May 25, 2005
Being Matt Miller
Matt Yglesias and Brad Plumer are discussing Leif Wellington Haas's plan for universal health care, which breaks down into another one of these individual mandate thingies. Sigh. I feel so left out. There was a time -- not long ago! -- when I'd have been the first to tear through Haas's 78-page plan, summarize it, and issue my pronouncement for its chances. But that all caught up with me come midterms and now I'm having to -- yawn -- do schoolwork. Major bummer. But since I can't discuss Haas's attempt, why not come up with one of my own?
This here is basically a way of organizing universal health care in Matt Miller's world. You know the rules: progressive ends, conservative means. Since a surprising number of you folks, my good readers, seem to work in the health care industry, I want your thoughts on feasibility. Deal? Deal.
In short, I'm asking about progressive HSA's of the sort I detailed yesterday, but with a few modifications for enhanced progressivity. Every year, the government would deposit $1,000 worth of health credits into your account. Unused portions would roll over, up to a total of $4,000 (at which point the government would stop depositing in your account every year, starting again when the build-up had shrunk). Once health care costs for the year had surpassed $1,000, individuals would be responsible for the next $X of costs, which could be paid out-of-pocket or through account build-up. You probably noticed up there that "X" isn't a number. Right you are. I haven't forgotten that these are progressive accounts! If you make less than $15,000 and have a dependent, you pay nothing. $25,000 would give you a $500 deductible, $50,000 would stick you with $1,000 bucks, $75,000 with $1,500, $100,000 with $2,000, and so on. After you'd paid through your deductible (which, you'll recall, only comes after you used the free $1,000 the government deposited in your account), it becomes a copay arrangement, with the government responsible for varying amounts depending on your income (say 85% for high earners and 95% for low). Also, all preventive tests and screenings (think mammograms) are fully covered, they don't cost you anything.
As part of this arrangement, the government organization charged with administering the system could set about negotiating better prices on drugs, treatments, and so on, not to mention increasing the use of RN's for general care. They could further publish a booklet, or at least online guide, to the national average costs of a variety of medications and services, which consumers could then use to compare with the prices they were finding locally.
This preserves the consumer-side competitive forces that conservatives are so excited about by not only offering incentives to those who save their health credits for roll over, but by forcing users to be conscientious about what they get and where they go for treatment beyond basic care (basic care being covered by the first $1,000). According to Osh Kosh, this system is tamping down on their spending growth quite well, it'd assumedly have a similar outcome nationally. But it also results in full, affordable coverage for Americans without being unduly prejudiced against the sick, without offering disincentives for basic care, and with a large degree of progressivity.
The one thing I'm not sure about, of course, is the cost. I assume it's feasible since a company is currently experiencing savings by using it, but I really have no idea (maybe we can institute a VAT?). Federal actuaries in the audience are welcome to add their thoughts. As for the desirability of this sort of system vs. a single-payer one, I'm really not sure. If all things were similarly politically feasible, I'd go for the French system. But they're not, and despite all the promising articles predicting a move towards nationalization within the next decade, there's nothing certain about it. Codifying universal coverage by offering a sort of HSA is a worthwhile goal, but not with the traditional, deductible-first HSA's. Something along these lines, conversely, has many of the HSA's benefits without all its regressive effects.
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Not entirely sure I understand. This government-administered HSA would cover who? Only those who don't have employer-provided coverage? Or anyone who wanted to buy in? Would there be premiums charged for it, or would it be wholly funded from tax revenues?
Posted by: Toast | May 25, 2005 12:46:02 PM
Sort of like the question above: I assumed you meant the plan would cover everyone. Just as a technicality, how then is it not single payer? Only because it would allow people to buy insurance to cover the donut hole and the remaining 5-15% of the catastrophic coverage?
Beyond the difficulty of implementing this sort of universal more-or-less single payer plan that would wipe out the health insurance industry as we know it (not a bad thing, but obviously a politically difficult one), there's the problem of defining the economic unit. Defining household "heads" is tricky -- it's easy for companies to define the "head" as the person who is actually their employee. Would instead all adults be automatically covered and then let one of the adults in a household claim the children as dependents to gain the extra deductable so that the plan is done on the individual level (like, say, it is in Canada's single payer system)? The accounting might get tricky but I guess it could all be worked through tax returns.
