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Health Care Reform II

I.         Insurance reform

A.       It is desirable to create a number of broad-based insurance groups for which there are minimal selection issues.

1.      Each state could contract with insurance companies to provide insurance to people born within its borders.

a.        The idea is to create natural groups that cannot be modified.

2.      This could be modified to be the state of the mother’s permanent address.

a.        One would do this to handle the minor problem of babies born on vacations

b.       This might address the minor problem of mothers selecting states for giving birth.

i.      This is only a real issue if they anticipate that the baby will have health problems.

ii.      There is no problem if mothers choose a state to avoid the future administrative headaches of dealing with multiple states.

3.      At this point, it seems that the child’s birth state is the optimal one.

i.       Alternatives include the last 2 digits of a social security number and blood type.

4.      Clearly, families with several children, each born in a different state, will have increased difficulties in keeping track.

5.      Those who were not born in a state would be able to buy policies from Washington, D. C.

6.      Focusing on state of birth makes the insurance portable.

a.        If you were born in Ohio but move to Kentucky, you remain able to buy Ohio-based insurance.

b.       Your insurance policy would be sold to you by a private insurance company and not by the State of Ohio.

i.      The State of Ohio would design a menu of policies and then get bids from various insurance companies for those policies.

ii.      Insurance consumers who were born in Ohio would choose policies from that menu.

c.        The market power of states to get good rates would be profound.

i.      This is an understatement.

d.       If you were born in Ohio but purchase health care services in Kentucky, your benefit schedule would be based on what Ohio’s policy menu covers.  This outcome would hold whether the insured individual has moved to Kentucky, or lives in Ohio but obtains care at a nearby facility across the bridge in Kentucky.

i.      Medical service providers could charge whatever they wish but insurance would pay the coverage ratio multiplied by the provider’s scheduled cost.

ii.      Any amount above that would be the consumer’s co-pay

iii.      Of course, medical service providers would feel some market pressure to limit their charges.

iv.      They might very well engage in price discrimination, charging people born in different states different prices, perhaps based on scheduled rates in states of origin.

7.      Pre-existing conditions would not be a factor in insurability.

a.        Simply put, if you were born in a state, you can be a member of the state’s insurance group.

b.       Members of a state insurance group would be able to purchase any policy from that state’s menu.

c.        The members would be able to change policies once a year.

i.      There would have to be a coverage penalty associated with changing policies.

ii.      Perhaps the penalty would only be applied when going from a policy with smaller benefits to one with greater benefits.

iii.      Otherwise, people would enter the system with a low benefits policy and then switch after a health problem emerges.

8.      This would end the significance of health care insurance directly provided by employers.

a.        Anyone should be able to contribute to the insurance of anyone else at any time.

i.      Employers would be able to contribute to employees’ health care insurance premiums and deduct these expenses from income.

ii.      Parents would be able to contribute to the insurance premiums of their children or other family members and deduct this cost from their income.

iii.      Friends or relatives could do the same

iv.      Charitable organizations would be able to pay individuals’ premiums.

b.       The insured could, of course, pay their own insurance premiums and deduct the amount from their income for tax purposes.

i.      This feature would reduce the attractiveness to employers of paying for health care instead of simply paying a correspondingly higher wage and letting the individual buy health care himself.

ii.      It is assumed that there would be a medical deduction separate from current itemization.

c.        If an individual loses his or her job, he or she would not lose health insurance

i.      They would not face the high COBRA prices for temporary insurance coverage.

ii.      Their next employer would not really care about pre-existing conditions.

iii.      They would simply keep their existing policy and pay premiums from contributions from their next employer or whatever.

9.      Most likely, states would have policies in their menu with various features.

a.        Some may include drug coverage, dental, and eye care in their menu of available policies.

i.      It should be recognized that “insurance” for regular dental checkups and cleaning, annual physical exams, or eye tests is not really insurance at all. Instead, it is prepaid care.

ii.      Consumers of health care insurance should be informed that it is not cost effective to engage in prepaid care.

iii.      Consumers should use a pay-as-you-go system for regular and certain health care services and not send their funds to a third party (an insurance company) for processing.

b.       States would also include stripped-down insurance products that would be quite inexpensive.

i.      These stripped-down products might be high-deductible, catastrophic coverage.

ii.      Some policies could have a stop-loss provision. For example, beyond $5,000 spent in one year, all expenses could be covered, or all scheduled expenses could be covered.

iii.      All scheduled expenses here means those expenses approved by the state schedule of expenses for procedures.

B.       A state’s menu could allow coverage ranging from something like 50% to something like 90% of scheduled costs (with 100% coverage once any stop-loss limit has been met).

1.      If enrolled at birth, a child’s coverage might be the maximum in their birth state.

2.      It could stay at this level as long as their coverage is kept up-to-date, depending on the rules of that state

a.        with the existing policy or a different policy chosen during the annual renewal option period.

b.       Choosing a higher benefit plan should probably trigger an initial drop in coverage

i.      Otherwise, people would switch after they discover a health problem

ii.      Thereby destroying the value of the group by clustering people with health problems in a high benefit plan

3.      However, if a policy in effect is allowed to lapse at any time, upon reinstatement of that policy or the acquisition of a new policy the coverage would drop to the state’s minimum, and then it would rise again to the maximum only through steady increases over 5 or 10 years

a.        This provision would encourage all citizens to keep their coverage intact, such that the insured pool would always remain as large and diverse as possible.

C.       Coverage would be based on a schedule of benefits that each state would generate for participating insurers to follow.

