I think Dr. McGlynn starts with a great framing of the problem: After nearly two decades of experimentation with several of the best ideas about how to improve quality, there has not been much progress. Sure, new innovations (drugs, devices, procedures, etc.) have increased what we can do, but our overall ability to deliver evidence-based care to Americans is not really improving. She shows a great graph looking at our progress at getting people’s blood pressure under control. The percent of people whose blood pressure is well controlled has not, on average, gone up much in the last 18 years.
In other (blunt) words, we suck at care delivery innovation.
Why? Well, her answer looks at it from the structure-process-outcomes framework, which she describes and then proposes some solutions. My answer is two words: financial incentives. I won’t re-explain it here, but this post is a good start.
The structure-process-outcomes framework is a useful one, so let’s talk about it for a second. Those are the three major dimensions that can help to define quality, according to Avedis Donabedian.
Structure refers to things like clinic personnel (such as after-hours doctor access and care managers to check on high-risk patients), access to records that provide lists of patients with certain needs (like how many uncontrolled diabetics haven’t had an appointment for more than three months), and also basic facilities and management things. Getting the right structure is important because it provides the foundation for the other two dimensions.
Process refers to things we do, such as prescribing beta blockers and ACE/ARBs to patients with systolic heart failure, and ordering age-appropriate cancer screenings.
Outcomes refers to how the patients actually fare. How many have well-controlled blood pressure and diabetes, how often heart failure and COPD patients get hospitalized for exacerbations, etc.
We can measure any of those three things, and often we try to link them to reimbursement. Although, as Dr. McGlynn pointed out at the start, it hasn’t worked.
As a side note, trying to link reimbursement to the outcomes dimension is especially unpopular amongst providers because they can do everything right and prescribe all the right meds and schedule all the necessary follow-up appointments, but they can’t control whether the patient actually takes the medications and follows up, which means providers are often getting penalized for things that they don’t have control over.
Anyway, now you’re familiar with one of the foundational frameworks that has been used to approach quality improvement in healthcare.
Dr. McGlynn’s proposed solutions are very academic: focus more on social determinants of health since they often have a bigger impact on health than do medical treatments, start measuring things differently (stop measuring discrete events because that worsens fragmentation, use the more clinically meaningful EHR data for measurement rather than insurance claims data), and do a better job linking healthcare systems with appropriately resourced public health and community-based services. I believe all of them are important and will be helpful but not transformational like the solutions illuminated by the Healthcare Incentives Framework.
Lastly, I want to push back against one of her conclusions. She talks about how there has been little relationship found thus far between methods of financing and quality, and then she says, “Financial incentives alone cannot fix fragmented and reactive systems or create the operating systems required to enable reliable delivery of high-quality care.” And while I agree that financial incentives alone cannot fix our healthcare quality, I feel like she’s implying that it’s not the core mechanism of change and is instead just another lever we should consider using. I could be misreading that though. But whether I am misreading her or not, thinking of financial incentives as just another lever among many to improve healthcare quality is a generally held sentiment among healthcare experts. It’s another symptom of how healthcare experts misinterpret data and come to incorrect conclusions.
I’ve done the best I can on this blog to show that such a sentiment is incorrect. I’ve tried to explain that financial incentives are the core mechanism we have to induce change in the healthcare system, just as they are the core mechanism that makes every other industry function the way they do. And even though healthcare is different from other industries in many ways, those differences do not fundamentally alter the role of financial incentives in healthcare.
And that is why my answer to the question, “What will it take to improve quality?” is to systematically fix financial incentives first and then watch the quality-improving innovation emerge and expand.
The New York Times has a healthcare blog called The Upshot, and Austin Frakt of The Incidental Economist is a regular contributor. He recently wrote an article about drug prices, which is what got me thinking a little more about drug prices and prompted my post last week.
Sidenote: He has not been blogging very regularly anymore on The Incidental Economist, and it feels like a great hole has opened up in the health policy blogosphere. He has a great way of getting interested in a topic and finding all the useful evidence on the subject and then synthesizing it all, and through that process thousands of followers get carried along that journey of learning about an important health policy topic.
I think the topics Dr. Frakt covers in his most recent Upshot article are important, so I want to highlight some of them.
First, there is a link between higher prices and more innovation. Drug company executives aren’t dumb–if there’s a lot of money to be had in a certain drug market, they will put their R&D investments into those areas.