Just noodling. Interesting idea here.
Posted by: tlaura | May 25, 2005 12:56:40 PM
Your 'plan' seems like a good start, but with the hurdle that the insurance companies would fight to the death (yours, not theirs).
The $1000 base is probably too low, as fees would not appear to be controlled (no insurance company nannies!), and even today's 'allowed charges' by insurance companies (or medicare) would very quickly consume the $1000. I don't know what the average monthly fee for large-company group health insurance is (total of company contribution and employee contribution), but I'd guess that it is in the $400/person/mo range, so $3-5000 base would appear more appropriate.
As indicated above, the major impediment is the insurance companies...
but a nice, simple, understandable plan.
Oh, btw, how does MedicAid fit into this?
Posted by: JimPortlandOR | May 25, 2005 1:10:19 PM
Aside from the questions above, which all seem important... almost any major illness or surgery would pretty much eat through the base $1000 and the deductible (even at high incomes), and then have the govt. footing huge portions of the bill. This, it seems to me, would lead fairly naturally to price controls, which in turn would lead to opt-out mechanisms (private care above and beyond the services offered, etc), followed by a rush to the exits by doctors (and hospitals) more interested in profits. And it makes no mention of pharmaceuticals. And it leaves no incentive for things like health club membership deductions. Also it seems to leave room for unnecessary medical procedures, though I'm assuming there'd be a mechanism to evaluate medical necessity, thus adding more costs. It also seems to minimize pressure on health care service providers to improve quality or standards of care, unless the idea is to pressure them to fall in line via payment structures that codify all aspects of care. And who would define those? HSAs currently favor the healthier and the wealthier and so, it seems, does this plan. The healthiest would hoard their funds, and the wealthiest would opt out for private solutions, leaving the govt. paying for the sickest and poorest. Isn't that an expansion of Medicare and Medicaid?
Posted by: weboy | May 25, 2005 1:28:49 PM
almost any major illness or surgery would pretty much eat through the base $1000 and the deductible (even at high incomes)
How is that different from your typical private health plan? Any major illness or surgery quickly exceeds max out-of-pocket costs for those as well. And yes, this new government plan would have to use its leverage to set standard "usual and customary" prices with providers, the same as any private insurer does. Opt-out plans, it seems to me, would only be attractive to people seeking extraordinary coverage for heroic measures or (more likely) coverage for a broader range of elective procedures.
Frankly, I don't see how the sort of HSA plan Ezra is suggesting would be at any substantive disadvantage compared with similar private plans. Assuming, of course, that it wasn't deliberately hobbled by ideologically-driven poison pills -- e.g. the way the medicare prescription drug bill prohibited the government from negotiating lower prices with drug companies.
Posted by: Toast | May 25, 2005 1:56:25 PM
More on the $1000 base:
- if prescription drugs are included, then the $lK would be gone fast.
- a large, and rising fast, portion of health care costs are laboratory tests. A not-very-extensive set of lab tests can eat the $lK in one gulp. Fairly routine screenings recommended in middle age (prostate lab tests, colonoscopy, breast screenings, blood lipids (fats), etc. are no longer unusual.
Posted by: JimPortlandOR | May 25, 2005 2:18:20 PM
Toast, I think the issue isn't whether the HSA plan is at a disadvantage to private insurers; the issue is whether it offers a substantive change or improvement to the current system. Replacing the hodgepodge of private insurance systems - minus the coverage gaps - with a government-payer system covering the same things, only increases the cost structure, rather than reducing it. I don't see how that's an improvement. And that's before questioning the defnition of "usual and customary" prices, or something like "elective".
Posted by: weboy | May 25, 2005 2:40:25 PM
I think one of the key problems here is that you've assigned a dollar amount to the base benefits, rather than offering specifically preventative care. Give folks free physicals and check-ups, not $1000 of whatever treatment they want (watch the chiropracter claims pile up), and especially don't encourage them to skip their preventative care so they can "save" for the future. The lack of preventive care is our system's biggest problem, and almost any incentive you give people to forgo checkups will result in bigger bills down the road.
Posted by: Kylroy | May 25, 2005 2:50:42 PM
As far as I can tell, the driving force behind HSAs is to make consumers more cost conscious. That is to encourage them to consume less healthcare or to bargain over the price better.
I don't know how or where to bargain over the price of blood tests. And people who have chronic conditions often need regular blood work.
Posted by: Abby | May 25, 2005 3:03:50 PM
On "price controls": I favor a version of Social Credit, and this would likely require a special plan for healthcare. In addition to some form of single-payer, I would fully fund starting costs (med school, etc.) for any remotely credible applicant, provided she agrees never to charge anyone more than the government-desired price for each service. Except for the source of the money (and see link on this subject), the plan seems fully libertarian.
Posted by: Omar K. Ravenhurst | May 25, 2005 3:30:14 PM
don't forget that there is some level of rollover to 4k max.
it's unlikely that you'd need major services each year. just a note to remember.
Posted by: scott | May 25, 2005 4:00:32 PM
Interesting objections, lots to think about. As I said, I'm just turning this over internally. A few clarifications: as I noted in the post, screenings and tests are free. Anything preventive aside from a basic doctors appointment is not only free, but encouraged.
2) I don't think, in a national plan, you can give incentive for going to the gym. Too hard for the government to coordinate with all the gyms in the country.
3) Prescription drugs are interesting. If you raise up the pre-deductible limit, and make it go progressively higher as folks age, that seems doable.
Posted by: Ezra | May 25, 2005 4:57:30 PM
Ezra - these free tests and doctor's visits and other "preventive" services - who, then, is paying? the government? How would the reimbursement be fixed? Are these doctors simply on flat salaries? What do you mean by "encourage"? At some point it would seem necessary to ap even preventive visitations that were excessive... How are you incentivizing providers to provide a service for which they will only receive some sort of small base compensation? - seems to incentivize performing more unnecessary procedures, not less.
On prescription drugs - are you suggesting co-pays? What kind of structure? who would evaluate existing and prospective therapies? how would you sell in cost controls to the big pharmas? and how would you deal with generics/recommended therapies vs. higher end or me-too products?
Posted by: weboy | May 25, 2005 5:31:43 PM
weboy - The thing about HSA's, however, is that they're not the same old crappy product that health insurers have been offering for the last two decades. They're a completely new "consumer-directed" approach to healthcare that is just getting a trial run from a handful of private insurers this year. The structure of these plans, as Ezra outlined in an earlier post, offers a brand new combination of incentives that you don't see in HMO's or PPO's. And as one of the first guinea pigs, I have to say that so far I'm impressed.
Posted by: Toast | May 25, 2005 5:46:28 PM
Hmmm... I'm gonna point at another part of the plan, where you suggest more use of RN's for general care. I think I've read this point of yours in another post, but didn't respond at the time. My girlfriend went through a painful period due to multiple cysts that had grown on her ovaries, as well as endometriosis. Endometriosis isn't easily detectable, but cysts could have been detected and controlled before it got to the point where surgery was required. Guess who missed the development of cysts during her regular checkups? The general nurse practioner (or whatever you call it). While I'm not against this idea or any similar ideas, I think that before the government takes on the financial side of the health insurance business, there have to be some solid ideas on how current practices are going to be improved... which is, I suppose, part of the whole problem. It would be a terrible shame if the battle was won on universal health care, one way or another, yet the war was lost because the government wasn't able to control costs.
Posted by: Nuclear Era Poet | May 25, 2005 5:49:58 PM
If I had to pay for all my medical care out of pocket, it would be more than $4k per year. About $400/ month for pharmaceuticals, plus bimonthly blood tests. That's before you get to doctor's visits. Some people would never be able to save up.
