Best of Both Worlds

Several notable economists have released a white paper offering a compromise health reform plan entitled the “Best of Both Worlds.” They identify 5 priorities of reform:

  • Ensuring universal access to basic health care
  • Making health care affordable for the poor and sick
  • Restraining the growth of public spending
  • Ensuring the efficient provision of health care and health insurance
  • Respecting the diversity of patient values

These points are more big picture and less detailed, but still reminiscent of the plan I proposed in my book “Balancing the Budget is a Progressive Priority” published as ab ebook in August 2011, and then in paperback in 2012 that had as its centerpiece a suggestion for a bipartisan health reform strategy that I claim to be a necessary, but not a sufficient condition to have a sustainable federal budget over the long term. Here are my main bulleted points.

  • Replace the individual mandate with federally-guaranteed, universal catastrophic insurance coverage and sell private “gap” insurance in state-based exchanges
  • End/modify the tax preference of employer paid health insurance
  • End the Medicaid program by transitioning responsibility for dual eligible Medicaid costs to Medicare, while moving non-elderly low income persons into subsidized private gap insurance
  • Enable Medicare to become an active health care purchaser
  • Enact comprehensive medical malpractice reform
  • Adopt an overall cap on federal health care spending backed up with a tax-based fail-safe

The hardest part of the simple idea of providing a universal catastrophic health insurance system (or provision of basic care to everyone) is where the catastrophic insurance vehicle will come from. By far the simplest route is via Medicare. Still, in policy terms, the details are tractable.

However, our problem is not one of policy and dueling white papers, but one of politics. To have a deal such as the one I propose or the one noted above will require not only conservative scholars/think tankers to endorse a set of policies and interact with liberals and progressives–we could cut the deal over a long weekend–elected Republicans will have to identify what they are for in health reform. And be willing to lose an election over taking a tough vote to bring about something like the plan above (there will be plenty opposed to this, or any change). Elected Republicans have heretofore “free-riden” on whipping up rage about what they are against, and have never gotten around to what they would be willing to advance legislatively to shape the future of the health care system.

I am not sure how to change that, but it is what makes a deal impossible.

cross posted at freeforall

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

22 thoughts on “Best of Both Worlds”

  1. Why should American liberals be interested in this plan? After a titanic struggle, they managed to get quasi-universal coverage passed, in a suboptimal form for many, but it’s done. ACA includes a wide range of practical ideas for reducing long-run health costs, which perhaps coincidentally are stabilising. It’s a mish-mash, but the advantage of that is that it offers a variety of avenues for the next stage of reform in 10 years’ time. There’s no gain in trying to negotiate with people who (a) can’t begin to deliver their side (b) are still wedded to market magic illusions. See for instance the proposal to eliminate community rating and pre-existing provision protection, and allow insurance companies to set rates according to individual risk.

    1. A core problem with the American health care “system” is that it is hideously fragmented and complicated. The political realities of getting ACA passed prevented anywhere near as much simplification as would have been desirable. My first response to Mr. Taylor’s bullet points is that it sure looks complicated to me. Like it or not, a 21st century health care system has many of the characteristics of a public utility, and design should be approached with that in mind.

    2. As James notes, it is not only Republicans who would have to change for this work – it is far from clear that Democrats would go for it, either. The most obvious answer, though, would be if ACA turns out to be the disaster that many on the Right suggest it will be (and evidence in support of that might be found in the President’s deferring of the employer mandate, plus his willingness to let Congress use taxpayer dollars to pay for their own plans, which is contrary to the law they passed).

      But to my eyes, most of the main bullet points look very sensible. I just have no idea how a cap on spending could possibly work. What do we do when costs exceed the cap? Tell everybody that they get no healthcare? Any fail-safe would effectively just undo the whole idea of the cap.

      As for ACA ideas for reducing long-run health costs, I am extremely skeptical that any of them will actually work.

    3. James
      you may be correct about forgetting about even imagining a deal, and move ahead with the ACA. However, esp given the supreme courts decision making Medicaid expansion optional for States, a deal that meant movement in the US South towards universal coverage (you are correct, the ACA won’t get there) is needed.

  2. This is a weird list of bullet points. It’s clearly castles in the air – there’s no way it happens, it took a titanic struggle to get any sort of theoretically workable system enacted, and the Republicans have since melted down completely, and now spend their time demonstrating their desire not only to destroy healthcare reform but also to block all means of governance and abolish all the gains of the twentieth century (voting rights, labor rights, workplace protections, environment, medical care, social security … the list goes on).

    Between a Democratic party exhausted and grateful their law is still barely in place and a Republican party that has forsworn not only compromise but the very notion of forward motion, even ideal legislation won’t happen – so the only point in describing a system is as an intellectual exercise, to describe what you would want in an ideal world, or what would best fit our existing society (in particular, would care for a million insurance workers). There’s little point in writing a political document: and yet, you’ve stuck in there comprehensive malpractice reform. This is nonsense, a podium-thumping bit of rhetoric know-nothing politicians espouse to prove they’re not the tools of the trial lawyers. We’ve done the experiment: massive states have enacted malpractice damages caps (some of them absurd), and yet their malpractice insurance rates marched in step with those in state that had no such caps. Meanwhile, one of the biggest determinants of malpractice insurance rates is the equity markets – because insurance companies make a lot of their money from investing the money they’ve taken in as premiums.

  3. Don:

    One critique I have:

    -I guess I am fine with malpractice reform, but my impression is that states that enacted such legislation did not see dramatic decreases in healthcare costs. And from what I recall, it is only 1% of healthcare spending. I am not sure it will make much if any difference on the spending side, and Republicans were offered that sweetener back during the push for ACA, and they blew off that reform…


    1. Frank
      the malpractice system does nothing well, but you are correct it will be no cost savings panacea. It would be an important part of a political deal….and there is a reason Republicans have stopped talking about it (they don’t want a deal).

      1. So we’re busily negotiating with ourselves about stuff that is irrelevant? The GOP has beaten the med-mal hobby horse into the ground, and so we ought to give to them anyway? That makes no sense to me.

  4. Don,

    Have you read the plan? It appears no different from what AEI has been offering in the past. End the employer deductibility for health insurance, stop community rating, and allow people to purchase the bare bones insurance their money will still allow them to buy under the guise of “respecting consumer choice.” This is not in good faith.


    1. To be fare, compared to his previous posts on the subject (1, 2), Prof. Taylor’s gotten better about acknowledging who and what his interlocutors on the Republican/Conservative side are.

    2. Simon
      the key for me would be to get to a federal guarantee of cata coverage with income based subsidy that could be used to purchase more insurance for low income if you were trying to get a deal. And they don’t really have that spelled out clearly. The hardest part of any ‘get everyone cata plans’ is where the cata vehicle comes from? Medicare as the vehicle is by far the simplest way.

      1. So basically the cycle works like this:

        1. Hard radical right Republicans reject every effort to create a more rational health care system in the US (Truman proposal, Eisenhower proposal, etc).
        2. Right-wing think tanks propose a basic and very business-friendly and ultrawealthy-friendly health care reform
        3. Democratic politicians get elected with massive assistance from libruls and hippies
        4. Democratic politicians, through heroic efforts, get some version of health care system proposed by right-wing think tanks passed through Congress and onto the President’s desk. This effort requires massive amounts of librul-bashing, hippie punching, and general backstabbing of the Democratic base (including giving up substantial chunks of womens’ right won at great cost in the 60s and 70s), but they go ahead and do it because it is the right thing for the country
        5. Hard right-wing think tanks now claim that the system _which they devised_ is “unworkable” and “unsustainable” and demand that a new system be put in place that has substantially higher levels of individual immiseration and corporate profits

        I’ll pass, thanks.


        1. If it’s from AEI, and not from Norm Ornstein, it’s garbage until proven – well, it’s just garbage.

  5. How about reducing it to one bullet point:

    1) Medicare for all

    If the conservative’s real objections were to reduce the costs of health care, instead of enabling rent-seeking in that market, they’d be for this.

    1. Something like a million people work in the insurance industry, and they and others have money invested in it, so abolishing it would be a major problem. Arguably as a society we’d be better off with Medicare-For-All and paying those million people not to work, but that’s not going to happen (and would ignore the investors). I assume this is why Prof. Taylor’s scheme makes a place for the insurance industry, even if is a rather less important one. It surely can’t be because anyone still believes the private health insurance industry generates much in the way on efficiency, other than “the rejecting claims and letting patients suffer” variety.

      1. BruceJ and Warren
        I just don’t think politically it is feasible to have straight single payer, but given given conservative interest in catastrophic plans, the simplest and maybe even only way to get true universal coverage under such an approach is to use Medicare as the catastrophic insurance vehicle. I do think we eventually have to have some kind of political deal so that the hardest parts on cost control are the responsibility of both parties.I realize many commenters think that is (1) impossible, (2) waste of time due to the other side etc. but you can’t pick your opposition’s policies, and esp with the Supreme Court ruling making Medicaid optional, I think the need for a political deal that allows for some policy tweaks is needed.

        1. My question is whether catastrophic would sufficiently insulate low income individuals from the cost of chronics diseases. I have in mind diabetics or those with say, Rheumatoid Arthritis. The fixed costs here are extremely high. Also would the catastrophic plan be adjusted to income, and would that be sufficient?

          1. No. There is a convenience store down the way from where I live with a jar collecting money towards a $250,000 bill that an uninsured person with a house and something to lose has racked up andof course will be billed for. You could still have similar situations with v high deductible, but the amount would be $10,000 instead of $250,000. For low income I would want to provide income based explicit subsidy for insurance. The reality in my state of NC is that we aren’t even insuring 500,000 people via Medicaid under most advantageous terms ever, so I think we have to at least look for a politically possible way for a deal to allow us to move ahead more uniformly on insurance expansion. It may be impossible, esp in short term

        2. Just out of curiosity … who are these conservatives with “interest” in catastrophic coverage? My guess is, it’s only a few thinktankers who have to do something to justify their salaries?

          I have not observed any sincere interest in healthcare *at all* among GOP leaders. So this seems even less possible than you think.

          1. Catastrophic coverage was the Republicans’ figleaf during the Clintoncare battles – as in, “instead of enrolling everyone in the US with an HMO, why not have the government offer catastrophic coverage?”. As I recall, Bob Dole was a big exponent. This may have persisted well into the 2000s.

            Of course, experience teaches us this was all Lucy-and-the-football; any attempt to grasp the Republicans’ metaphorical hand in agreement over Catastrophic coverage would inevitably have clutched at empty air, to be followed by a still-more-distant “serious, compassionate” Republican plan, and denunciations of the Democrats’ Big Government Stalinist Takeover of healthcare (now in the form of Catastrophic coverage).

            Prof Taylor knows all this, of course, but he’s paid to pretend there’s room for civilized policy discussion, even though the only people on the Right who are remotely sincere in discussing these goals are completely irrelevant.

  6. Don, I think you’re going about this all wrong.

    Democrats and Progressives made one sacrifice after another during the fight for ACA. It was a thankless job and a lot of those who did the work are only marginally satisfied that the results are worth all the pain they went through to get there.

    Now you want them to voluntarily go through that whole ordeal a second time … once again starting the negotiations by pre-emptively compromising. We’ll begin the negotiations with a “sensible centrist” proposal, and then beg and plead with Republicans to sign on, presumably offering further painful compromises as the whole thing gets dragged rightward.

    Sorry, but that’s not going to happen.

    This time, I’d suggest that you start out by getting a critical mass of Republicans signed on to your proposal as the starting point for negotiations. Then we can talk about what compromises and improvements could be added in to get support from the left side of the aisle.

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