Overall Healthcare Solution is Simpler Than You'd Think! Just stop setting the 2 sides against each other....

 Since a large majority of Americans think government should provide health care insurance for all --

 In Searchlight’s polling, most respondents — 66 percent — said the government should provide health care to all Americans, regardless of age or income.  -- Opinion | This Is Why So Many Voters Hate Both Parties - The New York Times

and the main challenge to all healthcare in the world is simply that to provide what people reasonably want as good healthcare this has to include newer treatments (once proven)  which cost a lot more than old treatments, so that the needed new (better) treatments then cause overall costs to go up and up....

 -- which this blog has explained (accurately) as unavoidable due to an unchangeable fact:  that if someone's life is at stake, then price is no object  -- people will mostly choose to pay as much as it takes to save their lives (or at least try to do so)... 

-- and that's why the free market doesn't/cannot limit overall total costs in health care well (while it can limit costs for older standard treatments though, such as by using robotics and health care aides and such as technicians, it cannot control the cost of newly developed treatments that are still under patent)

-- While on the other hand, trying to limit the endlessly rising costs by switching to government run healthcare, which could potentially control costs powerfully, has the well understood other costs of:

•  1) stifling innovation, 
•  
•  2) resulting in long waits for some newer (or even sometimes older) key services.....

This is the well understood quandary as explained on this blog before...

But...

Looking at the big picture once you've accepted these facts makes it possible to think in new ways -- and a broad solution becomes obvious at some point, once you've understood and accepted the realities.

The great majority of Americans would like it if government would provide healthcare for all that wouldn't break the bank but also would encourage and allow continual innovation and better new treatments to continue to arrive, with private incentive to make new treatments....

A seeming impossible both/and goal....

But that's where to rethink.

"Why not do both/and."

It's a societal discussion flaw we can remove here, the mistake of opposing sides -- where so many have argued one side or the other without realizing both are best not as tolerated side systems.

Instead, think on it in a new way -- that both public and private are needed as primary, main systems.

Both.  (not one huge and the other small/marginal, but both large, primary, and thriving)

So, let's look at how that would work.

Both Systems Solution:

Here's a way:

A Medicare for All system (where private supplemental insurance is allowed as already is normal) that covers (wait for the new part at the end here....) only (as already standard in Medicare) proven treatments which are medically necessary....and....includes dental and vision coverage....and....sets prices by negotiation with individual hospitals and small associations (not giant monopoly like associations of course, so some new law is needed to control networking (healthcare associations) that makes a local monopoly (say over 70% of provider capacity (number of doctors could do) in defined areas where population is over 50,000) -- that has to be made illegal, and of course that means funding investigators to audit to check for such illegal local monopoly)...and...

...also carefully limit regulation on the private sector to include only key basic regulation such as fraud prevention (laws and enforcement), requirement of clear language and summaries of coverage, and (government audited) language about a treatment's rate of effectiveness -- then let the pure free market handle all the rest. 

  Under the private system would then be all the new treatments not yet included in the Medicare for All system -- where the Medicare for All systems would only cover new treatments that have proven themselves over a 7 (or 9 or 11) year period, to give time for competitors to come up with versions of that new treatment type and time enough for all the free market gains to happen.

So that private free market innovation can continue apace... in a major, large system way.

But at the same time, all basic well proven healthcare will be price fixed and under Government insurance.  Fully.

Both systems being full fledged, neither in a minor role.

We'd likely see that a high portion of all healthcare visits (most are lower cost) such as perhaps over 85% being under the Medicare for All system. (all the most routine and basic health care visits along with a wide variety of highly standardized well proven treatments (such as joint replacements, etc.).   

No one would need to die merely for lacking well proven and long standard healthcare -- proven and effective long existing treatments.  

Looking over time for what works well, a Medicare for All system could also include public clinics (as is common in many areas) for certain classes of visits, and law could also be included as needed to prevent the private sector from extending monopolies on drugs and treatments more than 20 years old, though it's reasonable to carefully consider when the clock starts ticking on such a timeline.

So: we'd have then also a large scale and widely used system of private supplemental insurance that is purchased privately with private dollars oriented to the latest (and of course relatively more expensive) treatments.

We need to simply stop thinking we should choose or prefer one system over the other. 

We can have both types of systems operating well, both the public and the private, without thinking we'd have to make one side (public vs private) operate poorly or at a disadvantage.

