Balkinization: Principles for the Homestretch in Health Reform Legislation

Principles for the Homestretch in Health Reform Legislation

Frank Pasquale

House and Senate leaders will soon have to reconcile several different versions of health reform bills. The bills are complex, but some simple principles should guide the process of integrating them into a final product. For any particular proposal, we need to ask: Does it . . .

1) Increase productive competition in health care? Everyone talks about "increasing competition" among insurers and providers, but there are many ways to compete. Hospitals and doctors can game the reimbursement system. Insurers may not directly discriminate against the sick, but can find other ways to keep high-risk patients out of their plans, as even the most market-oriented health policy experts realize:

[T]o avoid patients with costly, complicated medical conditions, health plans could include in their networks relatively few doctors who specialize in treating those conditions, said Mark V. Pauly, professor of health-care management at the University of Pennsylvania's Wharton School.

Both the Netherlands and Switzerland have already experienced problems in this area, even though the Netherlands has implemented risk-adjustment methods (which attempt to deter such "cherrypicking" and "lemondropping") far more serious than anything proposed in current bills in the US. As Karen Pollitz has repeatedly argued, we're going to need a much greater investment in insurance regulation to make any reform bill work.

2) Make it easier for uninsured or underinsured individuals to buy coverage? Many of the proposals for allocating and awarding subsidies for coverage sound exceedingly complex. We're hearing about serious limitations on access to exchanges, subexchanges, burdensome "free rider" provisions, etc. Any particular provision may sound good in the abstract, but taken as a whole they could become an obstacle course that makes obtaining insurance coverage a miserable and exasperating experience for those supposedly aided by reform. During the second Bush administration, hundreds of thousands of children eligible for subsidized health insurance were not enrolled because states failed to make enrollment convenient enough for time- and cash-strapped parents. As Liebman and Zeckhauser remind us, "we must design systems for mere mortals, not the people who inhabit the models of traditional economists." What seems easy to one of DC's privileged elite can be very hard for an overworked mom or minimum wage-earning service worker.

I believe that the main reason a solid 2/3 to 3/4 of the country supports a public option is because it is a straightforward, transparent way to provide a backstop of health insurance for everyone. If Congress both rejects a public option and makes subsidies for private insurance as complex as the tax code, health reform risks becoming a model case of government failure. Last week's negative votes on Rockefeller's strong and Schumer's weak public options could easily become a "you broke it, you bought it" moment for centrist Democrats and Republicans on the Senate Finance Committee.

3) Fairly distribute the burdens of reforming the health care system? This is the tax and finance question, and it promises to generate some epic battles on Capitol Hill. However the Senate Finance proposal ultimately evolves, it will be in tension with a House of Representatives that sees progressive taxation as a foundation for financing reform. The Baucus proposal to tax "high end"/Cadillac/"gold-plated" health plans may seem progressive, but it promises to gradually engulf even normal plans. While David Leonhardt offers some good economic arguments for such a tax, policymakers should be guided by Leonhardt's observations on the propriety of taxing those at the very top of the income scale, who have disproportionately benefited from economic trends and tax cuts of the past decade.

4) Provide incentives for long-term cost-saving and preventive medicine? Comparative effectiveness research is a crucial tool for focusing pharmaceutical research on drugs that save lives. We have a shortage of primary care doctors vis a vis specialists. Reimbursement systems are too easy to game. Insurance markets are concentrated and need more competition and transparency. Any bill that ignores these problems (or fails to empower HHS or another agency to address them) can't lead to truly sustainable universal coverage.

The health reform fight has been bruising, disappointing, and frustrating for many who care about health policy. Many unwise assumptions are already baked into leading bills. In the Senate, ostensibly Democratic lawmakers are promoting what are essentially Republican ideas and granting enormous subsidies to industries that may well betray them at the next electoral cycle. Nevertheless, there remain many opportunities for improving the final product at the beginning of the end of the legislative process.

X-Posted: HRW.

Posted 11:19 PM by Frank Pasquale [link]