Relevant Wishes: A Health Care Plan

The first half of this Friday double feature is a “for what its worth moment”. For what it is worth, here is my version of a health care reform bill with brief explanations for each of the provisions. Many of these provisions can be found in the bills that passed the House and the Senate, but there are some major differences. Before moving through the plan proper, I will lay out a brief case for change.

Health care accounts for about 16% of all economic activity in the United States today. That number, which is health care’s contribution to our country’s gross domestic product, has risen from 7% (1970), to 8.8% (1980), to 11.9% (1990). Currently, the number is projected to be 17% in 2015. In the period of 2000-2007, health care inflation was 80%, versus overall inflation of 20%. The inflation facts account for a bit of dark humor, as I recall objections to the first House bill because CBO predicted it would lead to an annual 8% inflation rate for health care. Unfortunately, that it is a decrease over what we have now. We pay all this despite receiving care that is only equivalent to the rest of the world. Oh, if you or a loved one needs exotic or advanced treatment, the U.S. is the place to be. For established procedures, it just costs more without being better. The analogy would be going to Neiman Marcus to buy a pack of Hanes underwear.

All of this spending has pushed more and more taxpayers out of insurance, and forced more and more businesses into bankruptcy. Although its management problems were systemic, we recall editorials in the Wall Street Journal that painted GM as essentially a health insurance firm. The obligations to current and past employees were an inescapable burden dragging the firm down. The Journal played down the $28 billion in bond obligations in order to highlight the $15 billion owed to the union (for pension and health care) only because the intent was to attack the union. But the burden on firms large and small is still plain to see.

The last element to discuss is the effect on small business. Drawing qualified employees is a key to an entrapreneur’s ability to realize her or his dreams. This notion that business drives the economy is truth in a vacuum; workers and consumers drive the businesses. People with families work at firms with benefits, and benefits are expensive. Firms that provide health insurance spend far more for their contribution than they do on employment taxes. Finally, prospective business owners are often forced to choose between their own business and coverage for their families. This last fact makes the Chamber of Commerce’s opposition to any reform puzzling.

With a case presented, let us move to the bill. The purposes of the measure are to create an accessible national marketplace with the goal of driving cost and service improvements. The measure should be constructed to create opportunities for more families to move to private insurance and away from no coverage and entitlement coverage (Medicaid).

Reforms:

  1. The industry’s anti-trust exemption shall be repealed. (Markets are not free in the presence of a monopoly or cartel.)
  2. Pre-existing conditions and the rescisssion of high-cost patients shall be outlawed. Exceptions can be made in cases of fraud.
  3. Average per-capita premium increases shall be capped at 200% of the consumer price index. This measure shall expire five years from the year of passage.
  4. There shall be NO individual mandate to purchase health insurance. (The first two points will reduce the margins insurers operate on, the third limits their ability to recoup revenues through absolute price increase. The result; they will compete to expand their volume, as all businesses due in similar circumstance. Competition improves service and lowers price.)
  5. The patent monopoly for prescription drugs shall be abolished (pharmaceutical companies are big boys, they can play by the same rules as other R&D intensive industries abide by already.)
  6. Prescription drug importation by qualified companies from approved firms in certain countries shall be allowed. The executive branch is directed to seek and set optimal tariffs on all imported medications.
  7. All herbal, natural, and “nutraceutical” remedies, concoctions, and blends shall abide by the same standards of advertising that current prescription drug makers follow. (i.e. generic sales numbers, Jimmie Johnson, and pretty girls are not “proof” that Enzyte does anything.)
  8. Medicare and the Office of Personnel Management are authorized to negotiate price contracts for prescription medications.

Supports:

  1. The national minimum for Medicaid participation shall be 50% of the poverty line (about $11,000 for a family of four)
  2. A premium buy-in program for Medicare shall be established. Copays shall be standardized across all income levels for this plan. Premiums shall be paid on a sliding scale of income based on filed and accepted federal tax returns from U.S. citizens. The plan shall be open for all individuals and households through 200% of the poverty line (part 1). The plan shall also be opened to any individual (having met tax and citizenship requirements) who intends to or currently owns and operates a business with less than 25 employees (part 2). The plan shall also be opened to any individual (only) who, having met the tax and citizenship requirements, is at the age of 55 or above, but not yet eligible for standard Medicare (part 3). Part 1 participants, in addition to part 2 and 3 participants will pay premiums equal to 90% of the median employee contribution for private plans in the prior plan year. Premiums for part 1 participants will decrease as income falls away from 200% of the poverty line. Current Medicaid particapants are eligible to leave that program in favor of the Medicare Premium program (this should pull some families off of fully subsidized plans and save taxpayer money at the state level especially.) Surgical contraception not needed to protect the health of the mother shall not be covered; all other approved methods shall be covered.
  3. Medicare shall set absolute reimbursement terms to providors at net-90 days. The current commision working on the revision of Medicare rates shall continue its work. Emphasis should be given on contrasts in urban/rural reimbursements and procedures identified by physicians as having below cost reimbursement.

Markets

  1. National exchanges as decribed by H.R. 3690 shall be placed into effect.
  2. Tax preferences will be given to physicians, executives, employees, and firms that engage in salaried non-profit health networks. (The goal is to encourage more networks like Mayo Clinic whose physicians are paid by salary rather than individually billed procedures; these organizations also operate as non-profits, and provide statistically better outcomes for less money.)
  3. Current utility co-ops and chambers of commerce can organize as non-profit risk pools for individual insurance coverage.

Well, there it is. This plan should cost less than any other because it subsidizes less care, brings healthier premium paying patients into Medicare, reduces the numbers on Medicaid, reduces the cost of pharmaceuticals for Medicare receipeints and those with federal insurance, and lowers the cost of pharmaceuticals overall. I believe it should be payed for by increasing the flat tax on Medicare and extending it to the first $500,000 of non-investment income. The tax increase should be exactly calibrated to the level of funding needed (i.e. it should produce no deficit).

The Rational Middle is listening, so fire away….