Organizing for America | Platform for American Progress: How To Rebuild Health Care Without Spending More Money

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How To Rebuild Health Care Without Spending More Money

By apinstein - Nov 9th, 2008 at 12:04 pm EST

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The US Health Care system is a complete mess. Whether you have great coverage, no coverage, or somewhere in the middle, you aren't getting the most for your money, and the main reason is that the Health Care market is simply designed wrong.

Let's take a look at how Health Care works today, and examine why this causes the problems we see every day, like spiraling costs and lack of access.

Over 90% of those with health insurance do not directly pay for their insurance premiums.
Those with insurance rarely pay more than an insignificant portion of individual procedures through co-pays.
Nearly 70% of those with insurance get it through work.
Most plans have onerous restrictions on pre-existing conditions.
Insurance premiums are not taxable, but only for those that get insurance through work.

The net result of these main facts about the current health care market include:

Consumers of health care have no idea about the true cost of care, nor do they care. Thus, there is no market mechanism that keeps prices competitive.
The core idea of insurance for insurance holders to be protected from a loss that they cannot bear individually. It should not protect you from any loss (ie spending), only from a large loss that you could not bear on your own. Since most insurance plans require very little out-of-pocket expense on the part of policy holders, they are not incentivized to minimize the use of insurance.
Since insurers are not required to cover pre-existing conditions, the marketplace has generally adopted a no-pre-existing-condition coverage policy. Thus, for anyone that has a health issue, it makes it nearly impossible to change jobs. This is bad for the economy (people don't move to the positions where they can be the most productive), and bad for the individual, as they cannot leverage the market to improve their salary.
For small businesses and independent contractors, health care is particularly expensive because it is difficult to get good coverage at a reasonable price, and typically unless there are 5+ people in your business, you cannot get a group plan, meaning you cannot pay your premiums tax-free.

THE SOLUTION My individual position is that it's ok if as a rich country, we decide that health care should be a human right, and thus ensure everyone has basic health care. However, I don't mind if as a country we don't decide to go that route either. However, I don't think that a single-payer solution is the answer. The only really valid argument for a single-payer solution is that you can eliminate the need for profit, and thus save money. However, I rather like market capitalism, and I would argue that the efficiencies and innovations produced by a free-market solution will, over time, be much more valuable than not having to pay profits. Besides, it really only saves the profits from the insurance industry; doctors, nurses, pharmaceuticals, etc, will still all need to make profit in order to bother being in business. With that being said, I think that there are a few simple but structural changes that could be made to the health care system that would dramatically improve the issues mentioned above. Many of you may recognize parts of my solution as coming from the excellent Health Savings Account and High-Deductible Health Plan system.

Encourage everyone to get health insurance and stay healthy by making all health-care related expenses tax-deductible: premiums, co-pays, out-of-pocket expenses, all medications, and wellness expenses.
Force transparency of health care costs by making individuals pay for premiums and other health expenses directly. Require health care providers to provide estimates of costs before procedures to encourage competition for services. Over the long term this will provide a true market mechanism for keeping costs under control.
Make high-deductible health insurance + Health Savings Accounts the normative health insurance plan. Those wishing to reduce their out-of-pocket expenses lower would have to purchase a supplemental insurance plan. This combination would strongly encourage intelligent use of health services. Increase the yearly maximum contribution amounts on these plans so that individuals and families can pay for more of their health care expenses with pre-tax dollars.
Require by law that all insurers have the exact same rules regarding pre-existing conditions. Without regulation, it is a certainty that insurers will not cover pre-existing conditions. And if all insurers have to accept clients without respect to pre-existing conditions, then individuals won't have any incentive to game the system.

These policies would level the playing field so that all citizens would purchase health care in the exact same way, while placing the responsibility for efficiently spending money on health care back where it belongs - on the person receiving health care.
It takes a lot more data than I have access to in order to get a good idea of the tax revenue consequences of such a program, but I would imagine this type of program would have the net effect of a small tax cut, which disproportionately favors the lower-end of the income spectrum. I think that most Americans would be just fine with that.
Furthermore, if, after a few years of the new plan that the country still wants universal health care, you could simply provide vouchers that would be equivalent the premiums + out-of-pocket expenses for an average person. Hopefully by then the new system will have caused health care costs to be lower on average, thus meaning that a universal health care program would be cheaper to implement. I look forward to your comments. References:

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