Monday, March 8, 2010

Simplified, Compromise Health Reforms?

I've quoted my brother Viranjit's friend Jonathan Starr before, as he's an avid and thoughtful health reforms enthusiast. To break the health reforms impasse he's acted on President Obama's call for "any other ideas."

Here's his compromise, simplified "Starr Plan" for health-insurance reform, sent to his California Senators and Congressman:

1) Increase Medicaid coverages and reimbursement rates to equal those of Medicare.
2) Allow everyone to buy into Medicaid coverage, at rates scaled by income (still starting at $0 for very low income people).
3) Pay for this program with a combination of participant premiums and a Medicaid tax similar to the present Medicare tax.
4) Exempt employers from their share of this Medicaid tax if they provide health-insurance to their employees (that meets federally-established quality standards).
5) Require all Americans to obtain health-insurance that meets federally-established standards, whether provided by an employer, purchased from a private insurer, or purchased from Medicaid.
6) Prohibit denial of coverage due to pre-existing conditions, as long as the person has previously consistently complied with the requirement, above, to obtain health-insurance.
7) Prohibit rescission of coverage for any reasons other than non-payment of premiums.
8) Prohibit federal Medicaid funds from being used to cover abortions, but allow state Medicaid funds to be used for this, at the discretion of the individual state.

That is basically it. Other issues (e.g. Medicare reforms, medical malpractice tort-reforms, insurance anti-trust exemptions and cross-state sales restrictions, prescription-price negotiations, taxing health-insurance employee-benefits, etc.) would be handled separately, in their own debates and legislation.

This approach has many advantages, including:
A) It would bring health-insurance coverage within reach of all Americans.
B) It is simple. It would involve far fewer changes to American society than the present proposals, and would entail a much shorter bill.
C) It is self-funding. It does not require modifying other programs to try to gain offsetting savings.
D) The cost of supporting the program is distributed largely by ability to pay.
E) It takes advantage of existing infrastructure and existing programs, reducing the cost of implementation and administration.
F) It avoids involving the American government in directly facilitating the transfer of funds to private insurance companies.
G) The question of funding abortions is handled according to the long-standing compromise embodied in the present Medicaid program.

So what do you think of this? Overall, I think this is an excellent approach and outline for effective legislation. The "compromise" here is with the holdout Democrats, as the Republicans collectively have pretty much dug in to oppose any reform package that meaningfully covers the uninsured.

Adopting Starr's proposals needs to be in conjunction with the House also passing the bill that was successfully cleared by the Senate last December. That way all the needed changes look as if they can clear the Senate through reconciliation. This is important, since reconciliation requires only 51 Senate votes, otherwise an all but impossible 60 votes are needed to overcome an expected Republican filibuster.

This proposal reintroduces the public option, in much more potent form than the House bill H.R. 3962 passed on Nov. 7, '09. Cost containment is more effective than anything else being seriously considered by Congress. That's because Medicare and Medicaid already have the infrastructure in place so incremental administrative costs are low. Moreover they enjoy the purchasing power and simpler payment process to be able to pay providers much less than what private insurers can negotiate, thus saving money.

Of course the very inclusion of this robust public option is the reason these proposals won't be liked by private insurers and their supporters in Congress. Point (2) of Starr's proposal can be refined so that the same subsidy on basis of low income is available to the recipients if they choose private insurers over Medicaid. Private insurers will still find it hard to match Medicaid's cost efficiency, leave alone have something left over for profit. Keep in mind though that much of Medicaid is outsourced to private HMOs and over a third of Medicaid beneficiaries are served in this way.

Starr's proposal also offers some financial flexibility. The total cost of the bill will depend upon the amount and the thresholds for income based subsidy, and that can be bargained over and decided in the legislative process. If Congress wants to limit additional public expenditure to say, a trillion dollars over the next 10 years, then
they can adjust the subsidy levels and the eligibility criteria accordingly. As also recommended by others the proposal envisages the remaining contentious issues to be dealt with separately.

Politics will (naturally) play a big role in the final outcome, but good ideas can show the way forward. For American liking this proposal Starr urges sending it to your Congressman (Representative) and your Senators so they are at least in the know and hopefully act on it.


