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Rational Health Reform for Conservatives

(c) Sam Kinney, 2009.  All rights reserved.

Health reform is a huge topic. The complexity and sheer scale of the problem nearly ensures that mainstream media cannot contribute to the debate, because the details and reality don’t fit in neat sound bites. Further, many of the issues are simply technical beyond the expertise of many observers. If the financial crisis is any indicator, the media will simply miss the important points.

The unfortunate reality is that health reform takes more than a few paragraphs to explain. Not constrained to sound bites, I will attempt to write a full proposal to address US healthcare restructuring.

I actually call this a quasi-conservative proposal because I believe some of its elements will sound counterintuitive for conservatives. My bias is generally against government meddling or entitlements. What you’ll see in my proposals are steps government can take to harness MORE COMPETITIVE MARKET FORCES. Market forces are already blunted in the current healthcare system, and are threatened to be eliminated by other proposals. (As an aside, I spent the most important years of my career designing market structures and technology to enhance competition in complex marketplaces.)

In places, I inject my personal anecdotes and biases, in an attempt to engage conservatives in the discussion. In a true policy paper, obviously, such interjections would have no place.

Notably, I have punted on discussing how to pay for health care reform. This is intentional. First, I lack the resources to model the sources and uses of funds to cost out all of the changes, although I believe my restructuring could be implemented in its entirety without significantly changing government outlays. I do, however, point out structurally where social subsidies are best applied when there is a political consensus to do so. Second, though, is that my proposals should be enacted regardless of whether we adopt a universal mandate and elect to subsidize healthcare for those currently uninsured. My proposals would make the current market work better, and perhaps even lead to savings that make a universal mandate more affordable.

In the balance of this paper, I discuss first a proposal for structural reform of the US healthcare system. I finish with some of the political talking points that might be raised to defend the proposal.

Background

Healthcare reform means different things to different people. To some, it means providing insurance coverage to the uninsured. To others, it means controlling expenditures as a percent of GDP. To others, it means removing waste and inefficiency so that we get the most bang for our buck. Because “reform” applies to so many different topics, my proposal is long and comprehensive.

I would note from the outset that rising healthcare consumption as a portion of GDP should be expected. We’re all running around as if it’s a surprise that healthcare has approached 17% of GDP. First, note that we currently provide incredible subsidies to healthcare, through the tax exemption of employee benefits, through Medicare, Medicaid, and SCHIP. When you subsidize something, you get more of it. Second, if we were to look back before the Industrial Revolution, we’d find that agriculture’s share of GDP was dominant. We don’t eat less now. We simply make everything we need, in far greater variety, with fewer resources. Manufacturing rose to a dominant portion of GDP, then fell off as we were able to make everything we needed with fewer resources. Services took on a larger portion of GDP as manufacturing productivity exploded. It should be no surprise that as service sector productivity has improved, that healthcare is just the next sector of the economy to be growing in importance. Healthcare and education haven’t experienced the productivity gains of manufacturing and agriculture, because they’re still practiced largely in a person-to-person, apprentice model.

Structural Reform–Summary

America can bring to bear much of the best of the current system, retain its allegiance to market-oriented solutions, and simultaneously, address the needs embodied by current impetus for healthcare reform. Reflexive proposals for a government-run, single-payer solution a la universal Medicare simply lack a creative understanding of what is possible with effective design of a competitive system.

In my proposed solution, government assumes the role of contracting officer and risk management overseer, while private insurance companies and a private provider network deliver our actual healthcare in a competitive environment. How to pay for it is almost completely separable from the structural reforms I propose.

My summary solution includes the following features, each discussed more fully in the sections that follow:

Dissociation of Health Insurance from Employment. Health insurance availability must be divorced from the employment relationship. While we seem to recognize that small business is our nation’s job creation engine, we persist in subsidizing big companies at small company expense through the tax-free treatment fringe benefits.

National Insurance Regulation. National regulation of health insurers, with companies chartered to offer insurance nationwide, must supplant the state-by-state patchwork of health insurance regulation.

