Donald Trump was recently elected President of the United States. One of his campaign promises is to repeal Obamacare. Although, anyone can say anything the actual details/execution are vague and sketchy. What I wanted to discuss was some details that Donald Trump could use to get us to a true free market healthcare plan.
I agree with Trump that allowing states to cross state lines to health insurance would improve things somewhat. State insurance plans are regulated by the state and different states require health insurance to cover different things and states insurance plans are subject to solvency and capital ratios. If you had state competition would allow people to figure out what features they would like in their healthcare plan (should my plan cover this or that).
1) Do away with the maximum lifetime limits/allow for even higher deductibles-Currently there are no maximum lifetime limits in terms of the cumulative amount an insurance company can spend on the insured. This puts pressure on the insurance companies since they essentially have an endless liability to pick up the tab for insurance expenses. One solution would be for health insurance companies to offer you different lifetime maximums which would dramatically decrease the premiums. Why not allow customers the opportunity to select a health insurance policy with a a lifetime limit of $500,000, $1 million, or $20 million? Adding this option would create downward pressure on premiums and would make health insurance more affordable. If the cost of insurance was decreased to an affordable rate you would see younger people enroll for health insurance which would strengthen the risk pools. Also if we had true innovation in health insurance individuals could purchase health insurance policies that are above and beyond what is offered in the market place today. Imagine if a policy had a $30,000 deductible (meaning you are on the hook for everything below $30,000 and the insurance company picks up everything after $30,000). If you wanted to be extreme you could have health insurance companies offer policies with $100,000 deductibles. Premiums would drastically decrease (deductibles and premiums are inversely related) and allow individuals flexibility and choice regarding their own healthcare.
2) Repeal the essential needs of health insurance plans-Under the Obamacare rules health insurance plans must cover things like mental health, laboratory services, birth control, and even breast feeding. Why not allow individuals to customize which plans they want and not force them to pay for services that they will never use? I am okay when people sign up for health insurance to check off what services they would like (more like an al la carte menu). It is foolish to force people to pay higher premiums because of what the government thinks is good for them.
3) Allow individuals to form mutual aid societies-Actually health insurance used to be through mutual aid societies or fraternal organizations. Mutual aid allowed individuals to help each other out when it came to medical expenses (without government intervention). In the 1920's at least 33% of males belonged to one of these organizations. Members paid $2 for a doctor's visit (about a day's worth of a wage). Also it is important to point out that the mortality of members of mutual aid societies was about 28% lower than that of the general population. The government of course stepped in and passed the Mobile Law which increased the amount of insurance reserves (cash on hand) that mutual aid societies needed. The government through regulation destroyed voluntary groups. If a group of engineers want to get together and pool their own assets to form their self fund their health insurance why is should the government say no?
4) Reign in the FDA-The cost and time to get a drug approved has increased. In the 1970's the number of patients required was only 1,600 and by the 1990's that increased to 4,200. To cost to enroll just one patient into a phase III drug trial is $26,000. The cost to approve a drug increased from $437 million (in 2010 dollars) to $1 billion in 2000 (in 2010 dollars). Currently the FDA requires drugs to go through 3 phases before a drug can be sold. Actually it gets worse because after a drug's patent expires and becomes a generic the drug then must go through yet another approval process. The solution would be to just require one phase and only evaluate a drug to make sure it was safe (and let the market determine if the drug is effective). It is hard to evaluate drugs because by definition everyone is different. If a drug works for someone it may not work for someone else. Why not let doctors/patients determine if a drug can improve their medical condition? If drugs only required to complete one phase there would be more options for patients which would increase the competition and the alternatives patients would have and prices of drugs would decrease. Most importantly it would provide much more access for individuals to treat their conditions, symptoms, and improve quality of life.
5) Repeal CON laws-Certificate of need (CON) laws restrict the access of healthcare. CON laws require approval from a local/state governments to expand medical facilities. On average there are about 14 procedures or services that are regulated from states that have CON laws. As a result there are 131 beds per 100,000 people, a 37% reduction in the number of hospitals offering CT scans. CON laws restrict the access of healthcare and drive up healthcare costs. It would be obvious to repeal these laws to allow more access to healthcare.
