I’ve posted and replied a lot about health insurance and healthcare on the #ksleg hash tag on twitter. Most of these comments have been an attempt to critique others’ thoughts and to challenge conservative thinkers to improve their ideas but offering objections that left-thinking folks don’t often offer.
My critiques are not my plan. Not that I have a plan, but I do have a few ideas about how to improve the financing of healthcare in this country.
Although it would be the lowest cost option, I am worried about the long-term effects of a Medicare for all option. This option is the lowest cost because, even if we finance it 100% with taxes, the total cost will be less than what is currently spent paying for private health insurance plans. There would be an instant reduction of bureaucratic friction and conflicting billing & payment systems as well as a reduction of competing bureaucratic systems. What worries me about these plans is that the payment for healthcare will match the actual cost of healthcare, leaving profits only at the margin. This may remove some incentive for healthcare innovation. Innovation is not just in medical advancements but in providing more desirable care facilities and more individualized care plans. Current advancement in these aspects of healthcare are financed by profits created by higher costs driven by inefficient friction within the system.
That said, costs do need to go down and costs do need to become more equitable.
One of the problems with the current healthcare system is that it does not function as a market. Markets happen when buyers know the product (or service) and price before the time of purchase. This allows buyers to shop the market for the most attractive offer and this allows sellers to compete in a way that encourages lower pricing or higher quality or both.
Except for a short list of plannable procedures, it is about impossible to know the cost and how different healthcare providers price procedures differently. What’s an emergency heart bypass operation cost at KU Med vs. St. Luke’s? The only way to know the actual cost is to get the procedure.
The state can help create a market by making prices knowable and comparable between hospitals and other facilities by creating a standardized price system. The state should work with healthcare providers to create a comprehensive list of medical procedures and provide a base price for each procedure. We can call this a “medical price manual” and new procedures can be added to a medical price manual as they occur. Hospitals and other healthcare providers would not be bound to the prices listed in the manual but would be bound to a multiplier of the prices in that manual and this multiplier would have to be filed with the state, published online, and posted at all entrances to the facility.
An example of how this would work is that Hospital A decides they want to be a 1.35 hospital. Whenever they perform a procedure they take the price from the manual and multiply it by 1.35 and bill according to that price. The same price is paid for cash customers and insurance other payors. Hospital B might decide that it wants to increase its caseload and offer a 0.98 multiplier. A person going to that hospital for a procedure would see the rate from the medical price manual multiplied by 0.98 before being billed.
Once people know the cost of healthcare, healthcare providers will be forced to complete. This will help create a market for healthcare and healthy markets tend to be pro-consumer.
If having access to a healthy healthcare market is not enough to bring healthcare costs under control and more equitable, it might be necessary to provide a “Medicare for all” system into existence but it could be provided for only major medical expenses. For example, a policy might only cover expenses after the first $50,000 of costs are incurred in a given year. This would create room for private health insurance for the sum of expenses below $50,000 and health insurance companies would have a much more manageable risk pool, having policy caps in place at the $50,000 limit and deductible options for expenses below that cap at whatever levels the market will support. These private health insurance policies would become much more affordable and would require much less regulation than policies we have now that carry much larger risks.
If our elected leaders do not create a functioning healthcare market, the future will be socialized healthcare. Most of my critiques are in the half-baked thoughts of conservative leaders because they consistently ignore the reality that healthcare markets are not possible without government action that creates markets. They fail to plan for processes that make price knowable and comparable, making socialized healthcare the only other alternative.