Update 6/23 -- Incentives (see end of post)
Update 6/25 -- Preventative care incentives,
Refined definition of what is an "effective" treatment
7/7 -- See new post above for a detailed incentive plan as an alternative to approved treatments
7/10 -- Alternatives (bonus!)
Let's work on better ideas for health care.
For instance, the quandary of some people dying from lack of very basic care on the one hand versus the spiraling cost of care on the other hand is resolved in an idea I present below. The proposal also resolves the public vs. private debate.
Even if it only helps to choose between existing proposals, it is worthwhile to think of better ideas. I think we can inject new ideas into the current debate, which can be incorporated into existing proposals, or new proposals.
We can come up with good ideas for health care.
This is our choice.
As citizens paying taxes, we have the right to influence the debate and the new law.
It is never too soon or too late. Even if we came up with a better idea after a bill is passed in August or September, it will influence the reforms and practices later. But here on June 20th, I think new ideas we find in the next few days could be communicated to Congress and help influence the debate and outcome right now.
I encourage readers/visitors to just plain shoot from the hip or give your thought-out ideas, either one.
One approach I like is to start from scratch -- what would be the best way to do health care, regardless of what has been done before.
So, blank slate time....
Here are my initial thoughts:
Even by 1980, most of us didn't expect we might well live to be 93 or 96. But it is more feasible for many now than it was 30 years ago. Our expectations of medical salvation have risen greatly.
Given some kind of reasonable chance to have a decent quality of life with new medical treatments, most people would indeed be willing to spend a lot of money if needed to make it happen. While some can afford to spend a lot, many cannot. The differences in ability-to-pay leading to too-large health care differences bothers many of us.
Next: Technology means that there is no real limit to what kinds of high-tech new treatments can be invented and tried to extend life. And there is no natural limit to cost except what can be paid from all available money, even if it is every cent, every last penny, people have.
No matter how much money we spend, there are always more expensive cutting edge treatments left to try if one is willing and able.
So since we are willing to pay large amounts of money to extend life, and since industries of people are making a living making up new treatments --....the national cost will...always...rise...and...rise...until it hits the limit of every last penny that can be taken from all other areas of life.
Unless we impose limits on the publicly-supported portion of this choice.
Notice I say publicly. A limit on public support still leaves free choice on the personal/private side wide open.
Anyone can still purchase *any* additional health care (via supplemental private insurance) they want -- just like before.
Basically this idea only creates one fundamental change in the status-quo: more cost-effective universal basic care than the current emergency-room care disaster we have. This is a huge change that reduces costs yet allows for the private health care "freedom of choice" many say they like.
So....one thought that occurs to me is that a public plan cannot cover unlimited new treatments or even a lot of advanced new therapies-- the public plan would need to be conservative in order to avoid gigantic cost increases. Public support could cover everything that really pays off well (this is defined below). No one would die from lack of basic care.
"Basic" includes all well-proven, cost-effective care, preventative care and emergency care.
Publicly covered treatments need to be cost efficient -- a lot of result per dollar.
There are a great number of medical treatments that produce a lot of results per dollar spent. Part of a health-care law could be that all employers *must* provide a work-free day per year for a routine checkup, and having this provision actually enforced. In fact, the best health scenario for anyone is to treat problems early with well-proven early treatments that work well.
Early treatments like these cost less.
Now, part of the consequence of better basic care is exactly that more people live longer into old age, where illnesses of old age arise.
Currently we spend a huge amount of our health-care dollars treating the last 6 months of life.
Once a person lives to an advanced age, fewer and fewer effective treatments are possible. "Effective" treatments are treatments that extend life by more than a year at least, most people would agree.
(Remember, for those that don't agree, we leave them their free choice -- further treatment options that buy 2 or 6 months of life are up to them, just as now)
Treating a 30-yr old diabetic will extend life for a great many years. But some expensive and technological treatments for a 91-yr old might extend life by only months in many situations.
We need a way to choose what the public plan will support.
First, as above, the public plan should support first the most proven, effective therapies/procedures, which have success rates that are clearly higher than alternatives, by public data tables, according to clear and distinct diagnostic standards.
The public plan should only cover "effective" treatments, if they haven't yet been tried. I'd favor that more expensive treatments with success rates below 30% be considered "extended" or some such designation, and have significant co-pays (perhaps 30%-50% of their cost), so that patients have a realistic way to weigh their high cost versus benefits.
A public plan can only work if it has limited costs. Otherwise it would fail in time, and be cut back by force of financial crisis.
Of course, this will leave grey areas.
But the public plan isn't for grey areas. It is for proven basic care, where the situation is a clear statistical likelihood of success or reasonable chance of success.
Grey areas can be left to free choice -- private health insurance and such. (more on grey areas below)
So a public plan needs to have a very clear standard for treatments in old age -- the public plan (only) needs to provide just treatments that will significantly extend life, by at least a minimum period of time. Private plans can cover other situations.
I propose the public life extension time period be 1 full year -- the public plan can provide proven treatments that extend life at least 12 months where the statistical odds are at least 40%, according to governmental actuarial tables -- clearly defined statistical results with clear criteria.
