Thursday, December 16, 2010

Bipartisan Health Care

With the individual mandate possibly in doubt (depending on Anthony Kennedy's mood at the moment) some are speculating that PPACA will need to be heavily modified. Unfortunately, I don't think that the health care bill will be significantly changed anytime soon. I think Republicans would rather have a bad and unpopular policy to campaign against in 2012 than actually do something to fix it. This is foolish because while I do think PPACA is bad policy it is not beyond repair. Additionally, irrrespective of whether or not it is improved upon, I don't think it will be unpopular for long (people love spending other people's money). Anyhow, in the event that Republicans decided that they would actually like to make some good policy, Donald Taylor has proposed something that they might find somewhat congenial. The meat of his policy would be:

1. for medicare to offer catastrophic coverage to every individual and family (Taylor says caps of $10k and $15k respectively, I wonder if he is referring to deductibles)

2. to offer premium support (who qualifies is undefined) for insurance to cover the gap

3. Employer tax exclusion would be eliminated to fund the above.

The first sticking point I see is I doubt republicans would be keen on having medicare for everyone even if it were a catastrophic program. I could live with this. The second sticking point that I envision is the relatively high deductible before medicare kicks in. I don't actually have a problem with it, this would limit the government's exposure in the outyears significantly, however, it sort of shocks the eyes when you see it. There is something of a lock-in effect that makes even a deductible as low as $2500 shocking to people. People have been conditioned to think of first dollar coverage as being free as it is provided by their employer (even though it as at the expense of wages).

Mr. Taylor suggests premium support for "gap insurance". I am of two minds on this. If you go back to the Rand study it appears that people actually manage to be competent health care consumers, with the exception of lower income folks (specifically those with chronic conditions). They are more likely to forgo care if they don't have first dollar coverage (even if their income is supplemented to offset the difference). In the Rand experiment, my understanding is that people were randomly assigned to different health plans but they were provided with side payments to equalize their economic circumstances. So for instance, let's say I had a gold plated plan that normally cost $10k with no copay and no coninsurance and no deductible and was assigned to a plan that cost $2.5k and had a $5k deductible. In the Rand study I would have been provided the cash to cover the deductible and possibly more. The central finding was that people spent considerably less the more coinsurance was involved while having a negligible impact on health outcomes. As I said, the real caveat was for poor folks with chronic conditions such as hypertension. This would indicate that providing first dollar coverage to the very poor would ultimately benefit health outcomes and should be considered preferable to a simple cash benefit. My question is would first dollar coverage also be preferable to something along a health savings account or MediSave (a la Signapore) where unlike cash your only option is to spend the money on health care? If the answer is yes, then so be it. If the answer is no then I think the some sort of either tax incentivized savings regimen (like an HSA) or more preferably a MediSave account (forced savings accounts used in Signapore) would be more preferable as a straight cash transaction involves less overhead and forces the consumer to to be price conscious and evaluate the tradeoffs involved in a given treatment.

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