Real Health Care Reform

Americans are used to seeing some products and services getting better and cheaper all the time. But some services don’t, and they’re important ones: health care and education are the best examples. The market for health-care services is a lot like the market for cellular phones: It is driven by technology and innovation and, because the capital costs of building a cellular network or a hospital MRI clinic are substantial, the markets tend to be more efficient when there are larger numbers of participants. If you could take an iPhone back to 1982, it would seem like something out of science fiction. But a 2009 visit to the doctor’s office is depressingly similar to a 1982 visit to the doctor’s office, and in many ways is worse: It’s more expensive, the insurance and billing systems are even more frustrating, and the record-keeping is frequently defective. The system is plagued by fraud, waste, and malfeasance. There have been some great innovations in medical technology, but there has been regress when it comes to affordability, freedom of choice, and transparency. Why?

This is the most important part of the article:

"Insurance on Your Insurance. Lots of reformers, including conservatives such as Bobby Jindal, want to require insurance companies to cover pre-existing conditions. That would be a mistake: It would only entrench the third-party-payer model, and it would use a statutory mandate to socialize costs, which makes it the equivalent of a government entitlement program. What is needed, as John H. Cochrane of the Cato Institute has argued persuasively, is a two-pronged approach to insurance: health insurance of the familiar sort, and what he calls “health status” insurance, which is, essentially, an insurance policy that keeps you covered in the event you develop a chronic condition that would normally render you uninsurable."

One reason voters trust dems more than pubiles on health care in polls is that pubbies haven't, up until now, given much thought of the insecurity endemic in our current system.

In our current employer-based medical insurance system, everyone runs a significant risk of experiencing the following scenario: devlop a chronic condition, lose your job, lose your ability to purchase insurance, and your medical bills ruin you financially.

This is a real risk the worries most voters, and dems at least address it, whereas up until now pubbies and conservatives have ignored it.

We need to devleop market-based solutions to deal with this issue, and Cochrane's idea health status is a nice first step. A Swiss-like system is another possible market-based solution, though I am starting to think the a Cochrane-like approach is probably more appropriate for this country.

At any rate, we need more people thinking about this, rather than merely repeating the matra of Catastrophic Coverave plus MSA.

MSA's and catastrophic are good ideas, but until we deal with the insecurity issue, we will not get any traction on real reform, and we give the dems an opening to push for socialized medicine.

What I would like to see would be a system whereby someone who has never had e.g. cancer would buy "cancer insurance" (one would likely buy insurance for many conditions in a package). If a person gets cancer while a policy is effect, the insurer would cover the lifetime costs associated with treatments listed policy. If a person does not get cancer while the policy is in effect, or does not file a claim within a certain time of the policy's expiration, the insurance company would pay out nothing.

At the end of each year, the insurance company should be able to estimate pretty well how much money will be required to provide lifetime treatment for all the insured people who got cancer. There are a few unknowns, but the uncertainty would be similar to that involved with annuities. Since the treatment protocols would be specified in advance, the costs could be reasonably predicted. It may be that some patients live longer than expected because they can (with their own money) purchase treatments that were unavailable when a policy was written, but such patients would probably have less need for the treatments the policy would provide.

Note that a variety of policies could be issued offering different levels of care. For example, some women might purchase a policy which would provide for reconstructive surgery in case of mastectomy, while others might purchase a cheaper policy which would not.

There would need to be a regulatory framework to determine when cancer will be deemed to have originated, and to ensure that if someone switches from one carrier to another shortly before cancer is discovered, the claim will get paid by one carrier or the other. It should not be possible both for the first carrier to argue successfully that the cancer originated after the switch, and for the second carrier to argue successfully that it happened before. To minimize difficulties in most common cases, it may be helpful for policies to generally be paid for in advance of their effective term. If policies were prepaid a year in advance, it might be theoretically possible for someone who secretly discovered that he had cancer to buy a policy, wait a year, and then seek treatment, but it would be unlikely that such a person could successfully pretend that the cancer hadn't originated well before the policy became effective.

While there would certainly be some difficulties setting up a system that would insure people based upon when they contract various illnesses, as opposed to when they incur costs related to them, such a system should avoid most of the inefficiencies associated with cost shifting that are present in today's system and in any other proposed solutions I've heard about.

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