Hennessey's health care reform plan

Hennessey's health care reform plan

I will be on CNBC’s Street Signs this afternoon at 2 PM EDT. Governor Howard Dean and I will be discussing health care reform with host Erin Burnett.

Update: We’ve got video.

Wednesday the President spoke in the Rose Garden about health care reform. He said:

And [nurses] understand that this is a problem that we can no longer defer. We can’t kick the can down the road any longer. Deferring reform is nothing more than defending the status quo — and those who would oppose our efforts should take a hard look at just what it is that they’re defending. Over the last decade, health insurance premiums have risen three times faster than wages. Deductibles and out-of-pocket costs are skyrocketing. And every single day we wait to act, thousands of Americans lose their insurance, some turning to nurses in emergency rooms as their only recourse.

So make no mistake, the status quo on health care is not an option for the United States of America. It’s threatening the financial stability of families, of businesses, and of government. It’s unsustainable, and it has to change.

I agree with all of this, except “those who oppose our efforts should take a hard look at just what it is that they’re defending.”

I strongly oppose the House tri-committee bill and the Kennedy-Dodd HELP committee bill. I do not support the status quo. I want different and even more aggressive reform than is being proposed in Congress. It is unfair to characterize those who oppose the current legislation as opposing all health care reform, or as defenders of the status quo.

I therefore want to be explicit about what I support. I propose Congress adopt the following plan instead of the legislation they are now considering.

A full description of a health care reform bill would probably take a few thousand words. Today I instead offer just the basic description of what I propose. This is not as polished or detailed as I would like, but it’s the core, and I would like to get it out there before our CNBC discussion today. I am going to label this v1. I may tweak it a bit over time, but the core will not change. If you follow the health care debate closely, many parts of this will look familiar. I may flesh out details in the future.

This should be a debate among alternatives, not “Are you for health care reform or the status quo?”


Keith Hennessey’s health care reform plan (v1)

Do:

  1. Replace the tax exclusion for employer provided health insurance with a $7500 (single) / $15K (family) flat deduction for buying health insurance.
  2. Allow the purchase of health insurance sold anywhere in the U.S.
  3. Make health insurance portable
  4. Expand Health Savings Accounts
  5. Aggressively reform medical liability
  6. Aggressively slow Medicare and Medicaid spending growth, and use the savings for long-term deficit reduction

Don�t:

  1. Raise taxes
  2. Create a new government health entitlement
  3. Mandate the purchase of health insurance
  4. Have government set private premiums
  5. Create a government-run health plan option
  6. Have the government mandate benefits
  7. Expand Medicaid

Results:

  • Lower premiums, higher wages
  • Portable health insurance reduces “job lock”
  • +5 million insured (net)
  • 100 million people will pay lower taxes
  • 30m with expensive health plans pay higher taxes
  • No net tax increase overall
  • Reduces short-term and long-term deficit
  • Fair to small business employees & self-employed
  • Incentives and individual decisions “bend the cost curve down”
  • More individual control & responsibility for medical decisions

(photo credit: Burnett: CNBC, Dean: Wikipedia)

28 responses

  1. Keith, thanks for providing an alternative.

    One other item could potentially be added to the plan. One of the most frequently cited problems with today’s system is “pre-existing condition” clauses. Of course, pre-existing condition clauses are necessary with an open system that does not have a mandatory purchase requirement. Otherwise, people would just wait until they are sick to enroll in plans.

    That said, dramatic improvements could be made with national legislation that limits pre-existing conditions for a limited period, such as during the first year of coverage under a policy or provides for no pre-existing conditions if the person was previously covered by insurance at all times since the occurence of the condition. Such a move would thwart one of the major complaints. Of course, such a move opens pandora’s box of allowing Congress to dictate terms of the plans. Perhaps that ship has already sailed.

  2. As a broad outline, I like your plan. But how do you propose to “aggressively slow Medicare and Medicaid spending growth” or private insurance health care spending? As long as the current employer-based system is a third-party payer system, where health care consumers do not know the true price of the care they are receiving, how do the incentives change so that demand for unnecessary or costly treatment is curtailed? How do we bend the cost curve without resorting to the same kind of rationing of health care services that is prevalent in countries with nationalized health care systems?

  3. Preferably a non-neutered version of Health Savings Accounts that allows roll-overs between years. The current use-it-or-lose-it system encourages wasteful spending. That plus catastrophic insurance would suit the needs of a LOT of people that are currently uninsured.

  4. Excellent and straightforward. I hope you’ll update this post after discussing this with Gov. Dean.

  5. Keith —

    Excellent plan — pleas add: very serious, deep, immediate tort reform so our doctors can afford to stay in the medical field. Catastrophic coverage for everyone, and a big push for HSA’s, will also be critical.

    Keep up the great work!

    Dale

  6. Keith:

    Your proposal is right on the money.

    I’ve mentioned this before in your comments, but the small business (five employees) that I own provides health insurance to all our employees.

