Tuesday, February 16, 2010

My Analysis of Sensible Conservative Alternatives

I've read a few high level summaries of some conservative proposals to health care reform, but Megan's is a pretty interesting proposal, briefly alluded to here.

First, she doesn't address Medicare which is an entirely different can of worms (old people have especially high health care costs especially end of life care, just as their ability to work and pay for such care degrades).

Her proposal is basically this:

"I think that the argument for catastrophic coverage is much stronger for a variety of reasons, which is why I'd like to see the government pick up the tab for expenses that total more than 15% or 20% of annual income. There's certainly also a case for providing basic care and treatment for certain chronic conditions to the poor, though even in that case, I'd like to see us at least try to handle the problem with a combination of catastrophic insurance, and better income supports. But if that failed--and it might--I'd absolutely support public provisions of those sorts of treatments to lower income Americans, along with no-brainers like prenatal and infant care."

So, in essence, she rejects the idea of health insurance at all for basic day to day health care that really should be paid for out of pocket, and believes it should only be used for catastrophic care that kicks in automatically as it reaches 15 to 20% of your income. In her view (and mine probably), that's probably about the level that, as health care costs rise above it, will push people into bankruptcy. Below that requires a pretty big sacrifice but a sacrifice that won't bankrupt a person. And this kind of health care plan would work well for many (most) people below 65 I'm willing to guess. And would go a long way in reducing cost and injecting efficiencies into the system because consumers of health care would be the ones actually paying directly for that health care.

By the way, this idea is a pretty strong revolutionary departure from our current system, and I have no doubts it would be a big improvement from our current messed up system.

I take some issue with the idea, though, in regards to how it treats those with chronic conditions. If a chronic condition consistently, year after year, puts you at the catastrophic levels, wouldn't 15-20% of your income significantly affect most middle income wage earners ability to do much of anything else useful with that money - say save for college, buy a house, save for other unforeseen expenses. I grant you that one costly health care event in a single year is painful but manageable, but if year after year, you have to take off 15-20% off of your salary for medical expenses - that's a pretty heavy burden.

I say this selfishly because I believe (I haven't run the numbers) that if we had to pay for diabetes care 100% ourselves, we would approach that level pretty quickly almost every year. And you cannot legitimately opt out of health care for chronic conditions without seriously sacrifices your long term health (although some would probably try).

One more point on the catastrophic portion of this plan if applied in a single payer free market environment, those with chronic illness may still be left out. Catastrophes are just more likely when you have chronic illness. So, as McArdle alludes to, this catastrophic insurance would probably have to be government funded or government regulated through an insurance exchange to be effective.

So, lets say we take McArdle's plan: an insurance exchange that offered nothing but catastrophic insurance. Say you throw me a bone and offer the idea of instituting a high risk insurance pool subsidized by government tax payers to make management of chronic disease more in-line cost-wise with current insurance plans. We still pay a lot of out of pocket for our diabetes, but its affordable - we are still able to afford a house, an education, etc. Its affordable because its subsidized.

Then how does this plan compare with the Senate's plan? Not much. You would have to have mandates on the catastrophic care if its provided by an exchange or you pay for it through taxes (another kind of mandate) if its funded by the government.

The high risk pool would be either funded by taxes or by higher premiums for everyone in the regulated exchange.

Basically, if you've given me a single, significant (but in my view necessary) concession to McArdle's plan, her plan is really, really close to the Senate's bill - a bill that McArdle ironically does not support.

No comments: