Restoring Quality Health Care: A Six-Point Plan for Comprehensive Reform at Lower Cost

Restoring Quality Health Care: A Six-Point Plan for Comprehensive Reform at Lower Cost

by Scott W. Atlas
Restoring Quality Health Care: A Six-Point Plan for Comprehensive Reform at Lower Cost

Restoring Quality Health Care: A Six-Point Plan for Comprehensive Reform at Lower Cost

by Scott W. Atlas



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The Affordable Care Act (ACA) granted the federal government unprecedented regulatory authority over health insurance and the health care industry. Those changes ignore the fundamental problems with the existing system: the incentives that have caused runaway costs and excluded millions of Americans from accessing the world's best medical care. Many former ACA supporters now push for an even more extreme takeover of the US system: overt single-payer health care, or “Medicare for All.”In Restoring Quality Health Care, Dr. Scott W. Atlas offers a fundamentally different approach to improving America's health care system. Instead of framing the debate with the traditional trade-offs—fewer benefits versus higher taxes—his plan is modeled around a new paradigm: restoring the appropriate market-based incentives to increase the quality of health care and reduce its costs. He proposes a six-point reform plan for US health care centering on lower-cost catastrophic coverage and universal, significantly expanded health savings accounts (HSAs). The plan transforms the US health care system and enhances innovation by instilling market-based competition and empowering consumers through incentives and strategic deregulation. Most important, the health care reforms in this plan reflect the key principles held by Americans concerning what they value and expect from health care in terms of access, choice, and quality.

Product Details

ISBN-13: 9780817923969
Publisher: Hoover Institution Press
Publication date: 09/08/2020
Sold by: Barnes & Noble
Format: eBook
Pages: 178
File size: 2 MB

About the Author

Scott W. Atlas, MD, is the Robert Wesson Senior Fellow in Scientific Philosophy and Public Policy at Stanford University's Hoover Institution and a member of Hoover's Working Group on Health Care Policy. Scott Atlas W., MD (Author), Stanford, California (United States of America) - Scott W. Atlas, MD, is the Robert Wesson Senior Fellow in Scientific Philosophy and Public Policy at Stanford University's Hoover Institution and a member of Hoover's Working Group on Health Care Policy. Scott W. Atlas, MD, is the Robert Wesson Senior Fellow in Scientific Philosophy and Public Policy at Stanford University's Hoover Institution and a member of Hoover's Working Group on Health Care Policy. Scott W. Atlas, MD, is the Robert Wesson Senior Fellow in Scientific Philosophy and Public Policy at Stanford University's Hoover Institution and a member of Hoover's Working Group on Health Care Policy.

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Restoring Quality Health Care

A Six-Point Plan for Comprehensive Reform at Lower Cost

By Scott W. Atlas

Hoover Institution Press

Copyright © 2016 Board of Trustees of the Leland Stanford Junior University
All rights reserved.
ISBN: 978-0-8179-1944-3


US Health Care Today: Setting the Record Straight

America is facing its greatest health care challenges in history. Unprecedented demand for medical care is a certainty. According to the Department of Health and Human Services' Administration on Aging and US Census Bureau statistics, the number of Americans sixty-five and older has increased by a full six million in the past decade alone, to more than 13 percent of the overall population, while those age eighty-five and older have increased by a factor of ten from the 1950s to today's six million (Figure 1.1).

Older people tend to have the most disabling diseases, including heart disease, cancer, stroke, and dementia — the diseases that depend most on specialists and complex technology for diagnosis and treatment. Simultaneously, obesity, America's most serious health problem, has increased to crisis levels, already affecting more adults and children in the United States than in any other nation (Figure 1.2); given the known lag time for such risk factors to impact health, the next decades promise to reveal obesity's massive cumulative health and economic harms.

