INTRODUCTION
PAUL HOWARD: I am a senior fellow and
the director of the Manhattan Institute’s
Center for Medical Progress. I’d like to
welcome everyone here, on behalf of the Manhattan
Institute and our cosponsor, the New York State
Health Foundation. The Center for Medical Progress
encourages the development of market-based public
policies to promote medical innovations and
improve public health. We are proud members
of the New York State Health Foundation’s
Coverage Consortium, which is dedicated to expanding
access to more affordable insurance options
for New York’s uninsured. As our own Tarren
Bragdon has pointed out in his “Rx NY”
report, it is critical that we have a healthy,
well-functioning private-insurance market to
ensure that scarce public dollars are reserved
for providing health-care assistance to our
poorest and sickest citizens. But in maximizing
help for the needy, we must also be cautious
that regulation of private-insurance markets
does not exacerbate the problem of the uninsured.
Our first panel will examine how state regulation
of insurance markets affects the affordability
of insurance, and the panel will suggest innovative
ways to make New York’s individual direct-pay
market more responsive to the needs of today’s
workforce, including the young, relatively healthy
consumers who may find themselves switching
jobs frequently and thus poorly served by traditional,
employer-based insurance options.
Our second panel will focus on the entrepreneurial
companies and physicians who are changing the
ways that patients interact with the health-care
system. Physicians are opting out of traditional
insurance arrangements while creating new formats
that promote a true medical home. Convenient-care
clinics are springing up in retail outlets that
offer rapid access to routine and preventive
care, complementing the primary-care system
and, one hopes, reducing the strain on our overburdened
emergency rooms. We have heard a lot over the
last month, particularly from the Dartmouth
Atlas of Health Care, on pricing disparities
in the treatment of chronically ill patients,
even among America’s best hospitals. Today,
we’ll hear how some companies are finding
ways to arbitrage these prices and quality differences
in order to lower health-care costs and improve
patient care. Our second panel will conclude
by looking at how one state, Georgia, is trying
to cover more of the uninsured by leveraging
market forces.
Our keynote speaker is noted Harvard Business
School professor and Manhattan Institute senior
fellow Regina Herzlinger, who will offer her
reflections on how to unleash innovation in
health-care markets. Regina has recently written
a book titled Who Killed Health Care?—and
I think that her answer is that we have all
had a hand in the death. The first thing I think
that she’ll ask us to do is to stop making
decisions for patients and to empower them to
make their own choices. But I’ll let her
explain how she sees that happening.
Before we start, I’d like to introduce
Jim Knickman, the CEO of the New York State
Health Foundation, whose support has been critical
to our participation in the Coverage Consortium.
Dr. Knickman is the first president and CEO
of the New York State Health Foundation, and
he comes to the foundation with tremendous experience
and expertise in public health and health-care
analysis. Prior to joining the foundation, Dr.
Knickman was vice president of research and
evaluation at the Robert Wood Johnson Foundation,
where he was responsible for external evaluations
of national initiatives. Throughout his fourteen-year
tenure at Robert Wood Johnson, he also led grant-making
teams in the areas of clinical care for chronically
ill, long-term-care services and population
health. He is coauthor of a widely used textbook
on health policy and management, serves as chairman
of the Robert Wood Johnson Health System, and
is a member of the editorial boards of the
Milbank Quarterly and Inquiry.
In my experience working with Jim on the Coverage
Consortium, he’s an exemplar of what we
need in our health-care debates today: someone
who asks tough, smart questions and is supportive
of good policy ideas no matter what partisan
label happens to be attached to them. Please
join me in welcoming Dr. James Knickman.
JAMES KNICKMAN: Recently, I felt very
proud when I was asked to be part of a panel
explaining the candidates’ health-care
reform positions—because after I finished
speaking, someone commented, “I don’t
think I’ve ever heard anybody talk about
this stuff, and I can’t figure out which
side you’re on.” And I replied, “Good!
That means that I was successful.” I think
it’s important that we look at health-care
reform in a broad way.
Why is health care such a complicated issue
to get right? I think it’s because four
factors come together in a baffling way: insurance
coverage; access to care; cost of care; and
quality of care—and figuring out how to
pay for it. In our society, it is very hard
to get those four things working together in
a way that doesn’t squeeze the balloon
in the wrong direction if you work on one versus
the other. Too often, we work on these issues
in isolation—people working on coverage,
people working on access, people working on
cost, people working on quality. But they’re
all one problem. If we expand insurance coverage,
but costs go out of control, it’s going
to fall apart because we’re not going to
be able to afford that insurance coverage. That
is what has happened in some of the other states
that have made important first steps. If we
improve quality but it’s unaffordable,
we don’t have access.
So trying to get these four issues right is
important. There are other complicating and
interacting factors as well: markets and government.
We must figure out how to bring those two forces
together. It’s easy when you have an economic
good that can totally rely on the market, which
determines supply/demand or price. It’s
also easy when you have an economic good that
comes totally within the realm of government.
But in health care, we need to bring markets
and government together. It’s hard to do
that because while we may have a basic health-care
package of services, it can be so expensive
that 30–40 percent of Americans cannot
afford it. So we must have some government role.
Americans are quite committed to using markets,
too. Trying to put those factors together really
challenges us.
Our foundation came out of the Empire–Blue
Cross conversion, and we’re here to improve
the health of New Yorkers and to make a better
health-care system and better public health
system. We think that expanding insurance coverage
is crucial. Insurance coverage is in our mission
statement. For over two years, in our efforts
to do something about coverage, we have made
four big bets.
First, we developed the Coverage Consortium,
which analyzes the choices for us to make as
a state about how to expand insurance coverage.
The consortium includes the Manhattan Institute
in addition to the Community Service Society,
New Yorkers for Accessible Health Coverage,
United Hospital Fund, the Rockefeller Institute,
and Columbia and Cornell Universities.
The second bet is a Medicaid initiative. Almost
a million people who are eligible for Medicaid
are not enrolled. We have to figure out how
to make it easier for those people to get enrolled
and to stay enrolled. So we’re doing administrative
studies and other work to figure out how to
get coverage for the people who are actually
eligible.
Our third bet is in a small-group market. Many
of the working people who are uninsured are
in this market. It has been a big challenge
to figure out how to get small-business owners
to focus on insurance coverage. If you want
to grapple with this problem, you have to grapple
with the small-coverage market.
Our fourth bet on the coverage side is cost.
Unless you worry about cost and affordability,
the focus on coverage is not really worth it.
PANEL I: REVITALIZING THE
INDIVIDUAL (DIRECT PAY) INSURANCE MARKET IN
NEW YORK
TARREN BRAGDON: I am an adjunct fellow
at the Center for Medical Progress. I have the
pleasure of moderating this panel, where we’re
talking about revitalizing the individual direct-pay
market in New York. Before we hear from our
esteemed panelists, I want to provide some perspective
on New York’s direct-pay market.