But the potential to make a lot of money with a drug doesn’t always line up with the potential to make a lot of health with a drug. We try to help those two things line up by manually setting patent lengths longer for drugs that will have a greater impact on health, but American politics is messy, so it doesn’t always work out that way. Another way to try to help those two things line up is by using administrative pricing. For example, New York Medicaid, similar to many countries, establishes prices based on a drug’s “therapeutic value.” If there is a high therapeutic value, the drug will be priced higher, and therefore the drug company will make more money if they focus their R&D on areas that are the most likely to increase health.
There is a whole independent nonprofit group dedicated to helping figure out the therapeutic value of drugs, and it’s called the Institute for Clinical and Economic Review (ICER). Some have proposed Medicare use the recommendations from ICER, but these days the trending proposal (which essentially accomplishes the same thing but is more politically palatable) is to instead look at the prices other countries set for drugs (presumably based on therapeutic value assessments) and then set our prices similarly. This is referred to as international reference pricing.
And while I think these proposals make a lot of sense because I, too, want more medications available to help my patients better, from a market perspective, I still have huge reservations to these sorts of administrative pricing proposals. It’s the same argument I end up at every time an administrative pricing proposal comes up: Taking the pricing power away from the collective knowledge of the market and putting it in the hands of a group of experts will never be accurate enough to allow the most efficient use of resources. And, in impossible-to-predict ways, it may create barriers to innovation.
I will talk more about the specific downsides of administrative pricing next week. And, by the way, my purpose here is not to say that administrative pricing is always wrong; rather, my purpose is to say that there are significant unpredictable costs associated with such a policy, and those short- and long-term costs need to be taken into account when deciding which policy would be best.
A couple weeks ago, I wrote about an experience I had at work with a patient wanting to stay in the hospital for two extra days just so he could spend a few hours with his daughter from out of town before going to a skilled nursing facility where no visitors would be allowed. The cost of staying in the hospital those couple extra days was probably at least $4,000 total, but the patient and his family were (rationally) ignoring that cost because they weren’t going to have to pay for any of it directly themselves.
The solution I proposed to such system-level irrational spending was to have the person making the purchase decision bear at least part of the cost of that decision. That way, if they choose something more expensive, it will be done with a consideration for the additional cost that choice entails.
As context for my proposed solution to such a problem, remember three things: (1) every system is perfectly designed to get the results it gets, (2) the design of a system generates a set of incentives, and (3) incentives are what drive the results of every system. So does no one have an incentive to get the people making purchase decisions to bear at least part of the price differential?
This is how I look at it:
Anything that lowers the total cost of care (while at least holding quality constant) is desirable for whoever is bearing the burden of that total cost of care. And the parties who bear that burden are the insurer and the patient, to varying degrees.
But since the patient typically doesn’t have much of an idea about what their out-of-pocket cost will be or how those costs will be impacted by choosing a different procedure or a different provider, they are not in a position to do anything about it.
The insurer, on the other hand, has the capacity to know–or at least give a reasonable estimate of–the cost of something. Therefore, we need to look to insurers for the necessary changes.
But think about this proposal from an insurer’s perspective . . .
The young energetic intern pitches such a plan to the executives, “Hey, how about we offer a new and innovative insurance plan that gets rid of the typical deductible and instead makes enrollees pay a 50% coinsurance on each service they receive (subject to their out-of-pocket max, of course). We could set the total price of each service (and, therefore, their coinsurance portion) at our negotiated rates with each provider. And we’ll make an app that will allow them to compare prices beforehand.”
The room’s executives would immediately see all the problems with such a plan. “This is too complicated for people! They will hate it and never want to get an insurance plan from us again.” “We can’t divulge our negotiated rates, all the providers who find out they are getting paid less will be angry and demand more from us.” “What about things that are not shoppable?” “If a single bad publicity event comes out of this experiment, it will severely damage our reputation and we’ll lose market share as a result, so we stand to lose more than we could gain.” “We’re going to have to make premiums extra low for such a plan to be able to convince people to try it out, but there’s no way to easily communicate how this plan is different, so a lot of people will just choose it because it’s cheap and says it has a $0 deductible and then they won’t be prepared to pay all their coinsurance costs.” “What about out-of-network coinsurance rates?” “Nobody’s ever done something like this before, so it’s too crazy to try unless we are likely to make a killing on it, which we aren’t.”
