Wednesday, December 16, 2009
Objectives of Health Care Reform
Health care reform – including a palatable public option – is capable of achieving each of the key objectives which must be satisfied for a bill to emerge from Congress. #1: The plan must drive down costs for all Americans, all health care payors, and the overall health care system. #2: All Americans must have access to affordable, reliable health insurance, and quality, affordable health care. #3: Americans must retain their ability to choose among health insurance and health provider options. In conjunction with other components of the Senate and House bills, the ten elements below could meet these objectives and appeal to key legislators and constituencies.
Opposition to Health Care Reform
The opponents to meaningful reform mainly base their resistance on three misconceptions: (a) individuals, families, and small businesses are adequately served by the existing system and can fend for themselves; (b) market forces should be the sole driver of competition to private insurers, and no governmental action should be taken that could result in a decline in the market share of insurers that are not providing reliable, affordable coverage for all applicants in their coverage area; and (c) the Federal government should have no role in pooling risk and providing coverage even for Americans who are not being adequately and affordably served by insurers.
The first objection is rooted in the centuries-long debate on the primacy of the community versus that of the individual. Advocates of comprehensive reform recognize that all payors and providers are inter-dependent, as evidenced by the uncompensated costs of health care pushing up costs and premiums for both private and public insurance (e.g., higher costs of care lead to lower reimbursement rates to achieve cost savings, which result in higher premiums). Reform opponents often focus on their own coverage and care, believing that free market principles allow their needs to be fulfilled in isolation from the needs and payment mechanisms of others.
But it is an illusion for anyone to believe that the cost of their health care – whether public or private – is isolated from other cost and coverage factors. Whether or not they realize it, families, individuals, and businesses need competition and a system that affordably serves everyone, in order to stabilize the scope and cost of coverage. Currently, neither exists. Each of us is one diagnosis away from learning that we are not insulated from the failures of the current system. Buyers in the individual and small-group markets are neither empowered nor self-sufficient, due to risk pooling, the practices of insurers, and the inequality of bargaining power between small purchasers and insurers. The shortcomings of the today’s marketplace cannot be ignored.
The second objection is rooted in the absurd suggestion that private insurers, who need to generate profits, cannot compete with an option that is not designed to generate profits. That argument is self-defeating. If profits account for the disparity in premiums between the two, then profits are unjustifiably high, and the amount spent on health claims is irresponsibly low. An insurer that retains modest profits can compete well. But insurers that manipulate coverage and care decisions to ensure high profits will not be able to compete. Why should anyone defend the right of insurers to generate windfall profits at the expense of the families that they insure? Why would reform opponents want to limit our choices to the most expensive insurance alternatives, which are also notorious for denying care? These insurers have been escalating costs, and have caused great hardship for many Americans. They should not be rewarded. If the bad actors lose market share, the responsible insurers will benefit, along with the American people.
The third objection is rooted in denial of the intrinsic nature of insurance: the pooling of resources of the many to pay for the needs of the few. That is also a normal and regular role of government in many contexts. People pay into a collective repository – even if they do not need services at the time – in exchange for that repository paying their own expenses in the future when needed. For most Americans, the health care repository is a private-sector insurer, whereas for senior citizens and people with disabilities, the main repository is Medicare. People pay into a collective fund for Medicare while they are able to do so, and become beneficiaries years later. Whether health insurance is provided by private insurers or the government, the principles of communal pooling of funds are the same. Thus, anyone who supports Medicare but objects to Federal risk pooling and health insurance is being hypocritical.
Reform, With a Palatable Public Option, that Achieves the Three Main Objectives
Many legislators would prefer a public option that is maximally robust and extensive. However, to pass a reform bill, the public option should be constrained to the part of the market for which it is most needed, and must not exclude insurers that wish to compete with it. The following ten elements could be combined to achieve the three objectives, and gain legislative support.
(1) Private-sector and non-profit insurers that serve the individual and small-group markets would be aggregated into a marketplace exchange for eligible purchasers that is similar to the Federal Employee Health Benefits program. This component would be similar to what was proposed by the Senate’s “Gang of Ten” in early December, and would be administered by the government.
