Duke/Peking University – Day 5

If you are just joining our blog community – this entry is the firth part of my continuing coverage of Duke University’s two week Global Health certificate course at Peking University.  For more background – Day 1, Day 2, Day 3, Day 4. For an article I wrote related to Day 2 activities, called  Moral Hazard and Chinese Insurance, go here.

Don Taylor’s Friday, July 31s lecture was wrap up of the week’s, and coalesced in a three part ‘Big Finish’ – How to expand insurance coverage.  How to Reduce costs.  And, Mistakes to avoid when creating a health system in China.

The last question is perhaps the most interesting and so I will post my notes from that discussion at the top of the post.  I particularly liked point #7, and I think it showed a very good understanding of the audience on the part of the lecturer, Don Taylor.

Mistakes to Avoid (When Building a healthcare system for China):

1.)    Do not provide large subsidy for rich to get private insurance

1. 1. Subsidies need to be clear

2.)    Don’t deny the existence of limits for what medicine can do

1. 1. The USA is terrible about having a cultural conversation about the limits of medicine.  Some people like to think that we will technology our way to a 300 year life span

3.)    Pay attention to the incentives in how doctors and hospitals are paid

1. 1. Fee For Service, capitation, salary

4.)    Not much evidence that markets for insurance reduce health costs

1. 1. Private insurance selects out sick people and those who need care the most
   2. Markets work well for lots of things like shoes, but its not certain that this is the case for health

5.)    You can have some ‘market notions’ inside a system that may help improve quality

1. 1. Choice of doctor, hospital
   2. If you have a system where patients have these kind of choices it will incentivize the health system to be better
   3. This can be done even within a completely government financed health system – ex. provide patients with multiple care giver options within the structure of the system.

6.)    Be careful with age-related insurance financed via payroll taxes (off of employment), demographic changes will greatly affect such a system

1. 1. Baby boomers in the US are about to start retiring in 2012.  Medicare beneficiaries are about to sky rocket.  Avoid this problem.
   2. It works better when you have one system for everybody as opposed to a system that carves out the elderly folks for financing.  Germany and Japan are good examples.

7.)    You can’t or shouldn’t copy another system.  You can learn from them, but your job is to build the CHINESE health system

How to expand insurance coverage:

1.)    Employer mandate, industries have to provide insurance OR pay a tax

1. 1. Exempt small businesses with payroll < $500,000/year
      1. i.      The senate negotiating committee has been negotiating this number for abou 20 days.
      2. ii.      With the number where it is at now, you are probably still going to end up with 5-7% of Americans uninsured
   2. Individual mandate – you tell individuals whose employers pay tax that they must buy insurance
   3. The lesson is that if you use employment to cover people in your country, then you will never cover everyone.  It is susceptible to people losing their jobs, and there will always be the issue of exemption for small businesses.  This is particularly crucial to the psyche of America, built upon the idea that someone can go from the garage to IPO.

2.)    Medicaid – cover those who don’t have employment insurance

1. 1. This is difficult because you always deal with the issue of cut offs.
      1. i.      If the cutoff for Medicaid is 50,000 but someone makes 50,001, then they have an incentive to make less.  Boosting the cut off to 52,000 does not solve the problem.

3.)    A  gov’t plan that people could choose (opt into)

1. 1. This is very controversial and if he had to guess, Don says that this will not become law.

4.)    States develop insurance cooperative

1. 1. Use many ways to expand insurance
   2. A state would basically say to an individual or an employer, here are all the insurance plans in our state, lets figure out how to get you the best deal based on your need
   3. Essentially what a lot of people are saying, is “we don’t want government, we want private insurance.  But we know that private insurance isn’t perfect, so we are going to set up a system to guide the individual through a process of getting good coverage.

How to reduce costs:

1.)    Limit tax subsidy of private insurance

1. 1. We would be limiting the upside-down nature of this subsidy.  A lot of people, both conservative and liberal are now saying this makes a lot of sense.  This would be a huge change.  We have had unlimited subsidy (meaning our health insurance subsidies are considered un-taxable income) for health insurance in the USA since WWII (1942).  This is an example of how if you make a shortsighted decision about health insurance the negative repercussions can last for decades.
      1. i.      This has created many generations of workers is that they got “benefits” from a job.  If someone pays for your health insurance then you likely end up with more health insurance than you would choose if you paid for health insurance yourself.
      2. ii.      You can imagine someone in China saying, “lets give all sorts of tax benefits to increase private health benefits.”  In the short run it might be a very good way to expand health insurance, who knows.  But thirty years from now you might be in the same boat as the USA.

2.)    People pay more of own care

1. 1. This goes hand in hand with limiting the tax subsidy on private insurance
   1. This speaks of multiple problems.
      1. i.      Some people have too much insurance and some people have less
      2. ii.      And, some people need to pay more for their care, and others less

3.)    Competition in insurance exchange

1. 1. The industry is not transparent.  There is not enough parallel information.  If we set up insurance exchanges and figure out a way to compare information then insurance prices could go down
   2. One thing about the insurance industry is that they have been welcome to figure it out for the last 40 years and they have not. So optimism around this idea is not high.

4.)    Board to consider health decisions in Medicare

1. 1. This is a big one
   1. The Medicare program does two things
      1. i.      They set the price that they pay
      2. ii.      They do almost nothing in deciding what actually gets done – this is left exclusively in the realm of the doctor and the patient
   2. Medicare is not the only offender in the healthcare system, but there is a lot of money being spent here that is either of marginal or no benefit
   3. The idea is to create a health board that is isolated from the US congress.  This is extremely controversial – we have never done this before.  The reason you have to keep congress out of this is that elected officials just would not be able to do this.  Each politician would want their own special circumstance.  The way this would work is that a group of individuals would produce a comprehensive list of changes each year.  Then congress would have to vote yes or no on the entire package.
   4. This is modeled on the base-closing commission.  The military base closing commission would make a proposal and congress would either approve it or not approve it.  They could not go in and change it line by line.