Anonymous said...

Why buy into Medicaid? Why not allow people buy into plans they want? Medicaid, Medicare and all gov't programs are "one size fits all."

We seen enough of those that have failed. Mao jackets for all in China. Yugo cars that don't run for all in Russia.

And why mandates? This is a free country... free to do good or not so good for yourself. You have the right to make a fortune and the right to bankrupt yourself. Mandates for car insurances haven't worked. We should take fiber everyday, and change our oil in the car every 3000 miles, but should the gov't mandate it?

And why no pre-ex conditions? This way, everyone will wait until they get sick and then buy coverage? Everyone, including the extreme left knows it is not a viable situation.


Sandip Madan said...

In the 3rd last para I say the same thing - allow people to buy private plans if they want. But "free choice" should also mean they can join Medicaid or the "public option."

You answered the question of mandates yourself. They are needed to bar restrictions (that lend themselves to a lot of abuse) on preexisting conditions.

Of course, one way to do away with mandates is to have a Medicare style taxpayer funded insurance for all. In this even private plans can be allowed to participate and receive the premium largely from public funds, as they do in the Netherlands.

Anonymous said...

Free choice does not mean Public option. The gov't will always skew the rules in their favor. You can see what they are doing in Medicare. Sometimes they want to give money to Medicare Advantage, sometimes they don't. Wait a second, this is my money. These are medicare taxes I've paid all my life. Now when I want a private company to manage my contributions, gov't wants to take it away?

With regard to mandates, Massachusetts has it in their plan but their costs are rising faster than the national average?

We have to bend the cost curve and this idiotic president is talking about coverage and not costs. I don't care the illegal is covered or not. I don't care if that bullet proof teenage doesn't want to be covered. I'm worried that the medical bills for me consume 15%, then 20%, then 30% of my budget.

The way to do it is to think of the company Christmas party. This party is paid for by my boss so I don't care what I eat. There is an irrational demand for caviar at $200 a pound. There's little demand for hamburger at $3 a pound.

As long as we have employer based plans where the boss is holding this medical Christmas party, I will order Viagra. We are not conscious of the costs. We have to move to an HSA system. We have to move to an individual based system. We have to become prudent shoppers.

We may disagree but I'm thankful for your viewpoints.


Sandip Madan said...

I appreciate your views too. :-)

We mainly talk about bending the cost curve when there's a need to focus on bending the price curve. US care is far pricier than anywhere else. That's the biggest reason for much higher US expenditures, although you are right about "someone else pays" reducing or removing patient concerns about unjustified costlier treatment AND higher prices.

Why should anyone think the government wants to squelch private plans and is keen to "take over" paying for health care? Especially when the government is facing budgetary pressures and trying to contain deficits. It's like saying that someone else really likes and wants to pick up your restaurant tab.

The government is not discontinuing Medicare Advantage but "only" the 12% extra subsidy given to private insurers over and above what public plans cost. The private insurers though have been saying that they cannot viably offer their plans without this extra help.

The government has the advantage of greater purchasing power and consequent leverage in setting rates. This is particularly so when scarcity of supply (often not accidental) enables providers to extract higher rates from private insurers. Vastly increasing provider supply will foster more competitive pricing and help private insurers better compete against a strong public option.

Anonymous said...

The gov't does have more buying power but does it know what to buy. That is the question. If it doesn't allow markets to decide what is the right allocation of resources than it is futile.

The Soviets in the 60's could buy huge amount of bread but it was just one kind. In fact, the citizens would play football with their loaves. Those who could afford it would then go and buy french bread.

Paul Samuelson, the author of the economic books that all of us used in university, also had the same theory that gov't had larger purchasing power. In the 1970's he firmly asserted that by the 21st century, the USSR will take over the US in economic output. Before he passed away, he realized the errors of his ways and confessed that you can take a horse to water buy can't make him drink.

Yes gov't could clothe everyone with a Mao jacket for $5. Why would you want to pay $500 for a Gucci suit? You, Sandip, super lefty, wouldn't be caught dead in a Mao jacket.