I talked about these same issues in my Why Insurers Don’t Innovate post a year ago. And not all of them are immediately solveable. But if we could address at least a majority of those executives’ concerns, I believe we would start seeing some enterprising insurers try this out.
The big thing would be solving the novel complexities that such a plan would create and then finding a way to convey this information to potential enrollees, either in the health insurance marketplace or in employer benefits explanations. And we would have to hope that many people would be willing to use an app to check healthcare prices in compensation for paying a much lower premium.
There would be lots of challenges to solve, and apparently no insurer has yet determined that the potential benefits are worth the potential harms. But I have hope that this will happen and be successful sooner or later. Maybe if the first enterprising insurer to try it can identify some first-mover advantages and create some barriers to imitation, they would stand to gain a lot more.
Also, remember there’s the static-world benefits to patients making value-sensitive decisions (they get better deals on the care they buy), and then there’s the dynamic-world benefits (the market starts to evolve toward delivering higher value). This kind of insurance plan design change, as it starts and then spreads, will enact a big change in providers’ incentives. In other words, the system will be fundamentally changed, which will result in much higher value care being delivered as it evolves in response to that change.
This week at work, I had a patient in the hospital who had been through a pretty challenging illness, and he was going to have to be discharged to a skilled nursing facility (SNF) to rehab for a few weeks. Sadly, SNFs in my area don’t currently allow any visitors due to the pandemic. The patient is very close with his daughter, who lives out of state, and she was flying in the next day to visit him and lend support in his challenging time.
Unfortunately, he was ready for discharge to the SNF now, and upon hearing my plans for discharge, the family requested we keep him in the hospital until he could see his daughter. Because she would be arriving late afternoon the next day, it would be too late to send him to the SNF that day, so he would be stuck in the hospital an extra two days just so he could see his daughter for a few hours.
It’s a perfectly reasonable request, right? But what am I to do when I get a request like that? What’s the socially responsible thing to do? If I assume that every day spent in my hospital costs at least $2,000, I am left judging whether $4,000 of society’s money is worth spending on this brief visit from the patient’s daughter.
As all these things were going through my mind, I gave them my response: “Sure.”
Maybe that’s an irrational use of society’s resources, but it’s a rational response to the situation. I, as a physician, am often asked the be the incidental steward of society’s resources.
And I face experiences like this every week at work. Actually, I would contend that there are thousands of these illogical spending decisions happening every single day across the healthcare system.
The issue at play here is this: The people making decisions about healthcare purchases are not the people directly paying for it.
But what if Medicare patients were required to pay even just a portion of the $2,000/day cost of staying in a hospital? Of course, not all patients could afford it, so there would have to be a policy to account for that, but let’s focus on the people who could afford it. Suddenly, the conversation with that family changes quite a bit.
“Can you keep him in the hospital two extra days so he can see his daughter for a few hours?”
“Sure, I’m happy to do that. Medicare requires patients to pay 50% of the cost of each hospital day though, which means it’s costing him $1,000/day to keep him here, so you need to decide if it’s worth paying $2,000 extra for him to see her for a few hours.”
Then the people making the purchase are directly bearing a portion of the cost of that purchase, and the utilization of resources becomes more rational.
In my Healthcare Incentives Framework, I focus so much on removing the barriers to people bearing at least part of the cost of their healthcare purchases for this very reason. And the way to get there starts with changing insurance plan designs and enabling patients to obtain price information up front.
The New England Journal of Medicine (NEJM) is one of the most prestigious medical journals in the world, and it has a new series of articles I find particularly interesting called Fundamentals of U.S. Health Policy. I’ll be reading through the articles of that series and giving some thoughts in response.
The first article in the series, written by Eric Schneider, Debra Malina, and Stephen Morrissey, introduces and defines the field of health policy, and then it defines the goal for the series: “To offer a foundation for a common understanding of where we stand and where we need to go.”
When I tell people I’m an internal medicine physician but that my real passion is health policy, they often respond by saying, “Oh, so you want to get into administration, eh?” And then I have the opportunity to introduce them to this amazing field of health policy.
Sometimes I’ll tell them my oversimplified analogy to NCAA basketball, with the clinicians being the players, the administrators being the coaches, and the policy makers being the NCAA. Sometimes I’ll tell them I want to set the rules for the system, to align incentives properly. Sometimes I’ll simply just say my goal is to fix the healthcare system (so far, everyone agrees–it needs fixing).
