A Bipartisan Healthcare Solution

 

Can Democrats and Republicans agree on a bi-partisan healthcare solution? That seems unlikely, especially as they fight over interpretation of the just-released Mueller Report.

Democratic presidential hopefuls all seem to be declaring their loyal support of Bernie Sanders’ Medicare for All bill even though polls say there is more support for fixing ObamaCare. Republicans tried to repeal ObamaCare but were stopped by GOP prima donnas. Now they are doing their best to improve ObamaCare.

But the 2018 mid-term elections suggest Americans are unsatisfied with their healthcare. Neither party’s solutions have captured the enthusiasm of voters. John C. Goodman, writing in Forbes, says each party has a dilemma to overcome.

The Democrats’ Dilemma

Democrats focused on scaring people they would lose coverage of pre-existing conditions if Republicans had their way. They spent $90 million on healthcare ads to convince the American public they were right even though they were wrong. Sadly, many voters believed them.

But most voters are not satisfied with their healthcare coverage. The 5% of the population that purchase their health insurance on the ObamaCare exchanges are happy because most of them get highly-subsidized coverage at a fraction of the real cost. Most of these people were previously uninsured. But most of these happy customers don’t vote.

Middle-income people are less satisfied. They’re paying higher premiums, about twice as much as before ObamaCare, and their access to care has declined. They don’t have access to the best doctors and hospitals, which they had before ObamaCare. Most of these unhappy customers vote.

The Republicans’ Dilemma

Unhappy customers under ObamaCare are potential Republican voters. But Republicans have failed to deliver on their campaign promises due to a few rogue politicians who prefer the attention they get when they oppose the party line.

Before ObamaCare, most states had high-risk pools to provide insurance for people who were denied coverage due to pre-existing conditions. These same people have now entered the ObamaCare exchanges, driving up the prices for everyone. People worry they will end up in the exchanges if they lose their job and their employer-provided insurance. While the Trump administration has made several moves recently to lower the cost of insurance, many people are still anxious about the future.

A Bipartisan Solution

Goodman says two major reforms are needed to solve the problems both parties face.

  • Stop the group market (employers) from dumping costs on the individual market – The individual market is only 5% of the total but is bearing the full cost of social problems created in the other 95%.
    • Spread the social cost of “pre-existing conditions” over society as a whole – Fund risk pools with a small premium tax on all group insurance.
  • Radical reform of risk adjustment – Instead of creating incentives for insurance providers to attract only the healthy (with low premiums) and avoid the sick (with narrow networks), encourage insurers to attract both healthy and sick patients with financial protections.
    • Specialty plans for treatment of costly conditions – diabetes, heart disease, cancer
    • Allow medical records to automatically travel from plan to plan
    • Allow health plans to ask health questions and conduct medical exams at the time of enrollment
    • Allow market for risk adjustment in which plans compensate other plans when high-cost patients transfer enrollment

 

Goodman says Congress will have to give states more flexibility in devising their own insurance solutions to make this work. He says three conditions must be met:

  • States must have a credible plan to make insurance better for people with chronic health conditions– lower premiums, deductibles and wider networks.
  • States must show progress toward the ultimate goal of letting people leave the group market and buy their own coverage as good as before they left.
  • State changes must be revenue neutral for the federal government.

 

There are solutions to the healthcare problems we face today. But achieving them will require bipartisan support of the changes needed. Unfortunately, that may just be a bridge too far. Too many politicians would rather score political points than solve political problems.

Profit is Not Bad for Your Health

 

Some people see profit as a bad thing. I see profit as an incentive to do things right and to please the customer. This is certainly true when it comes to your healthcare.

House Democrats do not understand this principle. Their new Medicare For All bill asserts “a moral imperative . . . to eliminate profit from the provision of health care.”

Bill Hammond, writing in The Wall Street Journal, says the legislation specifies that federal health funding – virtually all health funding if the bill were to become law – may not be used for “the profit or net revenue of the provider.” He says that makes it even more radical and less realistic than Senator Bernie Sanders’ bill in the Senate.

Hammond tells us to ponder that scenario: “It one stroke, the House bill would sweep away the business model used by the vast majority of doctors in private practice, 28% of hospitals, 705 of nursing homes, and countless clinics, outpatient surgery facilities, dialysis centers, home-care agencies and more. The bill doesn’t detail an enforcement mechanism, but it seems to mean that thousands of providers would either have to reorganize as nonprofits or shut down.”

