Helping government find its rightful place in the reform movement: this month, Lefton examines three regulation-related strategies for reforming the U.S. healthcare system. See Lefton's June column for the complete list of 14 strategies he believes will bring about meaningful health reform

Healthcare Financial Management, Oct, 2008 by Ray Lefton

In these last weeks before the Nov. 4 election, Senators McCain and Obama will undoubtedly be debating what needs to be done to fix the U.S. healthcare system. Despite what each candidate has to say, many citizens will interpret their remarks through party lenses: A Republican president will equal less government intervention in health care; a Democrat president will mean more intervention.

As with anything as complex as our current healthcare system, the right "fix" cannot be so black and white (or blue and red). There are places for the government to intervene--and places to let the free market reign, as evidenced by the three health reform ideas presented in this column.

Create a Separate Risk Pool for Costly Patients

Introduce insurance reform that adopts some of the approaches taken by The National Flood Insurance Program, which is administered by various insurance companies but funded by the federal government. The components of this program are flood insurance, flood plain management, and flood hazard mapping for 20,000 high-risk communities across the United States.

Placing patients that are "high hazard"--meaning patients with high cost, chronic needs or patients with catastrophic needs (e.g., low-birthweight baby, multiple trauma, severe burns, severe brain and spinal cord injuries, terminal conditions, and multiple comorbidities)--into a large, more predictable insurance pool will result in less risk loading. In addition, less cross- subsidization would be needed to manage the general population. Insurers and/or companies with proven expertise in managing these clinically complex types of patients (and their families) and in controlling losses and costs would bid for managing these patients.

The bottom line: Health care should sometimes look to other industries for ideas on how to solve complex problems.

Implications: Moving high-cost patients into a separate risk pool would result in more predictable financial and medical underwriting, making insurance more affordable and accessible to small groups and individuals.

Eliminate Unfunded Mandates and Time-Limit Laws

State mandates run from a low of 14 in Idaho to a whopping 63 in Minnesota. New Jersey recently passed a law requiring mothers to be evaluated for postpartum depression prior to discharge. Every state also requires insurers to cover certain medical services and providers. These services vary from essential services, such as emergency department visits, to marginal services, such as acupuncture, massage therapy, and pastoral counseling. Some covered medical services can be considered lifestyle choices, such as when an individual prefers to take a drug rather than modify his or her diet. This was an issue in the treatment of acid reflux disease before the low cost, generic drug omeprazole (Prilosec[R]) became available.

Forcibly expanding the scope of basic insurance plans might be a great deal for massage therapists and other special-interest health professionals, but it does so at the cost of forcing millions of people to pay for procedures or services that they wouldn't otherwise use. The rules fall hardest on those least able to afford them, particularly small businesses and individuals buying health insurance in the open market. Big companies and other firms that have the resources to self-insure can escape these state mandates.

One way to escape all of these expensive mandates and regulations would be for Americans to be allowed to purchase health insurance policies from insurers in states that have more sensible health policy regulation. For years, U.S. Rep. John Shadegg, R-Ariz., has been promoting legislation that would allow Americans to do just that, and his ideas have been incorporated into the McCain healthcare plan, which advocates that families should be able to purchase health insurance nationwide, across state lines.

Alternatively, we might consider setting national standards that allow patients to purchase additional coverage for services such as acupuncture, instead of a one-size-fits-all policy dictated by local lawmakers.

Similar to unfunded mandates is the government tendency of passing laws that do not evolve with the times. Take the Employee Retirement Income Security Act (ERISA) of 1974. One of the many elements of ERISA was to set standards for self-funded health and welfare plans for workers. ERISA plans fall outside the jurisdiction of many state regulations with respect to prompt payment, provider appeals, and other administrative-related activities. This lack of standardization and consistency creates much inefficiency and confusion, drivingup costs.

Other laws that need to be evaluated include antitrust laws, especially related to not-for-profits as they become more like monopsonies. Not-for-profit status and similar hallmarks of good intentions are largely irrelevant to antitrust analysis and, sometimes, result in a potential barrier for organizations to consolidate.

The bottom line: Unfunded mandates are very costly to support, and some of them have a marginal impact on improving care.