healthcare is somewhat of an impossible trinity. We want care to be universal, affordable, and quality…but we can only pick two.
A risk adjuster voucher system balances the above three traits because 1) It doesn’t lead to rationing or depress innovation. 2) It can easily be made universal without a “mandate”….just give people the vouchers…no one turns down free stuff! 3) It incentivizes cost savings.
Some twists I added to my proposal: A reinsurance/excess insurance system for extremely sickly people. To avoid skimping on care for extremely costly individuals, the “insurer” would have cap on liability, the rest absorbed by the government and funded through a sugar-sweetened beverage levy.
Second, the system as a whole should be funded via VAT. A 10 percent VAT would probably be more than enough.
What are your thoughts on Universal Catastrophic Coverage? I see a decent amount of people saying that it would be for the best that the gov’t doesn’t subsidize non-emergency care (outside of things like vaccines) because health outcomes are largely going to be determined as a product of lifestyle choices, not preventative medicine. The research consensus seems to be that preventative medicine raises costs, and also improves outcomes, with the question then becoming whether or not the gov’t should pay for it. It would certainly be cheaper, but I’m not sure if it would necessarily be better.
First, the Niskanen Center’s UCC plan is bad. It has a really weird means tested design, where the deductibles is dependent on your income (absolutely wild). So for the purposes of this exchange I’m gonna assume you mean a universal catastrophic plan that has a high deductible and cost sharing.
My understanding is that people genuinely do skimp on necessary care when they have to pay for it. So I would like it to be subsidized. My idea for ensuring price competition is to use a system of reference based pricing, whereby your insurance plan gives you a fixed subsidy for a specific healthcare need.
For instance, think dentistry. Suppose you need two dentistry check ups a year. Your insurance could provide you a dentistry subsidy that you can use to shop when it’s time to see a dentist. This subsidy could look something like the following:
- Your insurance will pay 90% of the cost of the visit up to 200 dollars
- All spending over 200 dollars will be unsubsidized
This keeps price exposure and encourages prices shopping, but it does so while providing subsidized sufficient to not lead to people skimping on necessary care.
A peer reviewed econometric paper out of Emory demonstrates that a universal healthcare system like what you're describing would entail raising taxes substantially across all income cohorts.
And even then, it may not be comprehensive for a long period of time entailing multiple political cycles.
You are naive to think the GOP will not be a bad actor during these cycles, as they amply demonstrated their disingenuousness for Obamacare..
Obamacare’s significant weakness stems from Marco Rubio's elimination of the risk corridors during a fiscal policy debate,that the Obama admin,and Schumer accepted under a Mitch McConnell Senate to pass a filibuster proof bill.
To posture is easy.
You need a functional congress first, or the death of the legislative filibuster.
I didn’t like the Niskansen plan for that reason, however there are other ways of structuring a UCC plan. I honestly wasn’t particularly sure what to think of UCC either way, however I can definitely see the argument you’re making. Personally, I think managed competition is likely superior, but I wanted to see what you thought of this.
Also yeah, reference pricing would be unquestionably the best system, that’s basically a given.
A supplemental insurance marketplace would almost certainly exist naturally in such a circumstance.
I imagine a potential UCC plan as having some flat coinsurance rate with an out-of-pocket maximum equivalent to some % of annual income, with covered procedures being reference-priced.
Care beyond the referenced price, as well as coinsurance costs, and routine care would likely fall under the oversight of private insurance. Subsidies for private insurance would be done away with.
I agree that non-emergency care should not be subsidized. It's in the best interests of insurance companies to pay for things that reduce their costs, and to the degree that preventative care can do this, no subsidy is needed, insurance companies will already do it without any subsidy. With a subsidy, they might do it too much.
I’ve spent quite a long time working on risk adjustment on Medicare, and I think it’s basically impossible to get right.
At the end of the day you are going to have some unmotivated people at CMS concocting some “model” based on out of date data. It will be subject to all the usual special interest pleading. On the other side you’ll have motivated generally more talented people at the insurers unburdened by politics. I think the same group that won that battle yesterday will win it tomorrow.
Reinsurance will either be too lean and not do anything or too rich and encourage out of control spending. Or insurers will turn one into the other by finding ways to shove cost into reinsurance.
I think demographic-based risk adjustment based on age, sex, and other variables is not game-able. Reinsurance also works, even if it does jeopardize perfect efficiency.
I am open to the idea that community rating would cause harmful distortions. If that's the case, at least premium variation can be compressed by the aforementioned mechanisms.
