Size Matters
If President Bush speaks extensively about health care in the State of the Union, as various press outlets have been reporting, then we're going to be devoting considerable energy (here and elsewhere) discussing why his ideas are so misguided. And appropriately so. But before we all get lost in debating the finer points of risk pools and tax credits, it's worth making a simpler point: Given the scale of our health care problems, Bush's solutions are just plain old small.
The gist of Bush’s health care plan is
to place more of the burden of health care expenses on individuals. And while that's a mostly bad idea, for reasons discussed previously, it's already happening -- in large part because employers, from whom the majority of working Americans still get their insurance, want it that way.
The single biggest thing government could do to speed this transition would be to invent special savings accounts, subject to favorable tax treatment, so that people find "self-funding" of health care expenses more palatable. But Bush and the Republicans already did that. They did it in the 2003 Medicare reform law, which, aside from creating a really awful drug benefit, removed the restrictions on health savings accounts (previously called medical savings accounts). Unless I'm missing something, the changes Bush would enact now (increasing the amount of money you can deposit in such an account, for example), would make a difference only at the margins.
Bush will likely propose some other changes, like tax breaks designed to reduce the tax advantages that now go to employer-provided group health insurance. Again, this is not such a hot idea (at least as currently constructed), but put that aside. I don't imagine we'll be seeing Bush put up more than a token about of money behind this effort. The consensus out there right now is that if you really wanted to take care of the uninsured, you'd have to spend somewhere in the neighborhood of $100 billion a year. (I tend to think it would be more, if you want to do it right, but that's another story.) There is no way in the world Bush would be willing to commit that kind of money to any health care initiative, good or bad.
I'm not saying that, politically, this is the smartest way to criticize the Republican appraoch to health care. But, substantively, it's an important distinction. Democrats (well, many Democrats) and liberals think that health care is a huge issue -- probably the most pressing issue in domestic policy -- that requires an ambitious response. Most of the major Democratic presidential candidates in 2004 had plans that would have cost somewhere in the neighborhood of $60 to 90 billion a year. (Gephardt would actually have spent more.)
Before we get all hyped up to criticize Bush, can we propose something ourselves? All the Democrats do is tell the American people how the Republican programs won't work. Fine. But then what will work?
So far all I've heard is Pelosi's pre-buttle:
Provide universal, affordable access to health insurance, beginning with a 50 percent tax credit and multi-insurer pools to help small businesses provide affordable and comprehensive health care coverage for their employees.
If Bush's proposals are small, the Democrats' are subatomic.
January 30, 2006 10:07 AM | Reply | Permalink
The original plan of Hilary and Bill sounds like a lot of money and it is, but it would more or less redistribute the money that is being spent already for Medicaid, Medicare, VA, private insurance and government insurances.
It would be more stable, and a lot of money would be saved by bidding, which isn't happening in Medicare now. If you add all the taxes spent for health care and co-pays and deductibles that individuals pay, it probably wouldn't take as much money.
Plus everyone would be insured from cradle to grave.
People have paid Medicare out of their paychecks for years, now they have privatized it and thrown it to market forces. It was suppose to be cheaper because people who are old and retired or disabled don't make the money to pay high insurance and health care costs.
The biggest problem is not the person who is using insurance, it is the way it is handled. I have been under a doctor's care for three years and keep paying a $30 co-pay each time I see him and each time he schedules a test 6 weeks down the road. Why they don't do it all at once may have something to do with the co-pays. I have been given tests that I didn't want and knew I didn't need. I quit going, because it seemed like a waste of time. I figure I will either get better or get worse. Either way will beat the hours spent in the waiting rooms with sick people.
January 30, 2006 10:19 AM | Reply | Permalink
What if Senators, Representatives and CEOs were required to have the same health coverage as their lowest-paid employees!
Do you think Bush would still think that we are 'over-insured' if he had to pay 20% of his medical bills and a co-pay, and had to get pre-authorization to see a cardiologist?
Why we need single-payor health coverage (a la Medicare) for us all:
For those who believe that Canada's single payor system is inefficient, please note that ours is also very inefficient. My knee surgery for a completely torn ACL ligament in the knee required 2 insurance companies, 1 year and 5 doctors and 3 PTs, not to mention hundreds of dollars in co-pays for the surgery and office visits. [I had a knee injury in December 2004 and finally got surgery for the totally-absent ACL ligament in the knee in January 2006. In March 2005, I saw a doctor and an incompetent surgeon; June I got in to see the second (more adequate) surgeon and two awful Physical Therapists, and got a knee brace; in October was able to change insurance and started with a new GP, new surgeon, new PT. Not efficient!]