This is how Schneider et al. define it: “the choices made by the people who govern, manage, deliver, and pay for health care.” They also describe it as shaping (1) how clinicians deliver care and (2) how patients seek care, obtain care, pay for care, and adhere to care.
There are many other definitions you can find online with a quick “what is health policy?” search. But they all seem kind of vague and textbook-y and obscure the captivating challenge and monumental opportunity that health policy offers.
My working definition of health policy is different. I would say that health policy is the field of work that deals with making the rules for our healthcare system; it takes on the ultimate challenge of figuring out how to properly align all the industry participants’ incentives in a way that motivates them to maximize value for patients. And then I’d add some rhetoric about how healthcare is the most complex and high-stakes industry there is, that it’s like the ultimate puzzle, and I’d tell them about how success can mean solving many people’s greatest heartaches, solving the nation’s fiscal crisis, and saving the world.
I look forward to evaluating the rest of the articles in this series!
There was a recent 60 Minutes episode with a segment that talked about why healthcare prices are so high, and I learned a couple new things.
The segment focused on Sutter Health, which is a large healthcare system in Northern California. Sutter Health was the bad guy in this episode, but the American Hospital Association dutifully provided a counter-argument to the story here.
For context, remember that the price negotiations between hospitals and insurers are not based on costs but rather bargaining power. The more bargaining power the hospital has over the insurer, the higher the prices they win.
Here is Sutter Health’s strategy to win more bargaining power, according to the 60 Minutes segment:
First, buy up other hospitals to become a monopoly in as many markets as possible. If you cannot be a complete monopoly somewhere, find a way to become a monopoly over a key service line, such as maternity care. Next, require two things in every contract you make with an insurer–a gag clause (so nobody can divulge the prices agreed upon) and an all-or-nothing clause (so the insurer has to have all the system’s hospitals and services in network or none of them).
The combination of all that leads to the hospital having much greater bargaining power.
The insurers are kind of forced to have Sutter Health in their networks to avoid having important gaps in coverage (either a regional gap if the one hospital in that county isn’t in network, or a service-specific gap if Sutter Health is the only provider of that service in an area). They leverage that foot in the door with the all-or-nothing clause, so now basically every insurer is compelled to include every Sutter Health hospital, so Sutter Health can demand very high prices and get away with it. And, for Sutter Health’s protection against the bad PR they would get by charging such high prices, they have the gag clauses in place.
Pretty clever I’d say. Unfortunately for them, the government tends to notice when a hospital system becomes a monopoly in multiple ways, and they also notice when a hospital system is making a lot more money than others around it. So they get investigated, reporters dig up the juicy story, and the government slaps a few wrists with lawsuits and new regulations.
Is there a better, long-term solution to these tactics? I have a few thoughts on the matter. First, there’s nothing like monopoly rents to draw competition to a market, so allowing healthcare entrepreneurs to enter those monopolized markets/service lines would be a great start. And if Sutter Health’s competitor hospitals start doing some thorough cost accounting, they could know how much their different services cost and be able to start setting competitive “out-of-network prices.” When those competitors start winning market share, Sutter Health will have to respond with lower prices and more price transparency to become competitive again themselves.
So many market failures are solved by price transparency.
This is one of those topics that comes up in healthcare reform discussions regularly, but we don’t often take the time to explain it. It’s not currently a trending topic, but it’s a perennial one, so it will come up again sooner or later.
Let’s start with an assumption: All people want health insurance.
But people’s willingness to pay for health insurance varies greatly. If it’s free, few would refuse. If it costs $200 per month, many more would refuse. If it costs $2,000 per month, most would refuse.
What determines whether someone thinks the premium is worth it?
A few things. The two biggest factors are (1) how much healthcare that person expects to need that year and (2) how much money they have. If a person expects to be hospitalized multiple times that year, a $2,000/month premium is probably going to be a lot less (even with the deductible and copays) than going without insurance. If a person is fairly wealthy and has the foresight to recognize that unpredictable healthcare expenses could be financially catastrophic, they would probably also be willing to pay the $2,000 deductible. But healthy people and poor people (and especially poor healthy people) are much less willing to spend much on premiums.
Ok, that was most of the background information, and here’s one more thing. If an insurance company is allowed to charge whatever they want for a premium, you know what they would do? They would collect a bunch of data on every insurance applicant and use some smart actuaries to calculate each applicant’s average expected annual healthcare spending, and then they would use that number (plus a percentage) for the person’s premium that year.
