What Obamacare Should Say But Doesn't
TAX EQUITY. All tax exemption stimulate overuse, because they amount to a discount. Federal tax exemptions now mainly extend to two consumer purchases: health insurance and home mortgages. We currently have a national crisis in both at the same time. The tax-subsidized-home-mortgage housing bubble preceded the financial panic, and tax-subsidized health care has led health costs into a second unsupportable bubble. More importantly, giving a tax subsidy to employers but not to self-employed or unemployed persons has created the uniquely American system of employer-based health insurance. Tax preference makes insurance a third more expensive for the uninsured, paralyzes portability with job-lock, and provokes hospital internal cost-shifting which further escalates costs for those who lack the tax preference. Equalizing taxation is not merely equal justice, it is the key to individual ownership of health insurance, which immediately creates portability and largely eliminates pre-existing condition exclusions, a related issue. It is impossible to imagine mandating individual coverage to large populations who are excluded from exemption, simply because of the nature of their particular current employers. For this purpose, it does not matter whether tax exemption is given to everyone, denied to everyone, or only extended to part of the cost. The choice between these three determines its revenue effect.
 If health insurance is mandated, the tax treatment must be uniform. 
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| Hidden Cost |
Once the tax is equalized, this proposal becomes 1. INDIVIDUAL OWNERSHIP OF HEALTH INSURANCE POLICIES, already proposed in Congress, but seemingly without hope of adoption. However, healthcare reform cannot be permanently settled without it. It must be understood, however, that eliminating the tax preference will be resisted by those who already have it, because of the rather strong likelihood its benevolence would be reduced for them, in order to pay the revenue cost of extending it to all. Since re-adjustment would positively be the ultimate outcome, those proposing mandatory individual coverage must score the revenue cost of implicit tax adjustments of mandatory coverage, even though unmentioned in this year's bill. The CBO should provide a sliding scale estimate for negotiating purposes.
2. PROVIDE MANDATORY CATASTROPHIC COVERAGE THIS YEAR, ADD TO IT LATER. Since Health Savings Accounts enjoy Republican support, this cost reduction by itself could transform chancy reform into bipartisan victory. To add the Savings account feature would have a revenue cost, and that should be the battleground of debate, not the reduction of full coverage to partial coverage by catastrophic insurance. Giving up the quest for total coverage nevertheless concentrates on relieving the most threatening feature of non-insurance, the most bang for the buck. For diehards hoping for first-dollar coverage, a catastrophic base still provides a simple pathway for future expansion after this much has been digested. Isn't Universal Catastrophic Coverage a better outcome than a pitched, prolonged and partisan battle? Must we be reduced to accusing certain interest groups of having the incentives they obviously do have? Grown-up negotiating takes that in stride.
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The States Are in the Road
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3. PRE-EMPT STATE LAWS WHICH INHIBIT CATASTROPHIC COVERAGE. State mandated benefits now severely limit high-deductible insurance in many states, and are the main reason Health Savings Accounts have been slow to spread. The provisions of ERISA shield employer-based health insurance from the unfortunate health coverage mandates in question. ERISA could not have been successful without this pre-emption, so unions and management unite in absolute concern to isolate ERISA from congressional meddling, although for different reasons.
4.MODIFY McCARRAN FERGUSON ACT. This act effectively makes the "business" of insurance the only major industry restricted to state rather than federal control. It should be amended to permit the sale and portability of health insurance policies across state borders and interchangeability of individual policies when people change state residence, thus greatly increasing competition and reducing prices. Once more, present law discriminates in favor of the employees of interstate corporations, who are also exempted by ERISA.
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The Supreme Court Needs Help, Too
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5. LEGISLATE OVER-RIDE OF 1982 MARICOPA CASE. This unfortunate U.S.Supreme Court 4-3 decision, was never tried and upholds only a motion of summary judgment. It prohibits physician groups from agreeing on lower prices, and has been taken to mean physicians are excluded from exercising control of HMOs and Managed Care. By some quirk, the full tape recording of the 1982 U.S. Supreme Court arguments can be heard on the Internet.
