A Modest Proposal for Healthcare Reform

Sadly, it appears that the Republicans have successfully "starved the beast". The phrase refers to the Republican strategy of cutting the revenue stream (taxes) to the Federal government so the government can not afford new social programs. Why Americans would vote for politicians who refer to our government as a "beast" and actively campaign to destroy it is beyond me and is a topic for another time.

Today, the economic crisis created by deregulation of the financial services industry and an unjustified trust in free markets whose only goal is short-term profit has left the next President severely handicapped. There is now intense pressure on the revenue stream because of the nationalization of the banking industry (I never thought I would write that), endless spending on a war of choice in Iraq, and economic depression that will require additional spending to assist individuals and local governments. It will be difficult to nearly impossible to pass any meaningful healthcare reforms if it involves federal spending.

So, I make a modest proposal to our legislators and future President Obama. Let's make small changes that will have large impacts. If it is no longer economically possible to have a single-payer system (because the Republicans have spent us into a gazillion dollar hole), then use the system we have and make it fairer.

• Prohibit cherrypicking: Health insurance companies don't want to insure sick people. They want young, healthy people who are too afraid to actually make a claim for benefits because their rates might go up. So, pass a simple law that prohibits all health insurance companies from using an applicant's health history or demographic information in its underwriting decisions. That's it. No more discrimination. No more pre-existing conditions. Everyone is equal. Insurance companies can't cherry pick the healthy ones. Statistically, the mix of sick to healthy in any one insurance company will even out over time.
• Require three standard policies: Once cherrypicking is prohibited, all Americans will be a single pool of potential insureds. The result is that to get new business, the insurance company will have to compete on price. To make price comparison meaningful, the government must require standardized policies. That way, consumers can compare apples to apples and oranges to oranges. By requiring three standard policies, consumers would have the choice of a high-deductible catastrophe policy, a mid-line policy that covers most things, and a whiz-bang deluxe policy for full coverage.
• Prohibit collusion and price-fixing: Insurance companies don't really want to compete with each other, so make it a federal offense to collude on pricing. Then, prosecute the first two executives who do.
• Amend ERISA and allow lawyers to sue insurance companies in state court for violations: A federal law called ERISA has built a shield around naughty insurance companies that won't pay claims. A one sentence amendment to ERISA will unleash our nation's contingency fee lawyers on the insurance industry and keep it honest. Once the insurance companies obey their obligations, they have nothing to fear from lawyers and local juries.

No federal tax dollars will be spent to achieve a huge change in healthcare insurance. Just follow the recipe above and health insurance will be available and priced fairly for all.

UNLESS,

the insurance companies decide to collude anyway and raise rates dramatically as a way to try to force a political backslide by Congress.

In that case, the Feds can allow consumers to buy insurance from the Federal government. The price set by the Feds will drive down the insurance company rates just like the Fed Funds rate controls the interest rates charged by banks.

It's time to rethink the hope of a single-payer healthcare system and achieve what is possible now, as well as revenue-neutral.