For over fifteen years, New York has had one
of the most highly regulated, uncompetitive,
and expensive individual-insurance markets in
the country. In the early 1990s, 750,000 people
were covered in this market. Today, fewer than
100,000 are covered. Premiums in the direct-pay
market begin at over $500 per month for individual
coverage. By comparison, California, which has
a very competitive individual market, with almost
twice the population of New York State, covers
2.8 million people in its individual market,
according to its Department of Insurance.
In New York, there are 2.2 million uninsured
adults. Over half of them are young adults,
aged 18 to 35. A third are aged 35 to 49, and
the remaining ones are near-retirees. Almost
a third are noncitizens, a situation that is
[unusual], compared with many other states.
Some 90 percent report that they are in good
health. Two-thirds have no dependent children
at home, and 69 percent of New York’s uninsured
adults are single. Their household budgets and
the types of coverage that they might be looking
for are likely very different from those of
someone with financial obligations beyond just
himself. Sixty-one percent of New York’s
uninsured adults earn over $25,000 a year, and
a third have household incomes of over $50,000
a year. If we use the Swiss standard of affordability—highlighted
in Regina Herzlinger’s writings—of
10 percent of family income, the vast majority
of New York’s uninsured would be looking
for out-of-pocket premiums of $200 a month or
less.
We know from national studies that the majority
of uninsured are temporarily uninsured. Seven
out of every ten people who become uninsured
become reinsured within a year.
In summary, New York’s uninsured population,
for the most part, is young, childless, and
healthy. It is an attractive population to insure
through the individual market. It is also a
very mobile population. We know from research
by RAND on California’s individual insurance
market that, when presented with an opportunity
to buy affordable coverage, individuals who
don’t have access to coverage through their
workplace will buy coverage. According to this
RAND study, three out of ten who don’t
have access to work-based coverage and are over
the age of thirty-five will voluntarily buy
coverage; that take-up rate does not significantly
increase with subsidies provided by the government
and is not projected to increase with subsidies.
We also know that four out of ten of the nonpoor
uninsured will voluntarily buy coverage.
For us, a revitalized direct-pay insurance
market in New York would be an important [contribution]
to maximizing the number of people with private
health-insurance coverage so that we can reserve
scarce public dollars for those who are truly
poor and uninsured.
Our first presenter is David Hyman, the Richard
and Marie Corman Professor of Law as well as
a professor of medicine at the University of
Illinois.
DAVID HYMAN: Insurance theorists talk
about insurance, regardless of the type of insurance,
as serving three distinct functions: risk-shifting
from the insured to the insurer; risk-spreading
through the insurer to the broader pool; and
risk distribution, by charging different premiums
based on risk. You basically socialize the risk
across the pool and decrease the variance of
the risk. Many risks are binary: you’re
either hit by a hurricane or you’re not.
The overall probability of that is somewhere
between zero and one. But you don’t know
whether you’re at zero or one, and you’re
willing to buy insurance to reduce to a fixed
amount the associated risks and move away from
the zero-one, binary set of choices.
Insurance allows for risk distribution. We
charge different premiums to people based on
the element of risk that they are transferring.
So the paradigm case for insurance is a very
low probability of a really bad outcome, such
as getting wiped out by a tornado. And the more
you move away from that paradigmatic case, the
less you’re dealing with insurance and
the more you are prepaying expected cost. Group
versus individual coverage is a very important
distinction; I’ll have more to say about
that shortly.
We’re going to be talking mostly about
individual insurance. Each arrangement has its
own advantages and disadvantages. Group coverage
is cheaper to underwrite, partly because you
don’t have to deal as much with adverse
selection because it’s a prepacked socialization
of risk. On the other hand, if you’re the
person who is bundled in with people whose risks
are higher than yours, you end up having to
foot the bill for their risks, rather than your
own. Individual insurance, at least in theory,
has a more tailored distribution of risk profiles,
but it’s significantly more expensive to
write. The last point is the basic regulatory
framework that applies to group versus individual
insurance. Individual insurance has a fairly
significant risk-pooling function built in.
Group insurance has its own elements of risk
distribution. So keep in mind that reality is
messy, and theory is neat.
Here are some facts about where Americans nationwide
get their health insurance, based on 2006 census
numbers. Private coverage covers about 68 percent
of the market. Employer-based coverage is responsible
for about 176 million individuals in self-funded
and insured plans. Individual insurance is about
27 million people, or 9 percent of the population
in the U.S. Public coverage is 80 million, or
about 27 percent of the population. The uninsured
are 47 million, or about 15 percent of the population.
That number has been going up steadily while
the number of people receiving private coverage
has been going down fairly steadily, although
it has stabilized in the employer-based side
of the market at about 60 percent.
The first key difference between employment-based
insurance and individual insurance is obviously
that the former is group-based coverage and
the latter is individual. Whether you can get
employment-based insurance varies greatly, depending
upon who your employer is, what sector of the
economy your employer is in, and whether you
have a large employer. There are certain areas
of the economy where it’s relatively unlikely
that you’ll have the opportunity to purchase
insurance from your employer. If you work in
the retail or agricultural sectors, the probabilities
are significantly lower than they would be in
other sectors of the economy. Size also matters:
the larger your employer, the more likely that
you will be able to obtain employer-based health
insurance and the more likely that you will
have a choice of insurers.
Another important distinction between employer-based
and individual insurance is the tax subsidy.
If you obtain insurance through your place of
employment because of some idiosyncrasies of
the tax law, you basically can purchase it with
pretax dollars. People who buy individual insurance
have to buy with after-tax dollars. Because
we have a progressive tax system, that’s
worth more to people in higher-income brackets.
ERISA, under some circumstances, effectively
preempts all relative state regulations if you’re
a self-funded ERISA plan. About 55 percent of
the employment-based health-insurance market
is in self-funded ERISA plans. There are limitations
on the [right to file a claim] against the plan
for coverage decisions. Private coverage is
regulated primarily at the state level, which
means that it varies tremendously. The states
vary tremendously in how aggressively they regulate
insurance. There is limited federal regulation.
ERISA is perhaps the last major piece of legislation
that affects health insurance. A series of focused
federal mandates includes: the Health Insurance
Portability and Accountability Act (HIPPA),
which imposed portability requirements; the
Mental Health Parity Act; and the Newborn and
Mothers Health Protection Act, which guaranteed
coverage of forty-eight hours postpartum for
vaginal delivery and ninety-six hours for a
C-section.
A conceptual model for thinking about these
regulations includes three basic relationships:
insurer-physician, physician-patient, and patient-insurer.
We have three different types of regulations.
As I said, states have regulated fairly aggressively
here. The mean number of mandates per state
is about thirty-six. They primarily regulate
the insurer-physician and the patient-insurer
relationship. The states generally have not
tried to regulate aggressively the physician-patient
relationship, with forced disclosure arrangements.
