President Barack Obama is on the stump talking up his goals, Congressional drafts of legislation are beginning to see the light of day, the usual suspects are crying foul and the initial wave of euphoria about healthcare reform is beginning to subside.
Despite the professed national unity on the need for significant new policy directions, the terms of a health reform battle are beginning to emerge. We could be seeing a graphic example of Washington policy-making as usual – or we could be looking at real change now. Only time will tell.
As legislation moves forward – and make no mistake, a bill will pass and it will contain major initiatives to broaden insurance coverage and control costs – there will be dozens of details to worry over and fight about. But there are a small number of major items that will be the focal point for real political debate and maneuvering; the resolution of those issues will determine the real character and quality of the reform that emerges.
1. Will there be a public insurance plan to compete with or supplement private insurance?
This has emerged as the focal point for Republican, industry and medical profession opposition to the Obama’s stated goals and Congressional committee drafts. Conservatives have two major reasons for objecting: They say a public insurance plan, no matter its initial limitations, is a stalking horse for the real goal of nationalized healthcare; and calim that governments are inefficient and inflexible managers, always inferior to the private sector, so a public health insurance plan will be wasteful and unresponsive to patients.
The first of these reasons frankly reeks of either honest paranoia or purposeful fear-mongering. The fact is that there is no public support for nationalized healthcare and nothing in any Congressional proposal or presidential goal that envisions even a tiny opening toward government control of healthcare delivery, government imposition of healthcare budgets, or any of the other defining characteristics of the British or Canadian systems. Government picking up more of the tab, and introducing an option that consumers can choose if they prefer it to private options, or if they don’t have access to private options, really shouldn’t frighten anyone.
As to inevitable public sector inefficiency, there are several possible retorts. First, if a public plan is indeed less efficient than private plans, and treats beneficiaries worse, it is not likely to attract anyone who has a choice – such an example will strengthen the appeal of private insurance plans.
Second, our private insurance system has left us with extraordinarily high and rapidly increasing healthcare costs, mediocre quality, large gaps in coverage, and an estimated 30 percent administrative overhead. It’s unlikely that a public plan can do as poorly.
And third, when put to the test within the constraints of Medicare funding, private plans have spent more than the basic public plan with no better quality outcomes.
Maybe opposition to a public competitor is really based on conservatives’ fear that the private sector can’t compete.
Opposition from industry and the American Medical Assn. is more practical, driven (regardless of rhetoric) by the fear that a public insurance plan will “compete” with private plans by paying doctors and hospitals at below market-level prices.
This is a real issue. Imagine, for example, a public insurance program that competes by offering lower premiums than private plans and does so by paying providers using substantial positive margins from private payers in order to survive; physicians and other practitioners likewise require higher private payer rates to balance low Medicare rates.
Let’s not even talk about Medicaid, which further increases the necessity of private subsidies to public programs. Using public program payment levels to compete against private insurance plans would be unfair and would have a pernicious effect on the quality and accessibility of health care system-wide.
The problem with the U.S. healthcare system is not excessive hospital revenues or excessive physician fee levels. Atul Gawande, writing in the June 1 New Yorker, makes a compelling argument that the real culprits are over-utilization of services driven by physician entrepreneurship and the perverse incentives of the fee-for-service payment system.
Paying doctors less per procedure would either force them to do more procedures (with ever-diminishing necessity) to maintain their incomes, encourage them to further exploit entrepreneurial activities of questionable ethical merit (like referring patients to facilities in which they have an equity interest, or drive them to find an entirely new business to be in. Paying doctors generous salaries, with incentives for quality of outcomes rather than quantity of services, would be a policy better aimed at the problems we face.
