Health Insurance Reform

MAKING GOVERNMENT RESPONSIBLE means . . . addressing national needs with solutions that make the fullest use of existing, private sector, service-providers . . . not exposing the federal government, and the national treasury, to uncontrolled liabilities established by Congressmen who use the authority of Congress to respond to voter demands for constantly increasing benefits.

POSITION SUMMARY:     

I OPPOSE a single-payer, government administered health insurance system.

I FAVOR a TWO TIERED SYSTEM consisting of:

TIER ONE: A system of basic insurance for all administered by private insurance companies who obtain an exclusive franchise to provide insurance to all residents of a territory – such as a state – through a process of competitive bidding.

TIER TWO: A system of insurance, above the insurance provided by the TIER ONE system, provided as insurance is provided today.

 DISCUSSION: 

Many of the proposals for health care reform are predicated on establishing the federal government as the rule-maker / single-payor for health care. There are, however, many reasons, Constitutional and otherwise, why this approach is ill-advised.

Nothing in the Constitution directly authorizes the federal government to assume an active role, let alone an exclusive role, in any aspect of the health care system — especially if that role represents the takeover of an inherently private sector enterprise. 

We cannot afford another national program that exposes the federal treasury to potentially open-ended liabilities.  Private sector insurers are in a better position to project their costs than any agency of the federal government—and these potential costs will necessarily be reflected in their rates. 

Inherent in any payment system is the need for an administration system to review and approve claims submitted by care providers and to monitor claims for fraud.    There is no justification for yet another federal bureaucracy to perform these functions. 

A direct federal role as the health care financial intermediary could, to the extent that it supplants in any degree the rights and interests of private insurance companies, subject the federal government to the “taking” clause of the Constitution—requiring it to pay enormous sums to private insurance companies. 

To insure the availability of promised benefits—e.g to keep care providers honest--participants in the health care program must have a right to sue the party who controls the services of those health care providers.  However, because suits against governmental entities are generally barred by the doctrine of “sovereign immunity,” a wholly federalized payment system would deprive consumers of this right.   

Insurance companies employ thousands of people as application processors, claims processors and reviewers, payment processors, data processors and in many other capacities.  These people have specialized skills that are not readily applicable to many other occupations, and they are unlikely to want to relocate to wherever a government-managed program is located. The potential cost of such a dislocation—i.e. job losses and the effect of job losses on local communities, unemployment compensation costs and retraining costs—will be enormous.

A total federal “takeover” of the health insurance business would be functionally irreversible.  Before taking any such action, we should first pursue solutions having less drastic consequences for the private sector.

An Outline for Reform 

While many health care reform proposals call for “comprehensive” care for all--e.g. providing everyone with all available and medically appropriate services -- such a system is not economically viable.  As much as we might like to provide everyone with the benefits of the most advanced medical technology and medical procedures, we cannot afford it.  While universal coverage of all available health care services is a noble objective, we have to begin with what we can afford.

There will be much disagreement over where we should begin.  But wherever the beginning is it should recognize that 10% of the population accounts for 70% or health care spending.  It should also recognize that the sickest 1% of the population accounts for over 25% of all spending--and the vast majority of these costs are associated with the “end” costs of treating complications of conditions that were undetected and untreated at an early stage.  A program that provides less than “total” care, but emphasizes early diagnosis and disease management, can provide the care that is really required—and for a fraction of the cost of “comprehensive” insurance.

Basic Design Features:

Two-Tiered Plan: Because we cannot afford to provide total health care coverage to everyone, we should focus our attention on the requirements of a two-tiered system.

The First Tier of this system will cover everyone while providing basic care mandated by federal legislation.   First Tier benefits should start with only very basic benefits and expand later.  Going the other way—starting with extensive benefits and cutting back when the program is found to be too expensive—is politically impossible.   First Tier benefits should be economically managed by insurance companies in the private sector who offer the basic plan of benefits specified by law for a cost that is established by a process of competitive bidding and/or negotiation as discussed below.

The Second Tier of coverage under this proposed may be available through individual policies and/or group policies purchased by collectives or employers, Second Tier policies provide coverage for  items not covered by Tier One.  Because most basic services will be provided by the First Tier system, policies providing Second Tier benefits would be less expensive than  today’s stand-alone policies.