It’s important to recognize that states
also impose premium taxes—that’s the
source of a significant amount of revenue for
the states. Each state has a regulatory monopoly
over the terms of coverage that can be sold
to its citizens, except that ERISA creates a
very large loophole if your employer is self-funded.
Self-funded employers don’t pay state premium
taxes and are not subject to any of the regulatory
mandates, including community rating, guaranteed-issue,
and coverage of specific benefits.
New York has about 13.2 percent uninsured,
with a margin of error of plus or minus five.
That’s compared with about 15.2 percent
nationwide, so it is slightly below average.
That’s a good thing, but it is above average
in the number of mandates it imposes: fifty-two
versus thirty-six, including community rating
and guaranteed-issue, in the small-group market.
You’ve already heard about that from Tarren
and Paul. Apparently, there is concern about
the number of mandates and their impact on health-care
quality and cost containment.
The good news is that a state commission was
established to examine these and other issues.
The bad news is that no one has yet been named
to the commission, and it has not yet met. More
bad news: the cost of care in New York—whether
you look at the volume of care or the cost per
unit—is higher than average, and the quality
is nothing to brag about.
The point that I want to end with goes back
to the idea of social insurance versus risk-based
insurance, and private insurers versus public
insurers. No matter how you regulate private
insurers, you are not going to turn them into
public insurers. If you want public insurance,
you should enact it. Trying to get private insurers
to behave like public insurers is not, in the
long run, a particularly effective strategy.
And it doesn’t provide any benefits for
its intended beneficiary: the consumers whom
we all care about.
TARREN BRAGDON: Next we will hear from
Sherry Glied, chair of the Department of Health
Policy and Management at the Mailman School
of Public Health at Columbia University.
SHERRY GLIED: I do most of my work on
group health insurance, so when I had the task
of talking about the individual market today,
I had to do some research. The first conclusion
I came to is that we need to have a functioning
non-group health-insurance market if we’re
going maintain the system of private health
insurance because there is a group of people
who naturally should be getting coverage in
the non-group market. These are people who live
in families that can afford coverage—they
don’t need to be in public programs—but
they are either self-employed or work in tiny
firms that don’t have much of a pooling
advantage; or they aren’t working, or they
are in the short-term or contingent work market.
That group probably constitutes 20–25 percent
of the population under the age of sixty-five,
which is quite a big market, although clearly
the smaller part of the private-insurance market.
Two problems face non-group insurance markets.
The first is that expenditures on health care
are very highly skewed. One percent of people
in any population account for 25–30 percent
of health-care expenditures in a year, and 50
percent of people in any health-insurance market
account for only about 3 percent. That a very
small number of people account for most of the
cost affects the way that many insurance markets
work. The difference in the health-insurance
market is that much of the information that
would enable us to predict whether you’re
in that category of very expensive people is
known by people who would be buying insurance
but cannot be known by insurance companies.
I’m struck by studies that look at everything
you can find out about a person’s health
status, everything that can be gotten from his
or her health record, everything that can possibly
be given to an insurance company. Then you ask
a person, “How do you rate your own health
on a five-point scale: excellent, very good,
good, fair, or poor?” It turns out that
a person’s rating of his own health has
a huge predictive value in telling us whether
he is going to have high expenditures next year.
Much private information exists in this market.
That is very problematic because it means that
people have the opportunity to select their
health plan, to decide to participate in the
market, to retain coverage or drop coverage,
and to choose what kind of coverage they want,
all based on private information. Insurance
companies naturally have to respond to the fact
that all this private information exists. So
private information is one big problem that
exists in non-group insurance markets.
The second problem, which is not recognized
enough in the non-group health-insurance market,
is that health-insurance markets are worse than
other kinds of insurance markets because they
don’t pay off in cash. The contract pays
off in services, which means that the payoff
is not fungible. In a life-insurance market,
or even an automobile insurance market, you
could layer coverage or you could sell away
coverage, in effect, over time. The health-insurance
market is inherently less flexible. The rewards
of the health-insurance contract are not fungible.
That has one serious consequence. People want
long-term health-care protection. They don’t
want health insurance for one year; they want
health insurance forever. It’s essentially
impossible to sell lifetime health-insurance
contracts to non-group health-insurance markets;
they pay off in services. This market is fundamentally
flawed, but we need to have it working.
All these flaws in the market have created
a golden opportunity for regulators to mess
up the market even more. They have generated
regulatory capture. But I’m going to argue
that these regulations don’t matter so
much. The regulations are a mess but they don’t
make much difference to the functioning of the
market.
Probably the number-one thing that people worry
about concerning these markets is costly mandated
benefits. According to the Council for Affordable
Health Insurance, in the state that has the
most mandated benefits—Maryland—the
benefits add about 40 percent to the cost of
the health-insurance package. In the cheapest
state, which I think is Wyoming, the benefits
add only about 4 percent to the health-insurance
package. There is a big difference in the scope
of mandated benefits among states.
Economists say that mandates make sense in
some situations. Whether that is true or not,
mandates don’t matter as much as we suspected
they would. To demonstrate this, I compare coverage
in big and small firms. Firms with more than
a thousand employees have ERISA plans. They
are exempt from all these state-mandated benefits,
and they do whatever they like. Overall, about
68 percent of people who work in very large
firms get coverage from their own employer.
So let’s compare coverage in these firms
with coverage in firms that are strongly affected
by mandated benefits: small firms that have
no more than twenty-five workers.
On average, about 30 percent of employees in
those small firms get coverage from their employers
collectively. When you compare coverage in very
big and small firms across states, you see that
in states where many people in big firms get
coverage from their own employer, many people
in small firms also get coverage from their
own employer. There is a strong correlation
between what happens in the non-mandated ERISA
market and what happens in the mandate-affected
non-group and small-group markets, probably
because of similarities in the underlying demand
for coverage and price of care.
What happens in states with many mandated benefits?
Consider New York, a state in which about 71
percent of people who work in large firms get
coverage and about 34 percent of people who
work in small firms get coverage. That is similar
to the national average. The rate for small-firm
coverage is only slightly lower than it is in
states with comparable rates of large-firm coverage
and few benefits. In general, states with mandates
don’t stand out at all. Maryland is the
state with the highest mandated benefits in
the country. It also has an unusually high rate
of small-group health-insurance coverage.
States with very few mandate benefits don’t
perform consistently better. Mandated benefits
seem to cost a lot, but the insurance market
seems to have figured out how to deal with them.
They are not affecting coverage rates as much
as we would expect them to. They just don’t
seem to matter.
