The Idea That Could Save Health-Care Reform

[babylonsister]

http://voices.washingtonpost.com/ezra-klein/2009/07/the_idea_that_could_save_healt.html

The Idea That Could Save Health-Care Reform
Ezra Klein

snip//

The Free Choice Act starts by setting the rules for the exchange: Within five years the exchange is open to all employers. More importantly, it's open to all people. The firewall is extinguished. But as the late, great, Billy Mays would say, that's not all!

The key component of the Free Choice Act is called "cash-out." Under the Free Choice Act, if I decide that I don't like any of the health-care coverage options being offered by my employer and would prefer to choose from the many options being offered on the Health Insurance Exchange, my employer has to give me a voucher that covers 65 to 70 percent of the cost of the lowest level of exchange plan. (That is the average portion that an employer pays of his employee's health insurance premiums.) I can take that voucher and, along with whatever money I want to throw in, choose a plan on the exchange.

This does a couple of things. First, it changes the health-care system for the currently insured. It doesn't take what they have. But it gives them a choice. If the political yin of health-care reform is that you can keep what you have if you like it, the policy yang should be that you can choose something different if you don't. The Free Choice Act gives the insured something concrete: autonomy. If they don't like what they have, they are assured options. In 1994, Bill Clinton's plan was defeated because people believed it would restrict choice. Given the apparent power of the objection, it makes some sense to try to sell health-care reform atop the concrete promise that it will increase choice.

Second, it gives people an incentive to choose cost-effective plans. If your employer is paying 70 percent of your $10,000 health insurance premium, and you find a $9,000 plan on the Exchange -- maybe it's an HMO rather than a PPO -- you pocket $1,000. Currently, since I pay only 30 percent of my health-care premiums, making the same choice within the HMO and PPO offerings that The Washington Post gives me would only net me $333 dollars. Wyden's plan would put 300 percent as much money in my pocket. That changes behavior. And even the CBO thinks so. This is one of the main reasons the Congressional Budget Office scored Wyden's Healthy Americans Act -- which had a similar provision -- as saving, rather than costing, money.

Third, it begins to build a viable alternative to the employer-based health-care system. Experts think that the exchange will need at least 20 million participants to really start seeing advantages of scale. This will ensure it has much more than that. And if the exchange works? If direct competition between insurers lowers costs and increases quality, if standardized billing and administrative efficiencies save money, if the massive pool of customers helps insurers bargain for discounts with providers, then the exchange will become a progressively better deal, and more people will choose -- there's that word again -- to enter it. And if more people choose to enter it, then that cycle happens again, more people enter, and so forth. Soon, you've built the system we want rather than the one we have.

That is not to say there are no problems with this idea. The primary one is adverse selection: What's to stop all of a company's young employees from buying their way out and leaving their employer with bad health risks and high premiums? According to Wyden's office, risk adjustment. And they say they'll risk adjust back to the employer level, potentially. It's hard for me to imagine how that would work. But it's also hard for me to imagine a flood of young people who don't care much about having good health insurance going through the process of contacting HR, attaining the voucher, going to the exchange, comparing plans, and so forth.

And the potential upside of this idea is huge: It gives the currently insured a bevy of new choices, creates real incentives for cost control, and begins the hard, and necessary, work of building a better health-care system. Wyden's Free Choice Act will not decide whether a bill called "health-care reform" passes the United States Congress. But it might decide whether that bill actually is health-care reform.

[lumberjack_jeff]

1. Kicking... important stuff. Answers the question "what's in it for me?"

Sorry I didn't see this fist time 'round.

Wyden has made a brilliant observation here. I'm for anything which affordably unplugs healthcare from employment.

[grantcart]

2. kick for more responses

[Inuca]

5. Hi grantacrat!

I think we "came" from the same place to end up in this thread :-). Reading the article now. Wyden is somebody to pay attention to, he is no Ben Nelson or Landrieu.

[Inuca]

3. K&R because this is important (and ignored)

Click on the link, people!

[City Lights]

4. K&R. nt

[Inuca]

6. More on Health Insurance Exchanges

also from Ezra Klein http://voices.washingtonpost.com/ezra-klein/2009/06/health_insurance_exchanges_the.html Health Insurance Exchanges: The Most Important, Undernoticed Part of Health Reform

The central problem facing health reformers is a simple one: America's health-care system is a mess. But a lot of people rely on it very heavily. But how do you merge the need for root-and-branch reform with the public's fear of rapid change?

The answer, put simply, is that you don't institute rapid change. You don't take what people have. But you give them the option to trade up to something better. As the theory goes, if the current system really is so inefficient, and your alternative really is so much better, then the lure of lower costs and better quality will persuade Americans to switch to the new system of their own accord.

[lumberjack_jeff]

8. Good link

And what happens when you introduce productive competition, efficiencies of scale, more innovation and increased consumer power into a market as dysfunctional as the current situation for health insurance? In theory, you get lower prices and higher quality. And if the Health Insurance Exchange has lower prices and higher quality, more individuals will use it and more companies will buy into it. And if that happens, then the efficiencies of scale should increase, and so should the pace of innovation (as the rewards will be greater with more customers), and so the Health Insurance Exchange should further outpace the other markets, thereby attracting yet more customers, thereby further accelerating the virtuous cycle. Eventually, it could become the country's primary insurance market.

To be sure, the exchange faces considerable difficulties. At the beginning, it's likely to be limited to individuals, the self-employed, and small businesses. Otherwise, experts worry -- probably correctly -- that only businesses with sick and expensive workers will buy in, and the costs of the exchange will start high. Instead, the hope is to get it on stable footing and then progressively open it to new groups. Its success isn't a sure thing. It's a theory. But it's arguably the best one we've got.

[sandnsea]

7. This isn't necessary

I would rephrase this, employers will not be required to create a hodge-podge of paperwork procedures to meet Wyden's legislation. They will be incentivized (I hate that word) to really look hard at insurance costs by having to provide vouchers to employees whose premiums are more than 11% of income. If the public option is cheaper, I think the business will be glad to use it.

"The House bill won't allow you to buy a public-option health care policy (or to participate in the exchange at all) if your employer already offers you decent health care and your premiums don't exceed 11 percent of your income, which is quite a lot. The Senate is a bit stingier, disallowing employees paying up to 12.5 percent of their income in premiums."

http://www.slate.com/id/2222939/

[lindisfarne]

9. Any employer offering >1 health insurance option should eventually be required to include the public

option & the Health Insurance Exchange Options. I say eventually because initially, big employers can't participate in these, but once it gets established, everyone should be allowed to - and employers should be required to.

[KittyWampus]

10. important