A Health Care Plan That Follows Republican Principles and Still Works

05.18.17
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Politics /18 May 2017
05.18.17

A Health Care Plan That Follows Republican Principles and Still Works

Since the Republicans haven’t been able to figure out a workable health care plan that stays true to their principles, I’ve done it for them.

No, I’m not being sarcastic. The main Republican principles regarding health care are:

  • Private insurers, not a government-run, single-payer system.
  • Premiums set by market competition.
  • No massive premium subsidies for low-income citizens.
  • Individuals are not required to buy health insurance.
  • Lower premium costs plus coverage for more people.

Let’s also add in:

  • No exclusions for pre-existing conditions and
  • No price penalty for older insureds.

All of these things are doable.

Two Earlier Proposals

I’ve previously published two articles on health care:

Some Ideas For Reducing Uninsured Healthcare Costs & Health Insurance Premiums

And

Instead Of Obamacare or Trumpcare I Propose ‘Medicare Junior’

Since I think the Republicans would hate my proposal for a single-payer plan, Medicare Junior, we need another strategy to get them to deal with this issue in an effective and efficient way rather than their current plan of closing their eyes and hoping that people will just stop demanding that the government provide them with a way to get low-cost health insurance.

So, here is that other way.

A Standardized Basic Health Insurance Policy

We start with a standardized major-medical policy that covers most medical needs. The basic policy will need to include maternity care, emergency room visits, and screenings for diseases that are easily treatable if caught early and expensive to treat if allowed to progress.

Keep Premium Costs Down With Coverage Caps and Reasonable Co-Pays

Most people most of the time just need run-of-the-mill medical care — broken legs, kidney stones, food poisoning, heart attacks, skin cancer, pneumonia, hernia, concussion, etc…

Most people most of the time don’t need a heart-transplant, but that’s the kind of risk and expense that drives the cost of premiums through the roof.

If you take away the small but very expensive heart-transplant-type coverage and instead cap coverage at $600,000 in insurance payments over any consecutive twelve month period I would think that you could drastically reduce the premium cost.

Essentially, 999 people would get the much more affordable coverage they need and one person wouldn’t. The alternative is that the premiums for all 1,000 people would be so high that the cost would put the program out of reach.

If people want higher coverage limits they could pay extra and increase the cap to $1.5M or $5M or unlimited. That would be their choice.

Co-Pays

There’s always a tug-of-war between over-using medical care for every little runny nose on the one hand and co-pays that are so high that the insureds can’t afford to obtain the treatment they need on the other.

I have no expertise in this area, but I would guess that something like 50% coverage for the first $500, 75% coverage for the next $500 ($675 insurance paid and $325 insured paid for the first $1,000 in a policy year), 85% coverage for next $1,000, 95% coverage for the next $3,000 and 100% coverage from $5,000 ($4,375 insurance, $625 insured) up to the cap amount in a policy year might be a more or less reasonable compromise.

Of course, lower co-pays also could be purchased by the insured for an additional premium.

How You Can Have a Big Pool Of People and Still Have Price Competition Between Carriers

The big issue that competing carriers have never solved is the old-and-sick problem.

The more carriers have to compete, the lower their premiums have to be. The key to lower premiums is excluding older and sicker people. When carriers include older and sicker people then they have to raise their premiums which lowers sales and reduces the size of the insured pool, raising premiums even more.

One of these men didn’t know health care would be so difficult. (via Facebook)

The carriers could cover more young and healthy people with low premiums or fewer old and sick people with higher premiums, but in a price-competition scenario they could never do both.

The key to having the same premium for old people, young people, sick people and healthy people is to have a pool of insureds that is so big that the old and sick average out with the young and healthy.

To do that you have to create a huge pool of insureds, tens of millions of insureds, and then let the carriers compete to serve the members of that already existing huge pool.

How Do You Create This Huge Pool Of Insureds?

