Friday, December 11, 2009

My Healthcare Post

I've been holding off doing anything on the subject of healthcare, even though it is the subject that just about every would-be pundit is spouting off about these days. It is really extremely technical stuff and frankly I don't feel particularly qualified to contribute much of value on the subject. Apparently, however, that hasn't stopped others from shooting their mouths off, and a lot of the nonsense going around about healthcare is incredibly misleading, both from pundits on the right and the left. So, I figured that I might as well join in.

First of all, I think it is helpful to draw the distinction between healthcare reform and health insurance reform. For the most part, the various pieces of legislation that pundits have been gnawing on for most of this year deal with health insurance reform, and not so much with healthcare reform. This limitation is not necessarily a bad thing, but it is important to remember this clarification of what we are talking about. Healthcare reform would address the quality and cost of healthcare, and to be sure, those are subjects that very much need to be addressed. I will say more about that towards the end of this post, but again, it bears repeating that in large part, this is not something being addressed by the current legislation.

That does not mean that the current legislation dealing with health insurance reform is unimportant. On the contrary, it is extremely important. Health insurance reform goes to the question of how Americans pay for healthcare. That is something that very much needs to be addressed. Indeed, I would argue that unless we deal with the problem of health insurance reform first - the way Americans pay for healthcare - we cannot deal with the more general problem of healthcare reform in a rational way.

In order to talk intelligently about health insurance reform, one first really ought to be able to talk intelligently about insurance. That is something right off the bat that has made me hesitate to try to pontificate on this subject. Talking about insurance inevitably gets you into subjects of "risk management" and actuarial tables and the like, at which point, I generally find my brain turning to mush. I don't know why my mind tends to recoil at the subject of insurance. I think I'm a reasonably intelligent person - I've even read Stephen Hawking's A Brief History of Time and understood a lot of it. Nevertheless, insurance eludes me. It always reminds me of the Seinfeld episode in which George was charged with the responsibility of doing a speech on "risk management" and somehow the notes for the speech got mixed up with Kenny Bania's comedy routine and hilarity ensued, but I digress.

What gave me the confidence to try to write something on the subject of health insurance reform was my recent reading of an excellent book on the subject, The Healing of America by T.R. Reid. Reid gives a pretty good rundown of the healthcare systems in various foreign countries, contrasting them with the shortcomings of the American system of paying for healthcare. I think this is a good way to approach the subject, because there are two salient facts that we do know about the American system of paying for healthcare: (1) the U.S. is the only advanced country that does not provide universal healthcare coverage; and (2) recent worldwide surveys rate the quality of healthcare in the U.S. very poorly, generally around #37 in the world. That statistic is somewhat misleading because it reflects an average, but that in itself is very revealing about what is wrong with the American system of paying for healthcare. If you have good health insurance in the U.S., you probably have access to excellent healthcare, among the best in the world, but the problem is that too many Americans can't pay for any access to healthcare, and that drags our average way down.

So, how do other countries pay for universal healthcare? There are three basic models analyzed in Reid's book, although I would argue (this isn't in Reid's book) that it is useful, particularly as it pertains to the U.S., to subdivide the third model into two sub-categories.

1. Socialized Medicine: This is the U.K. system, developed by Lord Beveridge and Aneurin Bevan and implemented by the Labour government following World War II. In this system, the government actually operates the healthcare system. The British government owns and operates hospitals and employs healthcare professionals to staff them (although most British physicians are private actors). The British National Health Service (NHS) is fully funded by the government out of tax revenues and its services are available to everyone free of charge.

2. Single Payer: This is the Canadian system, developed by Saskatchewan Premier Tommy Douglas (Kiefer Sutherland's grandfather) in the early 1960s. Unlike the British system, the Canadian healthcare system itself is privately owned and operated; there are private hospitals, clinics, etc., and doctors, nurses and other healthcare professionals are private actors. However, all healthcare costs, for everyone, are paid entirely by the government, financed out of tax revenues.

