How to Replace Obamacare
Here’s a blueprint for a GOP health care plan with seven key ingredients.
Former Health and Human Services Secretary Kathleen Sebelius and President Barack Obama. Official White House. Photo by Pete Souza.
With both houses of Congress and the Oval Office in Republican hands come January, the GOP will have no excuse for not reforming the delivery of health care in America to their liking.
Before they start down that road, though, they need to come to a basic understanding of the root cause of the nation’s crisis: it’s the costs of care that are out of control.
Republicans and Democrats alike, and their policy advisors, cite high premiums and incomplete access as major issues, but fail to make the connection between costs and prices and then high prices and poor access. The higher the costs/prices, the lower the access. Duh! But did costs come up in the two-year presidential campaign? I didn’t hear it.
The price of health care for the average employee now ranges between $17,000 and $27,500, depending on the plan and who’s counting. Those high numbers are enough to wreak serious damage on the solvency of businesses, government and households.
A small business person called me last week to say that his premiums for his 14-person work force had taken a huge jump to $22,000 apiece. That’s an absurdly high number. He was in a quandary on what to do.
Fortunately for Republicans, as they set out to repeal and replace Obamacare, the private sector has hewn a path that shows the right way to reduce the underlying costs of care. Note: It’s not about reducing coverage or the quality of care. Just the opposite.
The other major insight the Republicans need is that they should not look to health insurers for major reform. They are middle men. They play the safe middle ground. They don’t reform. The real reformers have to be the ultimate payers, namely employers and consumers.
Here are some of key ingredients that the GOP must bake into its reform:
- Greater use of HSAs or HRAs (tax advantaged savings plans), attached to high deductible plans. Since it is a consumer’s own money, they immediately cut down on unnecessary utilization – with savings of 20% to 30%. That is proven stuff. Further, it is a GOP-created tool.
- Buy medical treatments under all plans, private or government, with “bundled” prices. That is an all-in price that people, can understand, like $2200 for a colonoscopy or $26,000 for a knee replacement. That ends the consumer fraud that is enabled by incomprehensible bills with multiple line items. Savings can be 50% or more for any elective procedure. Private companies and Medicare have already started down this road to transparency and price competition.
- Offer free or low cost primary care at “medical homes” as part of all plans so chronic conditions — the big cost drivers — can be caught and treated early, before they require horribly expensive hospitalizations. Proactive primary care, preferably right at the work site, cuts costs by 20% to 30%. Again, that’s proven stuff. QuadGraphics has proved it over three decades of best practice.
- Don’t mess with employer-based plans, which are more cost effective than government plans. Offer subsidies or refundable tax credits to people without jobs through HSAs or HRAs.
- Grant immediate waivers so states can manage Medicaid through block grants. Enable the states to install consumer-driven plans with HRAs. Poor people will react the same as other people on becoming better consumers. If it is their money being spent, not simply a handout, they behave differently. Cost control is all about behavior change.
- Telemedicine in medical homes scan lower primary care costs sharply. Reimburse for it forthwith.
- Certify hospitals for lean disciplines and operations, just as private manufacturing companies have long been certified. Our customers demand lean operations. Cost savings are enormous. John Toussaint of Theda Care in Appleton can show the way; he is the world leader in lean for healthcare. Not all the experts are on the East Coast (those are the smart guys who gave us Obamacare and lost the election for Democrats).
The Republicans will want to “reform” insurance features under Obamacare, even though they have little to do with cost reduction.
They will get rid of the mandate on individuals to buy insurance and the associated penalties.
They will allow health insurance to be sold across state lines, which will do almost nothing to lower costs/prices of plans.
They will reestablish high risk pools to get the sickest people out of the general insurance pools and thus lower overall rates. We had such a pool in Wisconsin before Obamacare. It was paid for by a tax on insurers that was passed on to consumers in general.
All that insurance reform needs to happen. But it just tinkers with the real problem: the soaring costs. The Republicans have the political power and the blue print (the red print?) to get reform right this time around.
At $3 trillion for a national health care bill, about one-fifth of the economy, they have to get it right.
John Torinus is the chairman of Serigraph Inc. and a former Milwaukee Sentinel business editor who blogs regularly at johntorinus.com.
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So where’s the money go John? Are doctors overpaid (are they charged too much in the first place for college / med school)? Is it going to new gadgets in the hospitals? Is it going to the healthcare of the hospital’s own employees (how’s that for circular)? Is it lining the pockets of executives who deliver great shareholder value with lean initiatives?
HSAs are great, but the transition is awful. Switching from an everything paid-for-plan to a high-deductible plan with HSA left me little time to bank up any savings. Not saying we can’t start, but there’s a whole lot of people “in the middle” that will need help navigating that.
