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What should we do instead of the Obama health reform bill?
A lot of people think you have no right to criticize a bill unless you propose a better bill. I don't agree (if the aforementioned bill is bad on net), but in any case I will give this a try. These are not my first best reforms or even my second best reforms. They're my "attempt to work with some of the same moving pieces which are currently on the table" set of reforms. I would trade away the Obama bill for these in a heart beat. Keep in mind people, with a "no insurance" penalty of only $750, the current bill isn't going to work (and that's ignoring the massive implicit marginal tax rates on many individuals and families, or the "crowding out" of current low-reimbursement-rate Medicaid patients), so we do need to look for alternatives.
Here goes:
1. Construct a path for federalizing Medicaid and put it on a sounder financial footing; call that the "second stimulus" while you're at it. It's better and more incentive-compatible than bailing out state governments directly and the program never should have been done at the state level in the first place.
2. Take some of the money spent on subsidizing the mandate and put it in Medicaid, to produce a greater net increase in Medicaid than the current bill will do, while still saving money on net. Do you people like the idea of a public plan? We already have one!
2b. Make any "Medicare to Medicaid" $$ trade-offs you can, while recognizing this may end up being zero for political reasons.
3. Boost subsidies to medical R&D by more than the Obama plan will do. Establish lucrative prizes for major breakthroughs and if need be consider patent auctions to liberate beneficial ideas from P > MC.
4. Make an all-out attempt to limit deaths by hospital infection and the simple failure of doctors to wash their hands and perform other medically obvious procedures.
5. Make an all-out attempt, working with state and local governments (recall, since the Feds are picking up the Medicaid tab they have temporary leverage here), to ease the spread of low-cost, walk-in health care clinics, run on a WalMart sort of basis. Stepping into the realm of the less feasible, weaken medical licensing and greatly expand the roles of nurses, paramedics, and pharmacists.
6. Make an all-out attempt, comparable to the moon landing effort if need be, to introduce price transparency for medical services. This can be done.
7. Preserve current HSAs. The Obama plan will tank them, yet HSAs, while sometimes overrated, do boost spending discipline. They also keep open some path of getting to the Singapore system in the future.
8. Invest more in pandemic preparation. By now it should be obvious how critical this is. It's fine to say "Obama is already working on this issue" but the fiscal constraint apparently binds and at the margin this should get more attention than jerry rigging all the subsidies and mandates and the like.
9. Establish the principle that future extensions of coverage, as done through government, will be for catastrophic care only.
10. Enforce current laws against fraudulent rescission. If these cases are so clear cut and so obviously in the wrong, let's act on it. We can strengthen the legal penalties if need be.
11. Realize that you cannot tack "universal coverage" (which by the way it isn't) onto the current sprawling mess of a system, so look for all other means of saving lives in other, more cost-effective ways. If you wish, as a kind of default position, opt for universal coverage if the elderly agree to give up Medicare, moving us to a version of the Swiss system and a truly unified method of coverage. But don't bet on that ever happening.
Separate issues:
12. If you can tax health insurance benefits and cut a Pareto-improving deal overall, fine, but I am considering this to be too politically utopian and it's not clear what the rest of that deal looks like. The original tax break makes no economic sense but you don't want to end up with a big tax increase and a lot more people on the public books with little in return.
13. If the current bill were voted down, you can imagine some version of the above happening, although not necessarily all at once in one big bill.
14. Commission a study of how much the Obama plan is spending per QALY saved. I agree that more health insurance saves lives, but a) the study should adjust appropriately for the superior demographics of those who hold or buy insurance, and b) the study should adjust for the income that would be lost through mandates and the safety that income would purchase. I worry greatly that we have never, ever seen this number presented and that if we did it would not be pretty. In any case, do the study, scream the number from the rooftops, and reread points 1-11. Enact.
That's my recipe. It's better than what we are doing now. You don't have to adhere to any extreme form of economistic or free market ideology to buy it. It might even be politically easier than the current path, as it "sounds less socialistic."
Posted by Tyler Cowen on November 17, 2009 at 07:19 AM in Medicine | Permalink
Comments
What about expanding Medicaid to cover all catastrophic care? What would that do?
