06 April 2011

Deconstructing the Concept of Health Care And Options For Dealing With It

The convention of lumping all of the issues that fit under the rubric of health care is necessarily somewhat arbitrary. As we look to improve ways to control costs and find better ways to finance care, which is a never ending process despite the passage of the Affordable Health Care Act, which makes major reforms, it is worth examining ways to break the overall field of health care into parts, and to see if there are things that we commonly don't define as health care that are appropriate to address with the same tools.

Group health insurance plans and Medicare define health care quite broadly, but exclude certain procedures and treatments commonly deemed to be cosmetic or recreational or fitness related; long term care in nursing homes or with home health care services; and sometimes abortion. Medicaid often includes a broader definition that includes, for example, nursing home care.

Individual health insurance plans, out of concerns about moral hazard in the purchase of health insurance, have narrower definitions of covered health care. Routine services are often covered by a deductible on the theory that the tax advantage that applies to group health care plans creating an incentive to include as much as possible in the plan coverage scope for tax reasons does not apply in individual plans of employees who are not self-employed where risk management and price negotiation with providers, but not tax minimization is the goal.

Individual health insurance plans also usually exclude, or include only at prohibitively expensive rider rates (far more than this kind of care contributes to the whole in group health insurance plans) types of health care for which moral hazards exist because patients can know that they will need coverage in advance and buy it only if they need it. These conditions include pregnancy related care, mental health coverage, and coverage for pre-existing conditions (mitigated by a variety of devices to allow pre-existing condition coverage where moral hazard risks are not as serious, such as quasi-group COBRA continuation coverage).

Pregnancy is very expensive to insure against in individual health insurance plans because it is highly controllable by the insured, even though the lifetime costs of pregnancy related care frequently don't vary much from one woman to the next.

Mental health coverage has been further divided into categories that look more or less medical (biologically based conditions). There is dispute over whether some treatment regimes such as non-allopathic medical approaches (such as chiropractic, aromatherapy, herbal remedies, psychological therapy, acupuncture, personal training, and massage therapy remedies) are really health care in the sense intended, and over whether treatments such as fertility treatments are genuinely necessary as opposed to recreational.

Long term care coverage is an example of a very expensive, high probability event, with moderate risks regarding duration and costs, that is further complicated by the fact that long term care typically covers not only medical-like expenses but also non-medical-like expenses such as rent and food costs for the resident. Similarly, loss of income due to disability, or the disabilities presumptively inferred from old age called retirement, are typically handled separately from medical care.

We make distinctions between "emergency care" which everyone who comes to an emergency room is entitled to regardless of ability to pay, at least until stabilized, and other kinds of medical care.

We have different financing regimes for dental care, vision care, work related injuries (worker's compensation or the equivalent), non-work related accidental injuries (tort remedies and casualty insurance), health care for foster children, health care for Medicaid v. non-Medicaid patients, health care for the uninsured who can and cannot pay in cash, health care for certain veterans, out-of-pocket and insurance paid care, over the counter and prescription treatments, and so on.

Within the area of Medicaid covered health care, there are two groups of beneficiaries whose care is very expensive: older people who need nursing home care, and people with disabilities, and another, poor people who are not disabled or old served by the minority of providers willing to accept new Medicaid patients for below market rate reimbursements, for whom it is very inexpensive to provide health care.

A large share of all people covered by health insurance or governmental health care programs are entitled to that coverage not in their own right, but by virtue of their status of dependents of someone else. Medicare is one of the few programs that does not cover the entire family (although individual policies and CHIP enrollment in Medicaid for children only in a family are another).

The Affordable Care Act has made several strategic choices, which made political sense at the moment, but may not be the best long term solutions. One is to focus on a scope of care similar to bare bones group health insurance plans. Group plans are encouraged. Individual plans are made more like group plans through prohibitions on pre-existing condition denials, through mandatory coverage, and through expanded scope of coverage, in order to address moral hazard issues. The scope of Medicaid is expanded to include the near poor. And, tax credits and incentives ease the ability to pay problem for both group and individual plans.

There are other ways that the task could have been divided.

We could have chosen to deliver some or all health care services to children (and even college students) through educational institutions. Most school districts have school nurses and psychologists already, administer a few routine screening tests, provide health education (mostly, but not entirely sex education and illegal drug use propaganda), and refer children who seemed to be in need of medical attention but are denied it to social services authority. But, it wouldn't have been hard to establish a system of comprehensive, single payer health care for children through the school system. This would prevent the current system from suffering strain from the fact that large families do not fully bear the cost of their own care in many cases (particularly with more generous employers), and would in some ways reinforce the notion of connecting health care to one's place of employment - extending the idea to school aged children.

Colorado until recently, and some other states, have experimented with no fault automobile accident medical coverage, in which care for automobile accident injuries are financed through the injured person's car insurance, with particularly severe cases to be settled via subrogation actions by the insurer who pays for the care. There have been proposals to make such no fault coverage universal and finance it with a gas tax or other excise tax that functions as a "pay at the pump" user's fee. Worker's compensation, in theory, at least, covers work related injuries and diseases without regard to fault.

With a universal health care system, it would be possible to remove health care payments from the domain of automobile insurance, casualty insurance, tort judgments and worker's compensation entirely, by making health insurance the primarily responsible party for all health care, with legal responsibility for medical expenses related to fault in accidents or on the job injuries or diseases limited to subrogation actions. This would take a great many personal injury cases outside the tort law system entirely, and narrow dramatically the scope of the issues presented in these cases. Even more dramatically, we could decide that compensation for lost income due to disabilities that arise from injuries or diseases (or perhaps otherwise) ought to be entirely the province of insurance or social safety net programs, rather than the courts, perhaps via a more robust version of Social Security, or mandatory comprehensive disability insurance, in lieu of separate regimes for work related injuries, general tort cases, sick leave policies, and cases covered partially by private disability insurance policies and social security. Subrogation cases could allocate fault in cases where it was necessary to provide the proper incentives not to engage in negligent conduct (although in a society where everyone is adequately insured, this is harder to justify, particularly for small cases where the burden of the risk faced by different insurance companies can be expected to average out over time). In a regime like this one, only "pain and suffering" and dignitary injuries would be left to litigate.

Less radically, health insurance companies would process all health care claims, regardless of the nature of the injury, and then would be reimbursed by casualty insurance companies, with their actual costs entitled to presumptive validity. Tort lawsuits might establish liability for medical costs, but simply order the insurer for the tortfeasor to pay those costs as they come due, avoiding litigation involving expert witnesses over the validity of medical costs incurred and the estimated future medical costs involved in a personal injury case. Casualty insurers and health insurers could resolve medical expense disputes in individual cases through intercorporate arbitration.

We could have had a single payer system for some conditions, perhaps mental health care, or pregnancy care, or congenitally disabled people whose high cost of care is a certainty at the outset, that are hard to deal with through individual insurance due to moral hazard issues, while utilizing the Affordable Health Care Act insurance regime approach only for more ordinary cases. Mental health care or pregnancy care could be quite affordable to provide via a single payer system since they are a small part of the total national health care expense.  Failure to provide adequate mental health and/or pregnancy care has immense externalities for the rest of society as well, so perhaps these need to be redefined as public health issues.

We could have medical care in all trauma cases handled by one program or insurance regime, and handle non-trauma causes in another regime.  The public interest in universal trauma care is greater than the public interest in many kinds of universal non-trauma care.
Pregnancy care could be insured not through employers, but on a basis similar to universal life insurance or long term care policies, with premiums made over a lifetime or many years, to cover a lifetime of coverage. Rather than expiring for want of premium payments, these policies could create non-dischargable debts, a bit like student loans, which insurers could collect with bad debt figured into their pricing. Alternately, we could have a system of guaranteed pregnancy care loans that is directly analogous to the student loan regime, allowing births to be paid for over the course of a decade or two, rather than all at once, and could focus on transparency in pricing as a way to control costs in this area.