This is just the beginning of what government-controlled healthcare looks like. Every aspect of healthcare will be decided by bureaucrats in Washington instead of by your doctor. Do you think they will hesitate to save money at the expense of your healthcare? Do you think for one minute they will hesitate to deny you care they deem unnecessary or too expensive, no matter what your doctor says?

Profit is a good thing when it motivates doctors and hospitals to provide the best care possible to attract more customers. As long as the playing field is level – as long as there is transparency in pricing and the freedom for patients to choose – such competition for profits will drive prices down and quality up. Profits are only a bad thing when there is no competition.

Hammond says eliminating profit from an entire sector of the national economy would be unprecedented. He says a look at what’s happening now in the state of New York gives us an example of why this leads to dysfunction.

The New York hospital industry has been 100% nonprofit or government-owned for more than a decade. Hammond says this is a byproduct of longstanding, unusually restrictive ownership laws that squeeze for-profit general hospitals. The last of these closed its doors in 2008.

A report last year from the Albany-based Empire Center is quite revealing. The state’s healthcare industry’s financial condition is chronically weak, with the second-worst operating margins and highest debt loads in the country. There is no evidence that expunging profits has reduced costs. New York’s per capita hospital spending is 18% higher than the national average.

Despite several famous Manhattan flagship institutions, the overall quality of New York’s hospitals is poor. They only scored 2.18 stars out of five on the federal government’s Hospital Compare Report – last out of 50 states! Furthermore, they fall short on accessibility for the uninsured. They only spent 1.9% of revenues for charity care in 2015, a third less than privately owned hospitals nationwide. So the charge that “for-profit hospitals don’t do their share of charity work” is false.

Lastly, the Medicare For All bill in the House would also blow up the patent system for prescription drugs. If a manufacturer won’t agree to an “appropriate price” for its product, federal officials would be empowered to abrogate the patent and assign another company to make the drug. That policy would surely undermine pharmaceutical research and development of new, life-saving drugs. If this bill passes, it will be the patients who will be paying the steep price – with their health.

Transparent Medical Prices

 

You’d never buy a car without knowing the price. We compare prices every day for the food we eat, the clothes we wear, the hotels we use and the planes we fly. But when was the last time you compared prices for medical treatment?

It’s difficult to find out the cost of medical treatment. But that’s about to change. The Trump administration is sounding out the medical industry on requiring hospitals, doctors and other healthcare providers to publicly disclose the secretly negotiated prices they charge insurance companies for services, according to Stephanie Armour and Anna Wilde Mathews of The Wall Street Journal.

The idea is to put more purchasing power in the hands of patients (consumers) in an effort to lower medical costs and insurance premiums. Hospitals and insurers typically withhold specific prices for medical services as closely held secrets through confidentiality agreements. This puts consumers at a disadvantage when trying to compare prices.

The first step in this move by the Trump administration is the Department of Health and Human Services (HHS) seeking public comment on whether patients have a right to see the discounted prices in advance of obtaining care. Rates could potentially be posted on public websites, where consumers would check the negotiated price of a service before they pick a provider. If effective, it would lead to lower copays and/or deductibles.

With the growth of Health Savings Accounts (HSAs), patients have more control over their medical expenditures, and increased transparency of prices would make them more informed consumers of medical treatment. They would also have more incentive to save money because the unspent dollars are theirs to keep.

Naturally, this move is opposed by the American Hospital Association. They say, “Disclosing negotiated rates between insurers and hospitals could undermine the choices available in the private market.” Consumer advocates, however, praised the idea. “If this rule goes forward, it will be a huge step toward true pricing transparency and will finally allow patients to really see what their costs will be before a service – something that has rarely been possible before,” said Caitlin Donovan, director of outreach and public affairs at the National Patient Advocate Foundation.

The comment period closes May 3rd. Administration officials could move to issue a final rule mandating the disclosure of negotiated rates after that. They say the authority for requiring price disclosure stems from the 21stCentury Cures Act enacted in 2016, which makes blocking of health information illegal under penalty of up to $1 million, and from regulations stemming from federal privacy law.

Imagine shopping for medical treatment like you shop for the best deal on a hotel. Online comparison-shopping is currently available from a variety of websites including Trivago.com, Hotels.com, Expedia.com and others. Some day we should be able to do the same thing when you want to get your knee replaced.

Of course, the lowest price is not necessarily the best deal. Quality will always be able to demand a higher price.  The best doctors and hospitals should be worth more. But price transparency and competition should lead to higher quality and lower prices among all providers. Hospitals and insurers may scream and deny any benefits to this change, but patients should be the winners in the end.

 

(For more on this subject, see my earlier post Transparency Lowers Healthcare Prices.)