Thursday, June 18, 2009

BACK TO THE DRAWING BOARD?

The current congressional approach to health care reform of adding ever more fixes without changing the underlying system looks increasingly shaky.

What are the some of the indications?

1. The public plan has generated enormous opposition—and not just from insurers. Whether anyone believes that a Medicare clone would reduce under-65 health care costs or not, it is unlikely that a final reform bill will include anything other than a weak compromise.

2. The health care industry “promise” of $2 trillion in savings was withdrawn almost as soon as it was made. Only the truly na├»ve believe that the industry would willingly reduce its revenues.

3. Employer mandates face a “heads we lose, tails they win” dilemma. Mandating that every employer pay a substantial part of employee premiums won’t fly, but imposing only a nominal levy on non-payers will result in many employers abandoning existing coverage.

4. Individual mandates face the same problem as for employers. They may work where pre-reform uninsured numbers are low, but imposing them on states like Texas and Florida with more than 20 percent uninsured looks overwhelmingly difficult.

5. The Congressional Budget Office analysis of the draft Senate Health, Education, Labor, and Pensions Committee bill estimates that it would cost more than a trillion dollars over ten years and still leave 37 million Americans uninsured.

The shakiness of the present congressional approach was underlined this week by CBO Director Doug Elmendorf. In a letter to Senators Conrad and Gregg, Elmendorf emphasized: “large reductions in spending will not be achieved without fundamental changes in the financing and delivery of health care.”

And that’s exactly the issue.

If we want to achieve something close to universal coverage without bankrupting the nation (although this may happen anyway, without health care reform), we have to rethink our approach.

So here are seven principles to consider:

1. Affordable basic benefits – Everyone should be guaranteed basic coverage, but we can’t afford Cadillac-level (or possibly even FEHBP-level) insurance. Ultimately, funding availability must dictate basic benefits, not the reverse.

2. Fairness of tax treatment – Employers should have the option of providing supplemental coverage, but this should not be subject to an inequitable tax exemption, available only to some.

3. Price competition without “cherry picking” – As in other industries, competition should be fostered by transparent pricing of basic benefits (e.g. through an insurance exchange), with supplemental benefits separately priced. Insurers should be restricted from selling directly to employers whose employees are able to buy coverage through an exchange.

4. Individual choice, individual payment responsibility – With the exception of existing government programs and self-insured groups (which, with no insurer risk or profit involved, are assumed to provide better value), individuals should have the responsibility for choosing coverage that best meets their needs and, subject to subsidies for the lower-income, their budgets.

5. Restrictions on monopolies – There should be effective constraints on insurer monopolies, as well as on provider monopolies in which specialists in an area group together to control prices.

6. Funding – Just as with Medicare and Social Security, there should be specific guaranteed sources of funding for basic benefits, rather than continuing to rely on the goodwill of employers and the financial abilities of individuals.

7. Freedom from politics – As proposed by Tom Daschle and others, health care policy should be set by an independent board. Consideration should also be given to moving Medicare payment policy to the same board.

The Senate Finance Committee’s decision this week to delay reform bill markup until after the July Fourth recess is a strong indication of their own unease with the current direction of reform. Perhaps they could use the holiday to consider these principles.

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