Hadley Heath Manning joins the podcast to discuss this month’s policy focus: The Way Forward for Health Care. We’ll consider where the healthcare system is in the midst of the pandemic, its current flaws, and what improvements can be made.
Hadley Heath Manning is director of policy at Independent Women’s Forum. She frequently comments on health care, entitlements and economic policy, and manages IWF’s policy projects and publications. Hadley is also the 2017 Tony Blankley Chair for Public Policy and American Exceptionalism at the Steamboat Institute in Steamboat Springs, Colorado and In 2016, Hadley was named to Forbes’ 30 Under 30 list in Law and Policy. Hadley appears frequently in radio and TV outlets across the country, including Fox Business’ Stossel Show and Fox News’ Your World with Neil Cavuto. Her work has been featured in publications including the Wall Street Journal, Forbes, POLITICO, Roll Call, Real Clear Policy, National Review Online and Huffington Post.
Transcript
Beverly:
And welcome to She Thinks, a podcast where you’re allowed to think for yourself. I’m your host, Beverly Hallberg. And on today’s episode, we have this month’s policy focus, the way forward for healthcare. We’ll discuss where the healthcare system is in the midst of the pandemic, what the current flaws are and what we can do to improve healthcare in this country. Joining us to break it all down is Hadley Heath Manning, she is the director of policy at Independent Women’s Forum. She frequently comments on healthcare, entitlements and economic policy and manages IWF’s policy projects and publications. Hadley is also the 2017 Tony Blankley Chair for Public Policy and American Exceptionalism at the Steamboat Institute. And in 2016, Hadley was named to Forbes 30 under 30 list in law and policy. She appears frequently on radio and TV outlets across the country. And her work has been featured in publications, including the Wall Street Journal, Forbes and Politico. Hadley, a pleasure to have you on.
Hadley:
Thanks, Beverly. My pleasure to be here.
Beverly:
So much to get into and I want to let people know, first of all, that the policy focus that you did, people can go to iwf.org, download it, take a look at it. We’re going to get into it in detail here, but if they want to refer back to it, they can. But I just want to start with the state of affairs. Obviously there’s a lot that you had already been working on with healthcare policy and different reforms and fixes that you thought were important, but COVID turned everything kind of upside down. Can you start by just telling us what type of changes needed to be made on our healthcare system because of COVID? And where are we today on that?
Hadley:
Yeah, it’s been a really interesting topic to cover. I’ve been covering healthcare policy for IWS for about 10 years now. And during that time we’ve seen the Affordable Care Act, we’ve seen some Supreme Court cases related to health policy, we’ve seen really a robust debate going on about the role of government in our healthcare system. And so it’s been exciting to be a part of that. It’s also been in some cases, a discouraging topic to work on just because it seems like no matter what we do in America, a lot of Americans are still frustrated with our healthcare system, primarily because it’s expensive. It’s very costly. And also because we don’t have the same kind of choice as consumers of healthcare and certainly not the same kind of transparency as consumers of healthcare as we do when we consume other goods and services in our economy.
I would say the two big points to make it the outset to frame this discussion are number one, what is the role of government in our healthcare system? I think it would be wrong to say that we have a truly free market in healthcare in the US. We have a quasi public, quasi private system. I think, when I’ve talked with people from outside of the US, I think they underestimate the role that our government plays, because as many as one in three Americans are already on some type of government insurance plan, whether that’s Medicare or Medicaid or some kind of military program. And so the government’s already playing a pretty robust role in our healthcare system. Spending a lot of public dollars on healthcare as well. And so the question is, do we want to make that role bigger? Do we want to make the role smaller? Do we want to sort of reform the way government is playing a big role in our healthcare system?
And then the second big issue is the role of private health insurance in the US. This is a place where the US again, is very different from many other countries. Not only do we have really widespread use of private health insurance, over 90% of Americans are insured somehow, but private health insurance has become more and more robust, meaning it covers more and more of our healthcare transactions. And this is in large part due to the changes the Affordable Care Act made, requiring that so many of the services and drugs and procedures that we receive as patients are covered through insurance. When Americans pay for healthcare, we pay with our tax dollars, we pay our insurance premiums, which have also been high and increasing and we pay some out of pocket money as well, but this is a, that’s the kind of a 30,000 foot view of where we are with healthcare in America. We’ve got a robust role for government, but we also have a really robust and I would even argue, outsized role for insurance when it comes to healthcare.
Beverly:
And something that I’ve found interesting as we go through the pandemic is it does bring to the focus how much of healthcare is tied to employment. I know that’s one of the policy solutions that you have, but to me, that’s one of the things that has been exposed, that if people lose their jobs, they lose their healthcare as well. And so do you find that that has made people more open to policy changes?
Hadley:
Yeah, I hope so. It’s interesting because if you’re the type of person who believes that we should have, for example, Medicare for all, or some type of universal government insurance plan, you’re probably focused on this as well. That people have had interruptions in their health insurance due to interruptions in their employment. And this was a problem before the pandemic and I would say it was an increasingly difficult problem for many American workers, just because for one thing, Beverly, we don’t work the same way that our parents and grandparents did. It was more common back in the 1950s for someone to work a traditional 9:00 to 5:00 job at the same company for decades at a time. Whereas Americans now change jobs an average of 12 times during their working years. And so moving across state lines, from place to place, working in different fields, many Americans now working in the gig economy or working in jobs that are sort of independent contracting jobs rather than the traditional employer employee relationship.
This is really, all of these changes, have been chipping away at employer centric health insurance. And I would like to see a lot of changes here because the employer centric system that we have is I believe an accident of history. It came about because World War II, the government put some wage controls in place and so employers started getting creative with ways to attract and retain workers that didn’t involve increasing wages beyond the wage ceiling. And so they offered health insurance benefits and this was the beginning of the popularity of health insurance benefits. But then in response to that, Congress exempted those employer provided health insurance benefits from the income tax. We call this the tax exclusion. Those employer provided health insurance benefits are provided tax free. We don’t get taxed for those. That creates a huge distortion and a huge incentive for people to not only to accept whatever the health insurance plan that your employer is offering, but to funnel as many of our healthcare expenditures through that insurance plan as possible.
And so that’s one reason why we’ve had out of control health insurance premiums is because when you cover everything through health insurance coverage, you no longer have many of the mechanisms that a marketplace would have in terms of price transparency and price competition for the services and goods that people are consuming in the healthcare sector. You’re simply funneling it through an insurance plan where we all share the cost. And you know if you go to lunch with a bunch of friends and you’re all going to divide the bill evenly, that changes the way people look at the menu versus knowing that we’re each going to pay for what we consume.
Beverly:
I hate when we split the whole bill. It’s never a good thing. I agree with you on that. And I wonder with this, because this has been one of the messaging tactics by those who are not for a Medicare for all type of system, they say that you’re going to lose your employer covered insurance. As you were talking about making changes, what would that change look like if your employer wasn’t involved? And is that an uphill messaging battle since many people who have employer coverage, they’re happy with what they have or they seem to be happy with it?
Hadley:
Yeah, yeah. And I have employer sponsored health insurance, and I’m very happy with the insurance that I have. Fully half of Americans have employer provided health insurance. It is a difficult message for many people to hear. But I think in a time when people are really concerned about the marginalized people in society, one of the problems with the tax exclusion and one reason I would hope that even progressive, social justice focused people would be concerned about the tax exclusion is because it’s actually regressive. It provides a bigger tax break and a bigger tax benefit to people who earn more money and who have those good jobs with good incomes who typically, with that comes a full plate of employer sponsored benefits. And so I think the policy solution, rather than moving in the direction of Medicare for all, where employers play no role in health insurance but neither do private health insurance companies, period, I think a stepping stone that we could take to provide people with the option to keep their insurance through their employer if that’s something they choose to do, is to offer people instead universally available health savings accounts.
And so, this basically, the big policy change here is tax policy, which makes it terribly unsexy because nobody wants to talk about tax policy. But the reality is that the tax incentives in our tax code create these big market distortions. And so if you allow everybody to have basically a level playing field in terms of the tax break that you get on dollars that you spend on health insurance. And so I’m talking about a world in which you get a certain amount of money in your health savings account, maybe your employer puts it there or maybe you save it on your own or maybe even we have a system where the government provides some kind of safety net and funds health savings accounts for people who cannot save on their own.
