Wednesday, September 26, 2007

Health Care Reform is Coming Back

Not in the 07-09 budget, of course. That ship has sailed (or, at least, it sounds like it's sailing).

But, as expected, legislative Dems are making clear that fundamental health care reform is still in the works. As Senator Erpenbach put it bluntly: "It's not going away."

I hope this time away from the spotlight also prompts the Dems to give the Healthy Wisconsin bill a bit of an overhaul. I'd really like to see them come back with the Wisconsin Health Plan and call it a day, but that doesn't seem to be too likely.

There are, however, a couple of key areas that could be altered in the proposal to improve it and make it more politically palatable.

First, allow for HDHP options. These options could mirror those in the WHP where cost sharing isn't applied to preventive care, the deductible is set at a reasonable annual level, and there's a pre-set level of funding in a HSA to allow for first-dollar coverage.

Managing this alongside comprehensive options could be difficult, particularly if people are allowed to switch between plans during an annual open enrollment period. Nevertheless, it's something that should be explored.

Second, explore new funding mechanisms. This is a big one, but it's also the one that would be most difficult to realize. Clearly the biggest substantive objections to Healthy Wisconsin were related to its funding, particularly mandating that all employers contribute a fixed amount to health care.

The reasoning for this mandate is simply that employer-sponsored health care has developed over years and years in this country, and simply abandoning it in one swoop is difficult. But, as I discuss in more detail here, severing the tie between health care and employment should be a goal that's right up there alongside universal coverage in any reform plan.

Third, get some active state Republicans on board. I realize it's highly unlikely anyone in the GOP leadership will sign on, but Republican support for fundamental health care reform isn't impossible.

After all, former Rep. Curt Gielow was a co-sponsor of the WHP and Rep. Terry Musser was a co-sponsor of the Wisconsin Health Care Partnership Plan. And, on the national level, Sen. Bill Bennett -- one of the most conservative Republicans in Congress -- has jumped on board with Sen. Ron Wyden's sweeping Healthy Americans Act.

And, along the same lines, the support of the business community is also key. Healthy Wisconsin and the WHP have some solid business support, but more always can be done. Wyden's Healthy Americans Act is another example on this front; it has the backing of some key national corporations, most notably the CEO of Safeway.

There are other details that also should be examined, such as including more health professionals on the board that oversees the new system, eliminating the use of special affinity groups, creating a mechanism for new businesses to be phased into the plan, and loosening or eliminating the restrictions on insurance company profits.

Needless to say, let's hope the Dems use this break from pushing health care reform as a working vacation.

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Blogger Russ said...

Health care reform must have a mechanism to put the brakes on runaway cost increases. There are only two ways to bring health care inflation in line with general inflation. Price controls imposed by government. If we've learned anything from history it's that wage and price controls do not work. There is only way to control health care inflation. Consumers must have a reason to care about costs. Currently six out of seven dollars of health care spending is made by someone other than the person receivong the care. That's not working. With "skin in the game" consumers will "shop" for health care services just as they do for every other service. Fully tax deductable HSAs combined with fully tax deductable individual health insurance would put the consumer in charge and solve the problem.

September 26, 2007  
Blogger Seth Zlotocha said...

You're right that giving consumers some "skin in the game" is important, Russ, but you're wrong about that and price controls being the only ways to bring about lower costs.

To be sure, the real goal is getting payers and providers to be price sensitive. And there's more than one way to make providers sensitive to price. One way is to have consumers put direct pressure on them through HDHPs. But once the deductible is paid, the issue of cost again falls out of control unless third-party payers -- i.e., the insurance companies who foot the rest of the bill -- can also put pressure on providers to compete for business; and the only way that will work is if the purchasing power of the third-party payers is heightened; and the only way that will work is if third-party payers are all in the same system in which they compete directly for participants based upon cost and they're not able to engage in adverse selection.

There are also other related issues, such as cost-shifting, that drive health care costs. If third-party payers are allowed to engage in adverse selection, for instance, they'll essentially be competing only for participants from the more healthy segments of the population. When that happens, a bigger percentage of the population becomes uninsured, and when they go in for health care they can't afford, the costs get shifted to those who do have insurance. The same is true for bare-bones plans or those with unreasonable cost-sharing levels. People go in for care, they can't afford it, and then the cost gets shifted.

Bottom line, the health care market isn't like the market for TVs or cars. Direct consumerism can play a role, but it's not going to be a cure all, and it certainly isn't the only way to deal with the cost issue aside from draconian price controls.

September 26, 2007  
Blogger Dad29 said...

Altogether a good list of suggestions.

September 26, 2007  
Blogger krshorewood said...

Our problem is we link up access with cost control and they are two different things.

Cost control has to be looked at all on its own. A couple of thoughts there. I've seen statistics that 40% of healthcare delivery is waste. We need to institute practices such as Six Sigma and lean into healthcare.

Also, whether if we stick with for profit or go to government managed healthcare, there must be an incentive such as their is in the UK to get people on health improvement programs.

We say it time and time again, one of the reasons why our costs are so high is that health problems many times are not treated until they become real expensive.

September 27, 2007  
Blogger Seth Zlotocha said...

You're right that access and cost are separate issues, but you can't deal with access for long without also running into the issue of cost.

To be sure, BadgerCare Plus is essentially an access-only plan. There's some attention to streamlining Medicaid administration, but, for the most part, it's about access. But that plan alone leaves two big issues: 1) the type of access people have, and 2) costs continue to skyrocket, pushing more people into having trouble with access.

The first point comes down to the existence of bare bones and/or high cost-sharing plans. These people may "have access," but if they can't get coverage for most non-minor ailments or afford the cost-sharing on the care they need, that access really isn't worth much.

You could always mandate minimum amounts of coverage and reasonable levels of cost-sharing, but then you run into the issue of cost because you're going to be making the policies for those people more expensive, which is going to require public subsidizing. And, if you're going to go through all that, you're essentially at the point where you might as well re-make the entire system and try to build cost-savings -- via consumer, third-party, and provider competition as well as streamlining administrative procedures -- directly into the new system.

In the end, you're right that there's a lot of waste in the system, and that's precisely because of the perverse incentives that currently exist in such a fragmented system. The only real way to handle those is to fundamentally re-make the system and put everyone on a relatively level playing field so that payers quit seeking out only the more healthy and providers quit seeking out only the more insured. That practice may be fine in markets for luxury services like spas or fitness clubs, but not in a market for essential health care services that people are going to require -- and no one is prepared to deny them -- regardless of their coverage status.

September 27, 2007  

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