Healthcare Reform - A Possible Option

A national public option appears to be unsupported at this point and, in any case, it was unclear how a public option would quickly lead to lower costs. Following is an alternative that would be cheaper and easier to setup that might be called the 'local option'.

Essentially, the local option would involve individual hospitals selling comprehensive medical insurance policies. The attractive points with this option are:

• Cost Reduction - Currently, doctors and hospitals have the incentive to perform as many services as possible in a fee for service system. If the hospitals sold insurance coverage then they would have the incentive to find ways to reduce costs. As an example, in the current system, if someone has an operation, is discharged and then returns to the hospital with an infection acquired during the initial operation, the hospital would be paid extra to take care of the infection. Under the Local Option, the hospital would incur extra charges without a corresponding increase in income. I'm sure that since money is at stake the hospital would make sure that they changed processes to reduce infections.
• Private Sector- Since most hospitals are private sector enterprises, a major objection to the public option that the government is involved in health care would not be applicable.
• State Regulation - Since hospitals and the doctors who work in them are already state regulated there would not be issues with state versus federal regulations. Also, states already have organizations setup to manage insurance and deal with disputes.
  
• Competition and Innovation - Since there would be multiple providers in each large market, there would be significant incentive for the hospitals to innovate in areas of providing excellent service and reducing costs. For instance, I would expect that hospitals would work to bundle services.
  
• Local Needs - Since the hospitals operate locally, they can customize services to reflect the preferences and needs of the local market.

Following are some aspects that might be considered when developing the plan.

• Perhaps any federal subsidies that are available would be paid directly to the hospitals for their policy holders who qualify for the subsidies. This would provide some leverage with the hospital providers to ensure that the hospitals adopt certain minimum standards.
• Perhaps the hospitals that participate and receive the policy holder subsidies would be required to use a specified, electronic medical records system.
• In large markets, it might be advisable to allow multiple hospitals to participate as a single provider which would give patients more choice except that there should be a limit in terms of the number of insured that each provider services, perhaps 25% of the total market, to ensure that competition exists.
• In terms of pre-existing conditions, with private insurers, their medical underwriting assigns an additional cost for covering the pre-existing condition that is included in the insured's premium. Local Options that wanted to participate would need to cover pre-existing conditions without an additional premium. However, to prevent any single Local Option from incurring excessive costs related to pre-existing conditions, perhaps each individual local option would only be required to accept people with pre-existing conditions up to the point that the additional costs did not exceed a specified percentage of total premium income. There would need to be a state or federal surcharge price list for pre-existing conditions to prevent each local provider from creatively assessing pre-existing condition surcharges to prematurely meeting the maximum percentage that they needed to accept. States would have the option to pay the surcharge for any additional amounts if they wanted to.
• To prevent the Local Options from morphing into HMO's, it might be beneficial to limit the number of providers in any provider category such as cardiologists, vascular surgeons, etc. who are employees of the local provider to a specified percentage of the total number of participating providers in that category.
• It might be helpful if the state or federal government was able to identify providers who would take care of the billing and policy management to allow hospitals to focus on health care rather than accounting and administration. Ideally, there would be at least 2 administrative providers per state to keep the admin costs down through competition.