Don’t “Black Box” the PPACA Essential Benefits Package

April 5, 2011

In the 1980s and 90s, the uber dry-witted comedian Steve Wright tickled audiences on the Tonight Show with thoughts such as “I received a package of powdered water today, but I’m not sure what to mix it with.” I saw him recently on the Craig Ferguson Show and it reminded me of one of his best jokes from his heyday:

 “Why don’t we make the entire airplane from the stuff the “black box” is made of?”

 Of course, he is referring to the fact that after every major airplane crash, the NTSB finds the “black box” flight recorders intact and usually in perfectly good working condition. The plane, of course, no longer exists – along with the dozens of unfortunate passengers who happened to be aboard.

 It doesn’t take long to note that airplanes are made of aluminum (and not steel, as is the “black box”) for one simple reason: weight. Aluminum in structured form is relatively strong and only a fraction of the weight of steel.  It is not a strong as steel, but it doesn’t need to be. Aluminum does the job. Of course, this allows the airplane to fly. In contrast, an airplane made of “black box” materials has a big problem: It won’t fly. It probably wouldn’t even get to the end of the runway as the landing gear would buckle at the first turn onto the active taxiway.

As HHS looks at creating the definition of “essential benefits package” required by PPACA, word came last month that over 300 lobbying groups and health care special interests had submitted their “issue/condition/solution” for consideration in the definition of “essential benefits package.” If HHS includes even a small fraction of “The 300,” it will build a plane made of “black box” material. It won’t fly; even the basic bronze plan will be so unaffordable as to be a non-starter.

It would be disastrous to see the linchpin of the new exchange benefit delivery system fail before take off. But there is an interesting idea that might appeal to both parties – and cause the exchange concept to flourish in earnest in both Republican- and Democrat-led states.

 President Obama recently issued a waiver giving states more flexibility in designing, launching and managing their exchanges. This was a good start. State leaders worried about “ObamaCare” in general, and the “black box” problem in particular, should ask that the waiver be expanded to allow states to define “essential benefits” as meaning their current individual plan mandates.

 This should work for everyone. The Federal government wants to cede more health care control to the states. The states don’t want Washington telling them what to offer. This change would make plans in states like Idaho (with only eight coverage mandates) attractive to Idaho residents, and potentially all Americans, due to their “aluminum” design that gets the job of health care coverage done at less cost.

 Next, the 29 states with GOP governors and/or state house leadership should bring back one of their better health care ideas and allow individual plans to be sold across states lines subject only to the home state’s mandates and resulting product design. Almost every state requires today that an individual plan provide a minimum $5 million of lifetime coverage – not a bad deal at all, especially if all plans in the USA are guaranteed issue. PPACA will require that all plans have unlimited lifetime caps. This sounds expensive. It really isn’t. The bulk of claims in health insurance happen in the $0-$10,000 amounts and the $100,000 to $1 million range.

 Requiring unlimited lifetime maximums, when spread across a large guaranteed issue individual pool, won’t impact plan pricing in a material way. Having up to 300 “conditions” included in an “essential benefits package” is the real problem. We will be buying coverage for conditions very few people will contract – exploding the cost of even the most basic health plan and therefore the entire PPACA bill as we expand coverage to tens of millions of new entrants.

 A state mandate and interstate competition model could also start a massive job-creating cottage industry. We envision this happening in smaller states willing to offer more basic plans at a better price. Don’t believe me? Look at what happened when South Dakota changed its banking laws to entice Citibank and others to move all retail credit card operations to their state in the 1980s: unemployment in South Dakota in those years was practically non-existent. The same would happen in Idaho and other states unwilling to allow their health care airplane to be built of steel.

During our discussions with dozens of states about powering their insurance exchanges, we also talk to state development officers, and they tell us there is a fierce battle being waged for corporations and jobs. This dynamic of state vs. state competition is happening now as states seek to attract corporations with low personal and corporate income taxes.  What would it mean to the great State of Nevada if health plans based there were to enroll 20 million lives across America over the course of the next 10 years in individual health plans with manageable “essential benefits” at a lower cost than other states? It turns out it would mean a lot. Becoming the leading provider of individual health plans could mean 20,000 jobs in Nevada – making a huge dent in its high current unemployment rate.

 One would think that the federal government and Democrat-led states would be in favor of this also. There is going to be a firestorm when the “essential benefits package” is published for comment and the word “essential” gets abused by special interests and lobbyists who insert their motorized scooter or [name another benefit] in the definition of “essential.” Voters wrath will know no limits when they find out the plane we thought we were all building together won’t fly because the designers forced the use of steel when aluminum was available and more than good enough.

Enhanced by Zemanta

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s