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Enthoven’s ABCDs and why that socialist Gingrich is wrong on standardized benefits

Here's Alain Enthoven's four part plan for fixing healthcare. As THCB regulars might guess, it's familiar and very sensible stuff. (Here’s the PDF)

A. Create an exchange with standardized plans, make individuals buy through the exchange and limit outside subsidies to the value of the lowest cost plan.

B. Tax health benefits (starting with those over the value of the cheapest plan)

C. Phase in the same system for Medicare

D. Phase out employer based insurance, giving everyone a voucher for the lowest cost plan based on a dedicated tax like a VAT.

Meanwhile in the LA Times, Newt Gingrich, who continues to smell blood in the Palin-infested waters, spouts BS that would destroy any sensible Enthoven-style reform. Apparently in Newt-world a regulated insurance package of standardized benefits is government bureaucracy run amok.

What Enthoven and sensible people, whose numbers apparently don’t include Gingrich these days, know is that in order to be able to choose between benefit plans consumers need to be able to make accurate apples to apples comparisons. And when health care needs vary for different people, then everyone needs to be on a standardized plan that can accommodate all those needs. In Newt-land:

Currently, individuals and employers usually make these coverage decisions. This legislation creates a new federal Health Benefits Advisory Committee that would decide instead. For example, if you are a single male with no children, the legislation still requires you to have maternity benefits and well-baby and well-child care coverage. You don't want or don't need that coverage? Sorry, you have to pay for it anyway.

So lets ask Gingrich to explain how in a world where everyone is covered and in which poor people have subsidized access to the same insurance as everyone else, his desire for insurers to be able to write the exact rules they want will not lead to massive discrimination by some plans? What he claims is the ability for a young single male to not buy “maternity benefits” will actually become the insurers’ ability to create a plan that is not attractive to those with chronic illness.

We’ve seen this movie many times. Medicare HMOs in the 1990s and early 2000s clearly risk selected healthier enrollees. Private sector insurers paid off brokers like Marsh and AON to get them better risk groups. If you don't have a standardized set of benefits, insurers will change their plans to attract the consumers they want and reject the ones they don’t—and the end result will be a lot of sick people dumped on the dumb insurer, which will then go out of business and the taxpayer will take over. (BTW even if you have standardized benefit, you’ll still need risk adjustment between insurers at the back end).

And of course and this is something Gingrich must believe in when he’s not in one of his socialist moments, accurate apples-to-apples comparisons of products is a necessary precondition for an efficient market.

I cannot fathom why the right claims not to understand this. So let me give them a little lesson.

When motorists buy gas, the unit of what they are buying (the gallon) is agreed to within the market and mandated by the government. And it’s the same for everyone. In Newt-world the gas station could vary how much gasoline was in a gallon and not tell the motorist. What is not mandated in a market is the price.

The “gallon” is the equivalent of the standardized benefit that Enthoven wants, and the price (or value of the subsidy) is determined by the most efficient insurer in the market.

So when anyone on the right spouts off about buying insurance across state lines, or decries standardized regulations, tell them that they don’t believe in markets or capitalism so they must be a socialist! And as I said, Gingrich has already proved he is one.

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NateSkepticReadJohn Ballard Recent comment authors
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Nate
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Nate

Matt, your reaching here, supplying information to compare products is no way the same as the government dictating what those products are. They are mutually exclusive. Your gallon metaphor falls apart when it is corrected, benefits are like additives, you can shop from gas station to gas station free to buy the gas with the additive you prefer and you think will perform best. Laws dictate that a gallon must be a gallon but they don’t try to micromanage what is in that gallon beyond a broad scope. For all the complaining you on the left do about the cost… Read more »

Skeptic
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Skeptic

If Obama and progressives had devoted one-tenth of their energy to promoting a sensible approach to a standard benefit package like Enthoven describes as they did to the idiotic public plan option, health care reform would not be on the verge of failure (again).
Skeptic

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Read

I believe too strongly in the 10th Amendment and state rights to buy into the national health insurance market idea.
Gingrich is not only a socialist (according to your arguments Matt), he’s anti state’s rights.

John Ballard
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Here’s a link for you, Matthew. http://www.rightwingnews.com/interviews/gingrich.php “Interviewer Hawkins:…Health Care in this country is certainly expensive and a lot of people are uncovered. Briefly, what do you think we need to do to fix it? “Newt Gingrich: Well, I’m giving a speech today at the National Press Club on transforming the Medicaid system and I’m going to say that my goal should be for every American to have health insurance coverage. We should start by vouchering Medicaid money so that people who are the healthy poor can go out and buy insurance and be part of the insurance pool. We… Read more »