A simple fix for healthcare?
— Stephen M. Davidson, a Boston University School of Management professor, is author of the forthcoming book, “In Urgent Need of Reform: Saving The U.S. Healthcare System.” The views expressed are his own. —
Polls suggest the president is losing some popular support for his health care reform efforts apparently because people worry about some of the possible secondary effects. They fear that quality of care would decline, their out-of-pocket costs and taxes would increase, and they would not be able to choose their own doctor. The fact that there is little reason for these worries is beside the point.
Ordinarily, when a problem arises, we try to figure out what the cause is and fix it. With legislation, especially something as complex as healthcare, we don’t do that. Instead, we impose constraints that are unrelated to the diagnosis. In this case, Congress is trying to fix the problems using private insurers, without raising taxes, and keeping a limited role for government. So, leaders try to fashion a bill that accomplishes at least the main goals of reform – reducing the numbers of uninsured and containing costs – are at a considerable disadvantage. Partly as a result, it is much harder to persuade the American people that the complicated plans they come up with will do the job without harming them.
The fact is that much simpler solutions are available. For example, require that everyone contribute an income-related amount (that is, more for higher-income people) to a dedicated federal health insurance fund (HIF), which would be used to pay insurers and health plans. And then issue vouchers which entitle everyone to choose a health plan or insurance policy.
The contribution can be called a tax, which makes it a non-starter, even though it would probably mean that almost everyone would pay less than they do now. It would substitute for the premiums they now pay as well as for most of the taxes that go to health-related activities. (If Medicaid were folded in, the savings would be even greater; Medicare is so popular with an important constituency that it would be harder to include it in a new plan.) The amounts paid could be based on a person’s income (like our progressive income tax), which means those with pre-existing conditions would not face unaffordable premiums.
Using our vouchers, we would choose our own insurance policies from private insurers. Not only would the insurance cover the services we need, but instead of basing our choices on what we can afford (which might not cover what we need, which is the case for millions of Americans today), they would be based on the providers available and the quality of the insurer’s service. The insurers, in turn, could be paid risk-adjusted amounts from the HIF, which would protect them against the possibility that large numbers of people with pre-existing conditions and other risk factors would choose them.
The federal agency that administers the HIF would have only a few jobs to do: estimate the total needed for the next year and set contribution rates to produce a large enough fund; certify insurers as capable of performing the necessary insurance functions and inform the public about those firms; and set the risk-adjusted rates to be paid to the insurers.
Insurers would negotiate compensation arrangements with providers for the patients who choose them. Risk-adjusted payments would protect them to a considerable extent, but some might decide to transform themselves into prepaid group practices like Group Health of Puget Sound or find other ways to assure quality care at reasonable cost. Plenty of models are available for them to choose.
This approach sounds radical. But if you think about it – without the Congressionally imposed constraints – it is really quite simple. The federal government already knows how to set and collect progressive taxes, private insurers and providers already negotiate with one another, and having a voucher assures coverage and simplifies the insurance choice process. Most importantly, it would actually accomplish the two main goals of reform: providing insurance to everyone and containing costs.