I guess I’m trying to understand what your proposing that is different then what we have.
We didn’t use to have risk adjustment in MA, but then people complained that MA was skimming the healthy people so we needed risk adjustment. Now they complain that they jack risk scores up with intense coding.
Part D used to have reinsurance and it caused a gross to net bubble in drug costs (also way too much dubious utilization). So they got rid of it (for the insurer but not the member), though this has caused the market to explode (CMS just had to bribe the insurers to cover this up before the election).
Obamacare was a pretty huge thing. It included medicaid expansion and an employer mandate, both things that moved us an alternative direction from this model.
I am assuming though you are referring to the state based exchanges that the ACA established.
Here are the differences:
#1 EVERYONE is enrolled in it
#2 It’s national, not separated into separate state marketplaces
#3 The subsidy is universal not a complex means tested tax credit
#4 The coverage package is broader and cost sharing is lower
#5 Risk adjustment operated differently in order to more accurately balances risk pools
#6 Demographic adjusted risk scores are an entirely new addition
#7 The centralized claims and payment clearing house is entirely new
#8 The Public insurance option is new
#9 Universality is achieved via auto enrollment of the uninsured, there is no individual mandate
I like all the ideas except prohibiting charging different prices for age, gender, or pre existing conditions and then adjusting for that with some government risk evaluation. The big thing that makes one insurance company better than another is how accurate their risk assessments are. If you prohibit them from doing what they're best at for major categories of difference that have real and substantial differences, then you're without a doubt going to introduce a huge amount of waste. Charging different insurance prices based on age or gender or especially pre existing conditions is absolutely critical for efficient functioning of insurance.
If we really want to subsidize the burden for certain types of people, this should be done by giving those people higher value vouchers, not by prohibiting risk evaluation methods.
A better option than risk-adjustment would be a federal reinsurance program on top of a flat per-enrollee benefit. Reinsurance just tends to work more efficiently.
Oh interesting. I wasn't familiar with the word "reinsurance", but it sounds like an idea I had for fixing the pre-existing conditions problem by having people purchase a life-long insurance policy. Since the policy is life-long, conditions that come up later don't become "pre-existing" for insurance you begin later in life (like because of moving jobs). And if the person wants to change insurance policies or insurance companies, there would be a process by which one insurance company would sell the policy to the new company (with perhaps modified terms for the insured person). Is that basically what reinsurance is?
Reinsurance would basically be, any claim above a certain threshold would be partially (or wholly depending on the cost) reimbursed by the government. The benefit in this reimbursement is that patients who are likely to produce many high-cost claims don’t really skew the average that much, because anything that is too burdensome will be covered by the federal government.
That doesn't sound economically efficient to me. If the government wholly reimbursed claims above a certain threshold, the insurance company would have no incentive to help their clients reduce their claims, the clients themselves would have an incentivize to spend as much as possible on unnecessary marginally beneficial care if they've exceeded this limit, they would have less incentive to give their clients preventative care especially of the kinds that are most important for preventing expensive health problems.
Partial reimbursement has all of those problems just to a lesser degree depending on how partial it is. Why would you try to de-skew the average for insurance companies? The whole point of insurance companies is to provide a way to smooth out payments for their clients. If insurance companies want to do the same for themselves, they can (and do) buy "insurnace insurance". Doing what you say just doesn't sound like a good idea to me.
The problem which insurance companies face when you cannot price risk is that there will inevitably be certain plans which are more attractive for less health individuals, which as a result can sink the insurance company in high claims. Giving more money for the risk adverse works, but it is less efficient because of the administrative costs of calculating what is an adequate payment.
To some degree yes, it is incompatible with long term plan incentives, however I would argue that reinsurance or UCC does a better job and ensuring high cost emergency care gets accounted for.
> it is less efficient because of the administrative costs of calculating what is an adequate payment
I question that. If the government paid only partially for anything above a cap, calculating risk (the primary thing needed to calculate adequate payments) would still be required. If the government paid the whole amount above a cap, you instead get massive over-payments for health insurance as the only one left holding the tab is the government.
> reinsurance or UCC does a better job and ensuring high cost emergency care gets accounted for
Lol not me realizing a gazillion typos after publishing it 💀
Risk adjusted vouchers, or universal multipayer, as the best option for healthcare. I agree, as I wrote here: https://www.lianeon.org/p/infographic-healthcare-for-the-21st
healthcare is somewhat of an impossible trinity. We want care to be universal, affordable, and quality…but we can only pick two.
