Create a Federal Health Insurance Fund (HIF), Davidson Advises
In a series of articles, insights, and interviews in the nation's major media sources, health policy and management expert Stephen Davidson, author of the forthcoming book In Urgent Need of Reform: The U.S. Health Care System, outlines the fundamentals of sustainable healthcare reform. He also offers strategies for an equitable and cost-effective way to achieve this.
Davidson, a Boston University School of Management professor of business, policy, and law, advises creating a Federal Health Insurance Fund (HIF) based on income-related contributions. He explains why this solution will not commit “the cardinal sin of raising taxes,” and then outlines how the fund should be administered and used.
Davidson on NECN's This Week in Business
("Road to health care reform," October 18, 2009)
Below is a selection of Davidson's comments which have appeared in print:
The Elements of Effective Reform
Unfortunately, the [healthcare] reform proposals being discussed in the Congress are unlikely to [be truly effective]. Instead, to get there we need all of the following key provisions:
-
Everyone must have comprehensive health insurance. Indeed, there is no good justification for any other outcome.
-
Further, universal coverage is the single most important step needed to arrest the deterioration of the healthcare delivery subsystem. Providers will be able to count on a reliable source of income no matter where they locate and, therefore, to open offices anywhere that does not have enough providers to meet residents’ needs.
-
Everyone needs access to a personal primary care physician and, through him or her, early access to needed care.
-
All needed services must be covered; and providers should know that, if they exercise their best clinical judgment, they will be reasonably compensated for their work.
-
To improve quality, opportunities must be maximized to take advantage of information technology and to build teams and coordinated care; and system-generated obstacles to good quality care must be eliminated.
-
Costs – from insurance premiums and utilization, including patients’ out-of-pocket costs – must be kept under control. High out-of-pocket costs discourage individuals from seeking needed care. And high total expenditures will force insurers to cut back covered services and will make insurance too expensive for many to afford.
Read more from “Free now to do the right thing,” The Great Debate, Reuters, September 9, 2009
The Limitations and Dangers of Relying on Competition among Insurers
Reliance on competition among private insurers is fundamentally a weak approach to health care reform. (The reason is that to keep prices low, insurers have only two levers to pull: they can refuse to insure people at high risk for using services, and they can change the conditions of insurance. Usually that means refusing to cover certain services or charging high out-of-pocket amounts. It could also mean paying providers by other means than fee-for-service, but they tend not to do that.) ...[But] if competition among insurers is the approach to be used, it is critically important that [certain] provisions be in the bill presented to the President for his signature. They include the following:
-
Guaranteed issue, which would keep insurers from denying coverage to people with pre-existing conditions and other characteristics, like age, which increase the chances they will need services (and, thus, cost insurers money);
-
Guaranteed renewal, which prohibits insurers from refusing to renew a policy for a subscriber as it expires; and
-
Low or no cost-sharing when people use services, so that out-of-pocket costs do not make needed care unaffordable, as it is now for many insured Americans....
Even if the reform legislation that passes would cover all Americans, a critically important goal, unless the law also contains these provisions, many people will be shocked when they actually go to use medical care. They will understandably be angry if the coverage they are forced to buy is so limited that they still cannot afford the services they need. And they will get scant satisfaction if disappointed constituents make lawmakers pay a price at the polls in the next election.
Read more from “The Devil is in the Details,” Huffington Post, September 9, 2009
Paying for Reform by Creating a Federal Health Insurance Fund
The key to successful reform, Davidson argues, is to create a Federal Health Insurance Fund. He writes,
Here is the idea: Require that everyone contribute an income-related amount (that is, more for higher-income people than for others) to a dedicated pool of funds for paying insurers and health plans. Then issue vouchers which entitle everyone to choose a health plan or insurance policy.
Before dismissing this idea for the cardinal sin of raising taxes, consider these facts: If everyone is covered, per capita costs will be much lower than currently because everyone will be in the risk pool, including millions who will need few or even no services. Also, the currently uninsured who now rely on expensive hospital emergency departments could select community-based primary care physicians. And the vast sums now spent on administrative functions -- by insurers to keep from spending money on care and by providers to cope with the vast variations in coverage -- would no longer be needed.
