The next chapter in healthcare reform
No more Band-Aids; put patients and families first
A shorter version of this column appeared first in Modern Healthcare.
Lawmakers are gearing up for the next round in the nation’s ongoing fight over how to make health insurance universal, comprehensive and affordable.
Toward that end, Senators Tim Kaine (D-VA) and Michael Bennet (D-CO) recently introduced a bill that would create a public option within Medicare to compete on the Obamacare exchanges, mirroring a major plank in President Joe Biden’s platform. Another bill by Sen. Debbie Stabenow (D-MI) would give people the right to buy into Medicare at age 50.
On the House side, Representatives Rosa DeLauro (D-CT) and Jan Schakowsky (D-IL) have proposed a “Medicare for America” bill that would combine Medicare, Medicaid and the individual insurance market into a single government-run plan available to anyone not enrolled in an employer-based plan. In a bow to the realities of the current insurance marketplace, these liberal legislators even proposed allowing private insurers to sell and administer the public option plans just as they do now with Medicare Advantage plans.
Meanwhile, the Republicans, courtesy the Koch network and its largest affiliate Americans for Prosperity, are touting their alternative to Biden’s public option. It features more tax breaks for individuals buying insurance, expanded health savings accounts and less regulation of plans. In other words, they want the return of the dysfunctional individual market that existed before Obamacare, only this time with more government aid to encourage participation.
I’m disappointed by the absence of new approaches in the progressive proposals, all of which are guaranteed to send their opponents, which includes the nation’s hospitals and physicians who rhetorically back universal coverage, to the barricades to resist changes that pose an immediate threat to their income. Someone needs to start thinking beyond putting patches on a broken system. The way to do that is by crafting legislation that focuses exclusively on helping patients and families.
What are families most immediate needs? When you step back from the policy arcana, what people require are plans that are affordable, pay for all essential services, and are readily available to everyone. They also need to be fully insured at all times.
Fragmentation’s frailties
The existing fragmented insurance system fails miserably on all four fronts. Half the population gets coverage through an employer. But if the worker gets laid off, the entire family loses coverage.
Workers who either are not offered or fail to use employer-sponsored coverage (over 30% of all workers, according to the Peterson-KFF Health System Tracker) may purchase plans on the individual market, thanks to Obamacare. But without subsidies, the premiums are unaffordable, which leads many people to forgo coverage.
Medicaid is an option for the very poor. But if you lift yourself onto the lowest rung of the economic ladder, you’re thrown out of the program.
Coverage of essential services is another patchwork quilt. Some employer plans offer generous dental, prescription drug and eyeglass coverage in addition to physician and hospital care. But a growing number are shifting their members into high-deductible plans, which require self-pay for critical services like preventive care and mental health treatment.
These moves have turned affordability into the most pressing healthcare issue for many Americans. With overall costs continuing to rise slightly faster than the economic growth rate, employers over the past half decade have shifted new burdens onto workers through higher premiums, co-pays and deductibles. This exposed many families, especially those in high-deductible plans (which include the less expensive bronze and silver Obamacare plans), to the outrageously high prices their plans pay for services, especially at the nation’s hospitals.
Given this indefensible hodgepodge of plans and policies, you would expect more than a third of the public would support the single-payer alternative, Medicare for All. Yet its proponents have never been able to convince a majority of the public it’s time to jettison private insurers’ hold on the system.
Indeed, in recent years, private insurers have succeeded in attracting over 40% of Medicare beneficiaries to enroll in their managed care (Medicare Advantage) plans. One major reason is that rising costs are affecting the nation’s only universal program, the one for seniors, too.
The Medicare Payment Advisory Commission’s latest report notes that average premiums and cost sharing for Part B (physician care) and Part D (drug coverage) now consume 24% of the average Social Security benefit, up from 14% in 2000. While estimates vary, anywhere from 20% to 40% of retirees get 90% or more of their income from Social Security. For these retirees, switching to a MA plan without premiums represents a major boost to their skimpy retirement income.
