Last week Bob Laszewski proposed requiring health plans achieve cost control or lose their tax preferred status.
A commenter referred to this as cost control with teeth – the teeth of a pit bull. I agree, and while it has all the subtlety of a pit bull, it also has that canine’s simplicity.
We health policy folks tend to get all intellectual and esoteric, arguing about nuance and subtlety and discoursing about the intricacies of the French system vs the US system and the correct way to measure live birth rates and the merits of evidence-based clinical guidelines and whether and how our current system is rationing care and what if it is.
Losing 99.9% of the population in the process.
Bob’s idea – the Affordability Model – is to require all health plans meet pre-determined inflation targets set by an appointed health board or forfeit their tax-preferred status. They could continue to sell health insurance, but buyers wouldn’t be able to deduct the premiums from their taxes. Yes, that would mean the death of that plan – chewed to death by the very sharp teeth of fleeing customers.
Here’s what that means:
1. we don’t need a public plan option – and don’t have to fight that fight.
2. health plans finally have a reason to control costs – they have had none to date.
3. we avoid the arguments about taxing benefits.
4. it is easily attached to existing proposals – I suggest the Healthy Americans Act as the best foundation.
5. it appeals to ‘fairness’ – if healthplans meet the target, they survive and prosper. If not, the market kills them.
6. it is non-ideological – neither liberal or conservative, rather pragmatic and workable.
7. it is simple and easy to explain.
There’s still some work to be done – the implications of the Affordability Model on chronic conditions and vice versa need more thought.
But for the first time, I’m hopeful.
Jul
6
Joe – the concept is a good one. Unfortunately insurers have done wonderfully well convincing everyone that health care costs are a function of health care spending and so I wonder how it is that ‘fairness’ could prevail here. That is, insurers have routinely hiked premiums on the basis that spending is driving that, rather than those increases being attributed to spending PLUS lots of profit. I am also gravely concerned about how for-profit insurers would control costs. To date, control has meant adding substantial administrative cost to some else (namely providers of care, see the RWJF report on this for more details) and denying services to those that need them most (the sickest and most expensive members). Safeguards may be built in to ensure that patients are protected, but what about providers? From that perspective, it sounds like open-season on physician revenue to me. We really cannot rely on folks whose sole interest it is to hold on to as much profit as possible run the delivery of medicine!
Last I checked, vast majority of physicians in America were organized in private, for-profit entities…
he problem with any proposal that attempts to control cost by imposing any sort of mandate on health insurers is that the insurers will adopt an across-the-board approach in order to avoid litigation. In short, they will treat all providers alike. The problem, as Dr. Gawande pointed out is NOT the practice patterns of ALL physicians but those of a few outliers. On the continuum of physicians, we have the saints who practice appropriately ALL the time and, at the other end, the sinners who practice entrepreneurially ALL the time. In between are the physicians who trespass occasionally or frequently. Insurers do two things: (1) negotiate lower reimbursements with providers; AND (2) raise premiums for employers (and, ultimately, their employees). That’s it. That’s ALL they do. It’s all they want to do. They stopped trying to control cost almost a decade ago.
Bob Laszewski’s proposal is indeed an interesting one, but it suffers from some fundamental problems.
1. My own experience with health care contract management tells me that the threatened loss of tax deductibility is more likely to generate lawsuits than it is to induce cooperative efforts to reduce costs.
2. The proposal potentially penalizes “good guys” more than “bad guys”. It’s going to be a lot easier for the infamous docs in McAllen, Texas to cut their rate of cost growth than for their peers in Portland, Oregon.
3. The “all or nothing” slashing of tax deductibility means that a health plan that marginally meets the target will likely gain customers, while a plan whose performance is almost identical but marginally exceeds the target growth rate will potentially be driven out of business. (At this point my comment about the lawyers becomes relevant.)
Half of those in private plans are covered by self funding, they already have morethen enough reason to controlcost.
How does a 50 life self funded employer meet these goals when 1 large spec claim can swing their experience 10-20% alone?
What allowance do you make for government cost shifting? If Congress slashes medicare reimbursements 10% and providers shift the cost to provate plans does the entire private market suddenly lose their tax status?
Congress has never estimated the cost of mandates accurately. When they underestimate the cost of what ever new mandate again the entire private sector loses its tax status?
This proposal fails to recognise what a health plan is. Insured health plans are a fraction of the over all market and less then half the private market. Your either going to blow up the most successful and efficient part of our current systems, self funded plans, or your implementing a partial solution that only applies to 20-30% of the market.
Instead these standards should be applied to Medicare and Medciad, if they don’t control their spending politicians lose tax dollars to play with and their jobs.