Universal Medicare Choice: Winners and Losers
Over the past month, I have outlined a plan called Universal Medicare Choice. In the first week I outlined the basics of the plan which is financed as a single payor but maintains individual choice and the private market. In the second week I outlined the costs. In week three I discussed some of the ancillary and peripheral enabling reforms.
Now we get to the most contentious part of any reform. Who wins, who loses?
The key things to remember are that Universal Medicare Choice works because private entities compete to manage care and costs. The key to making this effective is to create a competitive environment rather than an environment filled with market hazards such as absence of transparency and or imbalanced market power.
While the plan makes “retail” insurance coverage more of a norm, employers are not pushed to the side. Creative, motivated employers can continue to provide insurance coverage if they believe that they can do better and the enhanced transparency rules make it easier for Employers to create compelling options.
Free the market; the market will free us.
That said, when you change a $3.5 Trillion industry, disruption will result. As long as that disruption is creative and leads to better options, that’s a good thing. So how will disruption ripple through the industry? Who wins? Who loses?
People. Winners. First of all, everyone who is mortal wins because a more competitive and transparent health care environment will mean better health care at better prices in the long run. Secrecy creates a barrier to entry for new and disruptive models. Reduce barriers to entry and you get more market entrants, which means more choice. Market participants will compete on price, service, and quality.
In fairness, there could be an increase in the overall tax rate (the where and how much and who gets an increase or decrease is beyond the scope of the article). As a general matter, if you are lower on the economic spectrum you are less likely to have to have the tax consequences outweigh the personal benefits you receive. Warren Buffet on the other hand is likely to pay more than he gets out of it personally (at least directly)
Employers. Mostly Winners. If you are an employer who currently offers your employee’s health insurance, you’re in pretty good shape. The worst thing that can happen to you is nothing. The best thing is that you now have more options to choose from.
You can continue to offer a plan like you have now. You can choose to self-insure and create your own program given the increased transparency, or you can safely let your employees get their own insurance using their vouchers. If you are a highly profitable employer, you may pay more in taxes.
Insurance companies/ Carriers. Mixed. Change does not favor the incumbent, but it does favor the nimble. If you are an insurer and have most of your business in large employer-based accounts, those accounts are in peril. Some may let their employees buy their own insurance with vouchers. Some may use the new transparency rules to explore new options such as self-insurance and direct contracting with providers. Insurers that can show that they add value and do more than process bloated claims will thrive. Insurers that expect a premium for commodity services will falter.
New Market entrants will be able to use the transparency tools to make market entry easier. Negotiating reasonable provider contracts is critical for market entrants, and transparency makes that easier. From there, they can begin experimenting with innovative designs that will push the market forward.
Providers. Mixed. Providers that are efficient and add value will get more business, providers that are costly and bloated will have challenges. This will undoubtedly create challenges for a number of providers as they struggle with how the dynamics of the more transparent and competitive system shake out. As prices become more transparent and carriers / insurers are better able to discern what they are paying for providers should expect that more will be demanded of them. Providers should expect margins to be challenged (from individual doctors to hospitals).
Pharmaceutical Companies. Losers. One of the key pieces of enabling legislation is to free up the pharmaceutical market and make it more competitive by increasing price transparency and allowing carriers/ providers/ individuals to source their purchases across national boundaries.
Brokers and Consultants. Mixed but lots of turmoil. There is a lot of money made by brokers and consultants who advise employers (mainly) and individuals about insurance purchases and designs. Many employers may move to take more control of their health care expenditures. Brokers and Consultants who can manage the transition to becoming operational and consultative will win a lot of business (taking it primarily from insurers/carriers who are unable to make the transition).
This is especially true of brokers that can integrate novel ways of actually working with employees to reduce care costs. Brokers who just help with benefit design will fall behind. Brokers who help individuals choose plans will also win or lose by how well they perform. More and more on-line tools will be developed to make choosing easy. Brokers who can help individuals see the signal through the noise will do well. Those that can’t will fold.
Technology Providers. Winners. Technology tends to be disruptive to traditional industries. Tech providers who can leverage data to make the industry more transparent for customers are one type of winner. Another type is the kind that can help manage costs or referrals through better care or better decision making.
The truth is that this is a mixed bag for the industry — which makes sense. No plan with a goal of getting more for the same money or less money will be completely neutral to those affected. As long at the consumer wins out in the end, those are fair costs to bear.
I don’t expect this plan to be universally loved, but it is, I think remarkably fair. Winners win by doing more and doing it better, rather than though market power and anti-competitive practices. Decisions get made using data, not blindly based on marketing spend. Everyone gets coverage, but choice and the free market is enhanced not squashed.
I am open to hearing criticism. Please respond and comment. Make me rethink my conclusions and ideas through cogent critique. It will give me a chance to refine, expand, or scuttle depending on the incisiveness of the feedback. Consider it a challenge.
