Healthcare Compromise – The Uninsured and Problems Facing Healthcare

Although there is room for improvement in our health care system, our current path will not solve the underlying problems. We need reform but we don’t need the confluence of bureaucracy and regulations currently under construction.

First let’s examine some facts: It seems everyone agrees there are around 47-48 Million uninsured. Of that total the White House includes 9.7 million foreigners, (Many of those illegal). And, according to the same Census report, 8.3 million uninsured people earn between $50,000 and $74,999 per year, and 8.74 million make more than $75,000 a year. That’s roughly 17 million people who ought to be able to “afford” some health insurance, (they make substantially more than the median household income of $46,326). Furthermore, a 2003 Blue Cross/Blue Shield association study estimated that about 14 million of the uninsured were eligible for Medicaid and/or SCHIP and would be signed up automatically if they went to the hospital. Technically these people have health insurance.

All-in that leaves 6.26 million Americans who are truly without health insurance. Hmmm, Should we spend 1 trillion dollars and completely alters the health care delivery, payment, and responsibility to satisfy 2% of the entire U.S. population? Along the way should we cut physician and hospital reimbursement for care? Does anyone believe cutting compensation will improve care? That’s what is proposed.

Examining the uninsured population a little further we see that 45% of the uninsured are “temporary”. It’s unclear which of the above categories they fall into. However, statistics show that these 20 million “uninsured” are without insurance for an average of only 4 months. Sure “temporarily uninsured” is dangerous. Many go longer than 4 months, and if care is required during the temporary period it can cause significant financial damage to families as well as the institution obligated to provide medical care. This point needs to be addressed. However, the current solution doesn’t specifically address this problem.

Lastly, the issue of “quality of care” in the U.S. verses other countries. Anyone who doesn’t inherently suspect that health technology and techniques in the U.S. is not one of the best in the world is delusional. This propaganda is distorted misinformation from a study performed by the World Health Organization (WHO). The report is not an analysis of care (The U.S. ranks #1 in outcomes for 14 of 16 cancer treatments) but more an analysis of social contributions towards healthcare. Since my goal is facts and solutions I will sum up the report for the otherwise misinformed. The WHO report has several major factors that contribute to country rankings. One major factor is: Individual Financial Contributions to healthcare. The scoring method is biased towards countries with higher levels of social (government) contributions. The result is a penalty effect on those countries with lower government expenditure. The scoring system further penalizes the U.S. for higher homicide and motor vehicle deaths which have nothing to do with healthcare delivery. The bottom line is it would be nearly impossible for a country like the U.S. with a “free-market” health system to score high in the overall ranking.  Bottom line, the U.S. is #1 in healthcare not so high in government financial intrusion.

Now that we have some facts let’s examine where there may be some legitimate concerns, and address some specific areas for improvement. The unintended consequences of the proposed solution will be enormous. To rush into a social experiment of this magnitude without every reasonable outcome fully vetted and addressed is reckless.

The problems:

Rapidly rising cost, A growing burden on individuals, families, and employers to maintain premium payments, the inability of those with health issues to get health insurance, the temporary uninsured, and the 6.2 million that may require some legitimate support and safety net.

For the benefit of society we need some way to manage this group (33M) for the greater good of society as a whole. However, the reality is that there are options available today that would resolve a big chuck of these obstacles. What we need is reasonable fine tuning to maintain relevance to the modern economic environment – Not the 1950’s environment. For one, there are high deductible health saving accounts which have not been embraced by individuals. Millions of uninsured could afford these premiums ($75-100/month for average 40 year old) yet they opt for nothing. This is just irresponsible on the part of many and it affects us all when these people (earning over 50K/year) become ill, and transfer their burden to society.

Another significant factor driving up cost is the fragmented system of regulation on our current health insurance market. Simplifying this system, providing new health technology, modernized regulatory and oversight, and standardized infrastructure including claims forms etc. would drive out significant overhead, create synergies, improve productivity, increase competition, and further drive out waste and unnecessary spending. This is the only area where we should ever see government involvement in a capitalistic society. Creating infrastructure and a platform on which capitalism can thrive. (i.e. interstate transportation system)

Next: The burden associated with the uninsured entering a hospital/emergency room. Hospitals account for these services under the indigent care expense line in there budget and make up the loss by overcharging the insured.

The final factor is addressing the reality of the “truly uninsured“. The burden (financial or otherwise) regardless of whether they are temporary, illegal, foreign, or have sufficient income – they must be dealt with. A real solution does not ignore reality nor should it jeopardize 250 million people to fix the problems of 6 million.