(2) Insurers in the exchange could offer low-premium catastrophic care plans, to provide families, individuals, and small businesses with a less expensive “safety net” just in case of a major health need. Consumers could choose between comprehensive coverage or a catastrophic care plan, which would be a lower-cost alternative for those who seek coverage just for major illnesses, and would alleviate the strain on health care providers from uncompensated care for major treatment.
(3) The public option would be in the exchange as just one of the many options for purchasers. Enrollment could be limited to individuals, families, high-risk populations, and small businesses (up to 50 or 100 employees, or under a payroll threshold). The eligibility of small businesses could mute some objections since their advocates maintain that they often cannot afford private insurance (even the opponents of the public option acknowledge that it would be less expensive). Insurance companies would benefit when high-risk persons enroll in the public option (their care is often more expensive). Large and medium sized groups and employers would be ineligible, continuing the major role of private insurers in this market. Although some oppose any coverage option that is not profit-driven, most would not mind getting a bigger bang for their premium buck.
(4) Health care practitioners who wish to participate in the public option would be required to meet new Health Information Technology (HIT) standards by a specified timetable that is sooner than that required for other providers. This would accelerate the adoption of HIT among providers who participate with both the public option and private insurers. Insurance companies would benefit because their providers would begin to use HIT – resulting in cost containment and administrative efficiencies for both providers and insurers – without insurers applying the same early efforts toward that transformation.
(5) All plans in the exchange – the public option, the non-profits, and the private insurers – would adhere to an “expense to premium ratio”. This ratio indicates the amount of premiums spent on administrative expenses rather than on claims for health services and treatment. If an insurer’s expenditures on overhead (including administration, advertising, utilization review, agent fees, corporate retreats, lobbying, and profits) exceed the specified ratio, a steep fee would apply. Insurers could avoid the fee by having a low ratio, signifying that premiums are paying for care, not disproportionately paying overhead. Use of “expense to premium ratios” would promote cost containment and consumer value, minimizing spending on activities that are devoid of benefit to consumers. The ratio is a strong tool for evaluating proposed hikes in premiums, deductibles, and copayments. It would apply separately to each line of business of an insurer, not allowing insurers to leverage and distort results among consumers by aggregating lines of business.
(“Expense to premium ratios” are a more accurate reflection of insurer behavior than “loss ratios” because “loss ratios” do not include insurers’ revenues from the investment of premiums. “Loss ratios” are cited by insurers because they erroneously create the impression that health insurers only have premium dollars, and no other finances. They allow profiteering and high expenses.)
(6) Since the 1940s, the McCarran-Ferguson Act has exempted insurers from most Federal regulation. This has created a patchwork of inconsistent state regulations for health insurers, and limited competition. It might also impair the effectiveness of the marketplace exchange: for example, the use of “expense to premium ratios” to enhance value for consumers and cost containment. Amending or repealing this law is necessary so that competition, cost containment, and reliable, affordable health insurance may thrive. Also, if health insurers were allowed to provide coverage nationally, as proposed by some Republican legislators, the outright repeal of McCarran-Ferguson would be essential.
(7) Claims administration – with each insurers’ distinct forms, processes, and rules – has become overwhelmingly time consuming and expensive for health practitioners. These problems would be solved by use of a single set of uniform, standardized forms and procedures for claims filing, and interactions. The system would be based on electronic filing, applied nationwide, and utilized by all providers, payors, and regulators. It would advance cost containment, facilitate evaluation of data to improve health care quality and treatment protocols, and magnify efficiency of the exchange. Providers and insurers who participate in the exchange could be required to adopt these systems first, ahead of the schedule for adoption by others, as a trade-off for the additional business that they would gain by joining the exchange. The cost savings and alleviation of burden would be incentives for others to embrace the standardized system.
(8) Rules should be developed that prohibit denials of coverage based on traditional underwriting schemes, and limit rate variances among enrollees in the exchange. The rules, which must apply to all plans in the exchange, would establish that premium rates are either to be constructed on the basis of Community Rating, Adjusted Community Rating, or tightly limited “rate bands” which allow only minor variances based on specified criteria.
(9) Consumers have been reassured that they can keep their health insurance and providers if they would like to do so. However, it is also vital to annually enable enrollees in the exchange to switch to a different insurer if they are not satisfied. The plans in the exchange should have the tightest controls against cost increases and coverage limitations, to enable continuity.