Large National Risk Pools. Health insurance shall be available to everybody based upon universal risk pool assignments not tied to a person’s employment at a big company or government agency. When risk pools are large and inclusive, issues such as pre-existing condition clauses fade in relevance.

Three-Layer Insurance Plan. The system is structured as a 3-layer system of health coverage, where the first layer includes mandatory and universal self-insurance through health savings accounts, atop which is a second layer of competitive major medical insurance, atop which is a fully socialized, government-insured catastrophic coverage layer to insure astronomical expenses such as organ transplant and long term dialysis.

Standardized Insurance “Forms.” As regulator, the government will create standardized “forms” for insurance coverage. In insurance parlance, the “form” is the detailed contract that defines terms. By standardizing coverage, insurers are forced to compete based on provider network, bulk buying, efficiency, and price rather than compete using the “fine print.”

Incentive-based Deductible and Co-payments. While refraining from setting prices paid to providers, the government will set standardized co-payments and deductibles paid by individuals as part of standardized policy features. The co-payment and deductible policy will be set to enforce price-based behavioral incentives for utilization of lower cost resources, such as higher deductibles for ER visits, lower for primary care visits, and none for preventative care.

Subsidized Insurance Premiums, not Payments to Providers. Government subsidies will be used to pay insurance premiums of lower income consumers, while provision of actual services will remain private and competitive, coverage determined by the standardized insurance form required to be offered by all providers. The system will be consistent in delivery whether the person’s insurance premium is privately paid or government subsidized, and all consumers retain choices.

Standardized Templates for Electronic Medical Records. While I don’t believe that the government should be the repository for medical records, I do believe the government can play an important standard setting role that will help electronic records technology penetrate the market faster than it would absent standards.

Deregulated Capacity. The “Certificate of Need” process, whereby states regulate the number of hospital beds built, is wrongheaded. In a private healthcare system, I don’t really care about “cost.” I care about “price”—the price I’m charged for service. Restricting supply raises prices.

Structural Reform–Detailed Discussion

Let me discuss each of these points of structural reform in detail.

Dissociation of Health Insurance from Employment

I think it is helpful to remember how employer-paid health insurance emerged historically. It wasn’t, as people think, part of some grand plan. While unions have helped entrench the practice, it didn’t originate with unions. It is not, as the President told the AMA, a “moral” issue that employers should provide insurance. It began in response to the WWII wage and price controls implemented by the government. While cash wages were controlled, employers could inflate the overall compensation package by offering services that included healthcare. Employer-paid health insurance thus emerged as the unintended consequence of a failed government policy.

My own circumstances inform my position on this issue. I have been the beneficiary of fantastic, generous employer-paid health plans, bare bones employer-paid plans, and currently purchase individual coverage. I have started businesses that became large as well as ones that have remained small, where I have been the “boss” selecting a plan. It is ludicrous that while I look demographically just like my neighbors who work for Microsoft, because I am self-employed, I simply cannot obtain, at any price, the health insurance they have. Their plan is subsidized by taxpayers, since Microsoft deducts the expense against its taxable income. My plan is not similarly subsidized, nor is tax deductibility worth anything to the startups I fund that are in the money-losing stage of their life cycle. Once I entered the world of small business entrepreneur, I became a third-class citizen to the health care system.

With certainty, the expense of providing health insurance to employees has caused me to behave differently as an entrepreneur. I really hope never again to have “employees” seeking instead to work with a loose affiliation of other free agents. While I’m not in favor of a single-payer Canadian healthcare system, it was blessedly simple to hire in Canada and painfully difficult to hire in the US in one recent startup.

As a plan purchaser, I was educated early on how to play the health insurance game. The name of the game is “make your policy so unattractive that employees choose the spouse’s plan.” The key was to hire talented people whose spouses worked for the government or a big company with gold plated benefits. This behavior is nonsensical but completely rational in our current environment.

Tying insurance coverage to employment is simply illogical. It doesn’t pass the sniff test.