A risk adjuster voucher system balances the above three traits because 1) It doesn’t lead to rationing or depress innovation. 2) It can easily be made universal without a “mandate”….just give people the vouchers…no one turns down free stuff! 3) It incentivizes cost savings.
Some twists I added to my proposal: A reinsurance/excess insurance system for extremely sickly people. To avoid skimping on care for extremely costly individuals, the “insurer” would have cap on liability, the rest absorbed by the government and funded through a sugar-sweetened beverage levy.
Second, the system as a whole should be funded via VAT. A 10 percent VAT would probably be more than enough.
Do you have a cost projection?
What are your thoughts on Universal Catastrophic Coverage? I see a decent amount of people saying that it would be for the best that the gov’t doesn’t subsidize non-emergency care (outside of things like vaccines) because health outcomes are largely going to be determined as a product of lifestyle choices, not preventative medicine. The research consensus seems to be that preventative medicine raises costs, and also improves outcomes, with the question then becoming whether or not the gov’t should pay for it. It would certainly be cheaper, but I’m not sure if it would necessarily be better.
So here is what I’d say.
First, the Niskanen Center’s UCC plan is bad. It has a really weird means tested design, where the deductibles is dependent on your income (absolutely wild). So for the purposes of this exchange I’m gonna assume you mean a universal catastrophic plan that has a high deductible and cost sharing.
My understanding is that people genuinely do skimp on necessary care when they have to pay for it. So I would like it to be subsidized. My idea for ensuring price competition is to use a system of reference based pricing, whereby your insurance plan gives you a fixed subsidy for a specific healthcare need.
For instance, think dentistry. Suppose you need two dentistry check ups a year. Your insurance could provide you a dentistry subsidy that you can use to shop when it’s time to see a dentist. This subsidy could look something like the following:
- Your insurance will pay 90% of the cost of the visit up to 200 dollars
- All spending over 200 dollars will be unsubsidized
This keeps price exposure and encourages prices shopping, but it does so while providing subsidized sufficient to not lead to people skimping on necessary care.
A peer reviewed econometric paper out of Emory demonstrates that a universal healthcare system like what you're describing would entail raising taxes substantially across all income cohorts.
And even then, it may not be comprehensive for a long period of time entailing multiple political cycles.
You are naive to think the GOP will not be a bad actor during these cycles, as they amply demonstrated their disingenuousness for Obamacare..
Obamacare’s significant weakness stems from Marco Rubio's elimination of the risk corridors during a fiscal policy debate,that the Obama admin,and Schumer accepted under a Mitch McConnell Senate to pass a filibuster proof bill.
To posture is easy.
You need a functional congress first, or the death of the legislative filibuster.
That sounds pretty reasonable.
I didn’t like the Niskansen plan for that reason, however there are other ways of structuring a UCC plan. I honestly wasn’t particularly sure what to think of UCC either way, however I can definitely see the argument you’re making. Personally, I think managed competition is likely superior, but I wanted to see what you thought of this.
Also yeah, reference pricing would be unquestionably the best system, that’s basically a given.
UCC with a marketplace of supplemental coverage.
A supplemental insurance marketplace would almost certainly exist naturally in such a circumstance.
I imagine a potential UCC plan as having some flat coinsurance rate with an out-of-pocket maximum equivalent to some % of annual income, with covered procedures being reference-priced.
Care beyond the referenced price, as well as coinsurance costs, and routine care would likely fall under the oversight of private insurance. Subsidies for private insurance would be done away with.
I agree that non-emergency care should not be subsidized. It's in the best interests of insurance companies to pay for things that reduce their costs, and to the degree that preventative care can do this, no subsidy is needed, insurance companies will already do it without any subsidy. With a subsidy, they might do it too much.
I’ve spent quite a long time working on risk adjustment on Medicare, and I think it’s basically impossible to get right.
At the end of the day you are going to have some unmotivated people at CMS concocting some “model” based on out of date data. It will be subject to all the usual special interest pleading. On the other side you’ll have motivated generally more talented people at the insurers unburdened by politics. I think the same group that won that battle yesterday will win it tomorrow.
Reinsurance will either be too lean and not do anything or too rich and encourage out of control spending. Or insurers will turn one into the other by finding ways to shove cost into reinsurance.
I think demographic-based risk adjustment based on age, sex, and other variables is not game-able. Reinsurance also works, even if it does jeopardize perfect efficiency.