When a treatment is close to the border, and a public inspector finds it falls outside the defined public criteria, the public compensation would be reduced by specific amounts after inspection. That is, the public inspector might find a doctor applied for public funds for a situation that wasn't fully within the public plan criteria, and then the public payment would be reduced according to precisely defined law in clear steps, such as 25% less (than the set public plan compensation), 50% less, 75% less. Only a few steps, and well-defined rules. Rules that clearly spell out what gets partial reimbursement. But specifying treatments precisely will hold the number of these grey situations to a minimum.
This overall approach allows enormous flexibility in actual treatment!
For instance, the public plan might cover an MRI and a certain specific surgery at defined payments, but if the patient and doctor choose to do additional steps, that's perfectly fine. The public plan covers what it covers, clearly and reliably.
But doctors/patients and private plans can do whatever further they want, flexibly, so that the total costs are covered in part publicly, in part privately.
Another idea that occurs to me is that there is no harm at all in making a public plan that is exceedingly conservative and....cheap!
It is necessary really. We have limited funds, and our goal isn't ultimate health care -- it's universal health care.
There are a lot of basic treatments that are effective and less costly, so we could choose to just create a public plan that does exactly only the most proven, effective treatments, and nothing more. The lower-rated treatments would never be covered by the public plan in this scenario.
In other words, instead of more comprehensive, we could aim for more cost-effective.
The whole point is to help everyone, every time, that can be helped in well-established, basic ways at a cost that almost all households can afford to pay for themselves.
The public plan would be well-defined and well-publicized.
The public plan could gradually take on new therapies/treatments over the years according to well-defined standards of cost-effectiveness in extending life.
No one would die from lack of basic care. Except by failure to act.
Anyone could then buy private insurance (see, we still have full-fledged, free-enterprise, private health care and private insurance here) to cover further treatment above that basic limited list on the public plan. Likely private plans would offer a great variety of options to extend coverage to various levels of less certain treatments.
The conflicts of public vs. private insurance solved!
We don't have to choose between "fairness" and "freedom."
We can have basic health care, just like basic education. Basic, defined, limited, universal.
NPR continues their excellent coverage of health care with this worthwhile segment on health care costs by Robert Siegel. Highly recommended. It is rife with examples the idea here would address.
Paying for the Plan:
No matter whether public or private, we all will pay for health care.
My initial suggestion for how best to run this public plan is by premiums, and a mandate.
Private insurance plans could, by choice, purchase the public plan as a building block for their own plans (at the same standard rate individuals pay). A free market in that regard.
So all individuals would either buy the public plan, or a private plan that incorporates the public plan, or pay a set annual fee to be excluded.
This plan would be tax-neutral, requiring no new revenue, and having no net public cost.
Since this public plan would be basic care only with limits as described above, it's cost would be quite low, affordable.
For this reason it may not be necessary to provide a subsidy for most lower-income households. The premiums could be *very* low.
In fact, another way to help set limits for the public plan is to let it buy whatever it can for a set low premium, like about $100-$200/month per person age 25-61, $50/month under age 25. Age 62 and over probably needs a careful consideration for premium level.
The virtue in this particular method of cost-control is that the chosen treatments would be determined by mathematics -- cost/benefit, and not by politics.
In order to extend this kind of plan, politicians would have to raise it's premiums.
That removes a lot of the forms of political kickbacks that can occur, where contributions lead to Congressional interference.
Next, I'd favor a pay-for-performance incentive -- according to detailed actuarial tables. Payments to providers would be higher by a set amount, such as 20%, for a successful outcome versus an unsuccessful outcome (in the well-defined treatments the plan is designed to cover).
I'm confident though that a premium of only $100/month to $200/month for a 45-yr-old adult could indeed buy quite impressive basic health care with cost-effective, well-defined benefits and reasonably low co-pays, such as $25 office visits and drug co-pays of $10-$25 for most drugs, and $50-$100 for more expensive drugs. Most people would then just supplement this basic care coverage with private insurance for extended benefits.
The whole point of the public plan is to provide affordable basic health care. Affordable means the cost would be quite low, so that a family with an income of even just $35,000/yr could actually pay the premiums. Thus the plan doesn't rely on large federal subsidies.
This post will be repeatedly updated. It is a brainstorming post.
James Kwak offers a good discussion of the other major cost-increasing force in health care: providers would like to earn more money.
This is a problem of incentives. The financial incentives for doctors/hospitals/health-care-providers are to do more, even if less is just as good.
We need to change the incentive structure to paying in part for outcomes, instead of only for services.
This could be accomplished without interfering much with doctors simply by laying out the basic treatment services covered for various precise diagnoses, which is what basic care is about. When a treatment doesn't work, it shows an additional condition, such as a doesn't-respond-to, which then would lead to a further course of treatment, etc. Once treatments are specified for these basic care situations, then only diagnostic services are difficult to incentivize correctly. I'd suggest we consider paying a significant up-front payment for diagnosis itself -- a diagnosis fee payment -- and then reduce the payments for specific tests, thus incentivizing some efficiency in choosing and giving tests. If initial tests did not determine the likely cause of illness, further tests would still be paid for, but the profitability of doing a great number of tests would be modest.
