Rob Sama Grand Plan – Health Care

Rob Sama Grand PlanThe principal reason why we’re dealing with this portion of the plan so early, and yes, there’s much more to come, is that our President has insisted on pushing this issue to the forefront of his policy agenda. Regardless, in the Grand Plan we tackled issues that are prerequisites to taking on health care reform before tackling the issue itself. In fact, much of the Rob Sama Grand Plan for health care has already been implemented in earlier planks. Didn’t notice that happening? That’s ok, I’ll walk you through it.

But before we begin, we need to state clearly what it is we’re setting out to accomplish. If we act without delineating our goals, we’re not likely to achieve much good. So here goes:

  • Stop the runaway cost inflation: Any and every other problem relating to health care is related to the spiraling cost of delivery. Take care of this and most other problems become easy to fix.
  • Encourage the development of new medical technologies: Medical advances don’t just happen, and they don’t just happen anywhere. Yet we all benefit from them. Any changes to our medical care systems cannot discourage the development of new medical technologies, whether they be devices, drugs or techniques.
  • Address concerns about portability and pre-existing conditions: People are upset about losing health insurance coverage in between jobs, and about insurance companies using the notion of a condition being pre-existing so as to not have to make payments. These are two sides of the same coin and are addressable concerns.
  • Stop the looming catastrophe that is Medicare bankruptcy: Medicare cannot continue as is, or it will bankrupt the country. At root a new system needs to be devised for seniors so that their medical care costs do not become an undue burden on the rest of society.
  • Retain patient autonomy in decision making: patients and their loved ones ought to be able to make decisions regarding their health without interference from the government.

One thing that it’s important to note that is not a goal is universal or free coverage. Universal, free national health care is not possible or compatible with our earlier stated goals. People’s appetites are unlimited, and where their appetites are limited their tastes are not. As a result, if you make something free, people will consume as much of the highest quality stuff as they possibly can. Unfortunately, while their appetites and tastes are unlimited, our means are not. Therefore, granting free health care to people is a surefire way to go broke. Alternatively, the government can get intimately involved in every healthcare consumption decision, which destroys our earlier goal of patient/doctor autonomy. In short, free health care provided for by the government is simply not affordable and not compatible with freedom.

What’s more, utopias don’t exist. Humans are imperfect creatures and they form imperfect societies. But when utopian promises are made by a society and those promises aren’t kept, invariably a scapegoat is sought, and then the ugliness begins. Putting the entirety of health care under the government’s umbrella puts enormous power in the hands of government. A government that controls whether or not you can receive medical care is a government that can dictate anything to you, whether or not you ostensibly have freedom. For that most fundamental reason, government health care is incompatible with freedom, and thus not a part of the Grand Plan.

If you don’t value your freedom than you’re fundamentally on a different page than I am, and the Grand Plan is probably not for you. For the rest of you who do value your freedom, let us continue.

So why is it we’re not currently achieving our objectives except for new medical innovations? The short and simple answer is that there is a disconnect between he who pays for medical coverage and he who is receiving the service. Virtually never does the patient pay his own bill. Rather, today, the patient has his insurance company pay the bill, and the insurance premium is paid for by a combination of his employer and a deduction taken from his paycheck. Alternatively, it’s paid for by the government if you’re on Medicare. But the point is, it’s never paid for by YOU.

This is a crucial point to grasp. If a good is not paid for by a consumer, then two things occur: the consumer makes no effort to limit his consumption of that good, and he makes no effort to price shop, he only shops for quality. Because human appetites are unlimited, they can literally gorge at the medical trough without even knowing that they’re doing so. Medical bills need to be reconnected to the person paying for the service, and insurance needs to return to its original purpose – to insure against the unexpected.

You will note if you remember in the Taxation plank of the Grand Plan, we eliminated the corporate income tax. This means that corporations no longer benefit from offering health plans to employees. They can if they wish to, of course, but it’s all income to the employee. Over time, most companies will stop offering insurance, and will instead opt to just pay employees in dollars, which makes more sense. This leaves employees to procure insurance on their own dime, in a non-tax subsidized way.

