Thursday, May 3, 2007

John Kerry's Health Reinsurance Idea is Counter Productive--Kerry Would Transfer All Health Care Costs Above $50,000 to the Feds

Senator John Kerry (D-MA) has rewarmed a health care proposal from his failed presidential campaign in 2004.

Kerry is proposing that the federal government reimburse (or reinsure) an employer's health care costs for any worker incurring more than $50,000 in annual costs. The employer would have to offer a comprehensive health plan to its workers below this point and also offer wellness benefits.

Senator Kerry's proposal is well meaning but wouldn't do anything to reduce our nation's overall health care cost burden.

Senator Kerry's proposal is also popular among some big companies with tons of legacy health care costs looking for someone dumb enough to take them of their hands.

I see two problems:
  1. This isn't cost containment. It is cost shifting. Kerry is simply shifting the cost of a person's care above $50,000 per year to the federal government.
  2. We lose the incentive to manage the cost and quality of care. The employer health plan (and their insurer) would still have responsibility for managing the care but would have no incentive to do it efficiently since the government would reimburse them for their costs. After shifting these costs to the government, who would have the incentive to manage care and reduce the costs of these very expensive episodes of care?
Seventy-five percent of all health care costs are incurred by only about 15% of us.

Most of America's health care costs are incurred by the very sick--including those who are chronically ill.

Senator Kerry is right to worry about the high cost of health care that is disproportionately borne by the employer in the under-age-65 market.

However, sending a huge chunk of our health care costs into the black hole of government is not the answer.

When someone--doctors, hospitals, health plans, patients, or even government--is at risk for the cost of care they have a reason to manage it. For all the shortcomings in the private American health care system we have made great progress learning to manage episodes of expensive care.

Senator Kerry, you can't just send the costs for the sickest Americans into the black hole of the federal government and kid yourself that you've reduced our health care costs.

The question is not where we park these people's costs.

The question is how we get control of their costs.

Show us a cost containment plan not a cost shift plan.
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