22 January 2007

The Healthy Americans Act - Analysis

Well, since I have jumped off the cliff with the "Medicare for all" explication, I might as well continue the theme and talk about my fave-of-the-day policy fix for the American Health Care Debacle. If you're bored by the whole discussion and want me to get back to posting freak-show medical tales, check back in later this week -- I'm working a couple of shifts and may have something interesting to talk about.

I am comfortable admitting that I am a relative neophyte in the field of health policy analysis. And maybe it is typical of newbies in any field to fall in love too quickly with the first Big Idea which comes across their field of vision, and maybe I have fallen victim to this tendency. So take the forthcoming enthusiasm with a grain of salt.

Senator Wyden of Oregon recently proposed the "Healthy Americans Act." (HAA) (snark: I thought all major bills were required to have either a catchy title or an acronym that spells something cool. "Healthy Americans Act" sounds like a joint resolution that all Americans should eat more vegetables. Geez, you'd think for such an ambitious proposal, they could have found a better title.) I have not read the entire text of the Act. It's quite long (166 pages) and written in dense legal-ese and I was more interested in watching the Bears crush New Orleans. But like any good upper-level executive, I did browse through an Executive Summary generated by the Lewin Group. It turned out to also be long and complicated. But I will attempt to summarize the executive summary for your benefit, only without taking 30 pages and using colorful graphs.

Goals:
This is a sweeping proposal which would dissolve the employer-based health insurance system and replace it with a system of universal coverage, at lesser expense, which includes cost containment mechanisms, increased reimbursement for providers, eliminates Medicaid, preserves patients' rights to choose a plan and doctor, and reserves a role for the private insurance industry. Modest, eh? But I like the "vision thing."

Mechanics:

  • All employers are obligated to terminate their current health plan, if they offer one, and redirect their current health care costs into payroll.
  • Statewide agencies called "Health Help Agencies" (HHAs) are established, which administer the enrollment of beneficiaries into plans, disbursement of premiums, and certification of participating health insurance plans.
  • Insurance companies are invited to develop plans which are community rated (i.e. no underwriting or adverse selection of those with health conditions) and have benefits at least as good as the Federal Employees Health Benefits Program(FEHBP) (the plan used by members of Congress), or better if desired.
  • Consumers may choose among the plans offered in their states. If no plan is chosen, they are randomly enrolled in a low-cost plan.
  • Premiums are collected by the IRS at the time consumers file their federal income tax. New and increased deductions offset any increase in taxable income due to increased payroll (bullet #1). New withholdings are created to spread out the collection of premiums over the course of the year.
  • Premiums are subsidized on a sliding scale for those with incomes below 400% of the federal poverty level. Medicaid is eliminated due to redundancy.
  • Medicare and VA/CHAMPUS programs remain unchanged.

Unlike some compromises which leave nobody satisfied and have something for everybody to hate (see: ArnoldCare ), HAA takes the opposite approach and tries to include a sweetener for every stakeholder in the current system:
Consumers
The big winners. Universal health coverage, guaranteed insurance that is not employer-dependent and can never be taken away. No pre-existing conditions screening. Flexibility and Security. Automatic enrollment and collection of premiums. Discounts for participating in wellness programs.
Employers
Also big winners. The risk of rising health care costs is taken from their shoulders and, in essence, all the extant health insurance plans are changed from defined-benefit to defined-contribution.
Doctors and Hospitals.
Ostensibly reimbursement will increase due to the elimination in care provided to the uninsured and the elimination of low-reimbursed Medicaid patients, all of whom will now be reimbursed at higher commercially insured rates. The multitude of payers ensures competition for providers to joins networks, which should keep reimbursement levels reasonably high (compared to the monopsony power of a single-payer system). Also promises increased reimbursement to Primary Care Providers. Also includes some weak incentives for malpractice reform.
Insurers
Realize cost savings from elimination of underwriting and premium collection. Profit margins will be built in to the system to encourage plans to participate, and well-managed plans will prosper.
State Governments
Benefit from the elimination of Medicaid, a large and escalating drain on most state budgets. Contributions from the states are still required, however, though to a lesser degree.
Taxpayers
The actuarial analysis promises that this plan will reduce overall health care expenditures by almost $1.5 Trillion over a decade. This is done through competition and engaging consumers in the decision-making process. According to the analysis of the non-partisan Lewin Group, this plan achieves near-universal enrollment at no additional cost.