January 30, 2006 11:23 AM | Reply | Permalink
I have been cogitating about a solution to our growing healthcare problem for a long time. We now spend 16% of our GNP on healthcare(growing geometrically) and somewhere in the next couple decades we are going to hit an economic stonewall on this issue.
I would propose a voucher type system funded by the Federal Government and generally paid for by corporate tax, partially by income and partly per worker. Essentially, it would be 6.5% VAT plus $3.00/hour for the number of worker hours a company had.
This would produce roughly $1.5 trillion/year with the balance of healthcare expenses paid by deductibles and coinsurance.
The plan would have a sliding deductible from $100 to 1000/year based on last years income tax return. Benefits would be 80% of expenses subject to an out of pocket maximum of $500 to 5000 again based on last years FIT. Any certified healthcare organization could provide coverage and each American family could choose their carrier. However, all claim forms and administrative procedures would be identical between all carriers and all providers must be able to submit claims electronically.
This is not an ideal solution but I believe it is the best we can accomplish right now. This program would replace all medicare, medicaid, and employer based insurance. Doctor and hospital choice is preserved and the problem of uninsured is addressed. Now cost containment under this plan will be a major issue and there are many complicated ways to address the problem but that will be the subject for another posting.
January 30, 2006 12:04 PM | Reply | Permalink
This is a very sensible proposal. I'm not quite sure about using a value-added tax to fund it, but using a combination of individual and corporate taxes (as with FICA) seems good. I like the fact that you are not allowing competition on plan design (this just confuses people--witness Medicare Part D). Are you allowing private plans to compete based on monthly premiums and networks? I'd allow the plans to provide incentives (extra coverage) for in-network visits, but require them to still offer the basic coverage (80%) you specified for out-of-network visits. This at least allows plans to try to steer people toward efficient providers, while still giving people the option to get care wherever they want.
January 30, 2006 12:32 PM | Reply | Permalink
Like it. A couple of questions.
1. Would the government set the rates that "certfied" providers can charge? [I know you promised a future post on "cost containment" but how 'bout starting, here]
2. Other than passing paper on to the government for reimbursement, what function(s) are the insurance carriers performing?
And a beside the point question. Why is it not reasonable for a wealthy country to pay 30% for health care? What's magical about 16% 20%?
January 30, 2006 12:33 PM | Reply | Permalink
In every SOTUS so far, Bush has babbled on about how we need to provide our families/children/seniors/goldfish/etc. with the healthcare they need. He is always full of passion at this point. You can tell he really cares! Every year for five years now, it's his top, super #1 priority! Yay!
So let's stop for a moment, us libs, and remind the voters of the progress this guy has made, what with having control of three branches of government and the fourth estate. So far, their big acheivement seems to be that have confused the bejesus out of Uncle Ed down that Rite Aid about his prescriptions. And they've managed to get a whole bunch of military types off the rolls of those who get healthcare. Oh! They've done nothing to stop the Clinton program of enrolling poor children (which Bush opposed as Tex. Governor -- before he supported it).
So let's just pause here and focus on the big picture. Bush professes a hot passion for gettin' us the healthcare we need. Then why oh why has he so far failed to deliver so spectacularly? Could we liberals have put a curse on him? Does Hillary have a little voodoo doll of the Preznit?
After this bit of fun, then we can figure out if the co-payment slides from $15 or $30.
January 30, 2006 12:55 PM | Reply | Permalink
JDledell,
Your idea has a lot in common with my Century Foundation colleague Leif Haase's approach, summarized here:
--Greg
January 30, 2006 1:29 PM | Reply | Permalink
Odds are that whatever the president proposes tomorrow with regard to healthcare will ultimately never come to fruition. Like his failed Social Security plan, political opposition from the left will simply not allow a Republican (much less George W. Bush) succeed in an area which is a leftist breadwinner. In fact, if Bush were to shock the nation and announce a $200 billion/year government run healthcare plan, the Democrats would likely oppose it simply because it is not their party getting the honors of implementing it. What I’m driving at here is that the left will oppose whatever Bush proposes (and, in fact, the Democratic Party seems to have already made up their minds before the president even offers anything).