6) Repeal medical loss ratios-Medical loss ratios mandate the percent of the premium that the insurance must spend on claims. The government believes insurance make too much (let's remember the profit margin of insurance companies is only 4%). This medical loss ratio is required to be 80%-85%. If a insurance takes in $100,000 in premiums between $80,000-$85,000 have to be spent on claims. Health insurance companies have to submit their data to the government to review. If the health insurance fails in any given year to meet this ratio the company has to offer a rebate to customers. The government should have no role in deciding how insurance companies allocate monies between paying premiums/administrative expenses. Medical loss ratios cause health insurance companies to spend more since the monies have to be spent within a year. If medical loss ratios were repealed you could have health insurance companies investing those monies over the long-term. This would change health insurance to model similar to life insurance companies (were companies often have monies for years and sometimes decades) and not force insurance companies to spend all their monies in the year.
7) Repeal the need for prescriptions for many drugs-In 2015 there were over 4.3 billion prescriptions that were filled. Now I would argue for a move to "deprescriptionize" or make many of these drugs available over the counter. The process would be to start by allowing stores like CVS, Target, Walgreens, etc. to sell drugs that had minimal side effects that honestly shouldn't require you to go to a doctor to obtain. The biggest benefit would be the amount of time saved for patients/doctors/pharmacists. Patients have to get in their car, drive to the doctor's office, wait, and then wait even longer just to have their prescription filled (assuming there are no issues with the pharmacy or doctor's office). Making more drugs available over the counter would create more competition, save doctors/patients/pharmacists many thousands of hours and greatly reduce the bottleneck at pharmacies (what a site that would be!).
8) Abolish CPT codes-Whenever you go to the doctor the doctor will essentially try to figure out how to explain to the insurance company what condition you have/what service you had performed. Complex coding terminology was created in 1966 (created by the American Medical Association to get fees-they actually own the copyright protection). Over the years new codes have been added and currently as I write this there are over 16,000 codes (prices). Of course there is the game of doctors trying to figure out which code will earn them the most money. If we abolished CPT codes doctors would have to figure out what value they bring and then charge accordingly which would create competition and varying prices for different services/procedures. 16,000 different codes to describe medical procedures reminds me of the former Soviet Union. It would be nice for doctors to have to figure out what their value is and charge based on that (oh wait plastic surgeons and psychiatrists already do this).
9) Repeal the National Organ Transplant Act of 1984-You would think you have ownership of your own body-but according to the government you don't. This act that was signed in 1984 after Dr. H. Barry Jones formed an organization to purchase and market kidneys. In the mid 1980's 70,000 Americans were on dialysis machines (dialysis is used for people who are waiting for a kidney transplant). Every year more than 100,000 people will start dialysis. Within one year about 25% of those on dialysis will pass on. Medicare spends $10 billion on dialysis every year. About 5,000 pass away every year waiting for a kidney. Allowing people to sell their own organs would save the expenses associated with dialysis (since kidneys would be transplanted) and allow other organs like hearts, intestines, lungs, bones, and other body parts and tissues to be transplanted. Allowing people to exchange their organs for money would save lives, save money, and most importantly improve the quality of life for so many individuals and families.
10) Reform Medicare-Of course I saved the best for last. Medicare was enacted in 1966 to cover the health insurance of individuals over the age of 65. If you don't sign up for Medicare you could pay a 10% penalty/year for not signing up (talk about government force). The issue with Medicare is the unfunded liabilities. Currently the unfunded liabilities of Medicare run about $48 trillion. The Medicare budget is $600 billion a year (with improper payments from Medicare exceeding $17 billion/year). Now there are roughly 55 million Medicare beneficiaries. Now if you distributed that $600 billion to 55 million beneficiaries that would be roughly $10,000 voucher which could be used to purchase private insurance in any state and the efficiency (improper payments would be brought down to zero). Of course you could have some type of means testing as well (so for example if your income was $250,000 you wouldn't earn as much of a voucher as someone who made $25,000). For the younger people who are not Medicare age you could allow them to place current Medicare tax they pay (1.45%) into a Health Savings Account (HSA). Over time with each paycheck the amount of funds that could be used for medical expenses in retirement would grow and be there at age 65. Also it is worth pointing out that Medicare aged individuals have the highest net worth compared with any other age group.
The changes I listed above would greatly reduce healthcare costs, improve the quality of life, extend life, and help prevent the nation from going broke. Most importantly it will give individuals more freedom in terms of how they make their healthcare decisions and reduce the force and power of the government.
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