Jay Fleitman: The GOP take on health insurance
NORTHAMPTON — An old friend called this week from New York City. He is also a physician, he is very liberal and he knows that I am not. He surprised me when he confided that he thought Obamacare was a disaster and needed to be repealed. He believed that the solution is “Medicare for all,” a single-payer system. That is one approach.
The website problems that plague the Obamacare rollout are of no long-term importance other than being a marker of governmental administrative incompetence. The website will ultimately be fixed. It is the fundamental structure of this law that leads to results that were easy to foresee and that few Americans desire.
The Affordable Care Act requires all private insurance, be it bought individually or provided by an employer, to cover an extended array of services that the government believes all Americans should be provided and obliged to buy. These insurance policies must also cover all pre-existing conditions and cannot have a ceiling on what insurance policies may pay during an individual’s lifetime.
The remaining private insurance companies that sell policies on the federal and state exchanges can only balance the marked increase in the expense of those provisions by raising the price of these policies, increasing the deductibles of these policies, reducing payments to the providers of health care, limiting choice to consumers by making available to them only the least expensive physicians and hospitals, or by the government paying insurance companies subsidies out of taxpayer dollars to fulfill the law’s guarantee of profit. The Affordable Care Act’s name is quite ironic.
A single-payer system would also need to deal with the issue of cost, as government resources and taxpayer largess are not infinite. The system can reduce reimbursements to providers (physicians, hospitals, nursing homes and suppliers) which ultimately limit availability and quality. The government can raise taxes, or it can directly limit or ration the services and products available to Americans. The mechanism to limit and ration the services available has been put in place by the Affordable Care Act. It is called the Independent Payment Advisory Board, which is directed to reduce Medicare expenditures each year by a specific amount. The Secretary of Health and Human Services must implement these recommendations unless there is a specific override by Congress. As has long existed in the British health care system, known as the National Institute of Health and Clinical Excellence (NICE), this entity controls expenditures by deciding what services or drugs are “cost effective,” and those that are not become unavailable to citizens.
A different method at limiting access to health care has been adopted by the state of Massachusetts. Citizens, physicians and hospitals in Massachusetts will be soon forced into Accountable Care Organizations, in which health care is financed through prepayment to health care providers of a fixed dollar amount to deliver care to a specified number of consumers. The less health care delivered by these providers, the more profit they earn. The state and insurers are protected from increases in health care costs by fixing the amount of that prepayment. The providers and consumers are put into financial opposition.
A problem with the above schemes is that outside of the high deductibles, consumers are divorced from the cost of health care. One way or another, insurance pays and there is no individual incentive to consider price.
The Republican approach is to put the consumer back in control of how health care dollars are spent. The primary goal of all types of insurance is to protect against disaster. Many American businesses have for years offered a combination of catastrophic insurance, which is inexpensive and protects against large losses, and a certain type of health care savings account, in which the employee is given thousands of dollars annually from which to buy day-to-day health care services.
Any money not spent out of that account at the end of the year is kept by that consumer for personal use. The involvement of that consumer in the cost of health care leads to smart shopping and downward pressure on prices charged by service providers and on pharmaceuticals. This has yielded reductions in health care costs of 40 percent in the state of Indiana, which uses this system.
Allowing for insurance to be sold across state lines would offer expanded diversity and competition in the insurance marketplace. The purchase of health insurance can be made more affordable by allowing premiums to be tax deductible for the individual policy as this cost is already tax-free income for employees.
A national tax-based subsidy for individuals with certain pre-existing conditions could be added to protect against significant chronic costs. Selling health insurance as one would sell life insurance, with premiums increasing by age, would encourage early subscription while not penalizing those with pre-existing chronic illnesses.
Medicare for the elderly and disabled and Medicaid for the poor would be continued.
The benefits of such a system are to reduce costs and to make sure that consumers and their families, rather than distant government bureaucrats or insurance company adjusters, control health care decisions. By putting in the effort to do their own health care shopping, American citizens regain that control and stand to benefit and profit.
There is a price to be paid, however, which is that this requires the consumer to do the work to shop in the health care system.
That is then the issue. Americans can gain control of their health care and profit through their industriousness, or they can cede these prerogatives to the government. What is not clear at all is which of these values are important in modern America.
Jay Fleitman, M.D., lives in Northampton. His column appears the first Tuesday of the month. He can be reached at email@example.com.