Posted by: Neal at Nov 17, 2009 7:31:32 AM
7. You really don't need to hedge. Maybe you've seen things I haven't but HSAs are rarely mentioned at all, usually by me. HSAs are only overrated in that the reformers expect them to perform the same contradictory miracles ("increase demand to reduce price while improving quality!" for example) that their ideas will also fail to deliver.
Posted by: Andrew at Nov 17, 2009 7:31:52 AM
Allow cross state sale and purchase of medical insurance.
Posted by: Paul H. Rubin at Nov 17, 2009 7:51:20 AM
Compared to the alternatives I absolutely love my HSA. How is Obama's plan going to "tank" them? I searched the text of the House bill and can't find any evidence of that.
Posted by: David at Nov 17, 2009 8:04:23 AM
10. One could end fraudulent rescission by requiring a "caveat emptor" approach to preexisting conditions. I do imagine insurers would require more comprehensive tests before granting coverage, though.
Posted by: WPH at Nov 17, 2009 8:08:23 AM
David: My interpretation of how HSAs get tanked - like MassCare, they won't satisfy the minimum requirements for coverage specified in the bill which makes your HSA illegal once any little bit of your plan changes.
Posted by: Jody at Nov 17, 2009 8:17:58 AM
I don't believe any current proposals deal seriously with the cost issue. At best they include demonstrations or pilot projects to experiment with different payment systems. We'll be very lucky if any of those pan out.
I'm not seeing anything in 1-14 above that addresses this either. So my list would include a 15th item: pay providers for cost efficient care. Now, what the heck does that mean?
Posted by: The Incidental Economist at Nov 17, 2009 8:20:06 AM
TIE: 5,6,7,9 address costs.
Posted by: Jody at Nov 17, 2009 8:26:02 AM
Well its now clear that you're a goddamn pinko.
Posted by: yoyo at Nov 17, 2009 8:26:51 AM
The weaken medical licensing part of your plan is dumb since physician salaries have stayed constant for the last decade, it would make no sense to weaken quality control and risk lives in order to deal with something that is not an actual cost driver in the system. In addition, empowering nurses, etc. to do more on the whole will increase costs since with less knowledge/more liability, NPs, etc. typically order even more tests and refer to expensive specialists to greater degrees thus obviating any supposed labor cost savings...
Posted by: v at Nov 17, 2009 8:29:37 AM
On point #3, this is irrelevant if the government decides to work within a "comparative effectiveness" framework or instigate international reference pricing, then further R&D subsidies are meaningless. Pharmaceutical companies are producing high cost/high benefit drugs that don't necessarily fit into the CER mold. Why produce new cancer drugs if the government won't fund them once they're produced?
Posted by: Ryan at Nov 17, 2009 8:32:53 AM
This post should earn a Sir Charles Trevelyan prize (see The Great Hunger, by Cecil Woodham-Smith), awarded annually for the most useless proposal to combat a social ill. The only part of Cowen's plan that would actually increase the number of medically insured people is his proposal to federalize Medicaid. How many Republican votes would this get in the House? My guess is zero, and if it did manage to pass it would be cut every time there's an economic downturn, like most proposals to help low income people. Nice work, Cowen.
Posted by: Stan at Nov 17, 2009 8:35:41 AM
Tyler - On #1, why should we federalize Medicaid? What makes the federal government, which is running its own unsustainable Medicare program, better able to administer the Medicaid program than state governments? You may not be aware of the improved efficiency and improved delivery of health care that has been brought to the Medicaid program by private companies over the past 10 years. Many states have outsourced the administration of Medicaid to the private sector which is better able to manage complex conditions among the low-income senior population AND among pregnant women.
Posted by: MBP at Nov 17, 2009 8:39:11 AM
Where is Rand when we need her?
Posted by: Anne T. Positivist at Nov 17, 2009 8:41:19 AM
Although a few of these are transparently bad ideas, many are not. This post is a big step forward towards a rational debate when compared to the previous "I'm convinced we *must* blow 30% of GDP and condemn millions of (poor) people and their children, it's simply the best we can do" default approach. For this you deserve two thumbs up, a standing ovation, perhaps even a bit more generosity and patience with your other complaints.
Now of course a right wing think tank will sum up the economics of the set of above proposals in a high integrity analysis and we can compare apples to apples.
Right. I don't think we're that far along the path toward rationality yet.
Posted by: Russell L. Carter at Nov 17, 2009 8:46:54 AM
#6 is the best - though I fear it is comparable to 'solving' the energy crises by saying we just need to harness nuclear fusion.
Posted by: Jeff at Nov 17, 2009 8:51:05 AM
Why would you want to "to EASE the spread of low-cost, walk-in health care clinics", rather than increase?
Posted by: Rick Blaine at Nov 17, 2009 8:51:11 AM
These are mostly excellent ideas. But, the fundamental motivating idea behind the current reform efforts (however well or poorly it is served by them) is that health care should be available to everyone, not just folks who can afford to buy it.
Case in point: my wife had breast cancer a few years ago. We've been insured our whole lives, and currently we have wildly expensive hipaa coverage; but no one is going to sell us insurance for any less than whatever the government mandates. With slightly different circumstances we'd be out on the street, medically speaking.
If you can extend your ideas to a system where people won't dread the medical consequences of a layoff, or take serious health risks because they can't afford care, I'll be truly impressed.
Posted by: peterg at Nov 17, 2009 8:53:48 AM
On the whole, excellent. Not enough incentives for evidence-based health care. I wouldn't mind paying so much *if I got what I was paying for!* Further evidence that useful, mid-range policy proposals that move the dial in a progressive (with a small P) direction need have no partisan coloration..
Posted by: R S at Nov 17, 2009 9:01:21 AM
For #7, I think you meant "spending discipline", not "pending discipline".
Posted by: ScottN at Nov 17, 2009 9:20:37 AM
I like Tylers plan but here is my my plan:
The state would provide insurance to all Americans but the annual deductible on the insurance would be equal to the family’s trailing year adjusted income minus the poverty line income (say $25,000 for a family of 4) + $300. So a family of 4 with a trailing year adjusted income of $30,000 would have a deductible of $5,300. A family of 4 with a trailing year adjusted income of $80,000 would have a deductible of $55,300.
I think that we should at least try this sort of very high deductable plan but if that does not work then we may need to try monopsony and squeeze the providers. The marginal benefit of health care seems so low that the shortages created by monopsony are likely to have little negative net effect as it will free people to spend more money on other things that might improve health.
BTW I will be livid if Obama care makes blue cross eliminate my $10,000 deductible plan.
I am a libertarian and would support more freedom but that seems to not be politically viable, my proposals are compromise.
Posted by: Floccina at Nov 17, 2009 9:24:19 AM
Jody, I wonder if this fear about HSAs is overstated. More mandates would increase the cost of HDHPs a bit, but if the mandate is for coverage after the deductible the increase will obviously be smaller than for a low-deductible plan. My HDHP is from New York, which is I think one of the most mandate-heavy states. I wonder if Federal mandates would even come close.
In the media I see lots of warnings about HSAs from June 2009 or earlier. More recently the talk has been about the loss of tax-exempt purchase of OTC drugs and an increase in the tax penalty for unqualified expenditures, but nothing about eliminating high deductibles. Of course this is the same media that can report the House passing a health care bill without once mentioning the bill's name or number...
Posted by: David at Nov 17, 2009 9:26:00 AM
My plan:
1. Accept that no amount of regulating will ever move the mortality rate from 100%, and that nothing in the Constitution gives Congress any powers relating to health care.
2. Inform people that they are individually responsible for their own health, and that nobody else is going to pay for care for them. TANSTAAFL.
3. Allow any individual to purchase any type of coverage from any health insurer in any state, at any price they like. Alternately, allow people to self-insure and pay for their own expenses out of pocket.
4. Allow any health insurer to offer any type of coverage to any person in any state at any price they feel they like. Regulate insurers to verify they have adequate assets to cover their liabilities and risk exposure.
5. Allow any health service practitioner to refuse care to any individual who does not have the means to pay for it, or insurance that will cover the cost.
6. Let free markets work their magic to efficiently allocate health care, while saving billions in regulatory costs and administrative bureaucracy.
That is all.
Posted by: Russ R at Nov 17, 2009 9:31:59 AM
That's refreshing. It's been a while since we've heard from Tyrone. Considering the lack of solutions that are politically feasible & useful, it's true that he's probably the only one who would be able to tackle this. ;-)
Posted by: kebko at Nov 17, 2009 9:37:25 AM
I'm always suspicious of any blog post that cites Greg Mankiw to support a claim. The man is an influential economist (the 19th-most!), but he's also a disseminator and originator of Republican talking points.
