Diary

A Real Healthcare Reform package

Free image via Pixabay https://pixabay.com/en/medical-appointment-doctor-563427/

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Promoted from the diaries by streiff. Promotion does not imply endorsement.
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Compare the US to UK, Canada, Japan, Switzerland, Germany, France, etc.  We pay roughly 2x the rest of the developed world for our healthcare system, roughly 20% of our GDP.  A common refrain on our side of the aisle is that socialized medicine would bankrupt us from the cost.  Effectively we are saying that with the Feds (even more) involved we would be (even more) ripped off.  I don’t disagree, but we should realize that we don’t have a free market for healthcare, and so we don’t need to defend the status quo.

This is not about a proposed bill.  I honestly don’t think any real reform bill could be passed.  Remember that we are paying 20% of GDP into the US Healthcare system.  If we brought that into line with international standards then 10% of our economy evaporates.  That’s a lot.  In fact it is so much that there are so many lobbyists that would object that a bill that brings us in line with international spend rates would never pass.

Let me pause here and address cognitive dissonance.  1) If we adopt a European welfare state healthcare system it will bankrupt us from its high costs! 2) Our costs are only higher than the rest of the world’s because we have such better treatments.  It cannot be that we have a more expensive system than anyone else and that adopting their system would raise our costs.  In fact, if we adopted any of the other OECD nation’s systems we would be able to fully implement their national programs using only the money already spent by CMS on Medicare and Medicaid.  Please dwell on that for a minute.  Our existing Medicare and Medicaid budgets are enough to enact the British NHS.  Granted, NHS has issues (but then so does Medicare), but that is how much we overpay.

So what would a rational system in a developed country look like?  Scratch that, what are the goals that ought to generate buy in from the 80% of the economy that doesn’t sell health goods and services?

  1. Universal coverage (I know there will be screaming “I don’t want that!”  But ask if you are willing to accept universal coverage if you get the other goals)
  2. Cut overall costs by at least half
  3. Make it so normal people can understand their bill
  4. Eliminate medical bankruptcy (or get as close as you can)
  5. No worse outcomes than we have now (we do not implement government rations)

Now let’s consider some pieces from various schemes around the world that work towards these goals

  1. Germany has automatic enrollment into insurance plans
  2. In India doctors will make the cost of a procedure public information (you can look at it on a board and comparison shop for things like kidney stone treatment)
  3. Health Savings Accounts help to save against emergencies
  4. Payment by insurance companies to the patient rather than the provider
  5. Several US states prohibit (or restrict) balance billing and surprise billing

Let’s imagine a test case – Jen.  Jen has just graduated from college, gets a job, and is no longer a dependent on her parent’s insurance policy.  She is automatically enrolled in a healthcare plan with a $300 deductible and $500 out of pocket maximum, and an additional $400 is directed into her personal HSA each year.  If Jen does not like her plan she is free to switch to another plan (with different qualities), or drop coverage altogether with $2,400 now going into her HSA.  However, as long as Jen maintains coverage her current insurer cannot drop her from her current plan.  All funds will be collected through payroll deductions (the deduction enough to meet the premium and $400 annual HSA contribution) although Jen and her employer are allowed to contribute more to the HSA pre-tax.  Medicare/Medicaid will be converted over to the same program so that anyone who is deemed by the state to be incapable of purchasing coverage has it provided.  So far we have addressed Universal coverage (except for able bodied persons who are not employed or dependents of the employed).

All providers will be required to provide their price book.  That is, when Jen goes in to the doctor for a routine visit she will be able to ask “how much will this cost?” and get an answer.  In fact, the doctor will be required to provide a price and Jen will sign agreeing to pay the estimated amount.  If forseeable services are provided that Jen did not agree to she will not be obliged to pay for them.  So, let’s imagine Jen is expecting her first child.  She calls 3 different providers to ask what delivery will cost.  She gets prices of $16k, $12k, and $4k.  She chooses the provider that is $4k.  During the delivery the doctor uses a pair of surgical gloves and itemizes the bill including $12 for the gloves, and $10 for an ibuprofen to reduce post delivery swelling.  No dice.  The $12 and $10 do not have to be paid, since those were foreseeable and Jen never signed her willingness to pay them.  Effectively the doctor will have to include consumables in the list price.  The $4k package may not include a epidural.  If during the delivery Jen decides she wants an epidural she knows that it will be an extra $2k.  The simple fact that you are now able to shop will be a step towards free market forces.

