How I'd Like to See Our Healthcare System Work...

I read a piece by Holman Jenkins this morning in the Wall Street Journal.  It introduces a new term I hadn't heard before that gave me a chuckle: “lip-commitment” – referring to politicians who have verbally committed to something, but haven't actually done it yet.  He also proposes a solution to this country's healthcare problems, via a relatively small tweak to ObamaCare:

Now just modify the Affordable Care Act so buying any health policy authorized by the new charter, no matter how minimalist, satisfies the employer and individual mandate.

What would follow is a boom in low-cost, high-deductible plans that leave individuals in charge of managing most of their ordinary health-care costs out of pocket. Because it would be cheap, millions who would opt not to buy coverage will buy coverage. Because it will be cheap, companies will direct their low-wage and entry-level employees to this coverage.

I don't believe the solution is anything like that simple, but this is definitely a component of the reform I would like to see: a return to real insurance, instead of the all-you-can-eat prepaid healthcare pseudo-insurance we have today.

In response to a reader's question, here are the pieces of a reformed healthcare system that I'd like to see here in the U.S.  A lot of these pieces interact with others, so they really need to be considered together.  And before people start yelling at me, I know that the chances of these elements being enacted together at that national level are vanishingly close to zero.  So shut up, already – it's my dream!  The elements:

1. Either eliminate healthcare costs as deductible by employers, or make them deductible by individuals (or both).  This would eliminate the tax bias toward employer-provided healthcare (this never was a good idea, and only came into being as an accidental side-effect of WWI-era wage controls).  Employers could still provide healthcare, but it would cost them more.  Most employers would drop healthcare benefits like a hot potato, and then most Americans would be shopping for insurance.  Why do I think this is good?  Because it would empower individuals to shop for healthcare and health insurance, choosing the right combination of benefits and cost for them.
   
2. Eliminate all mandated features of health insurance products, both at the federal and state levels.  In other words, allow health insurance providers the same freedom as car manufacturers – let them make high-end and low-end products, some full of glitzy features and others stripped down to the bare metal.  Insurance providers will immediately start promoting high-deductible major medical policies – because they are dirt cheap compared with the feature-laden policies most states mandate today.  Why do I think this is a good idea?  Because then the insurance companies will fall all over themselves trying to find products that the marketplace finds compelling – just like car makers do today.  This will include low-end products (like high-deductible major medical policies) and high-end products (like today's healthcare insurance, if enough people are willing to pay for them).  The most important piece of this is that consumers then get to choose – and the marketplace does the rest.
   
3. Eliminate all state regulations that have the effect of creating a separate market for healthcare insurance within a state.  I can buy a Toyota in any state of this country.  I should be able to buy a Brand XYZ insurance policy the same way.  Why do I think this is a good idea?  That's easy: increased competition always means lower prices and better products.  No government ever produced a product like the iPhone, good service like Zappos, or low prices like Walmart – these all happened through the magic of competition in the marketplace – and the bigger that marketplace is, the better.
   
4. Forbid denial (of high-deductible, major medical policies only) on the basis of pre-existing conditions – but allow insurance companies to recover as much of their costs related to the pre-existing condition as possible.  The idea here is to allow anyone to obtain coverage, no matter what their medical situation – but when an insurance company is forced to accept someone with a pre-existing condition, they can come after all that person's assets to recover their costs, much the way student loans are treated today.  I'm glossing over lots of troublesome details here, like determining what's actually related to pre-existing conditions, dealing with pre-existing conditions that predate adulthood, people uninsured for a short time (like between jobs), etc.  All that would most definitely have to be worked out, and I suspect it wouldn't be pretty.  But...what I like about this approach is that we'd end up in a situation in which two things are true: (1) anybody, with any pre-existing condition can get insurance, and (2) people who choose not to buy insurance until they needed it would be penalized, potentially severely.
   
5. Remove all barriers to forming a robust healthcare reinsurance market.  This has the effect of enlarging the risk pool, an unambiguously good thing for competition.
   
6. Completely separate the welfare component and the insurance component of healthcare-related policy and regulation.  Government programs like Medicare and Medicaid are part insurance, part pre-paid all-you-can-eat healthcare services, and part welfare.  What I'm proposing is requiring that when the government provides (directly or indirectly) health insurance to a program beneficiary, they buy a private health insurance policy to do so.  This has the effect of greatly increasing the size of the risk pools for both the indigent and the elderly, while still keeping it a competitive marketplace.

See what I mean?  Chances of all that passing are zero!