"I will prescribe regimens for the good of my patients according to my ability and my judgment and never do harm to anyone." [Hippocratic Oath]
The United States of America, it is often said, has the best healthcare in the world. In many respects this is true. We have cutting edge technology, well paid and educated surgeons, and ... However, this care is too often the privilege of the rich alone. The adage does not well apply to the rest of our fellow citizens. The wealthy are hesitant to change the current system for fear of loosing the excellent care they currently receive. And certainly there are many ways in which the system might be changed that would degrade over all quality. Yet there are regimens that would not only save everyone money while addressing the needs of the lower and middle classes, but would actually increase overall quality of care for everyone, even the wealthiest among us.
A problem cannot be satisfactorily resolved without first knowing its causes. Every good doctor knows this --it is fundamental to their practice. Without a proper diagnosis of an ailment there cannot be a sure prescription. Any so called solution that prescribes without inference from causes is nothing more than a shot in the dark, almost guaranteed to fail. Such are the plans currently on the tables in the halls of congress.
What follows here is a prescription that specifically addresses the root causes of our modern health crisis.
The foremost factor effecting the rise of healthcare costs in the United States, as has been repeatedly reported by medical economic researchers, is the disconnection of the customer from the act of purchasing his or her own medical care. Out-of-pocket expenses amount to less than 1/6th of every health dollar spent in the United States --a third party covers the remaining 5/6ths. For most working Americans, that third party is an insurance company paid by their employer. When we spend money not directly our own, thrift and price awareness take a back seat to other concerns. Under the present setup, most Americans have little incentive to be economical consumers of healthcare. As a result, healthcare expenditures, and insurance premiums, have been racing upward at three and four times the rate of inflation for decades.
The rise of health insurance is generally marked by the establishment of the non-profit organizations Blue Cross and Blue Shield in 1932. At first these early programs were successful because they were limited in scope and secured discounted contracts negotiated with doctors and hospitals in return for promises of increased volume and prompt payment. But since then, the rise of health insurance has acted as an ever increasing buffer between the consumer and the physician, leaving the consumer further and further out of the loop in making expenditure decisions. Due to this divide, few consumers have ever noticed, let alone recognized the significance of, the large difference that has emerged between the cost of services for those without insurance and the reimbursements insurance companies payout.
Consider this real-life example. A patient covered by Blue Cross/Blue Shield receives a simple vitamin-D blood level test. The insurance company pays the lab $90 for the test. But if the patient were not insured, the paperwork readily admits, the cost would be over $450 --a 500% difference. That is a remarkable markup, and conversely a remarkable discount for the insurance company.
From the perspective of fairness alone, we can all agree, one customer should not be charged more or less for the same service. Indeed, we have laws for such with regards to race, ethnicity and gender. But corporations skirt the application of such regulations, despite their legal recognition of personhood, by representing themselves as a pool of customers buying in bulk.
The idea of bulk purchasing is the selling point upon which the health insurance industry sells itself. On the surface bulk purchasing seems like a good thing. After all, if costs are high and a consortium of buyers can come in and negotiate for lower prices, then certainly that is a desirable result. But the result is ultimately ineffective. Rather than lowering costs for consumers, medical practitioners ultimately raise their prices, charging more to the non-insured, because these higher rates provides them greater leverage when negotiating with insurance companies. Insurance companies are unfazed by this, they simply negotiate larger discounts, all the while knowing that these higher costs put pressure on the non-insured to buy their product. The wide price gap furthers the effectiveness of their business models. This create higher demand for insurance itself, and by simple application of supply-and-demand, the cost of insurance itself is pushed up. Insurance companies, of course, claim that it is the un- and under-insured that drive up premiums, because it is healthy people who tend to opt out of purchasing insurance. They would expect us to understand that the hight cost of insurance is due to healthy people who refuse to pay for services they would never use.
Practitioners cannot easily thwart this system. If they are going to accept insured patience, the methodology of negotiated cost-reduction by insurance companies effectively requires practices to charge more to non-insured patients. And practitioners usually want insured patients, because they have learned, despite increases in administrative overhead, they can more readily order additional services for their patience, necessary or not, without the patient complaining of cost. Thus increasing their overall revenue streams.
The current model of price negotiating --even disqualifying some procedures from coverage at all, is in effect a form of corporatized communism. This is true whether it is government run insurance like Medicare or private insurance. Insurance companies do not provide a product people want, but one that they no longer can afford to be without. This difference, between what individuals pay out-of-pocket and what insurance companies pay, puts the out-of-pocket payer at an unfair disadvantage, effectively forcing them into expensive comprehensive insurance plans. So ingrained has this differential become, that most people now believe that health insurance is a "got to have it" product, as if it is inconceivable that anyone does or ever has lived without it, and the whole solution to our health crisis has become little more than an issue of providing insurance to all. But this is not the case.