Did anyone read Greg Mankiw's post or click through to the underlying post? Basically, the point on the uninsured is that:
1) There are undocumented aliens--these were excluded because of a political firestorm from Republicans.
2) It is undesirable to penalize uninsured, "free riders".
Tyler, granted that the undocumented aliens must be excluded, do you agree that it is undesirable to have healthy people uninsured and not address the free rider problem?
Posted by: MostlyAPragmatist at Nov 17, 2009 9:53:42 AM
What exactly does it mean to "make an all out attempt"? In federal legislation? This must be satire, right?
Posted by: Mick at Nov 17, 2009 9:57:03 AM
I would be happy if the Congress would adopt its entirety the plan of any of the following countries (in my personal order of preference): Switzerland, The Netherlands, France.
Posted by: Butch at Nov 17, 2009 10:08:40 AM
"I would be happy if the Congress would adopt its entirety the plan of any of the following countries (in my personal order of preference): Switzerland, The Netherlands, France."
Then you should probably start drafting an amendment to the Constitution.
Posted by: Russ R. at Nov 17, 2009 10:10:46 AM
Tyler, what exactly are the goals of your proposal?
Cost cutting seems to be one, laudably, by increasing the quality of essential services (3,4,8), decreasing the amount of unnecessary ones (6,7), and stepping up competition between care providers (5,6). These measures are mostly incremental and should be taken /in addition/ to the fundamental change required to arrive at a sustainable system. [Catastrophic care (9) appears to be provided already in today's system by ERs but it ignores cost savings by preventive care.]
You seem to give up on universal coverage which is not only an ethical question but, if implemented properly, also makes financial sense: The mandate gets the healthy to share the risk, thereby lowering rates, and it provides preventive care to the poor instead of waiting for them to become expensive ER cases for which the government picks up the tab, thereby increasing rates but lowering taxes. If the net amounts to an overall cost increase it is because of increased welfare to the previously uninsured. You control the level of welfare and cost by the minimum coverage you mandate.
What I'm missing from your list:
* The mandate
* Establishing market transparency by defining a minimum coverage contract that each insurance must offer *to everyone* with no exceptions. There is no proper competition without transparency.
* Severing the counter-productive ties between employment and insurance
Medicare and Medicaid could then be privatized to compete with the other insurers. The government funds would become available to subsidize insurance for the poor, provided by the market. With a mandate and a transparent market there is not need for a public plan.
Posted by: Oreg at Nov 17, 2009 10:32:36 AM
What about malpractice reform? One option would be to require a license suspension if a licensed professional pays to settle a malpractice claim. Shift the balance to make it more expensive to pay off dubious claims, and make it harder for problem doctors to stay in business.
Posted by: Don Marti at Nov 17, 2009 10:40:27 AM
Most of those are quite good. Nice work. It's obvious why they are not in Obama's plan: his goal is to take over the healthcare system, not to improve it.
But you left out the most obvious, and simple, thing that should be done: allow people to buy health insurance across state lines. The current restrictions are insane, and I have no idea how they could possibly be legal, either. I am forced to buy a plan in my state, while the Governor meets with lobbyists who represent acupuncture, aromatherapy and leeching... and suddenly all of those things are required by law to be in the plan too. My rate goes up; leechers are billing the insurance company $155/hour; Gov gets his kickback. A great system.
I would say that this change alone would make an enormous difference.
Posted by: Jim at Nov 17, 2009 10:41:47 AM
Here are two tweaks I believe would improve medical care. I don't know about long-run consequences.
Pay for longer doctor visits. The current under 15 minute version isn't long enough for patients to reliably explain what's wrong or for the doctor to do much thinking.
Pay for drug reviews for people who are taking a bunch of prescription drugs.
Posted by: Nancy Lebovitz at Nov 17, 2009 10:47:27 AM
Wow, 4, 5, 6,and 7 by themselves would accomplish more than anything being currently discussed.
Posted by: anon at Nov 17, 2009 10:59:26 AM
By the standards of this blog I am pretty hard left, but I like this approach. Too many people don't realize that the US already has socialized medicine, but only for certain people: Medicare for seniors, Medcaid for the indigent, the VA for veterans who can demonstrated that they need care for disabilities incurred as a result of service, plus the various government plans for its employees.