I am open to the idea that community rating would cause harmful distortions. If that's the case, at least premium variation can be compressed by the aforementioned mechanisms.
I guess I’m trying to understand what your proposing that is different then what we have.
We didn’t use to have risk adjustment in MA, but then people complained that MA was skimming the healthy people so we needed risk adjustment. Now they complain that they jack risk scores up with intense coding.
Part D used to have reinsurance and it caused a gross to net bubble in drug costs (also way too much dubious utilization). So they got rid of it (for the insurer but not the member), though this has caused the market to explode (CMS just had to bribe the insurers to cover this up before the election).
This differs from Obamacare, how?
Obamacare was a pretty huge thing. It included medicaid expansion and an employer mandate, both things that moved us an alternative direction from this model.
I am assuming though you are referring to the state based exchanges that the ACA established.
Here are the differences:
#1 EVERYONE is enrolled in it
#2 It’s national, not separated into separate state marketplaces
#3 The subsidy is universal not a complex means tested tax credit
#4 The coverage package is broader and cost sharing is lower
#5 Risk adjustment operated differently in order to more accurately balances risk pools
#6 Demographic adjusted risk scores are an entirely new addition
#7 The centralized claims and payment clearing house is entirely new
#8 The Public insurance option is new
#9 Universality is achieved via auto enrollment of the uninsured, there is no individual mandate
Get in line to get in line.
I like all the ideas except prohibiting charging different prices for age, gender, or pre existing conditions and then adjusting for that with some government risk evaluation. The big thing that makes one insurance company better than another is how accurate their risk assessments are. If you prohibit them from doing what they're best at for major categories of difference that have real and substantial differences, then you're without a doubt going to introduce a huge amount of waste. Charging different insurance prices based on age or gender or especially pre existing conditions is absolutely critical for efficient functioning of insurance.
If we really want to subsidize the burden for certain types of people, this should be done by giving those people higher value vouchers, not by prohibiting risk evaluation methods.
A better option than risk-adjustment would be a federal reinsurance program on top of a flat per-enrollee benefit. Reinsurance just tends to work more efficiently.
Demographic risk adjustment + reinsurance i most effective in my opinion.
Oh interesting. I wasn't familiar with the word "reinsurance", but it sounds like an idea I had for fixing the pre-existing conditions problem by having people purchase a life-long insurance policy. Since the policy is life-long, conditions that come up later don't become "pre-existing" for insurance you begin later in life (like because of moving jobs). And if the person wants to change insurance policies or insurance companies, there would be a process by which one insurance company would sell the policy to the new company (with perhaps modified terms for the insured person). Is that basically what reinsurance is?
Reinsurance would basically be, any claim above a certain threshold would be partially (or wholly depending on the cost) reimbursed by the government. The benefit in this reimbursement is that patients who are likely to produce many high-cost claims don’t really skew the average that much, because anything that is too burdensome will be covered by the federal government.
That doesn't sound economically efficient to me. If the government wholly reimbursed claims above a certain threshold, the insurance company would have no incentive to help their clients reduce their claims, the clients themselves would have an incentivize to spend as much as possible on unnecessary marginally beneficial care if they've exceeded this limit, they would have less incentive to give their clients preventative care especially of the kinds that are most important for preventing expensive health problems.
Partial reimbursement has all of those problems just to a lesser degree depending on how partial it is. Why would you try to de-skew the average for insurance companies? The whole point of insurance companies is to provide a way to smooth out payments for their clients. If insurance companies want to do the same for themselves, they can (and do) buy "insurnace insurance". Doing what you say just doesn't sound like a good idea to me.
The problem which insurance companies face when you cannot price risk is that there will inevitably be certain plans which are more attractive for less health individuals, which as a result can sink the insurance company in high claims. Giving more money for the risk adverse works, but it is less efficient because of the administrative costs of calculating what is an adequate payment.
To some degree yes, it is incompatible with long term plan incentives, however I would argue that reinsurance or UCC does a better job and ensuring high cost emergency care gets accounted for.
> it is less efficient because of the administrative costs of calculating what is an adequate payment
I question that. If the government paid only partially for anything above a cap, calculating risk (the primary thing needed to calculate adequate payments) would still be required. If the government paid the whole amount above a cap, you instead get massive over-payments for health insurance as the only one left holding the tab is the government.
> reinsurance or UCC does a better job and ensuring high cost emergency care gets accounted for
A better job than what exactly?