• Wishlist for Health Reform 1.1

    Let’s call the health reform that will be in place after budget reconciliation passes the Senate and is signed into law Health Reform 1.0. I think someday we’ll see Health Reform 2.0 that focuses more on costs. Between now and then there will be tweaks to version 1.0. Here’s are a few things I’d like to see in version 1.1:

    Depending on an individual’s income, the employer plan for which he is eligible may be a better deal than exchange-based plans (or vice versa). That’s because employer plans benefit from a tax subsidy and exchange plans come with low-income subsidies. Except (perhaps) in the case of small businesses employees, one can’t receive the tax subsidy for an exchange plan and one can’t receive both a tax subsidy and a low-income subsidy.

    All this heterogeneity in subsidy rules creates different incentives that have nothing to do with the underlying quality of health plans. I’d much rather see all insurance products compete on a level playing field where subsidies are fully portable across all plan types. I don’t like the employer-sponsored health insurance tax subsidy, but I accept that it won’t go away quickly or easily. If we’re going to have it anyway then let’s allow the subsidy to be used for an exchange plan.

    In time states will be permitted to allow larger employers to offer exchange plans. So that’s a good start. The sooner we decouple health insurance from employment the better.

    • How about firewalls in the exchanges? The way I see it now, is adverse risk selection akin to the wild, wild west–even in a subtle way. An MCO can market two separate products in two places–in and out–and it is not clear to me whether behavior like this is subject to federal or state regs at this time?

    • According to the Kaiser Family summary, catastrophic coverage is available under the age of 30. In my state, Pennsylvania, you can get catastrophic coverage with a deductible of $2,500 for about $1,000 a year. I would think this a much better choice than the fine for many people. At any rate, the fine can be adjusted.

      On competitive MA bidding, why didnt we get that to begin with? Why didnt MA plans in big cities like Miami decide to compete on price?


      • @steve – I should do a post on why we don’t have competitive bidding in MA. Stay tuned.

        I agree with you about catastrophic coverage. If it were up to me enrollment in that would be automatic. Buying additional coverage would be optional.

        @Brad F – I haven’t thought a lot about the in/out of exchange market issues. It will be very interesting to see what happens. I hope there is some discretion left to states to police things and I hope there are data made available on plan characteristics and enrollment (person level data would be even better but I don’t hold out hope for that). If such data are available there will be some good studies done.

    • I’m not at all confident we’ll see Health Care Reform 2.0. To address costs, we must bring the market back into the health care choices we all make every day. That’s certainly not something Pelosi or Reid will ever do, and I’m not convinced Obama would do it either. Why? It forces us to face the reality that unlimited health care for all is just not possible. And that’s a political reality some are just not willing to embrace.