(10) Medical malpractice liability insurance and defensive medicine have played a role in the escalating cost of health care. It is important yet difficult to assess the justifiability of premium rates, due to the lack of data from liability insurers. Increased reporting from them is necessary, including premium rates and revenues, med mal claims made, claims defended, claims paid, court settlements reached. Reasonable regulation of premium rates would contain costs and enhance accountability, alleviating the burden on doctors, hospitals, and payors. Defensive medicine costs, on the other hand, will be reduced not by legal reform, but through the adoption of HIT. When electronic medical records and practice guidelines are fully implemented in the US, defensive medicine will be ameliorated by the access of providers to patient records of treatment, tests, and health history, as well as guidance from the aggregated data.
Wednesday, December 2, 2009
The dialogue is certain to address a wide range of issues, from access to capital and insurance to promotion of key industries and market development, and from small business incentives and micro-lending encouragement to tax benefits and trade enhancement. As a contribution to this national brainstorming session, the following three perspectives could also add significant value to our national effort to create employment opportunities in the short-term, and institute sustainable economic and job growth over the long-term.
1. Job Skills Training via E-Learning
Job skills training and workforce development are critical components in job growth and economic development. There is often a co-dependent “chicken-and-egg” relationship between the need for well-trained workers and the availability of jobs for well-trained workers, such that progress toward the two objectives necessarily must advance concomitantly. Companies are usually reluctant to establish or increase operations without assurance of the availability of qualified personnel to hire for such operations. Similarly, once people have gained high-value job skills, there is a need to place them in jobs in which they will be able to put their skills to remunerative use. Thus, it is vitally important that job skills training and workforce development resources be widely available, and be correlated with and calibrated to the proliferation of jobs and work opportunities. Online e-learning provides a highly scalable and relatively low-cost solution for dissemination of a vast array of job skills. Americans would be well served by Federal support for e-learning of job skills training that enables convenient access at a place and time of the learner’s choosing.
2. Information Technology and Business Skills for Competitive Advantage in the Global Economy
For maximal relevance to today’s 21st century information-based economy, it is increasingly necessary for new workers, re-trainees, and displaced workers to obtain information technology and business skills. With the acceleration of the global economy, digital-based skills have become a core competency in many industries and roles that are transitioning to advanced business methods, mechanization, and reliance on information technology tools. This trend is prominent in the manufacturing sector, which, in past decades, may not have embraced these developments as closely as in other sectors. Even more crucially, in the services sector --- including financial services, health care, IT and telecom services, fulfillment and delivery, etc. --- these skills have long been of paramount importance. Job growth in each of these sectors depends upon workers having contemporary IT and business skills, as well as the foundational capacity that will enable them to quickly achieve operational competency in the IT and business skills that are used by a specific employer.
This imperative was illuminated earlier this decade during the concern over “outsourcing”, by which many jobs were being relocated outside of the United States. As the global economy allows – and even promotes – the free flow of jobs to locations with lower operating costs, the key to success for US companies and job growth for US workers is the mass proliferation of advanced IT and business skills. With such skills, US workers and industries can remain pre-eminent in innovation, cost-efficiency, and value. These outcomes will continue to be the cornerstone for product development, service delivery, entrepreneurship, and new business models, each of which propel our economy, and, ultimately, are essential for job growth among people who can advance these objectives.
