By TAYLOR J. CHRISTENSEN
In Part 1 of this series, I reviewed the relevant context of our post-ACA healthcare system to show why President-Elect Joe Biden’s healthcare plan is perfectly reasonable. In this part, I will critically evaluate that plan to show what he got right and what he got wrong or missed altogether.
Joe Biden plans to get rid of the current limit (400% of the federal poverty level) on who qualifies for health insurance premium subsidies and instead convert it to a flat percentage of income (8.5%), which means anyone whose health insurance is going to cost more than 8.5% of their annual income would qualify for a subsidy. And those subsidies would be more generous, being based on a gold-level insurance plan’s price rather than a silver-level insurance plan. He also plans to create a new government-run health insurance company to offer an insurance plan—a “public option”—on the private market, which would be available to private market health insurance shoppers and some other groups as well.
Ok, now for some evaluation of all that.
First, let me frame how I am going to evaluate Joe Biden’s plan.
There are three problems healthcare reformers are usually trying to solve. They want to (1) increase access to care, (2) decrease healthcare prices, and (3) improve the quality of care.
But if we merge the last two goals into one, we can say they want to (1) increase access, and (2) improve the value of care (Value = Quality / Price). We will take these one by one.
Goal 1: Increase Access
How will Joe Biden’s plan do at increasing access?
There are three things to consider when evaluating access-increasing policies. The first is how many people will be covered. The second is how much it will cost. And the third, almost universally forgotten, is how much it will interfere with efforts to accomplish the second goal to improve the value of care.
That third consideration is important because if we increase access but coincidently impair our efforts to improve the value of care, we have taken one step forward and one step backward all at the same time.
Regarding how many people will be covered, remember from Part 1 of this series that there are about 30 million uninsured people in the U.S. Joe Biden’s website quotes that this plan will get 97% of Americans insured, which means he projects there to be about 10 million uninsured people when all this is implemented. Whether that is too many or not is purely a judgment call based on your own personal moral and political beliefs, so I will not give any comment on that here.
Regarding how much it will cost, we will skip that discussion and instead let the CBO weigh in when they actually have a bill to evaluate. Suffice it to say that it will not be as expensive as Medicare for All. Again, whether it is too expensive or not is a judgment call.
And regarding the plan’s impact on efforts to improve the value of care, this takes a little more analysis.
If you have read any of my other writings, you will already know that I believe the key to improving value in healthcare is to get more patients to choose higher-value insurers and providers, which comes from giving them price and quality information about their options and then making sure nothing interferes with their incentives to choose the highest-value one for them. When that is happening properly, market share and profit flows to the higher-value providers and, therefore, it stimulates competition over who can offer the highest value to patients.
In contrast to recent Medicare for All proposals, improving the Affordable Care Act in the way Joe Biden has proposed is possibly the most value-improvement friendly way to increase access. It will not interfere with patients having multiple insurer and provider options, it will not create new barriers to them being able to know their price and quality beforehand, and it will not ruin whatever incentives they have to choose the highest-value one. In short, Joe Biden’s plan does not create any major new barriers to the changes that need to be made to improve healthcare value.
Goal 2: Improve Value
How will Joe Biden’s plan do at improving value?
. . . Crickets.
In spite of choosing an access-increasing plan that should not create any new barriers to our efforts to improve value, I do not see much in his plan that will take advantage of that. Nothing about payment reform, price transparency, publicly available quality metrics, insurance plan design changes, anti-trust enforcement, insurance plan shoppability, etc.
I do not think this is an oversight; I just think this is an acknowledgement that he and his team do not yet know what needs to happen to make transformative changes in healthcare value.
He has at least proposed what he can to try to lower drug costs, which would improve value in that narrow but significant segment of the market.
But what about the private option? Would this somehow improve value by forcing private insurers to price more fairly?
Creating a public option is a workaround. It is trying to solve a problem without getting at the root of the problem, which severely hampers its effectiveness at solving that problem plus risks causing collateral damage.
The primary problem that a public option is trying to solve is the issue of supposedly non-competitive insurance markets. The idea is that if a new insurer joins the competitive landscape and offers great quality at a fair price, it will force the others to do the same or else they will lose their market share.
But no other market in society needs a government-produced option to keep the market’s competition and pricing honest, so why does healthcare insurance?
The answer is that it doesn’t.
What the healthcare insurance market needs is what other markets already have, and it’s the same thing I mentioned above: It needs shoppers to be able to readily identify the highest-value insurance plan and then choose it. Eliminating barriers to this will do more to stimulate competition over value than a public option will, and it risks no collateral damage.
But if the long-term goal is a gradual shift toward 100% of people being on a publicly run insurance plan, a public option is a great way to do this by slowly phasing out private insurance. You could call it Medicare-and-Medicaid-and-Public-Option for All. Whether that is his goal or not, it does not matter, because a public option opens up an avenue for that to eventually take place, which could work out fine where improving healthcare value is concerned, but only if it is implemented correctly.
I am impressed with Joe Biden’s approach to fixing the ACA. It’s a very rational approach to increasing access to healthcare, which is why it is very similar to what I described in my KevinMD post in 2019 about a possible optimal future U.S. healthcare system.
Importantly, it also avoids the moral dilemmas of (1) having people priced out of the insurance market on the one hand and (2) forcing people to buy something they do not want on the other. In a system like the one he is proposing, if there are people who do not have health insurance, it will be because they simply chose to spend their money on other things.
But I am very concerned about his addition of a public option, which I think will distract from the real changes that need to be made in the health insurance market and also risk creating, sooner or later, new barriers to improving the healthcare system’s value.
And as for his plan to improve healthcare value, he does not really have one. I guess that means it is only half a plan, with some positive aspects and some negative aspects. But if he drops the public option and instead proposes some things to improve the value of care (here are some suggestions), we would have a bright future for our healthcare system.
Taylor J. Christensen is an internal medicine physician and health policy researcher who blogs about how to fix the healthcare system at clearthinkingonhealthcare.com.