Alternatives to Obamacare

As Obamacare looks more and more as though it will collapse, there are some alternatives beginning to appear. Several years ago, I suggested using the French system as a model. At the time, the French system was funded by payroll deduction, a source affected by high unemployment, and used a national negotiated fee schedule which was optional for doctors and patients. The charges had to be disclosed prior to treatment and the patient had the option of paying more for his/her choice of physician. Privately owned hospitals competed with government hospitals and patient satisfaction was the highest in Europe.

Recently the French system has run into trouble.

French taxpayers fund a state health insurer, “Assurance Maladie,” proportionally to their income, and patients get treatment even if they can’t pay for it. France spends 11% of national output on health services, compared with 17% in the U.S., and routinely outranks the U.S. in infant mortality and some other health measures.

The problem is that Assurance Maladie has been in the red since 1989. This year the annual shortfall is expected to reach €9.4 billion ($13.5 billion), and €15 billion in 2010, or roughly 10% of its budget.

This may be due to several factors. The French economy is in terrible shape with high unemployment. More of the funding for the health plan is coming from general revenues. This was not how it was supposed to work. It was payroll funded, much as the German system is, with a wider source than individual employers. This allows mobility for employees and allows employers to distribute risk among a larger pool. Germany allows other funding sources such as towns and states. I think it is still a good model for us but, with the passage of Obamacare, it will take a generation before another large reform would be viable. Obamacare must stand or fall first and I think it will fall but, as in most government programs, it takes years before the sponsors will admit defeat.

Another proposal has been made by a serious study group.

1. The government should offer every individual the same, uniform, fixed-dollar subsidy, whether used for employer-provided or individual insurance. For everyone with private health insurance, the subsidy would be realized in the form of lower taxes by way of a tax credit. The credit would be refundable, so that it would be available to individuals with no tax liability.

2. Where would the federal government get the money to fund this proposal?

We could begin with the $300 billion in tax subsidies the government already “spends” to subsidize private insurance. Add to that the money federal, state and local governments are spending on indigent care. For the remainder, the federal government could make certain tax benefits conditional on proof of insurance. For example, the $1,000 child tax credit could be made conditional on proof of insurance for a child.10 For middle-income families, a portion of the standard deduction could be made conditional on proof of insurance for adults. For lower-income families, part of the Earned Income Tax Credit could be conditioned on obtaining health coverage.

3. If the individual chose to be uninsured, the unclaimed tax relief would be sent to a safety net agency providing health care to the indigent in the community where the person lives, so that it would be available there in case he generates medical bills he cannot pay from his own resources. The result would be a system under which the uninsured as a group effectively pay for their own care, without any individual or employer mandate. By the very act of turning down the tax credit for health insurance in choosing not to insure, uninsured individuals would pay extra taxes equal to the average amount of the free care given annually to the uninsured. The subsidies for the insurance purchased by the insured would then effectively be funded by the reduction in expected free care the insured would have consumed if uninsured. [See Figures II and III.]

The paper goes on to explain the proposal The trouble is that this is another major reform and I see no chance for it in the foreseeable future.

What then is the most likely development ?

Many physicians have chosen to drop out of insurance and Medicare. The AMA, contrary to its usual ineptitude, has come up with some proposals (pdf). It is also known as concierge medicine, a system of paying for medical maintenance with a monthly subscription.

This article suggests that cash practices are compatible with Obamacare. I doubt it.

Even surgeons, usually dependent on hospitals, are interested.

So in 2008, after 22 years of practice, Dr. Petersen did what many surgeons dream of—he dropped all insurance, federal and private, from his practice. Today, he operates on a strict cash-only basis, offering general surgery procedures to uninsured or under-insured patients for an all-inclusive, one-time fee.

“I have no regrets,” said Dr. Petersen. “Since I’ve dropped ER [emergency room] call and don’t accept any new patients with insurance, a workweek for me is really 50 hours, no nights, no weekends.”

This trend usually involves physicians who do not have student loans and are fairly well established.

