Health Reform on the Wrong Track

While the status of the “public option” is still unclear, it does seem that both parties seem to be more focused on discrediting each others ideas and plans, rather than promoting things good for the American People as a whole.   The desire for an acceptable plan to a greater number of people may lower the common denominator to make any reform different, but not substantively better.    


 


The unfortunate reality is that science and technology have advanced beyond the point of being able to pay for it.   The Congressional Budget Office report in December 2008 on health care, which contains lots of conflicting data, did point out that by the year 2082 (Yes, 2082), that health care will cross the 50% of Gross Domestic Product line.   A laughable statistic, but indicative of the path we are on.    It is a reality that some body, either public or private, will have to ration care at an ever increasing level.   In that both State and local governments are built to say “Yes” instead of “No”, and we elect legislators based on the amount of “YES” that they bring back to each of us,  I prefer that a for-profit system as a better way to control costs.   The example of true market-forces health care is cosmetic surgery.  In general, procedures available 10 years ago, cost far less today.     In a competitive system with multi-carriers, if carrier “A” says No, you can move to carrier “B”.  In a public system, you can’t move from the US to France or Canada. 


 


The Public option, as presented in HR3200 does not offer cost control or provide reason or incentive for providers to be more price competitive.  It does not lower their costs to provide service. It does not reduce their collection costs from members. The public options main driver of viability is the belief by many, with limited statistical evidence, that the government can operate more cost-effectively than private industry.   In addition, the Public Option shifts more people to mandated reimbursement rates below provider costs, forcing those providers to either raise prices to non-Public option members, or to drop from providing service to members with a government plan.   Gerald Ford’s WIN campaign in 1974, (Whip Inflation Now) designed to temper 6% inflation, proved that forced government price shifting, and delays of market forces, have devastating counter effects later.  (Inflation averaged 10% per year for the next 8 years)


 


If the goal of health reform is to offer better access to health care AND control costs, the Public Option is the wrong flash point.    The real debate should be between a single payer system and a free market system as described in http://bloghealthinsurance.com/2009/08/19/health-care-reform-part-2.aspx


 


 

A Foundation for a different health reform option



Although HR3200 may be dead, we are at an important crossroads that calls for reform activists to try again.  As a fervent Capitalist, I’d like to propose the foundation of what I believe is the cornerstone for healthcare reform that will control costs without limiting choice.

The primary reason that HR3200 and virtually every other bill that is being crafted will bring nothing but complaints is because it perpetuates the single most flaw in our US health care system, Hyrdraulic funding.   For the past 30 years, the primary goal of Medicare, Medicaid and Private Healthcare companies was to obtain “discounts” from the cash price.  This elimination of this system is the contingent and primary pillar of my reform proposal.    

Do away with discounted hydraulic funding of healthcare models.   Under my reform proposal, provider can charge what he wants, within standard deviation averages, and must charge that same amount to the member or insurer regardless of the type of insurance the member has or doesn’t have.


Using existing Medicare Pricing models and PPO network data, all providers are assigned a rate category based on the rates that they charge for a procedure.  Rate Categories are separated into 6 rate tiers with additional sub-regional adjustments.    The provider would be given notice of their rate tier as determined by their current charges.   The provider would be notified of their preliminary tier 90 days prior to the effective date of the program.  The provider would have 30 days to review their tier and request a change of tier.  If they do not request a change, the provider will have that rate tier starting 90 days later.   Forty five days prior to the beginning of the rate period, providers will be sent their final charge scale which will recalculate the scales based on provider tier change requests.


 Percentage of Providers will be divided into rate tiers in the following ratios:


·         Tier 1: 25%, Tier 2: 20%, Tier 3: 20%, Tier 4: 18%, Tier 5: 15%, Tier 6: 3%.


 


Providers priced in Tier 6 will not have any pricing limit or average charge, but will be classified as Private Healthcare providers.   If the provider is a tier 6 provider for the following year, similar to the Section 4507 declaration as provided under the 1997 Balanced Budget Amendment, the provider may not accept reimbursement from any insurer.  In this plan, the rule would extend from Medicare only, to all public or private insurers, except under emergency situations.  To see a Tier 6 provider, the consumer must sign a private contract with the provider acknowledging that no insurance will pay any part of charges from that provider.  A provider found to be in Tier 6 may elect, at any time, to be a Tier 5 provider.  If that election is made, the provider may not revert to Tier 6 for a period of three full years. 