A few more simple rules would flesh out the incentives, such as making half the diagnosis fee contingent on diagnostic success, so that sending the patient on to associated providers for more testing means giving up a part of the profit. Kickbacks for referring patients in general need to become illegal.
One good incentive would be a successful-outcome incentive.
Many specific illnesses and injuries have fairly clear criteria of what constitutes curing/healing. In these cases, a successful treatment bonus is a very good kind of incentive. Even for pains that have less clear causes, some kinds of incentives are possible -- success in these cases could be relief that last a certain length of time, or even two incentives, for two different lengths of time.
Successful-outcome incentives encourage providers to effectively treat the patient, and make room for more patients in their system.
A final category of incentives we need are powerful incentives for preventative care. Good reimbursement for providers is a basic necessity. But there's more. Patients themselves need incentives. Along with the mandatory day-off for a wellness checkup mentioned above, we could require the wellness checkup as a condition of the low premium cost, or even give a direct payment to the individual for meeting their wellness checkup requirement.
One possible version of an incentive for individuals to follow through on a wellness checkup -- after missing a wellness checkup, a bill would be sent to the individual for $250 as a supplemental annual "risk-premium" cost, with a note that the individual can choose among three options:
a) have a wellness checkup during the time period remaining in lieu of the $250
b) elect to pay an extra $250 annual premium within 60 days
c) default to an increase in their automatic monthly premium of $21 in the case of no-response (refunded later if the wellness checkup is done within the annual period).
This extra annual risk-premium for not accomplishing a wellness checkup can increase after more than two years of missing wellness checkups to $500/yr ($42/month). This is simply a "risk-premium" and should be named correctly for clarity.
7/10 Update -- Bonus section for Geeks and those who like to consider further alternatives.
I think it's fun to think outside the box, and if no good health care reform comes out in the next month or two it could be worth thinking further -- there are more than one or two ways to get to a good health care outcome.
For instance, Universal Coverage with guaranteed acceptance (no preexisting condition exclusions) doesn't absolutely require a Public Plan or Single Payer. The public methods are ways to get things done, but there are further ways....
Our ultimate goals are only a few:
- Cost efficiency for the sake of the general U.S. economy
- Universal coverage -- preexisting condition coverage
- More Preventative Care (for both quality of life and cost effectiveness)
- Reasonable flexibility/freedom for doctors and patients
- Continued innovation
Call this "Automatic Insurance." Make it refundable if the individual then chooses to buy their own policy.
Second, basic, is to require policies to be fully clear about what they cover, and to meet at least a very limited, basic level of coverage such as all preventative care, emergency care, and well-established treatments (any treatment in use for more than 18 years.) Yes, basic, limited, clear, cheaper.
Co-pays could be required and also limited by law to $0 for preventative care, $25 office visits, $100 for emergency care, and to 20% of lab and test costs (with legally required on-the-spot price information). Deductibles and out-of-pocket maxes could be capped by law at $500, or the total amount an insured individual or family has in a HSA (health savings account). Keep this very simple -- proof of HSA account balance is enough, once/year -- almost zero paperwork. These steps could stop fake insurance policies that trick buyers.
The electronic record of insurance would be at a Government database, allowing providers to ascertain the insurer of anyone walking in the door who is a citizen or pays taxes, or is a dependent of those.
The second piece of legislation is simple disclosure -- requiring providers to fully disclose costs for patients in real-time (to the patient, immediately) of care/options they are offering -- the amount that particular patient will pay out of pocket for that particular treatment.
That's how to generally keep our current system while eliminating most of its worst aspects. The cost spiral problem would continue to some extent....for a while, until the too many customers (you and I) finally get tired of over-paying and *choose* changes in providers/insurance. Private insurers could set up pay-for-outcome if they like, and increase incentives for cost-efficient preventative care. Those doing so could increase their own profits.
Doctors and insurers wanting more profits could simply do some planning, modest investing, and aim for cost-efficient care and higher numbers of patients. It's called free enterprise.
It would be easy for providers/insurers to hire reasonably smart people to actually improve their own health-care efficiency and cost-effectiveness. Even consultants. Ultimately, the free market can drive the unattractively overpriced providers out of business and replace them with more efficient competitors. That's called free-enterprise too.
It's an economic fact that if you get too overpriced in a market, you can go out of business.
Some kind of change is needed at least because of the form of cost-spiral castastrophe where the uninsured, including those able to pay for insurance, can walk into an emergency room without paying and the costs be put on taxpayers and the insured. That's why Government collecting premiums through taxes makes sense in terms of fairness. Even poor people can pay a little.
A Public Plan is ultimately only a way to accomplish similar goals (Universal acceptance) a little faster.
A Public Plan won't have extra costs unless it is poorly designed. Poorly designed, though, is a quality too many of our current private (and public) health care funding systems.