These daunting demographic realities combine with serious fiscal challenges in US health care that promise to worsen over the near future in the absence of change. America's national health expenditures now total more than $3.1 trillion per year, or more than 17.4 percent of gross domestic product (GDP), and they are projected to reach 19.6 percent of GDP by 2024. Medicaid, originally covering 250,000 beneficiaries, has expanded to cover more than seventy million people at a cost of $500 billion per year. Medicare spent less than $1 billion in its first year, but today it spends more than $260 billion annually on hospital benefits alone and $615 billion in total. With the aging of the baby boomer generation, the program's costs in its current form appear unsustainable when one understands that in 1965, at the start of Medicare, workers paying taxes for the program numbered 4.6 per beneficiary, whereas that number will decline to 2.3 in 2030 (Figure 1.3).

The 2014 annual Medicare trustees report projects that the Hospitalization Insurance trust fund will face depletion in 2030. Regardless of trust fund depletion, Medicare and Medicaid must compete with other spending in the federal budget. With the current system, and barring new taxes and benefit cuts, federal expenditures for health care and social security are projected to consume all federal revenues by 2049, eliminating the capacity for national defense, interest on the debt, or any other domestic program.

At the same time, we have entered an extraordinary era in medical diagnosis and therapy. Innovative applications of molecular biology, advanced medical technologies, new drug discoveries, and minimally invasive treatments promise earlier diagnoses and safer, more effective cures. The possibilities of improving health through medical advances have never been greater.

Before we consider reforms designed to reach the promise of twenty-first-century health care for all Americans, we need to understand the state of US health care prior to the Affordable Care Act. Whether defined by preventive screening tests; waiting times for diagnosis or specialist appointments; access to treatment for the major chronic diseases; timeliness of biopsies for cancer; waits for life-saving and life-changing surgeries; or availability of safer medical technology and the newest drugs that save lives, Americans enjoyed unrivaled access to care. And, just as important, the objective data from the world's leading medical journals prove that American medical care already delivered exceptional results for virtually all of the most serious diseases. Those results include superior survival for major and rare cancers, better outcomes from heart disease and stroke treatment, and more successful treatment of chronic diseases such as hypertension and diabetes than in those countries with centralized health systems heavily controlled by governments. The inescapable conclusion on the basis of the facts is that both quality of medical care and the access to it have been superior in the United States as compared with those nationalized systems heralded as models for change by ACA supporters (Figures 1.4 and 1.5).

Partly based on now-discredited studies alleging the poor quality of America's health care, the ACA was enacted. Its two core elements, a significant Medicaid expansion and subsidies for exchange-based private insurance, will each cost about $850 billion over the next decade. Fundamentally, the ACA consists of a huge centralization of health care and health insurance to the federal government, driving government centralization of health insurance to unprecedented levels while dramatically pushing up private insurance premiums. During the first three quarters of 2014, 89 percent of the newly insured under Obamacare were enrollees into Medicaid, not private insurance. Together with population aging, the Centers for Medicare and Medicaid Services (CMS) projects that the 107 million people under Medicaid or Medicare in 2013 will rapidly increase to 135 million just five years later, a growth rate tripling that of private insurance. At the same time, we are witnessing increasing consolidation under Obamacare in several areas of health care, including insurers, doctors, hospitals, and pharmaceutical companies. This ongoing consolidation is going to reduce competition and therefore hurt consumers.

But the goals of health reform demand quite the opposite. Facts show that private insurance is superior to government insurance for both access and quality of medical care (see chapter 2). History shows that the best way to control prices is through competition for empowered, value-seeking consumers. Instead of shunting more people into insurance and care provided by the government, heavily subsidized by the government, or massively regulated by the government, reforms should focus on how to produce competition-driven markets that will deliver innovation and cost savings, thereby maximizing the availability and affordability of the best care for everyone. The key is to move away from centralized models based on misguided incentives necessitating more and more taxation to one of individual empowerment with personal responsibility.


Reform #1: Expand Affordable Private Insurance

Principal Features of Reform #1: Expand Affordable Private Insurance

* Permit all insurers (including all companies available on any state or federal exchanges) to offer true high-deductible, limited-mandate catastrophic coverage (LMCC) plans to all citizens, covering hospitalizations, outpatient visits, diagnostic tests, prescription drugs, and mental health.