I have the highest regard for John Torinus, but he once again, in my view, misstates the heart of problem of health care cost control when he says, “Cost control is all about behavior change.” In the context of that paragraph, he clearly means behavior change by consumers. That places the blame for high health care costs squarely on the shoulders of consumers, rather than where it belongs, on providers. If hypochondriac consumers are obtaining more health care then they need, it is only with the consent and most often the encouragement of their doctors. You cannot be treated, tested or prescribed for without a doctor’s approval. At other points in his piece, Torinus acknowledges or at least implies that providers and insurers simply charge too much (because they can). In other of his frequent writings on health care costs, he has acknowledged that providers fail to provide upfront information on costs. That makes the notion of effective consumer choice a joke. I recently had to change insurers. I e-mailed my doctor to ask if he took my new plan. He said he didn’t know. Let me repeat that, He said he didn’t know. He said call the hospital billing department. LIke the overwhelming majority of people, I like my doctor when it comes to explaining medical stuff, which he does well. But this is an unconscionable system and his reply was part of it. The only effective answer to controlling health care costs — in the entire developed world — is government run health care. Which obviously brings its own dangers, turning every doctor and health care worker into a government employe subject, ultimately, to political decision making. (Political is not a bad word, Usually it just means majority rule. Even when special interests rule. it is almost always after competing special interests have fought it out, usually in public) At any rate, short of government controlled health care, with the ability to set prices, I know of no other method to seriously influence prices. John Torinus’s solutions do not affect prices. They control costs, and usually he is talking about employer costs, legitimately from his point of view as an employer — but ultimately under his plan by using less health care. Where does that end? Obviously, society wouldn’t spend too much, or even a dime, on health care if consumers would just stop using it.
“Greater use of HSAs or HRAs (tax advantaged savings plans), attached to high deductible plans. Since it is a consumer’s own money, they immediately cut down on unnecessary utilization – with savings of 20% to 30%.”
John is one of my favorite Republicans, but he is too much of a fanboy for HSA’s, which only make sense if you have money to put into it in the first place.
Really don’t see anything in their about how to handle low income people.
Cutting down on “unnecessary utilization” I’ll be means holding back on certain treatments until they become really costly.
BTW Ken Lamke — great points but do yourself a favor. Please use the RETURN key.
I agree with fightingbobfan. Forcing citizens to use less healthcare because the cost has a negative effect on personal economy may be an effective behavior modification, but it by no means is a sound approach to achieving good health. In some cases it will undo the idea of preventative care, something which otherwise reduces the need for more expensive care later. Find a different way to effect cost control and to encourage efficiency. As an example, it makes no sense for some lower middle class family to have to choose between needed health care and rent, utilities or food. The challenge is to create a more transparent system which allows those for-profit businesses who are part of the health care system to make a profit, but to not price out those who are not wealthy.
Torinus does address some aspects of that with his bundling observation. However, how standard would the suite of services provided be under bundling? If a service which is part of the bundle proves unnecessary for a particular treatment, does the consumer get that portion back? Before any transition to a different system occurs, the cost-to-benefit elements for all actors in the system should be explained. If, as with Obamacare, the insurance companies easily make an end run around the intended process, then we will need sensible regulations in place prior to the change, whether some folks gag at the thought.
As for block grants. Yep. Those have worked at times in our country and individual states. Wisconsin, however, has lacked good leadership for quite some time, and there is no reason to believe we wouldn’t continue to limit access to healthcare if block grants were an option. Poor people are looked upon as slobs, and government as something to dismantle by the political majority in state government.
Part of the problem under our current system of commerce is that the benefits often accrue more to financial institutions than the buyer. An example might be the speedy transactions of the current age, where funds are immediately held for a purchase and more quickly transferred to the seller than in the past. This is not a bad thing, especially for the seller. However, when a refund is necessary, the purchaser might wait days for their funds to return. Why this is a more challenging transaction to process is unclear even to those of us with an inkling. Who here has a grasp of the amount of opportunity benefit which accrues to financial institutions as they hold on to vast sums of money for short periods of time? The excuse might be given that very few consumers will miss the interest value of that $100 they wait a week for. See how quickly principal (principle) goes out the window? Now, if you only had $100 to spend on some necessity in the first place and that money is tied up for days while waiting for a refund, how is that just?
In other words, devise a system which provides very good healthcare without dissuading folks of low to modest means from using it. Devise a system which provides profit motive without as much opportunity to gouge. Not an easy task, and something which is not changed by the suggestions of this column. Unless, the aim is to achieve efficiency in a way which provides benefits mostly to the more highly placed members of our society while providing anecdotal improvement for that portion of workers in the right place at the right time. Let’s not point to the existence of a sweet spot as justification for killing Obamacare. Come up with a plan which is much more fundamentally sound in the first place. Either that, or admit a fondness for Darwin which has little to do with evolution, and everything to do with survival of the pecking order.
Apparently Torinus, bound by the naval to the greed driven, private health care delivery system, is constitutionally unable to consider other countries experience in health care. John, take a deep breath and gird your loins, then go to the Commonwealth Fund.Org. They have done all the heavy lifting for you and have been doing it for years. Contrary to your assertion that privately delivered health care is the cheapest, the researchers at Commonwealth have found exactly the opposite. In their annual report cards for various nations, the US. has for years come out as the most expensive system with the worst outcomes. All of the other nations surveyed pay far less as a percentage of GNP and have longer life expectancy, lower infant mortality, greater consumer satisfaction, etc. The U. S. is the only nation without a public option of the 24 industrial nations.
Single payer would allow everyone to be covered with the same total cost. Medicare for all would be a logical solution, but will never occur with a GOP in control who function as lap dogs for the health care industries lobbyists. John , take a look at the drug advertising on television. Would any well run health care system allow this nonsense, which is increasingly hated by physicians themselves, and has resulted in scandalous drug costs in this country? Despite Reagan’s talking point, in some matters, government is in fact the only realistic solution, and private corporations are the problem.
Sounds good on paper but block grants will only offer a slush fund to Republicans for use on their favorite projects. What are the metrics for monitoring disbursements? Who develops those metrics? What are the penalties for improper use?
The only way to solve health care woes is to remove Republicans from the picture.