If you think about it, this is no different that the way your car insurance works today. You shop around for a policy that will cover you in case of catastrophe, and you carry that policy with you no matter who you’re employed with. Your policy is priced in part on your driving record, but also on what type of coverage you want. And in most cases, barring some sort of disaster with one’s insurance company, you hold your policy throughout your life. That’s how insurance ought to work.

Because consumers will be paying the bill themselves, they can make an informed economic trade-off as to how much they’re willing to self-insure before insurance benefits kick in. They can choose to pay high premiums for something more all-inclusive, or a lower premium for something with a higher deductible. I strongly suspect that most people will choose a higher deductible. When the consumer puts money away to self insure, there is no need for any special health-savings account or other such paperwork generating nonsense. Simply put the money in an interest bearing account, and it’s assumed to be invested under the Grand Plan tax setup. And when consumers spend their money, they’ll be encouraged to shop on price, as they shop for everything else in their lives. This simple change will encourage health care provides to drive costs down, and provide better service to their consumers, who will now be paying their own bills.

So the changes we’ve already made to the tax code alone, will go an enormous way toward reducing costs in health care. Moreover, these changes will also eliminate problems regarding portability and alleviate problems regarding preexisting conditions. Because you own your own health care plan, you’ll take it with you wherever you go. And consumers will be motivated to keep some form of catastrophic insurance with them throughout their lives. Costs will be lessened, and the price for not doing so may be getting caught without should a medical emergency arise. Yes, some people will wind up getting stuck or take undue risks, not hold insurance, and then get sick. But we’re not seeking an utopia here. The best solution is for people to maintain catastrophic insurance, maybe coupled with unemployment insurance, so that the premium gets financed for the consumer is they’re unemployed for a period of time.

The other thing we’ve done to reduce costs is enact tort reform. Any serious proposal to bring medical costs down must include tort reform, if not begin with it. Though we’re discussing the Grand Plan here, it should be noted that the plan passed by congress and signed by the president does not include any meaningful version of tort reform. It is, in my opinion, an unserious bill.

We should also discuss life insurance here. You may not be aware of this, but currently, the biggest lobby in favor of the death tax, also called the inheritance tax, is the life insurance industry. The reason for this is that when a person wants to pass down a non-liquid asset to his descendants, an asset such a business or a piece of land, he must find a means of paying off the inheritance tax in order to avoid liquidating the asset. In order to accommodate this need, life insurance was born.

However, in a world without an inheritance tax, the need for life insurance diminishes substantially. So let’s repurpose it. Instead of life insurance, let’s call it “End Of Life Insurance”. After all, we all know that somewhere at the end of our lives, we may encounter large, end of life medical expenses. These are not the type of expenses that should be covered by catastrophic medical insurance, because death is inevitable. But the expenses are not necessarily inevitable. So here’s how it would work: you buy end of life insurance, which is available to be cashed in on any time after you’ve reached the average of death, 75 years or so. It’s up to you if you want to spend it on keeping yourself alive, or if you’d rather let your descendants get the money. But the point is, it’s up to you. And like life insurance now, it could even expire after a point, say 95 years of age, if you think you’ve lived a full enough life. The great part about this is that the infrastructure for this already exists. All that needs to happen is for existing policies to be repurposed from being life insurance to being end of life insurance.

There are a few things that do need to be changed to further lower costs beyond what we’ve already discussed in the Grand Plan however. Let’s talk about them now:

Allow Insurance To be Purchased Across State Lines:

As it currently stands, citizens are forced to buy health insurance within their state borders. This is patently absurd. You can get your mortgage from anywhere, hold your retirement accounts across state lines, get credit cards across the country, incorporate in any state regardless of where you reside. So why should ou be restricted to buying insurance from within your state borders?

The problem with this limitation is twofold. Firstly, people who live in small states have a limited number of insurers to choose from. Limited choice will always drive up costs. Secondly, state laws differ as to what insurance plans are required to cover. Some states cover quackery like chiropractic and acupuncture. But if you don’t want those services, why should you be forced to pay for those who do? The easiest way to drive those inefficiencies out of the system is to make the states compete with their laws, the same way that they do with incorporation statutes and lending statutes. That way, you can buy a plan in Delaware regardless of where you live, so long as you like the plan, just as you can incorporate there today.