3. Development of Industry-Specific Technologies for the Future Economy via “Business Parks”
The Federal government can fulfill a critical role in developing and implementing strategies to accelerate job growth for skilled workers, due to its unique capacity and powers for policy development, resource coordination, stakeholder collaboration, and incentive creation. The Administration could convene a task force (comprised of government officials, industry leaders, university leaders, financiers, economic development thought-leaders, scientists, educators, and others) to chart the course of future innovations through accelerated and coordinated creation of “business parks” to catalyze technologies, products, and services that will become industrial leaders and revenue generators for decades to come. Deployment of these initiatives would have a strong impact on localized job growth in the near-term, and become focal points of our country’s global economic leadership in future decades. Some of the key steps include:
(a) identification of industries, products, and services with very high growth potential that are anticipated to address US and global economic and societal needs in the future, e.g., clean-tech energy production, resource conservation, clean water production including de-salinization, health care and biotech advancement, environmental remediation, recycling and waste management, high-volume food production, mobile telephony and computing, transportation safety, homeland security technologies, etc.;
(b) identification of stakeholders who have resources that could contribute significantly to development of those industries, products, and services, e.g., technologies, intellectual capital, financial capital, facilities, delivery or deployment infrastructure, end-product usage, etc.;
(c) development of conceptual frameworks for the coordination of resources in physical “business parks” that are dedicated to an individual industry, product, or service, so that participants can leverage each other's research, resources, and manufacturing and deployment capabilities, resulting in synergistic benefits for all participants;
(d) specification of components, inputs, and services with which each business park would be equipped, including high-tech communications and technology infrastructure (with fiber and wireless connectivity), energy-efficient facilities that are tailored to each business park’s needs, support services, and, possibly, environmentally-friendly affordable housing;
(e) identification of localities that would be appropriate for the siting of business parks, considering their access to facilities, infrastructure, research, intellectual capital, local and business funding, planning coordination, technology transfer, zoning variances, skilled workers, job skills training resources, manufacturing or production capacity, markets, leadership, etc.;
(f) identification of incentives, business relationships, and the legal framework associated with the business parks, e.g., ownership and partnership characteristics, sharing of patent and licensing revenues (including for the Federal government), tax incentives, establishment of enterprise zones, coordination with Federal science and research institutions, anti-trust waivers to allow for coordination of activities, procedures for accelerated initiation of operations to stimulate job growth and economic impact, etc.; and
(g) coordination of the activities and results emanating from the business parks with the industry stakeholders who are engaged in the products and services that are designated for development through this initiative.
Tuesday, August 18, 2009
The Roots of Division
This divide illuminates a classic philosophical tension in American culture that has deep roots and even transcends politics, going to the heart of the American psyche. Each of the two dominant viewpoints has key characteristics. One group seeks linkages to, and success for, the larger community, and is amenable to reform to achieve it. The other group gives priority to the individual (and family unit), and is oriented toward the status quo, with the notion that, on their own, people earn prosperity over time. The current divide is similar to the 1820s’ battle between elitism and populism, the 1890s’ conflicts between “laissez-faire” proponents and muckrakers, the 1910s’ and 1920s’ disagreements between isolationists and those who favored global engagement, the 1930s’ success of “New Deal” concepts, the 1980s’ “trickle-down economics”, and the 1990s’ and 2000s’ debates between big and small government. A notable recent example was in the 1990s, when Hillary Clinton’s book “It Takes A Village” was countered by Republicans at the national convention who claimed that “it takes a family”.
The Cultural Division on Health Care Reform
In the context of health reform, rather than the division being crudely defined as a dialectic between Democrats and Republicans, it is actually the underlying philosophies that are at issue. Health reform is a microcosm of the centuries-long debates on the community versus the individual, and reform versus the status quo. Advocates of comprehensive reform recognize that all payors and providers are inter-dependent, as evidenced by the uncompensated costs of health care pushing up costs for the insured and government programs, which again affect the insured down the line (e.g., lower reimbursement rates in government programs, to achieve cost savings, then result in higher health care costs for the insured). Those who oppose major health reform focus on their own coverage and care, believing that free market principles allow their needs to be fulfilled in isolation from the needs and payment mechanisms of others.
These two views are intertwined. Individuals’ satisfaction with their choices and costs require cohesive policies and structures that enable each person to access reliable and affordable health insurance; and the viability of the American community requires that policies and structures allow for all individuals and families to choose and afford services that meet their quality-of-life needs.
Health reform is a natural arena for this conflict in philosophies to play out. The intrinsic nature of insurance is based on the pooling of the resources of the many to pay for the needs of the few. The underlying principle is that people pay into a collective repository --- even though they may not need services --- in anticipation of that repository paying their own expenses somewhere down the line when needed. For most Americans, the central repository has been the private-sector insurance companies, whereas for senior citizens and persons with disabilities, the primary central repository has been the Federal government (via Medicare). Medicare itself is based on everyone paying into a collective fund while they are able to do so, and then becoming beneficiaries of that fund years later. So, in essence, whether health insurance is provided by private insurers or by the Federal government, the principles of communal pooling of funds are at the core.
Flashpoint: The Federal Option
The debate over the “Federal option” thus comes down to a question of how to pool and administer the collective risk. Insurance companies oppose it because it may draw away the premiums from some lower-risk, and therefore lower cost, sectors of society. Insurers appreciate Medicare, because older Americans are the most costly group to ensure, as they need the most health care services and pharmaceuticals. It is fine with them if the Federal government picks up the tab for them. Similarly, insurers do not mind Medicaid, because most recipients would not be able to afford health insurance on their own. But insurers want to maintain their flow of premiums from healthier groups. Insurance companies have mobilized many to oppose health reform, and especially the Federal option, because it is in their interests to do so. It is not because insurance companies would not be able to compete with the Federal option, but rather, that they would miss out on some of the premiums from people who are not expensive to insure.
It has been argued that private insurers, who need to generate profits, could not compete with an option that does not need to generate profits. But that argument is self-defeating. If profits account for disparity between the two, then insurers’ profits are unjustifiably high, and the amounts being paid for health services are irresponsibly low. For an insurer that structures their operations for profits at a reasonable level -- which can be achieved through smart investments of premium dollars before they are needed to pay for care -- competition would not be a problem, since they provide good value for premiums paid. But for insurers that manipulate coverage and care decisions to ensure high profits, competition will, indeed, be difficult. Why should anyone defend the right of private insurers to generate windfall profits at the expense of the families that they insure? These insurers have been escalating costs, and have caused great hardship for many Americans. They should not be rewarded. If the bad actors lose market share, the responsible insurers will benefit, along with the American people.
It is an illusion for any individual or family to believe that the cost of their health insurance or health care is isolated from other cost and coverage factors. This is the case for all risk pools, managed by insurers or by the government. Family premiums escalate according to the cost, underwriting, risk-spreading, and administrative expense decisions of their insurer. The premiums which are set by each insurer are also affected by the health care marketplace, and are thus impacted by the uninsured, other insurers, Medicare, Medicaid, and other payors. Whether or not they realize it, the ability of individuals, families, and businesses to maintain the level of coverage that they desire, and maintain some semblance of restraint on premium increases, is dependent upon competition and an overall system that affordably covers and serves everyone. Currently, neither exist. Anyone who thinks that they are insulated from the effects of the overall system needs only to be diagnosed with a serious illness or condition to learn otherwise.
If no one ever got sick, then everyone’s costs would be low. But, since people do get sick, insurers have a choice of paying for those costs in either of three ways: (a) to deny coverage or treatment; (b) to spread the costs via premiums among those who they insure; and (c) to minimize profits and administrative expenses to pay for those costs. All too often, private insurers opt for the first two choices, and skip the third. A Federal option would spread the costs via premiums, because it would not deny coverage or treatment, profits would be irrelevant, and administrative expenses would be kept low. Thus, when insurers complain that they would not be able to compete with a Federal option, they are really saying that they are not prepared to responsibly manage risk and costs as well as the Federal government would. However, private insurers who provide good value for premiums paid would attract more people, and in so doing, expand their pool of insured people amongst whom to spread their risk and costs.
How Does This Impact the Current Debate on Reform?
Lawmakers should recognize the underlying philosophies of both the proponents and opponents of reform, as well as how their views relate to the Federal option.
The first imperative is to raise awareness of the basic nature of health insurance: that it involves a communal sharing and spreading of the risk and costs, whether by private insurers, the government, or anyone else. The illusion of families and businesses being isolated and insulated from the overall health system must be dispelled. Much of the current opposition is based on this misunderstanding.
Second, it is not enough to explain that people will be able to keep their insurance despite reform. This approach perpetuates a misconception by suggesting that their health insurance is stable and reliable. It is not. It is vital to speak directly to the opponents by explaining that they are currently at risk of being denied coverage and treatment. It is also imperative to explain that, without reform, their premiums will escalate dramatically, pricing many of them out of the market and into the ranks of the uninsured. Since opponents are more likely to focus on their own status quo rather than the long-term needs of the broader American community, reform must be explained as essential for their sake, rather than for the uninsured or people already victimized by the system. Individual liberty to choose affordable, reliable health coverage is in jeopardy.
Third, the Federal option should be discussed as just an alternative pool for families, individuals, small businesses, and high-risk people. This would place the focus on those who would be served, rather than those who would be serving them. It would merely aggregate a pool of people, just like insurance companies do. Whereas the “Federal option” conjures images of a “big government” program, an alternative pool emphasizes that it is basically just another source of insurance. Since opponents of reform tend to focus on the rights and choices of individuals / families, an alternative pool that is designed to meet their needs would appeal directly to them. For those who are uninsured or facing very high premiums (especially if they are covered through the “individual market”, rather than the “group market”), they could join the alternative pool. If a small business cannot afford premiums charged by traditional insurers, they could more likely afford the alternative pool. The main distinction would be that it would not pursue profits. Although some opponents might object to any coverage that did not provide profits to a company, most people would not object to getting a bigger bang for their premium buck. The alternative pool could also offer a low-premium catastrophic care plan, to provide individuals, families, and small businesses with a less expensive “safety net” just in case of a major health need.
Fourth, since it is likely that any bill that reaches the President’s desk will include some compromises (e.g., narrowing the Federal option’s scope, enrollment eligibility, etc.), reform should be promoted to proponents in terms of the many gaps that it will fill. Since reform proponents are more likely to focus on the overall American community, the tightening of the overall fabric of the system should be embraced. Even without becoming airtight, the new system would prevent denials of coverage and care, greatly expand the pool of people who can afford coverage, increase competition, and decrease uncompensated care. These advances would lower costs for all payors of health insurance and health care services, including families, businesses, and the Federal government.
The heated debate on health care reform is an extension of a philosophical division about the role of government in our lives that can be traced back to the early days of our nation. Recognition of these views is vital to successful reform. By directly addressing these underlying principles, reform can appeal to many of their adherents, and concerns that have been raised can be alleviated.
Wednesday, August 12, 2009
THE FEDERAL OPTION
The Federal option has been hailed for serving two crucial objectives of reform: less expensive premiums and expanded coverage. Yet, opponents distort these assets into liabilities. While they recognize that the Federal option would be more efficient and less expensive – that it will be so good that most people will choose it – they then suggest that this competition hurts competition! Besides for being illogical, their argument suggests that insurance companies either cannot become efficient or should not be prompted to do so, and that insurers can only survive when their market share is protected from competition. It is akin to calling for a cure to cancer but refusing to fund cancer research on the grounds that cancer deaths would decrease, causing the population to swell out of control. Opponents claim to support consumer choice while, at the same time, denying them the choice!
Why do opponents want to restrict choice to the most expensive insurance alternatives, which are also notorious for denying care? Why do they want to protect market share for companies that they recognize would not be the choice of most consumers? Why do they condemn the Federal option for being too efficient at providing quality health care with higher consumer satisfaction? Senator DeMint (R-SC), for example, claims that he has proposed many health care reform alternatives. But each one just used a pretense of reform to promote business development initiatives for insurance companies, allowing insurers to sell to more people and accept premiums from more sources. Promoting and defending health insurers that charge high premiums for limited care that do not satisfy health needs is an affront to the public interest. True competition would and should force some of the “bad actors” in the health insurance market out of business -- which would be good for consumers and businesses -- while the “good actors” in the private insurance market would continue to thrive
Still, in the spirit of bipartisanship, concerns about the Federal option could be accommodated by imposing some limitations and terms on the Federal option. (1) Enrollment could be limited to individuals and families who are currently uninsured, as well as to those who are not insured under group coverage, and to small businesses (with up to 50 or 100 employees, or under a payroll threshold). (2) The Federal option could provide enrollees with a choice of comprehensive coverage or a catastrophic care plan, which would be a lower-cost alternative for those who seek coverage just for major illnesses, and would alleviate the strain on health care providers from uncompensated care for major treatment. The eligibility of small businesses would mute the objections of advocates who claim that small businesses cannot afford comprehensive coverage from private sector health insurers, since even the opponents of the Federal option acknowledge that it would be much cheaper. Insurance companies would benefit by high-risk persons enrolling in the Federal option (as their care is often more expensive), which would also limit the extent to which the Federal option’s premium pricing could decline below that of private insurers. The ineligibility of large and medium sized groups and employers to enroll in the Federal option would ensure that the private market would continue to play a fundamental role in health insurance coverage.
(3) Health care practitioners who wish to participate in the Federal option could be required to meet Health Information Technology (HIT) standards by a specified timetable that is sooner than that required for other providers. This might inhibit some providers from signing up to provide services through the Federal option, thus limiting its market share and maintaining balance with insurers. Yet, it would accelerate the adoption of HIT among many providers who participate in both the Federal option and private insurance. Insurance companies would benefit from this as their participating providers would become oriented toward the use of HIT --- resulting in administrative and cost efficiencies for both the providers and the insurers --- without the insurers applying early efforts toward that transformation.
