A Deplorable Proposal On Health Care Reform: Joint Open Premium Yield (JOPY) Fund

The 2016 Presidential election has created a unique moment in American politics.
The ground has shifted and the apple carts of both major parties, as well as the
national media, have been upset. Into breach must now step an unruly and rapidly
organized cadre of volunteersthe Deplorables, todays peaceful Minutemen.
Establishment Republicans, along with the remaining Democratic forces, will
attempt to preserve the status quo across a range of key issues. The storylines will
be all the things that cannot be done.
But the storyline that America needs to succeed is what can be done.
Guns and butter issues are named for a famous statement from Frederick Von
Bismarck, who unified Germany from the martial Prussian state and a collection of
German-speaking territories in the 19th century.
The 2016 election was marked by a failure of the status quo to serve the American
publics interest on guns and butter issues. The attempt to fool voters by
substituting a set of emotionally fraught social issues failed in a complete and
devastating fashion.
In order to forge a successful Presidency and a new direction in American politics, it
is critical for the incoming Trump Administration to score major wins on guns and
butter issues. The pre-Inauguration work on U.S. manufacturing firms and trade
demonstrates both the importance of these issues, and the precious room for
change that the electoral earthquake has created.
Health care is directly in the new Administrations sights. There is immense
appetite for change. If the next reforms fail, systemic collapse or a national singlepayer scheme become by far the most likely outcomes. Facing this extreme
strategic risk, it is clear that the President-elect has an opportunity to bring in the
executives of the Nations health care insurers, major care providers, and
pharmaceutical firms. He can make, and expect to win, very tough demands and
come to very big deals with these executives.
The question iswhat does he ask for?
Replacing the Affordable Care Act has been an elusive quest for the establishment
Republicans. On the Democratic side, and mix of timid incremental fixes rests
uneasily with an urge to socialize the entire health care sector. This intellectual
bankruptcy is just one more symptom of the failure of the status quo.
Now is the time for a truly Deplorable proposalone based on the fundamentally
American tenets of liberty, free markets, and the quest for innovation. A proposal
that blows by the status quo and the short-sighted strategies of the industry powers
that be. A proposal, most importantly, that can be implemented quickly, offer
premium relief to Americans, and create a permanent shift in an industry that
makes up 20 percent of the U.S. economy.

The basis of this proposal is twofold: First, that the executives of the industries can
and will make major changes under existential threat (indeed, this is the only means
to induce such change); and second, that significant cost efficiencies are possible in
health care delivery and administration, but have not been incentivized due to the
baroque, opaque, and often nonsensical regulatory tangle that both stifles
competition and allows profiteering to those who learn to game the system.
What the President-elect should demand is the creation of a $100 billion fund, paid
for up front by the industry. We call this the Joint Open Premium Yield fund or JOPY.
This fund would be used to pay the profits for those elements of the industry that
demonstrate significant efficiency gains over the following three years. For the first
time, corporate boardrooms would be seeking lean and efficient cost structures
rather than padding and gold plating (to inflate or hide excess profits). Insurance
companies, hospitals, medical partnerships, and patients would all share a common
goal, to meet needs at the lowest cost. Foreign providers and procedures should
be allowed to compete in open marketplaces. At least five competitive sources
should be sought, or if necessary created, for as many cost points as possible. In
this manner, one three-year big bang would be the genesis of a culture of
competition and, one can hope, excellence in service delivery.
But there will be another use of the $100 billion JOPY fund. Immediate and
significant premium relief for Americans can provide the Trump Administration with
its critically needed big win. It is also fair, and well deserved. A $100 billion fund
would be sufficient to bring $1,000 of premium relief to every American household.
But not all households use private insurance. So even more would be available to
those that do, at least $100 per month, perhaps double that.
What if the industry succeeds in bringing competitive efficiency to play, but the
JOPY fund has been used already for premium relief? In that event, further sources
of funds would be considered, such as a bond securitization. But if this plan
succeeds, so much productive investment and cost-cutting would be unleashed that
industry profitability should be greatly enhanced. Perhaps the JOPY fund is an
investment that pays for itself. The scale and inefficiency of the U.S. health care
system today certainly suggests the possibility.
This proposal is not put forward in order to take credit, and not for personal profit.
The specific Deplorables responsible for it have a combined half century of public
policy experience, and understand the details of regulated industries including
health care as well as anyone in the country. We are as fed up as the majorities that
voted for Donald Trump in state after state in November. We can do better and we
must.
Other reforms are also called for. Catastrophic care should be paid for directly via a
Federal cost reimbursement model, with long term lifestyle and wellness
approaches prioritized. The long tail of catastrophic risk needs to be cut off so the
vast majority of Americans can have more choices, including the choice of no
insurance coverage, in a normally functioning free market. Incentives can be
provided to make self-insuring against catastrophic risk an attractive deal, without
forcing its purchase.

Pharmaceutical companies have been parasites on all of us for long enough. The
proposal outlined here is not for them. The Trump Administration should simply
demand an immediate discount sufficient to wipe out the past five years of excess
revenue (not profit since the drug firms tend to hide excess revenues in their
research and development programs, among other games). The new small-p
politics of the big deal make this another immediate win that can, along with
significant premium relief from the JOPY fund, turn a true guns and butter issue into
a turning point in American political economy.