Wednesday, December 16, 2009

A 10-Point Plan to Drive Down Health Care Costs & Expand Coverage

Without health care reform, premiums are expected to escalate dramatically in the upcoming years, pricing many Americans out of the market and into the ranks of the uninsured. There is also a rampant misconception that health insurance is stable and reliable, which is easily disproven by multitudes of coverage and treatment denials. Reform is just as essential for the sake of the insured as for the uninsured.

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

Job Creation as Job One: 3 Ideas for The Forum on Jobs and Economic Growth

President Obama’s commitment to job creation and revitalization of the economy is highlighted by his designation of job growth as a top priority for the Administration, and his Forum on Jobs and Economic Growth. In addition to the myriad efforts by his Administration to establish, implement, and accelerate initiatives for job creation, his leadership is amplified by his call to all sectors of American society for ideas and strategies that will further advance these objectives.

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.