* Transfer ownership of coverage to the individual so that it is portable; employer still available for sign up and automation of payments

* Permit insurers to eliminate Obamacare's 3:1 age-based premiums

* Permit insurers to risk-adjust premiums for obesity, as is already allowed for smoking.

* Eliminate the health insurance premium excise tax.

The Importance of Private Health Insurance

Broad access to doctors and hospitals comes with private insurance, not government insurance. The harsh reality awaiting low-income Americans is that most doctors already refuse to take new Medicaid patients because of government-defined low reimbursements, numbers that dwarf by eight to ten times the percentage that refuse to take new private insurance patients. According to a 2014 Merritt Hawkins report, 55 percent of doctors in major metropolitan areas refuse to take new Medicaid patients. The Department of Health and Human Services reported in December 2014 that even of those managed care providers signed by contract and on state lists to provide care to Medicaid enrollees, 51 percent were not available to new Medicaid patients.

Like Medicaid, a superficial look at Medicare appears satisfactory to most of its beneficiaries, but on scrutiny we see a different scenario unfolding today. While the population ages into Medicare eligibility, a growing proportion of doctors do not accept Medicare patients. According to the Medicare Payment Advisory Commission, 29 percent of Medicare beneficiaries who were looking for a primary care doctor back in 2008 already had a problem finding one. In 2012 alone, CMS reported that almost ten thousand doctors opted out of Medicare, nearly tripling from 2009; according to the Texas Medical Association, the number of Texas physicians accepting Medicare patients dropped to 58 percent in 2012. In a 2014 physician survey, about one-quarter of doctors no longer see Medicare patients or limit the number they see; in primary care, 34 percent refuse Medicare patients. The percentage of doctors who closed their practices to Medicare or Medicaid by 2012 had increased by 47 percent since 2008.

Beyond access to care, the quality of medical care is also superior with private insurance. For those with private insurance, that quality includes fewer in-hospital deaths, fewer complications from surgery, longer survival after treatment, and shorter hospital stays than similar patients with government insurance. Restricted access to important drugs, specialists, and technology under government insurance most likely account for these differences.

The Harmful Impact of the ACA on Private Insurance

Affordable private insurance options have clearly not been improved by the ACA. As a direct result of the ACA's new regulations on pricing and its new mandates on coverage, the law has already forced more than five million Americans off of their existing private health plans. The Congressional Budget Office (CBO) projects that a stunning ten million Americans will be forced off their chosen employer-based health insurance by 2021 — a tenfold increase in the number that was initially projected back in 2011. Meanwhile, private insurance premiums have greatly increased under Obamacare and are projected to skyrocket in 2016, in some cases increasing by 30 percent to 50 percent and more. The shift into government insurance itself also increases private insurance premiums. Because government reimbursement for health care is often below cost, costs are shifted back to private carriers, pushing up premiums. In some calculations, the underpayment by government insurance adds $1,800 per year to every family of four with private insurance. Nationally, the gap between private insurance payment and government underpayment has become the widest in twenty years, doubling since the initiation of Obamacare, according to a 2014 study by Avalere Health. Even more ominous, consolidation among the five big private insurers has accelerated, a trend that most analysts believe will raise premiums for individuals and small businesses. This rise will impact not only the individual but also taxpayers, because taxpayers subsidize those increasing premiums under Obamacare.

Choices of private insurance and covered providers under them are dwindling as well, despite the theory that the law would increase insurance choices and competition. According to a December 2014 study, the exchanges offer 21 percent fewer plans than the pre-Obamacare individual market, with a decrease to 310 nationally in 2015 compared to 395 insurers in the individual market in 2013, the last year before this implementation of Obamacare.

For middle-income Americans dependent on subsidized private insurance through government exchanges, Obamacare is also eliminating access to many of the best specialists and best hospitals. McKinsey reported that 68 percent of those policies cover only narrow or very narrow provider networks, double that of the previous year. The majority of America's best hospitals in the National Comprehensive Cancer Network are not covered in most of their states' exchange plans. And as of late 2014, we are experiencing a severe shortage of the specialists essential to diagnose and treat stroke, one of the most disabling and lethal diseases in the United States (in some cities, the number is actually down to zero) under Obamacare insurance plans. The narrow network strategy is hitting even more Americans in 2015, as Obamacare exchange plans restrict access to doctors and hospitals far more than insurance bought off exchanges, in an attempt to quell insurance premium increases caused by the law itself.