3. The Bismarck System: This is the German system (followed in variations by many other European countries), developed by Otto Von Bismarck in the 19th Century. In this system, all persons are required by law to have health insurance, and you may choose from any number of different private not-for-profit insurance funds to provide coverage (in Germany, there are over 200 of these "sickness funds"). The amount a person pays for coverage depends on their income level, which is implemented through tax adjustments, with taxes imposed on the rich and credits and subsidies available to the poor. If you don't like the coverage offered by any of the funds, you may opt out of the system and buy health insurance from a private for-profit company; but again, all persons are required to have some form of health insurance coverage.

As I said, I would also include a variation on this last system which Reid does not discuss, namely, the Dutch system. Like the Bismarck system, the Dutch system mandates that all persons have health insurance, but instead of using not-for-profit insurance funds, the Dutch system implements universal coverage through for-profit private insurance companies. The government maintains an intensive system of regulation over health insurance companies to prevent premiums from being excessive and to ensure that there is a high level of competition among the private health insurance companies. As in the Bismarck system, government subsidies are provided to the poor to pay for health insurance.

Reid applies these categories to the American system of paying for healthcare, and shows how these categories do in fact apply to various segments of the American population:

Category One - Socialized Medicine: In fact, one segment of the American population does receive socialized medicine, namely, veterans. The Veterans Administration owns and operates hospitals and staffs them with doctors, nurses, and other healthcare professionals who are employed directly by the Federal government. The VA operates a system that is every bit as much an example of pure socialized medicine as the British NHS, perhaps even more so.

Category Two - Single Payer: Senior citizens are covered by a single payer system, namely, Medicare. Notably, the Canadian single payer system is also known as "Medicare". In Canada, however, everyone is covered by Medicare, while in the U.S., Medicare is only available to senior citizens.

Category Three - Private Health Insurance: Most employed Americans are covered by private health insurance. Generally, this is provided as a benefit of employment. This system is encouraged by the tax laws, which make health insurance coverage tax deductible for the employer and non-taxable for the employee.

People falling into these three categories comprise about 84% of the American population, which of course leaves about 16% who have no coverage. This translates into roughly 40-45 million Americans without coverage. Those without coverage include employed persons whose employers do not provide health insurance; unemployed persons; persons who have "pre-existing" medical conditions and as a result are rejected for coverage by private insurance companies; and persons who for one reason or another choose not to purchase health insurance. This last group includes many young people who do not perceive catastrophic illness to be a significant threat and accordingly elect not to incur the cost of purchasing health insurance.

Before talking about different possible approaches to reform, it is helpful to think of this last group - Americans without coverage - as comprising a distinct fourth category. As one healthcare expert pointed out in a lecture I attended, we do have a form of "universal" healthcare coverage in America; after all, American cities do not look like a third-world country, with untended sick people dying in the streets. However, the manner in which the U.S. provides "universal" healthcare to people falling into Category Four is barbaric. America deals with this fourth category in a manner that is both extremely expensive and extremely ineffective as a means of providing healthcare services, which can be summarized as follows:

Category Four - Welfare, Charity and Emergency Rooms: Persons falling into Category Four lack the means of paying for "wellness" healthcare such as routine check-ups and regular doctor visits. However, if these persons are poor enough and sick enough, they will get some form of healthcare, generally paid for by various forms of welfare, primarily Medicaid, and frequently administered in hospital emergency rooms. This is a method of providing healthcare that is extraordinarily inefficient in that it is both extremely expensive and ineffective as a means of promoting good health. This is reflected in a particular statistic about the quality of American healthcare that I find to be extraordinarily damning. The rate of death from treatable illnesses is far higher in the U.S. than in any other even moderately advanced country. This is clearly a product of the fact that for persons falling into Category Four, the healthcare that they receive is not only too little, it is often too late.

I find it very helpful to use these four categories as a way of thinking about the nature of the problem of trying to reform the manner in which Americans pay for healthcare. This categorization is also very useful in understanding the political problems that are posed to attempts to reform health insurance, and the deficiencies in the approaches to reform of both the left and the right.