NOTE:  If Medicare/Medicaid is to be merged into the proposed system, as I believe it should be, an “Alternate Second Tier” program can be established to provide Medicare participants with benefits now provided by Medicare but not included in the First Tier program.  HOWEVER, since long-term care now accounts for approximately 35% of Medicaid spending, long-term care should be segregated from coverage through private insurance—to avoid driving up the cost of private insurance—and the government  should find another way to pay for the institutional care of Medicaid recipients

 Tier Two insurance policies would be subject only to State regulation  and include the full range of benefits (and limitations) found in those policies today EXCEPT that pre-existing condition exclusions should not be permitted in group policies marketed to employers or, if included, may not be applied to employees who were previously covered by a policy which provided benefits for that condition.

“Regional” Networks / Service Areas: A system of State or regional networks will provide administrative services for Tier One insurance.  For purposes of federal legislation, each State should be designated as a “Region” for funding purposes, and should be given the authority to create intra-state sub-Regions.  Thus, consistent with the acknowledged variability of population demographics, facility availability, geographic distribution, economics and industrialization, States will be free to create regions most suited to the local needs.

Insurance companies would be required to “bid” for the rights to provide insurance within each Region--with all bids subject to a statutory cap on premium related profits.  Each “bid” would include, in addition to an insurance premium for each covered person, a proposed plan for containing health care costs and improving health care quality, and achieving such other goals as the State may establish. 

[Approved Providers] who would provide insurance within each Service Area and to establish criteria—such as home address or work address—to be used in determining what region includes which persons.

State Control:  “Control” of the Approved Provider must be placed in the hands of the States and the insurer responsible to that entity.  This makes use of actuarial data already available (since current  benefits and rates are already regulated at that level) and allows closer oversight than would exist in a purely federal system    [There is, of course, a need for federal oversight of the States to make sure they are doing their regulatory job with proper energy and accuracy and have a mechanism to withhold funds if there is poor management.  ]          

The importance of State control cannot be over-emphasized.  States know the local needs, laws and cultural/political conditions better than anyone in Washington does, and State agencies and Commissioners are accountable to the local population.

Vesting States with control of the system by which access to health care is provided through Tier Two policies is also essential.  Without the ability of each State to co-ordinate their own plans, initiatives and services with the mechanisms instituted by national health care reform legislation, there is the strong possibility of malfeasance or non-feasance.

Independent Review Panel:  Any system of billing, cost allocation and fee reimbursement has the potential for abuse by both the third-party payers and the care providers.  To minimize such abuses, there should be an Independent Review Panel [IRP] for each Service Area, having the binding authority to arbitrate rates establishment disputes and arbitrate payment disputes.

Fee/Rate Setting:  One of the most significant financial problems in our current payment system is that, unless the provider is a member of a practice group or other alliance that has economic influence, rates are unilaterally set by the insurance companies.  This system must be replaced by a system that includes all care providers, either as individuals or as group members in the rate-setting process. In the interest of promoting innovation, the specific procedures by which this mechanism is established and implemented should be subject to State discretion. 

Payment for Services:  The history of health care reimbursement teaches us that insurance companies are loathe to pay for everything a doctor believes is necessary.  Thus, what the insurance company does, or tries to do by managed care, has a direct effect of patient care.  To mitigate this unilateral control by the insurance companies, there must be a provision for a rapid timetable of independent review and resolution of contemporary issues.

Prescription Drugs: Prescription drugs may be furnished as part of the First Tier benefit package (as I propose) or as a separate plan (as is the case with Medicare).  The issue is not how they are provided, but how to control their cost because that expense is a major contributor to rising health care costs. Much of this is due to the higher cost of the latest drugs—and “Me Too” medications, many of which have not proven to be more effective than those in existence.  

National Health Identification Cards:  Several features of the proposed system of health care reform recognize the importance of providing for patient participation in cost of health care—such as co-payments for certain services—to be subject to a sliding scale based on income.  Because it would be impractical for each health care provider to make a determination of each patient’s eligibility and financial liability, the proposed system should include the issuance of a Health Identification Card that would identify the holder’s obligation and contain an encrypted code that would enable a care provider to access the patient’s records in the national Electronic Health Record system.

Innovation in Health Care:  In the past decade, the health care system has undergone many changes aimed at improving the economically viable delivery of quality of care.  Many of these changes hold the promise of reducing long-term costs. Any reform of the health care system must provide for (and encourage) innovation.

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