Friday, August 14, 2009

Medical Insurance - one more experience, one more opinion

Foreign experience:

I grew up in Italy where national medical insurance was always the norm.  There, people that wanted could afford extra service and options had supplemental insurance to cover private clinics and whatever extra they wanted.  Supplemental insurance was relatively affordable because it was only for the extras.  All citizens are covered with a minimum of care as befits a civilized country.

I lived and worked as a Canadian resident (same taxes and benefits as citizens) and there again all taxpayers have a minimum of medical care as befits a civilized society.  Those that could afford a supplemental insurance to cover extra services and choices could do so at a reasonable price.  Canadian care and facilities in my experience were no less than I've experienced in the US.  A single payer system made it more convenient and efficient.  People can change jobs without having to change insurance and employers largely can stay out of employees' medical lives.

US experience:

In 39 years in the US I had to use personal individual policies, group policies and shop for policies for my employees in several companies.  My views reflect the experience as a consumer and as an employer:
In the US we hail competition, but in reality we regulate insurance at the state level in such a way that competition really cannot work efficiently because information is not standardized and broadly distributed.  Complexity and confusion are the best stiflers of competition.

Insurance tied to place of employment started in WWII as a way to attract workers despite wage controls.  Since then, relative to medical insurance (MI)  we've created two classes of citizens: the employed with group plans (no preexisting condition exclusions, competitive rates shopped by employers, negotiated service fee schedules, little or no cost to the employee, no management of the policy's features and costs by the insured), and the non-employed (self-employed, unemployed, retired, etc.) with a confusing and bewildering insurance options, pre existing condition exclusions, etc.

Since the consumer of care is not the decider of the features of employer provided MI, options selected in policies reflect what the HR department prefers, not what the user would like (cafeteria plans try to address that but only marginally).  Trade offs between insurance cost and deductibles and copays are difficult if not impossible to do.

When one changes employer one has to change MI.  Besides generating employment in the HR departments and insurance sales offices, what is the benefit of this?  Since medical record-keeping goes hand in hand with payment for services, does the continuous changing of insurer not create an artificial obstacle to implementing electronic medical records with a historical scope?

If one goes from employment to new employment to unemployment to self employment as any are learning to do in the new economic environment, one can change insurance many times in few months.  My own recent experience is 3 times (soon to be 4) in six months.

It is argued that employer paid insurance plans promote coverage as they force coverage on workers that would not otherwise provide it for themselves.  I'll ignore the coercive aspect of the argument which is questionable in itself.  However, we manage to make automobile insurance mandatory without involving employers and I suspect auto insurance is more widespread than MI.  The same model could easily be implemented for MI.
Individual MI plans are different by state, so advertising and comparative shopping require a PhD in business analysis and competition is stifled; probably on purpose.

Multiple insurers with different policies and terms make medical service providers insanely inefficient at processing claims and prevents adoption of standardized electronic records, which causes another source of inefficiency.

The idea that taxpayers do not (because they shouldn't have to) pay for the uninsured or illegal aliens is an illusion.  Hospitals routinely provide at least a minimum of emergency care (as they should in a civilized society) to all comers.  The unpaid bill of the uninsured becomes absorbed by society through the most inefficient and uncontrollable process flowing through budgetary deficits, reimbursements, charitable foundations, etc.

Here is a  great analysis from The New York Times of some of the above ideas or click below listen to an economist make the case  

Conclusion

So, what is the point? Here is a proposal that probably does not make much money to anyone so it will never happen:

  1. Start chartering medical insurance companies at the national level requiring all participants to cover all buyers in all states (no more cherry picking people, make money out of efficient processing and promoting preventive care)

  2. Direct a federal agency in whatever department to web publish a side by side comparison of fees and coverage features for all authorized insurers (promote standardization so buyers have an easy time comparing alternatives and making decisions)

  3. Stop employer tax deduction for employer paid MI.  If the employer wants to pay for it, let them pay the employee as wages. 

  4. Make all MI costs tax deductible to the taxpayer. 

  5. At tax filing time require the taxpayer to demonstrate personal medical coverage (PMC).  If PMC is not demonstrated, the taxpayer is charged a premium (like is done now for Social Security) for a federal insurance to cover the minimum level of care (use a developing country or Sweden or something in between for a standard).  Those happy with the federal insurance can still buy supplemental  for whatever extras they desire.

  6. Mandate electronic medical records maintenance by the insurers along with services records. Providers may subcontract, but the service must be provided and standardized so all clinics and hospitals can easily process all bills to all insurances along with all medical records.  This is not over regulation - for instance we already demand all automakers to make cars that drive the same way on the same highways with similar signaling devices, etc.

  7. Have all unpaid medical bills for illegal aliens charged to the Homeland Security Department.  By doing so we'll see how much this aspect of the business costs and how much we should spend to fix it.  Now we have no tracking method we as a society we pay the full cost any way for sure.

Probably other aspects could be added, but the idea is to have a prescription that is SIMPLE so lobbyists cannot turn it into a paralysis by complexity.  Once an open competitive market is fostered, competition will take care of the rest.

One aspect I purposefully did not address is: What is the minimum level of medical care that a taxpayer or any human being should be entitled to?  The range from developing country to Sweden is big.  A national debate must address that, but it does not have to be mixed with the decision of how to process payments or to insure ourselves.  It is a moral issue that hospitals confront daily and requires ethical decisions of allocation of resources.  Within the parameters proposed above, directives to service providers can be defined the reflect what "as a society we are willing to pay for".  On their own, service providers may choose to do more, but if so they will have to do it as their own charity and not charge society for their value system.

You comments are welcome

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