As you would expect, this would work fine for the young and healthy who will have low premiums. But for most others, it can be pretty expensive to the point that many would rather choose to forego insurance.
Now we can talk about how to cause a death spiral.
To solve that problem of premiums being too expensive for the people who probably need insurance the most and ending up uninsured, the government can make a simple policy that requires insurance companies to charge everyone the same premium. (For simplicity, I’m saying they will only have a single premium, although in reality they usually say something like, “You can only charge the sickest person 3x what you charge the healthiest person, and you can only use these few variables to decide who is sick and who is healthy.”)
What happens? The sick people get a great deal, and the healthy people end up subsidizing the sick people’s premiums.
This enables the sick people to get insurance, although now that the healthy people’s premiums are so expensive relative to what they’re getting out of it (many of them probably don’t even end up using their insurance most years), they say, “Forget that. Buying insurance isn’t worth it anymore.” And they drop out of the insurance pool in favor of going uninsured.
What happens then? All the healthiest people are no longer in the insurance pool, so the average expected healthcare spending per person will be much higher the next year. Therefore, the insurer is forced to raise premiums accordingly.
And, predictably, when those new higher premiums come out, again the healthiest in the insurance pool will say, “Last year it was just barely worth it for me, but this year with this crazy increased premium, it’s not worth it.” And they drop out of the insurance pool. This is about the time when the insurance companies get labeled as greedy, too.
The next year, premiums rise again, and more people forego insurance.
Do you see the pattern? That’s a death spiral. And, again, it’s caused by requiring insurance companies to restrict the degree to which they can charge different people different premiums.
There is a way to prevent this, though. If, at the same time as restricting premiums, the government also creates some sort of incentive for healthy people to stay in the insurance pool, it can prevent them from leaving.
That’s what the individual mandate was for. It was the government saying, “Hey, we need you healthy people to be in the insurance pool subsidizing the sicker people’s premiums, so we’re going to persuade you to do that by making you pay a fee (tax) if you don’t buy health insurance.”
It didn’t work very well. Many people didn’t know about it, and those who did figured they’d rather pay a relatively small tax than a relatively large insurance premium. That’s why premiums in the private market rose so quickly after the Affordable Care Act was passed. Not enough healthy people joined the insurance pool, and more dropped out each year. It wasn’t exactly a precipitous death spiral, but that is the direction it was trending.
This week’s post is a little later than usual, but next week will be back on track with a Tuesday post about Hayek’s book about socialism, The Road to Serfdom, and how it fits into my framework for categorizing governments.
Something I have noticed for many years now is that many good and important healthcare reforms are touted by experts for the wrong reasons. Supporting a good reform for the wrong reason may seem harmless, but without a clear understanding of the principles behind why the reform is important, the implementation may undermine much of the benefit of the reform, or it may not be evaluated based on the right expected impact (and, therefore, cause the reform to be incorrectly judged as a failure). Either one of these mistakes could ruin the reform.
Example 1 – Quality metrics reporting: This refers to making providers track and report a variety of quality metrics, which are then usually used to give quality-contingent bonuses. These quality metrics are also often reported publicly with hopes that it will add some accountability to providers and motivate the lower-quality ones to improve.
Example 2 – High deductibles: Some experts say that if people have high deductibles, they’ve got some “skin in the game” and will therefore stop being such spendthrifts, which will decrease overutilization and total healthcare spending.
It’s true that a high deductible will reduce healthcare spending;, although, unfortunately, people tend to decrease unnecessary AND necessary care. That’s what the classic Rand Health Insurance Experiment demonstrated. But lowering spending is not the main purpose of high deductibles. The primary benefit of them is that they make people actually consider price when they are choosing where they will get care, which allows people to start preferentially choosing higher-value providers (i.e., make value-sensitive decisions). Of course, this only applies to services that cost less than the deductible.
Example 3 – Bundled payments: These are seen as a way to get providers to integrate more and, through that integration, “trim the fat” (what’s with all the flesh metaphors?). Usually the reduction in total episode costs comes from providers becoming less likely to discharge people to skilled nursing facilities.
Bundled payments do get providers to send fewer patients to nursing facilities and to find other superficial ways to decrease total episode costs, but the primary benefit is that they allow people to compare, apples to apples, the total cost of a care episode. Again, it’s all about removing barriers to value-sensitive decisions. This will lead to complete care process transformations as providers become motivated to improve value relative to competitors and are assured they will win greater profit as a result. So implementing bundled payments with a single provider in a region will likely result in only very modest benefits, which will come from those superficial low-hanging-fruit types of changes.