I'll admit I never understood the "government benefits for some but not for others" paradigm Americans seem to love, but OK, just gradually extend the existing network. This was crazy leftist Howard Dean's proposal in 2004. It is also what Neville Chamberlain of all people did in the UK in the 1920s and 1930s, what the NHS really did was rationalize and reorganize a US style hodgepodge of existing government programs.
One problem is that Medicare apparently is inefficient and much too gold plated in some areas, but some of its beneficiaries have demonstrated they will fight hard to keep it that way, even if it means denying coverage to their grandchildren.
Posted by: Ed at Nov 17, 2009 10:59:56 AM
Good proposals. 5 is the one most relevant to me. I recently had the flu and wanted to make sure it wasn't the new swine flu variant, so I went to the hospital after work (which means an emergency room visit). What took an hour and a half could have been done in the first 10-15 minutes if I wasn't required to see a doctor. The nurses had already told me it wasn't swine flu and the reasons why. Obviously the doctor had a better medical explanation, but I didn't need to hear it, nor did I need to tack his services to my bill. But there is no 24-hour walk-in where I live. And if I had waited till the morning, it changes the cost to me, but not to the hospital.
Posted by: Dan at Nov 17, 2009 11:10:41 AM
Tyler (if you're still reading this far), not that you wake up in the morning trying to earn my approval, but I find your list odd. It seems as if you're saying, "Whoa whoa whoa! The proposed big government plan will not work as advertised and will make us all worse off." (I agree, and I applaud you for having the courage to say so.)
But then you are mostly saying, "If I were central planner, this is what I'd do instead."
I don't disagree that your proposals are better, but do you really think Pelosi et al. have an intellectual disagreement with you about the cost-effectiveness of doctors washing their hands?
In other words, I think this is all hopeless if we keep trying to get the central planners to "do the efficient thing." We know the system is designed so that they won't do the efficient thing. I realize you don't want to sound like a knee jerk libertarian, but some of us are knee jerk libertarians with good reason...
Posted by: Bob Murphy at Nov 17, 2009 11:17:28 AM
I'd like to see a tax exemption factor of about 1.10-1.4 times the cost of care added into the mix. It would incentivize providing care for the unable to pay, or underinsured, wouldn't cost anything other than reductions in revenue (which is great by me).
Posted by: Ryan Vann at Nov 17, 2009 11:21:25 AM
@Paul H. Rubin: ARGH! This drives me bananas. There is no rule, regulation, or law anywhere that prevents insurance companies from writing policies cross-state, or in any state! Why do right-wingers keep repeating this? It's like lobbying for right-turns-on-red, or the ability to take out a loan from a bank. You can already do it!!!
In fact, the only reason that any insurance company doesn't write in a particular state is because they don't want to. And if that's the case, take it up with the company!
Posted by: Brian at Nov 17, 2009 11:21:26 AM
Ummm or just put everyone on Medicare, the most popular Federal program in existence.
I mean, if you're not going to end subsidies to employer-based health care and let an actually free market take care of this. I try not to think about that one too hard because it makes me cry at night.
Posted by: John at Nov 17, 2009 11:21:59 AM
Russ - - You forgot step #7: Stand back and watch as millions of citizens in one of the wealthiest nation in the world, literally die because they are ill-equipped to deal directly with healthcare providers and/or cannot afford good medical care.
That's OK - if you're poor, you don't deserve to live, right?
Posted by: spike at Nov 17, 2009 11:22:41 AM
"4. Make an all-out attempt to limit deaths by hospital infection and the simple failure of doctors to wash their hands and perform other medically obvious procedures." The threat of Capital Punishment should do the trick. Dead cheap.
Posted by: dearieme at Nov 17, 2009 11:43:38 AM
Has Tyler provided his first and/or second best proposals in an earlier post?
