If I Were Reforming Healthcare

If I were the person writing the healthcare reform there are several things I would do. These are probably dumb ideas but they are ideas that I think fit within the framework of the nation and would not violate the constitution, would protect states rights and preserve the free market system. I also believe these ideas would actually help with the cost of healthcare.

One of the main problems with the US system is the fact that the real cost of healthcare is hidden from the consumer. Because most people have health coverage from their jobs, and the insurance company pays almost all the costs patients have no idea how much anything costs. This lack of knowledge prevents the consumer from being able to participate in the decision making process with all the information. It also means that most consumers have no idea how things got to where they are today. Hiding costs from consumers is bad for the system and is not a free market concept.

Another problem with employer provided health insurance is the lack of choice in the coverage. Most companies will offer one heath insurance option and the employee is stuck with a take it or leave it approach. The quality of this coverage almost makes no difference because you have not other options - nothing to compare it to. The quality of employer provided health insurance is decided by an HR rep negotiating with the insurance company for a plan that provides the most benefit to the company and not to the employee.

In my view employer provided health insurance must be one of the first things to go. Individuals should shop their health insurance options just as they would any other insurance product. My job does not provide car insurance or homeowner’s insurance so why health insurance? This one change would force insurance companies to change their focus from negotiating with a few HR reps to having to provide hundreds of more options geared towards appealing to consumers. This would completely alter the health insurance landscape.

Naturally, companies would no longer have to pay the employer portion of this coverage and would have a bunch of money that they are not longer paying out. Since this money is part of the total compensation package for the employee the company should give each employee a raise in pay equal to the amount of savings. This will allow the employee to have greater financial resources with which to purchase coverage. The savings to the company will come in the form of elimination of maintenance of the health benefits for the employees.

Another problem with the US system that makes a public option attractive is the issue of portability of coverage. A public system would not worry about a pre-existing conditions because, well, they wouldn't have to. Insurance companies have an issue with covering people that have a medical condition that has already been diagnosed and treatment started. This is very much the same issue as a car insurance company have with making repairs for damage that happened while the car was insured by another company. The difference is that cars rarely need ongoing treatment for an issue the way people sometimes do. A car is either broken or not. Once health insurance is detached from employment then the need for portability drops dramatically, but there should be rules in place to protect both patients and insurance companies.

Another issue that comes up is the insurance company’s refusal to offer coverage to certain individuals. This is usually associated with the portability issue mentioned above. With the reduced need to change insurance there is less chance of this happening. There should be some strict rules setup so that in the rare instance of it happening there are protections in place. People should not be refused service by insurance companies for all the usual discrimination scenarios but this should also include age and physical condition. This is a tricky area that needs to balance consumer/patient protections with logical standards to ensure one insurance company is not unfairly shifting the expense to another company after collecting the premiums.

It is common for health insurance policies to have limits on how much can be paid out over the life of the policy. Once this limit is reached the patient is usually dropped from coverage. In most cases this limit would increase as savings are realized in other part of the system. There should also be regulations that limit the ability of an insurance company from dropping a patient. One sensible rule would be that a patient cannot be dropped from coverage while being treated for an existing condition.

A huge area of cost drivers in the current system is the area of malpractice insurance. The current laws allow for nearly unlimited cash awards to patients who have been the victims of doctor incompetence. While malpractice is a real problem the huge cash awards act a transfer of funds from one set of patients to another, filtered through insurance companies. You see doctors pay insurance companies for malpractice insurance at huge premiums. The costs are rolled into the cost doctors charge their patients, and by extension the patient’s insurance companies. Which, in turn, drives up the cost of health insurance.

Previously I mentioned the fact that costs in the current system is hidden from the consumers. Most people do not realize that doctors and hospitals are more than willing to negotiate process for services with their patients. You see, filing and insurance claim is very expensive for the doctors and hospitals. They will frequently have large staffs of people who work solely on insurance billing. This increased cost means that higher prices are charged to insurance companies to offset this additional expense. Insurance companies are also notoriously slow at processing claims. If patients were to take a more active role in paying the bills they would be encouraged to work with their doctors on the price. This, in turn, lowers the costs throughout the entire system. Patients could then purchase insurance policies that cover a greater amount of catastrophic medical conditions that will have higher total payouts for the policies.

The same situation is true for pharmacies. They, too, have to bill to insurance and have huge amounts of expense for this. They would also benefit from customers paying more out of pocket but they may not be as will to negotiate the prices the way a doctor might.

This is all well and good but what about the poor you ask? Isn’t the point of reform to help those who cannot help themselves? If a person can’t afford health insurance today why would these reforms change that? The fact is there will always be people who cannot or will not purchase health insurance. For the people who will not I say tough, you got sick so now you need to pay the bills. For the people who cannot afford it (and there are very few of these people) then the government can provide some sort of assistance for these people. Any of these programs should be managed at the state level and not at the federal level. The states are much more responsive to their people than the federal government and will have a better idea of the needs of their people. These types of programs for the poor should ne means tested and carefully monitored for fraud. Ideally they would involve reimbursements to patients rather than doctor or hospitals billing to the program. Most states already have these types of programs in place and they tend to work better than federal options such as Medicare.

What about Medicare and other federal healthcare programs? I think that eventually all federal healthcare programs, such as Medicare/Medicaid and VA medical benefits, should be phased out and converted to the private sector. These could be transitioned by way of vouchers to allow people to purchase private insurance rather than be on the public system. They would also need a grandfathering as many people who depend on them today would not have the ability to transfer off the system.

If you think these changes would not work keep in mind that Congress as excellent healthcare…and it is provided through private insurance companies that provide lots of coverage options. You don’t see Congress rushing to eliminate their coverage. If it works so well for them why wouldn’t it work well for everyone else?

Summary:

1. Eliminate employer provided health insurance
2. Individual consumers purchase own coverage based on their needs and budget
3. Insurance companies forced to compete for customers on an individual basis
4. Protections for pre-existing conditions
5. Restrictions against refusal of coverage or dropping coverage
6. Tort reform to lower the cost of malpractice insurance
7. Encourage patients to negotiate prices for common services with their doctor and pay those costs out of pocket.
8. Phase out federal healthcare programs in favor of private insurance