Can eliminating rating restrictions fix this
market? Not much. The literature on rating restrictions—there
is much economic and empirical writing on this—says
that rating restrictions shift the composition
of health-insurance markets. They lead older
and sicker people to be in the market, and they
lead younger, healthier people to be out of
the market. As Tarren said, there are many young
and healthy people who are shut out of the market
because of rating restrictions. The flip side
is that some older, sicker people are in the
market because of these same restrictions. The
restrictions have some effect at the aggregate
level, reducing non-group coverage about 2 to
3 percent.
The potential market for non-group health insurance
is self-employed people or people working in
small firms. Some states—such as Montana,
Wyoming, South Dakota, and North Dakota—have
many people with non-group insurance. But that’s
because those states have many farmers and many
self-employed people who have to be in that
non-group market. In states such as New York
and California, fewer people naturally belong
in the non-group market. New York, which has
community rating, does a little worse than a
place like California. Eliminating community
rating would increase non-group coverage in
New York. If we eliminated community rating,
though, we would introduce many new problems
in the non-group market because we would shift
the sick people out of what is now a protected
market. We need to think about how to do that.
Can better subsidies fix this market? Like
Tarren, I think not. The price elasticity of
demand for health insurance in the non-group
market is quite low, especially for inexpensive
products. There have been major expansions in
the tax-deductibility of health insurance in
the 1990s, in the HSA system—and what has
happened at the aggregate level? Between 1995
and 2003, we expanded the tax-deductibility
for the self-employed from 25 percent to 100
percent. In 1997, eHealthInsurance was founded,
which was important in bringing down administrative
costs. In 2004, we instituted HSA regulations.
But [despite] all these changes facing non-group
coverage, the percentage of people in the non-group
market remained virtually unchanged. We introduced
major new subsidies in the non-group market
over the 1990s, and it made no difference.
What to do? Start off with what not to do.
The non-group market is the residual market;
it is not the main market. It would be a disaster
to mess with the ERISA plans in order to fix
the non-group market. Second, more competition
is not, by itself, going to fix this market,
although it might lead to somewhat lower administrative
costs. We need to do more than that. Third,
community rating is costly, but suddenly getting
rid of it will create a major upheaval, so we
need to think about how to do that.
We do need subsidies in this market. Remember
that there are huge subsidies in the group market,
so we need to level the playing field in some
way. The evidence today suggests that probably
the best way to achieve those subsidies is through
reinsurance money, not tax credits. Reinsurance
would be particularly useful if we were going
to get rid of community rating because it would
soak up some of the variation at the high end
of the market.
TARREN BRAGDON: Next we’ll hear
from Gary Lauer, president and CEO of eHealthInsurance.
GARY LAUER: We formed eHealthInsurance
in 1997. We market and sell health insurance
online as an Internet-based company. We focus
primarily on the individual markets, for people
buying individual products, and small groups
that typically have fewer than fifty employees.
In the spirit of full disclosure, I should say
that we are a profit-making company and a publicly
traded company on NASDAQ. So you can certainly
argue we have an economic interest in this market
and in this business. The majority of the business
that we do is for individuals—people who,
for many reasons, buy their own health insurance.
Several years ago, I spoke at a meeting in
Washington, D.C., along with a number of members
of Congress. At that time, a great deal of opinion
and emotion surrounded this topic but very little
fact. It seemed then that what we ought to try
to do, because we had a treasure trove of information
in our company about people buying health insurance,
is mine some of those figures and produce something
that explains what is occurring in the markets.
So every year since then, we have published
an annual “Cost and Benefits of Health
Insurance Plans” survey. We survey our
member base or customer base to ascertain what
people are paying for health insurance and what
kind of benefits they are receiving.
We market and sell health insurance in all
fifty states, and, as you have already heard,
it is a highly regulated business, regulated
state by state. We are licensed in all fifty
states. We do not underwrite health insurance.
We are not a health-insurance company. Rather,
we are a distributor or broker, so we represent
the major carriers—Aetna, United, GSI,
Oxford in New York, and so on.
You might be interested in taking a look at
“The Costs and Benefits of Individual Insurance
Plans: 2007,” available at www.ehealth.com.
We helped publish this with Forrester Research.
We’ve also done this in the past with the
Kaiser Family Foundation. This report surveys
about 160,000 individual and family policies
purchased through eHealthInsurance. We’ve
taken a look at how much people are paying for
health insurance and which benefits are being
provided. We give you information about age
and gender. We also break this out by families,
although I’ll comment on individuals for
now. It is interesting to see how this business
looks state by state. On average, health insurance
for an individual in Iowa is about $98 per month.
Health insurance in New York, the most costly
in all fifty states, averages about $358 per
month, more than three times what people pay
in Iowa. The average across the United States
is about $140 a month. New York, among four
other states, is a guaranteed-issue state, which
simply means that no one can be denied for any
reason. The theory makes a lot of sense, but
in practice, it forces these products for various
reasons to become very expensive—in many
cases, prohibitively expensive—which leaves
many people out.
If nothing else, look at page fourteen, because
it lists all fifty states broken out by what
people pay on average for health insurance in
the individual market, what their average ages
are, and the kind of benefits that they receive.
These are fairly robust products and typically
have physician benefits for physician co-pay,
pharmaceutical co-pay, and, in many cases, maternity
benefits. The states that are guaranteed-issue
and/or community-rating are Maine, Massachusetts,
New Jersey, New York, and Vermont. Kentucky,
New Hampshire, and Washington were, but have
since either modified or repealed these mandates.
We have had an interesting experience in Washington
State. In 1993, at about the time the Clinton
administration was pushing hard for change in
the health-care landscape, Washington’s
state legislature took on many principles that
the administration was discussing and designed
a plan that reflected them. In fact, the legislature
was open about the fact that it had modeled
its plan after what was being discussed in Washington:
guaranteed-issue, community rating, mandates—one
mandate being that everyone had to buy health
insurance along with a number of other things.
In the first two years, the number of health-insurance
carriers providing health insurance in the state
quickly declined, because a business cannot
be forced to do business. They chose not to
participate in the market, so the choice of
products declined. Second, the ranks of the
uninsured increased in the first twelve months—by
over 20 percent. Third, the price of these products
increased 40–50 percent.
Later in the 1990s, there were small changes.
In 2000, the state legislature got together
and repealed the guaranteed-issue part of this
health-care reform. We came into the market
with several large carriers that had not been
there previously. Prices fell, interestingly.
Washington is one of the few states in the country,
over the last seven years, where the rates have
not increased—they have actually stayed
flat. You’d like to think they went down,
but, given the trend of increasing premiums
in other states, staying flat is actually a
good thing.
In California, my home state, Governor Schwarzenegger—a
Republican governor in a Democrat-dominated
state legislature—in his State of the State
Address, in January 2000, proposed sweeping
changes to health care in California and the
landscape called the California Health Care
Reform Act. I was quite involved with the governor’s
staff and spoke with the governor many times.
California is very much an open-market state.
