Saturday, January 30, 2010

Ten things I'd like to see in Health Care Reform

While I am not a fan of the reform plans being discussed, I do agree that health care reform is needed. Many of these reforms would only be applicable to government provided or subsidized insurance, I fervently believe that individuals and insurance companies or health care providers should be allowed to make whatever kinds of agreements they wish in the private market. That being said, here are ten things I would like to see.

1. Cost effectiveness measures. These limit the treatments you can receive, the medicines you can take, and the doctors you can see. A lot of health care that is currently provided has very little benefit. That's fine if you are using your own money, but not if you are using taxpayer money.

2. Substitutes for doctors. If your goal is to cut costs and increase coverage, then this involves increasing the supply of health care. One way to do this is to expand the use of substitutesw such as nurses, practitioners, and physician assistants. Most of my visits can be handled by these people without ever having to see the doctor.

3. Subsidizing medical education. If you can reduce the cost of becoming a doctor, then you can increase the supply of doctors available. My personal preference involves providing payment for med school in exchange for several years of service, just as a West Point education is free with the requirement that the cadet serves in the military after graduation.

4. Focus on preventative care. If someone has government provided health care, then you can require that they come in for an annual check up and actively monitor their situation. This is especially important if we are talking about prenatal care.

5. Health care with externalities. Similar to preventative care, behavior with negative externalities need to be discouraged and positive externalities need to be promoted. This could include things like promoting vaccinations and providing antismoking or diet services.

6. Tort reform. This could cut costs for all customers, not just those with government provided insurance. There could be an explicit ban on suing or a higher cost for policies that include the right to sue.

7. National markets. The market for individual health insurance is really 50 different markets on a state-by-state basis and each state is pretty much dominated by a single provider. Allowing insurers to compete across state lines could cut costs. This would also eliminate the 50 different sets of rules and mandates that currently exist.

8. Doughnuts. It sounds stupid at first, but it actually makes a lot of economic sense. Most people really just need catastrophic insurance that covers major emergencies. These plans may have deductibles of $10,000 for example. This means that people would have to pay for preventative care themselves, and alot of people would go without annual checkups and other preventative measures. Doughnuts provide coverage for preventative care by paying for the first $500 of expenses and they pay for catastrophic care by paying for anything over $10,000, but they don't pay anything in between (the hole in the doughnut). These are really the judgement calls where it is up to you to decide whether or not it is worth spending your own money for the treatment.

9. Innovative insurance offerings. People should be able to buy Health insurance in the same ways that they can buy Life Insurance. You might buy a term plan that holds premiums steady for the next ten or twenty years. You might also buy a whole plan that covers you until you cancel or die and holds premiums constant or at least limits the rate of premium increases.

10. Portability. I don't mind the fact that most people get insurance through their employer, but insurance should not be job-based. However, an expansion of COBRA that allows people to continue their coverage even after employment is terminated doesn't consider the fact that there is a differential tax treatment and that employer-based coverage tends to be way costlier than necessary, at least for healthy employees.

Jurassic Health Care

As is true with any plan where nothing can go wrong, something will go wrong. I don't know what, if anything, will be passed in Congress, but I see several potential problems regardless of the final outcome. Here now is my top ten list of future problems.

1. If the reform involves expanding coverage either with private or public insurance, then the reimburesment rates paid to doctors under the new plans need to be set. If rates are so low that the newly insured still don't have access to health care because no doctors are willing to accept them as new patients, then what is the point.

2. If reimbursement rates under the new plans are sufficient to entice doctors to accept them, then Medicare members, which have lower reimbursement rates, or people that already have insurance start getting left out.

3. If Medicare increases their reimbursement rates to ensure that members maintain their access to doctors, then this will cause the cost of health care reform to go way beyond the original estimates. I believe that this is a major concern. If health care reform is passed, it will be based on cost estimates that are way below what they will end up being.

4. Private insurers may also increase their reimbursement rates so that their customers can maintain access. Any hope of "bending the curve" is lost.

5. The government steps in to ensure that all patients have equal access to doctors regardless of the reimbursement rates offered. Private insurers will lower their rates since their is now no advantage to offering to pay more. At this point doctors basically become government employees and their offices are jampacked with patients making it harder for everyone to get an appointment and see the doctor.

6. Doctors revolt by no longer accepting insurance and moving to a cash only basis. This may not be a bad thing in terms of reducing the costs of health care as much of the cost goes to unnecessary procedures that people wouldn't pay for if they were paying their own bills.

7. The number of students training to become doctors starts falling as a future of dealing with government red tape doesn't seem so enticing.

8. Another part of cutting the costs of health care is implementing cost effectiveness measures in order to cut the extent of unnecessary procedures. These measures may include things such as less frequent mammograms, new guidelines on transplants, and reduced end-of-life care. The determination of cost effectiveness would be made by experts, also known as death panels.

9. I'm acually a big fan of cost effectiveness and support death panels, but affected parties will cry foul on these measures and demand that they be alowed to receive any care approved by their doctor. Government will no doubt relent and pay for less efficient treatments causing costs to go way beyond original estimates.

10. If insurance reform involving guaranteed issue, community ratings, and individual mandates passes, then premiums for healthy people would rise dramatically. Granted, premiums on sicker people would fall, but you are robbing Peter to pay Paul. I don't think anyone disagrees that this would happen. Some people believe that that is a fair tradeoff and some people don't.