Lane 3

Insurance Reform Ideas

Sounds like I missed a spirited discussion on health care reform at this year’s Barcamp Atlanta. Here is a highlight of what I would have added:

1. Forget Democrat vs Republican. Since Medicare was enacted in 1965, politicians of all stripes have spent funds meant to cover tomorrow’s Medicare obligations on today’s “priorities.” Whether the money was spent on butter by Democrats or on guns by Republicans is irrelevant. It’s gone. Get over it.




2. Over the next 20 years 33 million baby boomers will enter the Medicare system and suck what marrow there is from its bones.




3. Medicare has an unfunded liability of $32 trillion meaning we need, and don’t have, that amount of money to pay for future Medicare claims.




4. Yes, Virginia, Medicare is bankrupt.




5. So, forget the uninsured. They are the excuse not the reason for health care reform. Without some other source politicians will have to take money from the special interests who keep them in office and use it to honor their obligation to Medicare recipients.

Separate in your mind health care reform into two parts:

Part I – Funding Medicare. If you were to read the news and see examples of the government making wise spending choices; tightening the belt as normal families do when money is scarce then maybe a case could be made for drastic action. But that’s not happening now. Drunk meet sailor.

The simplistic, even call it idealistic, answer to funding Medicare is for the government to reset its priorities and honor its commitments. Quit spending money on _________________ (enter your list of non-essential projects here).

Part II – Insurance Reform. Over the past year or so when politicians talked about “health care reform” everyday Americans understood them to mean “insurance reform” – new regulations to address the stories of uninsured people, expensive coverage, people who were denied insurance because of pre-existing conditions, rescissions, etc.

Here is a list of insurance reforms I would consider. Note that there are plenty of smart people out there, so I’d like to hear some constructive criticism of these ideas – and would welcome additional ones too.

• Guarantee issue individual health insurance. In a nutshell, insurers would have to take everyone no matter what medical conditions may exist. Insurers currently do this for group business. It is not practical, however, to have a person opt-out of insurance, wait until they get sick and then sign up for a policy as they enter the emergency room. There have to be some protections for insurers:




• Include an annual open enrollment period. A person could only enroll once a year. Maybe make it their month of birth. If you choose not to enroll you are uninsured until the next year’s open enrollment period. This reduces the opportunities of adverse selection from twelve months to one.




• Include a pre-existing condition provision that is offset by prior creditable coverage. A pre-existing condition would be one that was diagnosed or treated in the previous twelve months. After the policy has been in force for twelve months a claim could not be denied because it was pre-existing. So, yes, you will have stories of people denied coverage due to a pre-existing condition, but these will be reduced over time as the policies mature. This is currently done with group insurance.




• Make individual premiums tax deductible. If a person is covered under a group insurance plan they can pay for premiums with pre-tax dollars. This reduces the effective cost of $100 in premiums to maybe $65. Make this tax benefit available to people who purchase individual policies as well. This would go a long way in making coverage more affordable and accessible to many people.




• Allow people to buy policies from insurers in other states. In effect, this will cause states to make their policies more affordable by removing expensive state mandated benefits.




• Make Health Savings Account plans a more robust option. Especially for young people, HSA plans are an attractive alternative to traditional insurance. Imagine if such a plan was available in 1965. Many of the baby boomers who are about to hit Medicare would have a nice nest egg ready to address their upcoming medical expenses.




• Tort reform. There are plenty of fresh ideas out there that could address the high cost of the practice of defensive medicine while still preserving patient rights.

As I write this I hear reports that the Senate is about to unveil a measure with stiffer penalties on employers and a government-run public option. This public option is the proverbial camel’s nose to a single-payer system. We do live in interesting times, no? What are your thoughts?