And that seems to be the problem with the Obama administration. They don't seem to want to listen to the fact that we want choice. The Public option is a trojan horse to a gov't take over of the healthcare system. It will be one-size-fits-all. Mao jackets for everyone. And don't worry about the cost. If you need a new knee you can't get a titanium one. We'll send you to the seaport and give you a wooden stump that all the sailors used.

Sandip Madan said...

Nobody is talking of restricting free or private markets, but instead to include the freedom to have and choose the public option. That way you can buy your $500 Gucci while others if they want can go for a $5 Mao jacket.

Anonymous said...

We know gov't cannot be a competitor but will stifle competition. If you want competition force companies to sell across state lines. Only private companies can compete with private companies because the rules are on a level playing field.

It's just amazing that when Republicans put up an idea like this they are summarily dismissed as obstructionists. Yet it is so commonsensical that the referees in the NBA cannot compete with the basketball players in the league. Nor can they place a bet on the outcome of the game in Las Vegas. In the Constitution we have a separation of powers clause and it has held the country together for the better.

And there is a constitutional issue with mandates like forcing everyone to get health insurance. So the whole Obamacare plan may fall apart in the courts if mandates are the pillar.

Sandip Madan said...

Of course a public agency can compete with private companies who remain viable if they deliver better value. Just look at the US postal service, UPS and Fed-Ex.

You can even level the field by stipulating the private players will get no less taxpayer help than the public agency. If in spite of this the public model delivers better value (as it does in defense, police, fire services, etc.) then so be it. I personally think private insurers can do fine if they innovate more (e.g., utilize health care trade options) while getting overdue legal protections and increased provider supply.

On another note I'd appreciate even "anonymous"comments to be signed (pseudoname is fine) especially if you'd like my response.

Anonymous said...

By relying on mandates Obamacare cuts into the basic structure of our society. A quote from an economist:

"For Congress to guarantee a right to health care, or any other good or service, whether a person can afford it or not, it must diminish someone else's rights, namely their rights to their earnings. The reason is that Congress has no resources of its very own. Moreover, there is no Santa Claus, Easter Bunny or Tooth Fairy giving them those resources. The fact that government has no resources of its very own forces one to recognize that in order for government to give one American citizen a dollar, it must first, through intimidation, threats and coercion, confiscate that dollar from some other American. If one person has a right to something he did not earn, of necessity it requires that another person not have a right to something that he did earn. To argue that people have a right that imposes obligations on another is an absurd concept. A better term for new-fangled rights to health care, decent housing and food is wishes. If we called them wishes, I would be in agreement with most other Americans for I, too, wish that everyone had adequate health care, decent housing and nutritious meals. However, if we called them human wishes, instead of human rights, there would be confusion and cognitive dissonance. The average American would cringe at the thought of government punishing one person because he refused to be pressed into making someone else's wish come true. None of my argument is to argue against charity. Reaching into one's own pockets to assist his fellow man in need is praiseworthy and laudable. Reaching into someone else's pockets to do so is despicable and deserves condemnation."
--economist Walter E. Williams


Sandip Madan said...

I'm an economist, too, and there are legions of us. Simply quoting one espousing one view (which makes little sense to me) means nothing.

There are some areas where pooling resources is more efficient than individual efforts, which is why you have taxes that are compulsory. They support the army, police forces, and other national infrastructure, including Medicare. Except for the US every developed country and many developing ones have a kind of a Medicare for all. It is taxpayer funded which is more "left" or socialistic than mandating insurance coverage.

Anonymous said...

And that explains why every, yes every country on this planet, except Singapore is going to default on its debts. We have entitlements stretching to the other side of the universe and you want to start another one. How about just trying to fund the damn mess Medicare has created since its inception. It has unfunded liabilities of $37 trillion or 3X our annual GDP. And the baby boomers haven't started retiring yet.

Why do we want to be another Greece or Italy? Even this Democratic president said in his inaugural speech, "We should all be Republicans in the sense that we should all be self sufficient. Don't look for the gov't to do it for you." That's the only smart thing this buffoon has said so far.

Sandip Madan said...

Actually the US without universal coverage is worse off with a net deficit of 72% of GDP as compared to Eurozone countries' 63%, despite these having public funded health coverage. In terms of gross deficits it's 99.5% versus 93.2%. See: