A Solution Path to Health Care Reform

If Congress wanted to be successful at Health Care Reform then they should look to use an approach that would be foreign to them. I don’t mean foreign as in a system perhaps more typical of international country’s form of health care. I don’t believe that the health care systems of other countries are founded upon a superior operating for funding approach. Those systems are simply structured to obtain their funding through their government’s own preferred forms of taxation.

What I mean by an approach foreign to Congress is one of which they could never conceive. An approach that implements a system and process that is not based on Congress’, or their supporting political staffs’, or lobbyist groups’ knowledge or ability; or more importantly their collective lack thereof. For such an approach Congress would have to pursue a creative solution; one that does not solely rely upon their power to tax, appropriate, or to earmark (graft) funds according to their usual methods.

Consider for example having Congress pass a Health Care Reform act that instead of just finding different groups to tax, or restricting the insurance plans and offers that can be offered in the marketplace, or creating obligations that do not contain future costs; would rather have Congress structure the reform act to motivate competition, reward effectiveness, and control costs. If instead of assuming that Congress is capable of creating a system that will work, why not create a process that will leverage the knowledge, abilities and innovation of the marketplace. Not only would such a creative approach stimulate the marketplace to find better ways to provide health care services than the current proposal. An innovative approach would also avoid having insurance companies, medical service providers and the other health care industry companies from investing their time and efforts in finding ways to leverage the loop-holes in the proposed versions of the bill, the misguided requirements, and the politically-intended abusive provisions to make their products as profitable for themselves as possible.

How would a creative approach differ from the Congressional approach(s)? In either case at the heart of the plan is a taxation funding method. You cannot propose to provide services that are not covered today if you don’t have a funding source, and the Government only has one funding source. But maybe the taxation method could be a reinforcing action rather than a punitive one. If the income tax rate schedule was appropriately calibrated to incorporate a minimal health care cost component then a health care tax-credit could be allowed for tax filers who have paid for an entire year of insurance coverage. This allows the Government to collect health care funding from individuals who would be ‘fined’ under the Congressional plan but would not require the Government to find and collect the funding. A similar tax provision for employers would also allow companies who do provide health care to receive a competitive advantage to companies that do not provide health care. On the corporate tax credit level, the credit would have to be based on number of employees and not total amount of insurance cost incurred; otherwise the gilded insurance packages granted to executives would be subsidized inappropriately.

Another area that a creatively structured act could improve upon the Congressional plan’s approach would be to specifically reward an insurance company that provides either more coverage in a market than their competitors at the same premium rate or who provide the same coverage at a lower rate. The Government could identify upfront the tax credit or exemption levels that a company can earn if they can achieve a superior cost performance than their competitors; and can provide an incentive formula that increases the taxes on insurance companies that generate additional revenues at a higher cost structure. Thus companies earning more but not improving the cost effectiveness of their products relative to their competitors will contribute more of their profits to the health care system. Such a design will make it obvious to insurance company executives where they are failing or succeeding, and their stockholders will be able to view an independent fiduciary evaluation of how well the executives are performing in maximizing their stakeholder value in the companies.

On the medical service providers’ side of the equation, a similar tax incentive can be created. A lower tax rate for low-cost providers and a higher tax rate for excessive-cost providers would incent the providers to find better ways to deliver their services.

The thing that distinguishes the Health Care system that Congress will produce from a better approach is that Congress’ plan does not recognize nor provide for rewarding that which works from that which does not. It does not generate an evolutionary force into the medical and insurance businesses but will stagnate the ineffectiveness that has produced the failed system we are trying to address and correct.

If you want to improve something then you have to change not how it is paid for, but you have to change what causes the providers and competitors to aggressively seek better costs, better services and better quality; and Congress’ plan does none of these.