A summary of insurance options was published in Forbes. It includes some interesting ideas.

Many of us in the health policy world warned Democrats that ObamaCare created a number of perverse economic incentives. In most cases they simply refused to listen. Now that the actuaries have started weighing in on the cost of coverage (here and here), pointing out that some young, healthy people could see their premiums more than double, ObamaCare backers are worried that millions of Americans will game the system. That is, remain uninsured until they need coverage and then sign up.

The perverse incentives of Obamacare are going to be fatal.

But just because millions of Americans refuse to get ObamaCare-qualified coverage doesn’t mean they will be uninsured. There are policies available now that would work very well for the ObamaCare avoiders.

Some of these policies are built on a life insurance platform rather than health insurance — which, incidentally, means they are outside ObamaCare’s long arm of regulatory control.

UPDATE: Here is an article on why high deductible policies will be banned by Obamacare.

In 2014, plans sold on the individual and small-group markets will have to meet new standards for coverage and cost-sharing, among other things. In addition to providing 10 so-called essential health benefits and covering many preventive-care services at no cost, plans must pay at least 60 percent of allowed medical expenses and cap annual out-of-pocket spending at $6,350 for individuals and $12,700 for families. (The only exception is for plans that have grandfathered status under the law.)

Thus, the life insurance model will be adopted for alternatives, unless the law is changed.

The customer buys a life insurance policy that pays up to $250,000 upon death, which I believe is the current maximum available for this kind of policy.

Along with life insurance coverage the policy includes what’s called a “critical illness” component. If the policyholder needs, say, surgery, the insurer writes the policyholder a check based on a schedule. Let’s say, for example, it’s $10,000.

This goes back to the model of indemnity style insurance of the 1950s. Diagnoses lead to an estimate of the hospital costs. This is a bit like the French system. Hospital charges have ballooned out of sight since the “cost-plus” method of reimbursement became popular in the 1960s. What if hospital charges were limited by a flat fee, not rationing?

One existing policy pays 100 percent for heart attack, stroke, life-threatening cancer, major organ transplant, kidney failure, Alzheimer’s and paralysis, among other medical conditions.

The policyholder could also be part of a provider network that provides a discounted rate for the care — one of the most important current benefits of having health insurance.

How much would such a policy cost? For one company, a 30-year-old male would pay $1,438 a year, and for a 50-year-old male it’s $3,234.

Compare that to Obamacare. Obamacare bans physician owned hospitals.

Because of the new health care law, Dr. John Dietz has an empty building that he’s not sure what he’s going to do with.

Dietz is part owner of the Indiana Orthopedic Hospital.

“It is an expansion of our hospital that is three-quarters finished; it had three operating rooms for outpatient surgery,” he said. “Now it can’t be used for that purpose. We’ll have to figure out an alternative for it.”

Dietz and his fellow investors put $27 million into that new building.

Under the new law there are a host of bureaucratic hoops that physician-owned hospitals must go through to expand.

• The hospital must apply to the Department of Health and Human Services and can do so only once every two years.

• It must then wait for a period for members of the community to provide input.

• It must be in a county where population growth is 150% of the population growth of the state in the last five years.

• Inpatient admissions must be equal to or greater than the average of such admissions in all hospitals located in the county.

• Its bed occupancy rate must be greater than the state average.

These obstacles are intended to exclude private hospitals from Obamacare. OK, that sounds like an opportunity rather than a penalty. These specialty hospitals have been given very high marks for quality of care.

The American hospital association, which has endorsed Obamacare, supports the exclusion.

Ellen Pryga, director of policy at the AHA, said, “The provision is a good one that will stem the tide of an entrepreneurial approach to medicine that is potentially fatal.”

Fatal to general hospitals which are inefficient. I am in favor of big city hospitals that are trauma centers and serve the poor. They were ravaged by Medicare and Medicaid in the 1960s which had promised “mainstream care” even if it killed the recipients. They should be funded by general funds. Obamacare will only add to fraud.

The following comment thread shows how unrealistic the Obama supporters are and how resistant to reality.

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