It’s a vibrant market with many products
to choose from, and a large percentage of people
in this market buy individual health-insurance
and small-business products.
The governor’s plan was to put a guaranteed-issue
mandate or regulation in place to mandate that
everyone buy health insurance as well as a number
of other things. At first, it was applauded.
In January 2008, it was crushed—that’s
probably the right word to use in the state
legislature—by Republicans as well as Democrats
for a couple of reasons. One was that many characteristics
of guaranteed-issue seemed so appealing but
were not quite so appealing to the electorate.
Another reason was that the cost associated
with these things became staggering. We have
a large deficit in California; the cost of this
plan in the first year was going to be about
two times the deficit that the state was already
running, so it simply wasn’t affordable.
In heavily regulated states with lots of mandates,
especially guaranteed-issue, these become very
expensive plans and programs to administer.
So [while there are] the moral reasons for trying
to get everyone covered, there are important
economic reasons that have to be considered
as well.
We have some real issues facing us, not just
in the state of New York but in our country
as well, regarding the number of uninsured people.
More than 47 million Americans have no health
insurance. We have a moral obligation to address
this problem. But we have an economic issue
here as well, along with an economic reason
to address it. This is not a problem that is
going to stay the way it is; it is growing every
day. The number of businesses offering health
benefits to employees has been declining for
the last several years. A recent Kaiser Family
Foundation study noted that in 2000, the number
of U.S. businesses offering health benefits
to employees was 69 percent, but by 2007 it
was down to 60 percent.
Where are these people going for health insurance?
They’re either buying individual products
or joining the ranks of the uninsured. In 2006,
the ranks of the uninsured swelled by more than
2 million. The Kaiser Family Foundation also
noted that for every percentage point that unemployment
rises in our country, more than a million people
will join the ranks of the uninsured. This is
one more reason for us to think about these
markets, mandates, and regulations, and to find
sensible, affordable ways for people to get
coverage.
TARREN BRAGDON: Last, we’ll hear
from Sara Horowitz, founder and executive director
of Working Today, which offers health insurance
to freelance workers.
SARA HOROWITZ: I’m going to talk
to you about Mary Jo, a self-employed graphic
artist. Mary Jo decides that she’s going
to get health insurance. She telephones XYZ
Insurance Company and buys an individual health-insurance
plan. Then Mary Jo has a medical problem—nothing
significant—and goes to the doctor, who
takes care of it. She then finds that the condition
that she was quite sure was covered has been
denied by the insurance company. So she telephones
the insurance company and says, “You made
at terrible mistake. This isn’t the way
it should be.” The 1-800-XYZ Company asks
Mary Jo to send in all the material again. After
a week or two, Mary Jo calls the insurance department
and says, “I’m Mary Jo, I’m an
individual, I bought health insurance, and my
health insurance should cover it.” They
say, “Yes, that’s a problem. You should
probably send us a letter.” So that is
Mary Jo in the individual market.
Now I’d like to suggest that this Mary
Jo is in the Freelancers Union. Mary Jo calls
us up with a problem. We start realizing that
not only does Mary Jo have a problem, but ten
other people just called us and e-mailed us
because they are having the same kind of problem.
This could be one of two kinds of problems:
either the error was in the infrastructure,
which can easily be worked out; or there is
a real misinterpretation of the plan. We believe
that we negotiated coverage of the condition,
but the insurance company said that we did not.
We don’t call 1-800-XYZ Company; we call
our key person at that insurance company. We
have 17,000 people covered in New York. We switched
from HIP to Empire, but for both companies,
we are one of the biggest contracts because
we have 17,000 people. I can assure you that
when we hear of Mary Jo’s concerns, it’s
a top priority for us. We are going to get to
the bottom of Mary Jo’s problem. Either
Mary Jo is wrong or the insurance company is
wrong or there is a problem that has to be fixed.
We are making a fundamental mistake if we think
that Mary Jo is going to do well in the individual
market. We have to reframe this debate. Human
beings are not cars. When you buy insurance
for your car, the kind of driver you are is
relevant. But as my father would say, only the
lucky ones grow old. We can anticipate that
we are going to have illnesses, and we must
consider how to start risk- sharing. How should
we spread this risk around? Calling people who
are under thirty a “group” will not
work.
I would like to review our experiences in New
York and demonstrate that when you get vertical
groupings of people—by profession, skill,
chamber of commerce—you will do far better
than you would by pulling out your best risks.
There has been a change in the economy. People
used to work for a large employer, such as a
university, factory, or hospital, and the people
who had jobs were full-time employees. They
had health insurance, a pension, training, and
the right to unionize. In effect, the safety
net was attached to the two conditions of having
a job and having the legal status of an employee.
But in this new economy, work is short-term
and flexible—and the safety net is outdated.
Now there tend to be more independent contractors,
freelancers, consultants, and self-employed
people, and they work more. When they’re
employees in the short term, they are part-time
and temporary. The whole New Deal safety net
is not attaching to this part of the workforce,
which may not feel like a bad thing at the Manhattan
Institute. But we have to agree that we don’t
have the coherent system for these things that
we used to have.
The Freelancers Union created our 501 (c) (4)
status, and Working Today is our 501 (c) (3).
We are a platform or online vehicle by which
people can come together and purchase insurance,
get jobs and education, and talk about new ways
that we can come together to purchase these
kinds of things as a group.
We are 72,000 nationwide. The states with the
most members are New York, New Jersey, California,
Pennsylvania, Connecticut, Florida, Texas, Georgia,
Illinois, and Massachusetts. In New York, we’ve
been able to group people together. Now, we
have to expand to states where there is an individual
market.
We founded the Freelancers Union to group people
together in a market-oriented way. We are completely
independent, we are able to exist within the
market, and we receive no subsidies. We are
an example of something that works. We have
gone to other states with our strategy, and
the insurance experts there say that eighteen-
to twenty-four-year-olds can get better rates
than what we will offer. When state insurance
regulations allow the young and healthy to pull
out of insurance risk pools, it becomes very
difficult to pursue the grouping strategy. The
whole point of insurance is to pool together
different types of people, with different risk
profiles, to create a sustainable grouping.
But in those states where young adults take
themselves out of the insurance market, the
insurance companies become uninterested in forming
large groups for insurance purposes. What results
is a bifurcated market in which only large employers
can form insurance groups and everyone else
is left to face the individual market.
As we look toward the future, we must decide
whether we want individuals to be treated like
cars or whether we can be creative in our market
approaches. We have to be careful about how
we group people together. The Freelancers Union
is building the next model, for the next New
Deal—by grouping people to have power in
markets and power in the policy debate so that
they can start talking about how individuals
can come together in mutual aid and negotiate
better rates in the market.
