|
With Governor Romney’s proposal to spend $200 million on health care for the currently uninsured, we can expect some heated debates in the Legislature and elsewhere. To be fully productive, these debates need to address five issues that have to do with cross-subsidization. In each instance, we must ask whether there is a societal benefit that justifies it. If not, we need to find ways to restructure the financial flows so that each party pays its fair share.
• Issue #1. Preventable Illness. Should people who maintain their weight subsidize their fellow citizens who do not? Should non-smokers subsidize smokers? The country’s obesity epidemic, and the resulting high-cost medical conditions, are caused by preventable factors, such as diet and life style.
Similarly, smoking is associated with many high-cost forms of illness. Many of these are preventable simply by having people maintain an appropriate weight and refrain from smoking.
The solution: Differentiate health care premiums on the basis of body mass index (for people who are not genetically pre-disposed to obesity) and smoking habits.
• Issue #2. Family Size. At the moment, most health plans have two premium levels: one for single people and one for married couples. Some plans have three levels, with the third distinguishing between couples with and without children. In short, childless couples and small families subsidize large families.
It is hard to understand the rationale for this pricing policy. Automobile insurers don’t charge one premium for a family with one car and another for a family with multiple cars.
The solution: Charge a separate premium for each individual.
• Issue #3. Nonprofit Hospitals. Massachusetts, by exempting nonprofit hospitals from property, sales, excise, and income taxes, provides them with multi-million dollar annual subsidies. Although these hospitals complain about the burdens they face in meeting the health care needs of the uninsured, they in fact should be providing such care in exchange for their subsidies.
The solution: Require nonprofit hospitals to pay their tax forgiveness into a fund to help pay insurance premiums for the uninsured. Hospitals that provide a great deal of care to the uninsured will receive payments from the fund in excess of the amount they pay into it; those that provide little such care will not.
• Issue #4. Physician Training. Each of the state’s teaching hospitals spends several million dollars a year on graduate medical education (GME). Yet, only Medicare helps pay for it from its financially-precarious Trust Fund. All other health insurers are free-riders: they receive the benefit of a cadre of well-trained physicians at no cost.
The solution: Require health insurers to pay a percentage of their premiums into a fund for GME, and reduce Medicare’s GME payments accordingly.
• Issue #5. Co-payments for Pharma-ceuticals. The substantial cost difference between generic and brand-name drugs is addressed only minimally by co-payments. Co-payments also force low-income patients to choose between filling (or refilling) a prescription, and spending their limited resources on food, clothing, or shelter.
The solution: Eliminate co-payments for pharmaceuticals. Instead, when there is a generic equivalent for a brand-name drug, require patients who wish to use the brand-name drug to pay the cost difference (rather than a co-payment).
It should be relatively easy to implement the first two solutions.
Overweight people and smokers have little political clout, and large families will have a difficult time mobilizing any opposition. By contrast, progress on the last three issues will require considerable political will. With each there is a powerful lobby in opposition: hospitals, managed care plans, and pharmaceutical firms.
However, with health insurance premiums skyrocketing, and with pharmaceutical costs growing even faster, the time is ripe for significant change. Indeed, because of double-digit premium inflation, many employers, who a short while ago paid each employee’s entire health care premium, are now asking employees to cost-share. Thus, an approach that provides a fair way to structure premiums and supplemental payments should be welcomed.
David Young is a professor of management at the BU School of Management, with a specialty in healthcare management; dwyoung@bu.edu.
|