Furthermore, for people who are currently insured, this "tax" will not only be lower but will substitute for the premiums they pay now.
Read more from Paying for Health Care Reform: Part 1, Huffington Post, August 12, 2009
How the HIF Should Be Used
Davidson continues,
The Fund's managers would estimate the next year's needs and set rates to create a pool large enough to cover them. Individuals would receive vouchers with which to choose a health plan that meets federal standards for covered services, appropriate numbers and types of providers, and fiscal and managerial capacity. Private insurers, which would continue to play a large role, would be paid risk-adjusted amounts so that those that happened to attract large numbers of high-risk people would not be disadvantaged by their success. That is, the HIF would pay the plans more for older people and those with pre-existing conditions than for healthy 25-year-olds. Another benefit of this proposal is that those who like the coverage they have now would be able to select the firm that provides it. Importantly, individuals would choose a plan based not on price but on the particular providers who are included and the quality of the plan's service.
Read more from Paying for Health Care Reform: Part 2, Huffington Post, August 13, 2009
On the Insurance Industry’s “True Colors”
The release of the PriceWaterhouseCoopers report reveals the insurance industry's true colors for all to see. Everyone who has followed events closely saw insurers publicly supporting reform ("We want to work with you, Mr. President."). The pros knew that, at the same time, their lobbyists have been working hard to strip the proposals, especially the Senate Finance Committee's version, of provisions that would guarantee robust coverage and might actually keep expenditures under control.
Not content with the prospect of huge new profits from the addition of millions of currently uninsured to their rolls, greedy insurers have worked hard to strip "most of the serious proposals ... to curb costs" from the bills under consideration. (New York Times, "Lobbyists Fight Last Big Plans to Cut Health Care Costs," October 11, 2009) Unless Congress rebels against this duplicity, unhappy voters will discover -- when they need care -- the limitations of the new coverage they must buy. The result is likely to be profoundly disappointing to everyone but the insurers….
The silver lining from this cloud of duplicity may be that insurers have destroyed any lingering justification for trying to please them in exchange for their public support of reform. If our Representatives and Senators are as angry as they should be for having been played for fools, they could wind up passing a much stronger bill -- one that would provide good coverage to more people at relatively modest cost….
The bottom line is that the insurers have demonstrated that there is no reason any more to cultivate their support. That being the case, Congress has a new chance to do the job right.
See more from “By Revealing Their True Colors, Insurers Eliminate Any Reason to Compromise With Them,” by Stephen M. Davidson, Huffington Post, October 19, 2009
On the Public Option
On October 20, 2009, the New York Times publishes the following letter from Davidson, warning that if Congress does not adopt a public option in its health care reform initiative, “We will be creating a whole new generation of underinsured.” He writes,
The Public Option, and Other Choices
To the Editor:
I agree with your editorial that Congress should adopt a public option as part of its health care reform bill. It is the only way that those who do not have access to good, affordable insurance through their employers will be able to get decent coverage. Without it, the most popular private plans for this group of Americans are likely to be those with the highest out-of-pocket expenses, because those will be the plans they can afford.
In the Senate Finance Committee’s bill, that is the bronze plan, which requires that insurers cover only 65 percent of medical bills, leaving a whopping 35 percent to the patient. Many will forgo beneficial services because they will not be able to afford the out-of-pocket costs. Those who get really sick and need hospitalization or surgery will be in debt for years.
We will be creating a whole new generation of underinsured. The public option will give them a reasonable chance at affordable coverage that actually protects them.
Stephen M. Davidson
The writer, a professor at the Boston University School of Management, has written a forthcoming book about health care reform.
See letter online
Related News Stories & Blog Posts:
- “Free Now to Do the Right Thing,” by Stephen M. Davidson, Huffington Post, September 8, 2009
- “Why the Public Option is Critical,” by Stephen M. Davidson, Huffington Post, August 18, 2009
- "A simple fix for healthcare?," Stephen M. Davidson, The Great Debate, Reuters, August 4, 2009
- "In the New York Times, Stephen Davidson urges new incentives for cutting hospital infections," Boston University School of Management News Brief, July 6, 2009
