As I reported in my last post healthcare costs in the U.S. are expected to start climbing rapidly in next few years as the economy continues to recover and insurance coverage expands.
The Manhattan Institute’s Avik Roy has proposed a comprehensive new plan, ”Transforming Obamacare” to achieve, at the same time, both near-universal coverage and stringent cost control for healthcare. Mr. Roy emphasizes the need to regulate hospital system consolidation which is especially responsible for driving up the cost of healthcare. In Omaha NE, where I live, there are three hospital systems: Catholic Health Initiatives, the Nebraska Medical Center and the Methodist Hospital System. According to the insurance company, Blue Cross Blue Shield Nebraska (OWH 9/6/14), “CHI prices are 10 to 30 percent higher than for the Nebraska Medical Center and Methodist Hospital System.” BCBS insists that CHI cut its prices. As of September 1, CHI hospitals are out of network for BCBS and so patients who are insured by BCBS have to pay higher hospital rates.
“We are ready and willing to meet with them when they propose an agreement that gets serious about the cost issue,” said Lee Handke, a senior vice-president for Blue Cross Blue Shield.
Reports the OWH “Blue Cross’ biggest customers are the region’s employers, whose 560,000 workers and family members supply 80% of Blue Cross’ revenue each year. A big share of these people are CHI customers, too. … Blue Cross has told us (an insurance benefits broker) they understand that they might lose some business over this deal, but they feel that the point they have to make on the cost disparity is more important.”
For one hospital system to charge 30% more than two others for the same services is totally unacceptable. It means that customers for the other two systems are paying higher insurance costs in order to subsidize the system with the higher prices.
In the Omaha market, Blue Cross has the clout and the will to force CHI to lower its prices. But many other communities may not be as fortunate.
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!