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Paul Ryan’s Naive Healthcare Reform Plan

October 3, 2011

God Bless Rep. Ryan. In his simplistic reform utopia all the kids could have ponies and all the adults Ferrari’s if only the market and consumerism were in play.

At 100,000 feet it is easy to say lets get rid of the employer tax deduction and give it to consumers who will be better spenders of their dollars. In a perfect market that would work but healthcare is not and never will be a perfect market and the fundamental changes required to get to this nirvana in human behavior and systemic transparency cannot happen overnight or even a few years.

This was the McCain plan from 2008 & it would have covered nearly no one new and changed nothing about how insurance is sold. Like in his Medicare Voucher plan there is no mention of the insurance reform needed to allow consumers to buy on a level playing field without age, sex and underwriting discrimination.

He avoids the major issues in the PPACA law and market that need to be addressed to work:

1) Getting a “tax credit” is fine if you pay Federal tax but what about the 47% who pay little or none simply because they have incomes <$40K. How do we cover them and allow them choice”
2) Pre-existing conditions
3) Medical underwriting
4) Free riders – how to stop Limited policies that offer low coverages and then the rest of us pay the bills for these folks
5) Core benefits for catastrophic so that the rest of us do not foot the bill for the person who buys poor coverage (like uninsured motorist)

Most notably with no understanding of how the benefits marketplace works he fails to grasp that if tomorrow all group coverage ended and 260 million people bought their own coverage directly that the insurers are incapable of dealing with it on every level from marketing, sales, service, billing, claims,web services et al. What chaos!

The group model has distinct advantages of selling once for a large population and all admin is handled thru the employer including enrollment, communication, first level problem solving (with broker help)payroll deduction.

With 256 million individual consumers we would have a huge shortage of agents/brokers in the country to handle all the needed work the carriers cannot and do not do well. They are not consumer facing businesses as they nearly always sell and service thru 3rd parties like brokers.

This is already an issue with Medicare Advantage where carriers cannot handle the consumer without the broker’s help. Large numbers of options, even simply presented are still overwhelming to the buyer and a boon to good brokers.

Clearly consumerism and choice is a needed as is reform of how we all view health insurance, or non-insurance as it is quickly becoming with higher deductibles and out of pocket costs.

The real model is more like your auto insurance with catastrophic and a warranty for preventive coverage and then use the right service provider for the problem you have at a cost you want to pay.

Imagine what an oil change would cost if your auto insurer covered it in network, out of network etc? That $19.95 would be $99 in a heart beat?

Today we go to the doc for sniffles and cancer making as that is what we are accustomed to doing like a Pavlovian dog.When I was a kid we had major med and the rest my folks paid. A return to a 21st century variant on that is the answer.

Ryan’s naive and utopian view of change would be very hard to achieve and at the end still leave most people uninsured and allow all the option to be under-insured if they want to be.

His plan can get employers out of the healthcare business which any sane one wants in today’s world but the resulting “new world” would likely end up tilted heavily against the consumer.

Can you imagine Congress passing the laws necessary to make a truly open and transparent market possible? Look at the partisan wrangling over banking reform, consumer credit and yes PPACA and it will never happen.

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