That’s enough examples for this week! Merry Christmas, and may everyone do good things for the right reasons.
When I was evaluating Joe Biden’s healthcare plan recently, I talked about how to properly evaluate policies that attempt to increase access. I think this is important enough to discuss briefly in its own post.
But first, as a brief reminder, there are traditionally three issues that healthcare reformers are attempting to solve: cost, quality, and access. And I like to combine quality and cost into one variable–value.
Access-increasing policies are typically evaluated based on (1) how many people they will cover and (2) how much they will cost, but we need to add a super important third metric in: How many barriers the policy creates to improving value.
Just because access-increasing reforms of the past have worsened healthcare value doesn’t mean they always have to do that. It just means healthcare reformers of the past haven’t known how to improve the value of healthcare, so they haven’t been able to evaluate their policies on that metric. But that’s what the Healthcare Incentives Framework is for (specifically this part of it), and that’s why I have been using it to evaluate politicians’ access-increasing policies lately.
Last week, I evaluated President Trump’s healthcare platform. The problem is, he doesn’t seem to have one. At least, he doesn’t say anything about one on his official campaign website. This is in stark contrast to Joe Biden, who gives many details on his healthcare plan (see my evaluation of it here).
So, to help President Trump out, I decided to write a healthcare plan for him. Let me be clear from the outset that this is not my personal healthcare plan–it is just one of many possible ways to implement the principles outlined in the Healthcare Incentives Framework, and it’s a way I could see Republicans going about it.
One other reminder: The President doesn’t make laws! But the modern reality in this country is that people want to hear a President’s plan for fixing all sorts of problems, so there we have it. He does have the power to set the agenda and influence his party, so this is by no means a useless endeavor.
Ok, now on to his brand new healthcare plan, which I am pretending to write on behalf of his staff, with a little rhetoric mixed in just for fun . . .
The problem with policies designed to increase access is that they usually create market distortions that become barriers to improving value, so his plan starts by addressing how he will improve value, after which he will show how he has crafted a way to increase access that will not undermine his other efforts.
First, he intends to enable patients to act as consumers and make informed choices. This applies to their ability to shop for the best insurance plans and their ability to shop for the best providers.
Take the insurance side first. To facilitate patients shopping for insurance plans, he has a unique approach for each segment of the insurance market.
For Medicaid, which is administered state by state rather than nationally, instead of allowing states to create and administer a single Medicaid plan, he will require them to contract with multiple insurers to each offer a Medicaid plan. This gives Medicaid enrollees more choices, and their insurance is provided by private businesses rather than government beaurocrats. The good news is, more than 2/3 of all Medicaid enrollees are already such plans (known as Medicaid Managed Care), and when these policies are combined with the other policies described in this plan, they will start to generate significant savings.
For Medicare, President Trump will make a similar change. Instead of the government offering a traditional Medicare plan, Medicare will shift over to relying exclusively on private insurers to create Medicare-compliant plans, and Medicare itself will simply pay those private insurers for each enrollee they have. This is called Medicare Advantage, and 34% of Medicare enrollees are already on such plans. But, again, increasing this number to 100%, when combined with the other changes in this plan, will create greater competition and cost savings.
For the private insurance market, President Trump will continue to rely on healthcare.gov as the marketplace for private health insurance plans. Even though this website was poorly rolled out, it has become a well-known source for health insurance, and now it will rise to its full potential because Medicare Advantage and Medicaid Managed Care plans will be rolled into it, meaning every American who does not get insurance through their employer will be able to shop for their health insurance on healthcare.gov. This will simplify the experience of buying health insurance, and it will strengthen Americans’ ability to find the best plan for them.
On the topic of employer-sponsored insurance, President Trump will take a historic first step in decoupling health insurance from employment because someone who loses their job should not lose their health insurance along with it. He will take this step by extending the employer health insurance tax exemption to all people buying health insurance on healthcare.gov. Employers will also have the option to stop paying for health insurance on behalf of their employees and instead give that money directly to their employees in the form of a pay raise, which allows employees the freedom and choice to use that money to shop for an insurance plan that fits their needs better than their employer’s plan.