For the right, the deficiency in their approach to the problem is obvious. The right acts as though it either does not believe or simply does not care about the fact that Category Four exists at all. I find this attitude appalling and unacceptable. We cannot accept an America in which more than forty million Americans simply do not have any means of paying for decent healthcare. Indeed, as I discuss in more detail below, it seems clear to me that if we do not do something about Category Four now, the condition of persons falling into this category will soon deteriorate markedly, and in a few years, America may very well begin to resemble a third-world country in which we routinely expect to see bodies of the dead or dying strewn about the streets due to lack of medical attention.

The deficiency of the approach of the left is a bit more subtle. The left, to its credit, is very much aware of the existence of Category Four, and its goal is to eliminate Category Four by making access to quality healthcare a universal right. I absolutely join in that objective.

The problem with the point of the view of the left, I would submit, is that it does not pay enough attention to the needs and interests of Category Three, which consists of the overwhelming majority of American workers - and voters. For almost everyone on the left, the ideal means of achieving universal coverage would be to enact a single payer system. While most people on the left do recognize that this is not politically feasible, there is a tendency on the left to believe that this lack of political feasibility is solely due to the power of insurance company lobbyists. I think this is a mistake; in my view, the real reason why a single payer system is not politically feasible in the U.S. is because it would not be acceptable to most of the Americans who fall into Category Three.

It is helpful to step back and look at the history of how the U.S. came to have a system, unlike any other advanced country, in which most Americans' access to healthcare is financed not by the government, but by private health insurance obtained as a benefit of employment. This system did not come into being either because of a nefarious conspiracy perpetrated by private insurance companies, as some on the left believe, or because the free market dictated that private health insurance companies provide better services than government agencies do, as the right believes. Ironically, the American system of employment-based private health insurance actually came into being because of government interference in the marketplace. During World War II, the government imposed strict wage and price controls as a means of guaranteeing the smooth production of war materials. Labor was very scarce during the war, but employers were nonetheless barred from offering higher wages as a means of competing for the services of scarce workers. However, government wage and price controls permitted employers to offer benefits other than wages, such as health insurance, as a means of attracting employees. Thus, by the time World War II ended, the provision of health insurance as an added benefit of employment had become widespread and very popular with both employees and employers (as noted, the tax laws reinforced the attractiveness of employee health insurance). At the very time that the postwar U.K. was establishing the NHS, and most of continental Europe was adopting different versions of government-subsidized Bismarck-type health insurance schemes, there was relatively little enthusiasm in the U.S. for a government-financed system of universal healthcare.

For those Americans falling into Category Three, employment-based private health insurance continues to be quite popular. Surveys generally show that most Americans who do have private health insurance are relatively satisfied with their coverage. To be sure, Americans who have private health insurance are sufficiently satisfied with it that they become very nervous if they think that politicians are threatening to force them to relinquish their private insurance in favor of a government-run program; this is why the "Harry and Louise" ads and similar scare tactics have resonated with the American public and have successfully killed prior efforts at reform. And, as I will discuss below, I also believe that the preference for private health insurance as opposed to a single payer system is by no means irrational.

Nevertheless, the problem with a system that relies so heavily on private health insurance to pay for healthcare is that it leaves you with Category Four - a large segment of the population dependent upon welfare and charity to pay for even minimal levels of healthcare. Thus, the goal of health insurance reform ought to be to try to eliminate Category Four by folding Category Four into Category Three, using government subsidies and regulations of health insurance companies to deal with the costs entailed. This would produce something in the U.S. that resembles the Bismarck system, particularly as modified by the Dutch, while of course leaving socialized medicine in place for veterans (the VA) and single payer in place for senior citizens (Medicare).

The basic elements of what would be required to move Category Four into Category Three are fairly straight-forward. First, you need regulations requiring insurance companies to cover everybody, prohibiting denials of coverage based on pre-existing conditions and the like. Second, you need subsidies to enable the unemployed and other poor persons to be able to buy insurance. Third, you need to require most employers to provide health insurance as an employee benefit. Finally, as a sort of mopping-up device, you need an "individual mandate" requiring everyone to have health insurance, prohibiting "free riding" by those (mostly young persons) who are willing to gamble on the possibility that they will remain healthy and not need health insurance.