National Insurance Regulation

While I certainly support, and benefit from, states’ rights to pursue different policies, health insurance oversight must be taken away from 50 separate state insurance commissioners and regulated at a national level. My own experience informs this assertion as well. I’ve been the “boss” trying to cover employees in two different states. While it is difficult enough to find an acceptable plan at an acceptable price in one state, it’s virtually impossible as a small business to offer a uniform plan across multiple states.

Our current system is far from competitive, but rather, is a patchwork of state-by-state duopolies, with a one or two dominant health insurance companies in each regional market. In addition to limiting consumer choice, these dominant insurance players effectively limit the service reach of doctors and other health providers, because the insurer has usurped “ownership” of the patient relationship, directing patients to “in-network” providers and away from “out-of-network” providers. While I live in Washington State, in the event I ever need heart surgery, I’m heading back home to Cleveland, where I will suffer financial penalties for going “out-of-network.” Why, exactly, should the Cleveland Clinic not be part of my network?

I would be personally better off under a nationally chartered health plan, a national “network” of providers, and the ability to offer employees consistent plans in multiple states. National regulation compromises my principals, but appeals to my logic.

Large National Risk Pools

Insurance has always been, and will remain, about sharing risks within a population. A population of users forms the “risk pool” where patients with low claims subsidize patients with higher claims. While I have already made the case that employers shouldn’t pay for insurance, what’s worse is that our current system uses employment to define membership in risk pools.

On a national level, it is simple for actuaries to predict how many heart surgeries we’ll consume next year. Actuarial estimates will be uncannily accurate. For a company with 10,000 employees, actuarial estimates will be good, but not as accurate as predictions for a whole nation. For a company with 50 employees, it’s very hard to accurately estimate how many heart surgeries will be required. One more or one fewer case, and the estimate misses drastically. This is the law of large numbers at work.

If we could fix one thing that is drastically broken in the US healthcare system, it would be to eliminate the definition of risk pools based upon employment. First, self-employed individuals like me don’t fit into an employment-based risk pool. Second, by carving up our large number into thousands of little pools, we actually make insurance riskier for the insurer to provide. Third, we limit mobility of individuals.

We’re surrounded by populist rage about insurance denial for “pre-existing conditions.” The reason insurers go to such great lengths to classify and deny coverage for such conditions is that they don’t want to admit that risk into a specific private risk pool. The problem exists precisely because we take a large population, divide it into many little risk pools based upon employment, then go to great lengths to fence off one risk pool from the next. The whole notion that a condition is “pre-existing” means that the condition “pre-dates when I accepted you into my risk pool.” The employee who has such a condition becomes locked into his or her job where that condition is covered, but where it will be deemed “pre-existing” should he or she move and attempt to transfer into a different risk pool.

Our system suffers many self-inflicted wounds by virtue of maintaining thousands of employment-based risk pools. The solution is to place every single covered resident into one or more national risk pools. Membership is automatic and mandatory. It is important to note that we already do this with Medicare. In the case of Medicare, we’ve defined the risk pool by age, and have already socialized payment for this most-expensive risk pool. It would be a simple proposition to define two or three other age-banded risk pools for the younger population.

Now, it helps to remember that I’m libertarian by nature. It is against my nature to want anything to be controlled by the Federal government. Insurance, however, has that unique property that we are all truly better off when we’re all treated equally. While I’ve always been able to afford my own health care, I would be better off if everybody else were covered, because I’m paying for them anyway. I pay through my taxes and by occupying that last full-price-paying niche where I get soaked by doctors and hospitals who subsidize Medicare, Medicaid, and indigent care on my back.

Note that creating national risk pools implies nothing about whether we have a single payer or competitive private payer insurance system. In fact, standardized risk pools is crucial to making the system MORE competitive. If I occupy a standard risk pool that insurers must cover, I am completely portable. I’m portable in my employment. I’m portable state-to-state. I can select an insurer with better customer service. I can select an insurer with a better price. My most counterintuitive proposition is thus that standardization of risk pools allows markets to work MORE efficiently, not less so. (This is true of all markets. Our stock markets are efficient precisely because the SEC establishes standards that define what a share of stock represents.)

