Bipartisan Health Care Reform

It looks like we can hit the reset button on health care finally.  The Democrats are still determined to get “something” done and the Republicans are saying that they’re willing to go along, just not with the existing bill.
This sounds like it could actually lead to some progress.  Following are a set of ideas that would truly bend the cost curve down.  This is a bipartisan approach, with plenty for both Democrats and Republicans to like, and to dislike.

The existing bill is a train wreck for at least 5 reasons:  (1) There is too much government control (2) Politicians said it would expand coverage and lower costs….. What?  (3) It didn’t include most of the good ideas out there that actually would reduce costs (4) It is full of favors for special interests (5) It is way to complicated.

There are some things that are obviously broken and some things that work very well with our health care system.  As far as what is broken, America spends too much of our national income on health care, about 16%.   We spend more than double the average of other advanced countries on health care per person.  For about 35 years, medical entitlement spending has outpaced GDP growth by 2.3%.  Medicaid and Medicare, unless they are reformed, will literally bankrupt our country.  There is little disagreement about any of this.

In terms of what works, American medical innovation is the best in the world.  Some of our best innovations come from the Federally Funded NIH (National Institute of Health), some come from American private enterprise, and some innovation is imported.  No matter where the innovation occurs however, America far surpasses other nations in our ability to bring innovation to market to help patients.  The majority of marketable medical technology on the planet is developed in America.  These technologies extend and improve the lives of sick people around the globe.  We are also ranked the highest of any country for health care responsiveness.  There is certainly a cause and effect relationship that exists between the excellent technology and responsiveness that we enjoy, and the high costs that we pay. 

How do we continue to save and improve lives throughout the world, and continue to get responsive service, while also controlling health care costs?   As long as patients receive limitless health care services at nearly no (perceived) cost, the quantity of health care services demanded will exceed what the system can affordably provide. 

I’ll break down what I consider to be key elements of any care bill into a list of “Should Haves” and “Should Not Haves”.  Let’s start with the “Should Haves”.  The following “Should Haves” can best be implemented through government tax rebates or incentives to individuals that purchase such insurance policies, or to insurance companies who sell them.

In order to reduce costs, patients need to have a stake in the cost of health care delivery.  Without such a stake, lonely seniors will make weekly doctor visits because they enjoy the company.  Patients and providers will over test, over treat and over use the system.  Large co pays are a good start, but even better are large co pays that represent a percentage of the cost of services provided, 10% for example.  10% of a $200 visit is only $20, but 10% of a $500 visit would be $50.  This would make health care consumers price conscious so that they would shop.  If pricing mechanisms were allowed to work in this way, doctors would be forced to compete on price, quality and service, just like other businesses.  Out of pocket costs could be capped, and co pay percentages could be indexed upward along with people’s income in order to prevent too large of a burden from being placed on the poor. 

While pricing mechanisms may be a good way to achieve savings for treatment delivery, preventative care should be encouraged as a way to reduce health care consumption and costs long term.   Preventative care can be provided much more affordably than most treatments.  The adage that “an ounce of prevention is worth a pound of cure” is correct, and should be institutionalized by differentiating services and putting incentives in place for people to seek more preventative care.

Massive savings could also be achieved by rewarding people for making healthy lifestyle choices.  Obesity costs are nearing $100 billion per year for example.  If insurance companies provided rebates at year-end for obese patients who showed progress in their body mass index, these costs would slowly be reduced, and our population would truly be healthier.  Safeway has implemented these kinds of rewards and as a result, their health care costs have remained flat for several years while health care costs across the country have soared. 

One of the more obvious solution for lowering costs; create a national market for health insurance by allowing insurance companies to sell policies across states lines.  This would create an order of magnitude more competition in the insurance industry.  This would reduce beurocracy and red tape because consumers would quickly begin purchasing policies that are offered in states with lower levels of regulation, and lower cost structures.  As a result, more highly regulated states would be forced to reduce regulation to become more competitive, and costs would decrease across the board.

Now let’s get on with the “Should Not Haves”

No bill should stifle medical innovation, or reduce incentives to enter the field of medicine.  Will innovators invest tens or hundreds of millions of dollars of capital to create new drugs or medical devices if they are not allowed to determine the price of their innovations?  Will as many students be willing to assume tremendous debt and go through years of demanding education if the government will largely determine their compensation?  No bill should allow the government to control costs by command because doing so reduces incentives to innovate or to enter the field of medicine.

No bill should enable price controls, or put mechanisms in place to do so.  History shows us that when costs are controlled by command, instead of by the market, other costs emerge such as waiting, lower quality care, diminished access to new technology, and trips to foreign countries for health care services.  These non-financial costs keep the quantity demanded in line with whatever supply the government sees fit to allocate.  Sadly, other non-financial costs include pain and suffering from treatable illness, and death.  This is not hyperbole, just a stark observation from what has occurred in nations such as Canada and Great Britain that adopted such plans.

I doubt that my final “Should Not” will be met with much objection by anyone, except maybe by some corporate or labor interests.  No bill should treat any person, regardless of state, occupation or labor affiliation, different from any another.  This includes Congress, although it's doubtul that they will participate in any new program.  Except for elderly or indigent citizens who are truly in need of additional care and protection, special favors or exceptions for political advantage must not be allowed.  Favors on this scale for the politically powerful or connected are antecedent to tyranny.