Congress need only pass a law requiring that non-insured patients pay no more (or less) than insurance companies for the same services, and the system would fundamentally change. By requiring equal cost for equal service more patients could afford to pay for services out-of-pocket. When people pay out-of-pocket they are more cost conscious of the expense and further more, it eliminates the cost of the middle-manager. This simple law would radically alter the way insurance companies conduct business. Rather than negotiated costs, their intrinsic advantage of insurance becomes value added services, luxury care and catastrophic coverage, which is exactly what insurance should be about.
The simple act by the Federal Government to require equal cost of services to all payers, would alone fundamentally transform the cost of healthcare in this country. It would not so much address the needs of the poor, since they have little money for even low-cost services, but, for the middle class, this would provide substantial economic relief and in itself would almost be enough to fix our healthcare system.
To further out-of-pocket expenditure and promote preventative care, especially among those with little discretionary funds, the Government can seed new HSAs (Heath Savings Accounts) with a starting balance, and once established, provide on-going matching funds on new deposits.
HSAs can be a powerful mechanism for encouraging people to seek preventative care. It is well established that preventative care, more than any other purely medical remedy, has the potential of reducing overall medical costs to the Nation. The reason is clear. Catching an aliment in it's initial stages, prior to it becoming a full-blown crisis, eg. before one must be hospitalized, means a much more inexpensive means of treatment.
Seeding Health Savings Accounts with starting balances will encourage people to open HSAs and begin putting them to use. A government granted, instant opening deposit of say $500, would have an immediate and profound effect or preventive medicine, in particular to the more than 45 million uninsured. To be fully effective however, all HSA dollars must be limited to payment for direct care, including optometry and dentistry, and medicine. They should be restricted from use for payment of insurance premiums or deductibles --doing so would amount to subsidization of insurance companies.
Providing on-going matching funds on all deposits will encourage continued use of HSAs.
The ratio between matching funds and deposits could effectively range anywhere from 1:5 up to 1:1 (20-100%). This rate might start high and be reduced over successive years as the system became common place, but the rate must remain high enough to encourage regular deposits.
Matching funds must also be limited to a maximum annual dollar amount in order to cap total cost. We might expect this limit to be equal to the overall effective federal tax rate, about 20%, applied to the per-capita average of all medical costs (est. $1600 per individual in 2008). The important consideration for determining this rate is that it should not be so high as to induce inordinate upward pressure on medical costs, but it must also be high enough to encourage regular preventative expensing of HSA monies.
Progressives will be wont to suggest that matching funds be pro-rated to income levels, but this is not necessary, nor necessarily prudent. Pro-rated funding would require a much more complex and costly administrative bureaucracy to administrate the program, and would further citizenry perceptions of inequitable treatment by government. The relative value of matching funds themselves are sufficiently progressive. That is to say, $1,000 to a low-income worker is far more valuable than it is to a multi-millionaire.
At 2008 levels, we can expect this program to cost $240 billion per year, assuming an uptake rate of 50%. But we can expect this cost to decrease substantially as healthcare costs come under control with application of the programs outline here.
These encouragements to use HSAs will precipitously drop the use of emergency rooms as primary care facilities. People will have the money to see a doctor on a regular basis. And because most of the money being spent derives from the earnings of individuals, they will be cost conscientious, seeking out doctors who offer services to fit their budgets. This in turn encourages doctors to establish medical practices to meet the budgetary needs of local patients. This is market capitalism at it's best.
While the above measures effectively repair our healthcare system, they remain deficient in one significant respect. They do not address the needs of the very poor who can not afford and emergency and hospitalization insurance whatsoever. For them, the only fair course of action is for government to provide life-and-limb coverage. That is to say, not general coverage, but services that seek to prevent sudden death and disability. It is not unreasonable to ask government to take on a larger roll in providing this kind of care as a final safety net for all citizens as part of our common social contract. Just as government is charged with providing firefighters and police officers, it is reasonable that government should provide for basic emergency medical services as well --ambulance services, emergency rooms, vital surgeries, etc.
However, rather then depend on the Federal Government for a large heavily bureaucratic system, it would be more prudent to charge the States with providing this universal life-and-limb coverage. By having State governments manage these programs, each could establish it's own plan, and as long as they meet a baseline of federally established requirements, they could provide differentiating services, managed and funded in different ways, creating public competition between States. This kind of State differentiation is at the heart of what is profoundly good and useful in our multi-state democracy.
The Federal Government could help establish these programs by buying State bonds to fund them until such time as the States have established their own revenue streams to fund their program. This would avoid increases in Federal taxes, and possibly even allow for eventual Federal tax cuts, in exchange for increases in State revenues streams which would further provider better accountability in the use of funds.
Each of these prescriptions progressively improves upon our healthcare system. Each would have a positive effect on it own and together they outline a nearly perfect system, taking advantage of the benefits of properly orchestrated capitalism, while still providing adequate care for the less privileged. Nonetheless, these are not the only things that can be done to improve our healthcare system. Certainly, there are other important, albeit less fundamental regimens that can be effective, such as medical record standardization, lowered barriers to medical education, and .... But the three programs outlined here provide the bedrock for an compassionate system fitting a free people.
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