Monday, October 5, 2009

Save Medicare!

Medicare is going broke. You can save it by either raising taxes or cutting benefits. Cutting waste can help, but government seems incapable of truly eliminating waste, and even if Medicare were waste free you'd still need to raise taxes or cut benefits.

Fortunately, there's another way to save Medicare. Medicare can open up a Money Making enterprise, and use the money to help cover its debts. There are millions of Americans who would rather buy Medicare than their current insurance policies. The government can offer it to them at a nice profit, for a true win all around. Millions of Americans get a better health care plan, and the government gets revenue to help keep Medicare afloat.

If you want to save Medicare, let it make money. Let it be exposed to market competition, and learn how to fight to keep customers. In addition to making money, the lessons learned can help improve quality for its current customers as well.

What many people don't know is that there is a precedent for this idea. There was a time when the Federal government offered free mail delivery to everyone over the age of 65. This was very expensive as it required mailmen, delivery trucks, and post offices, none of which brought it any revenue. The burden on taxpayers was terrible, and the volume of mail went up year after year, threatening to bankrupt the nation Meanwhile everyone under the age of 65 was barred from using the free US Post Office and instead had to use FedEx or UPS for mail delivery, each of which was fairly expensive. Finally some frustrated customer had a brilliant idea. Why doesn't the government offer mail service to everyone? As you can imagine, people were quite shocked at the idea. Do you know how expensive it would be to give free mail service to everyone? So the customer explained that he wanted the government to offer mail service and charge a hefty markup. He gets his mail delivered, and the government makes money. Well in that case, why not use FedEx or UPS? So he explained that even with the markup, it would still be cheaper than FedEx or UPS? So then he got attacked from the other side. If the government offered mail service, it would put FedEx and UPS out of business. And he said trust me, FedEx and UPS will do just fine. Anyone who says private companies can't compete with government bureaucrats doesn't understand American ingenuity and capitalism. There will always be a market for additional forms of mail delivery, and if they are run well FedEx and UPS will find many ways to make money. In fact FedEx will buy Kinko's and UPS will buy Mail Boxes Etc. And sure enough he was right.

And so the US Post Office was saved from bankruptcy by competing in the market and making money off of those under the age of 65. The lesson here is very clear. If you want to save Medicare, let people buy it. When you want to save a species from going extinct, you encourage people to eat it. And if you want to save a government program, find a way for it to make money, so people can voluntarily purchase it.

The High Price Public Option

The purpose of a public option is to compete on price and quality, thereby forcing insurance companies to become more competitive. What's much better than offering one public option is to offer several of them, so consumers can choose the best fit. And by making them profit generating, these “Deficit Fighting Public Options” can help balance the budget.

One way to truly ensure that these Public Options will be Profit Generating is to not allow them to undercut the competition. Whatever the lowest price in a given market may be, the Public Options must charge an amount equal or greater to them. This means that the government will only be competing on quality, and not on price. If you may ask why would anyone be interested in purchasing such a Public Option, the reason is that many Americans trust the US government more than they do the insurance industry. If they feel the government will be less likely to them deny coverage when they need it, let them purchase a Public Option and pay full price for it. Millions of Americans will have greater peace of mind, and the federal government will make money off of them.

Now I don't think those in favor of a Public Option will need to go that far in order to get the votes they need. I think the previous ideas I gave will be more than enough to get the measure passed. Giving each state the power to allow these Profit Generating Public Options to be sold – and to get a cut of the revenue - is an especially good idea, since it will put pressure on state legislators to vote in favor of allowing their state to offer the Public Options. However if all else fails, a Profit Generating Public Option that will only compete on quality and never undercut on price will be an especially hard measure to vote against.

Friday, September 11, 2009

A Bulletproof Public Option

The best way to pass a public option is to make a “for profit” public option With the country deeply in debt, it is politically dangerous to vote against a way for the government to make money without raising taxes. Anyone who does so will be attacked for putting corporations – and their political donations – ahead of the citizens who want to purchase the healthcare options. What’s worse is they will be putting corporate profits ahead of government solvency. You can’t rail against the deficit and then vote against a way for the government to help close it.

What is needed is a good name for the plan. “For-Profit Public Option” is a bad name, since it is too close to “Non-Profit Public Option”. I’m not sure what the ideal name is, but here are some possibilities.

1) Money Making Public Option

2) Profit Generating Public Option

3) Deficit Reducing Public Option

4) Capitalistic Public Option

5) Profitable Public Option

6) Deficit Fighting Public Option

Once the government is making money off the plan, it really is a fair fight with the private insurance companies. True the government has the advantage of instant brand recognition and can use its huge market power to negotiate better prices, but such are the advantages of all large players in a market economy. It’s capitalism at its best, and is no different than Wal-Mart profitably gobbling up another market segment.

As a protection measure, let each state determine if they want the “Deficit Reducing Public Option” offered within it. And since the government is making money in the states that offer it, it should share some of those profits with those states.

As a further protection mechanism, it can be mandated that the “Profitable Public Option” gain no more than 20% of the national health insurance market. Once it gets close to that percentage it will have to raise prices to a level which keeps it below that threshold.

Of the names I came up with thus far, I prefer “Deficit Fighting Public Option”. It makes it clear that the purpose of this plan to fight the deficit, so anyone opposed to it is in favor of bankrupting the country. That’s a highly unfair and partisan way of viewing it - which is why it can be politically effective. If those in favor of any public option can be accused of socialism, then those opposed to a way to make money can be accused of wanting the government to “beg and borrow” until it declares bankruptcy.

I don’t know why those in favor of a public option have not taken this approach yet. By adding a few percentage points of profit margin to their “revenue neutral program” they can make it “revenue positive”. This can make a public option “bulletproof”: so much harder to shoot down, and nearly impossible to vote against.

I think what’s lacking is the right name. If you have any ideas I’d love to hear them.

Thursday, September 10, 2009

An easy deal

Here is partial healthcare deal which both sides can live with. It gives each side what they want, with conditions the other side can live with.

1) Democrats want a public option. They can have 4 of them: Medicare, Medicaid, Veteran Affairs and the Federal Employee insurance plans will be made available to all.

In return the Republicans get 2 big concessions.

a) By law, the prices will be set so that the government makes money on each of those plans. Not only will there be no subsidies, but the government must make a higher profit margin than the health insurance industry as a whole. No one wants to pay those prices? Tough luck. It shows government healthcare is not that cost efficient after all.

b) Every State will have the right to decide which if any of those options will be offered within it. And since the federal government will be making money off these plans, it must share a percentage of the profits it makes in each state with that state in return for allowing the plans to be offered.

2) Republicans want to remove state healthcare regulations to allow interstate competition.

They get it by offering the Democrats 3 small concessions.

a) States may voluntarily ditch their own healthcare regulations in favor of an IHA (Interstate Healthcare Association).

b) Every state can vote on the regulations of the IHA it joins.

c) States that join an IHA will receive federal subsidies for their uninsured, who in turn may use it to purchase the insurance policy of their choice.

3) Republicans want to set up Malpractice Courts.

a) The Democrats agree that if any state wants to experiment with Malpractice Courts, the federal government will pay for the cost of setting it up, as well as monitor how effective they are at settling claims quickly and equitably. If they work as promised more states can be expected to follow, and the federal government will pay their transition costs as well. President Obama has already agreed to allow some initial experimentation. Paying for every state that wants it is the next logical step.

By making the public option a profitable government program, it will be much easier to get Republican support. By paying states to reform their regulations and not forcing them, it will be much easier to get Democratic reform. And by making all these changes a package deal it is even easier to find something in it for both sides. For more details, kindly read my previous post.

Tuesday, September 8, 2009

Healthcare proposals for some, tiny American flags for others.

I have several suggestions on how to increase choice and competition. I’ll start with one idea for the Democrats and two for the Republicans.

For the Democrats: Don't settle for a single public option. Offer four of them, but with a twist that makes it nearly impossible to vote against. The Medicare, Medicaid, Federal Employees & Veteran Affairs health plans should each be made available to all as FFPO - For Profit Public Options. Propose a bill that offers every American a choice of each of those plans, but only at prices for which the government will on average make money. A minimum profit margin (of perhaps 5% of revenue) will be set by law, and the government actuaries will be required to calculate the prices which will (on average) provide that profit margin. The legislated profit margin can even be required to be larger than that of the health insurance industry as a whole.

It's hard to rail against the deficit and then vote against a program that will make money to offset it. Here is a way for the government to profitably introduce more competition into the market place. In a fight between public and private corporations almost all Americans will root for the latter, so any private company who can't compete with a profitable government program deserves to lose market share.

The government plans will have the advantages of brand recognition and massive purchasing power, but such are the advantages of all large corporations. Some Republicans will say that without government subsidies no one will want to buy a public option. In that case there is no reason to vote against a FFPO. Set up the program and let the American people decide for themselves. If no one buys the FFPOs it will be a repudiation of those who say the government is inherently a more cost effective provider of healthcare, for in a fair fight people preferred private insurance.

To help keep the federal government honest with its pricing, a percentage of the profits will be shared with the states, so that if the profits ever drop the states will push back and demand that prices be increased to help preserve their revenue stream.

To make it even harder to vote against, give each state the right to decide which if any of the FFPOs it wants to be allowed to be sold within it. As each state gets paid a percentage of the profits generated by the FFPOs offered within it, most will happily welcome the program. However, any state which would rather protect its local insurance companies will be allowed to do so. This allows the experimentation which we all favor. Some states will naturally allow FFPOs to be sold, while others will resist. After a few years the effects of the program will become clear, and most states will gravitate towards the ideal policy, whatever it may be.

For the Republicans: When each state writes its own healthcare regulations it fragments the market and makes it more difficult for companies to operate, thereby decreasing competition and increasing prices. However, it would be hypocritical for a party that supports states rights in most other areas to forbid a state to determine on its own what regulations are best for its citizens. No one likes when the federal government tells their state what it must do. A solution to this dilemma is to use all carrots and no stick, as was done by offering more federal highway dollars to those states that raised their drinking ages to 21.

One way to do that is with an Interstate Healthcare Association IHA. If a state becomes a member of an IHA it removes all of its own healthcare regulations, and instead accepts those of the IHA. As a member of an IHA, it has a vote on what those regulations will be. The state would not be able to put up any additional barriers to entry, so that any insurance plan which meets the requirements of the IHA could be sold in any state that is a member of it. To encourage states to ditch their own plans and accept those of an IHA, the federal government will offer subsidies to every state that joins one, perhaps in the form of subsidies for the uninsured, who can use it to buy the policy of their choice. Offering aid for the uninsured is a great way to get Democratic support for this Republican plan to reduce healthcare bureaucracy.

It may be best to start with 2 IHAs, one for those states which prefer more regulations and one for those which prefer less. A state may join whichever IHA it wants, and become a full voting member on its policies. There may even be a rule which lets states form new IHAs, as long as they have a minimum of (let’s say) 10 states in it. Reducing the number of distinct sets of healthcare regulations from 50 to a much smaller number will make it much easier for many companies to offer policies in places where they currently don’t.

For the Republicans: One of the ways to reduce healthcare costs is with special malpractice courts. However, that is a state issue, and many people would not want the federal government interfering. Once again the key is all carrot and no stick, while encouraging innovation and experimentation. The federal government can offer subsidies to the first 5 states that decide to set up special malpractice courts. The cost and effectiveness of these courts will be carefully monitored, and the results publicized so that other states may decide for themselves if they wish to institute the program.

If it indeed leads to quicker and more consistent verdicts for victims while lowering malpractice premiums for doctors and healthcare costs for patients, there will naturally be pressure on other states to follow this proven reform. If however it doesn’t have the intended effects, those states may revert to the current system, and the rest of country would be forced to go participate in the experiment. It truly is a laboratory of democracy at its best.