Health Care Reform

I'm very concerned about the way health care reform has been going. My ultimate concern is that they are going to pass a bill that doesn't cover everyone and doesn't satisfactorily cut costs. I think the Obama team has been too concerned with the failed Clinton health care legacy and has not taken a strong enough role. At the same time, Congress has proved to be a huge impediment.
While I think there is a moral imperative to provide every American with adequate health care, it is also essential to cut down the health care costs to help ensure the long term fiscal sustainability of the United States. With that said I have provided a set of principles I see important to the health care debate.

1. Medicare Reform

I think that there is general agreement that Medicare needs reform. The first order of business should be to fix its long term sustainability. I'm exactly sure the best way of doing this, but it would probably involve things like raising the age for eligibility. In addition, doctors have alot of complaints about Medicare and we should help address some of their concerns. This does not mean, however, that all their compensation issues will be dealt with. Lastly, we should do the best we can to root out fraud and abuse in the system. This is a politically touchy issue though.

2. Preventive Care

The cost-savings from doing this are unclear but it is still a path that we should pursue. In some cases preventive care means that people will live longer, meaning additional costs. The real goal should be to help avoid catastrophic cases that can be avoided with prior care. There is a statistic that around 62% of personals bankruptcies are caused by health care costs (any many of these people do have health insurance). It is these catastrophes that cause these bankruptcies and we should do whatever we can to avoid them.

There was a New York times article about this a few months ago. It discussed how having follow up calls with heart attack patients helped avoid future problems. And alot of hospitals did not follow this path because there was no money in it for them.

3. Health care Delivery-Fee for Service Model.

One of the major problems with the health care system is the fee for services model. The more tests that doctors run, the more they get paid. And there have been studies that show that excess care does not really lead to better health care results. For more information on this there are some studies out of Dartmouth and there is also an excellent New Yorker article from Atul Gawande.

So there needs to be a realignment of incentives. Ideally, hospitals would follow the model of places like the Mayo Clinic or the Cleveland Clinic where doctors are paid a salary and not for each test that they perform. These places deliver excellent health care at a very reasonable cost.

If the health care system is reformed in the way it needs to be, doctors are going to be paid less. Looking at other health care systems (note there is a great book coming out by T.R. Reid on other countries health care systems) the biggest complaint from doctors is that they do not get paid enough. And in a health care system that really works, this will likely be the case. While this may not completely make up for it, the answer may be to do things like making medical school cheaper or even free like it is in some countries. Also there can be medical malpractice reform, which I will discuss below.

4. Hospital Reform

Most of my thoughts from this come from the Economist issue from two weeks ago. Extending health insurance will benefit the industry in the long run. People who turn up in emergency rooms often do not pay bills and hospitals often recover 10-12% of these costs. In 2007, this was 34 billion. Hospitals also often have problems collecting from under insured patients.

The first thing that we need is more competition for hospitals, this could achieved with better antitrust enforcement. Hospitals face too little competition and often price at a city or regional level.

Some have proposed changing the tax status on non-profit hospitals (who provide little charitable care, while paying enormous salaries) but I don't know if this would work politically. Closing the loophole could lead to hospitals shutting down and higher costs.

5. MedPac

A important component of changing health care delivery would be creating something like MedPac. This would be a group of doctors and other experts who would come up with a set of best and effective practices. They would do things like to set Medicare payment rates, conduct trial programs, and fund policy initiatives. There would also be the added benefit of taking things out of Congress's hands which has shown the complete inability to act and can be heavily influenced by special interests. Republicans may call this a bureaucrat deciding what medical treatments you get and say that this will get between patients and doctors, but insurance companies already occupy the space between patients and doctors.Peter Orzag and the CBO do not seem to agree on how much this would bring down costs.

6. Malpractice Reform

An important part of this process has to be malpractice reform. One reason that doctors are running endless tests is because they are afraid of being sued and practice defensive medicine. A friend of mine says that the doctors he works with have the philosophy of CYA, as in cover your ass. Doctors also pay quite a bit in malpractice insurance. Now I still want to protect a patients right to sue if a doctor seriously screws up, but I want to get them away from having to practice defensive medicine.

7. Increase in number of doctors

There is consensus that the number of doctors needed in the US is going up (especially if we get universal care). There needs to be some mechanism for training the necessary number of doctors and getting them to under served areas. There also needs to be an infusion of primary care doctors. Not enough med students are going into this specialty and often they are the most important because they are the first doctor you see. Perhaps we can increase their pay or something like that.

Alternatively, we can up the use of Nurse practitioners and other equivalents. As long as they are supervised by doctors, they should be able to provide comparable levels of care.

8. Insurance Reform

There is general consensus, though no agreement on particulars, that insurance needs to be reformed. The United States is different than the rest of the world because other countries have either a single payer model or non-profit insurance companies.

An important component on this is increased competition. For instance, in some states there is only one insurance company that has an effective monopoly. The Democrats have proposed a public plan that would act as to keep insurance companies honest. This has been a non-starter for Republicans.