A provider would be able to request a mid-year rate tier change at any time, with a 90 waiting period.   A provider may only request a change of tier once every 5 years.   No more than 25% of providers in any tier may change from their tier from in any given year to prevent pricing model manipulation.   Each provider would be required to prominently post their rate tier.


Under this new system, both Public and Private Insurers would have fee-certain levels to insure and members would clearly understand their obligation and share of costs. 




Medicaid and Medicare reimbursement rates would be set at 100% tier 1 levels.  Any member on Medicare or Medicaid would be able to see level 1 provider and receive 100% reimbursement for services provided, eliminating the need for providers to collect any additional funds from their members and reducing their cost to provide service.    This would allow all consumers on Medicare to be able to choose cost effective providers and receive 100% coverage with no deductible to 25% of providers.  If a low income Medicare recipients did not have a supplement, they could have thousands of dollars of out of pocket costs even if they tried to go to lower cost providers.  This puts additional burden on not only the member, but the provider who must make up the lost revenue on others.       


Medicare would reimburse Tier 2 providers at 80% after a small deductible, similar to current Medicare structure with declining percentages of reimbursement and increased deductibles, based on the rate tier of the provider, through Tier 5.  Members could then purchase supplemental insurance, based on their needs and desires to have insured benefits.  Medicaid eligible individuals would then be able to purchase for little or no premium, depending on % of Federal Poverty Level (FPL) a Medicaid policy covering level 1 providers.    Insurers can compete for Level 1 policies with reimbursements similar to Medicare Part C exchanges. 


Private insurance companies would develop products for members based on reimbursements at levels of providers.  A plan might be $5 copayment at Tier 1, up to $50 at Tier 5.   Deductible might be $100 at Tier 1, to $2500 at Tier 5.   


A governmental health board would set maximum out of pocket limits for insurance policies  to make sure that insurance companies are forced to provide benefits that do not leave providers with large receivables. 


Why this would work.


Currently insured members have no direct control to seek out cost effective providers.   Under a posted number system, a member could seek out, and directly benefit from, seeking out lower tier providers.   If a member needed an MRI, they might have to wait a couple of weeks to get a level 1 scan on a non-emergency basis, but could get a level non-emergency scan that day.  The insured member has control and Medical providers could decide on priority.    


Providers who want to be busy will feel pressure to lower their operating costs without reducing service.    The argument that the “free market” system hasn’t worked is flawed in that we do not currently have a free market system.  We have a system dominated by insurers’ public and private who cannot incent members to choose less costly providers.  Low income and Medicare members are guaranteed to have at least 45% of all providers available at coverage levels at or better than current levels.   


Our current hydraulic funding of healthcare with phony pricing schemes designed to maximize reimbursements has driven providers to have more finance people than medical people on staff.  Anyone who has ever had an inpatient hospital expense where the bill might be $20,000 to start and is then discounted to $4000 by Medicare or private insurers, knows that this system is broken.


Guaranteed Access to Individual coverage.  Individual Pre-existing Condition elimination, No Mandate.  Incentive and Tax Penalty based:   Both are implemented conditionally.  


We currently have an estimated 12 million uninsured that are entitled to free or minimal cost subsidized healthcare.   It is not reasonable that all individuals purchase insurance or enroll in low income programs.   Additionally an additional, 7.3 million uninsureds earn in excess of 400% of FPL. (Source: US Census Bureau)    Without a single payer system financed by taxation, a system must address the 3-4% of the population that will continue to be uninsured or may try to beat the system, even with tax penalties.    >>


As a result, the program would offer all uninsured’s an opportunity for guarantee to issue insurance with an initial 24 month pre-existing condition clause.  A waiver of the preexisting condition clause can be elected at the initial enrollment period by selecting the preex waiver fee.    The preex waiver fee is a 24-month rate surcharge of 15% above standard rates.  The 15% preex waiver fee is only available during the initial year of the program and applicable only to those without current insurance.  


