For most Americans, complexity in government is like apples in apple pie. Many of us accept that we must purchase a complex computer program to do our taxes, or verify our identities by way of state-issued drivers’ licenses that require extensive documentation and a long wait in line. When we retire, we cash in our 401-Ks cobbled together across our various jobs, and managed without much expert help. We make sure our long-term care plans are in order, and decide on whether to purchase a supplemental Medicare package, or go with an all-private Medicare Advantage plan. All of the complex rules and programs we navigate in our lives ensure that relative to our peers in other countries, we shoulder immense amounts of risk in hopes of fostering innovation, and we tolerate immense levels of complexity in the name of preserving some notion of personal choice.
How did we get here? From a global-historical perspective, when doctors couldn’t do much beyond prescribing chicken soup and leaches, we paid cash. As it became possible to routinely survive a surgical procedure, or recover from serious illness through medical intervention, health care got more expensive, so people came up with all sorts of clever ways of spreading the risk. Guilds of artisans, unions, and charities helped people to pool their money for the next time someone needed an amputation, or a case of tuberculosis required months in a sanitarium.
Then our fates diverged. Some nations began a slow process of nationalizing the finance and delivery of all health services, while others codified their existing complex arrangements into laws that ensured some level of help for the weakest. In America, in the name of non-interventionist choice preservation, we left health care up to employer, leaving the poor or elderly free to choose chicken or split-pea soup as they pleased. Eventually, feeling bad for the elderly and poor, we created Medicare and Medicaid. Eventually, for the poor people’s kids, we created CHIP, or the children’s health insurance program. Somewhere along the way we passed ERISA, or the employee retirement income security act, which, despite its name, also had a lot to say about the average working stiff’s insurance plan. There was also COBRA and HIPAA, which are important but tedious.
Over the years, mostly in the name of choice and innovation, we variously delegated some responsibilities to states or the private sector through a series of waivers and demonstration projects. In hopes of saving money, we placed a greater share of the costs on the individuals, so they’ll shop around for chemotherapy, or in any case, no longer be part of someone else’s budget. Every year, open enrollment allows us to pick from a smorgasbord of health insurance policies that are significantly more expensive than the year before, with higher fees, and smaller networks of providers. We’re thankful for what we have, and we count the days until we’re old enough for simple, cheap, national Medicare.
The Affordable Care Act did nothing to change anything I wrote above. It added some regulation to make health insurance available to (almost) all through existing mechanisms, and paying insurance companies to cover those for whom a plan would cost more than roughly 10 percent of their income. Its means testing guaranteed a rough interaction with our already byzantine tax rules, and its diffuse market approach ensured that there would be 52 sets of rules for 78,000 individual health plans, another 52 for Medicaid (poor people) plans, and all sorts of tax credits, market incentives, and options for employers to offer coverage (or not). The people who are trained to help others enroll are called Certified Application Counselors, Navigators, In-Person Assisters, and non-navigator personnel. And those are just the ones operating in the 36 federally-run health systems. The other 16 have their own set of terminology.
But we don’t have to start over. We can and should build on what we have. If I was the God of US Health Care, here would be my ten commandments for a new bill (in no particular order):
1. Start negotiating for prices. Mandate national negotiations for a medical fee schedule with any necessary geographic adjustments, similar to Medicare. Negotiations would be between medical societies and insurance providers, with a government-chartered but independent panel of public citizens and experts as final arbiter of any decision. Allow providers and insurers to create their own fully comprehensive regional networks of care using any payment structure they want, as long as it costs the same or less than the national one. Let them keep most of the difference. Inside a network, this puts the people who pay for care, and the people who provide the care on the same side. Outside a network, this frees insurers to charge a little more to those who want maximum choice, while ensuring that insurers compete on quality of customer service, and the ad hoc coordination of care.
2. Federalize Medicaid. Giving Medicaid to the states was a political compromise that has long outlived its usefulness. Today, state budgets are often upwards of one-third devoted to Medicaid. Its waivers and exceptions are unfair and incomprehensible, and it is massively expensive to run dozens of programs instead of one. Since states typically cover half the cost of Medicaid now, to pay for it, cash transfers would have to flow from the states to the federal government, or other transfers from the federal government could be reduced to offset the difference. In either case, the net change in funds the state would owe could be significantly reduced through administrative simplification and economies of scale. Medicaid plans can be distributed through the newly established health insurance exchanges.
