Why isn’t Mayor Pete talking about the Indiana program that’s superior to single payer?
Democratic presidential candidate Pete Buttigieg has a strange blind spot when it comes to health care reform. Despite being the mayor of one of Indiana’s most famous cities, he appears to be completely unaware that the state of Indiana has already come up with two health insurance systems that both work much better than the single-payer variants that he, Sen. Bernie Sanders (I-Vt.) and Sen. Elizabeth Warren (D-Mass.) are proposing.
The first system has been offered to state employees since 2007, while the second has been available to Indiana Medicaid recipients since 2011. They are both wildly popular with participants and just as effective as traditional insurance systems in providing quality health care. Even better: Both have also been shown to reduce medical spending by 35 percent relative to tradition forms of private or government health insurance, including PPOs, HMOs and Medicaid.
These Indiana programs can deliver the promised benefits of single-payer health care — including universal access and coverage for pre-existing conditions — while also providing participants with the personal incentives for cost control that are completely absent in the Canadian and British single-payer systems.
Both of Indiana’s programs achieve these remarkable outcomes by pairing a traditional health insurance plan part of whose annual premium is paid for by the state with a health savings account into which the state deposits an amount equal to the annual deductible every single year.
Those annual gifts ensure financial security because they guarantee that participants always have enough money to cover out-of-pocket costs. But they also provide a strong incentive for comparison shopping and prudent decisionmaking because they give participants some skin in the game. In particular, there is a strong incentive to keep costs under control because participants are told – truthfully – that any money they don’t spend in a given year is theirs to keep and will roll over in their health savings accounts to the next year.
When people are given that personal financial incentive, they suddenly start opting for high-quality, low-cost options. That includes selecting low-cost generic drugs instead of high-priced brand name drugs that are chemically equivalent and going to urgent care centers for $100 a visit rather than emergency rooms that cost $800 per visit.
Because all spending below the annual deductible has to be paid for out of their personal HSA balances, participants spend prudently. They cut back on wasteful spending while still going in for mammograms, annual checkups and other forms of preventive maintenance at the same rate that they did back when they were enrolled in traditional insurance.
By contrast, single-payer systems deny skin in the game not only to patients but also to providers. In single-payer systems, there is no personal financial incentive for providers to be entrepreneurial and figure out how to deliver higher quality or lower costs.
The only fix is to do what Indiana has done and empower consumers with both money in their pockets and the right to choose how and where it gets spent. When doctors, nurses and hospital groups know that consumers are in control, they must cater to those consumers and deliver what they actually want, which is high-quality health care at affordable prices.
Whole Foods Markets has been using a version of Indiana’s system since 2002. It’s approved by both of the company’s unions and is very popular among employees. In its first year, it showed a decrease in health care spending similar to the decline Indiana experienced. This experience suggests that the Indiana system works just as well in the private sector as it does when the government is in charge.
Even better, this innovative method for running a health insurance system is a net cost saver. The 35 percent reduction in health care spending on the backend more than pays for the annual HSA deposits that have to be made on the front end. There is in fact an 11 to 12 percent net savings relative to PPOs, HMOs, Medicaid and other forms of traditional private or public health insurance even after accounting for the cost of funding all those health savings accounts each year
So, Mayor Pete, let me ask you: Why not push for your home state’s innovation? Why not argue for empowering consumers while also delivering financial security? Why not fight for a system that actually bends the cost curve down? Your home state of Indiana has led the way, let’s keep the momentum going.
Sean Flynn is an associate professor and chair of the economics department at Scripps College. He is the author of both the international best seller “Economics for Dummies” and most recently “The Cure That Works: How to Have the World’s Best Health Care—at a Quarter of the Price.”
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