Healthcare should not be tackled at the Federal level. It is highly unlikely that there will ever be a nationalized healthcare plan in existence in the U.S. The odds for a Bush-style savings account plan are also very small, but undoubtedly more substantively realistic than a centralized plan which the Democrats favor. Where does that leave us? Simple. No effort should be put forth at the Federal level for healthcare. Rather, state governments, with Federal assistance in funding, should initiate and implement their own plans. This would, of course, require state governments to increase their taxes, but it is simply unrealistic to suppose that a broad, “one size fits all” Federal program will cure the nation’s healthcare crisis. If you believe that, you are an idealistic buffoon. As I have said many times before, problems are most effectively dealt with at the most basic and local level as is humanly possible. Healthcare is no different. Neither is education for that matter. How much longer it will take for people to realize that Washington cannot rule the country on its own is beyond me. But until we do, we will continue to be set back by partisan politics which will muddy and compromise any Federal plan.
January 30, 2006 1:37 PM | Reply | Permalink
You guys, it's outsourcing!
George Bush doesn't know how to control healthcare spending. He doesn't want to make the insurance industry or the pharma industry angry.
So now, he's making it YOUR job! YOU have to fix the healthcare system!
I, for one, look forward to taking on the insurance industry, big pharma, and enormous billion dollar for-profit hospital chains that stretch across the nation. Because I've had such great success in the past getting them to listen to me and take my complaints seriously.
January 30, 2006 1:51 PM | Reply | Permalink
Yeah, sign me up for the Blue State health insurance plan so my wife and I can go to Disneyworld for vacation and find that contraception ain't covered down thar under our Yankee plan...
It would be an interesting experiment in demographic trends, though. I don't imagine many people would rush to relocate somewhere where their favorite pills aren't covered anymore.
January 30, 2006 4:00 PM | Reply | Permalink
1 - The premiums are set by the insurance carrier/HMO etc based on the amount of the federal voucher. The voucher amount would vary by age and geography( this is to prevent cherry picking of insureds) and guaranteed issue for all applicants. The benefits are set by law as a minimum but extra benefits are allowed in the area of dental, vision etc.
2- The carrier is absorbing most of the risk (reinsurance of this risk probably necessary by either government or commercial entities) They are processing enrollments, call centers, paying claims and administering the cost containment. After dinner, I'll post again but all cost containment provisions will be consistent across all carriers to prevent competition in this area which could lead to abuse.
3 - The problem with even a rich country spending 30% of it's GNP on healthcare is it's primarily a non-productive activity. Imagine for a moment a country that spends 50% of it's GNP on healthcare. It's a situation where (hyperbole because productivity ignored) half of the people are working taking care of the other half.
January 30, 2006 5:00 PM | Reply | Permalink
1- In each geographical area a set fee schedule will be mandated for each type of medical provider. Physicians will have a fee/procedure and hospitals a diagnosis based set fee. This is similar to Medicare financing. This will save some money for both the insurance carriers and the healthcare providers in terms of minimizing some of their paperwork.
2 - All hospital admissions must be immediately reported to the carrier and the carrier will follow on the care rendered. This is mainly intended to cut down on the myriad of redundent testing done in many hospital admissions. Because of the diagnosis based compensation there is no incentive for the carrier to kick people out of the hospital early.
3. Most important is there will be set protocols for the plans in the treatment of chronic illnesses(perhaps set by NIH) This is where enormous amounts of healthcare dollars are spent. It means making sure diabetics get regular supply of proper medications and very frequent visits to the doc, even if he has to send a taxi.
4. All claims activity for ALL healthcare providers will be fed into a central databank by ALL carriers. It is here that we can truely start getting outcomes measurements by provider. Until the healthcare system can focus on the outcome of medical treatment we will continue to be slaves to the cost of per procedure reimbursement where more is always the answer in order to keep provider income up.
5. At a certain point in the case of serious illnesses, a case worker will be assigned by the carrier to follow with each of the each of the medical providers and coordinate the activities so that overlapping and redundant care is reduced considerably. Without getting into the esoteric behind the scenes issues, the above is the essence of cost containment.
6- Computerization of the medical community is a must and that will have to be rolled out concurrently to any implementation of a national healthcare program.
If we can keep in mind that 80% of the healthcare dollars are spent on 20% of the population each year we can see where the greatest gold mine for cost containment exists. It's with the serious and chronic illness patients, including the elderly. That's why Bush's silly proposal won't save anything measurable. It's not the first $2,000 of expenses that amount to anything, it's the next $98,000 etc. If Aunt Milly goes to her doc an extra time or two each year it means nothing to the total cost picture.If you are really sick, all you tell a doc is make me well - not what does this cost, or do I really need that test?
