As the health care debate crescendos, it is difficult to pinpoint where the health care debate lost its way. Perhaps it never truly began in the right direction in the first place. So much anger is being directed at a potential public option and those who are uninsured that some of the most pressing issues — those of medical inflation and warped incentives built into the system — are often overlooked.
And why? Perhaps because they are more complex — they require a bit of explanation to understand, whereas soundbites about the levels of uninsured or lies about so-called ‘death panels’ take only a second to comprehend and elicit an emotion. And in the age of breakneck speed information, media outlets often opt for the quick fix, instead of the slow lecture.
If you have an hour, check out the “The American Life” podcast “Someone Else’s Money” for an excellent diagnosis of what is at stake in the health care issue.
So what should (in my opinion) a health care reform bill address? Well, the first thing I think the health care system needs is the average person to be more invested in their health care consumption.
Much of the problem of rising costs results from health care consumers not realizing the massive costs their health care entails — if people are more invested in the costs of their health care, they will take more care to avoid unnecessary treatments that they would otherwise order because the costs are invisible to them.
There are two philosophically opposing positions in regards to solving this problem (and from those two positions, a myriad of different solutions).
- Wean the health care system off the employer basis on which it currently rests.
- Continue the employer-based system, but reform how it works.
I’m mainly going to focus on the second. Theoretically, the money an employer contributes toward a worker’s health care belongs to that worker. However, the worker never sees that money — they only focus on their out-of-pocket expenses. To them, the money their employer contributes to their health care is invisible, except in cases of contract disputes and the like. Abolishing the employer-based system would call for this money to make its way into workers’ pockets, to allow them to pay for their own insurance (this, in turn, requires something like the currently proposed Health Insurance Exchange, but we’ll get to that in a moment).
That model, I think, is largely unrealistic. Although that money theoretically belongs to the worker, I don’t think it would work that way in practice. Instead, employees could have individual Health Care Accounts, into which their employers contribute. In the account lies all the money employers and the individual worker contributes. He/she can then spend the money in their account any way they see fit, as long as it is on health care. In this way, employees will be more invested in how their funds are spent, and will make more effective choices, like they do in other aspects of life. You’ll have more control over your health care than you do right now (since now, employers largely control which plans you can choose from), and you’ll be more aware of the costs, which should help stem the tide of medical inflation. Also, you can transfer funds from your Health Care Account to other people’s accounts (such as your spouse, children, etc…) if you want, and any funds you have left over after you pass away will not simply disappear, but can, for instance, be transferred to your child’s account.
Of course, this model also requires the creation of a Health Insurance Exchange — essentially a market in which insurance providers compete for people’s business. This will curb medical inflation and reduce costs as people gravitate toward the plans that will offer more and cost less. Providers will compete to give consumers what they want (as they do in other areas of our economy). This will get costs under control, and even reduce them. The competition will nullify the need for any kind of public option, which will in turn save a lot of money (though, if you want, there could be legislation for a “Public Option Trigger” which would kick in on a state-by-state basis if health care is unaffordable).
You can even allow Medicare- and Medicaid-eligible people to opt into a Health Care Account, and the government will contribute certain amounts to their accounts, based on their income. This will also help solve an issue that occurs with Medicaid, in which people who make over the threshold amount needed to be eligible for Medicaid instantly lose their Medicaid coverage. This threshold trigger encourages people not to make too much money, lest they be thrown from the Medicaid program and unable to afford health care. Gradating the amount a person on Medicaid receives will allow people to be weaned off of Medicaid as they make more money, not instantly tossed off.
Tort reform should take place — protecting doctors from expensive lawsuits that scare them into over-prescribing for their patients (which drives up prices).
Allow generic drugs onto the market earlier (give only a 5-year exclusivity to the original) — this will allow cheaper alternative for people, and drive Pharmaceutical companies to the next big discovery, instead of allowing them to coast by on 12 years per discovery.
As prices fall, more people will hopefully be able to afford medical care. The government can make income placed into the Health Care Accounts untaxed, which will encourage people to contribute into their own accounts.
A major issue are people with pre-existing conditions. There are a few ways to deal with this — you could legislate that no one can be barred from getting insurance due to a pre-existing condition, or you could give a tax break to insurers who carry people with pre-existing conditions and penalize via taxes those insurers who do not carry people due to pre-existing conditions (and distribute that tax money into the Health Care Accounts of those who are unable to purchase health care due to pre-existing conditions). In this way, insurance companies will have more of an incentive to carry those with pre-existing conditions, and those who aren’t carried are still aided. If the second option is to work, however, the taxes need to be high — the insurance companies need to have a strong enough incentive to take on such people and, if they decide not to, the taxes will have to provide enough revenue to fund the Health Care Accounts of the uncovered.
For those who, right now, do not buy health care of their own volition (mainly, young people), they will be able to contribute into their personal Health Care Accounts at their own speed, and accumulate money to use on health care for their futures. The responsibility for these people is thusly on themselves to decide which course they want to take — buy affordable health care through the exchanges, put away (untaxed) health care money into their accounts in case they need it or for their future, or they can take a gamble and do nothing.
As per those who can afford health care, but decide to take the gamble and do nothing, and then get injured and drain taxpayer money in the emergency room, there could be a deficit placed on their health care accounts that would be paid off incrementally through future taxes on that individual. This will retain free choice, but not penalize everyone at the expense of the few. It will also encourage people to purchase health insurance, just in case.
These are just a few reforms to help increase competition in the health care system and make it more affordable for everyone, while retaining the drive for ingenuity and efficiency.
Medicaid and Medicare also need their own reforms, to put them on the path to solvency, but that’s for another blog post.
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