The Alan Katz Health Care Reform Blog

Health Care Reform From One Person's Perspective

The High Cost of Simplistic Health Care Reform

Posted by Alan on February 15, 2008

Representatives Jim Langevin, a Rhode Island Democrat, and Christopher Shays, a Republican from Connecticut, introduced legislation this week to create a nationwide health insurance plan similar to the Federal Employee Health Benefits Program. This is an idea that blossoms every Congressional session like the cherry blossoms near the Jefferson Memorial. There’s an internal logic to the proposal which is compelling: every American should have the same health care coverage as members of Congress.

The concept is similar to the managed competition initiative developed by the Clinton Administration in the early 90’s.  As described by the Kaiser Family Foundation’s, uninsured residents would be required to enroll in a health plan that meets national standards. Individuals would pay up to 28 percent of the premiums. Employers would either offer their workers coverage or pay up to $12,000 per employee to finance their coverage through the FEHBP-type purchasing pool.

That this kind of reform was introduced — again — isn’t what caught my eye. It’s the potential price tag: $12,000 per employee. A California Employer Health Benefits Survey in 2007 found employers in the state pay monthly premiums of about $374 for each employee. That comes to slightly less than $4,500 per year. Double this real world premium average and the Langevin/Shays proposal still seems to apply a 25 percent surcharge.

Maybe I’m missing something in their formula, but this does seem to point out a problem with overly simplistic approaches to health care reform. They sound good, but don’t always hang together well. And cost is not the only problem. The population served by the FEHBP tends to be well educated and, as federal employees, have a support network to help them make it through the annual open enrollment program. It tends to service a healthier population than the overall country, too. Duplicating that system for the general public won’t be nearly as straightforward as its advocates hope.

Even with all it’s problems — and it’s high cost — the Langevin/Shays proposal should be part of the mix when the next Administration begins to address the nation’s health care system. So should a single payer system. So should health care vouchers and every other idea out there. It’s important for the presidential candidates to explain their approach to health care reform. But once the real work begins, it would be more helpful for the next president to identify the goal and set the parameters, then let all ideas flourish. Even those that are too simplistic for their own good.


One Response to “The High Cost of Simplistic Health Care Reform”

  1. Harvey said

    Universal (socialist) health care will not solve the fundamental problems with our health system. Instead, the non-free market friction needs to be removed. Besides health care, what goods or services do you purchase where you neither know the cost nor the quality beforehand? Our core needs are:

    1. Make medical service prices and quality transparent to the market.
    2. Eliminate the tax-advantaged health insurance benefits provided by employers – make all insurance purchases with after tax dollars.
    3. Allow consumers to buy insurance from any provider from any state.
    4. Provide “health insurance” stamps to those consumers whose income falls below a government determined threshold (similar idea as with food stamps).

    Finally, we need to start a national discussion on health care access. Is health care a service that should be available equally to all regardless of ability to pay? If you answer yes, then why doesn’t housing and food fall into the same category?

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