Solving the Healthcare Crisis
There are around 300 million people in the US. About 50 million, or one in six, is without health insurance coverage. Health insurance costs are growing at double digit rates, and have for many years.
A Proposal
Eliminate State Governance: Every State regulates health and other insurance providers. This was quite relevant when companies were small and most employees were within one state’s boundaries. Now, of course, even very small companies are multi-state if not international.
A significant cost of providing health and other insurance coverages is compliance with the regulations of the 50 states. Each company must establish a separate corporation in each state with executives and management. Each state has its own special requirements and coverages. Various states require certain coverage for chiropractic, psychological, psychiatric, pregnancy consulting and other care and services. This complexity alone prohibits new creative insurers from competing with the huge established providers. Open competition drives prices down and options up. Establishing a national regulatory framework that preempts State regulation would dramatically reduce the cost of health insurance immediately.
Allow Open Cooperation: If any group of individuals, businesses, charities, unions, trade associations, etc could band together to negotiate national and even international group health, life, disability, workers comp and even liability, auto and casualty insurance coverage for their members, including whatever services and care the membership deemed valuable, one would drive substantial reductions in the price of health and all other insurance.
One auto mechanic cannot afford coverage for himself or his employees. If the national trade association of auto mechanics were permitted to band together and negotiate group rates, they could all afford reasonable insurance with the coverages they deem important. Charities would band together to create huge groups of uninsured individuals and provide affordable coverage that delivered only the coverage these individuals want and need. This is not allowed under today’s laws. Negotiating power for purchasers will reduce insurance prices significantly.
Provide Catastrophic Coverage: The government should provide only coverage in the event of major health problems. If an individual’s illness or injury exceeds some set minimum, we will use $150,000 for these purposes, then the government will pay for all future medical and prescription costs for the patient.
The risk to insurance providers would be capped at $150,000 and so basic insurance premiums would be much lower and more people could afford coverage. Doctors working on patients whose medical costs have exceeded $150,000 would be employees of the government as to this work, subject to the negotiated rates, etc. Doctors could opt out and transfer patients to doctors in the system. Most would remain, just as most accept Medicare and insurance company negotiated rates at present.
For this work, they would be immune from medical malpractice liability, eliminating the extreme costs of that coverage for this higher-risk work. Mistakes would be addressed by a government medical panel and the physician would be disciplined accordingly, including criminal penalties for situations were punitive damages might otherwise be granted.
If one elects government coverage, the patient understands that he or she has no right to recover against the doctors if there is malpractice, but he or she also knows that the government will cover medical bills, prescription costs and other medically required items for as long as required. An individual with means could opt out of the government provided system.
All costs now expended by the government on Medicaid, Medicare, Social Security Disability and other programs would be rolled into this program.
Wellness: Different costs, underwriting requirements and the like would be encouraged rather than discouraged as they are now. Those who are smokers or obese would pay more. Groups would strongly encourage members to quit smoking, lose weight, exercise and get healthy or risk being removed from the group entirely. HIPAA would be amended to allow the group to monitor participants with chronic but manageable diseases such as diabetes, to make sure that the members are taking their meds and monitoring important vitals. Because of the government cap, the costs of health insurance associated with these diseases would not be as significant.
Brokers: Insurance brokers would be held to a higher standard. Broker malpractice would be expanded. Kickbacks, a common practice today, must be eliminated. At present, when a broker reaches certain annual premium levels, the insurance company pays that broker a bonus. These are often very substantial. They are obviously designed to convince the broker to sway the decisions of insurance purchasers toward a certain provider even if that provider is not right for them.
Conclusion:
Freeing the system of undue regulation, permitting greater creativity and providing negotiating power to the purchaser will dramatically reduce insurance prices and increase the number of people covered. Adding catastrophic coverage for all cases above a certain limit will also reduce ordinary coverage prices and make sure that everyone is taken care of if they suffer major illness or injury. In the end, it should be affordable for the government and dramatically increase the number of Americans who have coverage, which will ultimately help the medical community and everyone wins (except perhaps malpractice plaintiffs’ attorneys).
