Another health reform proposal

By eight important health economists, with support from the National Research Institute and the American Enterprise Institute (ungated PDF here):

First, we allow and encourage insurance companies to charge individualized premiums to consumers that reflect their true health care costs. This moves away from the current approach of offering coarse and relatively uniform premiums to the wide range of individuals seeking insurance (through the use of group insurance or state-level community-rating mandates). This reform provides a firm foundation for a health insurance market that no longer motivates healthy individuals to opt out. Insurance offerings would be made available in an open market—for example, through insurance exchanges— with premium transparency.

Second, to ensure that offers of insurance are affordable, we propose government financed premium supports. The poor, especially the sick poor, gain access to a basic insurance plan at no cost and to more generous plans at significantly reduced costs.

Third,we propose eliminating the practical and legal barriers to multiyear (long-term) health insurance contracts. Such contracts protect all Americans from increases in insurance rates that could accompany major illness.

Fourth, we propose to abolish the tax preference for employer-sponsored health insurance plans. This subsidy encourages excess utilization of both insurance and low-value health care services. It also costs the federal government nearly $300 billion in lost revenue—revenue that could be used to fund insurance for the sick and the poor. Finally, it forces an awkward bundling of health care and employment with adverse consequences for workers and firms alike.

I did not read all the details, so perhaps the following is included somewhere. I’d add something that encourages/removes barriers for plans and providers to fund and offer health care that is evidence based (e.g., safe harbor from lawsuits under certain conditions). Still, theirs is a plan with elements I could defend.

Nevertheless, I would be surprised if the authors believed any plan like the above would become law in their lifetimes. This sounds critical, but I don’t intend it that way. I just believe path dependency, status quo bias, stakeholder interests, etc. are too strong.

That’s not to say it isn’t likely we’ll see some movement in some of the directions the authors propose. Indeed, in a few cases, the Affordable Care Act takes steps consistent with their plan (e.g., the Cadillac tax; see also Arkansas’s private option). Though in many other ways, it must be acknowledged, it is a step in another direction.

That does not, by itself, make it a step not worth taking. Reasonable people can differ on that. But they really should keep in mind the likelihood of passage other, substantial reforms that assist the poor and near poor. Just as it is reasonable for people to find the ACA wanting, it is also reasonable for others to cling to it unless and until another plan obtains strong political viability. Repeal will never obtain broad, bipartisan appeal without replace. Even then, good luck!


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