Wednesday, May 2, 2012

Trade Can Cover All, Regardless Of Verdict

Trade can be key to solving our health related financial morass, though its best path of introduction and usage depends on a much awaited Supreme Court judgment on ObamaCare.

Objective legal experts say that the law including the mandate for everyone to have insurance is a valid exercise of federal authority and should be upheld.  But Bush v, Gore (2000) or Citizens United (2010) show that the conservative majority can go out of its way to help out the party that put them on the bench.

Regardless of the Court challenge the health law and other reforms have a vital shortcoming.  They hardly address the massive and surging healthcare costs that swamp our budgets and drag down our economy.  The two political sides have opposite priorities on publicly funded care.

Obama and the Democrats pushed through affordable care for all without a way to pay for it, particularly in outer years as projected expenditures escalate. The Republicans led by Paul Ryan want to limit public expenditures through fixed payments to future Medicare recipients or block grants to states for Medicaid. This likely transfers cost escalations to hapless patients and shreds the safety net.

Both sides are beholden to industry interests (though Republicans probably more so than Democrats) and hence are unwilling to address over-pricing as a root cause of rampant health costs.  With Medicare and Social Security slipping closer to insolvency, there is public pressure on lawmakers and leaders to maintain entitlements while controlling budgets. And it can all be accomplished with trade in a combination of its four forms.  These are (a) allowing medical services to be remotely delivered from abroad, (b) sending patients for treatment abroad, (c) letting foreign providers set up hospitals here, and (d) bringing in foreign doctors.

By importing market competition and best practices worldwide, trade can lower US medical prices to 120% - 130% of those in West Europe, instead of the 200%-300% presently, with same or better quality.  As trade and its benefits take hold the savings will show up as a flattening of the total expenditures in nominal dollars rather than a sudden dramatic dip.  Health expenses as a proportion of GDP will trend down slightly (instead of going up steeply as per historic extrapolation and current projections), approaching those in Europe. This frees up immense resources to avoid future tax hikes even after extending health care to the currently uninsured.

Yes, medical trade promises extreme benefits, though the precise manner in which it is deployed and utilized depends on the forthcoming supreme court decision.  There are two broad scenarios.

 If Obamacare is upheld in its entirety then everyone is required to have insurance and most will comply.  The economic issue for payers and insurers is to keep down the premiums or the cost per covered member.  All the four modes (kinds) of trade contribute substantially to this.  Legislative and regulatory steps to allow such trade will lower prices and make the burden manageable for taxpayers and private employers. 

What if Obamacare is largely upheld but the individual mandate is struck down? It creates a new problem of some people not buying insurance unless and until they get sick, which upends insurers who are required to keep premiums low.  But as it turns out the same path of deploying trade mitigates this problem and combines well with other ways to address it. 

An April 5, 2012 article in BusinessWeek describes how "Obamacare Can Live Even If The Mandate Dies."  It primarily talks about alternative ways to prod healthy people to get insurance and points out how penalties under the mandate are quite light anyway.  It proposes converting the stick of the insurance requirement into a carrot of a tax credit for those who do buy it in advance.  Another option is having a limited open enrollment period for buying cheap insurance or higher prices for late enrollment.

Trade complements these measures by greatly lowering the price of medical services and hence the corresponding premiums, making healthy people more willing to enroll. Also, for those who still don't enroll till they are seriously ill, the cheaper treatment means that insurers take a smaller hit when they are forced to cover preexisting conditions.

 There's the other possibility (I wouldn't bet on it but you never know) that the Supreme Court will invalidate the entire Affordable Care Act. This would leave the uninsured in the same plight that they are in now.  Here trade still can and should be used to lower the price of care for those do have insurance.  But in addition intelligently deployed trade can transform care for the uninsured who currently face neglect or crippling bills if they get sick. 

Best of all, it can be done by the state government by changing their own regulations without need for federal action, and with no additional budgetary burden.

This is because the laws and rules about establishing medical facilities, who can practice medicine and prescribe drugs, malpractice caps and the licensing process are all largely state subjects.  The state can allow and facilitate trade and even accredit some agencies to enable their residents to access foreign medical services with some assurance of quality.  Moreover if this is done at a much lower price point, the uninsured can afford to easily self-pay in full for these services.

In my April 7, 2011 post is a narrative of how such services can be availed.  A patient could walk into a clinic staffed with a nurse for an instant video conference "visit" with a good primary care or specialist doctor sitting in India. The doctor "examines" the patient with the help of the local nurse, prescribes medicines, diagnostics and treatment as required, and this office visit costs $25 - $40.  Even preventive care and routine physicals can be easily availed this way.  MRIs and CT scans?  These could be done by US based foreign managed centers with data transmitted to and reported upon by Indian radiologists at $200 - $400 a pop, as compared to $1,000 - $2,500 presently paid to US providers.  X-rays and even blood lab tests can be offshored for comparable savings.

Medical travel to reputed foreign facilities, preferably through agencies vetted by the state government, can be a viable option for major treatment.  Heart surgeries, angioplasties, and hip or knee replacements can be performed abroad for $10,000 - $15,000 all inclusive, as compared to $40,000 - $100.000+ that US hospitals charge for uninsured patients.  These much lower expenses can be met by many of the uninsured without driving them to financial ruin.

In other words the state governments here would be easing their laws and regulations to enable external competition to make prices plummet without sacrificing quality.  With or without Obamacare this will bring us closer to affordable health care for all, without burdening taxpayers. 

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