The most pressing goal of health reformers in Congress should be to replace all the costly provisions in Obamacare with the consumer-friendly health plans Americans prefer. In the process, reformers must change the way medical care is financed so that consumers have control over their health care dollars as well as the means to pay for medical care over their lifetimes.
As a starting point, Congress should repeal the individual and employer mandates and taxes of the Patient Protection and Affordable Care Act (ACA). Congress should also repeal regulations that prevent insurers and employers from designing affordable health plans, including the “essential benefits” package, and allow consumers to choose limited benefit plans and catastrophic coverage if they want. Regulations that prevent insurers from fully adjusting individual premium rates to reflect known health risks drive up costs for most Americans. In its place, Congress should restore the right to renew coverage if an applicant has maintained insurance with no gaps of more than 63 days (COBRA) and allow insurers to sell multiyear coverage. This would also allow individuals to keep their portable health plans regardless of employment. Creating a national market would also allow insurers to sell policies across state lines, resulting in competition among states to reform overly-restrictive state mandates.
Increased flexibility in health plan design should also encourage the use of cost-containment tools, such as expanded health savings accounts, innovative cost-sharing and reference pricing. Reference pricing allows health plans to set the amount insurers will reimburse for a particular procedure, but it also allows providers to balance their bills if they believe their services are more valuable. This gives providers an incentive to compete on price, charging near the reference price to avoid losing customers. Insurers and health plans should also be allowed to maintain exclusive provider networks, require competitive bidding of providers and selectively contract in order to obtain the best prices.
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Many Americans do not have access to coverage through work. They must pay for health insurance with after-tax wages or pay the full cost of medical treatment out of their own pockets. Those who lack access to health coverage at work should receive a defined tax credit that provides a comparable amount of tax relief as employer-provided health benefits for a middle-income family. The tax credit should be able to be advanced (so that it can be used to pay monthly premiums) and refundable (that is, a net subsidy) for those who cannot fully pay the cost of premiums because of their income or health status. The tax credit would replace the cost-sharing subsidies and sliding-scale subsidies of the Obamacare exchanges and could be used to purchase private health insurance or to pay directly for care. The credit should be adjusted for health status, or age as a proxy for health status. Individuals who prefer to keep their employer plans should be allowed to do so.
Another goal of any reform agenda should be to expand Americans’ access to primary care. The supply of physicians is relatively inelastic; it takes time to train a doctor. The shortage of primary care providers is expected to get much worse over the next 20 years. Expanding the number of primary care residencies would help. In addition, there are many foreign medical graduates who would like to immigrate but find insurmountable barriers to licensure in the United States.
Reforming the practice of medicine would also better serve patients and boost access to primary care. Medical practice has hardly changed in the past century. Many states have regulations that inhibit talking to a doctor over the phone, and prevent so-called physician extenders, such as physician’s assistants and nurse practitioners, from practicing to the limits of their training.
Reformers should focus on removing barriers to competition in the hospital sector and expand price transparency. Nearly one-third of health care spending is on hospital care. It is more costly than need be because hospitals do not have to compete on price to attract patients. Hospitals charge more for almost every service, whether performed only in hospitals or done in other care settings.
Public policy also should seek to encourage price transparency. This could be done by requiring a meeting of the minds between patients and their providers, the standard for an enforceable contract. It should also create a safe harbor, making it easier for a provider to collect fees if he or she is transparent about costs. Providers who disclose fees and declare their network status in a patient quotation would be an indicator of transparency. However, agreements should be obtained through informed consent, rather than consent under duress.
Health care should also be reformed to better care for high-cost patients. One-fifth of patients generate 80 percent of medical costs, while 20 percent of expenditures are on the sickest 1 percent. Some Medicaid Advantage plans employ a patient-centered medical home that coordinates care for high-cost patients and advises them on providers and procedures. Another technique is a high-risk pool that requires a higher level of patient responsibility for sticking with treatment programs and following the advice of their care coordinator.
Medicaid needs reformed to better serve low-income families. States should be allowed to experiment and find solutions that meet each state’s unique needs. For able-bodied adults on Medicaid, the program could be designed to transition them to private plans as their incomes rise, including requiring enrollees to pay small premiums; to work, seek work or participate in job-training programs; and requiring enrollees to pay nontrivial copays and cost sharing. States should also be allowed to remove beneficiaries who fail or refuse to pay premiums, co-pays or follow the rules.
Medicare needs to be reformed to reduce the burden on seniors and taxpayers. Cumbersome regulations and procedures make the Medicare program overly bureaucratic. The program needs to experiment with cost containment measures such as reference pricing to encourage price competition among providers, competitive bidding among providers and selective contracting with low-cost providers. It also needs to better coordinate care among its sickest beneficiaries.
Congress should also address tort and malpractice reform. Accountable Care Organizations are needlessly bureaucratic and patient-centered medical homes is a concept that hasn’t been tested as much as necessary.
These are just a few of the needed reforms that would make health care more responsive to patients and consumers. The key to any substantial reform agenda needs to fully engage the patient. Only then will providers compete for patients’ patronage by competing on price, quality and other amenities.
These and other reforms to fix our health care system are outlined in the NCPA’s Agenda for Health Reform.
Devon Herrick is a health economist and a senior fellow at the National Center for Policy Analysis (NPCA).
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