Posted by: Abby | May 25, 2005 8:13:51 PM
Before you get completely carried away, remember that any program has to have achievable limits. That said, once you're equipped for a service it only makes sense to keep it busy. Obviously, any public health concerns should be carried by public cervices. That takes care of inoculations and preventative screening. Prescriptions, vision aids and non-critical dental services are all likely opt outs. Chronic care is a sticker. It can be review intensive and hard to administer. That said, getting the emergency waiting room cleared of non-emergency nuisance care has obvious advantages. The main thing is to find a way to reduce financial paperwork and markup. It is possible to give bureaucracy a worse reputation than it deserves. The main thing is to reduce interference and give a mandate that makes sense. And not everything has to be done in hospitals. Clinics have many virtues. But seriously. How can anything else compare to universal medicare in reducing paperwork and litigation ? It scares the hell out of the make work private interests. That's because it's a simple idea. For once, an easy sell ?
Posted by: opit | May 25, 2005 11:44:55 PM
Consumer driven health plans/health savings accounts - the problem that i have with this idea is that consumers in general don't have the information necessary to choose the most efficient medical care and it is most inefficient for them to have to research their options.
In my experience Health Insurance companies all realize that there are serious problems with the health care delivery system - but they are only one player in the whole system.
In a lot of cases for-profit hospitals that are the only game in town so to speak have a lot of leverage in negotiating contracts. All of the current payment methods have incentives that are problematic. Any FFS reimbursment methodology encourages more procedures/services than are necessary as well as not giving provider any reason not to order expensive tests/send people to expensive facilities or specialists. On the other hand HMOs have a bad reputation in the minds of both patients and providers. It does however control costs (depending on how well it is managed) and control utilization. The problem with that model is that doctors have the incentive to underprovide necessary care plus many HMO arrangements involve a lot of carve outs, most importantly inpatient care with various stoploss agreements which definitely limit the extent of cost control. So in all these arrangements there is a constant battle between doctors and the insurers. The model which seems to work best is the staff model HMO where the insurer is the exclusive provider of health care because the doctors are salaried and they own all the facilities they focus on cost effective treatments and consistent standards - Kaiser is the biggest example of this and from what i know they deliver very consistent care for way cheap. The veterans health administration is another example run by the government. Drawbacks of staff models are the large fixed cost in having your own everything which requires a lot of membership . The advantage is minimal cost for each additional member. This arrangement also lends itself most easily to disease management because they have all of the medical records and will directly reap all of the savings from reduced need for services as long as the member stays with the plan. This is directly maximized in the case of the VHA because they have their people for life.
The problem with HSAs is that they don't do anything about the provider incentives and lack of coordination. I don't think that average workers like these plans at all because they don't want to have to do a bunch of research. CEO types however LOVE the idea of these plans. Average workers prefer less cost sharing and are willing to accept network restrictions but they don't generally make the benefit offering decisions. In my opinion there is just too little information available to people to make a really informed decision - do you really want to be arguing with your doctor or force him to use a hospital that he likes less? Hospital charges are so unpredictable anyways - a hospital that is great and efficient for maternity may be horrible for orthropedic surgery for instance. The other problem is that people may assume high cost = high quality when there is no consistent relationship between them. One huge challenge in general that we should address is at least having generally accepted and widely used quality standards with some sort of public disclosure. Part of the battle is even to measure all the moving parts in the system and at least capture the low hanging fruit.
Malpractice litigation is a pretty small component - malpractice insurers have also been gouging doctors. If you do get seriously hurt from medical care then you probably do need money and that just sucks - maybe we should work on AVOIDING those situations as much as possible and cracking down on the worst doctors who we don't want practicing anyways for a lot of reasons (a lot of malpractice is serial offenders) Also people are less likely to sue for malpractice if the doctors are nice to them and talk to them - can we make that a national campaign too!
I like the idea that was in the article in the Washington Monthly about expanding eligibility and capacity of the Veterans Health Administration maybe to people who perform x years or x hours a year in a service program like Americorps - hell we could use it for medicaid and medicare too and allow buy ins with a sliding scale premium. Drastically expand it as a governmental function akin to public schools - people can send their kids to public school for free or pay for private school and the private schools have to compete with the public schools for their business but we generally agree that everyone supporting public schools is in the public interest. Frame it as a community service that everyone should contribute too and promote the hell out of all of the benefits can offer everyone.
Because now there is a piecemeal defacto provision of some level of health care for uninsured/underinsured people but whatever that costs besides medicare and medicaid "cost control" measures is just cost shifted to the commercial insurers which drives up the cost for those who manage to keep health insurance.
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