Phone: (585) 412-6895 Email
Address: 165 Saxton Lane, Canandaigua, NY 14424, USA
Phone: (585) 412-6895 Email
Address: 165 Saxton Lane, Canandaigua, NY 14424, USA
By Jeff Adams, October 16, 2015
Governor Bobby Jindal (Republican from Louisiana) released his health care plan. This article is intended to be an objective analysis of his plan. Due to the politicization of our health care system, any objective article will be disliked by both partisan Democrats and partisan Republicans, and I expect that is true here.
Jindal’s Plan
Listed below are the major components of Jindal’s plan, along with a brief analysis of each:
Full Repeal of Obamacare
Obamacare is, by far, not a perfect solution for our health care system, as it has some rather large issues. If a plan is brought forth that is better than Obamacare, it would be reasonable to repeal Obamacare and replace it with the newer, better plan. Jindal’s proposed plan, similar to prior Republican proposals, lacks the elements that would help fix our health care system, such as components that would help control costs while increasing quality of care and provide relief for the tens of millions of uninsured Americans. Jindal’s plan is far inferior to Obamacare in improving these key elements. A total repeal of Obamacare would be a step backward in fixing our broken health care system. The Republicans should, instead, set aside their political agenda and do what is right for the country and work with the Democrats to fix the many issues with Obamacare. The Democrats, in turn, should also set aside politics and work with the Republicans to improve our health care system.
Medicare Premium Support
The Premium Support concept contained in Jindal’s plan can be thought of as a defined contribution approach, where the Medicare beneficiary would use the money allotted by the Federal government to offset a portion of the cost of purchasing any available Medicare plan, including the current Medicare fee-for-service plan. This concept has been proposed in response to out-of-control health care costs becoming an increasing portion of the Federal budget. Currently, health care comprises approximately 27% of the Federal budget, double what it was a couple of decades ago, and cost increases remain out of control. This Premium Support or defined contribution plan would allow the Federal government to rigidly control the cost of the most problematic portion of the Federal budget.
The issue with this approach is that it does not address the major problems with our health care system, which is the out-of-control cost trends. Jindal’s plan requires Medicare beneficiaries to pay a large portion of the premium increases in the future, which will result in Medicare becoming unaffordable for all but the wealthy. An example of the likely scenario is shown below and is based on the following assumptions:
Using these assumptions, the table below shows the Premium Support amounts and Medicare beneficiary payments in premiums above and beyond the government contribution:
| Year Annual Increase | Total Cost of Health Care | Government Premium Support | Monthly Cost to Senior | Annual Cost to Senior |
|---|---|---|---|---|
| 2015 | 6.00% | 3.00% | $147 | $1,764 |
| 2016 | $995 | $848 | $181 | $2,175 |
| 2017 | $1,055 | $873 | $218 | $2,620 |
| 2018 | $1,118 | $900 | $258 | $3,101 |
| 2019 | $1,185 | $927 | $302 | $3,621 |
| 2020 | $1,256 | $954 | $348 | $4,182 |
| 2021 | $1,332 | $983 | $399 | $4,786 |
| 2022 | $1,411 | $1,013 | $453 | $5,438 |
| 2023 | $1,496 | $1,043 | $512 | $6,140 |
| 2024 | $1,586 | $1,074 | $575 | $6,895 |
| 2025 | $1,681 | $1,106 | $642 | $7,707 |
| 2026 | $1,782 | $1,140 | $715 | $8,580 |
| 2027 | $1,889 | $1,174 | $793 | $9,517 |
| 2028 | $2,002 | $1,209 | $877 | $10,523 |
| 2029 | $2,122 | $1,245 | $967 | $11,603 |
| 2030 | $2,250 | $1,283 | $1,063 | $12,761 |
| 2031 | $2,385 | $1,321 | $1,167 | $14,002 |
| 2032 | $2,528 | $1,361 | $1,278 | $15,332 |
| 2033 | $2,679 | $1,402 | $1,396 | $16,757 |
| 2034 | $2,840 | $1,444 | $1,523 | $18,282 |
| 2035 | $3,010 | $1,487 | $1,660 | $19,914 |
| 2036 | $3,191 | $1,532 | $1,805 | $21,660 |
| 2037 | $3,383 | $1,578 | $1,961 | $23,528 |
| 2038 | $3,586 | $1,625 | $2,127 | $25,525 |
| 2039 | $3,801 | $1,674 | $2,305 | $27,659 |
| 2040 | $4,029 | $1,724 | $2,495 | $29,939 |
| 2041 | $4,270 | $1,776 | $2,698 | $32,374 |
| 2042 | $4,527 | $1,829 | $2,915 | $34,975 |
| 2043 | $4,798 | $1,884 | $3,146 | $37,752 |
| 2044 | $5,086 | $1,940 | $3,393 | $40,715 |
