Commentary
A Pharmaceutical Economic Stimulus Plan
Encourage health care spending as a way to stimulate the economy and care for the uninsured.
By Stephen T. Parente, Ph.D.
As a former campaign health policy advisor to Sen. John McCain, I have now reached the final stage of the Kübler-Ross process—acceptance. I accept the inevitability of our adopting a Keynesian macroeconomic policy to achieve health insurance expansion. Since this was not a thought experiment we considered during McCain’s run for the White House, I would like to propose the following idea as thinking outside the box given the new Realpolitik.
Borrowing from the dual-use opportunities policy deployed by the Roosevelt Administration in 1941 to transform a consumer economy into a war-time economy, this proposal should be considered part of a domestic war-on-the-uninsured policy. It is guided by three principles: First, for any economic stimulus plan to work, money needs to be spent by consumers as quickly as possible. Second, inventing new programs or infrastructure for spending the money will not be as effective as using existing ones. Third, opportunities to achieve multiple public policy goals through a single program have great merit.
Health Care Debit Cards
As part of this proposal, every adult in the United States would get a debit card issued by the dozen or so national retail pharmacy chains to purchase needed pharmaceuticals and pay for primary care visits at the retail clinics associated with them. The cards would come preloaded by the federal government with $500. To receive a card, which would be available from cashiers at the stores, people would simply present their driver’s license or other official identification. The cards could be loaded with as much as $3,000, depending on the financial need of the cardholder. Financial need would be determined by referencing the cardholder’s income tax filing data. The cards could only be used at qualifying pharmacies and only for purchasing noncontrolled pharmaceuticals in order to prevent an oxycodone-fueled stimulus.
This proposal addresses the first principle by directly channeling money to consumers to help counter many of the ill-effects of the economic downturn, including loss of health insurance.
This proposal satisfies the second principle of using existing infrastructure to deliver the stimulus. If enacted, it would effectively turn Target, Walgreens, Wal-Mart, and other stores into analogues of the Ford Motor Company, which built bombers, and General Motors, which built tanks, during World War II. However, whereas it took nearly a year for Ford to retool its factories to make bombers, the retail pharmacies could likely gear up to accept the cards within months if not weeks.
Finally, the proposal satisfies the third principle of achieving multiple goals from one program. This dual-use policy would help uninsured or underinsured adults with chronic illnesses maintain or improve their health, and it would stimulate the economy. In addition, it would allow policymakers to learn who the uninsured really are in terms of their illness burdens based on the pharmaceuticals they purchase, and it would help them estimate the potential cost of insurance coverage expansion proposals.
Furthermore, the debit cards themselves might be a first step toward identifying a means for arranging future insurance contracts similar to the public-private hybrid approach used in the Netherlands and Switzerland. In the Netherlands, a private insurer receives an additional subsidy from the government for taking care of a sicker patient if it provides pharmaceutical consumption patterns as one of the key data elements. Switzerland uses clinical data similarly to determine payments to regional cantons providing coverage for high-risk individuals. Indeed, the Association of Health Insurance Plans recently stated it would support a national health insurance reform program under which insurance companies would provide coverage to all Americans as long as an individual mandate is in place. This proposal could jumpstart that process.
Pragmatic Proposal
How much would this cost? The potential market for the cards is roughly 210 million people, if you exclude those on Medicaid and Medicare. If you included people on Medicaid, we would be talking about a program serving roughly 255 million Americans. Based on results of previous health policy subsidy programs, only 20 percent of the U.S. population is likely to take advantage of this proposal. Historically, those who signed up for such programs have been the people most in need. With this level of participation, the implementation cost of this economic stimulus/health care reform proposal would likely run $25 billion at the most.
In playing the role of a Keynesian, I propose this policy with great trepidation, not because I think it will fail to stimulate the economy but because it will add to an already high national debt. But if money is to be spent anyway, this strikes me as a comprehensive, efficient, and pragmatic proposal that would have measurable metrics for success. The policy prescription offered by the Obama administration of air dropping $30 billion for electronic medical records does not have nearly the direct consumer benefit or velocity of stimulus action required.
Many details would need to be worked out beyond what can be articulated in this short essay. But the logistical details Ford faced when gearing up to build bombers instead of sedans were no less daunting, and the outcome of this dual-use proposal would be a healthier economy and a healthier population. MM
Stephen Parente is director of the Medical Industry Leadership Institute and an associate professor of finance at the Carlson School of Management at the University of Minnesota.