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Monday, April 06, 2009

Swiss Offer Fresh Health Care Model

By Micha Gisser
UNM Economics Professor Emeritus
          In case you have not noticed, President Obama and the Democrats have by now launched a "stealth-care" campaign to nationalize health care in America. Unfortunately, so far, Republicans and independents and "blue dog" Democrats have failed to address some of the most important issues of our health-care system and offer an alternative plan.
        While the fringe on the left is making a grab at the health-care sector, Republicans should promote a universal health-care system that is consumer driven, market based and acceptable to most Americans. In other words, there are several systems leading to universal care, and single payer is not the best.
        The Republicans have taken a few steps toward achieving a market-based health-care system. The Bush administration's greatest contribution to health care was signing into law the Health Saving Accounts (HSA) in 2003. Bush also deserves credit for attempting to cap medical liability damage awards. The House responded by a favorable 229-196 vote. Senate Democrats, however, resisted the reform.
        Republicans also advocated allowing people to purchase health insurance across state lines and override the hundreds of state coverage mandates. Such real changes could open up a huge national market for millions of American such that the spiraling cost of health care would level out.
        The tax code that created the traditional employer-based health plan locks most Americans into their jobs mainly because their insurance would not follow them to a new employer. Currently most Americans are covered through a third party, leaving health-care decisions to an employer or government bureaucrats.
        The only sure way to rein in the costs of medical care would require reforming the tax code to divorce workers from their employers, allowing them to purchase insurance on a free open market across state lines.
        At one time the previous administration proposed to first cap the tax deduction of employer-sponsored health insurance at $15,000 and, second, give people the same tax break to buy insurance regardless of whether they get it from an employer or elsewhere. The GOP should adopt this tax-code reform as the cornerstone of its health-care platform.
        The Achilles heel of reforming the tax code is that the young, non-poor and healthy workers would forgo the employer-based insurance in favor of cheaper options available on the market. The older and the bad-risks would be left behind in the smaller risk pool facing higher premiums.
        To properly address this issue, Republicans could borrow a page from the Swiss health-care system. In Switzerland consumers purchase health insurance neither from employers nor from the government, rather directly from private insurance companies. All consumers pay a uniform premium for a defined minimum package — a basic plan. The poor are subsidized, but otherwise the premiums are the same within five age groups.
        In exchange for providing basic health insurance to consumers, insurance companies receive uniform premiums from consumers. To compensate for insuring the variety of bad risks, the insurance companies transfer risk-adjusting payments among themselves: Insurers who in the course of the year insured relatively healthier-than-average people transfer funds to those with sicker-than-average enrollees. (The alternative of the government insuring all the bad risks is another step toward a nationalized health care.)
        The Swiss government mandates that all citizens purchase at least the defined minimum package. However, consumers shop around in search of the insurance company that will treat them the best, and they choose their health providers. Furthermore, individuals are free to buy supplementary insurance in the form of amenities such as a private room in the hospital, selecting any hospital in the canton, low deductibles and similar benefits. This provision induces insurance company competition and allows consumers great freedom of choice.
        Competition among Swiss insurers is not perfect — they must provide the minimum package at a uniform premium, and adjust among themselves for insuring bad-risks. But they compete vigorously through offering higher quality and a wide range of amenities that are not covered by the minimum package. We cannot achieve universal coverage coupled to a free market without losing at least one degree of freedom.
        The Swiss system that has been alive and well since 1996 is a proof that universal coverage and a free market are not an odd couple.
        The GOP should launch a positive campaign to educate the American public this is the way to go.