D.       Medical service providers that kept their prices low would attract business from people across their own states, and also from other nearby (or even more distant) states, because scheduled benefits based on typical medical costs in the various states would allow a patient to obtain care from an efficient provider with low accompanying co-pays or deductibles.

E.        Many individuals would shop for procedures in other states and countries

1.      If the cost of these procedures is less than their coverage ratio multiplied by their state’s scheduled cost, then their procedure is completely covered by insurance

2.      That is, the co-pay could be as low as zero if the provider’s price were sufficiently low.   A state could prohibit the insured from actually getting a refund for care from an extremely low-priced provider, to prevent the most aggressive venue shopping, the provision of services by unqualified providers, or the incentive to obtain unneeded services (or merely to say that services have been provided) by unscrupulous providers.

3.      States that engage in tort reform would lower costs and attract consumers of health care services

F.        Electronic health care records will be maintained by a consortium of the selected insurance companies and would provide such records to their insurance companies and to health care professionals.

1.      With any such system, there must be a way for patients to monitor the content and to post any disagreements with that content.

II.        Cost reform

A.       States in which treatment occurs and in which medical professionals are credentialed would be responsible for court awards covering delayed diagnosis or mismanagement as well as any punitive awards by courts in the state.

1.      This feature would encourage states to pursue tort reform.

2.      It would also encourage states to weed out the problem professionals through their regulatory processes.

3.      The states could self-insure or buy malpractice insurance.

B.       Cost may become lower as doctors reduce the practice of defensive medicine.

C.       If costs are to be held in check while a great many more individuals have access to regular health care (as opposed to just emergency room care), then new resources will need to be brought to bear.

1.      Information technology will be an important element.

2.      Specialists will inevitably be contacted much more frequently by computer.

3.      States would set the parameters of practice, allowing medical practitioners other than doctors to perform routine or otherwise simple procedures with greater independence.

a.        Of course, apparently routine health problems may occasionally turn out not to be routine. As a result, contacts with practitioners who are not doctors should be limited.

i.      For example, it might be limited to a single contact for any given physical complaint. Any subsequent contact would be with a medical doctor.

ii.       It would naturally be limited in terms of what medications can be prescribed and under what circumstances they may be prescribed.

b.       Pharmacies may be candidates for increased services.

i.      For example, vaccinations are likely candidates for pharmacies.

ii.      Taking blood pressure, pulse, weight and height, drawing blood and sending it to an independent lab may be another arena for pharmacies.

1.       Results could be reviewed by an online medical service that employs doctors.

i.      One might imagine an inexpensive annual checkup that includes a visit to a pharmacy to acquire data, the data being sent to and reviewed by an online medical service, and a written report sent to the consumer.

ii.      Independent pharmacists, nurses, nurse practitioners, and physician assistants (etc.) will need the state malpractice insurance if this is to become a reality.

D.       There should be a recognition that health care services are provided internationally.

1.      There are private clinics around the world that are providing amazingly good care at reasonable cost

a.        There are clinics that specialize in all sorts of procedures

b.       There are finder services that match consumers with providers . . . worldwide.

E.        At the point that medical professionals get written permission from the patient for procedures, they should reveal the full price to the patient.

1.      Pricing should become transparent.

2.      Medical professionals could advertise that they accept scheduled payments in the state in which they practice.

F.        Regulations regarding the development of new drugs and modalities of treatment must be tempered.

1.      Approval must be speeded up and requirements must be diminished.

a.        In some cases, this may mean that more errors will be made.

b.       Consumers (patients) must be fully informed of the extra risk associated with new treatments.

2.      At the same time, fraud in testing that is discovered later should be severely punished.

a.        It should not be just the company that is punished; the individuals responsible should also be punished.

b.       This will increase trust in the process.

III.      Implications for alternative systems

A.       Why does Medicare exist?

1.      Because insurance has not been portable into old age and retirement.

2.      But this proposal is for portable insurance.

3.      So Medicare need not exist at all.

a.        The government need not shut down Medicare

b.       Market forces would make it irrelevant

B.       Why do personal health saving accounts exist?

1.      They exist because of the difficulty the self-employed and others have in obtaining health care insurance.

2.      They exist to offer flexibility to those who would substitute their judgment for those of an insurance company regarding what expenditures should be covered.

3.      An individual might maintain a personal health savings account for paying deductibles.

a.        Particularly applicable for those who would choose low-cost policies that provide genuine insurance, rather than pre-paid care

b.       One might anticipate that personal health savings account would have tax advantages

IV.      Getting started

A.       To get started a state would design a menu of policies

B.       Create a schedule of prices for various procedures

1.      The schedule relates to coverage and not what providers charge.

C.       Get bids from acceptable insurance companies

D.       Announce winners and sign contracts

1.      The contracts allow the companies to represent their products as sponsored by the state

2.      The contracts require the companies to contribute data and funds to the electronic data base consortium

3.      The contracts require the companies to offer specific insurance policies to individuals born in a state at the agreed price.

E.        Explore carrying malpractice insurance for their credentialed medical professionals

F.        Explore tort reform

G.       Explore allowing greater independence for nurses etc.

H.       Explore new IT modalities of medical services

1.      Perhaps it would be best to start with the annual checkup

a.        Develop an app that would elicit history and any current complaints

b.       Find a provider that would draw blood, take key digital photographs, and sound files

i.      This could possibly extend to X-rays and sonograms

c.        Find doctors who would review the lab results as well as the various digital files.

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