| 2045 | $5,391 | $1,998 | $3,656 | $43,877 |
| 2046 | $5,715 | $2,058 | $3,938 | $47,251 |
| 2047 | $6,058 | $2,120 | $4,237 | $50,849 |
| 2048 | $6,421 | $2,184 | $4,557 | $54,686 |
| 2049 | $6,806 | $2,249 | $4,898 | $58,777 |
| 2050 | $7,215 | $2,317 | $5,262 | $63,138 |
| 2051 | $7,648 | $2,386 | $5,649 | $67,785 |
| 2052 | $8,107 | $2,458 | $6,061 | $72,737 |
| 2053 | $8,593 | $2,531 | $6,501 | $78,013 |
| 2054 | $9,108 | $2,607 | $6,969 | $83,632 |
| 2055 | $9,655 | $2,686 | $7,468 | $89,617 |
| 2056 | $10,234 | $2,766 | $7,999 | $95,990 |
| $10,848 | $2,849 |
As the table above indicates, it will only take 13 years for annual senior contributions to exceed $10,000. This is out of the affordability range of most seniors. This will result in seniors dropping coverage.
The numbers in the table would be adjusted based on the year in which this program would be implemented, but the results would be the same. The implication here is that Jindal’s premium support plan will mean the end of health care coverage for all but the wealthiest seniors. Even the wealthy seniors, at some point, will drop coverage due to the outlandish cost.
Capping Medical Liability Lawsuits
This idea has been thrown around for decades. Its time has come to pass a law limiting malpractice liability. Malpractice liability insurance premiums have become so high in certain fields that physicians have dropped out of the profession, causing a shortage of physicians in those fields. Not only do physicians perform additional procedures due to the current malpractice laws, but their fees are also substantially inflated as they have to recover the additional cost of malpractice insurance.
Cap Medicaid Spending with Block Grants to States
Jindal’s plan would set up block grants to be paid by the Federal government to the states in order to cover the cost of the states’ Medicaid program. This would allow the Federal government to have strict control over its Medicaid budget and push the responsibility for keeping Medicaid cost increases onto the states. Another advantage of this plan is that it would allow the states to tailor their Medicaid program to the needs of the residents of its state and to the goals of the state government. The disadvantage is that the states would not have the clout of the Federal government behind the program as sometimes the “bigger hammer” approach actually works in our health care system. The states would also be reliant on giving reasonable increases for Medicaid each year.
This approach is not an unreasonable approach, although some states, especially the smaller states, may have difficulty keeping a cost-effective Medicaid program with a high quality of care up and running.
No More Pre-Existing Conditions, $100M to States for Risky
The reasonableness of removing the pre-existing conditions ban depends on your view of what our health care system should do. I personally do not believe that someone with diabetes, asthma, heart disease, or any other chronic health condition should pay more than another individual solely because of the health condition. Some of Jindal’s other ideas to replace the pre-existing condition ban have some merit. Still, they are not as effective as leaving the pre-existing condition ban that is currently in place as it would require many individuals to pay substantially more for coverage due to health conditions or even leave them uninsured.
Allow Individuals to Have Standard Deduction for Premium Payments
It seems reasonable to give a tax deduction, as Jindal proposes, if an individual has to pay premiums for a health care benefit. It may not help much, but at least it is something.
Sale of Insurance across State Lines
Jindal proposes to allow insurers located in one state to sell insurance in other states without having to follow state mandates of the state in which the insurer is selling its coverage. This is a bad idea that has been put forth for years. The impact would be minimal, even increasing overall health care costs. The main objective of this approach is to avoid the state mandates of the state in which a policy is sold. Insurers would pick the location which would have the least restrictions and mandates and use that as its corporate headquarters. This would allow the company to sell in any state and be subject only to minimal state regulation. It would only take one state to pass even looser laws in an effort to draw insurers to allow insurers to avoid most regulations.