What I would do is create a trigger for the public plan. If the insurance reform fails to achieve certain goals, then in five years (the period could very easily be adjusted) the public plan would come into play. To help encourage Congress to craft an effective plan, I would make sure the plan comes into play without any enabling legislation.

An example of the kind of reform I would offer would be a federal charter for insurance. Jim DeMint has talked about allowing competition by insurance companies across state lines. Because some states do not do a good job of regulating insurance, I would seek to avoid this. Instead I would create an optional federal charter that regulated in a way to help increase competition. It could also require federal plans to cover a broad number of treatments, as opposed to catastrophic care. This would help the many people who are under insured.

Insurance companies should also be forced to offer care to everyone, even the sick and very old. In return for this there must be an individual mandate that requires everyone to get some form of insurance. This means that many young and healthy people would be forced to buy insurance. There has also been some talk about providing subsidies to help the poor purchase health care.

I don't know if a public plan would really drive private plans out of business. Ezra Klein has used the example of public colleges not driving private schools out of business but I am not sure if this matches up completely. Ideally a public plan would force private plans to adopt a set of best practices and drive down costs.

I am open to any other suggestions on insurance reform.

9. Paying for Health Care Reform-taxing employer based benefits

Health Care reform has to be paid for and I am opposed to just taxing the rich more. While I believe in a progressive tax system, the rich are not a well that we can draw from to pay for every program we want to pass. It also prevents us from increasing taxes to help cut the deficit. And if we are going to provide our society with health care, it is important that all pay for it. It's bad when a majority can get services that they do not have to pay for.

The best way of doing this is taxing employer based benefits. I think John McCain talked about replacing this with a tax credit. Because Obama campaigned against this, it might be best to cap the exclusion at first and phase it out over a few years. Though this is unpopular with unions, it is the best path. There is no reason for the government to subsidize employer provided health care. Changing this would help everyone to realize the growing costs of care. Otherwise, employees do not know how much their employer is paying for health care. They don't know about how much they not getting in wage increases. Employees become unaware of growing costs and the need to reform the system.

It is also a good idea (though politically difficult) to move away from the employer based model of insurance. There are a number of reasons for this. The big reason is that to do so makes it easier for employees to change jobs. One of the best aspects of the American economy is the idea of creative destruction. And the easy movement of labor helps to drive this. If you do not have to worry about losing your insurance, you would have no problems changing employees or quiting your job to start a new business.

Moving away from this model would also help employers. They would get be able to avoid the growing costs of health care that have helped cripple the auto industry. I would also oppose the employer mandate which could be unaffordable for small businesses (who employ about half of the US workforce)

10. Prescription Drug Reform

An important part of this process requires that the cost of drugs comes down. The pharmaceutical industry is very powerful and would be very resistant to price controls. They argue that because of the high costs of developing drugs, they need to charge alot and require maximum patent protection.

There is some truth to these statements. Drug development is a long and expensive process. I would be all for streamlining the process to help drive down development costs. In return, I would expect prices to go down and I would limit some of the patent protection. Pharmaceutical companies would also get the added benefit of more people using their products. It might also be a good idea to loosen restrictions on drugs from Canada.

There is also a need to reform Medicare plan D. I confess to not knowing enough about plan D, other than it is in need of drastic reform.

11. Sin Taxes

I would also advocate a tax on things like soda to help pay for this reform. The same way that we tax alcohol and cigarettes, I would want to tax products that hurt health care outcomes. I want to incentivize better health care decisions. If society is going to be paying for health care, then we have an interest in encouraging healthier choices.

11. Better Use of Technology

The major thing that people have discussed when it comes to technology, is moving to electronic records. This would help to decrease costs, though apparently not as much as people say. Taiwan has a model that we could try to copy where every person has a card that contains their records. These cards provide doctors with easy electronic access.

The Taiwan example is meant to illustrate a way that we can implement technology. One of the problems with the health care system is that we do not do a good job of integrating new technologies. Doing so may lead to better and cheaper care.

12. Look at other models around the world

There is a tendency in the United States (especially amongst Republicans) to criticize other health care systems. Clearly the United States is unique and is going to require its own solution. But that does not mean that we shouldn't look at other models and implement their best practices.

13. Aging Population

I don't really have any comments here, except to say that we need to be aware of this and adjust when the time comes.

14. Politics of Health Care Reform

Since Truman, Democrats have tried to pass health care reform and have failed every time. Looking at the current situation, polls say that people are in favor of reform but that they want to keep their current care. This is because there is a realization that the system is broken, but people are afraid of what they will get. Democrats have to deal with the politics of fear and defang words like rationing. Even our current system rations, as there is only so much care to go around.

There is some talk amongst liberals that Obama should follow the Massachusetts model of getting universal coverage first and dealing with costs down the road. I would hate it if they pursued this path, it is important to get the legislation right the first time.