The government opens a registry for everyone in the country who wants health insurance under the predefined standardized policy. Individuals can register. Companies can register. Unions can register. Institutions can register.

Everyone who registers is guaranteed coverage from one of the private carriers who elect to bid to cover the people in the pool.

Let’s say fifty-million people register. That’s the pool of customers that the private carriers would be competing to serve.

One Identical Premium for Every Adult

Specific insureds in the pool would be chosen by a computer algorithm to be assigned to the winning carriers so as to average out each carrier’s insureds with young and old, healthy and sick. Thus, from the pool of the 50,000,000 people who registered, the number of young, old, sick and healthy people would be evenly distributed among the winning carriers.

Because each carrier’s pool of insureds would contain millions of homogeneously assigned people, the carriers would be able to calculate a bid for one, average, uniform premium for every insured to whom they would issue a standardized policy irrespective of that individual’s age or health.

How the Competitive Bidding Would Work

Carriers would be invited to bid a monthly premium charge for providing coverage to members of the pool. The lowest three bids would be averaged and the lowest three bidders would split 75% of the pool at that average monthly price.

Let’s suppose that the three lowest bids were:

Company A $190/month/insured
Company B $200/month/insured
Company C $210/month/insured
Average bid: $200/month

Companies A, B, and C would each be offered the right to provide coverage to 12,500,000 insureds (75% of the total number of registered insureds divided by 3) in three homogeneous pools at the $200/month average premium rate.

If the highest bidders didn’t want to participate at that price then each of the remaining two would be offered the right to provide coverage for 18,500,000 insureds (75% of the total pool divided by 2) at the average bid price.

The next four lowest bidders would be given the opportunity to equally divide the remaining 25% of the pool at the same monthly premium amount. If some did not want to participate those who did would split that remaining 25%. If none wanted to, then the top three bidders would get that 25% too.

In this way each insured would be charged the same monthly premium which would be the average of the three lowest bids.

The three low bidders would split 75% of the pool and the next four bidders would split the remaining 25% of the pool, with each carrier’s pool of insureds being “averaged out” to include equal numbers of old and sick and young and healthy.

The government would create in advance an algorithm that would be used to calculate optional fees for higher policy limits and lower deductibles as percentages of the basic premium.

The Key to A Big Insured Pool Is Employer Participation

Right now each employer has to shop for a group-medical plan from various carriers with wildly differing offerings, deductibles, caps, coverages, and premiums. This is costly and time consuming for employers.

A uniform basic policy and uniform schedule of upgrade options with the basic premium set by competitive bidding will make life much easier and cheaper for employers. All they will have to do is register their company in the pool and in return they’ll get uniform coverage, competitive prices and no hassles.

Since the upgrade options would also be standardized, each employer could easily customize their coverage for various levels of employees by simply electing to exercise upgrade options for certain job titles.

Covering Everyone

Other Times When the Republicans Dug In Their Heels And Lost

Anti-Discrimination Laws

When anti-discrimination laws were proposed in the early sixties the Republicans claimed that they violated people’s property rights. “The government has no right to tell me how to run my restaurant,” they would argue, but they lost that battle.

The public decided that it was just plain wrong for restaurants and hotels and the like to be able to discriminate and, in spite all the Republicans’ arguments about how wrong it was for the government to take away people’s freedom to discriminate, the laws were passed.

Gay Marriage

In the 1990s and 2000s the Republicans claimed that gay people had no right to marry, but time was against them there too. The issue hit a tipping point and the Republicans lost their argument that states should be able to prohibit gay marriage.

Health Insurance

Today the Republicans are tilting against another windmill, arguing that the government shouldn’t be involved in assuring the availability of health care. Their position that if you can’t afford to buy your own health insurance that you should just be sick and die cannot be politically sustained.

The Republicans are slowly starting to realize that like the anti-discrimination laws of the sixties and the anti-gay marriage laws of the nineties and early two-thousands, that they are also inevitably losing this argument.

As much as the Republicans hate the idea that the government must provide everyone with access to health care, most Americans believe that everybody should have access to medical care and that if people can’t afford it on their own that the government should help them get it.

Yes, the Republicans hate that the tipping point has already passed on this issue but one way or another they’re going to have to face the fact that the public is going to demand that everyone have access to medical care.

That leaves the Republicans with only two choices:

  • The government can subsidize medical insurance for low-income people through tax revenues.
  • Businesses can pay for medical insurance for their employees through higher product prices.

Given their principles of smaller government, lower taxes, less bureaucracy and more individual, market choices, the Republican’s preferred alternative is clear.

If the choice is that either 1) taxpayers subsidize low-income citizens’ (or all citizens) medical insurance, or 2) employers provide all workers with medical insurance, the Republicans should logically choose to have medical coverage be provided by employers instead of by taxpayers.

Whether they will or not is another matter.

Medical Coverage Mandated As Part of the Minimum Wage

If the federal minimum wage law required every employer to pay 80% of the cost of a standard, uniform medical insurance policy for every 40-hour/week employee, 60% of the cost for every 30-hour/week employee, 40% of the cost for every 20-hour/week employee, and so forth, almost every employer in the country would rather quickly register its employees in the pool.

That change in the minimum-wage law would end up providing medical coverage for about 95% of Americans without any government-funded subsidies.

This Actually Saves Most Businesses Money

The silver lining here for Republicans is that about 52% or workers are already covered by employer-provided medical insurance. These employers would actually save money under this new system because the huge new pool of customers, competitive bid rates, annual caps and realistic co-pays would result in far cheaper coverage than their existing group medical insurance plans.

This system would actually increase profits for employers who already provide medical coverage to their employees.

Some low-wage industries like fast food, hotels and the like would have to raise their prices to cover the increased cost but an increase in the prices of these generally low-priced products would have only a small effect on the economy while the increase in insured citizens to almost 95% of the population would greatly improve the productivity of the economy as a whole.

On balance, making employers pay most of the cost for a standardized medical insurance policy for all employees would actually improve the economy and make most businesses richer.

Unresolved Details

  • A formula would need to be created to govern the fees for the optional extras such as higher caps, lower deductibles and additional coverages.

Perhaps, each carrier would be required to offer a preset schedule of higher caps and lower deductibles for government-specified percentages of their basic premium bid.

  •  Coverage would still need to be made available for people who could not work and who did not qualify for Medicare or maybe those people could be allowed to enroll directly in the Medicare system or put into Medicaid.
  • The basic insurance policy would need a second premium schedule to deal with coverage for an insured’s unemployed spouse and children.

That might be a flat amount per child per month, a flat amount for all children per month or a percentage of the base premium per child per month. The actuaries would need to figure out a realistic way to cover unemployed spouses and children.

You would also need to determine an age cut off for children on their parents’ policies. 18? 21? 24?

  • You would have to deal with employment gap coverage.

How long would the policy remain in effect after you lost your job? A month? Six months? Would a terminated worker have to pay the entire premium during that period? Since they would be out of work and short on money perhaps they would get a heavily discounted premium during the first three or six months after they lost their job.

Summary

  • Retain a health insurance system powered by private insurance carriers — Check
  • Use market forces to reduce premium costs — Check
  • No major government subsidies for medical insurance premiums — Check
  • Expand medical insurance coverage to 95% of the population — Check
  • Cover pre-existing conditions — Check
  • Eliminate high premiums for older citizens — Check
  • No tax increases to fund this system — Check
  • Individuals not required to spend material amounts of their own money for health insurance — Check

Will the Republicans embrace this plan?

Almost certainly not.

Why?

Because imposing obligations on employers doesn’t fit into the catechism of their political religion.

They won’t allow pragmatism (or sick people) to stand in the way of their core principle: Sink or swim — Every man for himself — If you’re not able to get health insurance on your own without government interference then you deserve to get sick and die. That’s the Republican way.

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