If this nation is about to embark on an overhaul of our
health care system, let's create a wide-open competition to see who is
up to the task.
If Washington wants insurance for all and more
choices for most, let's have an all-out fight to see who's best at
providing the most basic of human needs.
If we want reduced costs,
let's unleash the free enterprise system and see who can deliver. Let's
put the consumer at the controls, making the choices and causing the
insurance companies to scramble for people's patronage. Health care
reform has suddenly emerged as the hot-button issue in the nation's
capital. Conservatives are skeptical of change; liberals want a
full-bore reform plan that puts the government in charge of the health
What I envision is a complete transformation, a
system in which each individual or family is empowered to shop around
for an adequate health insurance policy. With 1,300 insurance providers
chasing 300 million potential customers, imagine the enterprising -- and
affordable -- insurance products that could emerge.
machinations of auto insurance are far less complex than paying for MRIs
or heart surgery, there's a certain simplicity in how the market
provides auto coverage.
The government mandates insurance so no
one can bleed the system. But the market offers unfettered access,
allowing unhappy customers to switch coverage again and again. There's
always another company out there desperately seeking your business, and
luring you with a good deal.
Anyone who has seen hundreds of TV
commercials with the Geico gecko knows what I'm talking about. And
Progressive and Allstate are always trying to keep up.
we all had the ability to shop for a Chevrolet-type health insurance
policy -- not the Cadillac version -- with an eye on a few basic costs:
an annual deductible, co-pays for prescriptions and doctor's visits,
emergency room care and a hospital stay.
Assuming that the competition is a fair fight, those five numbers would tell us most of what we need to know.
This is not brain surgery. This is creating universal health coverage, American-style.
insurance providers would face only a few requirements: every policy
would have to cover a standard array of medical expenses; policy holders
could choose their doctor and hospital; the pricing would be the same
for those customers with pre-existing conditions; and a licensing
process would weed out unconscionable companies that sell policies which
resemble the health care equivalent of a sub-prime mortgage.
all those insurers who are routinely criticized for excessive profits
and bloated overhead costs and cutthroat criteria for denying certain
medical procedures, this would be an opportunity for redemption.
all, this is do-or-die time. If the providers don't come up with
innovative ways to hold down costs while improving quality, political
momentum will grow in Washington for reforms that will put each insurer
in a regulatory straightjacket. Or out of business.
Those on both sides of the partisan aisle must concede that timing, in this debate, is everything.
economy is flailing, unimaginable budget deficits are mounting and the
American people are agitated by the federal government's role in
propping up banks and taking control of U.S. auto companies. This is not
the time for an expensive government takeover of the $2.2
trillion-a-year health care sector.
At the same time, anxiety
across the land grows as people fear losing their job and subsequently
losing their health insurance. Many workers are paying hefty payroll
deductions for their coverage while some employers have simply stopped
offering benefits due to spiraling costs. With health care expenses
swallowing up nearly one-fifth of our economy -- and sure to eat away
more in short order -- this is no time for an abundance of caution.
effort by congressional Republicans to quash reforms will only fuel
concerns that Washington can't get anything done. Any attempt by
President Obama to slowly grab hold of the health insurance industry
will be met with skepticism by some, and fierce opposition by others.
Level playing field
time is surely not right for a single-payer government insurance system
for all. The alternative proposed by liberals, a "public option," a
government insurance plan that competes with the private sector, invites
all kinds of questions about a level playing field and a slippery
The alternative, as I see it at this time, is a fierce
competition among the private insurers to offer basic, affordable health
care coverage for each individual American.
If we devise a system
that puts American purchasing power to work and frees the business
community from its health benefits ball and chain, the result could be
an economic boost -- a real stimulus -- at a time when we desperately
Our current system, unique in the modern, industrialized
world, created a disjointed regimen in which most Americans rely on
their employer to supply health care coverage and make all the choices
involved in maintaining or curtailing those benefits.
result of a quirk in the World War II era attempt to limit war
profiteering by corporations and to impose wage and price controls. What we were left with, through a
perverted tax code, is a system in which fringe benefits were a means to
lure new employees, and a means for labor unions to help justify their
What we don't have is a real choice for consumers. Most
employees have no idea how much their health insurance policy costs or
how their employer managed to select their provider. What I'm proposing
is a plan, referred to immodestly, for purposes of this column, as the
Selweski Solution. I propose this:
* Ending all employer-provided
health care. Eliminating those outdated, 1940s-era tax deductions for
health benefits could generate more than $300 billion a year to pay for
health care reforms. Of course, each employer would have the option of
maintaining benefits for their most-prized employees. That would be a
perk, not protocol.
* Creating a system in which each individual
is required to have health insurance, much like the mandate that we must
all have auto insurance. This is a provision that seems to already have
gained considerable bipartisan support in Washington. It's a
self-evident means of addressing head-on the problem of having 47 million
uninsured people in this nation.
* Allowing consumers to switch
their insurance on an annual basis, much like the Medicare prescription
drug program. This would further fuel competition.
each state to establish an alternative -- a massive pool of residents
seeking coverage, with the state's insurance business collectively put
out for bids. Each household or individual who does not want to engage
in the shopping process would sign up to be a part of the pool and
receive coverage from the insurance carrier that's chosen by the state.
* Offering a federal tax credit that refunds to each taxpayer the amount
they pay for health insurance premiums over 5 percent of their income --
a reasonable place to start. This would not be a deduction, it would be
a dollar-for-dollar credit awarded in their annual income tax refund. A
family with a household income of $60,000 would, in effect, pay no more
than $3,000 a year for health insurance.
* Devising a federal
catastrophic coverage plan that would relieve insurers from paying for
medical cases in which expenses go off the charts. This would amount to a
tax-funded program that would, for example, pay 75 percent
reimbursement for all costs above $50,000 in any one year for any one
The reason why the tax credit is ideal is because
it sets a moral measuring stick that says no American family should
have to pay more than 5 percent of their income on a basic service like
The reason why state insurance pools are essential to
this mix is that they would supply huge bargaining power to the average
consumer who now has no leverage, especially for the unsophisticated
consumer who is currently told that prices for an individual health
policy begin in the five-figure range.
The reason why the
employer-based system must end is fairly obvious. With all the layoffs
and corporate downsizing we've witnessed in recent months, millions of
Americans are losing their health care coverage. Millions more are
staying put at failing companies, declining to pursue opportunities to
join a firm on the rise -- or to create their own business -- simply
because they cannot afford to join the ranks of the uninsured.
reason why catastrophic coverage is integral is that it substantially
revises the risk assessments facing insurance company bean counters.
Take away the prospect of a patient piling up $500,000 worth of medical
bills, and the cost of all insurance policies should drop significantly.
The reality is that a substantial share of the nation's health care
bill is generated by a tiny portion of patients with massive medical
At General Motors, company executives estimated in 2005
that a national catastrophic health plan would reduce the price tag on
the automaker's health benefits by 23 percent.
In Michigan, a
unique provision mandating catastrophic coverage for auto insurance
policies offers unlimited medical coverage in the event of an
-- at a cost of about $100 a year. A national
catastrophic coverage program could be financed through FICA tax
withholdings, requiring a payroll tax that would be barely noticeable if
it's levied equally on all income earners.
Perhaps the biggest
benefit of this plan would be the economic impact. Imagine the boost
employers would realize if they were no longer saddled with
administering a fringe benefits program for medical care. Less
paperwork. Less HR headaches. And no more attempts to create in-house
wellness programs or smoking cessation classes. Isn't that the job of an
The bottom line is that this system would
provide a financial boost for a company's bottom line. This would, in
effect, provide a supply-side tax cut.
In addition, with health care costs off the books, employers would have a significant incentive to hire more workers.
more, many workers will realize a weekly pay increase as their weekly health
care deduction disappears. And at tax time, most would receive a healthy
IRS refund. Some will spend it; some will use it to pay their health
Even state and local governments struggling to
avoid budget deficits would enjoy a large fiscal boost from a ledger
that's free of rising health care costs for employees.
U.S. firms, especially manufacturers, would suddenly emerge far more cost-competitive in the
marketplace, where they currently struggle to keep up with foreign
companies from countries that have government-run health care.
In terms of logistics, the key is flexibility.
states may favor awarding two bids for their pool of customers, to
allow companies to compete with each other rather than giving all the
participants to one firm. Each pool member would choose one or the other
insurance carrier, and if states rebid every couple of years, no one
would be locked in.
Some states may want their chosen insurer to
offer two plans - one with a low deductible and one with a fairly high
deductible that features low monthly premiums. A few states may choose
to levy a small assessment on each premium paid to finance a transition
to comprehensive computerized medical records and billing. The move
toward an IT system pays big dividends.
