Tuesday, February 26, 2008

A Healthcare Plan I'd Like to See

Shay at Booker Rising calls me to task for my post on McCain and healthcare. But she misinterprets my viewpoint – which is probably because I didn’t actually say what kind of healthcare proposal I’d most like to see. So, here it goes…

First, I do think the federal government has a role to play. This is a national problem involving millions of citizens, thousands of businesses and plenty of interstate commerce. However, I do not support nationalized healthcare as that just reconfigures the system without addressing the cost/quality conflict at the heart of the current problems.

Healthcare costs are high for a variety of reasons. Some are uncontrollable, such as the increasing number of older Americans whose advancing age requires a great amount of medical care. Others are directly related to the high quality of care we’ve come to expect: we use the newest (thus most expensive) technology and produce highly skilled (thus well-compensated) medical professionals. We could fairly easily lower costs if we substituted older technology and less-skilled medical providers, but we’d have to settle for lower quality care.

In many ways, we’re already making the cost/quality tradeoff. Healthcare providers, following the demands of the free market, are increasingly using nurse practitioners in lieu of board certified physicians and hiring lightly trained medical assistants over more highly trained nurses. Many insurance companies take a more draconian approach, telling patients and doctors what level of quality care is acceptable based partially on what the insurance company is willing to spend. That kind of cold, cost-benefit analysis results in the rare but heart-wrenching stories of people suffering because they were denied treatment.

Using fewer physicians and registered nurses can only go so far until quality of care becomes dangerously insufficient/incompetent. There’s little reason for the federal government to force even more lesser-trained providers into the system. Similarly, mandating what insurance companies must pay for would require a massive government intrusion into private business with unknown and likely undesired results. The solution, therefore, will not come from artificially controlling the cost/quality relationship. Instead, we need to look at the risk management aspect.

Where the plans of Barack Obama and Hillary Clinton go wrong is in their assumption that lack of affordable insurance for millions is the core problem when it’s actually just the most obvious symptom of larger issues. Making sure every American has insurance is a nice idea but without addressing the underlying risk/reward problems, simply shoving more people into an already unbalanced system will decrease the quality of care for everyone.

The lack of affordable health insurance is not due to greedy insurance companies or the quality-control initiatives of theAmerican Medical Association or even because we Americans are leading relatively unhealthy lives (the obese and smokers actually cost less to treat over their lifetime than do more healthy individuals). Health insurance is expensive because high quality healthcare is expensive. Insurers must take on significant risk and thus charge significant prices. The most expedient way to lower prices is to spread the risk over larger numbers but, thanks to ridiculous regulations, many Americans are not allowed to buy insurance as part of a group and instead must opt for staggeringly expensive individual plans.

So, step one is deregulation/re-regulation. Allow individuals as well as small businesses to band together with others and buy group rates. More radically, instead of requiring businesses to provide health coverage for their employees, we can sever the business/insurance relationship and let each individual citizen choose a plan based not on where they happen to work but on their healthcare needs.

Without large corporations footing the bill, insurers would have to innovate to create plans affordable for individuals. Plus, individuals would have fully portable plans that would allow them to change jobs or start their own businesses without fear of losing coverage. A more fluid and less risk-adverse workforce would be a boon to our economy, as would freeing our businesses from the burdens of paying for healthcare.

Deregulation alone will not be enough. Step two is increasing the level of choice available to consumers and the level of responsibility expected from them. Right now, health plans are stratified but not particularly customizable. It’s a collection of prix fixe menus with designated courses at each price level but no real choice. This has the effect of disconnecting the consumer from the real costs of what they are purchasing. If it’s covered, they’re going to opt for it, even if it’s not medically necessary. The current coverage system creates a disconnect in patients’ minds between care and cost and is actually one of the leading causes of higher healthcare expenditures.

However, if more customizable plans were available, individuals could choose coverage based on the level of risk they were willing to assume and the level of premium care they desired. There could even be different deductable levels for different procedures and medications, rather than one flat deductable. That way, patients would know the cost of the care they seek and have to take personal responsibility for choosing excessive procedures and medications. This, of course, is not something the government could mandate but it could encourage innovations by providing tax incentives to those companies willing to reform their coverage.

The final significant way the federal government can help is through providing tax credits which individuals and families can apply to health insurance (John McCain’s otherwise gaunt plan, has this provision). Additionally, the government can expand health savings accounts allowing families with more expensive coverage or additional health needs to put aside extra tax-free funds.

Clearly and inarguably, what I’ve laid out here has huge holes. This is a profoundly long blog post but a terribly insufficient description of a healthcare plan. My thoughts are really nothing more than the very basic outlines of ideas I’d like to see developed and advanced on the federal level – I realize they are not devoid of fallacies or complications and I do not consider them anywhere near a complete list of available remedies. There is a lot of room for states to promote their own plans and take other measures such as preventative care initiatives and malpractice lawsuit reform. There is also a lot of room for free market solutions from both insurers and providers. What’s important is we avoid restricting the marketplace of ideas by federalizing the healthcare system and cutting out the vast majority of the innovators in this field.

As a general rule, I like a narrow federal government focused more on clearing the road of obstacles than trying to design and drive my car. Right now, Obama and Clinton are focused on building the car while John McCain is either unaware of the huge piles of junk blocking the way or is unmotivated to develop the bold actions needed to remove them. I think the best solutions will come from a conservative-leaning mindset, but I’m still waiting for a Republican to champion pro-market, limited government ideas that can win out against the Democrats’ big government plans.



Blogger Hans & Diane said...

Amen! And thank you for some common sense!! How can that "seed" be planted with current and potential "leaders?"

12:46 PM  
Blogger Michael said...

Excellent article. The only thing I might add is that consumers (Americans) need to assume more accountablity and responsibilty for their healthcare. See this article.

1:21 PM  

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