A lot of people have trouble understanding why you have to have the mandates - why can't we just require insurance companies to offer insurance to everyone who wants it regardless of pre-existing conditions and the like, but continue to allow people who are so inclined to choose to take the gamble that they will not need health insurance? The answer to this question lies in those nasty, arcane principles of "risk management" that have always made insurance such an opaque subject for me. I'll do my best to lay out the issues as I understand them.

The idea of "risk management" works as follows. The "product" that an insurance company sells is the right to receive a benefit upon the occurrence of a particular event; in the case of health insurance, that "event" is the need to see a doctor or possibly the need to receive some more extensive, and expensive, form of healthcare services such as a long-term stay in a hospital. The price that the insurance company charges for the product comes in the form of the premiums paid by insureds, and the amount of the premium depends upon a computation of the likelihood that the insurance company will have to pay out these benefits. This in turn gets you to those actuarial tables, which enable the insurance companies to compute the likelihood of an "event" occurring that will require the payment of benefits. "Risk management" is the process by which an insurance company minimizes the risk that it will have to pay out benefits relative to the amount of premiums paid by insureds. Successful risk management enables an insurance company to maximize its profitability, which of course is the raison d'etre of any private business.

There are two different ways in which risk management enables an insurance company to maximize its profitability. First, the insurance company can shrink its pool of insureds so as to eliminate those who present the greatest risk of being likely to claim entitlement to benefits. That is why health insurance companies want to deny coverage to persons having pre-existing conditions, because those persons present the greatest risks of being in need of benefits. There is, however, another way that an insurance company can use principles of risk management to enhance profitability. The insurance company can expand its pool of insureds, so that even though the insurance company is providing coverage to people who have a high likelihood of becoming entitled to receive benefits, that risk will be counterbalanced by the fact that the insurance company will be receiving premiums from a large number of insureds who have a very low likelihood of being entitled to receive benefits.

Thus, if, in order to get to universal coverage, Congress passes a law prohibiting insurance companies from denying coverage to persons with pre-existing conditions - the riskiest portion of the population from the perspective of health insurance companies - the inevitable result would be a huge increase in the premiums insurance companies would have to charge its customers; either that, or else a large number of insurance companies would be forced out of business. The way to avoid that is to expand the risk pool by mandating that all persons have health insurance, particularly those young, relatively healthy "free riders" who are unlikely to need much by way of benefits and whose premiums would therefore pay for the benefits to be provided to the folks with pre-existing conditions, who present the greatest risk of needing healthcare benefits.

This is the essence of virtually all of the health insurance reform proposals floating through Congress. It is also the essence of the Dutch variation on the Bismarck system. The Dutch system makes it possible to provide universal coverage through private for-profit health insurance companies by spreading the risks, thereby ensuring that everyone is covered and premiums are kept at manageable levels.

Before we all celebrate and proclaim "mission accomplished", it should be noted that there are some glitches that make it difficult for the U.S. simply to copy the Dutch system. As I said above, the Dutch system includes intensive governmental regulation of the health insurance industry so as to ensure that risks are truly spread out throughout the system and premiums are kept in check. In addition, the Dutch make sure that there is a high level of competition among private health insurance companies, again, so as to guarantee competitive pricing and competition in the packages of benefits that are offered to consumers. The U.S. currently lacks both of these features. Almost all regulation of the insurance industry is carried out at the state level, and there is very little by way of Federal insurance regulation. State insurance regulators tend to be pretty spotty. In some states, such as New York, state insurance regulators are known to be very active; in other states, however, such as Texas or the Dakotas, state insurance regulation is minimal to non-existent. In addition, the level of competition in the health insurance industry varies widely from state to state. Again, in some states such as New York, there is a good deal of competition among health insurance companies, but in a great many states, there is little if any competition, and single health insurance companies hold virtual monopolies on the business within their states.