Three-Layer Insurance System

Having standardized risk pools and assigned them on a national level, the next step is to stratify insurance coverage into three levels or layers. It’s common for other types of insurance to be provided in “layers”, where the first layer must be exhausted before the next layer kicks in. Corporations or individuals can purchase “excess liability” coverage that kicks in once general liability coverage has been exhausted. The three-layer insurance plan explicitly exposes health consumers to health prices. One of the tragically broken parts of our health care system is that health consumers are so economically insulated from health costs (and in our system, face no effective rationing mechanism) that health demand grows unchecked.

Applying layered insurance to healthcare would go something like this: (1) every citizen must establish a health savings account tied to their SSN. Lower income participants can have that account loaded by the government, while higher income citizens need to charge up their own accounts through payroll deduction. (2) Atop of that layer, everybody obtains competitively some equivalent to “major medical” insurance based upon their national standardized risk pool. This is the insurance pool that pays for the bulk of treatments, hospitalizations, surgeries, accidents, and illnesses. (3) Atop of that layer, everybody contributes to a single national catastrophic coverage plan. Let me address how each of these would work below.

The mandatory health savings account would be the source of co-payments and deductibles for routine, preventative, primary care. Balances left over would be allowed to roll over, saving the beneficiary from making future contributions (i.e. there really is some “savings” associated with it). But to create some reasonable incentives for people to utilize appropriate care resources, deductibles and co-payments must have some incentives built in. For example, if the co-payment for a primary care doctor visit is $20, co-payments for an ER visit have a penalty payment of $100. If you’re in a car accident, tough luck, but that’s what your plan is there for, and that’s what the ER is there for. If you go to the ER with an ear infection that could have been handled by your family doctor, then you get snared by the penalty because you chose to consume unwisely. Right now, ERs are perfectly subsidized. They are free to the uninsured. Is it any wonder we see excessive utilization of this free, subsidized service? The health savings account layer is effectively “self-insured”, providing health consumers some economic feedback to their decision making. The required “self insurance” layer can be aggregated in families and can be subject to family maximums (say, $1000 per person or $3000 per family). Administration of these health savings accounts is currently private, and may remain so.

The middle, or “major medical” layer is perfectly suited to competitive pricing by insurers allowed to compete on a national basis. I am automatically qualified based upon my age-based national pool to be insured by any insurer. I can’t be denied, and pre-existing conditions aren’t even of concern. If I want unfettered ability to self-refer to specialists as part of my plan, perhaps I choose one with such freedoms and pay a higher premium. If I’m willing to live within the guidelines of an HMO, then my premium may be lower. If you want to purchase a high deductible plan, feel free do to so. If you want to guarantee private hospital rooms and two nights of inpatient post partum care, feel free to pay up and do so. By standardizing basic coverage terms and a price, the government lets plans compete over other features, such as access to specialists, in-network versus out-of-network coverage features, or wellness programs. Plans should be encouraged to design in health behavioral qualifiers, such as having smoker versus non-smoker premium levels. Because risk pools are national, it should be simple for the competitive marketplace of insurers to access reinsurance contracts to offset variances in underwriting losses.

When it comes to applying social subsidies to lower income consumers, the government can establish a “standard plan” that it’s willing to purchase for low income participants, at a standard price point. The consumer can choose from multiple insurers and “assign” their premium benefit to that insurer. To avoid having persons stack up at certain income thresholds to retain their subsidized benefits, the government needs to make a smooth transition between 100% subsidy and 0% subsidy over a range of income levels.

The top, or “catastrophic” layer should truly be socialized risk pooling. A portion of every person’s premium should be paid into this national program, whether paid by the individual/family, or in the case of low income participants, the government pays in on their behalf. The difficult question within this layer is whether to cover really catastrophic stuff. Does this layer of insurance provide for organ transplants? If so, what limitations are imposed? Other nationalized health systems explicitly ration exotic services like these. Our ultimate plan will of necessity provide some form of rationing. I believe that creating a true catastrophic layer, where rationing is isolated to the catastrophic layer, has some political chance of prevailing. I might be able to accept that the government won’t replace my liver, but I won’t accept that a bureaucrat tells me who should fix my torn ACL. By covering the ACL under my competitive major medical layer, I can choose a more gold plated plan for myself that lets me pick a specific surgeon. I feel entitled to choose my orthopedic surgeon. I feel less entitled to claim that the government owes me a new liver.