Each person will be offered a once in a lifetime waiver of their pre-existing condition clause.   If an individual does not obtain individual insurance or is enrolled in group insurance after the initial period, and if they find themselves uninsured in the future, they exercise can elect the once-in-a-lifetime waiver.   The waiver cost starts at 5% in the first month after their initial enrollment period.  If in the future, if the member is uninsured and attempts to get insurance, electing the preex waiver, they pay a 5% surcharge plus additional 0.5% surcharge for every month they were uninsured,  starting at the initiation of the program, continuing for 10 years. 


The member does not have to elect the preex waiver and can wait for an underwriting decision before electing the waiver.  The insurance carrier may offer coverage without a preexisting condition clause without the waiver election.   If coverage is offered to a previously uninsured member, the carrier may not rescind coverage as they can now, but may retroactively assess the surcharge if the member misrepresented their prior health history.  If the member rejects the assessment, the carrier may rescind coverage under the same two year period that they can now.  >>


If someone was uninsured at the initiation of the program, enrolled in coverage, and wanted insurance with no preex clause at the program initiation, and if standard premium was $100, they would pay a $15 surcharge for 2 years.   If that same person waited for 2 years and wanted a waiver of coverage, you would be 24 months after the initiation period, at 0.5% per month; you would have 12%+ base 5% or 17% surcharge for 10 years.  The surcharge would follow the individual even if the individual changed individual carriers.  If the member obtained group coverage and remained continuously insured during the term, the surcharge would not extend to the employer policy, and the time would continue to accrue during that time.  If and when the individual loses their group coverage during that 10 year period, the surcharge would continue until the 10 years is up.  Pricing for individual policies can range from 5% above or below standard pricing, based on medical underwriting, exclusive of uninsured, time-surcharges.  An individual may bypass underwriting by electing the maximum medical rating of 5%. >>


Every year an individual will be allowed to elect new coverage without evidence of insurability during an annual open enrollment period.  The annual election period would be based on the surname of the individual to spread out the enrollment month.  If you wish to change carrier in between your annual open enrollment period, you may, but you would be subject to the underwriting 5% rate up or discount. The insurer may decline you except during your open enrollment period.   In addition, an insurer may decline your ability to buy enhanced coverage but must offer you comparable coverage.   State insurance boards would decide what is considered comparable coverage between carriers. >>


Individuals losing group coverage may elect comparable coverage, with no preexisting condition clause or being subject to time-surcharges, unless previous time-surcharge exists, as long as they elect coverage within 63 days of the loss of coverage.   Coverage would be retroactively effective to the day following their loss of group coverage.  >>


Uninsured Income Tax Penalty:  Individuals without insurance would pay a 4% surtax on every dollar of income earned, per person in the family, up to 8% of income to the Federal Health Pool.  If you are uninsured during part of the year, the surcharge would be of .5% per month, per person, up to 8% maximum.     

Employers and Group Health Insurance –  Employers of all sizes are required to contribute to employee insurance benefits.  No exceptions.  The minimum wage will be lowered by $0.50 per hour.   Employers are mandated to contribute the greater of 5% of gross earnings, or $1 per hour, towards healthcare benefits for their employees up to maximum $500 per month, per employee.   An Employer is not restricted from providing more than $500 per month in employer subsidies.   This benefit level is applicable for all employees working more than 20 hours per week, or earning at an annual rate in excess of 125% of Federal Poverty Level.  


For employees working less than 20 hours, the employer must contribute 5% of their income into the federal health pool. 


Where group insurance exists, and is not elected by the employee, regardless of reason, a tax surcharge of 2% of that employee’s income must be paid into the federal health pool.

(Example 1:  Full time employee, 170 hours per month, earning $2,000 per month:  5%=$100,  $1 hour=$170,  employer contributes minimum off $170) 
(Example 2:  Full time employee, 170 hours per month, earning $20,000 per month: 5%=$1000 per month, but maximum required is $500.  Employer must contribute at least $500, but may contribute more.) 
(Example 3: Part time employee: 10 hours a week, $8 per hour, 43 hours per month:  Employee not eligible for benefits, employer pays $17.20 into health pool)
(Example 4:  Full time employee: Group plan exists, waives coverage for any reason, earns $2,000 per month:  Employer pays 2%, $40 per month into federal health pool).

