How to Broaden Consensus

Our current health-care system is unsustainable due to high costs. And millions of Americans have no insurance. There are broad areas of consensus across congressional bills, the president's priorities and Republican alternatives that can expand coverage. The key is making hard choices that will also slow cost growth.

Government insurance will continue to cover the oldest and most expensive persons (Medicare covers 14 percent of the population), the poorest (Medicaid, 12 percent) and veterans (VA, 1 percent). No elected official of any party has called for repeal of these programs, so nearly 30 percent of Americans will continue to have government health insurance.

There is broad agreement about the following basic steps to insurance reform:

•Ban exclusions for pre-existing conditions and the ability of insurance companies to rescind coverage after illness.

•Create markets through which consumers and employers can compare and purchase plans.

•Provide subsidies to persons not eligible for Medicaid to purchase private insurance.

• Regulate the degree to which premiums can differ based on personal characteristics.

• Specify an individual responsibility to purchase insurance. Even the Patients' Choice Act, the most comprehensive Republican reform alternative, envisions auto enroll procedures that function as a soft individual mandate.

This approach saves money when competition causes private insurance plans to bid down premiums. I hope this happens, but such savings are mostly theoretical, and additional policies are needed to slow cost growth.

The Senate Finance Committee and the president have proposed an Independent Medicare Commission that would use nongovernment experts to consider payment and benefit policies and apply cost-effectiveness research to improve quality of care, slowing cost growth. The Congressional Budget Office has said such an approach can reduce spending without harming patients. This is the most realistic way to reduce costs in Medicare.

Republicans have begun criticizing this approach, but the Patients' Choice Act proposed a similar commission that would broadly apply cost-effectiveness research, even allowing penalties for providers that didn't follow practice guidelines developed by the commission.

The Senate Finance Committee has proposed a tax on insurance companies selling high premium "Cadillac" insurance plans (premiums of $21,000-plus for families or $8,000 for individuals). By comparison, Duke University's most expansive family plan has total premiums of about $13,000 a year.

A more straightforward policy would be to cap the tax exclusion of employer-paid health insurance premiums. While this has not been proposed in any of the Democratic bills, it is broadly supported by health policy experts and represents a straightforward way to redirect money currently in the health system to help finance reform. It would slow cost growth by curbing the current unlimited subsidy of private insurance that results in overuse of care. The Patients' Choice Act proposes repealing the tax exclusion, as did Sen. John McCain during the presidential election.

Deleting a Tax Subsidy from the EquationEither the Finance Committee's tax on insurance companies or a cap on the tax exclusion would be preferable to the House approach of raising income tax rates for persons earning $250,000 or more to pay for reform, because this would not help reduce costs in the system and would not redirect money already being spent on health care.

The president mentioned medical malpractice in his speech Wednesday night, and the Republicans should take him up on his offer to listen to their ideas. Malpractice reform is a very important step to get doctors on board as we move toward a more evidence-based system that transitions away from adversarial treatment of medical errors toward a patient-safety approach. I don't think malpractice reform will reduce costs much, but I would be thrilled to be proven wrong.

The president pledged not to sign a bill that increases the deficit over the next 10 years. This is an important goal, but so, too, is putting in place policies that can begin to fundamentally reduce the rate of cost growth in the system. An independent Medicare commission, a cap on the tax exclusion of employer-provided insurance and malpractice reform are three concrete steps that should be taken along with insurance expansions. This mix of policies would be an improvement over the current system.

Donald H. Taylor Jr. is an assistant professor of public policy. His blog is available for discussion of this article and health care reform in general. This article was first published in The (Raleigh) News & Observer on September 11, 2009.  This is part of a weekly series of articles by Donald Taylor exploring aspects of the health care reform issue.