6. CONVENE BLUE RIBBON COMMISSION TO REPAIR PSYCHIATRIC INPATIENT CARE. The 1983 BRA switched hospital inpatient reimbursement to payment by diagnosis(DRG). Abuse of the psychiatric exclusion then led to "corrective" legislation which has essentially reduced American's psychiatric inpatient care to a national disgrace. Rather than make headlines, a commission should devise a workable methodology for psychiatric hospitals, relying neither on present approaches, nor on DRG. But accepting overpayment as a better outcome than no care at all.
6. DRUG PATENTS ISSUED ONLY TO DRUGS APPROVED BY FDA AS MEETING A NEW STANDARD. This additional standard -- confirmed unique advantage -- would exclude "me-too" drugs from higher prices from patent protection but not to competitive, generic-level, prices. It would also strongly encourage comparative effectiveness research in order to meet this standard, since cost effectiveness would be considered. Such drugs must continue to meet safety and efficacy standards. This might also be considered to be a modification of the efficacy standard, to include cost effectiveness.
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If Congress simply must micro-manage --
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| A few tips |
7. MANDATE DISPLAY OF COSTS NEXT TO PRICES (whenever prices are displayed, as in bills, price lists, etc.) FOR ITEMS COVERED BY HEALTH INSURANCE. Some high mark-ups are justified, but the public has a right to criticize them. This would not prohibit, but would considerably hamper, cost-shifting. It should be presented to provider groups as forestalling the prohibition of cost-shifting because of abuse. For this and other reasons, it would enhance provider competition.
8. REIMBURSE HOSPITALS ONLY ON RECEIPT OF ASSURED POST-DISCHARGE HANDOVER OF MEDICAL RESPONSIBILITY. Unfortunately, hospitals do need increased incentive to improve communication after discharge, which now increasingly occurs on a Saturday. Payment by diagnosis, otherwise a good idea, results in sequestration of medical charts in the accounting department.
9. Similarly, REIMBURSE HOSPITALS FOR LAB WORK ON THE LAST DAY OF HOSPITALIZATION ONLY AFTER DEMONSTRATION OF REPORTING. Such lab work, frequently obtained within hours of discharge, is sometimes overlooked and may even be unobtainable for the previously mentioned reasons, which in this case also apply to the hospital's own physicians.
10. RESTORE ORIGINAL FORM OF PROFESSIONAL STANDARDS REVIEW ORGANIZATIONS (PSRO). These physician organizations effectively regulated many issues which are now the subject of complaint. They were lobbied into ineffectiveness in 1980, and together with Maricopa, essentially turned medical oversight over to insurance companies who thus receive no physician advice except from their own employees.
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Treat liabilities like debts.
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| Accounting, for Congressmen |
11. SUBJECT MEDICARE TO DEBTOR DISCIPLINES. The present convoluted accounting of contractual obligation liability escapes being treated like debts. But Medicare is now the largest debtor in the world, rapidly becoming more indebted; coping with a Medicare insolvency without inflating the currency is hard to imagine. In any other such situation, the creditors would impose controls. a. Suspend new entitlements and restrain cost of living increases until stated goals are reached. b. Merge Medicare and Medicaid, bringing accounting and cross-subsidy issues to an end.
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No surgeon can pay malpractice premiums with Medicaid reimbursement.
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| Now hear this. |
12. TORT REFORM. Malpractice costs mainly affect surgeons and obstetricians, who sometimes pay annual malpractice premiums of $200,000. Not only does this provoke defensive medical behavior, it provokes local physician shortages which in turn lead to hospital cost-shifting and other responses. The only tort reform which has proven value is to place a limit on awards for "pain and suffering", the traditional catch-all cost expander.
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