As I suggested in yesterday’s post, among the reasons I am reluctant to present ideas about how to design the health system is a hesitancy about the whole concept of a proactively designed system and a belief that it is beyond the capability of humans to do a good job at such a task, a belief reinforced by the abysmal results of the most recent “reform” law. But from a pragmatic perspective, we have to start with the mess we have created to date and try to imagine what could be done better. On the surface most health care is paid for by someone other than the patient, private insurance–through employers or purchased directly, Medicare and Medicaid. Many economists have expounded on the bad effects of this separation of receipt of service and payment for it. And at least in the case of employment-based insurance, which still covers the largest subset of Americans, employees pay the cost in foregone wages. One way or another, consumers pay the cost for health care–direct cost-sharing, foregone wages, taxes, etc. Since they are paying for it anyway, makes you wonder why we don’t just have them do so directly. The answer of course lies in concerns about dispersal in the ability to pay.
As we all probably acknowledge, health is a very emotional subject for most people. Having access to health care to address health issues usually involves financial concerns. So people fear not being able to pay for necessary health care. These concerns gave rise to both the private health insurance market and government programs to pay for health care for some segments of the population. The presence of third-party payers has, among other things, led to a conflation in most people’s’ minds of health care and health insurance. People fear losing their health care, when what they mean is fear of losing health insurance, private or public. You have to wonder whether insurance is really the best way to pay for health care. It certainly hasn’t removed the financial fears connected with health care for many consumers. And my thoughts in this regard are deeply shaped by the statistics on how much health care most people really need. The AHRQ briefs on which I regularly post suggest that health spending is heavily skewed. The latest such brief on the concentration of health spending found that in 2014 15% of the population had no health spending and for the bottom 50% of the population spending averaged $264 in health spending. That’s right, 50% of the population averaged almost nothing on health care.
So why do these people need insurance and all the administrative complexity it brings for them and for providers? I think a better way is to at some age have every person contribute or have contributed for them $2000 or $2500 into an account that could be used solely for health care. The amounts would belong to the person and build up over their live to the extent not used. The money could be invested but only in very liquid, very safe instruments. There would probably need to be limits on what health care it is used for–no cosmetic procedures for example. People could put aside more if they want to, up to some limit. Employers could choose to fund this for employees. For truly low-income people, the account may need to be funded from tax revenues. This is not a new idea, and I am presenting it in grossly simplified fashion. What it does do, however, is largely rejoin the use and the payment for health care, for the vast majority of the population. It eliminates much of the health insurance industry, which won’t make the health plan companies happy, but they are a huge tax on the health system right now, when there is a better way to provide financial security and resources for access to health care. It will eliminate costs and hassle for providers. Medicaid could be eliminated.
For those persons who have a health care episode or chronic conditions which rise above a certain amount of expense, a high-cost pool would be used, it might even be the Medicare system. If the high cost episode is not ongoing, the person would return to base system after the episode. Those with chronic expensive conditions would stay in the pool. The pool would pay set rates, as Medicare does now, or it could pay provider systems on an at-risk basis for being responsible for the person’s care. Those in the high-cost pool because of chronic conditions would have to engage in positive health behaviors or lose their coverage. Those who have an acute high-cost episode caused by poor health behaviors, i.e. lung cancer from smoking, a car accident due to drunk driving, will owe the full cost of treatment to the pool, to be paid back over a reasonable time, but it must be repaid. It is critical that those receiving treatment paid for by other people engage in responsible behaviors. We can’t allow the divorce of behavior and consequences.
I believe that such a system would dramatically lower total health spending, if for no other reason than it would eliminate much of the administrative expense and the “net cost” of insurance in the current system. It would need a transition period and will obviously work best for younger people at first, but in the long run it will be a better approach than the current one. Tomorrow, I will make some suggestions more in the nature of “patches” to the existing system.