Roll Back The FDA

The FDA imposes enormous costs on the development of new drugs and devices in the medical field. Approval of a new drug or device can take years. Because patents only last 20 years, this process significantly diminishes the ability of companies to adequately recover sunk R&D costs when selling new products. So the approval process need to be seriously scaled back.

Currently, the FDA tasks itself with two things: ensuring safety and efficacy. But why should the FDA concern itself with efficacy? Does denying a drug to a sick patient because the FDA is uncertain of its effectiveness a smart idea, so long as it has been deemed safe? Does anybody want to spend money on drugs that aren’t effective? Clearly not. Yet the FDA delays letting drugs come to market, using up valuable patent time attempting to do what the market is better able to do more quickly and more effectively. And in the meantime, they’re denying treatments to patients who need it, while they satisfy themselves as to whether or not those treatments are effective. Let patients and their doctors make that determination. There is no need for government intervention there.

Moreover there’s no need even for the FDA to be in the safety certifying business either. Certifying safety is something private licensed agencies can do perfectly well. SImply make the agencies post a large enough bond in case of failure, and let them compete with each other on price and time spent testing. Competition in the safety certification market will reduce costs and time to market, which ought to lower costs across the board, all the while ensuring that new technological advances make it to market in a timely manner. Should a certification company screw up, it can lose its posted bond, or even its license to certify.

Unwind Medicare:

It should be apparent by now that there is little need for government sponsored health insurance for the middle class under the Grand Plan. In old age, most people should still have their own insurance policies, and they should have end of life insurance policies that would cover them with end of life medical expenses, should they choose to incur such medical expenses.

However, in the current time frame, too many people are dependent on Medicare to simply shut it down. But entry into the program ought to be limited, pending implementation of the remaining portions of the Grand Plan. I would support a cutoff of something like 35 or 40 years of age, under which Medicare would no longer be offered. Furthermore, any new entry into Medicare ought to be strictly means tested for those over the cutoff age. In this way, we limit the public exposure to future medical costs. We will likely incur debt to pay off the reminder of Medicare participants, but at least it is capped, and with a growing economy we ought to be able to handle the load.

Government Oversight:

It ought to be acknowledged here that any insurance provider, private or government run, has an incentive to collect premiums and simply to not provide payment when it is required. While it is difficult if not impossible to get the government to police itself, it is part of the normal functions of a proper government to police private industry. To that end, having a specialized agency, either at the state or federal level, enforce insurance contracts and payouts is a proper and desirable function of government. I would also be supportive of a fund established to aid plan participants transition over to other providers should an insurance company go under. However I should also state that I believe that insurance is best handled in a cooperative fashion, where the participants are also the shareholders. It’s how I buy my home and car insurance, and how I would choose to buy my health insurance, were that option available to me.

Recap:

So let’s just recap what life looks like for a consumer under the Rob Sama Grand Plan from a health insurance perspective:

As a consumer, you buy health insurance in much the same way you buy car insurance. You likely buy a high deductible plan, which is competitively priced because it’s competing for your business on a national basis. You self insure for the remainder, and pay ordinary medical costs out of pocket, price shopping in the process, thus further driving down costs. This policy will cover any catastrophe but perhaps have limits for normal, end of life medical costs, For those costs, you carry an “end of life” insurance policy, which will cover a fixed dollar amount, and which can be drawn on after the age of 75 for medical costs should you so choose. Current Medicare subscribers would continue unchanged, but a cutoff ill be instituted after a certain age, with younger people and people of means prevented from entering the system. Medicare is finally wound down some 30-40 years from now.

It goes without saying that nothing I’ve seen in the Obamacare proposal is compatible with the Grand Plan.