The arguments for a public insurance option are fairly straightforward. It would provide insurance for individuals and families that currently have no access to health insurance, or for whom available private plans are too costly. It would provide a mechanism to transparently fold many currently uninsured people – including the employees of businesses too small to afford to provide private insurance plans – into a single-tiered health delivery system. It would provide a benchmark – a basic menu of benefits and their associated costs – that would allow potential beneficiaries to assess the desirability of the private plans available in the market. And it would provide a laboratory for the field testing of innovative approaches to quality and cost control. A public plan needs to compete fairly – no use of government power to gain preferential pricing, etc. – and if it does that, no one should be afraid of it.
2. Will there be a universal coverage mandate?
Yes.
Well, sort of. It seems clear that any effective reform plan is going to have to make some kind of health insurance protection available to everyone and require that the vast majority of people take advantage of the opportunity. Moving basic care away from high cost settings like emergency rooms is an important element in cost control and quality improvement. Making sure that everyone has some minimum defined level of protection – whether through employment, insurance collective, individual purchase, or government program – is good public policy and good sense.
How many of the very rich – the people who least need health insurance – opt not to buy it? There will need to be some exemptions based on income, or small business size, or other factors, with a public option to absorb those excluded by those exemptions, but the principle of universality will, I believe, prevail. On this score, the Massachusetts model remains attractive.
3. What nature and level of insurance will be mandated and how much consumer choice will remain?
Here we begin to grapple with challenging questions where consensus is elusive. In all likelihood, legislation will define a minimum package of benefits for any qualifying health insurance plan. That’s a good thing. Having health insurance has to mean something and a prescribed minimum acceptable plan creates meaning.
But what will that minimum benefits package look like? The easiest answer is to take the Medicare package and require services covered by Medicare to be covered by any minimum acceptable insurance policy. Easy – but probably not a great idea.
First, the Medicare insurance package is very rich – covering a lot of things that wouldn’t qualify under any fresh consideration of “minimum essential …”
Second, the Medicare package of benefits doesn’t include a lot of the preventive services that some would argue are necessary for long-term cost control.
Trying to address this question leads to a more fundamental and critically important health policy question: What is the effect of richer health insurance benefits on the quality and cost of healthcare?
Intuitively, we would expect that richer insurance benefits would improve quality but increase cost – better insurance leads people to seek care earlier and more frequently; timely care will improve outcomes, but more frequent care will raise systemic costs.
This assumes that incremental services yield incremental quality – a proposition that is demonstrably true for ill-served population segments but probably untrue for segments with adequate access to services. Empirically, no one seriously argues that richer insurance benefits will actually reduce costs.
Indeed, the most cogent argument on the subject comes from Clayton Christensen, who argues that achieving real cost reduction requires a combination of personal health savings accounts and catastrophic insurance coverage (rather than comprehensive coverage of the type most of us now have), a complete restructuring of the service delivery system and an end to fee-for-service payment (is this a developing theme?).
Congressional drafts seem to be leading us toward a limited menu of defined benefits packages with differing levels of insurance protection — available for easy comparison on a web-based exchange — from which consumers can choose. Combined with information technology initiatives aimed at perfectly uniform billing and claims processing procedures as well as perfectly transferable electronic health records, the prospect of perfectly uniform benefits packages leads us to wonder about the nature of competition between insurers. How will they differentiate themselves: Speed of claims processing or friendliness of the help line? Obviously, there will need to be real differences – the provider network, for example; the participating hospitals in a geographic area.
I would argue, however, that encouraging uniformity across plans will in fact stifle innovation. Mandating minimum essential coverage is necessary, as is requiring clear, plain language descriptions of benefits, exclusions, copayments and deductibles, limitations on provider choice, etc. Providing resources to help subscribers compare options and further understand the choices they are making is a good idea.
But the experience of Medicare’s Prescription Drug Benefit (Medicare D) teaches us that a minimum defined benefit, with broader flexibility above the minimum, provided maximum consumer choice, and that consumers can, with assistance, manage that choice.
These are, I think, the major issues now in play. They don’t, you’ll have noticed, address how any of this will be paid for. And they don’t really address how quality will improve and cost will be controlled. Is this all a shell game, or is there more? There is a lot more, and I’ll address it in my next post.