You can use that money in your health savings account to go out into a marketplace, select the health insurance plan that is best for you and your family based on a variety of factors, the coverage and the costs. And this would restore some heightened level of competition to the health insurance market that we don’t see today. In fact, we’ve been seeing the opposite of competition, which is consolidation in health insurance.
Beverly:
This brings up the idea of also price transparency because if people are out there shopping and comparing, obviously knowing what’s going to be covered and also knowing price is going to come into play. Do you think this automatically leads to price transparency? Or are there other factors that we need to take into account? And also, what do you think the shopping market would look like for healthcare? Would it be similar to the analogy we hear all the time, like buying car insurance?
Hadley:
Yeah. It’s interesting. I think that price transparency, first of all, it’s an exciting topic to talk about because it’s one place in health policy where you might actually see some reforms. I think it is the right thing to talk about having large health savings accounts, where people can have a health savings account, regardless of what type of health insurance plan they have. I think that’s policy wise that’s correct. But I think politically it’s a challenge. I think we’ve faced a lot of challenges in insurance focused reforms in health insurance on both sides of the aisle. It’s just a difficult thing to change. But when it comes to price transparency, we’ve actually seen in 2019, President Trump signed a pretty significant set of regulatory changes, basically executive orders, requiring regulatory changes in price transparency that don’t go into effect until January of 2021.
And so, if these executive orders actually get to go into effect and by that I mean if they don’t face significant court challenges, they’re already facing some legal challenges, but it sort of depends on where those legal challenges go. Then we could see some requirements for hospitals and other healthcare providers to be transparent about their pricing, which is something that we have not seen in healthcare in the US for a long time. And so yes, our insurance infrastructure certainly contributes to a lack of price transparency because it sort of dampens the demand for price information. If you know that something’s covered through your insurance plan, for example, you might be less likely to seek out pricing information. But that’s very unfortunate for the 9% of Americans who don’t have any type of health insurance. And it’s also very difficult for the many people who have an insurance plan, but they also have high out of pocket costs because they have a high deductible or something like that.
And so, if we had price transparency, we could certainly see, I believe, pretty significant competition in terms of where people go for routine healthcare that you can schedule ahead. And here’s something I did not know before I started studying this topic of price transparency, but the vast majority, over 90% of our healthcare is something that can be scheduled ahead of time. It’s not an emergency. Less than 10% of our spending in healthcare is on emergency care. And so I guess that people say, “Well, price transparency in healthcare, it can’t be that important because when you’re blacked out in the back of an ambulance, are you really going to be looking on your phone to see where it’s cheaper to get treatment?” Of course you’re not, but those scenarios and those dollars that we spend on scenarios like that are actually the exception rather than the rule.
Beverly:
And I could be incorrect on this so definitely correct me if I’m wrong, but I find that people usually fall into one of three buckets when it comes to health insurance. One is the employer sponsored, which we’ve talked about. You’ve touched on a little bit those who buy health insurance on their own, so the individual market. And then there are those who need subsidies, need help. I want to focus on those last two, how would this type of reform help those who are in the individual market? And how does it help that the big thing that is being promoted as the answer, so Medicare for all is promoted as the answer to this. What about those with preexisting conditions? How would this ability to shop, help them especially with health savings accounts? Or how exactly does that work?
Hadley:
Sure. And I think it’s interesting because transparency could be something that you think of as an end in itself, something good. It’s just inherently good to have transparency. Sunlight is the best disinfectant and sunlight’s good for information, but price transparency really isn’t just an end in itself. It’s a means to an end. In the end, ultimately our hope would be lower healthcare costs for everyone and also lower health insurance premiums because health insurance premiums are in many ways a function of healthcare cost. If you buy your own health insurance and if you don’t receive a tax credit or subsidy or even in many cases if you do, you might feel a lot of financial pain associated with those premiums because that’s one place where we’ve seen premiums and deductibles increasing. The trends have not been good. If you’re in the individual markets, you know what that’s like.
And certainly, for people with preexisting conditions, these are the people who are the biggest consumers of healthcare in our country. Many people are lucky enough to be pretty healthy that year over a year, they don’t have enormous amounts of out of pocket healthcare costs. They may pay high health insurance premiums. Good idea if you want to financially protect yourself against some kind of unexpected tragedy or catastrophe, but if you’re someone with a condition, then you probably consume a lot of healthcare and so you’re feeling the pain of the cost pressure. And so some economists have looked at, for example, cash prices against the negotiated rates that hospitals pay to insurance companies. And cash prices are typically about 40% on average less than the negotiated rate that the hospitals are paying to insurance companies. And that’s in large part due to the fact that people who are looking for cash prices are really aggressively shopping and you don’t have to have everybody in a marketplace aggressively shopping to get the reduction in cost.
