A Plan, not the Plan

After my histrionic post Wednesday about the importance of health care reform, I thought a more academic post was needed to balance the equation.  It is premature to discuss the plan coming out of Congress, because there are about fifteen of them, but I thought I could point some of the best ideas (many of which have no chance of happening).

1. Scrap the whole system and switch to a single payer model.

Yeah right.

2. Close the Health Benefits Tax Loophole.

For a variety of reasons- including Obama hammering McCain for this proposal during the elections–  but primarily because no one wants to raise taxes, this is very unlikely.  However, it is the only idea that would both fund universality and actually lower the cost of health care.  The reason health care keeps getting more expensive in this country is because people have incentives to use it improperly.  Employer insurance, because its the only part of compensation that isn’t taxed, keeps growing as a proportion of total compensation.  In other words, instead of getting a raise people get a more expensive health-care plan.  Meanwhile, consumers don’t see how expensive health care really is and low co-pays don’t offer a sufficient deterrent against over-consumption.  If benefits were taxed then people would feel when prices went up and attempt to cut costs, plus businesses would stop pushing compensation into health care.  Not to mention that if you don’t have an employer subsidizing your health care, then you are indirectly subsidizing everyone else’s health care because your taxes fund a more expensive Medicare.  Selling this plan should point out that this loophole is in effect a tax, only it is collected by insurance companies.  Improperly selling this plan may cause you to lose elections.

3. The Public Option

The public option is a government sponsored insurance that people could opt into rather than choose an private insurance.  Insurance administrative costs are 25% of the price of health care in this country, while only 3% of Medicare costs are adminstrative. Thus, a well run public option would drive private insurance costs down by increasing (or in many places creating) competition.  Further, because most consumers do not have the ability to choose health care plans now (in that the only choice they have is their employer option) this would actually create a free market, rather than hinder it.  Naturally as this would cut into the profits of insurance companies, this is the part of the bill that is the most strongly contested and public option as currently proposed is toothless and wouldn’t even be available to most Americans.

4. MedPAC on Steroids

Under this plan, general Congressional incompetence would be mitigated by giving the recommendations of MedPAC the weight of law, unless blocked by the President or Congress.  This allows incremental progress without the furor that arises every time legislation is debated.  Instead, experts in the field- not morons and demagogues- would set policy and then it would have to be blocked by said morons and demagogues.  This turns legislative incompitence against itself, since it is so difficult for Congress to do anything that it probably would struggle to block MedPAC recommendations.  This sort of advisory committe recently recommended an end to the fee for service system in Massachusetts, which is the ultimate way to cut costs.  This is the trojan horse in the bill that might actually result in transformative change.

There are a bunch of other things out there, its a 1000 page bill after all, but those are my favorites.

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2 Responses to A Plan, not the Plan

  1. Carr says:

    I like the idea of public competition, but Im not sure about option number four. Doesn’t this essentially create a healthcare Fed, acting above the law, secretly and blinding with science any would-be investigations or audits?

  2. MAR says:

    I agree with your point Carr about Joe’s excessive faith in ‘experts’ at MedPAC. I’ve done plenty of work with coding and pricing ‘experts’, and they do some insanely stupid things (like allowing two of three products to be reimbursed at rate X, but allowing an identical product to be reimbursed at rate X, plus an additional Y per square inch of the product applied. Which product do you think now has 90% market share?).

    That being said, despite a forgivable overenthusiasm for experts over legislators, Joe’s point about the fee-for-service system being the problem is absolutely spot on. It’s hard to overemphasize how perverted this system makes incentives, especially when combined with rising malpractice costs. If the patient obviously has a kidney stone (to quote from a Sullivan ‘View from your Sickbed’ story), everyone is incentivized to nonetheless do a CT scan. Another ‘service’, another fee, and your ass is covered against a malpractice suit. Meanwhile, costs rise inexorably upwards, and of course, the CT scan finds nothing.

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