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One Response to “Rob Sama Grand Plan – Health Care”

  John Says:

This is all well and good in the world where healthcare consumers make rational choices and have real alternatives to spend their money on; a world which sadly does not exist. If I am out shopping around for needed treatments, where’s my leverage? If I need to treatment in order to return to health and work (or to not die), and the several large hospital systems in my area only stand to lose some revenue, where’s the downward price pressure going to come from? Which is why one of the best cost control mechanisms is actually the insurance industry. (The only time in recent history when we didn’t see costs rising quickly was the peak of HMO plans, which actually moved those cost decisions into the entire process of getting care. Which we hated.) Experience shows us that we by and large do not make rational economic decisions about health care – if we are sick, we want every possible treatment, even those unlikely to provide any benefit, no matter what they cost, and generally, we have very few places to get those treatments, so it’s not like we can really shop around for them.

And if we can, how do we decide what the best value is? This makes your suggestion that the FDA not bother with efficacy a bit strange; that removes an independent agency that actually has a role in determining whether a manufacturer’s claims about a healthcare product are valid.

Also: “free” and “universal” are not the same thing, although you’re mixing them together. “Free” is not possible (even if it feels free, it’s just that you’re paying somewhere else, such as via taxes). “Universal,” on the other hand, is an achievable goal (it’s been achieved in many places) and – this is just a personal value judgment – a moral imperative for a modern nation.

Regarding the inheritance tax and life insurance: most people buying life insurance have estates that fall into the exclusions on the tax. They are buying life insurance to make up for lost income, to cover mortgage payments, care of children, etc.

Tort reform: not a bad idea but this is a couple of percent of healthcare spending, so it’s more trimming around the edges.

Finally: autonomy. This is a mom & apple pie concept that no one would argue with, but defining it is a bit harder. On most group health plans, autonomy is currently limited: you do not get to choose providers (or you’re penalized if you do), and everything is subject to utilization review. Frankly, my British relatives have at least as much autonomy as I do now on a pretty good employer-subsidized plan: while everyone in the UK gets no-payment care from the NHS, it’s none uncommon for people to have private insurance (often employer-provided for higher-paying jobs) or simply pay for certain treatments themselves. Despite the horror stories we hear about rationing there, the system does a very good job providing care to everyone.

And, at a much lower cost than our system. Most of the NHS’s problems are problems of scarcity; give the NHS American-level resources (on a per-patient basis) and you’d have a system that was the envy of the world.

And, as you rightly point out, costs are the issue that makes everything else difficult. NHS may be a giant, stern, HMO in many ways, but it is effective and providing very good public health outcomes and keeping costs in line. It also wastes less as a percentage of health care spending on overhead than our private system).

All that said, I don’t think it’s the right choice for the US, because I think there’s tremendous benefit in keeping decision-making closer to the communities being served, whose needs vary a lot in a country as large as ours. My point is simply that “autonomy” is easy to love and hard to define; I suspect many Brits feel that being able to change jobs without losing coverage for an existing condition, or not having to worry about doctor bills if they’re laid off, or being able to decide to start a business without worrying about how health insurance will be impacted, would argue that this all gives them a kind of autonomy that’s much harder for Americans to achieve.

So what is autonomy? Is it being able to choose any doctor? I can’t do that; my British relatives can. Is it being able to get any treatment I want and have my health plan cover it? Neither I nor those relatives can. Is it being able to put down your own money for those treatments? I can do that. So can my British family.

Finally: you say that you see nothing in the bill just passed that reflects any of these principles, and I find that kind of strange. Autonomy is actually one area where it’s quite strong: there’s no new publicly-run plan, and in fact it enshrines privately-selected insurance as a core value of our system. It’s stunning in its conservatism, and it builds on ideas that come from the Heritage Foundation (that band of crazy liberals!). it seems quite obvious that Obama’s intent here was to start with something as moderate and palatable to Republicans (who have been endorsing the same ideas for years, until he did, when they became “socialism”).

There is plenty to criticize in it, but the suggestion that it’s a government takeover or socialist or completely partisan are just mindless. It’s additional regulation of an already highly-regulated activity. If it feels partisan, it’s because our opposition party simply opted out of participating in the process of refining it. And in doing so, I think, has cost itself all credibility as a useful opposition party – something any democracy requires.

 
 

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