A sensible healthcare plan

With all the debate going on about Health Care Reform, I thought I'd throw in my two cents.

First of all, I agree that reform is needed. Healthcare is too expensive and too complicated. While much has been made of the 'who pays' question, the 'why the heck is this so expensive' question really hasn't been asked or answered. No matter if the government acts as a single payer (i.e. we all pay via taxes) or we have a network of insurance companies (i.e. we all pay via payroll contributions) no system can compensate when costs go up 10%+ per year. A major component of any healthcare reform needs to be net reduction in total cost.

Now obviously a healthcare system needs to ensure that high-quality care is available for everyone, so we need to find areas of costs to eliminate that won't jeopardize quality or availability of care.

Here are some cost contributors to health care that add little/no quality or availability of care:

1. Lawsuits (doctors and hospitals need to be accountable for mistakes, but this should be performed by the criminal justice system, not by lawyers)
2. Insurance overhead - go in to any doctors office and you will see a whole gaggle of people who do nothing but handle insurance forms (be it private insurance or public insurance). Additional costs can be found in the entire health insurance industry. While necessary in the current system, these people don't make anyone healthier.
3. Medical records - we have been talking about this for some time; making electronic/online medical records would be a huge cost savings.
4. Pharmaceutical marketing - drug companies spend millions on advertising, free lunches for doctors office staff and free samples (which effectively acts as universal perscription coverage in some cases) trying to push expensive drugs onto patients. The choice of prescription drug should be solely that of a doctor and patient, without persuasion on either party.
5. Unnecessary ER - We have universal healthcare in the United States. Every hospital ER must treat incoming patients regardless of their ability to pay. What this means is there is a whole class of people who don't have the ability to pay for (or simply don't pay for) normal preventive care (say a diabetic who can't afford insulin) so they end up in the ER regularly. ER care is expensive and money would be saved if these people could access preventive care. As it is, hospitals absorb all of these 'freeloaders' and pass the costs onto the rest of us.

Problems #1 and #3 could probably be solved regardless of what type of health reform we peruse.

So in my estimation there are two potential systems that could make a real difference in reducing cost. They are at different ends of the political spectrum and both have weaknesses and strengths.

Option #1 : Medical Savings Accounts

This idea has been circulating in conservative circles for quite some time. The idea is simple. Instead of traditional insurance plans, employers would give employees money in a special fund that they could spend exclusively for healthcare. Additionally employers would provide high-deductible insurance for catastrophic coverage (like cancer). So for example, you get $3000 and an insurance policy with a $3000 deductible, so you have 'complete' coverage. You would get to pocket any money that was left so it would be to your advantage to shop around for doctors, prescriptions, etc. It would introduce cost competition to health care, which would lower costs. You would be able to choose any doctor or treatment. Right now, similar plans (sometimes called 'Cafeteria Plans') exist however disallow the employee from receiving any extra dollars.

Advantages:

1. Introduces Competition to lower costs.
2. Similar to existing system, so transition could be easy.
3. Could be done with no new tax dollars.

Disadvantages:

1. What about the poor/unemployed? We could still have the ER problem mentioned above in #5, also this plan would leave the Medicare/Medicaid/VA care untouched - and still inefficient. Also most proponents of this plan would not force employers to provide a plan to their employees, so many (including self-employed) would be left out.
2. This plan would not reduce the Insurance overhead as you would still need to track things because of the catastrophic coverage. Also you might not have total coverage as the insurance company may not count everything you choose as going towards their deductible. Additionally an employer could provide you with a plan with a gap (say $3000 MSA but a $10k deductible catastrophic coverage).
3. An employer-based system leaves US employers at an economic disadvantage in the global marketplace.
4. Competition could introduce a 'race to the bottom' with quality of care becoming in jeopardy.

Option #2 - Completely Public Healthcare

The idea here to make healthcare function like other public services such as police and fire protection. Communities (cities, counties or even states) would run hospitals and doctors offices with the doctors and nurses being public employees. Private hospitals could still exist (for 'elite' care or things like non-reconstructive cosmetic surgery) but would be a minority part of the system (much like private schools today). Tax dollars (rates, types and collection method determined by the community) would support the system. Medicare/Medicaid and much of the VA could be done away with since everyone (regardless of income, age or military service) would be able to access public health care. There would be a small national tax (likely far less than the current Medicare/Medicaid tax) that would fund grants to poor/rural communities, oversight to make sure communities are providing quality care and scholarships to medical students or funding for medical schools (since the pay would be lower than the current system). Additionally patents on prescription drugs would be done away with, reducing the cost of medicine. The government would provide funding for new medicine research. This would be an improvement on the existing system where pharmceutical companies have an incentive (i.e. small piece of a big pie) to research drugs for common conditions even if good drugs already exist and if their new drugs offers little difference for the existing ones (they rely on marketing to convince people, see #4 above). The government could ensure the research occurs for drugs for rarer conditions.

Advantages:

1. Insurance overhead eliminated
2. Local oversight, national accountability
3. Preventive care would eliminate unnecessary ER cost
4. Universal access to quality care
5. Employers no longer required to provide insurance (think of the $ they would save on HR) thus putting them on a better footing in the global marketplace.
6. No insurance means that employees can change employers without worrying about healthcare. Even better more may opt to start their own businesses since they don't have to worry about expensive health insurance (this is a major deterrence to many potential entrepreneurs I know).

Disadvantages

1. Stark departure from existing system - conversion may be difficult
2. No competitive element (could be an advantage depending on your outlook)
3. Possibility for corruption.
4. New taxes required (though some of this will simply be a shift from existing taxes and payroll deductions)

Now it should be noted that the current proposal being debated by Congress is not 'Completely Public Healthcare' but rather an extension of the current insurance-based system whereby employers would be forced to give insurance to employees, new taxes would help poorer people pay for insurance and the government would run their own insurance company. So aside from move around the 'who pays' question, little actual savings occurs (possibly un-necessary ER visits to some extent may be eliminated).

What are your thoughts?