President Trump will also get rid of Obamacare’s innovation- and competition-destroying medical loss ratio rule, which will become unnecessary after the changes described here fix the broken insurance markets and allow them to start pricing more competitively on their own.
He will also instruct the Centers for Medicare & Medicaid Services to sponsor bundled payment and reference pricing pilots. These are alternative payment models that enable patients to more easily compare apples to apples the prices of their healthcare provider options and then decide for themselves if they think it is worth it to pay more to go to a more expensive provider (which, in healthcare, usually does not mean better quality!). These pilots will help spread these new payment models as (1) insurers discover it saves them (and their enrollees) money and (2) providers discover that they can also make more money by lowering their prices and winning more patients.
These common-sense policies will transform the healthcare insurance market into one of honest competition and innovation.
President Trump will also make changes to improve the healthcare provider market and allow patients to more easily find the best providers.
First, he will build on the progress he has already made with healthcare price transparency by requiring all healthcare facilities to publish their cash prices for the most common shoppable services. The required price reporting will include bundled prices, when applicable. Over time, as more bundled prices become available, patients will have an even easier time shopping for the best deal because they will be able to compare up front, apples to apples, prices between providers for the same bundle of services.
In additon to price data, patients need quality data. President Trump will require healthcare providers to start tracking and reporting quality metrics that are more useful in helping patients be good shoppers. This means there will be a shift in focus away from aggregate quality ratings and toward the specific metrics that patients need to know most when deciding between different providers.
President Trump will make all those price and quality data publicly available so that entrepreneurs can use them to design creative and simple shopping websites, similar to what we see with flight booking websites.
All those changes to the insurance market and the provider market will help people become better consumers of healthcare. And when our nation has consumers shopping for the best value in healthcare, it will stimulate the kind of competition we have never gotten in healthcare–competition over value. In other words, these changes will shift insurers’ and providers’ focus of innovation onto ways to improve value for patients, and as a result quality and price improvement dividends will accumulate long after these policies have been enacted.
Joe Biden’s plan is costly, and it is fiscally irresponsible because it has nothing in it that will make a major dent in the cost of healthcare, which is the biggest contributor to our growing national deficit.
President Trump also wants to ensure everyone has access to affordable health insurance. How can he make affordable insurance to everyone without interfering with the market changes described above?
His solution is to take the guaranteed renewable insurance approach. Here is how it will work:
At the time of implementation, everyone in the country will have the option to purchase health insurance without their pre-existing conditions being considered. Insurers will only be allowed to set premium prices based on the individual’s age and smoking status.
As long as an individual maintains continuous coverage, they will always be able to continue with the same insurance plan or even switch to a different plan without any of their pre-existing conditions being factored into their premium price.
However, if an individual chooses not to maintain continuous insurance coverage, insurers have the freedom to take pre-existing conditions into account and charge them a different price. If the individual is healthy, they could still be offered a price as low as others their same age and smoking status who maintained continuous coverage. But if the individual has pre-existing conditions, they could be charged as much as the maximum premium, which would be the premium a 64-year-old who smokes would be charged.
Once they have again maintained 12 months of continuous coverage, the prices available to them will revert back to the continuous coverage price being offered to others their same age and smoking status.
This will encourage healthy people to make the choice to maintain insurance coverage without any draconian or unconstitutional big-government mandates. Personal accountability will be maintained.
However, for these changes to work, President Trump will have to solve one more problem that Obamacare created.
Currently, people up to 400% of the federal poverty level (FPL) qualify for subsidies to make sure insurance premiums are not financially grievous. What the middle class above 400% of the FPL has found, however, is that their premiums have rapidly become unaffordable.
President Trump will eliminate that 400% FPL limit and instead switch it to a flat limit of 9% of a family’s income, enabling anyone to afford health insurance if they choose to purchase it.
In summary, President Trump’s plan to fix healthcare starts by making changes to the insurance and provider markets to refocus healthcare competition on innovations that improve value for patients, which will lead to billions of dollars saved. And at the same time, his plan will encourage and enable all Americans to purchase health insurance at affordable prices in a way that does not create market distortions that interfere with value-improving innovation.
And he will accomplish these changes all for a much lower cost than Joe Biden’s foolhardy plan to strengthen the unpopular Obamacare policies and force more people onto government insurance.
Well, Mr. President, there you have it. A ready-made health policy platform, complete with rhetoric, to win over those last few independents and propel you into another four years as President. Let’s just hope you have congress on your side with this plan or it will go nowhere.