Commentary: Put health-care coverage in Pa. on sound economic footing

By Paul Mango

Obamacare has already failed, and it failed because the government violated several basic economic and free-market principles, resulting in devastating outcomes for those seeking coverage, people already covered, and taxpayers.

Under Obamacare, our most vulnerable citizens in Pennsylvania are paying more for health insurance with fewer choices. According to the Kaiser Family Foundation, individual premiums increased by more than 50 percent in Philadelphia this year. Deductibles for a family plan now exceed $6,000, and the choices continue to shrink.

Pennsylvania's Medicaid expansion will cost the commonwealth nearly $400 million annually by 2020 under the 10 percent matching rate imposed by Obamacare. This could jump to just under $2 billion annually should we revert to the legacy matching rate of 44 percent. Pennsylvania is already struggling to close a multi-billion-dollar budget deficit. These obligations will crowd out funding for education, public safety, and overdue investments in our ports, roads, and bridges.

Of course we all want our neighbors to have access to the care they need. But the delivery of affordable, high-quality care requires policy tethered to sound economics. Our health-care system is in dire need of innovation, yet the strict regulatory constraints imposed by Washington on insurers and health-care providers precludes it, relegating these organizations to the role of "public utilities."

We must unshackle health insurers, hospitals, doctors, and nurses from Washington's overreach. Pennsylvania should demand relief via special waivers offering lower costs, enhanced coverage, and better outcomes. With bold state leadership, we should enact four changes:

Offer special care for the most vulnerable: The 10 to 15 percent of our population suffering from advanced chronic disease consistently consumes 60 to 70 percent of our expenses. Managing their care with greater coordination, integration, and innovation is key to improving outcomes and effective cost management. This would require lump-sum, risk-adjusted reimbursement for providers.

New financial arrangements would permit providers to use the best technology possible to achieve better patient outcomes at much lower cost. Pennsylvania's health-care delivery systems are capable of achieving these outcomes today, if we simply get Washington out of the way.

Encourage personal responsibility. We must encourage participation in the health-insurance market rather than mandating it as Obamacare did. Some Americans obtain health insurance for the short-term purpose of having it pay for expensive medical services, then drop the coverage. This increases the cost to those who pay their premiums when they are not sick.

We should provide incentives to encourage continuous coverage by either requiring higher premiums for those who wait to buy coverage until they need services, or by asking them to pay for lapsed periods of coverage. Second, the indexing of premiums should instead be linked to one's health status rather than age. We can retain the limited ratio of 3:1 in terms of lowest to highest premium, but using age as the primary determinant of health status is inaccurate and discriminatory.

Allow for health insurance innovation. For those not suffering from advanced chronic disease, we should offer the option of using open network, lower-cost, catastrophic plans supported by health savings accounts. Those with lower incomes would receive refundable tax credits adequate to cover the premium and contributions to their health savings accounts for deductibles. Patients would pay a portion of services they consume, but with an understanding of the price and quality of care offered. Pennsylvania should require this level of transparency from its providers.

Emphasize wellness, not treatment. A growing percentage of our health-care costs is attributed to behavior and social context. We should place much greater emphasis on prevention and addressing these causes of poor health (e.g., smoking, poor diet, and substance abuse). The costs associated with congenital conditions and contagious disease are now minor; thus, the time is right to focus on wellness. Recent studies in Oregon suggest Medicaid coverage, by itself, has done little or nothing to actually improve the health and wellness of beneficiaries. We should engage trusted community organizations (e.g., the YMCA, veterans' groups, faith-based organizations), which understand the social context of their members, to help.

Health-care spending in Pennsylvania is the fastest-growing part of the budget, with increases far exceeding economic growth. What we need now is bold leadership, new ideas, and innovation found in nearly all other sectors of our economy.

We must be financially responsible, compassionate providers of health coverage for our most vulnerable citizens. We have the best chance of realizing this by drawing upon sound economic principles and rapid innovation. Let's move ahead toward a more effective approach to meeting the needs of Pennsylvanians.

Paul Mango is the former head of McKinsey's Center for U.S. Health Reform and a prospective candidate for governor in Pennsylvania. pauldmango@gmail.com @paulmango6