Posted by: johnson85 at Nov 17, 2009 11:47:35 AM
@Bob Murphy and many others - Maybe you haven't heard, but there is no good reason to be a knee jerk libertarian. Libertarian utopias are just as unrealistic and insane as all other utopias. Please learn to work with reality. Which, Bob Murphy, you seem to be of sounder mind than many others, so hopefully you can look at Tyler's proposals a second time and see that are reasonable for politicians to support. It's not so much the system that's the problem here as it is the status quo. It's our culture, not our bureaucracy, that prevents the highest offices from supporting the simple measures. We can all get behind the obvious solutions, but unless it's presented to the public as simple and obvious we can't expect our politicians to have the ability to support them. And politicians cannot be expected to propose revolutionary ideas to the public. I could go on, but hopefully I've got my point across.
Posted by: Dan * at Nov 17, 2009 11:53:03 AM
Too much focus on pure insurance.
(1) We do a lousy job of getting universal vaccination. That would do wonders.
(2) Auto accidents are responsible for vast number of injuries and deaths and handicaps. It is a major reason Europe is ahead of us on life expectancy. We need an overhaul of auto safety. Spend on roads and congestion, and be very harsh on those who drive on alcohol and drugs. It won't be solved by health insurance.
(3) Legalizing narcotics would be a good idea for a variety of reasons, but understand that doing so will hurt health indicators.
(4) We do a lousy job on controlling the spread of STDs and on unwanted pregnancies. Those are health issues as well as moral issues.
(5) Our high level of violence is a medical crisis. It won't be solved with health insurance.
(6) We need to make nutrition a real science, rather than the modern equivalent of astrology. See "Good Calories, Bad Calories" for a glimpse into that pseudo-science. I think many Americans are unhealthy because of their diet, including those with good incomes. Health insurance won't solve that problem.
(7) National Lampoon once had a cover titled "Medicine: The Nation's Number One Killer." If some European countries have socialized medicine and higher life expectancies, could it because their medical system deliver LESS medical care and thereby save lives? Hospitals are very unhealthy places. First, do no harm. Health insurance just feeds the medical-industrial complex without making it better.
Posted by: B.B. at Nov 17, 2009 11:58:00 AM
Delink insurance from work:
1) Move premia into wages (still tax deductible)
2) Force workers to buy their own insurance (deductible or not) with MSAs
3) Allow markets and incentives and competition to work.
4) Profit!
Posted by: David Zetland at Nov 17, 2009 12:14:17 PM
Spike,
Please.
Folks,
I put put Tyler in the same mental category of folks that when they create something if you didn't like it, chances are you didn't understand.
He's doing about 3 different things here including addressing the objectives of the reformers at face value. He just didn't label each one. That handles a lot of the "that does nothing about cost control" or "This does nothing about access" kind of gripes.
The fear about HSAs getting tanked is not overrated. Not only has it been reported many times, but HSAs (with high-deductibe) are actually antithesis to what the government is trying to do, move further away from the concept of insurance and saving for future need to a straight pay the other guy as he goes approach.
Posted by: Andrew at Nov 17, 2009 12:15:22 PM
Delink insurance from work:
1) Move premia into wages (still tax deductible)
2) Force workers to buy their own insurance (deductible or not) with MSAs
3) Allow markets and incentives and competition to work.
4) Profit!
http://aguanomics.com/2009/08/few-more-thoughts-on-health-care.html
Posted by: David Zetland at Nov 17, 2009 12:15:25 PM
Brian,
Way to miss the point. The complaint is actually that every state has differing mandates on what is an allowable plan. In some states, you can buy a cheap, high-deductible plans, and in others you can't. In some states you can more tailor a plan to fit your personal needs, and in others you can't- for example, why should a single man have to buy a plan that has mandated prenatal care?
Posted by: Yancey Ward at Nov 17, 2009 12:17:13 PM
David,
High deductible plans are anathema to most of the standard healthcare reforms originating on the Left. The reason is that such plans are a way for young and/or healthy people to avoid subsidizing routine, non-catastrophic care for everyone else- routine care that such people are less likely to use themselves (the main reasons such plans make financial sense for them to purchase in the first place).
Posted by: Yancey Ward at Nov 17, 2009 12:23:40 PM
Jody,
David: My interpretation of how HSAs get tanked - like MassCare, they won't satisfy the minimum requirements for coverage specified in the bill which makes your HSA illegal once any little bit of your plan changes.
I live in MA. I have an HSA. No problems. IIRC the law specifically states that HSA-qualified plans meet state requirements.
Posted by: Bernard Yomtov at Nov 17, 2009 12:24:15 PM