Even ignoring the issue above, the argument for this allowance to cross state lines would not produce the results intended. An insurer in one location trying to sell in another state would not have the leverage to negotiate with the various medical groups and facilities due to a lack of business in that state. Leverage is extremely important for an insurer to be able to negotiate with providers. As a result, these cross-state insurance plans would have worse discounts driving overall health care costs higher and providing more revenue for the providers. The cross-state insurers would target small groups that are in community-rated plans (plans that base premium rates on an overall block of business and not on the individual group). The cross-state insurer would pick off the groups with better experience, leaving a less healthy block of business with the insurer that is actually in the state and following state regulations. As a result, the insurer in the state would have to increase premiums to account for losing groups with better experience. Additionally, individuals purchasing coverage would lose coverage for the benefits that are mandated in the state in which the individual resides.
Expanding Health Savings Accounts
It is reasonable to pursue expansion of health care savings account to allow individuals to use more pre-tax dollars to pay for health care costs. An easier way may be to change the tax code and eliminate the 10% threshold currently in the tax law regarding medical expenses. With this change, medical expenses would be tax-deductible for individuals if they itemize deductions.
Allow Businesses to Pool Their Purchasing Power
This may not have a substantial impact but it is an idea that would be worthwhile to pursue. This pool of businesses would be trying to obtain better discounts than TPAs or insurers, a scenario that seems unlikely.
Republicans Claim that Democrat’s Policies will Destroy Medicare
There is some truth to this claim, even though the reason given may not be the actual reason. The reason given by the Republicans is that the Medicare Fund is supposed to be depleted in the future, according to the actuaries who normally perform that study each year. In reality, those studies are very restrictive. They do not include additional revenue put into Medicare by the government or by individuals due to Part B premium increases (and Part A premiums if applicable). Historically additional money has been put into Medicare to extend its lifetime, as calculated by the study. This will also happen in the future.
The real issue is that these additional monies are increasing Medicare’s portion of the Federal budget at an unsustainable rate. Medicare and Medicaid were 13% of the Federal budget a couple of decades ago, and now they are 27% of the Federal budget. That means 14% of the budget that was dedicated to programs other than health has been redirected to health care, and this will continue into the future. This has, and will, cause many Federal programs to be eliminated or funding to be reduced. It also causes funding to states to be reduced, reducing state programs and reducing funding to local governments. The reduction in local funding will cause a reduction in local programs.
Summary
The solution to the issues with our health care system is to make major changes to our health care system in an effort to increase efficiency and quality of care. These changes must not be piecemeal as a change only affecting Medicare or Medicaid, for example, will cause a shift in cost to our overburdened commercial coverage (employer group, individual coverage, Exchange, etc.)
One third of health care claims are unnecessary as they are either fraud, waste, or abuse. A treatment protocol needs to be developed that would detail the standard treatments for various conditions.
It must be acknowledged by policymakers that each entity in health care is run as a business and not run as a charity. Physicians, hospitals, pharmaceuticals, and other health care vendors try to maximize revenue and reduce their expenses to ensure that the business has enough money to stay in business. Decisions by providers and facilities are often made with the business results in mind and not what is best for the patient. A good example would be if I went into my primary care physician’s office and demanded a certain drug, my physician would probably give it to me rather than lose me to a physician down the road. I have often had physicians make this comment to me. There are many very good health care providers who look out for the best interest of their patients, and I am lucky to have some of these as my doctors. Policymakers, however, need to make policies based on the entire health care system, which means making policies that make it difficult for those entities most responsible for the 33% fraud, waste, and abuse, including the patients. Unfortunately, this means that the good physicians, hospitals, other providers, and patients suffer due to the acts of the not-so-good elements of our health care system.
There is no quick fix or “silver bullet” for our health care system. Our policymakers need to work together to find solutions that, combined, will help improve our health care system. Using health care as a tool to win the next election is an approach that may be single-handedly the most damaging approach to legitimate health care reform.