>>


Employers who do not provide health insurance benefits pay the greater of 5% of gross earnings or $1 per hour towards healthcare benefits for their employees up to a maximum $500 per month.


Group Health Insurance can be underwritten by carriers with a plus or minus 7.5%maximum rating based on medical conditions within the group.   A group medical plan may have no more than a 6 month preexisting condition clause. The preexisting condition clause is not applicable for those that had prior coverage, with less than a 63 day gap of coverage.   Individual and group coverage is creditable towards that 6 month preex period. Employers may not have a waiting period for coverage in excess of 60 days plus the time period to the next monthly period that the employer has coverage.  >>


Subsidies:  Individuals and families are eligible for direct to insurer subsidies in declining scale up to 400% of Federal poverty level.   Those subsidies are available to employees who elect employer or individual coverage.    >>


Age Band and gender pricing applicable to groups and individuals:  No more than a 150% price difference may exist for the lowest cost individual to the highest cost individual based on age and gender, per plan.   If a 20 year old male was $100 per month, a 64 year old male would be no more than $250 per month.   If the 20 year old male was $200 month, the same plan could not cost a 64 year old more than $500 per month. >>


The Public Option: Form an Agency of the US government in corporate structure like Fannie Mae.  Must operate and provide benefits in all regions.  The plan pays a 5% of premium for members, to the residential State of the member to offset regional costs and loss of employment costs.   Contingent on the existence of mandated pricing tiers, the government option can write their own rules and plan benefits competing on a level playing field with private insurers.   As a privately owned government backed corporation, it would have a profit requirement.  >>


Health Insurers whose claims payments average less than 77% over 24 months pay a tax surcharge equal to 35% of the difference to a 77% loss ratio.  >>


Plan limitations and regulation:  Each state can mandate their own coverage requirements.  Maximum out of pocket exposure for price level 3 providers may not exceed 10% of the FPL per individual.  Dependent children who are unmarried, are eligible for parent coverage until age 26 regardless of student status.   >>


The Federal Health Pool:  Will reimburse provide additional revenue to Medicare and Medicaid recipients.    


I believe that the net effect of this plan would be:>>


·         Lower cost healthcare.>>


·         Simplified pricing by providers. 


·         Reduction in provider overhead due to simplified filing and reduced collections cost.


·         Protection to insured employees from an employer selecting plan benefits that they can neither afford premiums or afford to pay their out of pocket expenses to providers.


·         Incentives to the consumer for choosing more cost effective providers but the opportunity to see any provider.


·         Incentives to providers to choose their market and charge a fee structure of their choosing.


·         Guaranteed access to insurance for individuals and employers. 


·         Reasonable protection to those that make a mistake or are unintentionally uninsured.  Penalty to those that try to beat the system.


·         Insurance funding for the poor spread out.


·         Incentives to employers to not only offer insurance but incentives to get participation and offer cost effective plan options.   If benefits are too rich, participation may suffer, and the employer will pay additional taxes as a disincentive to offer excessive benefit programs. 


·         Reduced cost structure for employers who already offer benefits to employees. 


> >


Who will probably object to this plan.  >>


·         The Government –  By no longer being able to pass on mandated, significant provider reimbursement discounts, Medicare will no longer have private insurance subsidizing their costs.     (They will cover those additional costs by additional Health Fund Revenues)>>


·         Those that believe that the government should have no rules except Constitutional requirements.  >>


·         Uninsured Wealthy individuals. >>


·         Ultra High income / Net worth seniors who may find their Medicare supplement costs increase. >>


Moderate Republicans and Democrats need to have an alternative.   I look forward to my subscriber’s criticisms and input to improve this broad outline. 

RIP HR3200 (June 2009- August 2009)

The White House appears to be backing away from the formerly ‘must-have’ provision of a pubic option health care plan.