Standardized Contract “Forms”

In the insurance industry, the contract language that defines what is and isn’t covered is referred to as the “form” of insurance. For my individual insurance plan, this contract is 56 page bound book. While some of the terms of my individual plan might be the same or similar to my neighbor’s plan, there will be enormous differences, and finding those differences would take a lawyer some number of days of work. It’s certainly not a layman’s job. It’s a rare consumer indeed who’s in position to compare and contrast this mountain of fine print and choose a plan.

In my proposed solution, the national insurance regulator creates one or more standard “template” contracts. Insurers may offer more, but not less, than the coverage defined in the contract template. Every insurer must offer coverage for the standard contract templates. Under universal risk pooling, any consumer can choose any insurer—they cannot be denied. Combining standard form with universal risk pooling opens up the door to a truly competitive marketplace for individuals to choose insurance coverage. But the point is to reduce competition based upon the “fine print” and increase the competition based upon more socially valuable features, like price and service.

Insurers would be expected to compete on price, but upon other plan features. A consumer willing to choose their coverage through an HMO that imposes restrictions might pay a lower premium. A consumer wishing to purchase a plan with fewer restrictions should be able to do so at a higher premium level. Insurers would be able to make other qualifications in setting their prices. They can adjust for domicile to account for cost of living differences. They can adjust for smoking or other health factors such as body mass index.

Standard-form insurance would drastically INCREASE competition and INCREASE choice beyond what is presently available. It is worth noting that such “standards” are common elsewhere in our daily lives. Our stock markets work because the SEC exhaustively reviews the disclosure made by public companies before deeming shares tradeable. “Compliant mortgages” were those that met the conditions of a standard template, and as a result, could be bought and sold (let us forgive for a moment the excesses that later developed in the mortgage market.) Individual Retirement Accounts (IRAs) are virtually standardized in their features and enjoy wide adoption by consumers and a competitive marketplace of providers. Standardization reduces transaction costs (such as comparing different 56-page contracts) and thus improves efficiency.

It’s worth remembering that Medicare itself represents a “standard form” of insurance applied to a universal risk pool. It’s absolutely possible that underneath such a standard form, Medicare could actually be “covered” by competitive private insurers.

Incentive-based Deductible and Co-payments

I think it’s appropriate for the government to declare mandatory co-payments for various types of visits (e.g. the $100 penalty for ER visits). They can take this flexibility out of the realm of competitive pricing behavior. These co-payments must be used to manage behavior. Low income participants will be subsidized anyway. This doesn’t limit or fix provider compensation, but does enforce some price sensitivity on the part of participants.

The insurance principle involved is one people hear about these days in the context of financial bailouts: Moral Hazard. Moral hazard is an economic concept that a person’s behavior is influenced by their ability to indemnify themselves against the adverse aspects of that behavior. If I’m willing to skydive only after obtaining life insurance, then my skydiving behavior would be said to suffer from moral hazard. In the case of health insurance, if a person bears zero cost to utilize health services, they’ll utilize more of those services. Co-payments and deductibles have been around for years. My proposal simply embodies and standardizes incentives for socially desirable behaviors.

More controversial will be other forms of incentive management. Should lower income participants be able to claim a cash rebate for a portion of their unused health savings account, for example? On the positive side, this creates clearer incentives for favorable substitutions like seeing the primary care physician rather than the ER. For users whose plans are totally subsidized by the government, they’ll experience no real pricing incentive unless they are able to earn a portion of their unused benefits back in cash. On the negative side, people might tend to forgo care at year end in order to earn their rebate. Should certain behaviors be overtly subsidized, like cash incentives for smoking cessation?