The Republicans frequently argue that the solution to the problem of lack of competition is simply to allow consumers to buy health insurance across state lines. The problem with this suggestion is, again, the fact that insurance companies are largely regulated at the state level. If a consumer were to buy a health insurance policy from an out-of-state company, the consumer would effectively be buying a policy from an unregulated insurance company. The consumer would have no guarantee that the company in fact has sufficient capital to pay the benefits promised by the policy. It is a virtual certainty that if consumers were permitted to buy insurance across state lines under the current system, a great many consumers would wind up holding the bag in the form of worthless health insurance policies issued by unregulated insurance companies lacking sufficient capital to pay benefits.

The only way that permitting interstate insurance sales as a means of promoting competition would make sense would be if you had some sort of interstate compact among state insurance regulators to ensure the viability of the companies and the policies they sell on the interstate market, or better yet, if you had Federal regulation of the insurance industry - in other words, if you had something more like the Dutch system. In my opinion, that would be a very good thing, and it is probably the most likely direction in which the American system will evolve.

A "progressive" solution to the problem of lack of competition in the health insurance industry was suggested in 2007 by a political scientist at Berkeley (he is now at Yale) named Jacob Hacker, who originally proposed the idea of a "public option." Hacker proposed that this public option could be integrated into a system of universal mandates, so that consumers would have the "option" of buying into a Federal health insurance program such as Medicare as an alternative to buying private health insurance. The idea was that such a "public option" would guarantee the existence of competition and would thereby prevent private health insurance companies from raising premiums excessively.

Conservatives and lobbyists for health insurance companies pounced on Hacker's concept of the public option as nothing more than a backdoor way of implementing a single payer system. This argument is not without some force. A public program such as Medicare does not operate through the marketplace. Rather, a public program such as Medicare finances itself through tax revenues, and it is not forced to support itself by offering competitive services in the marketplace. In addition, a public program such as Medicare keeps its costs down by being able to dictate the reimbursement rates it will pay to healthcare service providers (doctors, hospitals, etc.) by using rates that are set by law, instead of rates that are negotiated in the marketplace. Conservatives argue that no private health insurance company could possibly compete with a public program such as Medicare on these terms, not because Medicare offers "better" or cheaper services, but because Medicare has the ability to finance itself through taxation and it can impose reimbursement rates on service providers by force of law - things that no private insurance company could possibly do. Thus, the argument goes, even though this "robust" public program would only be an "option" available to consumers as an alternative to private health insurance, the inevitable result of having such a "robust" public option would be that private health insurance premiums would go up because healthcare service providers would charge higher rates to privately-insured patients in order to offset the low reimbursement rates dictated by the public option; this, in turn, would inevitably cause consumers to choose the public option over private health insurance, thereby driving a lot of private insurance companies out of business and ultimately leading to a single payer system.

In order to counter these arguments, many Democrats, led by Senator Schumer, have backed off of the concept of the "robust" public option (i.e., a government program such as Medicare as an option available to healthcare consumers), and instead have proposed what they call a "level playing field" public option. Under this approach, the public option would not be financed by tax revenues and instead would be required to pay for itself out of the premiums it would be able to collect from consumers; in addition, the "level playing field" public option would not pay Medicare reimbursement rates and would instead negotiate reimbursement rates with service providers just like a private insurance company does. In short, the "level playing field" public option would be no different from any other insurance company, except that it would be owned and operated by the government, and the only function of the public option would be to guarantee some measure of competition so as to "keep private insurance companies honest."

Critics of the "level playing field" public option on both the left and the right argue that the proposal does not make a lot of sense. A public health insurance program is unlikely to do the sorts of things that private insurance companies do in order to hold down costs, such as engage in hardball negotiations with consumers over coverage issues and with service providers over reimbursement. Thus, it is argued that the "level playing field" public option will inevitably be at a competitive disadvantage vis a vis private insurance companies. Progressives argue that this means that the "level playing field" public option would not be an effective check on private insurance companies. Conservatives argue that Democrats would not stand by and allow the public option simply to close shop because of its inability to compete with private insurers, and Democrats would instead be unable to resist the temptation to "unlevel the playing field" by providing tax subsidies and other advantages to the public option; this, in turn, would again put us on the slippery slope to a single payer system.