 Since the introduction of HR3200,  the politicians have been chopping away at health care reform mandates, upping the exclusions to the majority of small businesses,  reducing the amount that an employer must pay for employees,  cutting subsidy levels to the poor, balking at other provisions to help those with real issues, get a mandated correction.   Even AARP has publicly turned their back on HR3200 saying that they do not support HR3200. 


The Public Option has been a lightning rod of controversy, and in our opinion, deservedly so.  We saw it as the half-truth that was going to create savings to finance other, fundamentally flawed, ideals.  Without it, no front-loaded savings exist to pay for the costly parts of reform.


The likelihood now appears that the bill that will hit the Senate may be nothing more than a tax increase for all to finance the permanent removal of Medicare reductions to providers that are scheduled to kick in January 1, 2010.     A promise to create a co-op for individuals to purchase individual health insurance will probably be years away and could be revised, delayed, or killed by either of the next two Congresses or whoever is in the white house in 2013.  Major Medicare Reform passed over the past 8 years will be revised, rescinded and rolled back.  We expect both the Republicans and Democrats to claim victory, while in reality, both have lost.   


The best bill may be no bill at all.   

Health Care Reform starts to show it’s ugly side


As we end week 7 of the public debate on health care, the tone has changed.   Neither the Republicans nor the Democrats are pushing forward with clear explanations of who specifically will benefit, or who will be hurt by reforms offered.   The tone has changed to finger pointing and mis-information.   

As the public support for HR 3200 dwindles, the push-back has gotten nasty.   House Majority leader Nancy Pelosi has accused the insurance industry of “IMMORAL” Profiteering.  Democratic leadership has also accused Republicans of organizing “
Angry Mobs
” to disturb town hall meetings.      Republicans are pulling out some ‘cold war’ terms to demonize the Democrats.  

Profiteering is a pejorative term for the act of making a profit by methods considered unethical. Business owners may be accused of profiteering when they raise prices during an emergency (especially a war). The term is also applied to businesses that play on political corruption to obtain government contracts. (source: Wikipedia)

I encourage readers of this blog to keep focused on the issues at hand.   You are encouraged to be informed of cost and value while promoting intelligent discussion of ways to improve our nation’s health care system without vilification.  

If you are ready for a good read, you are encouraged to view the
44 page summary of HR3200 and committee notes, as prepared by the Kaiser Foundation.   It makes no judgment or editorial on the plans, but rather it points out the complex tax and benefit structure that each ideology outlines. 

The “Public Option” Flash Point


The most controversial point of health care reform centers on the need ,or opposition to, for the “public option”.   Current bills and committee notes in the House and Senate have various versions of the “public option” with the Republicans favoring no option at all.  Almost all other components of the legislation need only tweaking to get passed.   This issue is the proverbial ‘line in the sand’ on both sides of the aisle in Washington.    The truths, falsehoods, and half-truths should be openly discussed.    All progams have pro’s and con’s. 


 


With nearly 50% of Americans covered by some sort of government plan already (Medicare, Medicaid, VA, Government employees) it’s admitted difficult to fully understand the arguments of something that already works for half the people already. 


Red Dog Democrats (Liberal) argued during the last week of July that they would not support health care reform without a public option where the public plan members get Medicare reimbursement rates from providers.   Liberal Democrats claim that this is the most important way to reduce health care costs and make health care affordable to those on the public option.   They aren’t wrong.   It will reduce the insurance costs for those participants.  It just doesn’t fit into a sound byte as to why it’s a bad option.    



Currently Medicare and Medicaid reimburse providers at a dictated fee.  If a provider wants to participate and treat ANY Medicare or Medicaid provider they must accept that fee schedule.    In browsing Medical organization group websites, virtually all of them indicate that Medicare reimbursements do not cover the actual cost to provide the service.   If that’s the case, why would the provider continue to do business with Medicare recipients at all?   Businesses know that some customers are more profitable than others.   Businessmen also know that if you have a larger market to spread out your fixed costs, you can become a lower cost provider.  By accepting Medicare patients, you spread out your fixed costs and make up additional profit on your private insurance customers.  