Jim Knickman said that sometimes you can’t
tell which side someone is on. I think that
the next change will be that the same sides
no longer exist; it’s actually far more
complicated. I’m interested in promoting
market solutions, but those markets are not
going to have the 18 to 30 percent returns that
are driving private equity as we’re merging
insurance companies. When we look at the economic
alignments that we are creating now, we have
to conclude that the insurance industry is not
going be able to make its profit in such a short-term
way and that it will instead have to pay back
that capital. The insurance industry also isn’t
going to be allowed to promise such high returns
to shareholders that they are required to cherry-pick.
Mary Jo needs to find a group; that group has
to be a player in the market; and that group
has to be able to capitalize with market money
but produce returns of 8 to 12 percent. The
only way we can achieve that is by thinking
of the tax code as a vehicle by which we can
make a market function—not as an auto-industry
market but as a civilized market for health
insurance that we can be proud of.
TARREN BRAGDON: I’m going to ask
two questions of each panelist. First, in your
research into several states, or in your experience
particularly in states that have competitive
offerings and affordable plans, why don’t
individuals purchase coverage when they have
access to it? Second, how much societal benefit
do you think there would be in requiring people
who do not voluntarily purchase coverage to
purchase it?
DAVID HYMAN: Why don’t people buy
coverage who have access to it? Many people
have considered this question and have generally
drawn simpler conclusions. There are two distinct
categories: people who simply can’t afford
it; and people who don’t perceive a need
for it—the “young immortals,”
my children among them. They have insurance
because I buy it for them, not because they
would if I gave them the cash and they got to
decide what to do with it. It’s related
to larger issues of the value of coverage, perceived
and actual. Geographical variations enter into
this as well.
On the issue of requiring purchase, Massachusetts
is taking a crack at this, and the numbers are
evolving. Requiring people to purchase involves
two separate issues: the first is whether you’re
doing it because you want to get the low-risk
end of the pool in order to subsidize the higher-cost
risks; the second involves some moral theory
that [prevents] you from saying no to them when
they show up at the E.R., so you’re going
to force them to fund it at the front end. There
are other variances, but those are the two ways
that I’d explain what’s going on.
GARY LAUER: I’ll give you my practical
experience of why people don’t buy coverage.
Some people can’t afford it. Some people
apply for health insurance but don’t qualify
because they are not healthy. Across the industry,
an estimated 15 percent of applicants in the
individual business, in a non-guaranteed-issue
market, are simply denied. Many people don’t
know that the market exists; or they perceive
that health insurance is prohibitively expensive
and that only large corporations can afford
to provide it for their employees. Some younger
people think that they don’t need to have
health insurance because they are not going
to need it. There is yet another group of people
who know that that they need it but also know
that they can go to an emergency room—especially
in a nonprofit hospital—and receive the
care that they need.
Our approach has been to address each issue
incrementally as we look at the ranks of the
uninsured or why people don’t purchase
health insurance. Most people don’t understand
how strong the regulations and regulators are
in each state, [making it] fifty different businesses.
And in markets with more affordable products,
more people participate than in those markets
where products aren’t as affordable.
SARA HOROWITZ: How many of you want
to be dealing with your insurance in your retirement?
Some of us are great day traders who love figuring
out what to do with mutual stocks, but the vast
majority of Americans just want a trusted advisor
to help them figure it out. That factor is not
considered when we look at why people don’t
buy insurance. Some say that they think of themselves
as “young immortals,” but I don’t
buy that. Some say that it’s people just
don’t know; I don’t buy that, either.
I think individuals lack the tools necessary
to help them make decisions about retirement,
health insurance, and other essential protections
formerly provided by the social safety net but
that now must be procured by the individual.
The sophistication of these tools should be
commensurate with the amount of risk that people
are now supposed to be taking. We have moved
beyond the affordability issue—that is,
whether people can or cannot afford insurance—to
a question of value. That’s answer number
one.
What’s troubling about mandatory is that
you have to pony up the money for enforcement;
and if you’re not going to enforce it,
don’t call it mandatory. We should have
a national system of vouchers that is market-tested
and won’t scare people. We would have a
minimum amount of coverage for all Americans,
and then groups like mine and local chambers
of commerce and others would be allowed to come
together to provide basic coverage, plus additional
benefits. Bringing people together allows groups
to reduce administrative costs. You can then
also pool the costs of expertise and provide
advisors and experts to help make decisions
easier, without taking away individuals’
decision-making rights. In this way you make
their decision-making process easier while adding
more value for people in the group.
SHERRY GLIED: How many people have failed
to do something on their “to do” list
and did something else instead in the last twenty-four
hours? In my view, this is the reason people
who can afford it do not buy health insurance.
It is fundamentally a “to do” list
problem rather than a problem of not wanting
coverage or being a young immortal; we see that
when the same people who do not buy health insurance
in the individual market take jobs, they sign
up for the coverage that their employer offers
them, even when the premium that their employer
charges is quite high.
The reason for that is, when you begin a new
job, someone walks into your office and says,
“Here is the form for the health-insurance
plan; please fill it out.” And everyone
fills it out, and it’s deducted from payroll.
We see this in countless situations—Medicare,
for example. A big reason people don’t
buy health insurance is that they just haven’t
gotten around to it. They are figuring that
in, say, three months, they are going to have
another job, so why bother to go into the non-group
market and buy it now?
This inertia, and the fact that health insurance
is just one of the many items on the “to
do” list for most people, is a big issue
in terms of the non-group market. I’ve
spent the last eight months writing papers on
individual mandates. I was initially skeptical,
but I’ve come around full-circle and am
now a fan. This has been a very slow evolution.
I’m not a fan of Massachusetts, because
I agree with Sara—it is not putting the
money [into enforcement] that it needs to put
there.
But I’ve always been a fan of universal
health insurance, for a variety of ethical and
moral reasons. If you are also convinced that
you want to have a private health-insurance
system, you have to be in favor of mandates
because without them, you can never get from
here to universal coverage. The countries that
try to manage private health insurance, such
as the Netherlands and Switzerland, do it with
mandates. Whenever we want everyone covered,
we do it with mandates; they won’t work
perfectly, but that’s not the issue.
After I wrote a piece about mandates in the
New England Journal of Medicine, I received
a letter from a man at the Massachusetts Connector
that was exactly on point. He said that a young
man had come to him saying that he didn’t
really need to buy health insurance, but his
mother said to him, “It’s the law,
sonny. You got to go buy health insurance in
Massachusetts.” That’s why a mandate
will make a difference; not because there’s
going to be a penalty but because all the mothers
in Massachusetts will tell their children that
they must buy coverage.
The seat-belt mandate works that way: kids
get into the backseat of the car, and their
moms tell them to fasten their seat belts. If
they do not fasten them and a policeman stops
them, they will receive a ticket for breaking
the law.
TARREN BRAGDON: Now we will take questions
from the audience.