Each state would become a
laboratory for health care innovations and efficiencies. Arizona may
want to copy the best practices at work in Tennessee. New York may learn
from the mistakes made in Illinois.
Obviously, each would want to
emphasize preventive care, wellness programs and disease management
when writing their bid specifications. As the process plays out, state
officials could work in concert with the chosen insurer, doctors,
hospitals and medical experts to find ways to improve outcomes and
The Selweski Solution is all about choices and
competition. However, one federal mandate I would favor is a requirement
that every American receive a full physical examination annually. Other
than that, Washington would mostly take a hands-off approach.
way to give consumers a guide to judge how well their plan is serving
them would be a simple yearly report card. The Mayo Clinic in Minnesota
is the gold standard for quality, affordable health care due its
top-notch doctors and collaborative approach to medicine. The federal
government could establish federal guidelines that would allow each
state to compare their pool plan's efforts with Mayo Clinic successes.
The report card would become a selling point for providers, a seal of approval.
addition, many Americans don't appreciate that health care costs vary
widely from region to region across the nation. A pool plan would put a
white-hot spotlight on costs in states where bids come back
substantially higher than in other states.
In sharp contrast to
the current system, with employers quietly making the decisions, the
pool price would become a major public issue.
Critics of the
Selweski Solution may argue that only the sickest people will enter the
pool process, causing the bids to come in too high. But the elimination
of pre-existing conditions as a price factor will provide some
protections, along with the parameters established for catastrophic
Word of mouth
Yet, the pool must remain an option
only. Allowing individuals to pursue their own health insurance plan can
provide a powerful, free-market incentive that leads to healthy
Those unhappy with their pool price may look to their
neighbor, let's say a 40-year-old man who exercises regularly and eats
healthy foods, and recognize that he gets a good deal on his insurance.
That disappointed pool participant then has a financial incentive to
achieve the same low rate as the neighbor. Capitalism and
cost-containment by word of mouth.
Critics may also say that my
plan puts far too much faith in the free market system and the average
consumer's ability to make smart choices.
But the Medicare Part D
program, which provides prescription drug coverage for seniors,
demonstrates that the power of the consumer, plus a competitive
atmosphere with dozens of companies fighting for customers, can produce
surprising results. The program's cost is projected at hundreds of
billions of dollars less than originally anticipated.
system I propose would not offer insurance policies with wide-ranging
coverage, individuals and families could certainly purchase supplemental
coverage for things such as in vitro fertilization or chiropractic
And it's obvious that the Selweski Solution requires a
health care overhaul of unprecedented magnitude that would involve
logistical problems and unforeseen start-up costs. Labor contracts with
fringe benefits would also complicate the transition.
I leave the fine points to others with far more expertise.
I think this overall plan provides a platform that addresses some of
the basic issues that Congress has been wrangling with for many years.
more uninsured. No more ties between losing a job and losing health
care. No more concerns about providing "portability" of health coverage.
The price tag
Yet, every discussion of health care inevitably comes down to this: How do we pay for it?
in this case the end of the health care tax deduction for employers
would generate an estimated $300 billion a year. The economic jolt from
this transformation away from employer-provided coverage could generate
hundreds of billions of dollars in more revenue. And, of course,
Congress and the White House are tinkering with ideas to raise tens of
billions of dollars for the forthcoming health reform plans that are
emerging on Capitol Hill.
Once again -- the catastrophic coverage,
with an estimated price tag of just $30 billion to $40 billion a year,
would be self-sustaining. What's more, a slight expansion of Medicaid
coverage could provide insurance for more moderate-income families and
for the desperately unemployed.
The bottom line is that the 5
percent income tax credit, even if it's staggered to reflect a
household's number of dependents, would cost the government perhaps $400
billion to $500 billion a year. But it's worth it.
who have worked hard for years and expected little in return from their
government should not have to shovel out 8 or 10 or 12 percent of their
income in order to avoid chronic illness or premature death.
given the eye-popping deficits we now face under Obama or, for that
matter, the buckets of red ink we experienced under conservative George
Bush, can anyone assert that an investment of this magnitude should be
cast aside if it's not fully paid for?
Some will say this plan is
simplistic. Conservatives will find fault. Liberals may hate it. Unions
would try to destroy it. Many insurance companies would attempt to
undermine it out of fear of losing the cozy business relationships they
But if such a wide array of Washington insiders have
doubts, maybe the winners would be all of us who have nothing to gain --
except a fair deal.
Let's give it a try.