Solutions:

The following concepts will specifically impact the major issues facing the U.S. health delivery system. I have defined these major categories as: 1) Cost control 2) Minimize provider loss, 3) Reduce Insurance premiums 4) Provide catastrophic coverage for every American 5) Create an environment of affordable, manageable health delivery and 6) zero to minimal added cost to taxpayers. What follows is a 21st century, free market based, U.S. world leadership solution. They are the foundation of a real solution, a place I believe many of us can agree.

1) A system that insures displaced worker for up to one year. Most individuals look at COBRA through the lens of unemployment and conclude that it’s unaffordable. Of course they do; they’re unemployed. Employers should be required to provide some minimum level of health insurance for 12 months after unemployment. After year 1 the displaced employee could choose to buy the minimum coverage in that employer group for an unlimited time frame. Result, they are able to stay in that group as long as premiums are paid, no preexisting condition discrimination, and this specifically addresses the problem of the uninsured and uninsurable.

The minimum standard coverage would include 2 parts: First, some preventative and basic health care. i.e. 2 doctors visits annually plus some diagnostic coverage benefit. I would limit this coverage to $500 per recipient or family member. This would keep people going to doctors and minimize future catastrophic needs. Also it gives the unemployed or those doing other work access to a group health plan. Anyone who has at least one job in life would have coverage as long as someone paid a reasonable premium. The second part of the minimum requirement would be catastrophic coverage over $100,000 to the $250,000 threshold. Individuals could have the option to purchase “gap” coverage to fill in between $500 and $100,000 if they choose. Once employed again the individual would be transitioned to the new employer group and responsibility transferred. (This would only apply to groups over some predetermined level i.e. 50 members)

2) We need a National health Insurance Regulatory Agency so insurers who provide policies over several states could meet ONE regulatory requirement recognized by all states. I would make this requirement significant in areas of financial capitalization, loss reserve, as well as other necessary standards. It should be tougher than any state so that there is no “systematic risk” in the event of one national provider failure. Essentially, it should be tough enough to almost eliminate the possibility of failure. This would create an environment in which national plans would emerge strengthening competition and reduce insurance cost. Large insurance plans would not have to contend with 50 regulators, and regional providers that can do better on a local level would remain and drive out cost on a regional level. An insurance “exchange” as is currently being discussed would be a sufficient alternative but I don’t believe it will work. It is irrational to allow New Yorkers to buy insurance in Georgia or Indiana. Those plans are priced for those geographic areas and insurers will just impose higher premiums in zip codes they don’t want business.  In addition how will an insurer be regulated in NY that may be based in Tennessee? It seems like it adds more – not less – bureaucracy, but I am open to suggestions.

3) Minimize provider loss: The burden of the uninsured on hospitals, and other providers. This is one of the major issues driving up the cost for the insured. I would impose an off budget, segregated, “Lock box” type trust fund that could not be borrowed from EVER. A small tax on wages would provide for catastrophic coverage over a $250,000 threshold for every American. Since this would be a separate tax on income (over federal poverty level) it would bring every worker into the system including those wage earners with sufficient income to afford some coverage but skate by without. These individuals currently add cost by increasing risk, utilizing ER services for care, and those who have insurance pay higher prices and premiums.

As these individuals are brought into the system they can still opt out of other coverage but the high burden they place on the system is reduced and their newly captured tax pays for their catastrophic coverage. At least they have coverage above 250,000. Hospitals are relieved of the burden of losses above the 250k. The catastrophic burden is mitigated and shared by every Americans and more importantly foreign workers, and those irresponsible Americans earning sufficient wages but not contributing to the system.

Important: Those currently insured are rewarded when the artificial inflation of services is reigned in and provider loses are mitigated. This will result in some reductions in health insurance premiums, offsetting at least some portion of the tax paid. Additional premium reductions would occur since most insurance policies cover up to 2 million, 5 million, or even unlimited benefit limits. Those who currently have health insurance would see further premium reductions as the liability above 250K is transferred from insurance companies to the trust fund (could be phased in once the trust fund is in place). The total tax to those already insured would be offset – in time – by the savings. But I’m not banking on 100% return, but the added costs will be borne predominately by those who can afford the coverage in the first place but choose to ignore the need.

Results: relaxed underwriting standards, (insurer would be more willing to accept some riskier applicants since exposure is limited). This expands the availability of reasonably priced health insurance for those with preexisting conditions and/or elevated risk profiles. This further addresses the uninsured however many  would eventually become tied to some group plan. (above)

4) “Cost control”: (The ugly and anti-free market dilemma) – The government could create a reimbursement rate for services provided abovethe catastrophic amount controlling expenditures at the high end. This would be applied to high cost treatment and procedures only. An area where we could realistically apply responsibility over a group of multiple providers (Physicians, hospitals, and pharmaceutical providers) for the package treatment and healthcare of one. (Although not entirely necassary.) The plan could include BONUSES for quality of care, outcomes, and other health performance criteria that many advocate.

