A proposal from health reform has been cobbled together by Jacob Hacker in concert with the Economic Policy Institute (EPI). The Lewin Group (part of Ingenix) has analyzed the costs of the proposal, and based on their assumptions, they find it’s a zero sum scenario. Lewin’s must-read cost impact analysis can be found here at the EPI’s website.

The original Health Care For All plan was published in January 2007 as an EPI Briefing Paper by Jacob Hacker. Leave it to Hacker, the author of the terrific book The Great Risk Shift, to put together a more-than-modest proposal that Lewin calculates would cover nearly 100% of Americans.

The proposal builds on two coverage concepts already accepted by Americans: Medicare and employers. The plan would, in its own words,

“extend insurance to all non-elderly Americans through a new Medicare-like program and workplace health insurance, while creating an effective framework for controlling medical costs and improving health outcomes to guarantee affordable, quality care to all. It is at once comprehensive, realistic, consistent with American values and beliefs, and grounded in the best elements of the present system. It combines employer and personal responsibility with a strong public commitment to ensuring that American workers and their families and American employers can afford coverage. It promises better care, lower costs, more choice, healthier citizens, and immensely stronger guarantees for workers and their families. And it promises real savings for employers and state governments—without unraveling existing sources of health security, without forcing workers to obtain coverage on their own, and without pressuring patients into Health Savings Accounts or tightly managed health maintenance organizations (HMOs).”

The plan is based on social insurance, which Uwe Reinhardt has long extolled as a central, rational and moral tenet for health reform in the US. Social insurance is built on the largest possible pool of people from healthy to sick, across all socioeconomic strata. The pool is sufficiently large that it provides leverage required to drive quality improvements in health care, to negotiate prices and to leverage administrative costs across the population.

To fund the plan, revenues would come from several sources:

  • Payroll taxes for employers that don’t provide health coverage
  • Individual premiums for individuals covered in the health plan
  • Federal and state government savings to Medicaid and SCHIP that would be transferred to the plan, and,
  • “Other savings and new federal revenues,” which may include new taxes assessed on liquor and tobacco, along with, potentially, other “levies.”

Health Populi’s Hot Points: Building on what people know and trust has its attractions: Americans have not had a good track record adjusting to change when health care is involved. So basing a plan on Medicare and the employer-sponsored system would be familiar institutions that people generally seem to trust. This is no single-payer plan. Hacker writes that the plan would enable, “a constructive public–private dynamic that would reward the sector best able to control costs.”

Within this zero-sum game, there is a lot of fine print. For example, in the identification of revenue sources for the plan, watch out for those “other levies” which may need to be generated to fund coverage. The Levin team does a lot of calculating based on elasticities of demand and other assumptions. I recommend that you review these for yourself as, always, the devil’s in the details. Still, there are well-documented assumptions in these models.

The Lewin team also quantifies various stakeholder impacts in its report. Note in particular that prescription drug prices would be negotiated by a system similar to the one used by the Veterans Administration (which today extracts deep discounts from drug companies). At the same time, 46.5 million people would gain access to drugs through the plan, so prescription volumes for drug companies could increase for those drugs inclu

ded in a formulary. But generics would no doubt be very popular in this plan.

I applaud the requirement for an individual to have a medical home — a primary care doctor who coordinates care. This is the touchpoint in the health system that determines a majority of medical spending. Providers are a key component for health reform that’s missing in most presidential candidates’ health reform discussions.

With so much talk about health reform right now, the Health Care For All plan presents a coherent, straightforward program for achieving universal coverage in the U.S. Having read all 1,342 pages of the Clinton health plan in 1993, Hacker’s plan and Lewin’s economic analysis are lighter reading, far more politically palatable and won’t require major changes for people to make in the short run. For those without health cover, the change will be most welcome.