Tuesday, January 19, 2010

The Conservative Option

With the election in Massachusetts complete, I've realized that I've waited in vain for a conservative, any conservative, to offer a reasonable option on health care reform (or, more properly, health insurance reform). Deciding to apply my systems engineering experience to the problem of health care provisioning, I've come up with what I propose as a truly conservative and workable health care reform proposal. It's simple, makes the minimum changes to the existing system, and will serve to lower costs for all. It even has a simple title: "Universal Secondary Health Insurance."

Here's how it will work: the US government will establish a fund that will provide secondary health insurance to everyone. That's right, the coverage is universal with no one left out. This secondary health insurance initially pays 20% of all your qualified out-of-pocket health care expenses. (There's plenty of law about qualified health care expenses, so I won't try to define it.) That's no great shakes by itself, except that it lowers costs for everyone. Where it gets really helpful is that once you have spent 20% of your adjusted gross income on health expenses, the fund now starts paying 80% of your qualified expenses.

This is great in several ways. First, it helps you because you are almost assured not to go bankrupt paying for health care. Whatever health problems are going on in your life, those costs are mostly covered once you've spent 20% of your income (which, by the way, is about what most middle class folks spend, anyway.) Second, it helps the insurance companies, because they know that their risks are limited. The insurance companies also aren't going to be stuck with a huge bill for a single person's illness. Third, it helps the poor because it provides more coverage to those who need it most; the high-rate coverage kicks in earlier the less money you make.

How will we pay for this fund? The same way that your bank deposits are insured by the FDIC; the same way that rural areas are assured of telephone service; by a fee imposed upon the service providers. In this case, the health insurance companies will all have to contribute to this fund, and everyone will benefit. Yes, that raises the cost of health insurance, but you and I are already paying these costs in the current system. Our hospital bills are higher, our insurance rates are higher, our ambulance fees are higher, because of all the people who currently use these services without paying for them. This approach ensures that these higher costs are covered by normal health care spending, and not disproportionately by us when we have an emergency or serious health problem. By the way, the money you spend buying health insurance will be included under the 20% of income cap. If you buy health insurance for 20% of your AGI, then the 80% coverage of further out-of-pocket expenses kicks in immediately.

How do we make this system fair for everyone, including the insurance companies? That's where the universal mandate comes in. Everyone benefits from this fund, so everyone has to pay into it. This is better than having Uncle Sam pay for the fund, though, because it's not a tax. Congress doesn't get a chance to divert your health care funds to pay for public television or the V-22 Osprey. You are paying for health care, and it goes into a fund that pays for health care only.

Now, this universal mandate is a big boon to the insurance companies, so we have to put some additional constraints on them. Some of these features are the good parts of the existing legislation. "Universal Insurability" is one feature. You can't be denied coverage. No lifetime maximums is another. If we have to buy insurance, then the insurance companies have to treat us with justice.

There's a couple of other issues of justice that we need to deal with in the conservative option. First, retain the Hyde amendment. Abortion is not health care, it's the termination of a human person for the convenience of another, and the government shouldn't be paying for it. Neither will the secondary insurance fund. Neither can you count coverage of abortion from an insurance company as part of your out-of-pocket expenses.

Second, the fund needs to provide coverage for illegal aliens. I know there are a lot of conservatives who will balk at this, but the truth is that you are already paying for their trips to the emergency room by higher fees. By making the illegal alien eligible, he also has to buy health insurance and contribute (indirectly) to the fund. However, an illegal immigrant doesn't have a legitimate adjusted gross income, so he never moves to the 80% coverage bracket. His coverage stays at 20%.

Third, subsume Medicaid. I'm not proposing anyone touch Medicare, which is the current insurance for older Americans. Medicaid is the program that provides supplemental insurance coverage for the poor. Instead, if your AGI is below 150% of the poverty level, you start out at the 80% secondary coverage. This gets interpolated back to the 20% coverage when your AGI approaches 400% of the poverty level. This has the effect of actually lowering taxes, since we no longer have the payroll tax into the Medicaid fund.

There are a couple of additional steps that health insurance reform legislation should take to "bend the curve" of cost growth. First, eliminate direct-to-consumer advertising of prescription drugs. You know all those ads on TV for depression medicines? You and I are paying for those ads when we buy our own drugs. If the drug makers have the science to back up their claims, let them make those claims to doctors, not tax my wallet to advertise them on TV.

Finally, phase out over a few years the tax subsidy to employers for providing health insurance. There's no reason to subsidize insurance companies through a tax break, they're already making good money. As the tax subsidy to employers phases out, more of us will be buying insurance ourselves, instead of having our employers do it for us. This has the effect of putting power back in the hands of consumers. Right now, insurance companies don't answer to us, because we aren't paying them directly! They answer to our employers, who are paying them -- paying them with what should be our money! As any conservative knows, whoever pays the piper calls the tune. We want insurance companies who are responsive to our needs. To get that, we need to be the ones paying them. Remember, however, that what you pay to the insurance companies is included in the 20% AGI cap. That's where your tax break stays in place.

This is what real health reform looks like. It covers everyone. It keeps you from losing your life savings because of an accident or illness. It provides justice for the poor, and it puts the power back in the hands of consumers. It's well past time for a politician to stand up and put a true conservative plan on the table. Let this be the answer to true health insurance reform.



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