December 31, 2008
An open letter to President-elect Obama and Secretary-designate Daschle in response to requests for comments on health reform:
We appreciate your focus on health reform and your sensitivity to the many stories of those who are struggling to get the care and coverage they need. Thank you for soliciting citizen input as we all work to make progress in addressing the crucial problems in our health sector.
The Galen Institute is a non-profit research organization devoted to advancing an educated debate over market-based solutions to the problems in our health sector and to promoting policies that put doctors and patients in charge of health care decisions. While we support your goals of expanding access to more affordable health coverage, we are concerned that some of the policies that have been offered so far would limit people’s ability to control their health care and health coverage decisions. Instead of expanding individual choice, we see in the policies being offered as devolving more control to centralized agencies and authorities that cannot take into account the unique needs of 300 million Americans.
We offer below our concerns about some of the policies that have been proposed so far and our recommendations for patient-centered reforms.
Our Concerns about Proposed Policies
• Government Health Insurance Plan and Health Insurance Exchange:
While the current system certainly is not perfect and definitely needs change, the new government plan that has been proposed, along with greater government direction over what health insurance benefits must be offered, would move us toward more centralized decision-making. Creating a new government health insurance plan and a new Health Insurance Exchange would put more control over health coverage decisions in the hands of government officials rather than consumers.
Further, with government as a direct competitor to private insurance plans, we would quickly see the same result we saw with Medicare for seniors: private insurance offerings would dry up. A recent study by The Lewin Group showed that more than 18 million Americans could lose their private employment-based health insurance when employers switched them to the public plan. That would deny people the choice of keeping their current coverage they were promised during the campaign.
It also is crucial that health reform not increase that burden of bureaucracy and paperwork that adds expense and complexity to the delivery of health care. Creating the new Health Insurance Exchange and adding layers of new rules and regulation for insurers and employers would not streamline but rather would impede movement to a more efficient, economical health sector.
• Employer or Individual Purchasing Mandates:
During the campaign, you proposed a “play-or-pay” employer mandate that would compel businesses to pay for their workers’ health insurance or pay a fine. This would hurt those the plan is designed to help – workers. A February 2007 Employment Policies Institute study by three Harvard University authors examined different health insurance proposals and concluded, “In terms of labor market effects, employer mandates are by far the most costly.” They looked at employer mandates, including a play-or-pay structure, and concluded such a plan could cost nearly one million jobs – and the number could go much higher in a weak economy. A policy that kills job is the last thing our economy needs.
An employer mandate also locks health insurance to the workplace, denying workers the option of making their health insurance arrangements through other groups or plans, restricting rather than enhancing consumer choice.
You also have proposed a mandate that all children must have health insurance. Recently, many politicians and pundits have praised Massachusetts’ experiment with an individual mandate, which puts the burden of purchasing insurance on each person to avoid paying a fine. This does not fix the problem, however. Coverage is dictated by government, and people who cannot afford policies must be offered new subsidies or exempted from the law. There are better solutions, as we will describe below.
• Federal Health Board:
HHS Secretary-designate Tom Daschle has popularized the idea of creating a health board similar to the Federal Reserve that would oversee the U.S. health sector. Again, this would be a movement away from leaving decision-making in the hands of patients and their doctors and toward more centralized control. This is of great concern to us. We believe the board would be susceptible to political influences and far removed from the unique medical needs of individual patients, and it simply could not judge what is best for all Americans.
As we understand it, one of the charges of the new board would be to make recommendations on the merits of competing medical treatment. While the idea of this “evidence-based medicine” sounds attractive – everyone wants to get better value for their health spending – giving a governmental or even quasi-governmental body authority over people’s health choices is not the way to improve care. The reason we have so many different medicines and treatments available today is because each human being is different. A treatment that works for some people might not work for others. Having a board that excludes any treatment on the basis of “comparative effectiveness” is a danger to the health of people who may fall outside the norms or have special health needs.
In addition, the United States is the leading source of medical innovation in pharmaceuticals, medical devices and technology. The rest of the world depends upon these breakthroughs. Putting so much authority into the hands of a single board would certainly discourage innovators who would be wary of their ability to clear this additional hurdle in getting their products adopted. If cutting-edge development is discouraged, the health of people not only in the U.S. but worldwide would suffer.
Our Suggestions for Health Reform
We believe that public policy should not reduce innovation or limit patients’ choices, but expand them. We offer the following recommendations for policies that would expand access to affordable health insurance for all while enhancing their options and giving them more control over health decisions.
We encourage you to focus on the commitments made during the campaign to modernize our health sector to conform to a 21st-century mobile economy, such as allowing portable health insurance policies. As we are seeing now with the job losses in our troubled economy, tying health insurance to the workplace simply isn’t working for millions of uninsured Americans. An October 2008 Council for Excellence in Government study showed that 78 percent of Americans want portable coverage, and with four in 10 workers changing jobs each year, this is an important step in modernizing our health insurance marketplace.
We believe three policy changes are needed to do this: Allowing portability in the generous tax subsidies provided for health insurance; providing new purchasing options; and creating new opportunities for those with health problems to purchase coverage.
