Health Care

A Proposed Remedy for the Uninsured

A new federal agency would oversee a system in which all Americans could pick among competing health care plans—as long as they pay the cost differential.

By MEREDITH ALEXANDER

HEALTH CARE TODAY is “not affordable for most people, and it’s also not affordable for taxpayers to help many of those people,” says Alain Enthoven, professor emeritus at the Business School. That’s why he has joined with another Stanford professor of health policy and a GSB alumna to propose a new health care system. Their idea is to create a system of health insurance “exchanges,” each offering a choice of plans, and to build a new federal agency to monitor them.

Enthoven’s coauthors are Sara Singer, MBA ’93, the executive director of Stanford’s Center for Health Policy, and Dr. Alan Garber, the center’s director and a visiting professor this year at the Business School. Their proposal has been presented before congressional committees and is published in the new book Covering America: Real Remedies for the Uninsured.

At the crux of the group’s plan is the notion of an insurance exchange. An exchange would be created when an employer, or any other public or private organization, offers people a choice among several competing health care plans. Since consumers would be able to pick between plans—each with its own price tag—the resulting competition would give health plans an incentive to lower their premiums to attract more members.

The group hopes that the government will give tax credits to allow lower- and middle-income Americans to afford the premiums. Because individuals would pay for the coverage—either from tax credits, employer- given credits, or their own funds—consumers also would have an incentive to choose lower-priced plans. That pressure to lower prices could cut medical costs across the board, the three researchers believe.

Key points of the Singer-Garber-Enthoven plan are:
• The creation of public, private, and employer-based “insurance exchanges” that would offer a variety of health plans in every geographic region, as well as a government-sponsored “U.S. Insurance Exchange” to work as a safety net. Individuals who enroll through an exchange would be guaranteed an insurance policy. People who did not enroll themselves would be enrolled in a default plan.
• Tax credits for low- and middle-income Americans to use for health care purchased through such exchanges.
• A new “Insurance Exchange Commission,” a federal agency resembling the Securities and Exchange Commission, that would distribute tax credits and payments, accredit exchanges, and serve as an information clearinghouse for the public.

The proposals resemble the plans Bill Bradley put forward during the Democratic presidential campaign of 2000—and, interestingly, are also similar to a mid-1990s Republican plan that never got off the ground, Enthoven says. Such “managed competition” has been put into place before on a smaller scale—including at Stanford, which gives its employees credits and a choice of insurance plans, with employees having to contribute more of their own funds for more expensive plans. “It’s a wide range of choice, but it’s a responsible choice—if you pick something that costs more, you bear the cost yourself,” he says.

Enthoven, often called the father of managed care, since 1978 has promoted similar solutions to the country’s health care problems. Garber helped craft Bradley’s health care plans, and Singer has held a variety of health care research and government advisory positions.

Congress, however, has been more concerned with other health-related matters lately, like the Patients’ Bill of Rights. “America is not in the mood for looking hard at this right now,” Enthoven says. But when the political climate changes as costs rise, their plan might be just the thing the doctor ordered.

Meredith Alexander is a staff writer for the Stanford University News Service.