• In the private sector we trust?

    My interest in the filibuster, as manifest by my 2010 summer blog project on it, wasn’t idle curiosity. Legislative function, or dysfunction, is directly related to making progress on major problems, including health care costs. I connect the dots in a Kaiser Health News column that appears today. Here’s a choppy summary:

    [T]he Senate has reached such a level of dysfunction that it requires 60 votes under normal procedure to pass any significant bill or amendment. … The new health law that promises just a dozen more years of Medicare solvency only passed the Senate because Democrats had those 60 votes last December. They no longer do and likely won’t for the foreseeable future. Under these legislative conditions, can more health cost control legislation pass? …

    If not, this leaves a vacuum for private-sector approaches. Employers and individuals are not going to stand for double-digit percentage premium increases for much longer. Gradually, they will begin to demand that something be done. …

    The hottest trend in health plan design is the consumer-directed health plan, higher deductible plans sometimes coupled with a health savings account. …

    Will [such plans reduce costs] … and, if so, for whom and for how long? To date the evidence is encouraging but not conclusive. …

    Equally important, however, is whether these consumer-directed plans (or whatever private-sector innovations that fill the cost control policy void) will enjoy a long-term embrace by Americans. Remember, managed care worked too, until it became intolerably rigid for many people. …

    So, when it comes to the thorny problem of health care costs and with the Senate in seemingly endless deliberation, do we, must we, say, “In the private sector we trust?” If you find that unappealing, good luck trying to fix the Senate.

    See the rest at KHN.

    I left a few things out of the column. One is that though the private sector can and will come up with possible solutions to the health care cost problem that doesn’t make the private sector a replacement for a functioning government. Some problems, even in health care, require some  government involvement. A good example, not in health care, is global warming. The private sector can’t solve that on its own. In fact, our government alone can’t either, but it can play a major role. Without it, we’re toast (burnt, boiled, or even deep fried).

    Second, if the federal government doesn’t seriously address health care costs, private firms aren’t the only actors that could fill the vacuum. State governments could act. But the problem isn’t necessarily a whole lot easier at the state level. Massachusetts is still struggling with cost control, for instance. Maryland’s all-payer system seems to have kept costs down there. Your results may vary.

    Third, I ignored the fact that legislation can pass the Senate without influence of filibuster via the budget reconciliation process. But that process has constraints so not everything can be done that way. In general, the Senate has important work to do that requires a filibuster-busting 60 votes.

    Finally, I want to make one thing very clear. My column neither advocates for private-sector solutions, like consumer directed health plans, nor for government-dominated solutions, like single-payer. I may (or, actually, may not) have strong opinions on such things but they are not relevant to the column. My point, my only point, is that if the Senate cannot pass significant legislation to solve a problem like health care costs, the private sector will act. Like it or not, that’s just a fact.

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    • Austin:
      Shifting more of the risk to the insured will help keep costs down.
      The problem with the commercial insurers, in my opinion, is they really don’t want to shift too much risk, for it lowers their revenues.
      For example, a $25,000 deductible would lower premiums by about 60%.
      You would be hard-pressed to find such a policy available today.
      If we had such an option, we could devise innovative ways to fill the gap, and still save quite a bit from our present premiums.
      In 1986, Congress passed 501(m) which stripped Blue Cross and Blue Shield and similar non-profits of their federal non-profit status.
      From a 1992 paper published by the IRS, on page 1, “These plans (speaking of BCBS) had evolved to the point where many of the characteristics that distinguished them from the commercial insurance carriers were no longer apparent. Therefore, there was no longer any justification for the continuing exemption for service benefit plans if their primary purpose was providing medical insurance indistinguishable from that provided by commercial carriers. It was Congress’ look at the Blues’ exemption that served as the impetus for the enactment of IRC501(m).”
      This was the opportunity for non-profits to really set themselves apart from the for-profit insurers. To come up with innovative, cutting edge plans, plans, that could provide long-term security for both the insurer and the unsured.
      The limits to creativity were only bound by solvency and transparency.
      Go to: .
      Don Levit

    • “For example, a $25,000 deductible would lower premiums by about 60%.
      You would be hard-pressed to find such a policy available today.”

      Since such a large percentage of health spending is by a small minority, those who actually need care would effectively have premiums set at over $25,000. I also think that high deductibles would lead to bundling of services, trying to reach that threshold. Expensive procedures would cost even more as hospitals and providers make up losses on the insured procedures.

      Steve

    • Steve:
      I agree with everything you said other than “those who actually need care would effectively have premiums set at over $25,000.”
      I was not clear about the potential policy design.
      The 60% savings would represent a stop-loss policy whose coverage starts at $25,001.
      The underlying policy would be an innovative plan offered by a non-profit insurer to cover the gap.
      Don Levit

    • Your Aug 9, article, In Private Sector We Trust?, you got found half the solution.
      Supplementing your article with Robert Pozen, Boston Globe, Aug 10, A Bitter Health Care Pill, the simple private sector solution is complete.
      Combining both of your principles opens citizens access to a “Free Market” health care system that solves both access & afforablility of insurance & health care almost instantly!
      Medicare created Managed Care Pricing which resulted in the HMO Act of 1970, The Free Market essentially was dead with 3rd parties deciding prices for our personal health care services.
      Once competition was effectively killed, activist were poised to crucify Insurance companies for “Managing Care” and demanding the Gov’t Mandate Benefits for every conceivable personally responsible care & service.
      Solution – REPEAL THIS GOV”T TAKEOVER
      1. Allow HDHP to e sold FREE OF Federal & State Mandated non-essential benefits reducing premiums by 50% in most states immediately. It should not be my financial obligation to pay for someoen elses Invitro expenses, it’s a personal financial desicion & responsibility to have children.
      2. Expand HSA contribution limits to encourage Employers contributions of premium savings into employees’ HSAs.
      3. Allow Individuals Tax Deduction for purchasing HDHP Individual Policies.
      4. Providers mandated to post prices for their procedure codes online.
      5. Prohibit states from impeding competition with use of the Certificate of Need process.
      If individuals can Shop, Price & Buy virtually any other major good or service ONLINE, it is time consumers & providers were FREED from GOV’T controls.
      Tim Cox, CHC