Healthcare for America

As I see it, there are essentially four constituencies in the healthcare debate.

• Consumers who don't want to go broke trying to stay healthy, and would like more freedom to not have their ability to pay for life saving medications be tied to their job.

• Healthcare providers who want to make a good living, and be free to treat their patients with a minimum of interference from the government.

• Insurance companies that want to want to make money by not insuring people that might actually cost them money.

• The government, that wants to get all this done without bankrupting the country, and keeping as many of the above 3 groups happy as they can.

Let's get the obvious off the table. There is no win-win-win-win solution here. Somebody has to give up something in order to make healthcare work in this country. The question becomes which is more moral, that consumers die from lack of access to healthcare, or that a BC/BS CEO can only afford a new Porsche every other year, instead of every year? Is it more moral that women die trying to get back alley abortions, or that Christians pay an extra 32 cents per month each so that abortion is available to woman that want them? Is is more moral that we all pay an extra $40 a month so that diabetics and cancer survivors can have decent insurance, or should we just say fuck you to the people that didn't win the genetic lottery? (Number are all made up - don't know the real numbers, and it doesn't matter.)

So here is my plan.

Everybody is community rated, just like we we do today. Diabetics and cancer patients don't pay more just because of their DNA. However, the government becomes a re-insurer that takes over at some level of annual medical expenses. Let's say the number is $25K. As soon as an individual's medical expenses exceed that in a calendar year the insurance company is eligible for 100% reimbursement from the government for those expenses in excess of $25K. So the insurance company's maximum exposure in any given year for any individual is $25K. That lowers risk for the insurance company, and without fear of shelling out millions in long term medical care they can lower rates for everybody. Yes, we'll probably need regulation to make sure that happens, otherwise health care executives will be sleeping in piles of money. The ACA rule about 85% of insurance revenues going towards patient expenses seems like a reasonable rule to maintain, with whatever tweaks are necessary.

The individual mandate can then go away. If you want to gamble that you won't have significant health care expenses go for it. You are on the hook for the first $25K out of pocket, and since we are paying for the reinsurance with tax dollars you are already paying for that insurance. If you get cancer the hospital can garnish your wages for the $25k you own them if you don't pay, and the taxpayers pick up the rest. If you have $25K in savings and want to self-insure for the level 1 insurance that's fine too. It's your money.

The average health care expenditure per capita in 2013 was just under $10K. A small share of people accounts for a significant share of expenses in any year. In 2009, almost half of all health care spending was used to treat just 5% of the population. So by socializing the health care costs of the chronically ill, and limiting insurance company risk to a fixed amount per person, we should be able to produce a system that leaves consumers free to buy whatever plan they want, or no plan at all.

So what are the problems with my plan? Well, the government will have to decide what is covered and what isn't at the reinsurance level. Purely elective stuff should be out. If you want DD boobs you can do that on your own dime. Elective laser surgery for your eyes or elective plastic surgery is out. Since it only matters if the expenses are above $25K hopefully a lot of the petty crap won't even come into play. In theory, with their risk capped at $25K person, insurance companies might be a lot more innovative about the plans they come up, and find ways to better serve the market.

Another argument will that this does not really lower health care costs. The way to lower costs is to empower consumers to make decisions that keep them healthier. Like making sure diabetics can afford insulin so that they don't end up in the ER in a high blood sugar coma. Or making sure every woman that wants birth control can get it, cheaply, so that they don't have an unplanned $25K birth to pay for. Or making abortion available, affordable, and safe for women that aren't in a position to raise a child. The cold hard truth is that a lot of big expensive expenses are not anything we can do anything about, yet. Beating cancer is expensive, but coming together as a society to cover those costs is more moral than letting people die.

Another argument that I would expect is that this isn't a free market. If you want free market healthcare I hear Somolia's healthcare system is free from government interference, primarily due to a lack of a functioning government. Let us know how that works out for you, if you survive it.

So that is it. Socialize the excessive costs of chronic diseases or acute care, and let a regulated market function below the reinsurance levels. The insurers should be happy with the reduction in risk, although the trade -off for them is they have to cover everybody that wants insurance at very reasonable rate. If we need to regulate profits to do that, so be it. It hasn't killed the utility companies yet. Consumers should get more choice in plans, no mandate, and no worries about health costs bankrupting them. Premiums could be more like car insurance, and maybe we can wean ourselves off employer subsidized insurance in the process. I'm not sure how providers will feel about this. As a practical matter, I imagine the reinsurance would just be rolled into Medicaid as the infrastructure to deal with this is already there. So that would be more government for them, and probably not a good thing from their POV. However, as I said, there is no win-win-win-win here. And government? If consumers (voters) are happy they'll be happy, or back in the private sector if they don't get with the program.