Fixing Health Care: A Real Solution
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2009-08-07 12:34 by Karl Denninger
in Health Reform , 727 references Ignore this thread
Fixing Health Care: A Real Solution *
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Back on July 7th I wrote a piece on Health Care Reform and laid forth some general principles.

I have since done some more synthesis on this and have a more-fully-fleshed out, and yet simpler, set of proposals to solve the problem.  With no further ado, here they are:

If you sell "insurance" to anyone in a given state, you must accept all persons in that state on the same terms and at the same price.  If an insurer has a "we accept anyone at the same price" policy for a business, you must be able to buy into their plan for the same amount of money that the employer is charged on a per-person basis.  That is, all plans must be "open enrollment" for everyone within the state - period.  This immediately gets rid of the "tie" between employment and health "insurance", and it also removes one of the biggest issues that small business and self-employed people face - the inability to buy insurance at any reasonable price if there has ever been anything wrong with them medically.  The solution to the "adverse selection" problem is identical to that which exists in corporations - you typically can only elect out or in of a policy or plan on an annual basis - that is, you're obligated to participate for a full calendar year.  Enforcing the same terms (you can only opt in during one month, and are obligated for the entire year) solves the problem of someone deciding to buy only when they get ill, as you would have to wait for the enrollment window to open.  For acute conditions where adverse selection becomes most important this restriction resolves the problem.

All "insurance" companies must offer a true insurance policy covering only unlikely-but-catastrophic events on the same terms as their "full service" policies.  These were formerly called "major medical" or "hospitalization" policies, and have become very difficult to find.  They're relatively inexpensive as they do not cover routine doctor's visits or medications, but do cover catastrophes (e.g. a heart attack, cancer, stroke, etc.)  We must provide consumers with a reasonable-cost alternative to HMO/PPO coverage, and this is it.  If a company wants to sell "full-featured" policies that are unaffordable to a huge percentage of the population, we must mandate that they also offer affordable catastrophic coverage for those who prefer it (or can't afford anything else!)

All health providers must publish a price list and may not bill or accept payment at anything other than that price; doing so becomes a violation of Robinson-Patman and exposes the provider to civil suit for treble damages.  This instantly stops the practice of billing the uninsured or privately insured at a higher price than Medicare, for example - a practice that is rampant, particularly among hospitals.  Every hospital has a detailed price list for every function and thing in their health care panoply - this enforces even billing and even pricing for everyone, without discrimination.  The complaint that health providers cannot make a living at Medicare's reimbursement rates does not give that provider license to cost shift the expense of government-subsidized care to privately-insured or uninsured patients.  That sort of discrimination is outrageous and must be made unlawful.  Everyone would raise hell if your car was three times as expensive if you worked for Ford than if you worked for GM, yet it is accepted that if you're not insured by Kaiser (for example) your heart bypass surgery costs a different amount.  If Medicare's "price schedule" is inadequate the solution is for providers to refuse to provide the service at that price, not cost-shift the care of older Americans onto younger.  This is a more than $200 billion dollar a year rip-off of working-age Americans and it must end.

No event caused by the provision of your treatment may be billed to you.  Period.  Specifically, MRSA infections and similar contracted in a hospital cannot result in billing of that treatment to the consumer.  If you call someone to fix your roof and they break a picture window, they have to eat it - they can't bill you for the roof and the window which they broke!  The best incentive for better-quality care, particularly when it comes to controlling in-hospital cross-infection rates, is to make it ruinously expensive for hospitals to fail to prevent these adverse events.  Prohibiting by federal law the billing of any amount for a condition caused by the provider of health care (or a health facility) puts in place a very strong free-market disincentive for lax infection and process control. 

If you show up without insurance or ability to pay with a life-threatening condition, you will be treated, but the hospital cannot cost-shift the bill - it instead bills The Federal Government.  We have created an expectation that if you show up needing emergency treatment you will get it, irrespective of ability to pay.  This creates a monstrous problem for hospitals and results in the $30 aspirin, among other outrageous distortions.  The solution is to have The Federal Government receive all uninsured and unpaid bills, with the debt being immediately paid by the government.  Said debt then becomes a collection item against the citizen - a debt to the Treasury, administered by the Internal Revenue Service.  If you cannot pay cash, that's fine - the IRS will be happy to take payments (at interest.)  If you're an illegal alien the Federal Government will be mandated (by statute) to collect from the other nation, and if they refuse to pay, to deduct any such amount from foreign aid of any type and source on a dollar-for-dollar basis.

Five points and a fully free-market solution that brings affordable health care coverage to all who can buy it, yet protects those who cannot, while, to the greatest possible extent, forces everyone to bear the cost of their own decisions.

If you choose not to be insured and pay cash you are free to make that choice.  If you have a catastrophic illness or injury, insist on treatment but have no means to pay then you are subject to attachment of wages and assets by the IRS, a debt that is only discharged by your death.

Simple, fair, free-market and this path will dramatically control costs as free market competition will be forced to the forefront among health providers who will be compelled to make available their pricing schedules to everyone before they show up for treatment and are presented the bill.