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This is also politically doable, as it's not hugely different from the current Medicare system, and if it happened that there was too much fear or opposition to extending Medicare for All, it's pragmatic to be able to phase it in in a way that is more palatable to various sectors like insurers, hospitals, and private practices.

Phasing in Medicare for All:

If needed, phasing in slowly would make this much easier for insurers and providers to plan and transition over time.

So, for instance, a very slow transition (if needed to be politically viable) -- First lower the entry age into Medicare to 55 for 5 years. And then lower the entry age by 3 years every 5 years.

OR: (a perhaps better speed) -- First lower the entry age into Medicare to age 50 for 4 years. And then lower the entry age by 5 years every 4 years.

OR: (perhaps even just as politically viable) -- First lower the entry age into Medicare to age 45 for 3 years. And then lower the entry age by 5 years every 3 years.

OR: Set up a full transition All At Once (all ages) to be implemented all at once 4 or 5 (or 7) years after passage -- giving plenty of lead time.  This time gives insurers and health care providers time to plan and get ready, and will reduce their political objections.

How to do a Border Adjustment Tax that Succeeds Politically

For either a VAT (value added tax) or a BAT (border adjustment tax), the only way politically to get from here to there is:

Gradually.

Let the tax plan be to begin in 2018 at only 2% (or 4%), and be raised by 2% increments each year, until reaching the 20% that is typical (such as by import duties) for other nations, our trade competitors.

This would allow even incorrect fears among importers that somehow they would bear costs to be dissipated, as they would see plenty of time for currency prices to adjust, and thus for price disadvantage to be avoided.

Is it a good idea?

Without getting technical, the answer is Yes.

Currency adjustment will happen, but also the fact the U.S. isn't 1/2 or more of the world economy will allow also real change in relative costs (other markets under generally free trade will blend the adjustment with other nations who are also customers).

Doing this gradually is the only smart way.

The BAT, like a VAT, and letting either of these replace much of domestic corporate taxes (such as for instance setting the BAT rate equal to the corporate rate), would help level the playing field, in that foreign production would be taxed at a rate much closer to domestic production.

Why Health Care hasn't acted like a (simple) free market and has little price competition (regardless of Obamacare)

Graph via California Health Care Association

Before the Affordable Care Act, health care costs and insurance expense rose every year, often sharply.

As I wrote in 2010 here, people will pay whatever health care costs up to the limit of their ability to pay in order to get what they think is needed.   For much of care, having insurance makes price shopping feel beside the point.  Even for expensive care in terms of out of pocket cost, price shopping can be harder to do than we'd guess at first.  Often there is a feeling of little time.  Why not trust the insurance choices of network providers, because quoted non-network prices are often higher as one learns calling around the area one lives.  Of course the idea of a network to begin with is that price and quality have been shopped for....  But have they?

Health care insurers often have little opportunity to do effective price shopping in the U.S.!

Why?  For the reasons below.

What Prevents Price Competition:

1) Most doctors have banded together into associations to negotiate prices with insurers, so that there are in most places no significant (large enough patient capacity) competitors outside the near monopoly association groups to compete on price.

Two competing associations will naturally set their prices only a little apart.  For this reason -- most people prefer certain doctor or a certain specialist or group.  Insurance then hides the real prices of that doctor's services from the patients, who only pay a fixed co pay most often, such as $20 or $40, regardless of the price.

The somewhat lower cost association knows there is effectively no other choice available, except the somewhat higher cost association.

Therefore, they have zero need to lower prices to get enough customers.

As the other group raises prices, they can simply raise their own a similar amount without losing any customers.

2) Many possible types of competitors are prohibited by law--

As it's illegal to practice medicine without a license, meaning it's illegal to practice medicine without meeting the certain standards of what licensed doctors consider correct knowledge created by current and past licensed doctors and then taught by accredited medical schools.  Which are expensive here in the U.S.

New doctors going through these expensive schools to acquire this certain knowledge and then passing the licensing are economically compelled to join the higher-wage (existing) associations by student debt, and to avoid many of the overhead costs of offices by combining with other doctors in a group.

Thus there was and is little significant price competition in most areas.

This will not change merely by removing the Affordable Care Act.

One wonders if classic anti-trust legislation could even help, because even having 3 associations in an area may only have a small competitive effect unless they are all high-capacity, and there is at least some excess capacity.

It's feels more intuitive given patient doctor-preference or medical group preference that at least 3 high-capacity associations/groups (who are not price fixing together behind closed doors) in an area would be needed to get some actual price competition.  And that's only if there are sufficient sufficient doctors available for that competition, which is constrained by current laws about licensing and the outcome of medical student debt.