I would allow providers and hospitals to balance bill (up to 15%) and opt out of the catastrophic coverage system altogether (not likely since they would be exposed to loses when any uninsured presented in their emergency room and they were mandated to provide service) ALL group and individual “comprehensive” plans would have to include excess charges. However “Gap” plans available to individuals (one that paid up to the 250K cat coverage) would not. These “Gap” plans would only be available as HSA accounts and would include a minimum ($50/month) HSA contribution. The trade off here is the HSA contribution would belong to the specific individual but could only ever be used for healthcare. This is the trade off for purchasing individual coverage without the “excess” coverage feature. Theoretically the HSA owner would be saving for catastrophic expenses that went into the “excess” dimension. The insured would have the option to purchase these hybrid HSA plans or purchase plans that included the additional excess coverage.  Result: Under The new reform the 20 something’s obligated into the system could accumulate (with HAS’s) 10’s of thousands of dollars in their 20’s and 30’s which could be used later in life as health care needs become more likely. Later in life it could be used for individual or family healthcare and eventually it could be applied toward LTC premiums after age 55. That would solve ANOTHER problem facing the U.S. healthcare system.

As many have stated when individuals use there own accounts they spend more wisely. Having ownership of a health plan from the age of 18 or 21 keeps individuals involved.  Ultimately we’ll create an environment were everyone pays something, everyone gets something and everyone has some level of affordable healthcare insurance. No government intrusion necessary.

Some additional Details: Similar to our current environment HMO’s and other insurers would still negotiate reimbursement of excess charges above the 250K catastrophic limit. The plan provider would manage and make payments to providers but would be reimbursed at the scheduled rates from the healthcare trust. Further we need to also reform HSA account use and expand premium tax deductions to individuals. The employer provided version requires users to spend down these accounts each year. This is Dumb. We need to allow employer based MSA’s  to accumulate over years.

Although the “excess” billing option creates an environment of complexity to this solution it allows some sensible variations in pricing and regional cost variations. At the same time it does not create a system that encourage providers to “excess bill” and individuals to avoid the coverage. The result may be some high end clinics, hospitals and providers, but this is no different to the free-market environment present in the current hospital and provider system. Some providers will always be better than others. Experience and expertise will naturally accumulate in “pools” this is Nature at work and a working plan will have to accomidate the laws of nature.

In a later phase I MIGHT require all insurers to cover all applicants at a maximum of 2x the base rate. Or create some sort of national high risk pool and assign applicant to plans bases on plan size and other factors. This would make health care coverage attainable to those remaining high risk individuals. I would only consider this after several years and the impact of phase one of the health care reforms I have proposed is evaluated. Another option is a “High risk” reimbursement for those who have been denied coverage from 2 of more insurance providers. They would pay 2x the base rate from a provider of their choice and the government would kick in the balance necessary for the provider to take in the previously denied applicant. (Details on this portion world need to be worked out)

Many readers might retort that I overlooked items such as Malpractice Insurance and caps on lawsuits. I trust you I did not. Certainly there are additional issues that need addressing but healthcare reform should not be confused with other reform. We must find common ground and that sometimes means shrinking the ground to be covered. (pay attention Washington)

Before we continue on any such reform we should keep a few simple principles at the top of any government reform package including healthcare:

1) Do no harm
2) Improve the system for everyone.  Society should provide a safety net, but it should be simple and just – No excessive burden on any class.
3) Minimize government involvement (infrastructure, regulatory platforms, and technology platforms are the role of government – Not biased competition, or industry takover) If you don’t understand the hidden costs of government involvement – Read this next.
4) Find Common Ground – Horse trading is not working in Politics. Effective legislation can only be accomplished when we find areas of agreement and commit to legislation directed to specific areas on which there is agreement.

Responsible government means specifically defining problems, outlining solutions, and analyzing reasonable outcomes. There needs to be sufficient time for review before instituting reform. 30-60 days seems rational time for debate and analysis. Anything less is irresponsible. Our Constitution was not completely ratified for 9 months and it took 3 months before the first state put its signature on the plan. The current rush into new programs is our current governments attempt to cloak what is happening from the public. It is a disgrace, and the absence of these principles is destroying our great country. We need to return to the place our founders created.