My last three posts: here, here, and here, are concerned with the high cost of American healthcare and how this is so closely tied in with our very large and badly out-of-control national debt. In particular, three giant American companies: Amazon, Berkshire Hathaway, and JP Morgan Chase are forming an independent healthcare company to try to hold down healthcare costs for their combined one million employees in the U.S.
Dr. Elizabeth Rosenthal, an MD and editor-in-chief of Kaiser Health News, points out that this new company may help its own members but end up hurting the rest of us:
Previous efforts along the same line by Safeway and Boeing have held down costs for the companies own employees but are too small scale to have had broader impact.
The new company, much larger in size, may be able to negotiate lower prices from labs and hospitals for its own members. But then these same labs and hospitals will charge more for everyone else.
Moreover, in general, employer based healthcare insurance has lots of problems:
It diminishes incentives to reduce costs by insulating workers from the full price of their benefits.
It discourages changes that could displease even a small number of workers, thereby creating incentives to minimize disruption.
The pervasiveness of employer health insurance makes it more difficult for individuals to buy health insurance on their own, thus discouraging entrepreneurship.
Conclusion. Given the inherent flaws in employer provided health insurance, it is unlikely that more innovation by individual companies, or groups of companies, will lead to an overall solution to the exorbitant cost of American healthcare.
The solution lies in a different direction: ending or at least modifying the ACA’s employer mandate. See here for details. More later!
The Manhattan Institute’s Avik Roy has just released a comprehensive and very impressive new study of the American healthcare system, “Transcending Obamacare: A Patient-Centered Plan for Near-Universal Coverage and Permanent Fiscal Solvency.” By 2025 it will increase insurance coverage by 12.1 million above Affordable Care Act levels. It will at the same time achieve a 30 year deficit reduction of $8 trillion compared to current CBO projections (see chart below). More specifically Mr. Roy’s new Universal Exchange Plan will
Expand coverage well above ACA levels without an individual mandate
Improve the quality of coverage and care for low-income Americans
Make all U.S. healthcare entitlement programs permanently solvent
Reduce the federal deficit without raising taxes
Reduce the cost of health insurance
The five core elements of Mr. Roy’s Plan are:
Exchange Reform. The ACA’s individual mandate is repealed. The Plan restores the primacy of state-based exchanges and insurance regulation. Insurers are encouraged to design policies of high quality tailored to individual need. By lowering the cost of insurance for younger and healthier individuals, the Plan will expand coverage without a mandate.
Employer-sponsored Insurance Reform. The employer mandate is repealed, thereby offering employers a wider range of options for subsidizing employees insurance.
Medicaid Reform. The Plan migrates the Medicaid acute-care population onto the reformed state-based exchanges with 100% federal funding. The Plan returns to the states full financial responsibility for the Medicaid long-termcare population.
Medicare Reform. The Plan gradually raises the Medicare eligibility age by four months each year forever. The end result is to preserve Medicare for current retirees and to maintain future retirees on their exchange-based or employer sponsored health plans.
Other Reforms. The Plan tackles the growing problems of hospital system monopolies and malpractice litigation and also accelerates the pace of medical innovation by reforming the Food and Drug Administration.
These reform proposals are amazingly ambitious and far reaching in scope. How can they possibly be achieved? Stay tuned!