For the past eight years a debate has raged in Washington DC about what has become known as Obamacare. This debate fundamentally involves whether healthcare should be public or private. In 2008 the Affordable Care Act (ACA) was passed creating a slow firestorm over the religious, ideological, economic and political spectrums. ACA weighed heavily in the 2016 election especially when voters opened the envelopes containing premium increase notifications.
Below is an outline of a real alternative to the ACA. It addresses everything Obamacare failed to enact in ways that preserve what is good about the act while assuaging both political persuasions. As you read the outline note how it addresses issues advocated by both Republicans and Democrats. As in all outlines there are nuances that are not immediately apparent and thus, a discussion will follow pointing out the poignancies that could impact our society hopefully in positive ways.
- Coverage for pre-existing conditions
- No limits caps
- Premiums cut by over 50%
- Insurers allowed to market across state lines
- No forced purchase (mandate) of health insurance
- Loser pays for malpractice lawsuits – cut out frivolous law suits
- Telemedicine to reduce costs and triage patients
- Primary plan designed around medical necessity – no fluff
- Wide variety of plans with options beyond Primary
- Give new doctors student loan relief if they serve poor areas at lower pay
- Curb big pharma ads on TV for proprietary drugs
- Shift the purchase of health insurance away from employer to individual
- Provide positive / negative tax deduction – means tested
- Country wide group for primary plan – no middlemen
President Obama recently declared his legacy health plan, Affordable Care Act will most likely be reformed after he leaves office. He further opined the changes would be bi-partisan. Of course to be bi-partisan, provisions in a new national medical plan would need to cater to the core beliefs and philosophies of both parties. I have outlined below a plan that preserve key provisions of ACA that conform to design goals of Obamacare while resolving objections most loudly heard by Republicans in congress. Is it possible to provide coverage for pre-existing conditions without forcing the purchase of insurance? How can costs be contained and truly affordable while keeping healthcare in the private sector?
While some provisions below might be daunting because of special interests, recent increases in premiums and the tenor of the campaign on this subject might inspire a dramatic shift in congress to enact reforms.
Coverage for pre-existing conditions – This is achieved by making the entire country into one large group thereby making the law of large numbers work in an actuarial manner to predict financial outcomes and charge the proper premiums. Every insurer would have the same chance of getting a bad case as another. In the end there would be no adverse selection because of the size of the sample.
Premiums cut by over 50% – Because the primary plan provides coverage that keeps you alive and well the scope of coverage is much less and therefore less costly. With flexible features and the ability of insurers to market their products across state lines there will be more competition. Fraud can be more closely policed and telemedicine as well as other technological efficiencies will reduce cost. Currently, insurers and providers play games with charges, i.e., high initial charge for services and then reduced by negotiation by payer. Set the fees at the lower figure to start and cut out the games that middleman play to leverage large networks and/or groups. Since there would no longer be a network or group save the countrywide group, these fees would go away.
Insurers allowed to market across state lines, i.e., countrywide. This will surely spawn competition, advances in cost saving technologies and reduction of special interests who add nothing to the value of the transaction. This could be implemented quickly via an extension of ERISA that large corporations use to insure across state lines without interference by state insurance departments.
No forced purchase of health insurance – Insurance operates on the principle of spreading the risk. There is no free lunch. You can’t have young people for example, who deem themselves immortal not buying insurance until they get sick. That’s like insuring a burning building. Under this plan there would be no forced purchase of insurance. In its place would be a powerful inducement to purchase insurance that would go like this. If you are in need of medical care and you opted not to purchase insurance, you have to pay the provider. If you can’t pay, the government will give you a means tested loan. Providers will not forgive fees and the IRS can dog deadbeats who game the system. Given that the basic coverage under this plan is cheap, everyone should be able to purchase coverage. This inducement will hopefully promote a culture shift about the purchase of health insurance.
Loser payer in lawsuit – The US is the only country in the world that allows lawyers to sue for any reason without fear of paying the winners’ legal fees. If the loser had to pay the opponent’s legal fees there would not be any frivolous law suits. Medical providers would have no excuse to administer marginally effective test, i.e., defensive medicine. This could provide huge savings and reduce fraud.
Telemedicine to reduce costs and triage patients – Modern technology should be employed to further reduce medical costs by the use of telemedicine. Pick up your smart phone and dial the doc who appears on the screen live, and at your service. Tell him your ailment and he either prescribes a remedy or arranges for further treatment. Treatment can be tailored to the condition and provider. Sniffles or a cold should not require a full board certified doctor. A practitioner nurse or even a pharmacist can handle such conditions. A division of labor appropriate for a given treatment should act to lower costs.
Primary plan designed to medical necessity – no fluff Obamacare has mandates for certain treatments and preventive medicine that drive up the cost of medical care. The primary plan is designed to keep you healthy and alive – period. This is essential insurance. If you want coverage for psychological treatment, infertility, Viagra etc. then you can purchase this in addition to the primary plan. All of this can be very flexible with optional deductibles and co-pays to keep the cost down. Also, while the Federal government would enable the primary plan nationwide via ERISA, the supplemental plans could be regulated by the states.
Give new doctors student loan relief if they serve poor areas at lower pay – Want to go to medical school and have your student loans reduced or eliminated? Then plan on three years of providing care for the poor or poorly served areas. Pay your dues and get rewarded by the government. This, to some degree is already being implemented.
Curb big pharma ads on TV for proprietary drugs – Currently, big pharmaceutical companies spend more on media ads than on research and development. Europe, for example, does not allow ads for proprietary drugs and frankly neither should we. Three quarters of the ads are usually warnings and caveats. If we go to the loser pays model above, drug companies won’t have to worry about not disclosing side effects as defensive measures against predatory law firms. At least that excuse will be eliminated from their argument. All that advertising money can go to reduce the cost of the drugs.
