Hypothetical Mean

Commentary from an Actuarial and Economic Perspective

Modest Healthcare Funding Reform Ideas

with 4 comments

Here are a few healthcare reform proposals that deserve consideration.

1.  If a drug is advertised “Direct to Consumer” (DTC), ban it from being covered by a health insurance company.  This reflects two principles.  First, DTC advertising is done primarily when clinical effectiveness is not indicated, instead focusing on a “fad” element that drives up costs.  Rather than banning DTC, simply prevent those costs from being “socialized” through “insurance”.

2.  If an individual has prior creditable coverage, no pre-ex waivers apply, period, and they are guaranteed insurable, even if they want to switch carriers or select a different benefit option (actuarially equivalent to their current, or slimmer).  More details here.  This also means eliminating the COBRA purchase requirement from HIPAA before transferring to the individual market.  The COBRA requirement effectively guts portability because of the very high COBRA premiums and the fact that most individuals, if left to their own devices, would purchase plans that are slimmer than the plans offered by employers.

3.  Recognize that job loss causing insurance loss is a funding problem, not a systematic insurance problem (after reform #2).  Specifically, I’d propose expanding unemployment insurance benefits by an amount to exactly offset the employer’s contribution to the employee’s insurance plan.  This means that the laid off individual would be able to retain the exact same health insurance benefits for the length of their unemployment benefits.  At the end of that time, they could purchase in the individual market or, preferably, have been hired on with a company that offers group benefits.  This provision requires more money.

4.  Expand Medicare to be the primary insurance coverage for all eligible individuals over the age of 65.  Currently, an age 66 employee who has private insurance is covered first through private insurance (at companies with 20+ employees).  This is an administrative headache designed to save Medicare money.  However, it provides a significant deterrent to retaining aged workers in the workforce.  Medicare has its problems that need to be confronted directly, not through explicit or implicit cost-shifts to private insurance or companies employing older workers.  This provision is especially problematic for firms employing 20-50 employees and should be repealed.

5.  Revamp the FDA.  Drug approvals need to be based on increased effectiveness relative to the current market of drugs.  Drug dosages need to be determined clinically, independent of revenue and marketing strategies.  This requires a significantly greater commitment of federal resources to independent medical devices and pharmaceutical oversight.  A necessary evil.

Many of the regular buffet of ideas are amenable to my philosophies and experience.  More health IT probably wouldn’t hurt; more knowledge on clinical effectiveness would at least improve our medical care (although I doubt it will reduce costs); etc.  But we shouldn’t ignore the five issues I’ve outlined above.  Even though they aren’t politically saleable, they may be give a reasonable bang-for-the-buck.

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Written by Victor

December 11, 2008 at 1:50 pm

4 Responses

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  1. […] opposed to this approach.  I prefer the solutions I offered last month (see the second and third points, specifically).  My solutions address not […]

  2. […] opposed to this approach.  I prefer the solutions I offered last month (see the second and third points, specifically).  My solutions address not […]

  3. […] Covered — to discuss the main component of my desired healthcare reform approach that I began to outline last year. With a catchy phrase in hand and with no hope of having any impact on the current healthcare […]


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