A GOP playbook for the Blair House summit

William Pierce Contributor
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With President Obama’s invitation to join him and Democratic leaders at a White House health care summit on Feb. 25, Republicans have the opportunity to engage in a competition of ideas on health care reform.

Will the GOP grab this chance or will they resort to tired old ideas and rhetoric? If they grab the opportunity they can distinguish themselves from President Obama and Democrats on health care. If they engage in the same old political debate, Democrats will continue to hold the high ground with the public.

What would distinguish Republicans? What health care ideas would transform our system, address the challenges facing us and lead us into the 21st century?

Recently I had the opportunity to poise those questions to some top Republican health care thinkers: former Ways and Means Chairman Bill Thomas, former Centers for Medicare and Medicaid Services administrator and Food and Drug Administration Commissioner Mark McClellan, former CMS administrator Tom Scully and former Health and Human Services Secretary Tommy G. Thompson. The ideas they shared had similar elements, common themes and similar objectives.

Of this there is no doubt: Our health care system must be fixed. It has run its course and no longer serves Americans well.

If you have employer-based insurance, you can still get good health insurance, but it is getting more costly. If you work for a small employer, your odds of getting insurance are diminishing, and the price is skyrocketing. It you are self-employed or otherwise have to purchase insurance in the individual market, it’s a crap shoot as to whether you can afford it, and what you can buy is variable and not up to par with large group insurance. Even seniors are in a bind. While the Medicare Advantage program was designed to take Medicare into the 21st century, Democrats seem determined to dismantle it and return the program to the 19th century world of fee-for-service, which is the most expensive, inefficient, low-quality health care delivery system that exists. Medicaid is the worst of all government programs. And of course we all know about the uninsured and their high and rising numbers. They have no options.

One thing is clear; our health care system has enough money in it. We don’t need to spend more money. We also have the best quality health care in the world.

What a reform plan must do then is spend the money more efficiently and provide quality care more evenly throughout the country. If we do this we can have universal coverage that provides high quality health care for all.

What are the elements of such a plan?

  • Decouple health insurance from employers: As is well known, employer based health insurance is an anomaly from the WWII-era wage and price freeze. The government did not make a conscious choice to incentivize employers to provide health insurance. It just happened. As a result it can unhappen. Employers would provide their employees higher wages reflecting the cost of what they paid for their employees health insurance. To ease the transition, do it over 5-10 years.
  • Create a standard benefit: It can’t be a specific benefit. If we allow this to happen it will be loaded up like a Christmas tree. Instead create an actuarial standard benefit for individuals and families. This way, insurers could provide a variety of plans that would reflect different needs including HSAs and MSAs. As innovation advances the standard benefit would reflect these advances.
  • Create tax credits and deductions: For persons with lower incomes provide a credit, for higher-income earners provide a deduction to cover the cost of the standard benefit. The funding would come from increased income taxes collected as wages increase as the employer tax deductibility is phased out. If individuals wanted to pay for more health care or an enhanced benefit they could, but it wouldn’t be deductible nor would the credit cover it. This would give, as the saying goes, people some “skin in the game.” Instead of first-dollar third-party coverage, this would create price and cost sensitivity.

• Create health exchanges: Similar to the Federal Employees Health Benefit Plan (FEHBP) and the Medicare Advantage and Prescription Drug Benefit, divide the country up into 10 regions. That way you could reflect local needs and would avoid the one-size-fits-all problem. Insurers could offer plans in one, more than one or all regions as is allowed in the FEHBP program and they would compete on price and quality. Open season and marketing standards could be enforced by HHS working with the states.

• Change how we pay for care: Paying for care based on individual procedures promotes higher utilization. Everything has become a specific cost center. We must move away from this system of payment. What we need in its place is a system that pays for care based on a continuum of care. Doctors and hospitals would get a single payment to treat a patient, and that payment would cover whatever was needed to appropriately treat the patient. Payments would vary based on whether the illness was acute of chronic. Physicians would also receive payments to keep patients healthy. If the physician or hospital was able to treat the patient for less than the payments they could keep some percentage of the payment and return the remainder to the insurer (private or government). There are already several good ideas out there that would take us down this path—accountable care organizations and community health teams to name two.

• Pay for quality/value: Today, providers of health care are paid per episode or visit regardless of the outcome of the event. We need to move toward a system that pays physicians and others based on the quality of the service provided and the efficiency of it. This means we’ll have to invest in comparative effectiveness research (CER). CER is not cost focused research and should not be used to determine what to cover based on cost. Sometimes the most expensive treatment is best, and sometimes not.

• HIT: An HIT system for sharing information between physicians and other providers is essential to a modern health care system in order to reduce duplicative tests and avoid errors. Patients also need better access to information about treatments. That way everyone would know what the standard of care was. A well developed HIT system would also be necessary in order to know who was providing the standard of care and then to pay for it.

• Phase in an individual mandate: Whatever you call it, if you are going to decouple health insurance from employers and reform the insurance marketplace, an individual mandate is necessary. Phase it in over the same time period the employer tax deduction is phased out. This way the tax revenue to pay for credits and deductions would rise with the mandate.

• Insurance market reforms: There is already uniform agreement that we need to make changes to such things as pre-existing clauses and rescissions, limit premium variation, administrative simplification including standardized electronic claims processing and the like. The key to implementing these is that we need near universal coverage for them to work without increasing premiums.

• Medical malpractice reform: There is no doubt we need reform in this area. While it is not as big a cost drive as many claim, the system is not just. Some get great rewards when harm is done, some do not, and some get great rewards when no harm is done. Medical courts are an interesting idea that should be explored as is arbitration. Both would be more equitable than our current system

• Employer wellness: Create a tax credit for employers who provide their employees with a wellness program. Minimum eligibility standards would be necessary, but such standards have already begun to emerge. Employees spend at least eight hours a day working so why not use that time to encourage health and wellness. While still in its infancy, there are many examples of companies who offer programs that reduce their health care costs, while reducing absenteeism and boosting productivity.

    Medicare, Medicaid and SCHIP could all be folded into this system either entirely or simply as programs, but if done right there would be no need for individual systems to serve different demographic or income groups. The funding for these programs would follow them into this new system, but due to efficiencies costs should be more stable and predictable.

    These ideas are not meant to be all-inclusive and clearly much needs to be worked out. But these ideas would distinguish Republicans from Democrats and set the stage for a real debate over the best direction to move the country and our health care system.

    William Pierce is Senior Vice President for APCO Worldwide, Inc.