3. Open the insurance exchanges to all, and make us all use them. Retaining several different types of markets and risk pools is an actuary’s nightmare, and only adds to costs. Also, if competition is really worth anything, then we should all have the maximum choice possible and the freedom during open enrollment to deep-six any insurance company that gives us the run-around. Employers would also be freed from the costs associated with benefits decisions, reducing an administrative burden while retaining a protection people depend on.
4. Roll Medicare into the exchanges too. On one hand, Medicare beneficiaries would have the option to purchase private plans under the same rules as everyone else (eliminating Medicare Advantage and other complexities). On the other, everyone else would be allowed to buy Medicare. For this to work in the context of the other ideas, Medicare rates would have to be negotiated under the same rules as the other plans, as described in point 1. The only difference would be whether a plan is publically or privately administered. It's concievable that private plans could offer lower premiums compared to Medicare through carefully negotiated networks or alternative payment strategies.
5. Opt out instead of opt in. If someone chooses not to purchase insurance, they should be automatically assigned to minimum coverage. If they choose to be uncovered, they must actively do so. This removes the actuarial need for the hated “insurance mandate.” Insurance premiums should be payable through a payroll withholding, similar to income taxes. That’s how most places do it (even Canada). Payroll withholding also simplifies employers' contributions to employees' premiums.
6. Develop a truly universal claim form, and a universal format for insurance cards. Doctor’s offices often employ several people just to chase insurance claims, and it’s often unclear whether a service will be covered and in what ways. Patients should be able to scan their card and get a coverage determination on the spot, and claims that follow the rules should be paid out without delay or confusion.
7. Reform medical malpractice. Caps on fees don’t really work, as evidenced in Texas and California. Courts or expert panels are necessary to address complex litigation and make fair judgments. Suits deemed frivolous should result in penalties for those who file them. Malpractice coverage should be nationalized, with some measure of risk rating in the premiums.
8. Get everyone primary care. It’s not enough to give everyone insurance. We need standards for primary care that ensure access and quality. People with access to good primary care are healthier and cheaper, regardless of insurance status. Payment priorities, grants, and provider licensure rules can make this a reality.
9. Allow policies to be sold across state lines, but federalize the rules. States should not be involved in regulating insurance plans. If we want real competition, then insurance plans should be better able to conform to the natural catchment areas they operate under. In other words, insurance plans could be regional or national, and offered across state lines, but without the concern that one state or another would be encouraged to lower its standards to the detriment of consumers.
10. End tax writeoffs for insurance. Right now, large employers are far better served giving people expensive insurance plans over paying them more in cash. Take away the tax write-off, and employees will see a gain in net pay, though there will also be a gain in net taxes owed. The added taxable income could go towards subsidies for insurance. A dedicated payroll or other tax might also be needed to finance the vast new group eligible for subsidized coverage and make up for the loss of tax-advantaged coverage employers offer today. A payroll tax could even replace premiums altogether if the rate is pegged to a combination of employee income and their plan selection. For example, an employee making $50,000 a year and buying a plan that costs $5,000 a year would have a 5 percent payroll deduction (resulting in a 50 percent subsidy, perhaps split by the employer and the government), while an employee making $100,000 a year and buying the same plan would pay a 10 percent payroll deduction.
This isn’t about public-versus-private, conservative or progressive policy. It’s about creating a system that is a little more understandable to most people, and easier to access, and with fewer interruptions to coverage. For me, universal coverage is an absolute priority. It trumps nearly all other considerations when it comes to health care, but we have to do better than what we managed to get passed in 2010. For all nations that have taken on this problem, it’s required a series of laws, each with their own setbacks and controversies.
America’s market orientation and culture of innovation is responsible for a disproportionate share of the world’s medical advances. We need to preserve the unique incentives present here to bring new drugs and equipment to market. At the same time we need to make sure that our own citizens can afford it. It’s not fair to say that the United States has done nothing until now to address people’s concerns about their health care. We’ve passed a number of laws to help make health care more widely available and affordable, but when it comes to a universal system, we’re only just beginning. Let it be the beginning of something great.