 


According to EMSResponder.com, a media organization serving the needs of the emergency medical industry,    in 2007, the average cost to provide an ambulance ride to a patient was $415.  Medicare reimbursed providers $390.   What is not factored in the true cost to provide the service is the uncollectible portion of the patient portion.   Even conservative accounting would dictate that it would cost another $20 to collect the 20% balance from the patient.  Let’s use this EMS industry as a microcosm exam of how the public option would work.   For this example, I am going to use EMSR data and assume a 5% profit margin for the provider to illustrate and prove the Red Dog Democrats point in advocating a public option. (Or am I?)  


 


Example:  As a provider, you give 1000 ambulance rides throughout the year with an average cost of $415 per ride to provide the service, your collection costs are 5% with a 5% profit margin.    50% of your clients are under Medicare reimbursement rates.   What do you charge the Private sector riders?


 

































Cost to provide 1000 Rides


($ 415,000)


 


Cost to Collect balances 5%


($   20,750)


 


Profit Margin


($   20,750)


 


Total Revenue needed


 


($456,500)


Revenue from 500 Medicare Recipients


$  195,000


 


Balance Needed from Remaining Rides


 


($261,500)


Charge per non Medicare rides  (500)


$     523


 


 


 


Under the current system, with 50% getting Medicare reimbursement rates, the private sector would need to pay 32% ($523 v. $395) more for the provider to remain in business.  


 


In this example, if you were under a Public option with mandated Medicare reimbursement rates, that insurance would be able to charge you 25% less premium to cover the same service as private insurers.    So what’s the problem?    I like the idea of paying 25% less.   Doesn’t everyone?


 


Even if you are fundamentally opposed to Government Health care, you can assume, and most agree that the public option would be attractive enough to add 40% of those currently insured privately into the government health plan.  With that in mind, let’s revisit our Ambulance Company with now 70% of their riders in the Medicare Rate tier.


 


To be as fair as possible; let’s assume that this ambulance company did not have to pay any additional taxes (which isn’t reasonable) to insure the uninsured.  Many will argue that the taxes will be offset by the government insurance option, so let’s give them the benefit of the doubt.  


 

































Cost to provide 1000 Rides


($ 415,000)


 


Cost to Collect balances 5%


($   20,750)


 


Profit Margin


($   20,750)


 


Total Revenue needed


 


($456,500)


Revenue from 700 Medicare Recipients


$  273,000


 


Balance Needed from Remaining Rides


 


($183,500)


Charge per non Medicare rides (300)


$     611


 


 


Since the Medicare reimbursement rate has taken 40% of profitable clients into a loss position, additional money must be made from those paying privately.   As a result, the 32% difference from Public to Private has now jumped to 54% difference. ($611 v $395)    Our theoretical insurance public insurance company now charges 36% less than private insurance to cover the same services. 


 


Over a few a years, with escalating differences for private insurers to cover the same services, it’s reasonable to assume that all reasonable businesses and people would choose the government health plan.   This once and for all PROVES that the government run health plan would be better.  Right?   Wrong!  Getting someone else to pay your share doesn’t make it cheaper.  This example proves that the Public Option would allow people to insure themselves for 36% less than private insurance, yet the provider received no less revenue.  


The same EMSResponder.com shows that while the average cost to provide the service is $415, the range of cost varies from $100 to $1200 depending on provider.   Under the government reimbursement rates, higher cost providers would most likely close.  (Let me just state for the record that this coming conclusion sounds like fear mongering, but I have no other reasonable conclusion.)  


 


The fixed cost to provide ambulance service and staff are the most important factors in looking at the variations of providers.   If your ambulance is equipped with the latest technology and you have a low volume of needs, your cost will be the highest.    If you are in a high density area, you must be prepared with services that allow for twice the normal high load period that might also be 10 x the capacity for low load times.    In rural areas, you would most likely either have to wait much longer for an ambulance to come or not be able to keep the latest technology in your area.   In an urban area, your resources would be stretched much thinner in a small crisis mode.    This example can be extrapolated throughout the entire medical system, from Hospitals and Cardiologist, to Radiologist and Ambulances.  Experiments in State insurance reform in Kentucky, Massachusetts and New York expose the flaws in the assumptions of a true public option. 


