Arnold Kling  

Bipartisan Health Care Reform: My Bottom Line

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If I were a Republican, I would use any health care summit to set the following conditions for agreeing to support a bipartisan health plan.

1. All Medicare savings must be used to shore up Medicare. None of those savings can be used to fund new insurance subsidies or entitlements. Medicare is unsustainable, and it is going to need every dollar that we can save, and more. There is nothing to spare for a new entitlement.

2. Medical savings accounts must not be killed.

3. Catastrophic health insurance must not be killed or heavily disadvantaged relative to comprehensive insurance.

4. All new subsidies that enable people to purchase health insurance must be on budget, rather than through insurance company regulations that are likely to result in cost-shifting.

5. The bill must provide for at least one of the following:

a. Interstate competition in health insurance.

b. greatly reduce (preferably eliminate) the tax inequity between obtaining health insurance on your own and getting it through your employer.

As far as I am concerned, any bill that fails to satisfy all five of those points deserves opposition.


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COMMENTS (17 to date)
Milton Recht writes:

In addition to the insurance changes, we need to increase the supply of medical service providers to increase price competition.

Increase the number of medical school, nursing school and doctor assistant yearly graduates. The number of medical school graduates has been flat for many years.

Allow state licensed medical professionals to work in all states without need of relicensing

Allow many more foreign medical school graduates to practice medicine in the US.

Make other changes that will increase insurance and medical provider competition, increase the number of medical providers, and put the responsibility for purchasing, price negotiating and paying for health insurance directly in the hands of the consumer.

Loof writes:

According to Arnold:
Poll after poll reveals that 80-plus percent of Canadians like Canada's system of nationalized health insurance. That's not surprising. More than 90 percent of Canadians are healthy. Canadians don't see the problems until they need surgery or other expensive care and then find themselves on a long waiting list. Thousands of those who can't wait end up spending their life savings for treatment in the United States. [Note: I did not fact check this statement and I'm no longer sure it's true.]

Arnold, check your facts.

It’s been a long time since L worked in Canada (1990s) and was covered by their basic health insurance. Also had optional private insurance beyond the basic coverage. No longer have any insurance in Asia, since capital investment can be diverted to cover costs if and when a problem arises.

The fact is most Canadians even then were well aware of the waiting list problem, that largely occurred when balancing the budget was a priority; and cutting costs in health care was a focus to make government smaller, leaner and healthier. Even with waitlists that developed with cutbacks Canadians were good at shuffling things around: longer list here; shorter there, so go there is a choice, sort of thing. The rich went to the States, without privileged treatment in Canada.

Relative to privilege, problems of developing a two-tier system was also discussed in Canada at the time: a discussion absent in America, as far as Loof can see. However, such systems are typical of “universal” ones like in Thailand, which has some very good hospitals and treatment for the rich; but mostly second-rate and worse hospitals for treating the poor.

Yancey Ward writes:

An excellent list of goals, therefore totally impossible to achieve.

Yancey Ward writes:

And, Loof, there is one fact you probably need to check yourself.

Steve writes:

I don't get #1. Do you mean you oppose all plans that include subsidies?

The money is just money, completely fungible. So what counts as the "Medicare savings" and what distinguishes that money from other money?

Loof writes:

According to Yancy Ward:
And, Loof, there is one fact you probably need to check yourself.

There is, indeed. The fact: “Thousands of those who can't wait end up spending their life savings for treatment in the United States.” Don’t believe this is true now and never has been, but not certain, in fact.

Perhaps alerting the Canadian Press to this fact stated by an authoritative Professor of Economics in America could best check it. If true, it’d make headlines across Canada, the federal government would probably fall. Arnold could claim the credit.

MernaMoose writes:

Add to the list: FORCE the medical industry, lock-stock-and-barrel, to post PRICES for their services. I mean it needs to start working just like every other business in the US.

Today, you go into the hospital for a procedure or treatment and there's no telling what bills you'll get, from whom, or for how long. I'm *still* getting bills for a (supposedly) routine procedure that was done a year ago.

And while we're at it, get rid of this "doctor's prescription required" to get access to drugs and medical supplies. It's just another part of the AMA's great cartel. [and dare I mention the lawyers cartel needs to be broken too?]


Meanwhile, I wonder very much about how horrendous or great medical care really is in other western countries. I've talked to Canadians who leaned both directions, and I don't trust the researchers who publish stats to necessarily tell the unbiased truth. But I know two things:

1) Cancer survival stats I've seen, tell me that if I had to get cancer I'd much rather be living in the US than anywhere else.

2) If the US medical industry was subjected to genuine market forces, instead of the current twisted train wreck of cartels and government "help" that we now have, people would be amazed how much more affordable health care in this country would get.

If there be any socialists who disbelieve assertion 2), I'll make a deal with them: give us five straight years of a genuine free market medical industry. That means incorporating all the comments found on this thread. If things are still as bad (or worse) than they are right now, then I'll let you try your socialism.

ColoComment writes:

Thanks for the suggestion of hanging onto those medical savings accounts!

Health savings accounts are one of the better tax code ideas enacted in recent memory. It's YOUR money to spend according to your personal priorities; it's tax-advantaged (better than trying to deduct medical expenses where you never exceed the threshold); it rolls over from year-to-year so that you can build up the unused funds; and, best of all, you've got that catastrophic health insurance plan to protect the rest of your assets.