Everyone agrees that new revenues must be found to pay for the reformed system. But views differ on how to make revenue generation as painless as possible.
The proposal by Senator Kerry (D-MA) to tax health insurers would provide a major source of funds. Some think it would restrain insurers’ ability to compete. But, a tax on insurers that is linked to their overhead and profits would increase quality, efficiency, and consumer satisfaction without impairing insurers’ vital operations. By tying it to insurers’ “expense to premium ratios” (similar to, yet more meaningful than, “loss ratios”), the tax would promote the use of premiums to pay for health care services and treatment, rather than administrative expenses, utilization review, advertising, agent fees, corporate retreats, and profits. Insurers could avoid paying this tax by having a low ratio (below a specified level), since a low ratio would mean that premiums are being used to pay for care, rather than disproportionately paying for overhead. If an insurer’s ratio is higher than the accepted standard, then that excess amount could generate a steep excise tax to recoup those amounts for use in the health care system. Insurers would be incentivized to minimize premiums and expend them on health care services. (“Expense to premium ratios” are a more accurate reflection of insurer behavior than “loss ratios” because “loss ratios” only include insurers’ revenues from premiums, not their major revenues from investment of premiums, which “expense to premium ratios” do take into account.)
Sizeable revenues could also be generated from the House Ways & Means proposal to tax very high-income people, and various efforts to tax “Cadillac health insurance coverage” (e.g., worth more than $15,000 to $25,000 for family coverage). Despite some opposition to these, this criticism could be muted. The tax could be applied only to “Cadillac coverage” over a specified level (e.g., $20,000 for family coverage), and then also be means-tested, to ensure against the tax being placed on a family earning, for example, $100,000. High income families (for example, earning over $250,000 or $350,000 annually) would be taxed at a basic rate for their “Cadillac coverage”, and very wealthy families (e.g., over $1 million) could be taxed at a much higher rate. In this way, “Cadillac coverage”, which is akin to compensation, would only be taxed in the case of those who are most able to afford it (rather than being subsidized by all taxpayers by being tax exempt).
Means testing of “Cadillac coverage” could still be coupled with a reasonable tax on annual incomes over $1 million. This additional tax could be tempered, however, by applying it for just a limited number of years, until the efficiencies of the reformed health care system generate anticipated savings which can be applied to the system.
To some, an employer mandate is the key to universal coverage, affordability of coverage, and reducing uncompensated care. But to others, it’s just plain scary.
The employer mandate has been derided as unaffordable for small businesses, many of which allegedly would sacrifice business growth to avoid it. Scare tactics are intensifying, with Congressman John Shadegg (R-AZ) on July 30th implying that the mandate would apply to all businesses with two employees. While critics focus on the cost of insurance, they ignore the cost of NOT being insured. Employees in small businesses are not exempt from becoming sick, developing chronic illnesses, and wishing they had health insurance. If these employees do not have health coverage, then it adversely affects the business, for example, if illnesses spread among employees, decrease productivity, intensify due to a lack of treatment, cause skilled employees to quit their jobs, etc. If these realities are ignored, and measures to cushion the impact of a mandate are necessary, then there are some options.
As stated earlier, small businesses should be allowed to enroll in the Federal option to minimize their premiums and out-of-pocket costs, and provide reliable coverage. Additional meaningful incentives could be offered to non-exempt small businesses, especially to encourage their enrollment sooner rather than later. (1) A small tax credit or subsidy could be offered for the first few years if they enroll promptly, to defray a portion of the costs and ease the financial burden. (2) To bolster economic recovery and revitalization too, a tax credit for hiring employees could be made available to small businesses if they purchase health insurance prior to a specified date. (3) An investment tax credit for purchase of durable capital equipment could be available to small businesses if they purchase insurance by a specified date. Both of the latter two tax credits would serve as incentives for early participation in the employer mandate, and help stimulate the economy at the same time.