    It is what would in some circles be considered a catastrophic policy covering 90 percent of medical costs above a minimum threshold that depends on whether you’re single, married w/children or single w/children. The policy is tied to a Health Savings Account that the company, at a great cost, funded fully in year 1. The idea was not to overwhelm our loyal employees, who every paycheck are required to contribute at least 3 percent of their pay into their HSAs.

    It has worked as a charm. Our annual premium costs have actually fallen, adjusted for inflation, over the past three years since we adopted it. And because we’re all relatively healthy, we’ve not tapped too heavily into our HSAs. They’ve grown. So now we’re all wealthier. And we’re smarter healthcare consumers, since the first dollars effectively come out of our pocket. I now ask my doctor how much he’ll charge for this test or that. Imagine that.

    These cost savings have allowed us to keep five employees instead of downsizing because of a loss of business.

    I can only imagine how much more we’d be saving if we were allowed to buy insurance out of state. Pennsylvania has a bunch of whacky coverage requirements that increases premiums.

  7. Your savings in Medicaid and Medicare is nice, but you need some detail. How?

    I would suggest we look to Part D for the answer. Privatize the entire delivery system. Otherwise, you are just rationing care. It is almost impossible to find doctors who will accept Medicaid (because it pays nothing) and it is getting increasingly tough to find Medicare docs as well ( I read somewhere only 58% of GPs accept Medicare patients).

  8. I like your plan. The 64 dollar question in my mind is where was all this good stuff when the Republicans were in control? Did nobody think that as soon as the Democrats were back again we’d be heading down the socialized medicine highway?

  9. IF YOU WANT TO DEMAND HEALTH CARE REFORM, YOU BETTER MAKE THAT CALL NOW!

    CHOOSING THE USUAL PROFITING INSURANCE COMPANY, OR CHOOSING GOVERNMENT PLAN SHOULD BE UP TO AMERICANS?
    The deciding factor in implementing health care for everybody–LEGALLY–in America, is the Publics voice? Those who want to just follow the same old road, can do so with the profit taking commercial insurance. Those who would be satisfied with a government run health care program, can now start demanding it from the lawmakers. Those who see a Universal health care system, similar to most developed countries in Europe, should start informing every Representative and Senate politician starting today. Rationing in places like England, was caused by the major impact of uncontrolled immigration. I see–THE RATS–are coming out of the woodwork, using propaganda and downright lies about government run medical care?

    The Special interest lobby, status quo have very wealthy fingers in the pie and do not want Health care for everybody? It’s a trillion dollar business like Cancer treatments. The pharmaceutical companies, AMA and others have very much to lose? Even many corrupt politicians are stockholders in this behemoth money machine. Most American working class can do–without– high premiums, pre-existing condition clauses. deductibles, co-pays that is representative of the wealthy medical care insurers. CALL YOUR SENATOR OR REPRESENTATIVE ! Whatever pertains to your family, you should start ruffling the indifferent feathers of the people in Washington at 202-224-3121 Just like illegal immigration , we cannot afford anymore to subsidize the business that hire them or the millions of illegal families.

  10. KWH:
    Echoing others, your plan is okay. Tort reform is an absolute must.
    Inividucal catastrophic insurance is the best alternative for most people. If we pay first dollars out of pocket we pay far more attention to cost of services but with a catstrophic backstop, just in case.
    If you don’t make insurance mandatory why the tax deduction for all? If you don’t make it mandatory many will game the system by purchasing insurance only when needed and then dropping it later. This already occurs in Massachusetts.
    Irresponsible to just say, “Aggressively slow Medicare and Medicaid spending growth …” Big question is how? And if you do slow it will there be any medical personnel left for those of us required to use medicare?
    Where is the private alternative to Medicare? Why not permit private alternatives so we can evaluate government care vs private care? Is the government afraid of a little competition?

  11. Anyone ever wonder what type of system we would have today if business didn’t offer healthcare as a benefit?

  12. The thing I liked most about your proposal Keith was the inclusion of the statement, “More individual control & responsibility for medical decisions.” We need to have control over what we want (or don’t want) in the health insurance industry. If you choose to not have insurance that should be fine, just don’t come to the government complaining when something bad happens. People need to be responsible for their own actions and need to face the harsh reality that they make for themselves. The government shouldn’t be in the business of saving people from their own mistakes. They need to feel those so that they will not make the same mistakes again. People need to learn instead of being coddled like children.

  13. Keith,

    Once again your proposal has no reference to controlling costs except hand waving about Medicare and Medicaid. Both of these programs underpay providers and your solution is to further underpay providers so they will shift those shortfalls onto the private market. You need to get at the providers to control costs. Hospitals need competition, a new business model. Physicians need to be paid a salary not per procedure. Your blind faith in individuals to negotiate price of a prescribed good goes against common sense. You cannot negotiate the price of an apendectomy and it is difficult or nearly impossible to negotiate complex surgeries that are necessary but not emergencies. But you can look at countries where quality of care is high and average costs are lower. Medical tourism is a good example of a disruptive business model. Since most medical innovations occur here the diffusion of those innovations make high quality care available around the world for much lower cost. Insurance companies are paying patient airfare to travel to other countries for procedures.