 


The public option with Medicare reimbursement rates will save money and allow for more affordable health care options.   It will come with significant costs in other areas.  Without specifically rationing health care, it’s a virtual certainty that capacity will be reduced and care will be rationed.   With Medicare reimbursement rates schedules to be cut 20% in 2010 and then from 4-6% each year thereafter, the public option is push is a desperate attempt to cover the tracks of governmental mismanagement by delaying disaster a few more years and dragging more American’s into the morass.  


 


There is a better option.  


  



 


Source:


 http://www.emsresponder.com/print/EMS-Magazine/Medicare-Margins/1$6001


http://www.advocatesforems.org/_resourceContent/House_Govt_Reform_Hearing_Testimony__3_.pdf


http://www.saljournal.com/Print/editorial093007


http://cardiologycaa.com/pdfdocs/2008_Medicare_flyer_SEPT.pdf


 



 

Will the Chinese veto U.S. Health Reform

Are the only people watching our government spending located in Beijing?

Now that the Blue Dog Democrats and some Republicans in the house have agreed on a watered down health care reform package, yet to be fully outlined, we can start actually looking at how and who is going to pay for this reform.   Of the six goals outlined in the Presidents wish list on health care reform, it looks like only two are going to come to full fruition in a bill.   Guaranteed access to insurance for individuals, and a tax on health care packages that exceed $25,000 of annual value.  

This scaled down model of health care reform might not meet with approval of the American Public.  Polls taken between July 17-20, before the latest outrage, showed that President Obama did not have a plurality of support from those with private health plans.  It;s fair to say that if a poll were taken this week, the support would probably be even less.   This is even before any middle class family (defined as 4x the federal poverty level per proposed subsidy cut offs at 300% of FPL) realizes that their taxes would be going higher to pay for a plan that they will most likely not benefit from.  

Once the actual bill is published.  It will be gone over with a fine tooth comb by those on the left and the right.  One can expect that Fox News will bash it, and MSNBC will be supportive.  CNN and the NYT will most likely present both sides with a moderately left leaning.   BIg deal, I say.   What will Beijing say?

In June , Tim Geithner, US Treasury Secretary went to China to address the budget deficit issue and explain our 13% of GNP deficit this year, and a predicted 3% of GNP deficit next year, assuming a economic recovery, and to tell the Chinese not to worry.   China who currently owns an estimated $2 trillion of our bonds, and we assume will pick up another $500 billion soon, may ultimately have something to say about how health care reform goes, if it does.   They won’t necessarily offer public statement, but while most American’s think that ‘health care reform’ means “saving me money”, if the bill doesn’t deliver, and the government has to sweeten the deal to make it more attractive (meaning additional deficit spending), China might start dumping dollars and bonds.  

With the U.S. deficit financed by China, much like AIG is financed by the US Government, If you are looking to the political party that might really have the say so if we have health care reform in 2009, look East..  Far East…  

Bulletin: Blue Dog Democrats in House have reached Health Care compromise


  • Bill to be voted on in September.   
  • Senate Majority Leader HArry Reid says that bill will be bi-partisan.

Rumored components:



  • Small business exempt from mandates and penalty tax from not providing it.
  • Mandate for individuals to carry insurance.  
  • Taxation of benefit packages that exceed $25,000 per year for the employee.  

And for fun,  I am quoting here:   “have agreed that the full House would not vote on the legislation until September so lawmakers can read the bill and listen to constituents.  (Wow, these guys are SWELL!!)

Late Night Bulletin – Preview of the Senate Bill

Late Night Extra:  The Senate Finance Committee has leaked some big changes to the House Bill.  As I posted my summary of the bill I would create, A major leak of the Senate bill hit the wires. 



  • Individual Mandate to obtain insurance.
  • No employer mandate but a tax to reimburse subsidy’s to low income workers obtaining insurance.
  • Scaled deductibility of high cost insurance.   Those with $25,000 of annual benefits might only get to deduct 65% of the cost, much like the current entertainment 50% deduction.
  • Limit on Flexible Spending Accounts.   HSA’s not mentioned, but HRA’s probably also limited. 
  • Formation of a non-profit co-op to compete with insurers.   A government run plan is off the table. 
  • Elimination of pre-ex clauses
  • Major changes to Medicare enforcement of reimbursement cuts as mandated in previous legislation. 

