The Way Forward With Health Care

The Way Forward With Health Care

Health care costs are certainly a critical concern. “Americans often describe the U.S. health care system as the best in the world. But according to a report from the Commonwealth Fund, the U.S. health care system ranks last among 11 high-income countries. The country leads the world in health care spending, but its residents are sicker and more likely to die of preventable conditions than those in other wealthy countries.” From Last to First — Could the U.S. Health Care System Become the Best in the World?, July 2017.

In 2015, I compiled an analysis that assumed that health insurance costs would increase at the rates the actuaries for Foley Public Schools predicted and assumed the average income of a teacher increased at the rate of inflation at 2.5%. Under those assumptions, the percentage of the teacher’s salary that would go for health insurance would go up from 15% in 2015 to 34% in 2045. If extrapolated to the U.S. as a whole, it is clear that this is simply not sustainable. The public would not support that drastic a shift in consumption from other things, such as food, clothing, shelter, entertainment, transportation, utilities, etc. to health insurance. Something has to give.

I don’t have a specific proposal at this point, but will consult with experts on the subject to find the least bad option. If there were a simple solution, someone would have already found it, and it would not now be an issue. (The proposals at Council for Affordable Health Coverage (CAHC), however, may be a good place to start.)

However, it is clear that the following need to be considered, if the Affordable Care Act is found to be unconstitutional in the pending case, or even if it is confirmed:

• Preexisting conditions coverage will need to be continued
• Young adults would be allowed to stay on their parents’ health insurance plan
• Provisions be in place to take care of individuals who have been using the exchanges to purchase their insurance or who have been covered under the Medicaid expansion.
• The “cure” must be designed to actually solve the problem.

The first step you take when you try to solve the problem it to accurately define the problem. The problem may be simply stated as “the costs of health care in the United States have been and continue to rise rapidly, consuming more and more of the entire country’s GDP, and the average results are worse than many other countries spending far less.

Then you seek to uncover the cause(s) of the problem underlying the symptoms. Blaming the private health insurance companies and pharmaceutical companies is simply scapegoating and not focused on the causes.

First, I will address the “average results”. Medical advances pioneered primarily in the United States have dramatically increased the average life span of Americans. However, this improvement is not uniform, but has most helped those who have lifestyles most conducive to good health. That is, those who eat less, eat healthier diets, exercise more and avoid risky behavior (such as smoking and excess use of alcohol) fare the best. Many Americans choose lifestyles that simply is not optimal, but when they get sick, want the quick fix through prescription drugs and/or surgery, which are far more expensive than preventive health practices.

Second, most people who have health insurance or access to health care receive the care without regard to the cost of the care. Someone else pays the bill – either the employer through the employer paid health insurance or the government. And, in the case of the indigent who use the emergency room as their primary care provider, other people pay the bills.

Third, few people have any idea of what the cost of the care will be, until perhaps when they see the bill or Explanation of Benefits Statement. They may pay a deductible or some co-pays, but users of health care have little or no incentive to choose a lower cost service. They have no “skin in the game”. Even if they had an incentive, they have no means to save money because they do not have the cost information prior to receiving the care to compare alternative providers or alternative methods of care.

(Trump was right to identify price transparency as a critical element in controlling health care costs, but the courts rightly ruled that he did not have authority to demand transparency through an Executive Order.)

At Adrian Public Schools in 2004, just before the Health Savings Accounts (HSAs) became available, I designed a Health Reimbursement Account (HRA) option for our non-teacher employees. HSAs were established as part of the Medicare Prescription Drug, Improvement, and Modernization Act, which was signed into law by President George W. Bush on December 8, 2003. The chief architect of the new law was a Louisiana Republican Congressman. The Act replaced and expanded the previous Medical Savings Account law by expanding allowable contributions and employer participation. The HRA option I developed allowed the employee to have skin in the game. We had diagnosed and addressed one cause of the problem.

In 2015, as the Foley Public Schools Business Manager, I designed and negotiated with the teachers’ union an option for the teachers to have a high deductible insurance policy paired with a Health Savings Account. The school district contributed into the employee’s HSA the difference in cost between the high deductible policy and the other lower deductible policy the employees could choose, so this option cost the district no more than the other insurance plans they had to choose from. The expectation was that with the employees now having skin in the game, i.e., spending their own money in their HSA accounts, they would be more careful in how they used the funds and in the long run, help us control our health insurance costs through our experience rated partially self-funded plan we obtained through our insurance cooperative.

We also provided information on the school district website “Employee Portal” on how to access ClearCost Health, a website with cost comparison information on many common medical procedures to allow the employees to make informed choices on how they would spend their money.

Through the insurance cooperative, we negotiated to receive the rebates the Pharmaceutic Benefit Manager (PBM) received from the pharmaceutical companies. These rebates were used to promote healthy lifestyles, through employee health fairs, employee incentives for physical activity and much more.

With the HSA option, ClearCost Health, our experience rated self-funded insurance coop and the healthy life style promotion, we had diagnosed and addressed all of the causes of the rising health care costs. We didn’t just blame others. We diagnosed the problem and took action to directly address the causes.

So, any good solution to the “health insurance crisis” must address the issue similar to what we did at Foley Public schools – have employees’ skin in the game, have cost transparency and encourage healthy lifestyles. As any economist will tell you, “Incentives are important.” It is essential that we get the incentives right.

Using catchy slogans, such as “Medicare for all who want it”, “health care is a human right” and “the greedy private insurance companies and pharmaceutical companies are ripping us off” may sound good on the campaign trail, but are poor substitutes for sound public policy.

Rep. Craig touts her “I grew up for part of my own childhood without access health insurance” and having worked for a medical device company that has benefited from the increase in health care spending as qualifications for knowing about the health care problem. However, I believe the analysis of potential solutions fall more in the expertise of impartial economists than those who benefit from the problem.

I also understand and emphasize with those without access to good health care. I didn’t have health insurance until I went to college where I received access to Olin Health Center on campus as part of my tuition and student fees. The only doctor I saw before I was 18 was the eye doctor and the doctor who came to our school to administer the sports physicals. (cough) I didn’t see a dentist until I was 18, and my mouth was a mess. The only medicines I knew were aspirin stuck into the aching cavities in my teeth and Mercurochrome (since banned due to it containing mercury) for cuts.

The article There is no magic wand to fix health care shares disappointing news that many of the ideas that people hoped would rein in rising health care costs have not withstood empirical studies. The article ends with: "Politicians in office and on the campaign trail offer silver bullets and suggest no one will have to compromise. This simply isn't the case; our recent study shows yet again why silver bullet thinking is misguided. Real spending reduction in health care will require tradeoffs along at least one dimension: access, patient experience and choice, or quality.” 

Stay tuned!