Fixing Healthcare, Part Two: The Path to a New Healthcare System

The goals of reform are clear: provide universal care that is affordable.  So far, however, Congress has avoided any proposals that would require a major organizational shake-up--tabling Senators Wyden (D-OR) and Bennett's (R-UT) "Healthy Americans Act" ("Wyden-Bennett"), because it would eliminate employer-based healthcare as we now know it. 

(Senator Wyden/http://www.flickr.com/photos/pirateyjoe/3642123174)

Conceptually, the most obvious way to achieve universal care without eliminating existing employer policies is through a voucher--plus an exchange where the voucher can be traded in.  Employers would be free to top up the voucher and provide a more generous plan if they wanted to. 

 

Most of the proposals on the table can be described as providing some sort of voucher.  Massachusetts in effect gives vouchers to the needy.  Wyden-Bennett also provides subsidies that can be reframed as voucher.  But most of the proposals lack the clarity of a straightforward voucher framework.  Vouchers provide a simple analytical framework for expanding care, for defining public assistance, and for deciding how much we want to spend.  Moreover, by defining the amount of care we can afford, vouchers provide incentives for providers to improve efficiency in order to provide care within those limits, and provide a clear framework for evaluating cost and funding of universal healthcare.  Vouchers do not require a "public option."  Vouchers need not be universal, although some sort of offset for employer plans would be required if we want employers to maintain the incentive to provide their own plans. 

 

A voucher system, combined with an overhaul of the regulatory and liability system, would dramatically shift the incentives towards a more effective system of healthcare delivery.  Thus:

 

1.    Transition into a voucher system. The most effective way of driving providers towards a new model of delivery is to transition all public assistance (starting with Medicaid) into the voucher program.  This will put enormous pressure on insurers and providers to shift to a capitated system.  Set up a federal authority to evaluate providers annually and help define baseline care.  If we're going to have socialized healthcare for any significant part of the population (government already pays for half of all healthcare), there is no way to avoid government oversight.  The challenge is to create authority structures that are transparent and accountable.  

 

2.    Overhaul regulatory and liability structures so that providers can focus on care, not compliance and defensive medicine.  Congress should require special health courts with the goal of reliability. (Wyden-Bennett provides bonuses to states that implement liability reform.)  Congress should establish a medical version of a base-closing commission to propose a rationalization of federal and state regulation, including easing antitrust restrictions so that, for example, providers can share expensive diagnostic equipment.

 

Insurers and providers must be required to reorganize themselves to provide care for an annual fixed fee, adjusted for performance.  But they must be given the freedom to figure out how to innovate towards this end--subject always to oversight and accountability for good results.  Top-down dictates can never work.  A voucher system will put enormous pressure on them to become efficient.  A reliable legal and regulatory system will give them room to innovate.  And a new regulatory authority will make sure they provide competent care.   

 

Healthcare reform ultimately requires a proposal that everyone understands.  It's too easy now to blow smoke over any proposal.  Universal care can be accomplished through vouchers.  Cleaning out the legal jungle will create room for innovation and productivity.  People can understand these principles for change.  That gives them a chance of actually happening.

(For Part One)