Win-win. So, why are they trying to limit or at the very worst, eliminate these accounts?

Yancey Ward writes:

Loof,

Try again.

Matt C writes:

I may have posted this before, but I thought MernaMoose would appreciate the story.

A year or two ago I tried to price a medical service (endoscopy) by calling around to medical providers. I got prices ranging from several hundred to several thousand dollars, none really stated with confidence.

Getting these vague and tentative prices always involved talking to several people. In more than one case, the medical provider had difficulty comprehending the idea of trying to price a medical service in advance.

We do not have a market for medical care in this country, not really. Perhaps it is a market between insurance companies and hospitals. It is not a market for the consumer.

David C writes:

On net, Medicare costs are cut by about $200 billion in the plan, and the health care bills save $100-200 billion, so health care reform almost achieves your first requirement.

Requirements 2 and 3 are already in the bill. The biggest change to HSAs and high deductible plans is the requirement for coverage of preventive services without a copay or deductible, but this is, I believe, a requirement of all types of insurance and doesn't significantly disadvantage any of them.

4 would be very difficult to implement, especially if you want 5b. Using your wording, any change in health insurance could be defined as an indirect subsidy to somebody.

I thought your number one goal was to increase out-of-pocket expenses, but that's not listed as one of the proposals for number 5.

Using your restrictions, the bill could be on net an improvement in your opinion, and you'd still oppose it because it's not good enough.

Loof writes:

With Yancey Ward.
Thanks.

Sorry Arnold. David should claim the credit.

R. Richard Schweitzer writes:

We are not now dealing with the pragmatics of legislation.

We are dealing with the structuring of politically determined public perceptions.

There should be NO summit. The minority,which has been frozen out of the processes by the cat-herders in the House and Senate, who have throttled debate, should not be represented other than by written, submitted bills - to be debated in Congress and not in a Lecture at Blair House by the Professor directing the discourse of the class.

spencer writes:

Interstate competition?

Do you favor eliminating state regulation of the insurance industry and replacing it with federal regulation?

As I see it allowing interstate competition would require shifting to one national regulator.

I'm not convinced of this, and would love to see any argument to the contrary. But so far I have not seen anyone advocating interstate competition discussing the issue.

Otherwise, would we end up like the credit card industry (N Dakota) or state of incorporation(Delaware) where the one state with the most favorable regulation becoming the dominate player and the one that sets the rules of the game?

Lord writes:

3 would be a weird one to combine with subsidies. Presumably catastrophic would limit total out of pocket expenses to a percentage of income, or percentage above some level, which for low income would be indistinguishable from comprehensive, so catastrophic would have much less advantage over comprehensive, little to none if all their clients were subsidized.

ColoComment writes:

For the interstate competition aspect of this health insurance reform thing, what about something analogous to the SEC's federal regulation of the mutual fund industry? It was something over 5 years ago that the National Markets (something, something) Act was passed that pre-empted state regulation of mutual funds. Intra-state offerings and local securities enforcement are still within the purview of the states' securities divisions. However, national mutual fund offerings are federally regulated, with a single registration point, and disclosure is very standardized. Why couldn't something similar work for health insurance? (Just think of a menu of health insurance policy offerings comparable to the mutual fund industry -- what bliss!

Chris Koresko writes:

By coincidence, I was already thinking about just such a list of demands. Mine was longer (and maybe not as well thought out):

* No overall increase in the rate of growth of national medical spending, according to a realistic assessment

* No accounting tricks (like getting a favorable CBO score by using 10 years of taxes to pay for 6 years of services)

* No provisions of dubious Constitutionality (like a mandate for individuals to buy insurance)

* No new restrictions on catastrophic coverage or incentives that push consumers toward comprehensive coverage

* No requirement for guaranteed issue (since that fundamentally breaks the insurance model of risk-sharing and introduces severe perverse incentives)

* No "death panels" (defined as pornography is, i.e., you know it when you see it)

* Look to market competition for genuine cost reductions; rationing of care and cost-shifting to the private sector don't count

* Substantial tort reform, probably including the establishment of a set of guidelines for damage and punitive awards, and/or establishment of specialized courts competent in judging malpractice cases; probably also require law firms who lose cases to pay a substantial fraction of the cost to all other parties including the court

* Reform of the FDA to streamline the approval process for drugs and medical devices, probably including a requirement that FDA approve anything that has been approved by two or more of its peers in other advanced nations

* Expansion of HSAs (negotiable)

* Forbid states from banning medical insurance written in other states (in effect, forbid them from requiring a particular list of coverages)

* Encourage transparent pricing by medical service providers (may be necessary for HSAs to function efficiently)

* Break down barriers to entry into the field (I'm not expert here, but I bet the AMA has set up quite a few of these, and I understand that there are laws in most states that forbid a new hospital from opening without a finding that there is a need for it... and the body that issues that finding includes competing hospitals)

* Increase the fees Medicare pays doctors to make them commensurate with private insurers (end cost-shifting to the private market, and reduce the pressure for doctors to stop taking Medicare patients)

* Drop the requirement that Medicare pay providers within a time too short for their legitimacy to be verified (try to reduce the cost of fraudulent claims, which I understand consume on the order of 10% of its budget)

* End (over a period of time, probably) the special tax treatment which ties medical insurance to employment

* Over the long term, end the special tax treatment of medical costs in general (negotiable, probably not politically feasible)

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