• Portability of Insurance and Tax Subsidies:
Changes are needed in the way we currently subsidize private health insurance. Those fortunate enough to receive health insurance through their jobs benefit from a tax subsidy currently estimated at $300 billion a year. This subsidy is invisible and people get it only if they receive their health insurance at work. While this system worked tolerably well in the 20th century, it is ill-suited to a mobile, 21st century workforce. If the tax benefit were portable, health insurance would be as well and people would not have to lose their coverage when they lose or change jobs. Further, we need to equalize the playing field so everyone gets the same tax benefit regardless of where they obtain their health insurance.
Instead of the invisible subsidies currently provided to support job-based health insurance, all Americans not eligible for Medicare, including the currently uninsured, could receive direct credits to help them purchase private insurance. The subsidies could be in the form of direct vouchers or tax credits that would be refundable so people would be eligible for the full value even if they don’t owe taxes.
The credits could be used only to purchase insurance, and people would have a range of options from which to choose. The great majority of Americans likely would continue to choose to receive their health insurance at work; replacing the current tax exclusion for job-based insurance with the new tax credit would be little more than a bookkeeping change for them.
But a generous credit would be worth much more to the great majority of Americans than the currently invisible and regressive tax break, which is worth little or nothing to lower-income workers. The system we have today is highly regressive, hurting our poorest and most vulnerable population. Because the new subsidy would be in the form of a voucher or credit, and not a deduction, it would be worth much more to people at the lower end of the income scale.
Importantly, the credit would give families much more control over their health benefits and would allow them to have greater stability in their health insurance coverage.
• New Purchasing Options:
Another way to expand consumers’ options is to allow them to purchase health insurance across state lines. Today, patients in New York State are trapped under regulations that drive up the average monthly cost of an individual policy to $388 or more, according to data from eHealthInsurance.com. In contrast, the average policy for North Dakota residents runs just $83 a month, largely because the state has a lighter hand in regulation.
Allowing people to shop across state lines for more affordable health insurance policies would promote competition for consumers’ business, which would in turn give consumers more opportunities to find policies that suit their needs and their pocketbooks. Economists Steve Parente, Roger Feldman, Jean Abraham et al showed in a University of Minnesota study that at least 12 million more people could obtain health insurance if they were allowed to shop across state lines for policies. Perhaps the best news is that this change would not cost the federal government a dime.
• Guaranteed Access to Health Insurance:
Critics have raised concerns that giving people more freedom to purchase health insurance outside the workplace would mean that higher-risk individuals would be denied coverage, especially if they have pre-existing conditions or otherwise have trouble getting insurance.
Providing a better safety net does not require re-engineering the entire health sector. This problem would be much better addressed by targeted programs at the state level rather than through a major new federal bureaucracy. Idaho and Utah, for example, have created programs that guarantee citizens access to affordable private health insurance. Idaho has implemented a functional high-risk reinsurance pool, funded by premiums on carriers ceding risks to the pool, by a portion of the state’s premium tax revenue, and other fees. Unlike traditional risk pools, the Idaho pool is underwritten by the individual carriers operating in the Idaho market. Utah also has created a functional risk pool that guarantees its citizens access to affordable coverage.
The federal government could establish new payments to the states to support their high-risk pools and provide guidance in setting up these pools so they are able to provide a safety net for people who are unable to purchase or afford coverage in the private market. These policy proposals build on the current system and fill the gaps with new incentives, subsidies that are better targeted, and new programs to assist those who are being left behind in the current system.
Additional incentives could be offered by states to plans that implement disease management, individual case management, and health and wellness programs, as you have advocated. Disease management programs reach out to people who are at risk for certain diseases and chronic conditions and provide them with care managers and specialized support to make sure they are informed and receiving the proper care.
Innovation, Competition and Transparency
A key component of a properly functioning market is information to help people make educated choices about their care and coverage. Your proposals would support giving patients better information about the cost and quality of services, such as cost comparisons among doctors and hospitals. Whenever the consumer has transparent information, the better the consumer’s decision will be. We support this goal.
We also support continued innovation in the delivery of health care and policies that give health providers and plans the freedom to innovate to meet patients’ needs. Some examples of this are already showing success, such retail health clinics that are opening in Wal-Mart, CVS, and other establishments around the country to give patients ready access to primary care, often at a fraction of the cost of an office visit or a trip to the hospital emergency room. Many of those seeking care in these clinics are uninsured and otherwise would have difficulty accessing care. Innovations such as TelaDoc give patients access 24/7 to physician consultations so they can get care from a physician when they need it. In addition, some physicians are eliminating third-party insurance and instead of being buried in paperwork are caring directly for their patients through a new form of direct medical practice that offers patients a true medical home.
It is crucial that health reform not hinder these types of innovation and not interfere with established doctor-patient relationships.
Putting Patients First
We believe the reforms we have proposed put the most important constituency first: patients. These ideas provide a mix of public and private financing but leave the very personal health decisions where they belong: with the individual and the family and not with government officials. We ask that you steer away from creating more bureaucracy, including a federal health board, a government health plan, a health exchange, and mandates on individuals and employers. Instead, we encourage you to focus on reforms that would put patients first by giving them more options of more affordable, portabler coverage with fairer subsidies and new purchasing options for all.
The more innovations and options we are able to encourage here in our country, the better our health care – and that available to the rest of the world – will be.
Thank you for your consideration.
Grace-Marie Turner, President
Amy Menefee, Communications Director
A non-profit, non-partisan research organization focusing on health policy.