Democrats are the New Republicans

Imagine, if you are under the age of 40, that once, not really so long ago, one of the two major American political parties espoused the following ideals, and the other party did not believe in these ideals strongly at all.

• Free Enterprise -- That companies should operate in a market under the law without subsidies from government....  Without, for instance, subsidies for oil exploration.  ("According to...the Congressional Budget Office, capital investments like oil field leases and drilling equipment are taxed at an effective rate of 9 percent, significantly lower than the overall rate of 25 percent for businesses in general and lower than virtually any other industry." -- NYT)
• Market Solution for Health Care -- Health Care should be extended via a market solution: a regulated marketplace of private insurers and providers, a mandate, and subsidies for the poorest families (Nixon).
• Naive Free Trade -- Extend free trade everywhere possible, regardless of factors like currency manipulation.

So, which party was that?

The Republican Party.

Today, one party pays lip service to these ideals at times, but the other party truly believes in these ideals.

More of the true believers are Democrats.

I'd go further.

Today, it is the Democratic Party that believes in the Horatio Alger story, the upward mobility, the land of opportunity.

These are strong ideals, and the Democrats, having the real belief, should embrace the first two of these ideals, and Horatio Alger, more forcefully, publicly, rhetorically.

Free Trade, on the other hand has a complexity that is crucial:  Free Trade isn't actual unless the currencies freely float (click link to understand why).

...

I was surprised as I began to finish this post and looked up when Elizabeth Warren was a Republican because her party affinity history, wiki nutshell version, is just like my own:

"Warren voted as a Republican for many years saying, "I was a Republican because I thought that those were the people who best supported markets." She states that in 1995 she began to vote Democratic because she no longer believed that to be true, but she says that she has voted for both parties because she believed that neither party should dominate."

People, Elizabeth Warren has evolved some, but not that much.  It's the Republican party that has changed so drastically.

Updated: Let People Keep Their Old Swiss Cheese Policies

(Originally published 11/12; Update, 11/15, at bottom)
Just a quick post before other duties.  Some thoughts based on my 2 years of blogging on health care.

President Clinton has opened a helpful topic, which from the short NPR news summary I will paraphrase as: Change the ACA (Affordable Care Act) and let people keep their old policies.

I think this is actually a good idea.  There's little harm in letting people keep Swiss cheese health insurance policies by their own choice.  They can transition to better policies over time, by their own choice.

The premiums on those Swiss cheese policies will still rise due to health care inflation, and yes they will have less-than-complete insurance, but that's by their choice, without financial penalty.

And give these old policies the same premium subsidies according to the ACA income level subsidy formulas!

In fact, giving them the subsidies helps encourage them to eventually upgrade to better insurance.

It won't hurt the new ACA in any pronounced way I can see, at the moment. 

While insurers will need to raise some premiums for their new ACA-compliant policies now on the exchanges, since they provide maternity care and will have somewhat fewer enrollees, this won't likely be a huge increase.  And, lower income enrollees will still get subsidies to make their insurance affordable anyway.

There's little difference on that end, but a lot of difference politically, and in terms of choice.

Choice is always good.

It's a great opportunity for the President to show he's non-partisan while accomplishing some good -- choice helps people in subtle ways.

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Update 11/15

Insurers are said to be concerned about not having enough young enrollees.   Since insurers will be required to notify those keeping an old-style (Swiss cheese) policy of what that old policy lacks in coverage vs a new comprehensive policy, most younger people choosing to buy insurance at all would make the rational choice to buy the new comprehensive coverage since the cost of premiums is fixed vs their income by subsidy.

Insurers should be allowed to increase premiums mid-year.  Policy holders with subsidies would see no increase.  Insurers net profits are still limited by the payout loss ratio requirement, so they could not use this as a windfall.

If there is legal barrier to insurers raising prices in this way, new provision should simply give them that freedom across the board, across the nation.

Finally, a much smaller group -- higher-income policyholders seeing higher premiums in a few months for their new, comprehensive policies without any subsidy -- these households can typically afford to pay a little more, although that increase could be reasonably limited by law for this single year, perhaps to 5%, as a safety cap, and with required notification to policyholders that should the increase be larger than needed, the law requires the insurer to rebate excess premiums at year's end. They would be simply seeing the "true cost" of coverage, with less subsidy.  Insurers would be fine in each scenario, as the majority of their increased costs will be covered to begin with via subsidies.  The key being that they are allowed to increase premiums mid-year.