Sunday, July 20, 2008

Guaranteed affordable health care plan

I have come to the conclusion that American society needs to shift to a national policy of guaranteed affordable health care. It is simply too easy for a person to lose their job and too easy to stumble into a major health event (e.g., cancer, a car accident, birth defect, etc.) and even reasonablly well-off middle class consumers can hit the wall and be completely unable to handle the financial costs and face bankruptcy, foreclosure, and every manner of financial disaster. Even if a person has a strong sense of personal responsibility and has substantial life savings, a single health event can completely wipe out all of their savings and more. Quite literally, there is absolutely nothing that any of us mere mortals can do to protect ourselves from the financial disaster of a major health event, other than to be lucky. If you do still have a job and your employer's health plan does cover the health event, fine, you are set. But, increasingly we are seeing that health plans are not covering all costs of all events. There are simply too many "cracks" that your health and health care can disappear into for any mere mortal to be fully prepared. My conclusion is that we need guaranteed health care and it has to be affordable. I think that most people would mostly agree with that assertion, but how to get there is a back-hole question.

I have a modest proposition:

  1. The federal government would be the ultimate guarantor of health care financing.
  2. Health care delivery would remain roughly as it is today with a mixture or public, private, non-profit and for-profit health care providers.
  3. People could go to any health care provider for health care. No provider would have any financial interest to deny care.
  4. Health care would be provided at no charge to anyone who requested it, with only your normal ID and social security number required.
  5. The federal government would ultimately be responsible for paying all health care bills, which the consumer would never see, but the reality is that the federal government would simply be the guarantor of last resort.
  6. Funding for this plan would be a payroll tax, with a back-stop of general government funding, ultimately backstopped by the full faith and credit of the U.S. government. As economic times and demographics shift, there may be changes in priorities as to whether to raise or lower the payroll tax and fund health care either from general revenues or even issuance of debt securities.
  7. Consumers could choose their health care insurer. You could choose a private company, a non-profit, the federal government, your state government, or any other organization that chooses to be a health care insurer. Probably best handled at a state level, private insurers could petition each state to be one of a pool of round-robin chosen insurers when consumers make no explicit choice.
  8. Each health care insurer would set its own payroll tax rate based on expenses and added services that they provide. Obviously people wish to minimize this tax, but some people might prefer to pay extra for the right to a private hospital room or a choice of hospital or a choice of doctor.
  9. Each health care insurer would get the bulk of the payroll tax for consumers who have chosen them, but a portion of the payroll tax would still go the the federal government for coverage of major health events that the individual health care insurers are not covering.
  10. Health care insurers would normally be responsible for directly reimbursing health care providers for "normal" levels of health care, but not for major health events, such as cancer, severe birth problems, severe and chronic health conditions, severe accidents, etc.
  11. The federal government, through a separate agency, would cover reimbursement for all major health events. This would be done transparently, so that the consumer would not even know when or how payment is being made.
  12. The federal agency would in turn farm out both normal and major health event insurance underwriting to private companies which would bid for such business.
  13. The federal government would ultimately be responsible for the final (and largest) bills, but would never "take" business away from private insurance companies who are willing to bid for the business. The federal government's role is simply: 1) to guaranteee that people will be covered in all events, 2) to guarantee insurance when no private business is interested in the insurance (e.g., someone born with a birth defect or involved in a severe accident that affects them for life, open-ended experimental treatments, etc.), and 3) to assure that the government will not be involved in the insurance business when private business is fully willing to provide coverage competitive with the government's rate that is politically chosen to be "affordable" to consumers. Private insurers would either have to offer a lower rate or some added value to attract consumers away from the government.
  14. The government would not build and maintain a massive, national health insurance or health care bureaucracy. The role of the federal governmen is simply: 1) to assure that there are no gaps by guaranteeing funding, and 2) assure that health care providers have no financial excuse not to provide great service to all consumers at all times.
  15. The federal agency would oversee (as a regulator) an open market for insuring non-normal health care events. The government would ultimately foot the total bill (i.e., excess over collected payroll tax), but private insurers would finance well-defined slices of "super-cat" (catastrophe) coverage. A private company could bid a rate for a designated slice or payment coverage with some upper limit to payment liability. That would earn the company the right to a slice of the payroll tax. The company would then be liable for payment of bills for that slice of coverage. The federal agency would then assign bills for that slice to the private insurer as they came in. The private insurer would still nominally be resposible for reimbursing 100% of the cost to the health care provider, but the federal agency would then reimburse the super-cat insurer for costs above the threshold that the insurer is committed to. The goal is to achieve transparency for payments and to keep the involvement of the government to the minimum. In fact, maybe the insurers would directly deal with super-cat providers and only get the government involved when their limits are exceeded. Or, maybe that would be the insurer's choice.
  16. Most insurance payments would flow almost directly from employers to the designated insurer, thus keeping the day-to-day role of the federal agency minimized to the exceptions rather than the vast bulk of the "average", normal cases.
  17. The federal government would provide health care investment grants and loans to assure that health care providers have the facilities that they need. Actually, the grants and loans would come from any financial or health care institution that wishes to provide them, and those institutions would either get the funds from the federal government or simply apply for a federal guarantee for funds obtained from a private source. The goal is not to have the federal government to fund all investment, but to be the backstop, lender of last resort, and to assure that the investment money flows even if private interest dries up.

In short, this plan has three key components:

  1. A federal government guarantee that health care will always be available and affordable at no cost to consumers beyond a modest payroll tax.
  2. Most insurance and services will be provided by the private sector.
  3. The federal government simply acts as the enabler and back-stop and financer of last resort should the private sector not be able or interested in providing insurance coverage.

-- Jack Krupansky

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