Subsidized Insurance Premiums, not Payments to Providers

The heavy lifting of structural reform is contained in three elements: nationalizing regulation, establishing universal risk pools, and enforcing standard contract forms. Once those elements are in place, the stage is set for a COMPETITIVE payer system to emerge rather than a SINGLE payer system. In fact, the stage is set for a far more competitive system than currently exists, and I’d expect a torrent of innovation to flow from that competitive environment.

As private insurers compete against one another to attract consumers who are free to choose, many of the tools of cost reduction become sharper. If one insurer’s wellness program is sufficient to lower its costs, and thus its price, perhaps I seek that insurer’s coverage and participate in the wellness. If another insurer pioneers internet technologies to improve its costs and passes that through to me as better tools and/or lower prices, I might seek that insurer’s coverage. By opening up competition on a national scale, investments might flow that are prohibitive under state-by-state regulation.

Having established the conditions for competition among insurers, I believe the government’s role in social subsidies for healthcare can be made in the form of subsidized premiums. Underwriting risk itself should be borne by the private sector, where we would leverage the spur of competition to reward insurer performance through their profits and losses. Note that this is different than having the government assume the role of underwriter.

It’s notable at this juncture that having established the basis for competition among insurers, that Medicare might just as easily be converted to operate the same way I propose for the current private insured or uninsured consumer. In the legislative process, in fact, opening up Medicare to competitive private insurance under a standard form might be a sweetener to entice the insurance industry to accept the other structural reforms. There is certain elegance as well to a plan that is consistent throughout a person’s lifetime, rather than the step-change that happens upon Medicare eligibility.

Standardized Templates for Electronic Medical Records

I believe that government can perform a powerful and effective standard-setting role in the use of electronic medical record technology. Much of the basis for my competitive proposal relies upon government acting as a standard setter, and information technology is a particularly fertile application of government standard setting.

Standard setting for technology is another of those counter-intuitive problems for libertarian thinkers. On the one hand, it’s reflexive to reject government interference in technical decisions best left to entrepreneurs and technologists. The counter argument, however, is that standards allow more rapid market penetration and thus create conditions for private businesses to flourish.

A technical example helps illustrate. The US has a far inferior mobile phone marketplace and infrastructure to Europe’s. American coverage is spotty and customers are locked by proprietary technology and switching fees. In Europe, all phones work for all providers. Simply by moving my SIM card to another phone, I can upgrade. Coverage is superior because every phone can communicate with every cell phone tower. The reason is that Europe made a standard-setting decision long ago, to pick the GSM standard. The American “open market” with 3 or 4 competing technologies and customer lock-in is an outright failure by comparison.

We should avoid allowing electronic medical records to suffer the fate of our mobile phone market. Do we wish to have our electronic medical records “locked-in” to one hospital system or one insurance company? Or do we wish for true portability? I favor standards that create portability, because portability means more competition and more consumer choice, counter intuitive as it sounds.

Deregulated Capacity

Just a couple months back, one of my neighboring communities finally got a glimpse of plans for a new 175-bed hospital that will serve it’s exploding population base. Troubling, however, was that the hospital was proposed five years ago, and suffered through years of litigation around whether the hospital was “really needed.” In Washington, as in many states, hospitals can only be built when issued a “Certificate of Need” by the state health department.

The theory is that if too many hospitals are built, then health care will “cost too much.” The problem is that the economic logic of supply rationing is EXACTLY WRONG.

What matters to me as a consumer isn’t how much cost is incurred by the hospital’s private owners. What matters to me is how much they charge for an x-ray. If hospital owners build too many x-ray suites, what happens? They lower their prices to attract volume and fill their facility. Perhaps they waive deductibles That benefits me. If they overbuild and some hospitals lose money, what happens? They close. Only the hospital owner whose investment decision didn’t pay off suffers any harm. In no case am I worse off by unrestricted capacity expansion. (It matters, however, whether the hospital meets building codes, safety reviews, and is staffed by appropriately trained and licensed personnel. This is a matter of appropriate oversight by my state health department.)

