Marketplace of Ideas Blog

I got a forwarded email last weekend that was a forwarded pro-and-con (actually, con-and-pro, in order) on the proposed health care reform bill.

The “pro” writer claimed that “The medical lobbyists are doing a great job of making us all afraid of the change in health care that we need so badly in this country.” (Because we all need “universal” health care that is more expensive and less available, while simultaneously putting thousands of Northeast Wisconsin health insurance company employees out of work.) The writer also displayed more faith with our president than I have and you should have by adding, “I do not believe that what President Obama is trying to do will harm any of us who have coverage — it will definitely go a long way to help those who do not have any access to health care at all.”

The two main health care reform issues are access and cost. On the latter, Milwaukee Journal Sentinel John Torinus points out that free health care isn't free:

Here are just some of the elemental flaws in the Democrats’ plan that amount to financial fantasy:

• The House-passed 8-percent payroll tax on companies that don’t provide coverage. My company, like many companies, is spending about 15 percent of payroll on health care. Why would Serigraph and other companies not opt for the 8-percent penalty, drop coverage and let our employees go to a public plan? We would save several million dollars a year at taxpayer expense. The Wisconsin Democrats and AFL-CIO were more realistic when they put a 15- to 20-percent payroll tax into their Healthy Wisconsin bill.
• The House’s 2.5-percent penalty on people who don’t buy mandatory health insurance. At $40,000 in pay, that would cost a person $1,000 a year in penalties, about one month’s premium for a family plan. With guaranteed-issue, also part of the House bill, why would a person not pay the penalty and then jump into insurance only when a medical need arises? That’s what’s happening in Massachusetts under a similar plan.
• The “public option” that would pay a little more than Medicare rates to providers. Medicare uses government price controls to reimburse at 40 to 50 percent of retail charges. Big private insurers pay 70 to 80 percent. How could the private insurers ever compete with the public insurance company and its price controls? Smart analysts predict a stampede out of private coverage to the cheaper public plan. The subsidies, direct and indirect, will rival the massive expense of Medicare and Medicaid.
• The absence of reasonable deductibles and co-insurance in any of the schemes and of offsetting personal health accounts. No system will keep costs in check without the full engagement of every individual in the system. Free lunches are always expensive.
• The failure to deal with the glaring need to change from fee for service to bundled payments by treatment episodes. If you pay for procedures, that’s what you get, lots of procedures, all piled into out-of-control, inscrutable bills.
• The requirement that all insurance be purchased through the government. That public “exchange” would effectively put out of business the private insurance agents, who operate on a 3-percent commission. Would a bureaucracy do the job for 3 percent? Doubtful.

Torinus also points out that, again, Wisconsin’s health care and health insurance situation is better than in most other states, another reason to not pass legislation that will make things worse:

Coverage in Wisconsin is now estimated by percentage to be in the high 90s, partly through successive additions to the Badger Care program. The great financial worry, though, is that it and Medicaid will break the state budget as private companies default to state coverage.

It would be far better to keep private employers, large and small, in the health care game. Early in his term, Gov. Jim Doyle’s administration looked into the creation of a state plan for catastrophic coverage. That would be a device for small businesses with one or more unhealthy employees to lay off the catastrophic risk and thereby become an insurable group at normal rates.

Big companies can buy coverage for catastrophic accidents or diseases, but small ones can’t. A state pool for high risks, funded by a broad, low tax on all health insurance, solves that issue.

Any necessary subsidies to get to universal coverage for low-income people could be put into health savings accounts that would be used to pay premiums, deductibles and co-insurance.

Wisconsin is also home to breakthrough innovations in cost control. They include QuadMed’s primary-care model, Aspirus’ quality transparency on heart procedures, ThedaCare’s lean disciplines, Dean’s HMO model, Gundersen Clinic’s track record on end-of-life directives, Marshfield’s pilot on bonus payments for quality and disease management and the numerous companies and few public entities with consumer-driven plans.