AUDIENCE: I’m a practicing physician
in Louisiana. I’d like to ask the panel
to comment on the desirability, or lack thereof,
of having individuals buy their own insurance.
If I were to go to eHealthInsurance, I would
buy my own policy, much the way one buys a life-insurance
policy. If you move from one state to the next,
you can bring your life-insurance policy with
you. Obviously, there would have to be, as Congressman
[John] Shadegg [R-Ariz.] has said many times,
changes in the law necessary to make that possible
for health insurance policies.
Sara touched on my second question, which has
to do with defined-contribution plans: whoever
puts up the subsidy puts up the same amount
of subsidy, no matter what choice you make.
Please comment on the desirability, or lack
thereof, of defined-contribution plans.
GARY LAUER: One of the many tenets of
health savings accounts program is portability.
Once you have a health savings account, you
can own it for life. It is an intriguing idea,
discussed by Congressman Shadegg, to break down
the state market, so that we don’t have
fifty state markets—one could buy health
insurance from any state. So I could live in
New York and buy insurance in Ohio, where it’s
much less expensive. Where it gets complicated,
however, is that each health-insurance carrier
contracts with physicians, hospitals, providers,
and so on. Insurance will work only in that
network. Health insurance [for a New Yorker]
is contracted with providers in New York, not
in California. California health insurance is
good in California but not in New York or Ohio.
It starts to fall apart when you look at it
from that standpoint, unfortunately.
In terms of incentives, many people don’t
know that individual insurance is not tax-deductible.
Businesses can deduct 100 percent of the cost
of health insurance from their taxes; individuals
cannot deduct one cent. An interesting thing
about all three presidential candidates—currently,
Barack Obama, Hillary Clinton, and John McCain—is
that their platforms on health all talk about
incentives and reforms in the tax code. That
may address a bit of this inequity in the system,
which could be an incentive [to purchase health
insurance] as well as a bit of a stipend making
health insurance more affordable.
SHERRY GLIED: I’m a big believer
in markets. In level playing fields, people
tend to prefer large-group coverage. We see
this in other countries as well as in the United
States. Even the self-employed—who can
deduct the cost of health insurance—if
given the opportunity, will get into the large-group
market.
The rhetoric is bigger than the effect. I want
to second the point that Gary made: health insurance
is not like life insurance. It is not a cash
transaction. It is not a fungible benefit. A
health-insurance plan in New York is not the
same thing as a health-insurance plan in Hawaii.
If I buy health insurance, and next year I decide
I need more, I have to buy an entirely new contract.
With life insurance, if I don’t feel I
have enough, I can supplement my life-insurance
contract. The analogies are not very clean.
SARA HOROWITZ: The point about the defined-contribution
plan is interesting. We should be looking at
what is happening with individuals, as we do
with pensions, where we say that instead of
having x dollars when you retire, we say you
will receive x dollars each year as a contribution.
We’re asking individuals to bear a lot
of risk. Are we creating systems that enable
people to bear those risks successfully? There
is nothing wrong with the strategy of a defined-contribution
plan, if people have experts on pensions to
help them figure out how they are going to invest
and allocate the assets over time. With health,
we don’t have those tools in place. The
institutions that people are connecting with—health
insurance now—are not aligned with their
best interests from the standpoint of health.
We should be realigning those institutions.
DAVID HYMAN: To recapitulate: by owning
your own insurance, you basically gain portability
and the potential to avoid state regulatory
frameworks that you don’t like, if there
are cross-border sales. The trade-off is that
you forgo the advantages of group coverage,
which I talked about previously. Sherry mentioned
administrative expertise; you have a benefits
person worrying about this all the time instead
of having to worry about it yourself.
SARA HOROWITZ: It’s not portable
because if you discover a preexisting condition
along the way, you get excluded by a new state,
even if it has community rating. Portability
means a person can go from job to job in a seamless
system that is separated from your health status.
In the individual market insurance is not portable.
That is a fallacy.
DAVID HYMAN: No, that’s a separate
issue—and maybe it depends on what you
mean by portability and where you plan on using
it.
SARA HOROWITZ: I go from point A to
point B, carry my insurance with me, and I want
to know that when I leave A and get to B, I
brought it there successfully. I don’t
want there to be a waiting period, or in three
years, when we know our genetic code, [to lose]
portability because of who I am.
DAVID HYMAN: I took the question about
owning your own insurance to mean that you maintain
the same individual coverage, which means that
it’s portable across your [various] places
of employment. On the subsidy issue—the
tax subsidy, or the amount your employer is
contributing—matter a lot, just as they
matter in other areas. Expecting people to buy
health insurance today because they will be
able to receive a tax subsidy in a year and
a half is probably expecting too much of most
people’s forecasting ability, even very
smart and sophisticated people with very good
advisors.
AUDIENCE: Gary and Sara, by aggregating
individuals, you make them more powerful, correct?
But the two of you do it in very different ways.
Sara says that she fights with the insurance
companies and is an aggregate on their behalf.
Gary is a purely economic aggregator. He creates
a market where people can shop, and it is up
to them to decide if they need to buy. Would
you please debate the pros and cons of these
two methods of aggregation?
SARA HOROWITZ: Before we arrived here,
we said that we could be working together in
different markets and that we should meet afterward
to figure that out. I think it’s a good
debate. Your competitors are often your best
partners.
GARY LAUER: I don’t know how much
of a debate there is. What Sara is doing is
fascinating, but there are some problems with
it: ultimately, the payer is the health-insurance
company. It’s not Sara, and it’s not
me. Whether there are 17,000 people or 117,000
people, the health-insurance company is the
arbiter. It gets to decide what the price is
going to be. It also gets to decide what it
is going to pay for and what it is not going
to pay for. It gets to decide how to mitigate
the risk.
A couple of years ago, we took a look at this
vertically. One of the verticals was car dealerships.
Manufacturers have fabulous health insurance—there
is a long history there. The dealers and dealer
franchises don’t. One manufacturer asked
us to consider covering all its car dealerships.
We thought that it was a good business opportunity
and a way to help a lot of people.
But we found that they really weren’t
insurable because the people in the front sales
office have high rates of alcoholism and smoking.
This is a fact. And the people in the back who
repair the cars are very accident-prone, as
you might imagine: not a very good risk group.
I’m giving you a bit of the extreme, but
my point is that when you get together a [particular]
group of people, you have [a certain level of]
risk, and that risk is going to be assessed
and priced by the health-insurance carriers.
If you bring a demographic or a group that represents
a level of risk that is attractive, it is going
to be priced attractively. If it is not attractive,
it will not be priced attractively. That is
the way that this business operates, whether
you like it or not.
The other point I wanted to make is about the
purchase of health insurance. This is not a
pleasant process. If you’ve never purchased
insurance for yourself, or your employee, or
your family members, I challenge you when you
go home tonight to pull out your health-insurance
policy and start to read it. It is complex and
daunting. It’s much more fun to buy a car
or a flat-screen TV. One thing that we have
tried to do as a marketplace is to corral this
complex volume of data and reduce it to something
more understandable to people.
