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November 14, 2006

What Will Health Care Look Like?

Megan McArdle wonders what universal health insurance would look like in America. As she notes, proponents of UHC like to excise Canada and Britain from the conversation. She seems vaguely dismissive of this -- she shouldn't be. Those are literally the only two systems almost impossible to replicate stateside. You simply can't outlaw the private market in America. I'd guess it's unconstitutional but, in any case, it's totally impossible. So quality or desirability issues aside, those systems aren't feasible alternatives.

As for what UHC will look like? My best guess is that eventual reforms will heavily subsidize private insurance coverage up to 300 or 400% of the poverty line, but the private coverage will be provided under a heavily-regulated government umbrella that eliminates adverse selection, mandates various coverage components, and generally imposes a basic floor of coverage. This may happen under an expansion of the Federal Employee Health benefits Program. It will be paid for through a dedicated VAT tax, and the uninsured will be eliminated through an individual mandate.

There is, obviously, a certain error range here. I could certainly see a Medicare Plus scheme, a la Jacob Hacker, where businesses and individuals are offered the option to buy into an enhanced Medicare program, but can, if they choose, retain private insurance options. The problem with something like that is that insurers will have all the more reason to cherrypick, but the ability of government to bargain down prices will probably chop apart the relative premium savings of the private sector. It's also possible to outlaw underwriting and cherrypicking altogether, though I see that as somewhat -- though not totally -- unlikely. A healthy, fit, young friend of mine was just denied coverage on the individual market for the sole reason that he took an anti-anxiety drug over the last year. No health problems, no congenital deformities, he just had the audacity to actually utilize some health care. That's an unsustainable situation, and whatever the reforms look like, I don't expect it to continue for much longer.

November 14, 2006 in Health Care | Permalink

Comments

In my opinion, outlawing underwriting is a step backward. Cream-skimming is a problem you get with not-underwriting-correctly.

A more sensible approach would be to allow underwriting and underwriting-based pricing, and then subsidize premiums where needed. (If an insurer can charge expected cost, they don't care how high the expected cost is.)

Posted by: SamChevre | Nov 14, 2006 2:13:00 PM

Private healthcare is not outlawed in Britain:
http://www.bupa.co.uk/
There are other insurance providers too.

Posted by: Jacob Davies | Nov 14, 2006 2:57:06 PM

If Medicare is offered with private insurers also available, the model should be public school financing. Whether you have kids in school or not, your (or your landlords's) property taxes pay for the public school system. If you want to send your kid to a private school, that's your right, but you pay for it yourself without getting a refund of your property taxes. Likewise, if a private insurer cherry picks healthy people, it shouldn't diminish Medicare revenues in any way.

Beyond that, I don't like the idea of funding universal healthcare by requiring everyone to pay a premium, that's the worst sort of regressive taxation, a poll tax (a fixed tax assessed on everyone regardless of income or consumption). Better it be funded through general revenues. This could be a dedicated VAT tax, or since the Bush tax cuts conveniently leaves hundreds of billions of dollars on the table, repealing the tax cuts and dedicate them to Medicare For All.

Ultimately, if you're sick you're going to get more care than your pay in taxes and if you're healthy you're going to pay more in taxes than you get in medical care. But since good health is worth more than money (healthy and broke beats dying and rich any day), only an idiot would think the healthy are getting a bad deal.

Posted by: beowulf | Nov 15, 2006 3:06:39 AM

How about a link ;-)

Posted by: Jane Galt | Nov 15, 2006 4:29:38 PM

Sounds a lot like what's going on right now in Massachusetts: pay or play provisions for all employers > 10 FTEs, current nongroup and small group markets to be merged (with significant expected savings for thenongroup policyholders), subsidized coverage for those < 400% FPL, with funding under an 1115 waiver from the federales, state appropriations, and the penalties to be paid by employers and employees who choose not to "play."

For more info check out my posts on UHC in MA at http://healthblawg.typepad.com/healthblawg/universal_health_care/index.html and for the whole picture, see Health Care For All's A Healthy Blog at http://blog.hcfama.org/

Some pieces are already up and running, more will be January 1, and even more July 1.

The devil's in the details, but the commonwealth seems (so far) committed to the aggressive timeline for implementation.

John McDonough of Health Care For All calls this the Third Wave of health care reform in Mass (the first was the never-implemented Dukakis plan of yesteryear; the second is the Mediciaid 1115 waiver program that has been in place one way or another for about 10 years, and the third is the new UHC system, funded in part by the 1115 $$ that the feds now insist be used to purchase insurance rather than reimburse DSH for free care.)

While many of us may wish for a more straighforward approach to a single-payor system, incremental improvements such as these are about as good as it's likely to get, given the politics of healthcare, the medical-industrial complex, etc.

Posted by: David Harlow | Nov 16, 2006 11:16:52 AM

Ezra, your prediction seems quite reasonable on every point, but it leaves a couple important things out.

The first is what beowulf suggests: private insurance should and likely will be allowed but not at the expense of publicly-funded insurance. You still pay those taxes (be they VAT or whatever). I think it may work much like Medical Supplemental insurance works today (though Medicare Part D is going to do away with most of that market).

The reason for this system is that you get to have a universal set of basic benefits available to everyone, and payment occurs on a progressive sliding scale, while allowing a range of choices that don't undermine the basic program. The possibility of buying extra coverage remains for those who want richer benefits, or perhaps who want access to some elite doctors who opt out of the basic plan's network(s). This would eliminate cherry-picking for the basic plan, and would allow underwriting only for the supplemental/alternative plans. And that seems fair.


The second important point that seems to be missing from your analysis is any mechanism to significantly reduce costs, though you mention that in a Medicare-for-all scenario CMS would be able to set rates. We all know that rate setting by itself doesn't accomplish that much without utilization controls...we just get more (and more complex) procedures that tend to cancel out the lower rate per procedure.

Controlling costs is much more important in a system in which goverment takes up the lion's share of the cost burden and people are mandated to pay in. People are going to become more sensitive to the cost of care when they see it come out of their taxes every year. The middle class (who already mostly have insurance and are blind to how much their employer pays) as well as all those "young invincibles" are going to make a big noise about having to pay more. Without a mechanism to reduce our per capita spend on healthcare, I think the opposition is going to be tremendous once people see the actual costs.

To make a long story short, either with the implementation of universal healthcare or shortly thereafter, major realignments in incentives will have to occur...perhaps the elimination of FFS, or the implementation of some elaborate P4P system, or mandated best practices, or extensive wellness incentives. Probably a combination of things.

Posted by: jd | Nov 16, 2006 10:09:14 PM

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