There are some bitter pills to swallow, though most are not deal-breakers.
For consumers -- The FEHBP is something of a high deductible, plan, and is still expensive, so consumers are exposed to the full cost of health care. The theory is that this will sensitize consumers to price, inducing them to reduce unnecessary spending and carefully choose the cheapest plan that works for their needs. This is one of the key elements in the cost containment strategy. Also, if your current employer doesn't offer you health insurance, and you earn more than 400% the federal poverty line, you will have to cover the full cost out of pocket with no increase in pay to offset. If you want to choose a plan which has more generous benefits, the excess cost (above the average plan's cost) will be paid for with post-tax dollars.
For taxpayers -- The health insurance market remains highly fragmented, though some functions are taken over by HHAs, and this plan will not reach the level of efficiency and cost savings associated with a single-payer system.
For insurers -- They will probably fight this more than any other group. They are forced to accept a much higher degree of governmental regulation, community rating of enrollees, and lower profit margins. We'll see Harry and Louise again.

Will it work?
It seems to have a good chance. There are some enviable efficiencies in the plan -- I personally like the idea of dovetailing the premium collection with filing for taxes, and nobody will mourn the death of Medicaid. The claim of universal (or near-universal) coverage seems pretty likely to be fulfilled. Forcing insurers to provide community-rated plans should guarantee the availability of affordable plans. There is portability of plans, and the entry-level plans are still decent coverage. The means-tested subsidies make good sense. The funding appears adequate. The big question is whether the promises of cost savings are exaggerated or unrealistic. I don't have the analytical chops to make a judgment on that one, though the Lewin actuaries make the case that the cost savings are real.

I do not know whether this bill has a chance of becoming law -- certainly the odds are stacked against it. But it is the first proposal for health care reform I am familiar with, which does not seem to contain any lethal flaws. It achieves much of the goals of a single payer system without threatening to impose a socialized healthcare system. It is not perfect, but, more importantly, it is attainable. It has attracted much positive attention from health policy wonks out there. It is more comprehensive, more generous, and less divisive than Arnold's California Health Reform proposal. You can learn more by visiting Wyden's advocacy site, Stand Tall for America. (What is it with this guy and the lame names?) I think it is worthy of qualified support, absent alternative plans. Write your senators today and urge them to support S 334; I already have.

9 comments:

DrWes said...

Might want to check out the WSJ this AM. Interesting opinion piece on "Illegal Health Care." Some of these reforms will be tougher to enact than we expect.

shadowfax said...

Dr Wes,

WSJ is behind a firewall, can you send me the article?

Thx

SF

Anonymous said...

Yes please post the WSJ article if you can. I would like to read it as well.

Kari said...

Hey SF... Thanks for the analysis and plug of STFA. I'm the guy who came up with that lame name, so you can blame me. (Not sure who came up with HAA, though.)

There's a lot of info over at STFA, so I encourage everyone to c'mon over and check it out. Thanks!

Felix Kasza said...

You know, if Microsoft (self-insured, administered by Premera) terminates my health plan and makes me sign up for endless quarreling with something like UHC over my insulin pump supplies, I'll be mightily pissed off. I worked and work hard to get a job with excellent benefits, and I'll thank everyone to keep his or her fingers out of contracts between two non-governmental entities (MS and I, in this case).

Mother Jones RN said...

I don't think the bill has a chance of passing while the Dems hold power in the House. The bill is DOA.


MJ

shadowfax said...

MJ -- It was introduced by a democrat.

More importantly, it doesn't have a chance while there is a one-vote majority in the senate, seven or eight competing plans, and a President who thinks tax cuts are the solution to every policy problem.

But it's important to identify the promising proposals and get behind them early to build momentum for 2008.

Kari -- did you go to Lake Oswego High School by any chance?

Anonymous said...

Hey Doc ShadowFax,

How were your shifts? Here's hoping for some medical posts soon!

-a pre-med reader

heromd said...

Hey Shadowfax
That was an awesome summary. I posted it to my blog as well, and I'm definitely going to write more about it. As for when major healthcare reform will take place in the United States, I'd give it a few years. I think things will start to boil over fiscally by 2008 and that will start the ball rolling. All it will take is for a major car manufacturer to default on their health plans.