Restricting supply raises prices. As part of a competitive overhaul of the structure of our health care system, entrepreneurial capital must be able to enter and exit the industry without years of litigation and wrong-headed economic thinking. (Only under conditions of single-payer healthcare would it matter whether the system incurs “too much cost” since the government will effectively be paying 100% of the cost. At that point, there’s little benefit left to private ownership of hospitals, which might just as well all be government owned and health personnel simply become government employees.)

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Significant structural problems exist in healthcare. These problems arise largely from poor assumptions driving poor regulation and poor market design. We obtain a market failure as a result. We can and should address these problems in a comprehensive way. Conservatives, who remain the keeper of “all things rational” should champion these changes and be known for providing a real alternative.

Political Talking Points for Conservatives

Fearing that the more counter-intuitive portions of my proposal will be lost on conservatives, I wanted to address some specific talking points on how to position the proposal.

1. Structural Reform is Distinct from Payment and Social Subsidies. The current debate is wrapped up in how much reform will cost, without addressing directly the failures in the current system. The reality is that our broken system should be restructured along the lines of the proposal without adding a nickel to current subsidies. Injecting this line of reasoning into the debate will go a long way towards blunting criticism that conservatives have no alternative and that the GOP is the party of “no.”

2. Our Current System Isn’t Competitive. By carving insurance into 50 fiefdoms and allowing private definition of risk pools, it is our current system that lacks competitiveness. Don’t be sucked into the trap that characterizes the problems of our current system arising from its private nature. The problems arise from poor regulation, not deregulation.

3. Tie Structural Reforms to Solving Long Term Medicare Solvency. I have read nothing in current democratic proposals that seeks to address the current ticking time bomb of Medicare benefits overhang. The debate from the left is about how to pay for more entitlements like Medicare. Assert that this competitive market solution with intelligent regulation addresses the whole healthcare system.

4. Emphasize Internal Consistency. Rather than pursue a two-track solution where Medicare remains a separate beast from “private” or “government option” proposals, emphasize that these proposals restructure healthcare in a way that makes Medicare more consistent with healthcare available in younger years.

5. Stress How Important Structural Government Intervention Is. Blunt the left’s talking point that conservatives are simply hands-off. This proposal contains a lot of hands-on intervention by the federal government. Show that the proposal is reasoned, not reflexive.

6. Emphasize Choice. This plan multiplies consumer choice. Point out how it might logically also add choice back to Medicare. Choice is one of the hot button polling issues, and these proposals increase it, rather than threaten it.

7. Take On Vested Interests. Nationalizing the regulation of insurance, which opens up competition across state lines, threatens some and thrills others. I would expect the insurance industry to screech. Perhaps this is where conservatives should never let a crisis go to waste.

8. Emphasize Long Term Competitive Efficiency. Nothing about a single payer plan creates the conditions for long term innovation and efficiency. Creative competition and enablement of entrepreneurship in health care will.

9. Demonize Single Payer Solutions. Single payer works for Medicare because there’s still a private sector component. With a single customer, who wants to own a hospital? Who wants to work at one? Why should one be different than another? The logical increment to single payer is pure socialized ownership of healthcare resources, with the government acting as sole employer of health personnel. Does anybody think this idea works?

10. Emphasize Elimination of Pre-Existing Conditions and Coverage Gaps. The left hates insurance companies for their pre-existing conditions exclusions. Correct the misinformation that this is due to corporate greed, but based upon a system structured around private risk pools. Solve the risk pool problem and you blunt this argument.

11. Attack Current Regulation Rather than Current Participants. Give something back to the insurance lobby by pointing out that the bad “behavior” is simply the way they’re forced to act by bad regulation.

12. Emphasize Benefit to Small Employers. Especially while we’re counting on small businesses to restart job growth, point out how dissociating health insurance from employment puts small employers on a fair and level playing field with big businesses. Also use this talking point to avoid being known as the party of big business.

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Conservatives must change the talking points and resist changes that are only incremental as relates to structure but massive as they relate to entitlements. We can lead a truly competitive solution, wrapped in the mantle of a significant Federal regulatory authority, assuming the moral high ground and taking away left wing talking points.