Monday, August 31, 2009

Health Care Reform

By Mr. Quarter

Early in the history of this blog during the 2008 presidential elections, I posted a lengthy dissertation on my vision of "universal health care" . Interested readers can refer back to those thoughts in the archives herein. Given the debate that is currently raging, I thought it appropriate to weigh in again, repeating and revising my earlier thoughts.

First a disclosure. Even though I am very conservative in my politics, I believe that there are certain target reforms that are necessary and beneficial to our current health care system. I do believe that some form of affordable health insurance should be available to all US citizens, although I vehemently disagree with the notion of mandatory compliance for all persons or businesses. I believe that excessive health care costs arise from some specific factors:

  1. Many of the uninsured (particularly low income individuals and families) rely on hospital emergency rooms as their primary medical provider. Unpaid or noncollectable charges are distributed to the hospital overhead costs and ultimately paid by those who have insurance.
  2. Medicare, medicaid, and private insurance disallow significant portions of the charges for service that are submitted by medical providers (think the charge is $120.00 and the reimbursement is $17.50). So there is a built in incentive to increase the volume and magnitude of charges submitted for reimbursement.
  3. The probability of tort litigation with consequent damage awards far in excess of the actual damages compels the practice of defensive medicine and drives up the cost of services in direct proportion to the cost of liability insurance coverage.

I believe that the necessary reforms to reduce the cost of health care and encourage health care insurance for all US citizens should include the following:

  • Private insurance should be made portable from job to job. Just as salary requirements are a consideration, so then would be the cost of the employee's health insurance as a hiring decision if the employer is providing this as part of the employment package.
  • Eliminate, by regulation, the existing conditions exception to health coverage. If existing conditions are known, then they can be priced into the cost of coverage as part of the carrier's total risk pool . However, this could lead to hiring or employment discrimination. Perhaps there could be set up a national risk pool for existing conditions coverage that would function like an umbrella policy. That could be contributed to by all insurers and Medicare.
  • Eliminate by regulation all barriers to purchasing insurance or insurance coverage across state lines. Open the market place and let competition set pricing.
  • Tort reform. A no brainer - and it has been done in other industries (you can't sue the airlines for wrongful death if you crash). Three key reforms here. First, the plaintiff will be liable for all legal costs if the court rules in favor of the defendant. Second, awards actual damages are based on actual lost income potential (i.e, a person who would never earn $5M in their lifetime cannot be awarded $5M) with an absolute cap on actual damages. Third, punitive damages are prohibited.

What about those who have no insurance or cannot afford it? Here I favor a quasi-public option. But again market based. The federal government should establish a minimum coverage specification. In my opinion that would include wellness care (i.e., annual physical, vaccinations, etc.) and catastrophic event coverage (i.e., appendectomy, knee replacement, heart transplant). This specification should be put out to competitive bid with all US based health insurers. The bid specification could stipulate a particular age/sex/ethnic range and risk pool size as a basis for the premium. Low bidder is awarded a 5 or 10 year contract to administer the program providing the coverage to all who apply. Annual audit of the low bidder, at the bidder's expense, would be required. A menu of additional coverages, for additional premium cost, could be offered as well.

This program would be open to anyone, including businesses who want to offer health care to their employees. Federal subsidies on a financial need basis would be available to low income individual US Citizens and their families. The subsidies will be offered on a sliding scale from 100% to the most needy to 0% above a threshold income of say $25k /yr for individuals or $40K for families.

Market competition in the private sector, market competition in offering coverage through the public sector, availability for all, subsidies for those that truly need assistance, reforms to control costs. These ideas are viable and implementable. They do not require mandates for coverage, force a one size fits all on the populace, and provide absolute freedom of choice.

One of my biggest issues with the Obamacare boondoggle as currently articulated is how they propose to pay for the costs. I have heard the number $500 billion in savings from "efficiencies and elimination of waste in medicare". Well, if we know how to do that now, what is the hold up? Get it done!

Post Script - After posting this, I thought about another aspect of the health care debate that has been tossed out there and is actually one of some significance. Employer paid health care insurance is a substantial benefit (income) that is not taxed. While I take offense at the characterization of this as a loophole (like not taxing the air that we breathe is a loophole) there are some legitimate arguments around this issue. I have a lawyer friend, a partner if a major Philadelphia law firm (yes, I know, a "Philadelphia Lawyer"). The business is a LLP (Limited Liability Partnership). Partners get no salary or benefits. They receive a portion of the firm's profits on a periodic basis. So when he purchases health insurance for himself and his family, he is paying full boat for the coverage (no employer contribution), and pays income tax on the money he uses to pay the premium. Not fair. I am not advocating taxing employer paid health insurance. But I do believe that the laws should be changed to allow for a personal tax deduction or tax credit for the cost of purchasing health insurance.

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