February 07, 2009 09:00 AM UTC

UNI-Care Health Reform Proposal

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• by: Bondo

So yeah, this isn’t really about Colorado Politics, though health care is certainly relevant to every state’s political system, but I figured I’d make a splash with my first diary and get all health care wonkish by presenting my health care reform proposal. You gotta start somewhere.

We must reform health care. We spend close to a fifth of our GDP on health care and that number is estimated to rise to half over the next few decades, which we simply cannot afford. Meanwhile, we have substandard health outcomes. Our broken bodies will break our personal and governmental budgets. As we approach comprehensive health reform in the United States, it is important to base the reform around what I call the UNI-Care foundation, that is, making the system Universal, National, and Individual.

Universal refers to public benefits that are equal for every citizen, regardless of age, income or disability. While some groups certainly need public benefits more than others, it is poor social benefit design to particularize benefits. Putting a limit on benefits at 100 or 200 percent of the federal poverty guidelines creates downward incentive on those around the boundary. Because the value of health care lost when exiting the program is greater than the marginal increase in income, one has no incentive to make that increase, damaging the individual and society. While this issue can be addressed somewhat by sliding scale subsidies that fade back, those lose another benefit of universal coverage, the creation of a broad-based constituency of support. Particularized benefits pit those who benefit against those who pay. Universal benefits still redistribute funds, but everyone sees value returned for their contribution. The key in a universal system is to find a baseline of health coverage necessary to the affordable maintenance of general health, and provide this for everyone, while allowing those with the means to purchase medical luxuries.

National refers to the need to tackle this reform at the federal level to ensure consistency across the states. This country has become a fluid one. Where you are born may bear little relation on where you end up, and frequently, one moves many times. Switching away from a trusted doctor is difficult enough for many, but disruption in the level of benefits is much more difficult. Moving from a highly fragmented system as we are, gaining some level of uniformity is vital to reducing administrative and transaction costs.

Similarly, we need to move to an individual system, one no longer tied to place of employment. Employer-sponsored health insurance may have been justifiable in a time when one worked at the same place their entire life, but these days, most people hold multiple jobs. Again, this movement that has benefited the economy generally, has caused disruption, inefficiency, and doubt within the health care system. Putting responsibility for health care has also burdened employers, held down wages, and left many employed at smaller firms, in lower wage positions, or unemployed without any access to health care, compromising their health and ultimately costing society much more.

It is important when talking about a move to a fully individual system that we do not conflate that concept with the individual insurance market as exists presently. Too often, the present individual market takes liberties, denying those who are most likely to need care and often pricing too many that need our help out of the market. The purpose of insurance is to share risk, and that is even more vital when it relates to our health, where a health emergency can quickly leave an individual or his or her family out of a job and bankrupt.

So with the principles for reform established, what might a reform of this type look like? Perhaps the least disruptive, effective way to accomplish this is to provide each individual with a health savings account, tied to a smart ID card that can also be used to enhance electronic medical records, holding a value around $4,000 per year. This account would be used to fund insurance premiums as well as co-payments and cost sharing. Because the benefits of this program are provided as an equal dollar value, it allows for the installation of a flat tax (preferably a consumption tax) while still being a progressive, redistributive mechanism. As part of a broader tax system, a flat consumption tax is one of the most efficient tax devices possible. Meanwhile, federal and state taxes used towards Medicare, Medicaid, SCHIP, and other health programs could be removed, most of which are slightly regressive and less efficiently targeted.

Why choose this means of providing universal coverage? I think it is a political benefit that a HSA based system would allow people to keep their present coverage if they desire (given some policy work to maintain groups presently tied to employment), something that seems essential, given that most people ultimately like what they have and are scared of change. Secondly, an HSA is an easy mechanism for establishing a floor without a ceiling. Finally, this plan takes what are the best ideas from the Republicans, but using them more effectively. President Bush’s suggestion of an ownership society was a key one, however, it missed the important point that many people do not have the wealth to “own” a health account. With this system, everyone is given ownership over an account that they can spend if they need to, or save over time to provide a medical nest egg, and eventually contribute to a secure retirement.

But it isn’t sufficient just to provide everyone with a basic means to pay for health care; the problems in our system go much deeper. As it currently stands, people who are at high-risk due to pre-existing conditions or risk factors would be not be able to afford coverage. An effective insurance market reform would be to merge the individual and group markets, to require guaranteed issue with a large degree of community rating to best share the risk. Additionally, universal reinsurance should be provided to insurance providers to offset high-cost cases, making premiums more predictable, stable, and ultimately lower by spreading the costs across all pools. This would create a broad competition among private, non-profit, and public insurance plans, each offering various coverage terms, with the most efficient insurers being able to offer the lowest premiums.

So now we have set the framework for providing all Americans with access to affordable insurance. However, with the growth in health care costs, this coverage would not stay affordable for long. To really tackle health reform, we must move beyond coverage or access issues to cost control. Much of the cost debate involves discussion of health, not health care. It involves agricultural policy, transportation and urban planning policies; it involves environmental policy. We must view all policy areas with a mind to the public health costs. However, even within the more specific venue of health care, there is much we can do.

An independent health advisory board should be created to manage health IT and medical effectiveness research. This board would ultimately be the source for a lot of administrative rules related to governmental role in health care. It would set medical records standards, moving us towards fully electronic records that help prevent medical errors. It would fund research on the cost effectiveness of various treatments and be a venue for dispersing this knowledge. Indeed, it could be even more commanding in changing incentives. Those practices that have the greatest payoff should be provided by insurance with no cost sharing to encourage their use (as prescribed by a primary care practitioner), various other tiers of cost sharing should be established as payoff decreases, to the point where ineffective treatments simply are not covered. While many suffer from a lack of health care, too many of us presently receive too much health care or the wrong form of health care. The combination of evidence based insurance coverage and individual HSAs providing an incentive to avoid unnecessary care would shift our resources in the right direction.

Another area the health board could be effective is in dealing with health workforce issues. Medical professionals are too often ill distributed across specialties as well as geographically. They tend to cluster in urban areas, leaving rural areas underserved. They tend to cluster in specialties instead of desperately needed primary care positions, which also help to influence oversupply of expensive and often unnecessary services. Providing incentives to fill needed positions and where necessary boost the supply of medical professionals, helping offset the cost of medical education, and doing what is necessary to handle malpractice concerns is a relevant concern for this board to help make our system more effective.

This comprehensive reform will move us towards an efficient, universal health care system while providing the needed remedies for health costs. Combined with a new public health mindset to promote greater disease prevention, we can do a lot to be healthier and strengthen the country’s fiscal situation. Yet it does all this in a way that does not radically cast off our current system. It adopts certain elements that should please those on the left and on the right. You will never satisfy everyone; some refuse to accept a government role, others refuse to accept private insurance companies. However, this plan accomplishes most of what needs to be done in a moderate, but effective, manner.