Last week U.S. District Judge Reed O’Connor declared that without the “tax” (disposed of by the Trump administration) the Affordable Care Act, i.e., Obamacare, is unconstitutional. While there is much speculation on how this will play out, it means that all or at least part of the law will be struck down.
This is NOT some trivial suit from some backwater court; this suit was brought by Republican Officials from 20 states led by Texas Attorney General Ken Paxton. This has some real teeth to it.
Anyone who lived through the last election knows there is little chance that Congress will come together to pass anything regarding healthcare. So how do we proceed?
I believe Trump could fix this through executive action. By that I mean he could pass measures to send prices downward and make America MUCH healthier.
What would it take? A single principle is involved here.
“Prices go down when consumers can buy goods and services in a competitive market based on price and quality.”
Sounds simple right? But NO!
In the current environment, insurance companies and employers separate consumers from the services they buy. You see the result; health costs are spiraling out of control. The patients don’t like it, but then again the patients don’t see the costs directly, they only see insurance rates double every five years. Doctors and insurance companies love it, and have no incentives for change.
How to fix this
1. Let’s get the consumer closer to the product. A brilliant move from the Trump administration earlier this year, allows small companies to reimburse employees for healthcare that they buy themselves. Hmmm, besides making small companies more competitive, this gets the employer out of the loop right? Once step closer to direct interaction between the consumer and the service provider.
But let’s go a bit further, let’s modify the existing Health Savings Account process, such that business can contribute to this and let employees buy their own insurance from this tax-free account. This means millions of individuals are making choices instead of much fewer employers. In other words, companies should not buy insurance, companies should support individuals in buying their own.
Now the cute part. We can even incentivize good management of these funds by saying if all of your health insurance and deductibles are covered, maybe you can use the remainder of these tax-free funds for your health club, or perhaps an occasional massage. Get the picture? That’s personal management of your own health care — EVERY doctor and psychologist knows that more attention means better health. If you want a GUARANTEED improvement in America’s health, stop trying to take care of all of these people, and enable them to take care of themselves.
2. Let’s separate “insurance” from “maintenance.“ Insurance is a statistical process that protects you against health problems that are not likely to happen. Maintenance is stuff like checkups, flu shots, stitches for kids, etc., that you know are going to happen, and you have to pay for them no matter what. For some reason, people believe that if their insurance company foots the bill that these are free services. Nothing could be further from the truth.
Insurance companies charge a 40% premium on services. Do you really want to pay for that? If you want a time payment plan for maintenance, why not do this directly with your doctor? It would be cheaper and you could shop around for the best deal. In a free enterprise system, this means prices go down. Buy insurance separately as an insurance product.
Insurance companies love to bundle because it increases their revenue. The more expensive the services, the more they make. So there is never an incentive for prices to go down.
3. Let’s take some of the complexity out of it. Suppose the U.S. Government were to make a “template” of good insurance plan types, the kind that any person would feel secure in having. We don’t wish to force these plans on insurance companies, but we should require them to provide a document that states, clearly, the difference between their plan and the closest USG insurance template.
This provides three nice benefits. First, the USG absorbs the complexity. Since you are only shopping based on differences, knowing that you are getting the right coverage becomes a lot simpler. It’s no longer a mass of uncertainty and gobbledygook that is impossible to comprehend, it’s now a trusted base plan vetted by the USG, plus a short list of differences.
Second, this allows insurance companies to start removing coverage that is not needed. For example, if you are not a traveler and don’t need to be insured against the Tibetan Croup or Somalian Malaria, then maybe your insurance can be cheaper.
Third, since the insurance company has to compare with the USG template, anything not in the exceptions list defaults to the USG template. That means litigation becomes much simpler and cheaper since the bulk of the legal interpretation is on the USG template which is in common to most plans, rather than on a squirrely insurance contract. Think how many lawsuits will not happen or be resolved with clear and basic arguments. How much money will THAT save!
There are a great many other things that would obviously help bring prices down, for example, the ability to buy insurance across state lines, or “X-prize” incentives for technologies that reduce health costs, etc. But the structure has to be right before pressure on costs is downward, instead of upward.