Guaranteed medical care loans also make sense as a back stop to a regime with catastrophic coverage in which not all patients have funds in a health savings account or otherwise sufficient to pay their current out of pocket costs.

We could distinguish between catastrophic care, which might be handled by a government program or secondary tier of insurers (a bit like umbrella insurance), and ordinary health care which would de-emphasize risk sharing and emphasized price negotiating and cash flow management. The greater ability of patients to pay for non-catastrophic care would make more ordinary market-like arrangements such as those seen in the area of dental health, seem more workable.

If coupled with a system of guaranteed medical loans, non-catastrophic care could be optional, and only catastrophic care would have to be universal either because it is mandatory in some form, or is a tax financed government program. The downside of making this a mandatory form of insurance, is that compliance can be difficult to secure for a program that actually makes insurance payments to the people who pay the bills only very infrequently, while accounting for something on the order of half of the cost of health insurance. But, catastrophic care on an umbrella insurance model would have very low administrative costs relative to premiums, and relatively few of the really controversial insurance coverage issues involve catastrophic care cases. This could give a government program a fairly large economic role in health care without having much of a day to day administrative role in it that people would fear would interfere with doctor-patient relationships.

Medicare and Medicaid are currently mostly programs that pay providers directly on a fee for service basis, but could be organized to pay for a menu of health insurance options, or to pay providers on capitation or similar basis. The Ryan plan that would provide mere flat dollar vouchers to buy health insurance would be problematic standing alone, but if there was a core set of coverages that could be purchased with the voucher without additional expenses from a vendor of last resort who was required to provide it, this would not be worrisome.

It would be possible to structure health care claim processing a bit like the way we structure credit card progressing today, where cooperatives like Mastercard and Visa process claims and adjudicate billing disputes, but the loans are extended by member banks that set interest rates, set credit limits, and establish their own reward programs. The vast majority of health insurers could be united in a small number of cooperatives, which would receive claims from providers and process them in a standardized process, set provider compensation rates for member providers, and leave the actual health insurers with only a few key terms like copay amounts or deductibles being set by the actual health insurer which would bear the financial cost of claims processed for its insureds, but would not actually administer those claims. This could produce many market efficiencies even if the claim processing cooperative had no formal monopoly.

Of course, to some extent, this is the easy part of the equation. Once you have universal health insurance coverage, it is a relatively bloodless affair to reshuffle the expense from one pocket to another in the interests of more efficient administration and more sensible cost distribution that is consistent with ability to pay. The really hard part of the issue is figuring out which scenario is not going to be to reduce just administrative and marketing costs to a minimum, giving health care consumers the best value for their money. This is the low hanging fruit, which shouldn't be that hard to realize.

The truly hard part of the health care reform question, which still remains largely unanswered, is who is both willing and able to effectively negotiate lower compensation rates for providers that will translate into lower compensation for doctors, nurses, pharmacists, drug companies, medical equipment makers, hospital administrators, and so on. The deepest problem with the American health care system is that the people who are currently making these decisions, with other people's money, are leaving American providers much better compensated than those anywhere else in the world by a large margin, for the same or less or inferior work. And, very few people in the policy world are entirely clear on what precise flaws in the provider rate system is most to blame. Notably, the truly iconic seats of medical excellence in the United States, like Mayo and Bethesda, are not the ones with the most highly paid providers.

Even in a perfect world with high levels of transparency, the sick and the injured are simply not in a good position to bargain for lower provider costs at the time of treatment as one would with many goods and services. They need intermediaries to handle this for them. But, how do we get the intermediaries (who might be civil servants or insurance company bureaucrats that we have never met) the clout that they need visa-a-vis medical providers who we know and love and the incentive to do their job well?

1 comment:

Jude said...

Since this is sort of health related, I'm posting this comment here. Check out the blue state in the CDC map of obesity trends: