Political ideology may be masking an obvious, pragmatic solution in the raging national debate to reform health care. Instead of continuing to argue, let’s work together to fix the system by shifting the most expensive illnesses to Medicare. That will lower the risks to health insurers who then can cut premiums by as much as 40 percent.
This idea can be the ultimate fix that makes health care affordable for most Americans.
Almost half of health care premiums are for catastrophic illnesses – the most expensive illnesses people experience. Two systems have developed to deal with these illnesses – the Medicare system for people 65 and older, and the system for everybody else.
People under 65 often are charged more than actual health costs because medical providers often take advantage of enhanced billing to recoup some of the costs they incur for treating people without insurance. These “cost-shifts” are variable costs that are hard to control, which leads insurers to charge a lot for premiums of people under 65.
But if you are covered by Medicare, the program pays actual costs to a medical provider. Because Medicare only pays actual costs, the overall cost of treatment for the Medicare patient is much less than for the patient under 65.
The difference in costs is amazing, according to research by the Charleston School of Law. Consider a patient under 65 who has an average catastrophic medical bill of $1.6 million. The cost for a Medicare patient with the same illness: about $320,000, or 80 percent less. That’s a savings of more than $1 million.
Imagine if we could get those savings hundreds of thousands of times. This proposal would remove the costs associated with catastrophic illnesses out of the cost for insurance premiums of Americans under 65. In turn, all of the costs for catastrophic illnesses would be protected under Medicare.
Other features of our plan: It wouldn’t exempt pre-existing conditions. It would allow children under 34 to stay on their parents’ insurance. And it wouldn’t impose caps on lifetime medical bills.
This approach is a win-win across the board:
Stronger hospitals. Hospitals would become stronger because they would be certain to be paid on all individuals with catastrophic illnesses.
Reduced catastrophic costs. The overall cost to implement the shift of catastrophic illnesses would be comparatively small – $12 billion to $15 billion a year – since most catastrophic illnesses already are covered by Medicare. This amount is far less than the subsidies being currently paid under the Affordable Care Act.
Lower premiums. For people under 65, premiums could be reduced up to 40 percent.
More patient-centered. Doctors and patients would be able to approve their treatment without having it approved by insurance companies, which would reduce regulation.
Increase competition. Removing the burden of catastrophic illnesses from the premium formula will create dynamism in the health care sector and increase market competition, potentially allowing new and smaller companies to self-insure again.
This pragmatic proposal should engender broad bipartisan support because of its ability to cover everyone while being cost-effective.
The common mantra spoken by many is that “high quality, affordable health insurance should be available to all.” While this is great in theory, no one has been able to find a mechanism to do it.
Let’s get to work.
Bell is president of the for-profit Charleston School of Law. Email: firstname.lastname@example.org