You have some people who aggressively shop and that starts to put pressure on providers to reduce their prices. Because really, if anybody who’s looked at an explanation of benefits for something that, hospital stay or something, many of these costs and charges are very hard to understand. Hard to understand why something would cost, for example, $10,000 more at hospital A versus hospital B, or in many cases, they’re charging one patient thousands of dollars more than another patient, simply based on which insurance company they’re with. That’s not the way we do pricing in any other market. And so I think transparency would help lead us to a place where there’s more price competition among providers and that potentially could help people with preexisting conditions most of all.
Beverly:
And something exciting I think has happened during the pandemic, is the rolling back of regulations so that telehealth can be implemented. Tell us a little bit about how your proposal addresses this idea of innovation and especially when it comes to virtual doctor visits.
Hadley:
Right. As I said, health insurance premiums are in many ways a function of healthcare costs. And healthcare costs are a function of many things in a hospital. For example, you have your labor cost, you have your doctors and nurses and CNAs and people who work in the hospital. You have your hard costs for hospital beds and for the drugs that you’re providing to patients. Well, one of the things that we’ve seen during the pandemic is that hospitals have faced enormous financial strain as a result of the pandemic. And you might think that they had a big surge of COVID patients. Well COVID patients aren’t the big moneymakers for the hospital. The big money maker for hospitals usually are the elective procedures like surgeries that people can schedule. Although those elective procedures were sort of abandoned and delayed for sometimes months at a time due to the pandemic.
And some hospitals are only now starting to talk about how they can get back to providing services as usual. This financial strain on hospitals, some of the smartest public officials and leaders went to doctors and went to hospitals and said, “How can we help you give you the agility that you need to respond to this pandemic, move beds from one ward to the other, put patients in the hospital across the street, do whatever you need to do to treat people?” And the answer from the medical community was, can we get rid of some of these rules that don’t make any sense? We saw in the hospital setting some deregulation that didn’t have a negative impact on patient care, but it allowed, for example, providers who could visit from a different state. We saw many people, nurses and doctors alike, go for example, to New York City early in the pandemic.
And if you’re licensed to practice medicine in one state, well, we ought to recognize that professional license in every state. And so some of the reforms during COVID with flexibility around professional licenses, certainly the flexibility around telehealth and the reimbursement changes to Medicare and telehealth, those allowed doctors to be able to treat patients and do their jobs without having some of the paperwork that gets in the way of these things sometimes.
And one of the most important changes is that many states, I think as many as 18 states, suspended their certificate of need laws in response to COVID-19. And certificate of need laws are really outdated. Shouldn’t be on the books anyway, but they’re essentially a requirement that if you’re going to build or expand a healthcare facility, you have to ask the state’s permission to do so. It’s kind of silly. It’s really anti-competitive, but suspending them during the pandemic was absolutely the right move. And we should just get rid of them altogether. Currently 35 states and Washington DC still have a certificate of need program, but they’re really kind of antiquated programs. And I think the way of the future, not just to be able to provide innovative care to patients, but to reduce costs for patients is to get rid of some of these counterproductive regulations.
Beverly:
Well, as I’m listening to this, I think on all of it, sold. This is all great. Let’s do it. But the reality is Congress has to do this. A lot of it. Now you mentioned the regulations that can be rolled back. An idea like this, is there any type of bipartisan support for this?
Hadley:
Well, on the certificate of need piece actually has to be done at the state level. That’s one more complication. I do see some, particularly on the deregulation piece, I do see some hope for bipartisanship because not all 18 of the states that suspended their certificate of need laws were led by Republicans. And we even saw one of the states that was really on the forefront of licensing flexibility was my home state of Colorado where Governor Polis was doing the right thing and he’s a Democrat. And he was saying, “It’s okay to suspend some of the normal restrictions on how people can practice medicine so that we give people who are doctors or nurse practitioners or occupational therapists or whatever your medical calling happens to be, can give you the ability to do all the aspects of your job.”