But analyzing health-insurance plans is not
something that people care to do, so they procrastinate.
If you are a member of Sara’s group, it
is easier simply to sign up than to go to the
individual market and buy a policy. But the
market today is changing in such a way that
more people are going to have to buy their own
health insurance. We have an obligation to make
this a market in which people can gain access
to programs that will work for them.
SARA HOROWITZ: The fundamental difference
is solidarity. What I mean by that is we didn’t
create a group like Sam’s Club to just
come and buy, though there are definitely elements
of that. We found people who are a naturally
occurring group and started realizing how they
could come together. That is what we should
be thinking about. How do we encourage naturally
occurring groups—not government-subsidized
groups—to come together? It is good not
just for health insurance but for democracy.
It goes back to an idea of Alexis de Tocqueville
and what our democracy is supposed to be about.
AUDIENCE: I have a question for Gary
on the debate over what’s wrong with New
York’s market and what’s right elsewhere.
You are basing your average process on people
who purchased through eHealth. You don’t
have a comparable sample in Ohio that includes
the [unhealthy] people who couldn’t purchase
because Ohio doesn’t have guaranteed-issue.
These people had to join a high-risk pool [and
pay a] 300 percent premium, unlike sicker people
in New York, who can buy insurance under the
guaranteed-issue system. Is that a reasonable
criticism?
GARY LAUER: That is a very fair point.
There’s another side to it, however: don’t
assume that sick people who have guaranteed-issue
can afford health insurance.
AUDIENCE: That’s the perfect connector
to the rest of my question, which is directed
to all of you. You’ve all shown how there
are winners and losers when we change any one
of these regulatory characteristics. If we go
to guaranteed-issue, the older people whom I
represent are going to do better, and the young,
healthier people are going to do worse. If the
goal is universality and comprehensiveness of
coverage, why are you all clinging doggedly
to the virtues of the private market as a way
to resolve this, rather than the social-insurance
model that David mentioned but didn’t really
discuss in this context?
SARA HOROWITZ: We are at a fork in the
road. The way the fork had been presented in
the past was the free market versus government.
The question had been whether individuals were
going to get a Medicaid system or, instead,
an individualized free-market system. The other
fork would be a non-employer-based, nongovernmental
grouping.
There is no way that we are going to have a
government deliver this. [Or an] unfettered
free market. So let’s reframe the issue
and ask, do we want individuals to [handle]
it, or do we recognize that people need trusted
groups? To me, that is the fork.
GARY LAUER: I’ve spent a lot of
time on this question over the years and have
concluded that the old definition of universal,
which is a government-sponsored management system,
is not practical and is simply not affordable.
I also think that we have a moral and an economic
obligation to get everyone in this country good-quality
health care. It needs to be a combination of
the private sector—much of which works
well—and public programs, presumably for
people who [simply] cannot afford health insurance,
or who cannot afford it because of their health
condition. We’re paying for them now, anyway.
SHERRY GLIED: I would agree. There is
no single model of a universal public insurance
system in the world today. All countries are
struggling with the division of public and private.
This is true everywhere: Canada, Germany, France,
the Netherlands, and Switzerland. The questions
are: What is the appropriate size of government?
And what is the appropriate role for the private
market?
For social-insurance fans, this is a moment
for optimism. In the United States, we think
of universal health insurance as being a black
or white issue. We’re either going to go
to universal single-payer, or we’re not.
But consider how other countries moved into
universal health insurance: mostly, they did
it incrementally. It took Canada fifteen years
from the time the first province brought in
universal hospital insurance until the last
province brought in universal medical care.
There’s no reason to believe that this
has to happen suddenly.
DAVID HYMAN: First, the rate of increase
in health-care spending is quite consistent
across different types of insurance systems
and across countries. All systems are struggling
with matters of demographics and technology.
Second, the only person who is advocating a
universal social-insurance system is Dennis
Kucinich, and we saw what happened to him. You’re
going to need a lot of years and reframing of
the debate for that to be one of the two options
you get to pick from.
PANEL II: INNOVATIVE SERVICES
IN HEALTH CARE MARKETS
PAUL HOWARD: For individual patients
trying to find the best, most cost-effective
health care, there are relatively poor metrics
concerning pricing and quality that are available.
If you’re looking for someone to tell you
who would be a really good doctor in your area,
there’s relatively little help for you,
aside from a few lists of the top-ten doctors
in New York. But the average patient doesn’t
need to know who the top doctors in New York
are; they just need to find a reliable, convenient
option for routine care. There’s a Zagat’s
for New York restaurants. Why isn’t there
a consumer friendly, Zagat’s-like guide
to doctors and health care?
At the system level, periodically Dartmouth
College—John Weinberg and his colleagues—reports
data on pricing disparities in hospitals across
the country, particularly for [treatment of]
chronically ill Medicare patients. In a study
released in early April, Dartmouth researchers
found that some of the nation’s leading
hospitals will spend about twice as much money,
close to $100,000, on patients in their last
six months of life, while other leading hospitals
are spending half that sum. To paraphrase Peter
Orszag, director of the Congressional Budget
Office: How is it possible that the world’s
best health care can cost twice as much as the
world’s best health care? If the experts
can’t figure it out, what hope is there
for the average patient?
Our second panel this morning is going to try
to chart a way forward through all this confusion
to offer examples of how entrepreneurs, physicians,
and policymakers can make health-care options
more convenient, transparent, and affordable
for consumers.
We’re starting off our second panel with
Kevin Kelleher, a physician in private practice
and cofounder of Executive Healthcare Services.
Kevin is going to give us a physician’s
perspective on the crisis affecting primary
care in this country and explain why the decline
in primary care is hurting public health and
driving up health-care costs. He’ll conclude
by suggesting some ways to reinvigorate primary
care by creating a new medical home for patients—where
the primary care physician works with the patient
to develop long-term disease prevention strategies
or help coordinate team care for complex chronic
diseases like diabetes.
Webster Golinkin, CEO of RediClinic, will discuss
another aspect of the market: the expanding
role of convenient-care clinics, which complement
the health-care system while giving people rapid
access to preventive and basic health-care services.
These clinics have proven to be remarkably popular
and affordable, but they are being held back
by misplaced regulation in some states.
Our third panelist is Jim Ward, president of
Patient Advocates, who is going to talk about
the hospital pricing and quality disparities
that I mentioned a moment ago, and how we might
arbitrage some of those differences to offer
patients better care at lower costs.
Finally, Jim Frogue, project manager at the
Center for Health Transformation, will discuss
consumer-driven health-care reforms that are
emerging at the state level. He’ll talk
about how the state of Georgia, in parti
