Risk and Healthcare Reform

Self-managed groups offer perhaps the only meaningful opportunity for healthcare reform in the United States.

For all of our talk of healthcare as an individual resource, “my healthcare”, it is actually a group resource, a shared risk pool like any other kind of insurance. How we draw the boundaries around the care that the pool will pay for, and how much the pool will pay for the care of any one individual, are the most basic questions in healthcare.

These questions are also the primary points of contention in the debate over healthcare. Many Democrats favor a national health plan, with the Federal Government deciding the covered care and how much will be paid to keep any one person alive. Many Republicans don’t trust the government with this kind of power over individuals’ lives and would prefer to have those decisions made by insurance providers.

But the Patient Protection and Affordable Care Act (PPACA) has for all practical purposes ended the debate – PPACA effectively forbids insurance companies from drawing financial boundaries around acceptable care. Among its provisions are prohibitions against insurers setting annual and lifetime caps on the cost of care, the two most effective tools insurers had to limit costs. An estimated 8,000 people in the U.S. had reached their lifetime caps of $2 million to $5 million. By some estimates as many as 200,000 people will exceed $2 million in healthcare spending in the next twenty years.

Health insurance is now perhaps the only type of insurance in the U.S. that is forbidden from setting limits on liability. If the choice is only between a government-run national plan and private insurers, the government plan will eventually win; PPACA comes close to guaranteeing that costs for private insurers will keep on rising and eventually they will be priced out of the market. The federal government, not bound by the rules it applies to private insurers, will be the low cost option, and eventually the only option.

Our only opportunity to save private insurance in the U.S. is to change who answers the questions. If the federal government refuses to allow private insurers to draw financial boundaries around the group, and many people don’t trust the federal government, then the only answer is to let the risk pool itself draw the boundaries – to let the group of people actually receiving the care decide which financial limits they are willing to live with.

This is a radical notion – letting the group of people receiving the care decide where to draw the boundaries. It would mean accepting that different groups might draw the boundaries differently. It would mean accepting that some people would be allowed to die because the cost of saving them is too high, because spending a million dollars on one person’s treatment would bankrupt the risk pool.

The challenges to self-managed groups aren’t technical – they would be easy to implement in our existing healthcare care system and further offer a path to meaningful healthcare reform. Instead, the challenges are ideological. Conservatives have spent decades trying to shoe horn healthcare into the framework of the free market and have somehow convinced themselves that care should be bought by individuals, not the risk pool they are part of. Accepting self-managed groups would mean accepting that yes, healthcare is a group activity. Liberals don’t like the idea that everybody would not have exactly the same coverage, and that some self-managed groups could in theory introduce personal responsibility and even morality into their definitions of covered care. And perhaps some Liberals don’t actually think our citizens are smart enough to draw their own boundaries around acceptable care.

Most importantly, of course, the Liberals are winning – if PPACA continues unchanged we will eventually have a national health insurance plan. Conservatives, for all they dislike the idea of a national plan, seem to dislike reality even more. They continue to promote solutions that play well on Fox News but have only a passing connection to how healthcare actually works; its hard to imagine them winning the battle of ideas, let alone actually changing the legislation. Self-managed groups can win the battle of ideas, and provide a real alternative. Giving the group the ability to make its own decisions on how much to spend to save a life is our only real chance of keeping that decision out of the hands of the our government.

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