Shift the purchase of health insurance away from employer to individual – The new requirements of Obamacare are surely job killers. An employer providing health insurance could easily give each employee a raise to cover the cost of health insurance outside of the firm. Employers depend on group insurance to get the best rates. Since the entire country is the group under this plan, there is no advantage to the employee in getting into the employers’ plan. Moreover, the employee now has complete portability and more mobility as far as employment is concerned. If all the components above are followed, the insurance costs will not be burdensome for everyone.
Provide positive / negative tax deduction – means tested – This is similar to Milton Friedman’s negative income tax but applied to the medical arena. First, the cost of medical insurance should be tax deductible for everyone. If you are poor, you get a stipend, if you are rich, you get a deduction. It is that simple. Businesses currently allow employees to deduct pre-tax dollars. This should apply to everyone. It is not fair that an individual gets penalized because they work for themselves.
Stop the Consolidation of providers and insurers – The Sherman Act was designed to stop mergers and acquisitions that sought to control prices at the expense of society. The trend to merge is one important factor causing medical inflation. The Sherman Act should be invoked whenever medical facilities or insurers consolidate to fix the price or attempt to control a market.
This is merely an outline of a plan that can certainly be expanded and elaborated. It addresses everything the ACA neglected like the insurance companies, doctors and hospitals, drug companies, lawyers, and most important, us. It aims to root out special interests, those that do not add value to the transaction, monopolies and oligopolies that exploit us with their size and bargaining power.
Implementation would need to be worked out to make the transition smooth as possible. Some of the ACA can be salvaged such as the digital medical record keeping mandate as it helps this sector in becoming more productive.
Family Coverage for adult children to age 26 – Why stop at age 26 why not to age 40? Insurance companies like to insure young people. This should not be an issue.
Discussion about specific provisions of ATACA
Birth Control / Abortion – Currently the ACA mandates payments for birth control while the government will pay for abortions all of which has been challenged by religious organizations. These objections can be eliminated under this plan. Why? The new plan shifts the responsibility to purchase health insurance to the individual who can then choose to purchase the coverage for these optional items. Remember, the employer no longer sponsors the group plan and thus the onus is on the individual to follow his or her own conscience. Moreover, since the government is providing basic coverage without mandates, there are no religious conflicts that spill over politically. The positive result is no more wasted resources on legal /political battles. We accomplish a saving for society and a victory for the individual that assuages both political sides.
Loser pays principal. The State of Texas has enacted legal remedies that encompass this principle for certain types of civil suits. Medical malpractice is one of those categories. The result has been significant reductions in medical insurance rates both for the providers and insurance to consumers. The United States is the only country in the world that enables lawyers to sue for any reason while not being held accountable for the legal costs of the defendant. This motivates frivolous law suits and legal abuses but more significantly, it has given the medical profession reason to practice so called defensive medicine. Even though the number and amount of medical professional lawsuits are small, a symbiotic culture between lawyers and doctors has arisen with a result that both benefit at the expense of society as a whole.
This vicious circle needs to be broken and the culture changed. If federal government required loser pays narrowly for the medical industry, an excuse would be taken away from providers, big pharma, and equipment manufacturers who tell us the legal exposures and precautions require them to charge more for products and services. This is daunting as the legal profession is a mighty lobby in all levels of government. A grand bargain however could be struck because rather than caps on judgements as a threat to the legal profession, enactment of loser pays merely takes away meritless and generally small lawsuits. The victims’ rights are preserved while legal abuse goes away.
Flexibility of plans – Here one can employ medical savings accounts, large deductibles, cafeteria plans and other innovative approaches that competition will spawn. It is also possible to have a central catastrophe fund to reinsure carriers against dreaded disease outbreaks but this is something that could evolve given the experience of the program. The catastrophe fund as well as reinsurance plans can easily address the principle of unlimited medical benefits or limits.
Implementation and Proof of Concept
The features presented herewith are designed to work conjunctively or to together in order to obtain the optimal results. Like a simultaneous equation, one influences the other. The design goals are highest quality of medical care for the largest number of participants across all economic income levels. Therefore all should be implemented together. Since there will be skeptics as in any proforma plan, a pilot or test implementation can be organized in any given state or territory that would represent a fare sample of the entire country.
As mentioned above there will be skeptics and the boast that 50% medical costs can be saved is not pure speculation. There is credible data that will support the assertion that individual networks as exist today cost at least 20% of the medical dollar. Another 10% could be saved with new technology designed to track provider who are abusing the system. The medical necessary idea might be huge item in the savings schedule, possibly 15% to 20%. Stratification or division of labor to provide medical care based on severity of symptoms could easily make up 5%. A really big factor is marginally effective diagnostic tests. If this culture is changed, given the tort reform suggested, treatments will become more cost effective. Finally, new medical technology will also contribute by some yet unknown amount. Some of these factors will become effective immediately while others are long run in nature.
There are many that feel a single payer system is the only solution to the crisis in healthcare. While Medicare appears to operate fairly well, it is extremely expensive. The last election made it clear that the majority of the US population is not ready for socialized medicine. This plan, preserves the private nature of our current system while removing the economic pitfalls that have befallen it as a result of well-intentioned but faulty government policies. By changing the culture of the providers, insurers, government and mostly importantly us, the system should work more rationally while giving personal choice to those who use it. Moreover, this plan will affect Medicare and Medicaid positively while saving the tax payers billions.
Alexander J. Wayne
25 March 2017