The real power comes in the next step – direct patient billing.  When Jen is expecting she informs her insurance company and they set up the claim.  She has pre-approval and as soon as she sends in the birth certificate the insurance company will deposit $5k into her HSA.  This is absolutely critical, Jen now knows the price the doctors charge and her budget!  If I have two options for a car – option 1 you pay $10,000 and option 2 you pay $50,000 I will choose option 2 every time because YOU are paying it.  As soon as it is ME my incentives change.  The differences between insurance companies now will largely be in their payout schedules.  How much money will does the insurance company pay out for routine Labor and Delivery?  How much for Diabetes?  How much for Pancreatic cancer?  If Jen has 6,000 in her account she may just decide not to have a plan that covers routine labor and delivery, even if she is planning on having a baby.  She might have a plan that would cover Cesarean delivery and delivery with complications though.

Notice also that the payment schedule will probably drop routine office visits altogether just because it would be a hassle.  Ear infection? $75 visit because now the physician doesn’t have to deal with insurance, billing, or denied claims.  You simply walk in, see your physician, pay with the HSA and leave.

Now let’s consider the case of Drew who had a heart attack, and got a surprise bill of $109k after his insurance paid $56k (way over the local average of $37k).  First, if St. David’s had to list the price of 4 stents they would be incentivized to bring it down to a reasonable number, maybe $70k.  In an emergency setting David would only be responsible for the difference between his insurance payout and the book rate, $14k in this case.  However, you might have a state “emergency medicine” program that would pay half the difference in these cases, and then David is held harmless for the rest.  We already require hospitals with Emergency Departments to take all comers in return for supporting funds.  This would be simply an alternative pathway to the same result.

Now what have we accomplished in this system?  Everyone gets guaranteed insurance as soon as they are no longer dependents, universal coverage as long as you don’t purposely exit the system.  The free market is now allowed to act in a way that brings down prices.  We protect against medical bankruptcy (emergencies won’t bankrupt you, and when you get sick you know your budget).  Bills are by nature understandable (you have to sign next to a “Total expected cost” number).  Additionally Employer sponsored health insurance no longer receives preferential treatment in the tax code.  Employers may contribute to your HSA, but it is now an individual market (like car insurance).  Also, for your socialist friends it can be as “Welfare State” as you want by adjusting Jen’s premium and HSA contributions.  You want unemployment support?  Unemployment benefits cover 6 months of premium support for your existing plan (whatever it is at the time of unemployment).  You want support for the poor?  Use a sliding scale to determine a support level.  The first portion goes to the premium, everything else into the HSA.  In fact, the entire Medicare and Medicaid system could be put in as 100% premium support and HSA contributions.

For those who have seen my writings elsewhere you may know how I feel about medical license protection and pharmaceutical practices.  I honestly still think those need revisited, but it would be much easier to go back an approve FNPs, PAs, RNAs and non-MD health professionals to operate with greater autonomy after this biggest change is made.  Also as people could see their Rx prices before buying you would have a lot more incentive to ask “So Doc, I’m paying $150 a month for my statins when my friend is on one that runs $4 a month at WalMart.  What gives?”  If the answer is “Dude, you should see how hot the pharmaceutical rep is, by the way, let’s check your blood thinners”  then you know it is time to visit another cardiologist.

It’s actually a pretty simple system.  There are two fatal flaws though

  1. It has to be enacted as a system – adopting a couple pieces here and there probably won’t work
  2. There are so many leaches in our current system that the resistance would be nearly impossible to overcome