only unemployed individuals would not. Further, Individual plans would be available as including excess charges OR as HSA accounts and would require a minimum ($50/month) HSA contribution as a trade off. The benefit; The HSA contribution would belong to the specific individual but could only ever be used for healthcare. This is the obligation for purchasing individual coverage without the “excess” coverage feature. Theoretically the HSA owner would be saving for future catastrophic expenses that entered the "excess" dimension. The insured would have the option to purchase these HSA plans or purchase plans that included the additional excess coverage.

Result: Under The new reform everyone but especially the younger American’s could accumulate (with HSA’s) 10's of thousands of dollars in their 20's, 30's, and 40's. This account could then be used later in life as health care needs become more likely. Additionally, the HSA could be used for the individual owner or family healthcare requirements. Eventually it could be applied toward LTC premiums after age 55. That would solve ANOTHER problem facing the U.S. healthcare system. So individuals are now in control, saving for their own of family healthcare needs and in addition have an account that could pay LTC premiums later in life.

As many have wisely pointed out, when individuals use there own accounts they spend more wisely. Having ownership of a health plan from the age of 18, 21, or even later in life keeps individuals involved. Ultimately we’ll create an environment were everyone pays something, everyone gets something, and everyone has some level of affordable healthcare insurance. No excessive government intrusion necessary.

Some additional Details: Similar to our current environment HMO’s, PPO's, and other plan providers would still negotiate reimbursement of charges above the 250K catastrophic limit. The insurance provider would manage and make payments to facilities and others but would be reimbursed at the scheduled rates from the healthcare trust. This will control excessive inflation for high end health services but does not completely communize and thwart our free market system. Further we need to also reform HSA account use and expand premium tax deductions to individuals. Employer provided versions require users to spend down accounts each year. This is Dumb. We need to allow employer based MSA’s to accumulate over years.

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 free-market environment present in the current hospital and provider system. Some providers will always be better than others. Experience and expertise will naturally accumulate in “pools” this is Nature at work and a working plan will have to accommodate the laws of nature.

In a later phase I MIGHT require all insurers to cover all applicants at some maximum rate. Say, 2x the base rate. Or, create some sort of national high risk pool and assign applicants to plans based on size and other factors. This would make health care coverage attainable to those few remaining high risk individuals. I would only consider this after several years and the impact of phase one of the health care reforms is evaluated. Another 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 world need to be worked out. Ultimately, most every worker would have access to a group plan from point 1

finnally, many readers might retort that I overlooked items such as Malpractice Insurance and caps on lawsuits. I trust you I did not. Certainly there are additional 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 ground to be covered. (Pay attention Washington)

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) Minimize government involvement (infrastructure, regulatory platforms, and technology platforms like online records etc. are the role of government - Not biased competition, or industry manipulation) You can apply for insurance online Example Aetna Health Insurance , but your doctor can't get test results or health history.

2) Improve the system for everyone. Society should provide a safety net for everyone including themselves. But it should be simple and just - No excessive burden on any class.

4) Find Common Ground – Effective legislation can only be accomplished when we find areas of agreement and commit to legislation directed to only those specific areas on which we agree. If you don't understand the hidden costs of government involvement see Medicare’s Hidden Administrative Costs: by The Council for Affordable Health Insurance

Responsible government means specifically defining problems, outlining solutions, and analyzing reasonable outcomes. There needs to be sufficient time for review, withtime for debate and analysis.(30-60 days seems rational) Anything less is irresponsible.

Our Constitution was not completely ratified for 9 months and it took 3 months before the first state put its signature on the plan. The current rush into new programs is our current governments attempt to cloak the truth from the public. Our Government is a disgrace, and the absence of these principles is destroying our great country. We need to return to the place our founders created. (1, large page I might add)