I’m hopeful on the deregulatory piece, just because the pandemic gave us an opportunity to really test some of these deregulatory moves. And I think I’m hopeful that we can learn from that test that, didn’t result in inferior patient care. It might’ve resulted in greater flexibility or some reduced costs for providers. Can we pass that along to patients and give some benefit?
On the price transparency piece as well, I think there’s some hope for bipartisanship. Former Vice President Joe Biden and presidential candidate, Joe Biden has said that he’s in favor of price transparency. Now, sometimes people say that and they don’t mean that they’re really in favor of making hospitals share all of their pricing information. Sometimes people, they might reduce price transparency to mean something less like a list of charges for the most common procedures or something like that, rather than what did you actually have to pay, Beverly, for your service?
I’m hopeful that at least at the 30,000-foot view on deregulation and on price transparency, there’s certainly hope for bipartisanship there. I think insurance reform yet again, is one of those places where it’s probably the hardest place to find by partisan agreement because the two parties are just in very different places in terms of the role that they think that insurance should play. It’s almost as if, since the Affordable Care Act, Democrats have treated insurance companies as a proxy for the government, socializing healthcare costs through insurance, rather through a government program. And that’s one reason why it’s going to be very hard to walk back some of the requirements for insurance there.
Beverly:
Final question for you. I think you touched on this earlier, which is the workforce of today is changing so young people today don’t expect to stay at the same job for decades and get their pension at the end of it. We have young people who are very entrepreneurial, plan to jump from job to job. And I also would say like to customize a lot of the things in their life like to use technology. The idea of telehealth is very attractive to them. They also tend to statistically poll in favor of Medicare for all or something similar. What has been your approach to message this to younger people, to explain why you think this actually gets to the outcomes they desire?
Hadley:
Well, you know what’s interesting? I agree with you that young people, we’ve really in my generation experienced some of the greatest opportunities to customize our lives in so many ways. I look at my iPhone and I can choose exactly which apps I want to be on it and I don’t have to put apps on it that I don’t like, but when it comes to health insurance plans, they’re pretty standardized and pretty uniform in large part due to the requirements in the Affordable Care Act. And one reason I think people in my generation and other generations are fearful of the customization or flexibility in health insurance coverage is they might think, this is very difficult to navigate. And it is difficult to navigate. When you’re used to your employer or your parents or a government program sort of restricting your choices or giving, offering, really picking your insurance plan for you and you haven’t had the experience of shopping for your own health insurance, because really, Beverly, only a very small fraction, about 6% of people in this country buy insurance directly.
And so that’s a pretty small portion of people who have that experience of shopping for and buying insurance on their own. It is a whole, you need a glossary of terms to do some shopping in health insurance, but I would say just like with price transparency, when it comes to insurance, if individual customers or buyers were put in charge of shopping for and selecting the right coverage, whatever, the right plan, there would be other organizations, apps, data number crunchers put together curation tools. This is what we have when we want to buy airplane tickets. Many people use kayak.com. And we have a lot of tools for curation because in a world where you can customize so much, in a world where information is so readily available at our fingertips, sometimes it’s overwhelming. Too many choices, too much information, but we do have health insurance agents are certainly a part of the landscape and could play a bigger role in helping individuals find the right plan. And a lot of it just comes down to education, learning what you need in your carrying coverage.
It would be a big culture shift to suggest that individuals could select from a robust and competitive marketplace, an insurance plan that suited them best. That’s something really foreign to us in the US. It’s too bad because I think that we could do it and I think that it would result in a lot more satisfaction with our health insurance plan and with the prices that we’re paying for those health insurance plans.
Beverly:
Well, as somebody who’s in that 6% who buys my own health insurance, I can attest to the fact that it’s a bit complicated, but I do think if the market opened up where everybody’s shopped, then they would have to make it more simple. That’s not how the insurance companies work right now. They don’t have to. If they have to cater to customers, yes, there would be the initial learning curve and the initial hurdles of doing it but I agree with you. I think eventually people would get used to it and it would be tailored to an easy way to figure out what insurance is best for you.
Thank you as always for breaking this down so well. I want to remind people, they should go to iwf.org. The policy focus is called, The Way Forward for Healthcare, but for now Hadley Manning, thank you so much for joining us today.
Hadley:
Thank you, Beverly.
Beverly:
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