Health Legislation Priorities

By July 31, 2017Commentary

I don’t know why anyone would be happy about leaving the prior Administration’s health reform law in place.  It is adding horrendously to the national and state debt, contributing to people not wanting to work, contributed mightily to the overwhelming administrative burden on providers and has left a brutalized individual health insurance marketplace.  It needs to be fixed, but the party responsible for enacting it feels no responsibility for fixing the mess it created.  So lets forget catchy slogans like repeal and replace and think instead about what our priority problems are and how they could be fixed one by one.

No. 1.  Medicaid.  This program has been the primary source of coverage expansion.  The costs are largely being picked up by the federal government for expansion enrollees, but that changes in coming years.  The program is absurd in its reach and unintended (or maybe intended) consequences.  Tens of millions of people are getting Medicaid who are perfectly capable of working and contributing at least something to paying for their health care. Many choose not to work just so they can keep their gold-plated health care (and other government freebies).  The coverage is far better than what is provided to people with commercial insurance or even Medicare.  This is fundamentally unfair.  It is an unaffordable disaster.  The real solution is to reverse the accident of legislative history that made it a federal program and return it to the states, whose citizens can each make better judgments about how much they want to spend and in what form to help the truly needy receive health care.  This would be a far better, and less expensive, program if operated at the state level.

No. 2  Medicare.   The Medicare trust funds are going to run out of money in the near future, just as millions more people every year are being added to the program.  The expense is unsustainable in its current version.  This should be a top priority for Congress, but both parties are too gutless to address it.  Several changes could restore its solvency.  The first is to stop automatically letting people who qualify for Social Security disability get Medicare.  Social Security disability is another out-of-control program which has come to be used by many slackers to avoid work.  It needs to have eligibility severely restricted to the truly fully disabled.  But Medicare should not have to bear the burden of this additional eligibility category in any event.  Medicare was intended for the elderly.  Next, the program should be fully means-tested.  Those who have either income or assets should pay as much of their full actuarial cost as possible.  Not the actual health costs, but the actuarial projection of an adequate premium, similar to what is done for Medicare Advantage premiums.  Then poorer Medicare beneficiaries could get less expensive coverage by paying less of their cost-sharing and part B premiums.  And speaking of Medicare Advantage, the whole Medicare program should be voucherized, with people able to join a plan and get a voucher for the lowest premium in their area.  If they want another plan, they pay the difference.  Finally, all the administrative nonsense being placed on providers in the form of various quality and other initiatives should be cut way back.  These changes would allow the program to be fiscally solvent for decades to come.

No. 3  Drug Prices.  While still a relatively small part of total health spending, this is very rapidly growing category which could see higher growth rates as more “innovative” therapies arrive in the next few years.  Drug prices are high (and by that I mean they earn a very disproportionate return to the what it cost to develop and make the medications) because they have a legislatively granted monopoly and drug makers implicitly collude where there is a little competition.  The solution is to use the thing that makes the high prices possible to prevent them.  That means tying patent length to pricing, both the initial price and any price increases after introduction.  Patents should be scaled to as short as three years depending on price and a compound should only get its full patent life if pricing is  very, very reasonable, meaning the net margin, calculated with a reasonable sales and marketing spend, is very low, single digits at most.

No. 4  Provider Prices to Private Insurers.   Consolidation has given providers way too much power to raise prices to private health plans.  The solution is obvious, break up the systems horizontally and vertically.  That would limit physician incomes, as well as those of hospital administrators, and force efficiencies and quality improvements in order to compete effectively.  The other alternative is to impose price limits on all services to all payers.

N0. 5  Radically Change How People Pay for Health Care.  As I never tire of pointing out, the vast majority of the American population doesn’t need health insurance because they use little care.  We need to switch to a system which begins building up health savings accounts for each citizen from birth, with a government-paid backup when people incur truly significant health needs that are very expensive.  This would save tremendously in administrative expense alone.

That is my list, I encourage each of you to come up with your own and press legislators to do something.  What we have isn’t going to last anyway.  But don’t count our the current generation of Congresspeople to do a thing.

Kevin Roche

Author Kevin Roche

The Healthy Skeptic is a website about the health care system, and is written by Kevin Roche, who has many years of experience working in the health industry through Roche Consulting, LLC. Mr. Roche is available to assist health care companies through consulting arrangements and may be reached at khroche@healthy-skeptic.com.

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