What this program accomplishes is decoupling healthcare from the employer marketplace. This makes our industry a bit more competitive (obviously taxes eat up most of the employer premium savings). More importantly, it significantly reduces stress that the huge worry of losing your insurance no longer exists for people. Healthcare providers would not be required to join the plan but if they did not they could not treat or receive monies from those covered. This provides an outlet for the rich to continue to get and pay for what they want while reducing a potential black market for medical services. Perhaps 5% of docs will take this approach. The total adminisrative burden on insurance carriers is about 15% of premium, not 30%. However, on the medical provioder side, 30% is a good estimate. This plan should save at least half those costs, a couple hundred billion. Okay folks Have at it.
January 30, 2006 5:53 PM | Reply | Permalink
I'm not clear why jdledell says that a rising percentage of GDP on healthcare is bad because it's "non-productive". If you think of it as a consumer service it's no less productive than any other service. But beyond that, it can be viewed as an investment in human capital much like education. Assuming that the increased spending actually makes the population healthier, it will be more productive to that extent. If we spend 30% of a larger pie, that might be better than spending 20% of a smaller pie.
This is leaving aside the question of whether we can spend the same dollars smarter and get better health care for it.
This is also leaving aside the moral question of whether as a society we would rather spend our income on health care versus less vital matters, whether such spending represents consumer goods and services or capital formation.
January 30, 2006 6:33 PM | Reply | Permalink
Giving the consumer more control/responsibility for how their health care dollars are spent will lead to a tremendous increase in one enormous source of waste: advertising.
Think about how much money the drug companies are spending to make you demand Levitra or Viagra or whatever the hot new drug is. Now imagine that the consumer is deciding where and whether to get CAT-scans done, and so on. You'll have ads for blood labs, for exciting new tests you didn't know you needed, and on and on.
One reason we have to go to a single-payer system is to get all the advertising waste out of the system.
January 30, 2006 6:48 PM | Reply | Permalink
Yes; I don't see why $75 spent on a pedicure is "productive" while the same amount of money spent on relieving an upper respiratory infection isn't.
January 30, 2006 8:01 PM | Reply | Permalink
Am I right in thinking you haven't figured out how to "contain" drug prices?
And also, I've thought for a long time that the government gets away with "containing" Medicare costs by way of setting fee schedules (physicians and hospitals don't scream bloody murder), because non-Medicare privately insured patients subsidize provider incomes, that is, fees charged these patients are, lately, 10-15% higher than Medicare fees.
But with a unified system such as you're proposing, there won't be any patients outside the system to provide this subsidization. Won't providers shout socialized medicine?
January 30, 2006 8:29 PM | Reply | Permalink
Think for a moment on our $12 trillion economy. If we spend $4 trillion on health care, that means ALL the other goods and services amount to $8 trillion vs $10+trillion in non healthcare expenses today, a shrinkage of more than 20%. That impacts our standard of living. As long as healthcare grows faster than our GNP we will inevitablably approach the tipping point. The economic models I've seen all use an increased productivity factor due to healthcare improvements to ameliorate the negative economic consequences. But those productivity factors vary dramatically and look no better than guesswork.
January 31, 2006 6:18 AM | Reply | Permalink
Keep in mind that if each state were to implement and execute their own healthcare initiative, the vast majority of them would be very similar. Birth control and things of that nature should absolutely NEVER be subsidized by the Federal Government. If the state of California, for example, decides that they think it ought to be part of the plan, great, they are free to do as they see fit. But remember, if Alabama, for instance (which is both culturally and fiscally conservative) cut out many “progressive” funding programs such as birth control coverage, the prices for necessary healthcare would drop substantially. It is a give and take relationship. Naturally there would be certain forms of guaranteed reciprocity between the states with regard to coverage. Traveling from one state to another should be encouraged, not discouraged. My point is that reform is necessary. When everyone looks for Washington to “fix healthcare” we are all taking our eyes off of the real objective when taking into consideration the problem is GETTING WORSE, not better. Does that not indicate that perhaps a different (maybe vastly different) approach is necessary? I certainly think so.
January 31, 2006 7:00 AM | Reply | Permalink
And even if you make the argument (which you don't seem to be) that higher healthcare spending reduces future economic growth, in order to convince me that that's a bad thing, you have to first convince me that GNP is the best measure of a society's well-being. I gather most economists assume this, but I don't. I think infant mortality rates, life expectancy, literacy and levels of violence are more germane to the well-being of society than the number of SUVs per person. If our GNP per person is 10% higher than that of Germany and we spend all of that 10% on guns and burglar alarms, do we have a "higher standard of living"?
January 31, 2006 7:15 AM | Reply | Permalink