Keys to Expanding Affordable Private Insurance

Fundamental change to private insurance is vital to leveraging consumer power and expanding health care access for everyone. The ACA has made private insurance less affordable and pushed health insurance reform in the wrong direction. It has furthered the erroneous view that insurance should subsidize the entire gamut of medical services, including routine medical care. When that inappropriate function of insurance is combined with the cloak of secrecy shielding health care prices and provider qualifications, consumers have neither an incentive nor the necessary means to invoke value into health care decisions.

On the other hand, high deductibles with catastrophic coverage would restore the essential purpose of insurance — to reduce the risk of incurring large and unanticipated medical expenses. Because they would pay for most medical care directly, consumers would have the incentive to choose wisely. Provider prices would consequently become more visible and align with what consumers value, rather than being set artificially or by government decree.

The behavior of American consumers counters the ACA's approach to insurance reform and validates the argument that higher-deductible coverage both generates more affordable insurance and reduces health spending. In the decade since the tracking of this type of coverage, consumers have increasingly selected high-deductible plans (Figure 2.1), and among those enrollees, a shift toward higher deductibles has continued (Figures 2.2 and 2.3). Consumer spending is significantly reduced for those in high-deductible plans, without any consequent increases in emergency room visits or hospitalizations and without the hypothesized harmful impact on low-income families or the chronically ill. Health spending reductions averaged 15 percent annually, and the savings increased with the level of the deductible and when paired with HSAs. More than one-third of the savings by enrollees resulted from lower costs per health care utilization, that is, value-based decision making by consumers. Additional evidence from studies of consumers' use of magnetic resonance imaging and outpatient surgery shows that introducing price transparency and defined-contribution benefits further encourages price comparisons by patients. While especially relevant to patients using high-deductible plans with HSAs, these reforms would reduce expenditures by all health care consumers.

Affordable private insurance, specifically with high deductibles and HSAs, should be a principal focus of health care reform (see chapter 3) in order to both improve benefits and reduce costs. To expand affordable private insurance options, we need to reduce onerous regulations on insurance, many of which have specifically harmed high-deductible plans. While consumers are still increasingly opting for plans with deductibles greater than $2,000, the growth rates have slowed compared to the growth before ACA mandates and restrictions (Figure 2.4). In addition, the premiums of high-deductible plans are accelerating faster after the passage of the ACA than any other coverage (Figures 2.5 and 2.6), although they remain less costly than other types of coverage. We cannot be certain whether these changes are entirely caused by Obamacare's regulations, such as limits on deductibles, but clearly health system reforms should not selectively make these plans less affordable for consumers. Restoring the choice of LMCC with truly high deductibles would add the more affordable coverage that many consumers value.


Excerpted from Restoring Quality Health Care by Scott W. Atlas. Copyright © 2016 Board of Trustees of the Leland Stanford Junior University. Excerpted by permission of Hoover Institution Press.
All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.
Excerpts are provided by Dial-A-Book Inc. solely for the personal use of visitors to this web site.

Table of Contents

List of Figures and Tables vii

Acknowledgments ix

Introduction 1

Chapter 1 US Health Care Today: Setting the Record Straight 5

Chapter 2 Reform #1: Expand Affordable Private Insurance 13

Chapter 3 Reform #2: Establish and Liberalize Universal Health Savings Accounts 25

Chapter 4 Reform #3: Instill Appropriate Incentives with Rational Tax Treatment of Health Spending 31

Chapter 5 Reform #4: Modernize Medicare for the Twenty-First Century 37

Chapter 6 Reform #5: Overhaul Medicaid and Eliminate the Two-Tiered System for Poor Americans 47

Chapter 7 Reform #6: Strategically Enhance the Supply of Medical Care While Ensuring Innovation 53

Conclusion 61

Key Questions and Answers on the Atlas Plan 65

Notes 101

About the Author 113

Index 115

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