MEDICAL MALPRACTICE / LIABILITY INSURANCE REFORM
Despite the intrepid popularity ratings of lawyers and volumes of lawyer jokes, medical malpractice laws serve a vital role in ensuring appropriate health care and providing recourse for medical errors. Yet, they do add to the cost of health care. For years, Republicans’ calls for reform in this area have practically been a mantra, closely tied to their desires to limit lawsuits, and tort and product liability laws.
First, health care providers often engage in duplicative and unnecessary care and tests so as to insulate themselves from potential lawsuits if an undesirable health outcome should result. The key to eliminating these extraneous “defensive medicine” costs is not through legal reform, but rather, through the adoption of HIT. When electronic medical records and practice guidelines are fully implemented throughout our health care system, defensive medicine will be ameliorated by the access of providers to patient records of treatment, tests, and health history, as well as the guidance from aggregated data.
Second, there have been many instances in which patients have sued providers and insurers in response to an undesirable health outcome. Although even the best health care cannot guarantee successful health outcomes, some patient lawsuits fail to recognize this. To minimize the burden of frivolous lawsuits, one option would be to encourage (or require) patients to first pursue their claims through mediation or arbitration. Many claims will be able to be resolved through such channels, while others may result in the patient realizing that their claim should not be pursued further. Naturally, however, patients should still retain their full rights, following such a hearing, to escalate their claims through the courts.
Third, the rise in medical malpractice liability insurance premiums in recent years has been disproportionate to the incidence of medical errors, medical malpractice claims, and court settlements. It has been difficult to assess the justifiability of premium rates due to the lack of data from liability insurers. (1) Increased reporting from liability insurers is necessary, e.g., premium rates and revenues, claims paid, medical incidents defended, etc. (2) Greater scrutiny of liability insurers would enhance accountability through reasonable regulation of their premium rate structures, in order to alleviate the burden on doctors, hospitals, and others.
Health care reform in 2009 is absolutely essential. As the reform debate hones in on remaining critical and challenging issues, it is imperative that all stakeholders dedicate themselves toward finding common ground. Practical solutions can be developed on a bipartisan basis, to serve the needs of all constituents, whether they be those of moderate and conservative Republicans, or progressive and “Blue Dog” Democrats. The final bill will not have everything that any single lawmaker would want. But meaningful reform is in everyone’s best interests, and requires everyone’s whole-hearted commitment and willingness to support a package that meets core objectives for America’s urgent needs. Through creative solutions, the final result will be a key to a sustainable health care system for decades to come.
Thursday, June 4, 2009
President Obama's agenda lays the foundation for major business challenges and opportunities, as our national success in each of these areas will improve life in America, revitalize our economy, and establish the US's worldwide pre-eminence in each of these fields. The President's priorities are clear from the American Recovery and Reinvestment Act, his leadership in legislation on Capitol Hill, and his White House conferences. At many industry-specific and general policy conferences across the country, there has been a clear recognition of the need for -- and rewards of -- concerted, timely action that takes advantage of the Federal leadership in these domains. There has been a broad understanding of the clear confluence of policy and business, from bipartisan perspectives, in a broad range of technologies and industries. Political and business interests are aligned, and results will now depend on timely, focused, committed action on behalf of all those who are willing to devote their capital, intellectual, human, and other resources to these efforts.
In digesting the discussions, presentations, and agendas of many conferences, forums, and gatherings in recent months, many technological and subject-matter areas appear ripe for action by stakeholders in the business, non-profit, academic research, and other sectors. The following five areas are among those which rise to the top of the list of the many business opportunities that are facilitated, encouraged, and supported by the Obama Administration:
- development of an advanced nationwide health information technology infrastructure and integrated, operational system;
- establishment of a carbon "cap and trade" market, based on offsets, conservation, and shifting to renewable energy "clean tech" technologies;
- deployment of broadband technologies to enable all Americans to participate in the digital-based economy (via fiber, WiMax, 3G, WiFi networks, BPL, and other technologies);
- development of technologies that convert high-value waste streams and municipal solid wastes into useable diesel fuels; and
- advancement of broad-based, affordable access to education and job skills training via e-learning that can be monitored and which leads to tangible results.
This list is by no means exhaustive, as there certainly are other fields and technologies in which the Obama Administration is encouraging and supporting advances and business activity. The Bipartisan Bridge community is encouraged to submit additional technological and business arenas which are of high priority to the Administration, and which can have a beneficially transformative impact on our nation's economy and quality-of-life.