Personally, the public option, in either the "robust" or the "level playing field" form, strikes me as an intriguing idea, and I don't see much down side in experimenting with it as part of an overall package of reforms to get us to universal coverage. On the other hand, I can also see the validity of many of the arguments that have been made against the various forms of public options that have been proposed. It seems to me that the issue of whether or not to have a public option has been blown way out of proportion. What is most important is the necessity of universal coverage, and we can achieve that with or without a public option - i.e., by imposing regulations that prohibit health insurers from denying coverage based on pre-existing conditions and other reasons, by regulating premiums, and by mandating that everyone have health insurance, with subsidies available to poor persons who cannot afford it. The Senate Finance Committee bill used these elements to achieve virtually universal coverage without a "public option" of any kind, "robust" or otherwise. Indeed, having a public option really does very little to enhance the ability of a reform package to achieve universal coverage; both the Senate Finance Committee bill, without a public option, and the House Bill, with a public option, achieve roughly the same results in reducing the number of uninsured.

Most people on the left are unsympathetic to the argument that a "robust" public option will undermine private health insurance companies and put us on the road to single payer. However, I believe that this attitude is mistaken, again, because it fails to pay attention to the very real reasons why people in Category Three like private health insurance and prefer it to a single payer system. To expand on this point, it is important to recognize the shortcomings of a single payer system, some of which are touched on in Reid's book. A single payer system functions by legal fiat, not through the marketplace. The amount that gets paid into the system depends on the amount of taxes that the government collects (Judge Learned Hand once referred to taxes as "forced exactions" and not "voluntary contributions"). The amount that gets paid out is set by reimbursement schedules that are fixed by laws and regulations, again, not by the market. The mechanism that a single payer system uses to reduce costs is to cut reimbursement rates, much to the dismay of healthcare service providers such as doctors, hospitals, etc. In the U.S., service providers regularly complain about the low reimbursement rates paid by the single payer component of the American healthcare system - i.e., Medicare (Category Two) - but in the U.S., service providers can compensate for low Medicare reimbursement rates by raising the rates charged to privately-insured patients. If private insurance companies were forced out of business and the U.S. system drifted towards a single payer system, service providers would be unable to do this. Low reimbursement rates would have other consequences, namely, it would lead to shortages of healthcare providers. This in turn would result in precisely the kinds of problems we see in single payer systems such as Canada, including long waiting times for medical services and strict government rationing of available medical care. Americans who are currently lucky enough to fall into Category Three would hardly view such developments as "reform."

This brings me back to what I said at the beginning of this post - there is a difference between healthcare reform and health insurance reform. Ultimately, the root of the problem lies in the fact that healthcare is very expensive, and it is only going to get more expensive in the coming years. In single payer systems or other government-run healthcare systems such as the U.K.'s NHS, the economic pressure resulting from rising healthcare costs is manifest in the form of shortages, waiting times, and rationed care. In the U.S., the consequence of rising costs is radical inequality, where the insured receive quality healthcare but the uninsured receive none at all. We cannot formulate a rational approach to healthcare reform in the U.S. until we address this fundamental reality - radical inequality - and that is why I believe that enacting health insurance reform and establishing universal coverage now are the top priorities, and the essential first steps towards real healthcare reform.

To be sure, the healthcare debate that has now been going on for almost a year has been very frustrating, often excruciating, and a lot of people would like to abandon reform efforts altogether. The right says that the endeavor to reform health insurance should be abandoned and that the sole focus should be on cutting costs. Some on the far left are also proposing that reform efforts be abandoned for now (I'm not sure why the left thinks that things will get better in the future) because of the apparent unwillingness of Senate moderates to accept any form of public option, arguing that without a public option, health insurance reform proposals amount to nothing more than a "giveaway" to health insurance companies - notwithstanding the fact that even the most conservative of the reform proposals on the table, the Senate Finance Committee bill, does in fact achieve something approximating universal coverage. I cannot say this too strongly: both of these positions are wrong, and they are worse than wrong - they are unconscionable.