Meanwhile, states have moved over 70% of Medicaid beneficiaries into privately managed plans. For many insurers, administering public plans has now become their main line of business.
A better path
There’s a better path to universal, affordable coverage than putting another patch on this dysfunctional, fragmented system or turning more of it over to private insurers. It accepts the fact that private insurers are going to play a major role in the system for the forseeable future.
It’s a path that leads straight to the desired goal. Policymakers should pass a law that requires all plans in the existing system meet patients’ and families’ need for universal, comprehensive, affordable care and sets up a national regulatory scheme for achieving those goals.
The environmental arena provides a model for how to approach national insurance regulation. It’s called performance-based regulation or PBR. Under PBR, regulators dictate an outcome and leave it to the private sector to figure out how to achieve it. Auto mileage standards are a good example.
What elements should Congress include in a PBR for health insurance? The first requirement should be seamlessness. People should be able to switch plans, whether government-run or private-run, without a break in coverage. Moreover, every plan administrator should be required to ensure continuity of coverage whenever a person or family leaves their plan.
In other words, if someone leaves a plan for any reason, then the plan must ensure that person and his or her family is still insured in their new life circumstance. Obamacare initially placed this responsibility on the individual (the individual mandate, prior to its repeal, was dubbed “personal responsibility”). The Affordable Care Act also included an employer mandate (dubbed “employer responsibility”), but excluded small employers.
A substantial portion of the public didn’t like either either approach. So let’s add “plan responsibility” to the lexicon of healthcare reform, and apply it equally to government-based plans and employer-based plans. Medicaid programs would have to ensure someone landing a job still has coverage just as much as employers laying workers off or downsizing must ensure their ex-employees line up continuous coverage.
This wouldn’t have to be an employer mandate to pay for COBRA coverage, where ex-employees can stay on their old plans by paying for it out of their own pockets. It would only require employers make sure their soon-to-be-laid-off workers obtain alternative coverage, which would in many cases mean buying plans on the exchanges.
A universal affordability guarantee
However, as things stand now, many people who are unemployed or take jobs without health insurance can’t afford individual plans sold on the exchanges even with subsidization. That leads to the second plank of a PBR for health insurance: Make all plans affordable.
The PBR would provide sufficient government support so that no one pays more than a set percentage of their income in total premiums, deductibles and co-pays. This would, again, apply just as much to government plans as private plans.
Moreover, people earning less than some percentage of poverty, say 200%, wouldn’t pay anything at all. Those above that level should pay a sliding scale of their total income with a fixed cap that kicks in for those in the upper middle class, say around $150,000 in family income.
The American Rescue Act provides a model. Besides providing additional subsidies for buying plans for plans sold on the Obamacare exchanges, it set the maximum cap at 8.5% of income.
Essential benefits (comprehensiveness), network adequacy (applying the income cap to out-of-network billing) and health record portability would also be included in a comprehensive PBR for health insurance. The larger point is that if we’re going to have a system with multiple plans, we need a common set of standards.
Obamacare’s benefits regulations proved extremely popular. Insurers can no longer discriminate against people with pre-existing conditions. Young people can stay on their parents plans until age 26. The plans must cover 10 essential benefits.
The same would happen for a PBR that required every plan ensure seamless switching between plans; continuity of coverage no matter what your life circumstances; and comprehensive benefits at an affordable price, where the definition of affordability was pegged to family income, not the price of the plan.
To make the PBR affordable for taxpayers and employers, Congress would simultaneously need to address the overall cost of care. I have laid out pieces of that puzzle in previous posts, and will address it comprehensively in another post about what should go into a PBR for providers.
Medicare for All and the public option have repeatedly failed to win majorities in Congress, even when Democrats held both houses. The untried alternative — a reasonable scheme for national insurance regulation — ought to be the next chapter in healthcare reform.