Now that health reform at the federal level seems to have hit an impasse, Congress and the Administration are scrambling to see if anything can be salvaged this year. Although both the House and Senate bills are severely flawed, each falling short both on true health reform and on fiscal responsibility, it would be a shame if we walked away from these efforts with nothing to show for it.
Doing something about those “evil” insurance companies remains a primary target, with brave talk still coming out about removing the ability of health insurers to consider pre-existing conditions in accepting new applicants.
This singular focus ignores two important facts – first, that this problem is primarily in the individual market, since such use of medical underwriting/preexisting conditions exclusions is largely absent from the predominant group health insurance market, and second, that such restrictions will inevitably lead to higher costs. The latter statement is not fear-mongering; it is Economics 101.When people come into the insurance risk pool who have, on average, higher costs than the rest of the pool, the average costs of the new pool will be higher. I.e., premiums go up. The only way around this is to bring in lots of people with below-average costs to subsidize the higher cost entrants, and without either mandates or subsidies this won’t happen.
Fortunately, there are several meaningful reforms that could be put into place that, while not achieving a full reform, could go a long way to addressing some of the most serious problems. Here are some:
- Extend HIPAA Portability Rules: Under current HIPAA rules, when an insured person goes from one group plan to another, they cannot be medically underwritten or have preexisting conditions exclusions applied to them (assuming there was no gap in coverage). This protection should be applied more broadly, so that – whether individual coverage to group, group to individual, individual to individual, or group to group – once someone has insurance they can’t be thrown out of the health insurance system for health reasons. These rules must apply to all health benefit plans, whether insured or self-funded (but not including limited benefit plans or “mini-med” plans).
- One time open enrollment: The above only helps people who have been able to obtain insurance, and there are several million (although not tens of millions) who have been precluded from obtaining coverage due to current practices. They should have a one-time, time-limited option to buy into the system – perhaps using the FEHB program as the vehicle, to avoid any individual health insurer from being hit with an undue portion of such risks.
- More fully expose the cost of health insurance: Individuals who pay for health insurance on their own are well aware of its cost and have every incentive to shop prudently, but those fortunate enough to benefit from the tax exclusion for employment-based coverage are often largely unaware of the amount of their compensation being withheld to pay for their health insurance. Such amounts should be included in the gross pay and also specifically highlighted as withholdings. This would help highlight the true cost. In a perfect world, the tax exclusion would be removed and replaced with income-based subsidies, but even the poorly named “Cadillac-tax” has little consensus for passage, so this “disclosure” approach may be the most palatable.
- Cost and Quality: The federal government should more aggressively get consensus on standards for provider-specific cost and quality metrics, at least for hospitals and physicians, using Medicare, Medicaid, FEHB, and whatever other data are available. It should then work to make this information available to both providers and consumers on an understandable and actionable basis. We must accelerate the drive to help consumers better understand differences in the care they are obtaining. We also need to do more to help recognize and reward providers who are delivering high quality, cost-effective care, but first we need to figure out how who they are.
The above steps would cost the federal government very little, should not cause significant damage to the private health insurance market, and ameliorate many concerns about the existing system.
There also seems to be congruence in Congress about the idea of insurances exchanges, but I must admit I fail to see the value. They seem a lot like the state-based purchasing coalitions that were put in place in the 1990’s (e.g., California, Kentucky), and the relative lack of success of those makes me wonder why anyone expects the exchanges to do better. Finding insurance is not the problem; paying for it is.
The above admittedly does not address most of the uninsured, much less “bend the cost curve.” If we were to go one step further on at least the former problem, I would advocate that we blow up Medicaid. No one – patients, providers, or states – is very happy with the existing program. We should replace it as follows:
- Create a new acute care program: Medicaid is de facto already two programs – one for acute care and another for long term care, serving largely distinct populations. We should have the federal government take full responsibility for the acute care portion and let the states take over the long term care program, subject to some minimum standards.
- Cover all poor people in the new acute care program: We should use a proxy such as food stamp (or rather — Supplemental Nutrition Assistance Program) eligibility to also determine eligibility for health benefits, covering every such person. The fact that many people under the poverty level do not even qualify for the current Medicaid program is a national disgrace.
- Use FEHB for coverage: Eligible people would become eligible for FEHB, and default enrolled into the least expensive plan in their area. They could be allowed to “buy-up” to more expensive plans should they choose.
- The near-poor: If there is any remaining political will to have additional subsidies, we could allow people with incomes up to 150% or 200% of poverty to buy-in to the new program on a sliding scale.
The above is certainly not an ideal solution, but something that accomplishes many key goals without creating huge and largely unfounded entitlement programs. Better small steps that are meaningful than no steps or – worse yet – big steps in the wrong direction!
Some people just don’t listen. That’s the reason HCR has become such a quagmire for the democrats.
From a strictly practical perspective, “job lock” is an issue that many voters can sympathize with, so the extension of HIPAA seems like a logical first step that both parties could agree on. I agree with the comments above that this reform do not get healthy people into the system, but absent mandates — something that there does not seem to be much agreement about — it is difficult to see how that will happen.
I don’t think removing the job lock problem should increase costs significantly — those people are already in the insurance system. On the the hand, allowing currently uninsured & uninsurable people to come into the system would impact costs. Then again, that could happen today, if those people were fortunate enough to get jobs with the “right” employer (i.e., offering affordable health insurance). I actually do not think letting those people come in via the open enrollment would result in getting a huge number insured, as cost would remain an issue for most (and which is why I also propose the revamp to Medicaid). But it would give that population options they currently lack.
Archon41 – yes, I do believe the vast majority of people insured through their employer have no real idea of what their employer is contributing towards their health insurance, much less consider it really coming from their wages. It is almost always a shock for people considering COBRA to see how much the full cost is.
Ah, yes, you avert the cost of funding the expense of known and/or certain medical conditions from the government by the expedient of imposing it on the “insurance system.” What happens to it then? Does it disappear into the void? Or do the insurers pluck more wealth from their vast, rolling fields of greenbacks? You know exactly where it will end up: on the backs of other clients of the “insurance system,” many of them already buckling under the weight of insuring their employees. But, if we can “spread the wealth,” we can “spread the losses,” no?
Do you seriously suppose the modern employer does not hammer into the heads of his employees what it is costing him to provide them insurance coverage? And I’m not talking about 15 minute “educationals,” but half-day sessions with the overhead projector, instructing employees on what they need to do to help the employer provide coverage next year.
These are good suggestions. However, one of the big problems with the cost of insurance in the private market is that healthy people don’t want to buy insurance until they get sick. This means that you only have sick high cost people buying insurance. The current legislation mandates coverage but people don’t like that. Rather than tell people they have to buy insurance, there could be a public funding mechanism (taxes) to pay for everyone. However, this is even more unpopular in spite of success in most European countries.
Any other ideas on how to address this problem?
Good ideas. In particular, extending the portability rules is a simple and obvious fix. It makes no sense that in most states today a sick person cannot move from one insurance company to another. This serves no useful purpose and only forces sick people to be stuck in an increasingly sicker insurance pool, which eventually becomes cost prohibitive.