Consider what would happen if health insurance reform were abandoned at this point: This would leave the current U.S. system intact, i.e., we would retain Categories One through Four. As I said, healthcare is likely to get even more expensive in the years ahead than it is today. Indeed, demographics are likely to result in breathtaking healthcare cost increases, as we Baby Boomers get older and sicker. How is Congress likely to deal with the inevitable pressures to make large cuts in the cost of healthcare? Categories One through Three all have a lot of political clout, and it is highly likely that politicians will do everything they possibly can to protect the interests of persons falling into those categories. Category Four, however, has no political clout. It seems unquestionable to me that a future Congress (one that would undoubtedly be dominated by Republicans if Democrats are stupid enough to bungle the current opportunity to implement real health insurance reform) would deal with rising healthcare costs by taking a meat axe to programs like Medicaid and other welfare programs for the very poor and the uninsured. Then the U.S. really would look like a third-world country or Dickensian London in which healthcare for the poor is entirely a matter of charity, if that. Maybe it's just me, but I don't want to live in that country.

There is an alternative: eliminate Category Four now by folding it into Category Three. Preserve the system of private health insurance that is popular with the many Americans fortunate enough to be covered by it, and use regulations, mandates and subsidies to make the system universal. Both the Senate Bill (without a public option) and the House Bill (with a public option) effectively move about 75% of the persons currently in Category Four into Category Three. We must not let the opportunity to do that slip away.

One final point that bears emphasis: what I have described is just the beginning of the process of reform, not the end. Some projects for future reforms include:

1. Implement better regulation of health insurance companies by establishing something at the Federal level like an SEC to oversee health insurers in order to prevent price-gouging on premiums and abusive practices on coverage decisions.

2. Get to work on real healthcare reform, in addition to health insurance reform. I will address one aspect of that subject which I actually know something about. Specifically, I believe that there ought to be bipartisan consensus on the need for tort reform to reduce the numbers of abusive medical malpractice suits. However, I think that a lot of the "tort reform" we have heard about in the past is misguided. Most tort reform has heretofore taken the form of caps on damage awards (e.g., the Texas system). Runaway awards are not really the problem. Relatively few malpractice cases actually go to trial, as most cases are settled before trial, and in reality, excessive awards by runaway juries are well-publicized but relatively rare occurrences. Arbitrary caps on damages can leave plaintiffs who suffered from true malpractice with inadequate compensation, while doing little to address the real deficiencies in the way our legal system handles medical malpractice suits.

The bigger problem is that there are simply too many malpractice claims and our legal system lacks effective means of weeding out frivolous claims. A reasonably smart plaintiff's lawyer can cobble together a medical malpractice claim that is good enough to survive a motion for summary judgment (not a very exacting standard) and then negotiate a settlement before the case goes to trial. Malpractice defense lawyers hired by malpractice insurers are often motivated to take the same approach, as they have no incentive to try to dispose of a case at an early stage of the litigation (i.e., before the defense lawyers have charged much in fees). The frequent scenario is that cases get settled "on the courthouse steps", just before trial but after a great deal of money has been spent on legal fees. In a rational system many of these cases should never have been brought at all - let alone become the basis for large legal expenses and substantial settlements.

There are a number of ways of dealing with these problems. Indeed, as part of governmental regulation of the health insurance industry, panels of medical experts can, and undoubtedly will, set forth guidelines on "best practices" in order to make determinations as to what kinds of medical procedures are appropriate for particular conditions, so as to delineate those procedures that warrant reimbursement. A physician who adheres to these "best practices" ought to be immune from a malpractice suit, provided that the physician did not act negligently in carrying out these practices. Such a rule would go a long way towards weeding out frivolous malpractice suits, thereby reducing the costs of medical malpractice insurance and also reducing the wasteful practice of "defensive medicine", i.e., wasteful and unnecessary medical procedures which are designed to provide a defense against a potential malpractice suit but which do nothing to promote the quality of healthcare.

The potential for healthcare reform is vast, and there are many competent professionals who know a lot more than I do about what ought to be done. There is, however, one thing I am certain of. The first thing that we need to do is to establish universal coverage. We have the opportunity to do it now, and we must seize that opportunity. When every American has access to quality healthcare, every American will also have a stake in promoting quality healthcare. That is a constituency that politicians cannot ignore.

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