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6 Responses to “Solving the Healthcare Crisis”
A few comments and corrections on your posting. First, Insurance companies do NOT have to establish separate corporations in each state where they operate. They must be licensed by each such state but normally if an insurance company is licensed in New York, the licensing in subsequent states is pro-forma. HMO's must establish separate corporations but not insurance companies. Even so, these separate HMO corporations are nothing more than shells and do not add materially to the complexity or cost of health coverage. Second, the dramatic lowering of costs for small businesses to band together is a myth. Such associations have been around for decades and eventually disbanded their health programs because rates, billing and most administrative costs were done at the small business level. There is a minimal saving in such programs due to lower risk premiums and profit needs BUT such savings usually amounted to only 3%-5%.
Lastly, most of the health coverage for medium and large corporations is done on an Administration Only Services contract where coverage is self-insured by the corporation. Self insurance programs are exempt from state mandated benefits. In any event, state mandated coverages do NOT add tremendously to insurance premiums, only 5%-7% in the worst states like New Jersey. The bulk of insurance costs are made by chronic cases of heart disease and cancer. Your idea of the government providing reinsurance on claims exceeding $150,000 is a good one and would be beneficial to all parties. Remember, the TOTAL administrative cost for the health insurance for a corporation of about 5,000 or more is only 4%-5%. The 30% figure tossed around in the media is for small business of 50 or fewer people.
Interestingly, the number of uninsured dropped from 2006 to 2007 (the latest figures available), from 47M (15.8%) to about 45.5M (15.3%), according to the US Census Bureau, although that is the first drop since the year 2000.
Also interesting is the almost identical trend lines for the percentage of uninsured for both the Clinton and Bush administrations. But as there seems to be a 12 – 18 month lag between a recession and another increase, it is likely that both the number and percentage will increase of the next few years again.
http://www.census.gov/hhes/www/hlthins/hlthin07…
Your plan is unworkable since it contains two political impossibilities. The first impossibility is ending state governance. That would require a constitutional amendment
The second impossibility is ending Medicare, Medicaid, and SSDI in favor of a system of catastrophic care insurance.
Dave Schuler — the requirement for an amendment for something the federal government is clearly not authorized to do ceased to be an encumbrance as of the New Deal. (At least people engineering that change to a de facto unitary government assuming what legally are state and locally reserved powers were honest about it, saying the Constitution was out of date and in their way.) Most reflexively assume complete federal (“national”) supremacy and broad, unlimited federal powers. They also find one set of rules rather than fifty to be more convenient, especially in today's highly mobile society.
I didn't see the need to comment on the proposal, as others have ideas and all seem similar. I've long suspected the answer will be having the Medicaid, VA, Indian Health, and other non-Medicare programs made a part of Medicare. With Medicaid it's a big aid to the states' finances at this time, and by absorbing all these programs (and S-CHIP, expanded as much as can be done) at the same time, it's the incrementalists' basic strategy and to the extent as much as done as soon as possible, their sweetest of dreams. All who remain to be provided services are the adult taxpayers, the people paying for all this, who will then fall into the program like ripe, juicy plums.
Any agitation over the offers by the insurers to provide insurance to all, even employing community rating, in exchange for all being required to buy insurance, is unnecessary. The insurers simply want to remain in business and make money while they still can. Medicare for All is the logical outcome even if it's window-dressed with HillaryCare II, insurance company window dressing now.
Here's another idea. When the insurance companies crash and burn, you know, like AIG, and come begging to us for a bailout, BUY THEM. Buy up all the stock (well, 51% of it will do), fire the incompetent, greedy, customer-hating creeps who run these health care denial companies and start over.
Catastrophic care only? You guys seriously, honestly don't get it, do you? When unexpected health emergencies arise, those who have money get bankrupted, the leading cause of personal bankruptcy *even in the fully insured* is medical costs. Those who don't have money go to the ER and we pay ER prices for a sniffle. Earth to fiscal Scrooges. This does not work for America.
I don't see anything in your proposal that would address the main issue with the cost of health care: the cost of providing actual health care.
Insurance company profits are less than 10% (http://biz.yahoo.com/p/522qpmu.html), so even if we were to make the business more competitive by reducing regulation, that would at best decrease rates for the same plans by single digits if that. As for creating more “creative” lower-cost solutions, “creative” is usually just a code-word for “less coverage.” (how else to you provide lower-priced plans?) Reducing health care costs by providing less of it doesn't seem like a great solution to the problem to me (although there are some good arguments that we do provide too much health-care to the point of diminishing returns, but that's a controversial issue).
So it seems to me that the only long term solution to this has to come in the way of reducing the actual cost of providing health care. Everything else is just a matter of shifting the cost around, which might be worthwhile by itself, but doesn't address the root of our problem.