    In short your proposal is just shuffling dollars amongst payers leaving the healthcare system unharmed. We need to inflict real pain on the provider community to unlock their monopoly power. True innovation will disrupt the provider community without comprising quality or access.

    The current proposals by the Democrats do just as little as your proposal. They just shift more dollars amongst payers except they set up the strong likelihood that the increase in risk to insurers will cause them to exit the market in droves leaving the federal government assuming all the risk and the provider community sitting there fat dumb and happy. The chapter after that is severe rationing and nationalized healthcare and no one will be happy with that outcome as it will kill medical innovation which will harm not just our country but the world.

    If everyone would read one book on healthcare I encourage them to read this one http://www.amazon.com/Innovators-Prescription-Disruptive-Solution-Health/dp/0071592083/ref=sr_1_1?ie=UTF8&s=books&qid=1247922949&sr=1-1

  14. Pingback: Keith Hennessey and Howard Dean debate health care reform on CNBC « Wintery Knight Blog

  15. Oh how far America has strayed from the Constitution! With all the talk of having the federal government tend to our health care needs, we totally miss the fact that doing so is unconstitutional. The powers bestowed upon the federal government are clearly laid out in the Constitution. As stated in the 10th amendment any other powers granted the federal government belong to the states and the people. Limiting the powers of the federal government is crucial to preserving our freedom and liberty. We as a nation have gone from being a noble “give me liberty or give me death” mentality of a freeman to a servile “give me convenience or give me death” mentality of an indentured servant.

  16. Keith–

    I also like the detailed proposals of Newt Gingrich’s Health Transformations site–quite a bit of which is the same as yours. See

    They have been actively studying this subject for more than six years now, and have very good proposals for dealing with escalating costs.

    I have no connection to them, I’m just intrigued by practical plans that can actually make a positive difference rather than the monstrosities being proposed by Congress. I just don’t think that the same government that has screwed up Medicare, Medaid, and the VA system is competent to be promoted in such a costly and ineffective way.

  17. @Skeptic@Skeptic – The expansion of HSA accounts and the power of individuals to choose what to spend on items before the high deductible kicks in will have a positive effect on the cost curve. For example, eye glasses– when someone else pays the bill the Oakleys or the Guccis get chosen; when I have to pay it, I might just be happy enough to get the $99 pair from Sears.

  18. Keith,

    You rightly emphasized in earlier posts the need for cost-containment incentives, although I think more from the patient side (i.e., the patient bearing more of the cost as opposed to your Jiffy Lube hypothetical analogy to our current system http://keithhennessey.com/2009/04/21/slowing-health-cost-growth-requires-information-and-incentives/ ) than from the provider side (correct me if I’ve missed your addressing the latter, particularly if you’ve offered solutions, direct or indirect). Perhaps, similarly, the incentive portion of your healthcare plan above is the health savings accounts. But I think there is still a gaping hole in the incentives portion of your plan; what about provider incentives?

    For whatever it’s worth, although there is still much I’ve been meaning to find time to read on healthcare reform options, and so I don’t feel highly-informed even for a layperson, my gut tells me that, sooner or later, we are headed toward widespread use of the gatekeeper capitation model of health insurance in both private and public sectors, quite possibly with “withhold” incentives (all explained below).

    Way back over two decades ago I worked for a large IPO-style HMO (“IPO” meaning independent physicians treating in their own offices, as opposed to the “staff” model of Kaiser that had their own facilities with salaried medical staff). Members could only see a specialist after seeing the primary physician first and only if the primary physician gave a referral (i.e., approval), and did so to an in-network specialist, sometimes only of his choosing. This primary physician was compensated on a “capitated” basis: a fixed dollar amount per month per member signed up with that primary physician, whether that member was seen as a patient several times that month or not at all. Additionally, a portion of that monthly payment was “withheld”, and how much of it was eventually paid to that primary physician would depend on his level of referrals to specialists (who are generally more expensive). Thus, the primary physician would earn more money to the extent that he/she abstained from — or refuse to, when the patient so requested — referring patients to specialists, whether that meant the primary treating the ailment himself/herself or doing nothing.

    I believe the above can provide strong cost containment. And I think it may eventually be necessary, in order to align provider incentives with a balance of healthcare objectives and cost-containment. But we should recognize that it would adversely impact healthcare in many cases. I recall personally having to argue somewhat heatedly with my primary physician before he would refer me to a specialist for a serious, chronic knee problem I had at the time. Someone less assertive would have been stuck with this primary doc’s best-guess “solution” of a few exercises he suggested, which may have worked for some, but not others.

    Frankly, I’m sick of seeing over and over and over again the same tired phrases regarding the need to “move away from fee for service” and “change incentives” and “reward quality instead of quantity”, etc., etc., with very little or no discussion at all of what that would entail (although it’s even worse when the matter of incentives is not even addressed). The above is what I think it will end up meaning, at least in part. If you or anyone else has thoughts on this topic I’d like to hear them, along with any sense you have of the likely/potential adverse impact on healthcare.

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