First look is a big improvement. 

Enough Criticism – What’s your plan

It’s easy to be critical, it’s tougher to present an alternative.    Today’s entry will focus on an outline of the components that should be debated point by point and my suggestion of a bill that would probably be palatable to the majority of American’s.   Even though this debate is less than two weeks old, most are already tiring of the hyperbole being thrown from all the special interests.  

To design any plan, the problems we want to address must be clearly defined.  I also want to be out front with my perceptions and biases so that you can judge them accordingly and take issue with them, if you disagree.  (although most criticism is coming via personal email)

Here are the key components of designing a more cost effective health care system, as authored by me. 



  • Providers are mandated to charge all customers the same amount and declare their fee for service.   
  • The Government creates an agency to take all the pricing data nationally and break all providers into a group of 6 pricing models with regional adjustments based on service area of providers.   All providers fees would then be compiled into the national price levels and each provider would charge the average level based on the price group of 1,2,3,4,5 or 6. 
  • The Federal Health Agency is the only legal wholesaler of FDA approved drugs.    
  • The Federal Health Agency provides direct-to-insurers credits to insurers for those with income less than 300% of  Federal Poverty level.  

No matter if you are 65, worth $100mm, or on Medicaid, the doctor charges you the same amount, and your insurance, if you have it, the same amount.   A very simple premise.   Let the market compete for health care.   Insurance would provide insurance to provide coverage at the level of provider you choose.  

To address the insurance issue of a jolt to correct the system as it stands. 



  • A once in a lifetime waiver of the pre-existing condition clause. The waiver is offered on a national level based on the month of your birth, rolled out over 12 months.  
  • Those not electing coverage at the initial creation of the plan would be entitled to get insurance via underwriting at any time, or during the annual open enrollment period. 
  • If you do not elect insurance at the initial enrollment, you are subject to a 24-month pre-existing condition clause.  If you elect your once-in-a-lifetime waiver of the pre-ex clause, you pay a higher rate of 1%, per month for each month past the initial election period, up to 100%.  If you decide to change carriers, your rate premium would remain for a period of 5 years.   ( if you decided to roll the dice and go uninsured for 2 years, you would pay 24% more than the maximum allowed for each the next 5 years, with the original insurer receiving the 24% premium addition even if you changed carriers)  
  • Insurance carriers would offer open enrollment one time per year, if an individual wanted to change coverage or carriers in between that open enrollment period, they would be fully underwritten and could be declined.   ‘
  • Individual insurance would be offered nationally in a Plus or Minus 20% underwriting risk.    If the Standard Premium is $200, the healthiest person would pay $160, the sickest group $240.    
  • Group/Employer based Health Insurance would be offered at Plus or Minus 10% underwriting risk.
  • Unmarried children eligible to age 26 regardless of student status.
  • Cobra benefits offered for 12 months maximum.   

If the initial premise that a provider must charge are insurers, public or private , the same amount for the same procedure, then you can have a government health plan without unfair competition. 

A Mandate that all people must be covered by a minimum coverage health plan.  A government body would determine the minimum coverage parameters that all private plans must cover.   No plan could have out pocket expenses, including copayments, that exceed $2,500 per person.   

How it would work for individuals and businesses in greater detail later this week.   (Unless the Senate bill comes out, and then I will read and critique that bill)

Organizational Chart of the Public Health Plan

I just received this organizational chart outlining the Public healthcare plan.    It is provided by a Republican congressman, and has a bias tone to it, but it factually represents the governmental plan as proposed.   

I also want to mention that if I were critiquing the current plan, it would be less complicated, but have some different, and sometimes very unfair, obstacles.   You must remember that while private insurance will be grandfathered, it will not be available to most going forward, most private carriers will most likely fold or be non-competitive,  and you will lose your ability to make decisions without a governmental approval in this system.