Here's a Real Alternative to Single Payer from a Conservative (me)

This diary is in response to a recent diary suggesting Republicans should give in to single payer:

Even China has learned that single payer does not work so why the hell would we adopt it ourselves? Residents of urban areas in China are NOT provided with free healthcare. They must pay medical expenses out of pocket or have insurance. China is actually experimenting with market based solutions to healthcare in some of their largest cities.

Are you really saying that Republicans can’t avoid Single Payer but the Chinese Communist can?

Are you really saying that the Chinese Communist can come up with a market-based approach but Republicans can’t??

Nonsense. We can do better.

The reforms in China are modeled after Singapore’s health system: Households put aside 8% of their income into health savings accounts. This program has enabled households in Singapore to directly pay 57% of all medical expenditures compared with only 11% in the U.S. Not insurers and not the government, households directly pay the majority of their medical expenses. Yes, the government covers the catastrophic events however a very small portion of households utilize this care and there is no reason that private insurance can’t cover higher income households’ catastrophic expenses in the U.S. without forcing everyone into government controlled care.

What the Chinese realize is that there is only one way to effectively control expenses: people have to pay most of their medical bills themselves.

Here is my proposal for the U.S. that will please even moderate Republicans:

To enable most households to directly pay medical expenses and drastically reduce Medicaid use:

1) Provide payroll rebates to households on the stipulation that they must pay for their own medical expenses BEFORE taking Medicaid or insurance. To receive rebates they must put aside 5% of their pay into health savings account–refundable each year if unused–and use a line of credit to enable households to pay large medical expenses over time so they do not depend on other people to pay their bills for them. By paying more of their own medical bills directly, they will have more control over the quality and cost of that care.

The payroll tax rebates would be $2000 for 45-64 year olds, $1500 for 27-25 year olds and $500 for those under 27. A young couple with two children would be eligible for $4,000 in tax rebates and would only have to earn $26,700 to earn the full rebate. These rebates would be for every working American–not a means tested program.

A. This action reduces Medicaid use from 45 million non-elderly households to less than 8 million saving a large portion of Obamacare expenses and offsetting a portion of the tax rebates.

This reduction in non-elderly Medicaid use, not to mention the large tax rebate will make conservatives happy.

The reduction in Medicaid use was calculated assuming households only used their own contributions and tax rebates–without even touching their line of credit! If the households used their line of credit, even more households would be freed from Medicaid. The reason for this results is that most medical expenses covered under the Obamacare Medicaid expansion were small and can easily be paid by the households using their tax rebate instead. The advantage is that because they pay the bills rather than Medicaid they will be more mindful of their spending, i.e. they won’t go to the emergency room for something that could be done at a health clinic because they would be paying the expense rather than Medicaid.

B. Keep Medicaid expansion for catastrophic medical expenses. This will make moderates happy.

Most states, even non-expansion states, already pay the catastrophic expenses of the poor so there is no additional cost to providing this coverage. States can decide the eligibility for higher income households to receive catastrophic coverage. Most households can pay their non-catastrophic expenses using their tax rebates, line of credit or their own contributions.

To address those with preexisting conditions:

2) One of the problems with Obamacare is that the unhealthy signup for coverage because they know they will use the insurance while fewer healthy people signup because they do not expect to need insurance. With more unhealthy than healthy in the insurance pool, insurance premiums are driven up causing even fewer healthy people to signup. However, insurance only works if the healthy people’s premiums pay for the expenses of the unhealthy. If only unhealthy people signup then the insurance pays more than it collects in premiums; the insurance company loses money and stops offering coverage. This is what is causing so many Obamacare insurers to fail.

Employer-based plans do not suffer from this problem because insurers require employees to signup as a group. Since any large group is going to be composed of both healthy and unhealthy households, the proper balance between healthy and unhealthy households can be maintained.

With individual coverage, however, an insurer could be overwhelmed by unhealthy people signing up for coverage even if just by happenstance.

A. To address this problem, we should allow insurers to shift NEW high-risk enrollees to Medicaid. The household still has to pay the insurance premiums and deductibles stated by the private plan, but their care and doctors would be through Medicaid. Paying private insurance premiums but only getting a Medicaid levels of service would incentivize the household to shop around for another private insurer. Rather than mandating insurers take new high-risk enrollees, insurers have the flexibility to instead a pay an annual fee of, say $600, for each household they forward to Medicaid*. Since insurers would not want to pay the fee unless the expected loss on a customer is greater than $600, they would take even marginally profitable customers.

Low income households would still be eligible for Medicaid. Higher income new enrollees shifted to Medicaid for being high risk, but who maintained coverage previously, would be covered by Medicaid automatically. However, those higher income households who did not maintain coverage would have to meet state Medicaid eligibility requirements. Since most states currently require households to divest themselves of most of their wealth to be eligible for Medicaid, this would serve as a strong deterrent to wealthier households thinking of trying to avoid buying insurance and simply getting put on Medicaid should they be diagnosed with a severe illness or suffer a severe accident.

Taken together these proposals enable households to purchase more of their care directly so that they would have more control over their own health, prevents the estimated 32 million who would lose coverage under the previous Republican plan, and solves the problem of preexisting conditions. All without resorting to the government taking over or controlling the health decisions of every American as would happen under single payer.

If this plan makes good sense to you, please forward to your Congressman and Senator.

*This fee would only be capped at a maximum of 10% of insurer’s customer base so no insurer would be overwhelmed with high-risk customers. Once an insurer reached the cap, the insurer could transfer that high-risk consumer to an insurer who had not yet reached their cap.

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