Over at Managed Care Matters( http://www.joepaduda.com/), Joe Paduda writes about how we might begin reforming healthcare—despite the economic meltdown.
First, he warns: “Comprehensive health reform will not happen in the near future. There is no money. There are lots of other priorities – financial stability, huge and growing deficits, energy, wars in two countries, nuclear proliferation and tax policy. There’s just no money, and not much bandwidth. Yet the Democrats will be highly motivated to do something meaningful, pressured by campaign promises and voter demands.”
His recommendation: “Congress could pass and the President could sign legislation prohibiting medical underwriting in the individual market, requiring insurers to cover pre-existing conditions, mandating community rating, and establishing a basic benefits plan. “
This would mean that private insurers would be forced to offer insurance to all customers in a given community at the same price—despite pre-existing conditions. Insurers no longer would be able to shun the stick, or gouge them by charging exorbitant premiums. And, if we establish a basic benefit plan insurers would no longer be able to sell “Swiss Cheese” policies filled with holes.
Admittedly, this would mean that premiums would be higher for everyone in states where the sick are no longer closed out of the pool. Today, premiums are significantly lower in California than in New York State because insurers in California are allowed to deny coverage to the ill. Sometimes they simply terminate a customer’s insurance when he or she becomes ill.
Younger, healthier customers might well object to Paduda’s proposal. But ask yourself this: how happy are you about paying less because you live in a state where people suffering from cancer cannot get insurance? Keep in mind: next year, it could be you, or your mother or your sister who is closed out of the market.
As Paduda points out, if the legislation he proposes passed, there would have to be stiff penalties if younger healthier people decided not to sign up for insurance. Otherwise, many might be tempted to put off getting insurance until they became sick—or decided to get pregnant—knowing that when they finally applied insurers would have to take them, and could not charge them more. In the meantime, these “free-riders” would not be paying into the pool. In an e-mail exchange, Padadua agreed with me that those penalties would have to have “pointed, ugly teeth.”
But if we’re going to have a penalty for people who don’t sign up, we also would need subsidies for those who truly cannot afford insurance. Alternatively, we could follow Massachusetts’ example and exempt low-income and some lower-middle income Americans from the penalty—which means that many would wind up without insurance. This is something we would need to discuss.
Read Paduda’s full post here: http://www.joepaduda.com/archives/001326.html
Just How Bad Will the Coming Recession Be?
Let me stress that I agree with Paduda. We won’t have the money for wholesale healthcare reform anytime soon. Presidential candidate Barack Obama had indicated that his goal was to reform our health care system by the end of his first term—not next year. And he said that before the economy began to unravel.
Make no mistake: we’re heading into a long and deep recession. And it will effect everyone. Both blue collar and white collar unemployment will soar– one reason why Paduda’s recommendation is so important. (Today, speaking at Harvard, Bill Gates predicted that unemployment will hit 9 percent. Whatever you may think about Gates, he is good with numbers.) Not only will people lose their jobs, they will lose their employer based insurance, and they will need protection in the individual insurance market.
I’m sorry to be so pessimistic, but as many readers know, this is an area that I have studied. I followed the economy and global markets when I worked for Barron’s from the late 1980s through the late 1990s. Then I wrote Bull! A History of the Boom, 1982-1999. When I finished the book in 2003, I realized that we still had not wrung out the excesses of the 1990s. When the stock market bubble burst, prices should have reverted to the mean. To do that, history shows that the pendulum has to swing below the mean. The Dow should have gone down to 6,000 perhaps 6,500. That never happened.
So after the bubble burst, the market bounced back—too quickly. The history of financial cycles shows that long steep bull markets are followed by long, deep bear markets. That is how markets correct. Instead, in recent years prices have spiraled and by the beginning of this year, shares were overpriced, not only in the U.S., but worldwide. Meanwhile, Wall Street was unregulated and a huge pool of money was forming—the worst possible scenario.
By continuing to cut interest rates Federal Reserve chairman Alan Greenspan had created easy money, and by refusing to regulate the financial markets, Washington invited the crooks in to play in that pool. At the same time the administration encouraged everyone to just keep on shopping and borrowing. Central bankers were printing money, and too much money was chasing too few assets —not just real estate, but stocks and commodities as well.
Sometimes, the market correction that follows a giddy bull market becomes a two-step process. I am afraid this is what we are seeing today: the second shoe is dropping. Today, the market turned up. Tomorrow, the next day, or next week it will turn down. It’s impossible to predict the short-term, but investors have been traumatized. I would expect heavy weather ahead—extreme volatility. It’s too early to talk about how close we are to a bottom.
Looking Ahead –We Don’t Have to Give Up on Healthcare Reform
In the next few years, most of the taxpayer dollars we invest in domestic projects will have to go into sectors where we can create jobs. Health care reform will not create jobs.
Instead, we should invest in projects such as infrastructure repair. Those bridges need to be shored up at some point—we can’t just let them continue to crumble when people are driving over them–and this is as good a time as any. We also need to bring our troops home from Iraq. This will be expensive. Finally, when we get them home, we must care for them. The VA needs funding.
That said, there are steps we can take to pave the way for health care reform that will not cost tens of millions—and in some cases, can save billions. There is no reason not to authorize Medicare to use its clout to negotiate for lower prices for drugs and devices, for instance. As I have said before, we should repeal the bonus that we now pay Medicare Advantage insurers. And we should begin demanding unbiased evidence that new treatments are indeed more effective before we agree to pay for them.
In the tough economic times ahead, Congress may be willing to stand up to the lobbyists on each of these issues. But voters will need to make it clear that we can no longer afford corporate welfare for the healthcare industry.
Finally, there is one area where I think we should spend money: we must address the health needs of the youngest and poorest among us by expanding SCHIP and raising the fees that we pay doctors and hospitals who treat Medicaid patients. See Niko’s recent post on how low reimbursements for Medicaid providers doom Medicaid patients to poor access and subpar care. The dollars we save by cancelling the windfall for Advantage insurers and negotiating fairer prices for drugs and medical devices could be used to help fund both SCHIP and Medicaid.
And we don’t have to stop there. We’re entering a new period of belt-tightening. But austerity also could lead to some clear thinking.