Stanley Feld M.D., FACP, MACE

Michael O’Grady of Grosse Pointe Farms, MI expresses the mistrust between the employers and the healthcare insurance industry much better than I can. He also confirmed for me that people on the internet are not only thinking about the problem of healthcare and what I am saying but are upset about the terrible things that are going on in the healthcare industry.

“I must comment on two key components of the healthcare system I felt were blatantly missing from your blog. ”

“The first was in your list of stake holders. No where to be found are the employer groups who actually fund most of the health care in this country.”

At the time I received Michael’s comment he was correct. I was concentrating on how the 46.7 million uninsured can be insured. The key answer is for employers to be able to provide tax deductible funds to their employees in order for the employees to purchase their own healthcare insurance policy with their own money. If an employee chooses not to buy healthcare insurance he does not get the money.

This maneuver accomplishes three things. First, it gets the employer out of the healthcare insurance loop. Employers may stay in the loop if they think they can protect their employees. Second, the employee relieves the employer of the burden of negotiating a premium at a tremendous disadvantage. Employers have noticed that they have be less than effective in keeping premium cost down in recent years as expressed by EC previously. Third, it puts the patient in charge of his healthcare dollar. This creates a huge buyer pool and forces the healthcare insurance companies to develop innovative and cost effective products. If they do not become efficient, someone will come along and take away the business.

Unemployed or self employed consumers can buy healthcare insurance with pre-tax dollars. This level playing field does not exist today. A self employed or unemployed person must be able buy insurance with after tax dollars. Notice that this simple change in the tax law would weaken the healthcare insurance industries hold on healthcare and force them to compete for the healthcare insurance dollar.

President Bush has called for this tax reform. However, there has been no follow-up. It seems he has backed off. Congress has no interest in passing this logical law that could help cure the uninsured problem. It would be putting power in the hands of the consumer. It has been opposed by the healthcare insurance companies lobbying effort. The evaluation of the Congressional Budget Office seems to point to a positive outcome when read in detail.

“Although you appear to have many good ideas, and are a proponent of changing many of the necessary evils of the broken health care system, you are in fact a stake holder.”

Michael, I am presently a consumer stakeholder. I retired from an excellent practice of Clinical Endocrinology in order to devote adequate time to help repair the healthcare system for the benefit of the consumer and the survival of the patient physician relationship. I believe the patient physician relationship is a critical therapeutic element in the care of sick patients. Making medical care a commodity will destroy medical care in this country.

“The employers are the one in the end who actually foot the bill for most of the health spend in the U.S. The unfortunate circumstance is they are being led blindly down the path of excessive baggage by consultants and their partners, who we refer to as BUCA (Blues, United, CIGNA, and Aetna).”

Michael, you are correct. The large employers have human resource officers whose responsibility is to choose the correct healthcare insurance plan for its employees. The BUCA have learned to manipulate and confuse the human resource officers. It gets back to the old question: would you let your human resource officer, or insurance company purchase your food, your clothing or your car? You might let the HR person negotiate for you. However you are the owner of the purchase and would be responsible for the choice. Your unwillingness to let the HR person negotiate for you would increase if the purchases became more confusing and unsatisfactory. You would want control.

The seller (healthcare insurance company) is motivated in the present system to confuse the HR officers. The seller also has the advantage because the number of people in a single company is small compared to the total number of people in society as a whole. The key to repair is to motivate the seller to compete. In a real price transparent environment the healthcare insurance industry would be competing for customers. All the necessary changes would have to occur at the same time for it to be effective.

“The second piece I felt that was missing was the reimbursement methodology in place today prevents any fix of the health care system. The PPO discount system is a disaster and adds between four to six billion unnecessary dollars to the health care system each year. These are dollars employer groups are paying to the BUCA’s and PPO networks in access fees each year, to provide provider discounts. Twenty years ago there may have been a value to an employer group to receive discounts in exchange for steering patients. There may have been a value to a provider to provide discounts in exchange for steerage. These days are over, and retail is for suckers.”

Michael, you are right on target. No one pays retail unless they want to. The reason Sam Walton went from a bloomer salesman to the largest department store on the globe is because he learned how to provide the best price with a good quality product to the consumer . Consumers figured out which price and product was best for them.

“So why should employers pay four to six billion a year for what really amounts to retail pricing? Transparency? Does it matter if a provider makes transparent their charge master? Each network or carrier has their own deal with each provider that is considered proprietary. What is being charged by the provider is irrelevant, thus making any HSA plan doomed to failure.”

Price transparency is bogus in healthcare lingo presently. The automobile industry is getting close to real price transparency. They are not there yet. The electronic industry is close with organizations like c/net.com and simonsays.com. The consumer is not stupid. When they are in control or their healthcare dollar they will force real price transparency. Actually, they are getting smarter each day.

“A new reimbursement methodology needs to be adopted. This new methodology needs to be developed in partnership with employer groups and providers. There is a necessity for administrative functions within the health care system. Third party payers and insurance carriers do provide a valuable service. Unfortunately, BUCA now is the majority stake holder in health care. Until this changes, and employers and providers begin to work together, BUCA and the consultants will continue to take advantage of this lack of connectivity and continue the path of absolute disaster.”

Bravo, Michael O’Grady. The easy way to accomplish your goal is to get the employer out of the picture. As EC pointed out the employer really wants to provide healthcare insurance to his employees. However, it is becoming an impossible and over costly task. Let it be between the patient and the physician. Reducing the physicians overhead by 20-30% will give the physician the ability to reduce his price. If he doesn’t he will suffer the consequence of the consumer walking with his feet and pocket book.

It does not have to be complicated. The primary stakeholders are the patients and the physicians. They should be the interface for the medical care transaction. If a hospital is too expensive, he would send his patients to another hospital. If patients had no choice of hospital the government should impose regulations on the hospitals to reduce the price. It can be done. It can also be profitable for everyone except the stakeholders that profit from the 150 billion dollars of administrative waste.

The healthcare insurance companies would once again be converted to a 6% broker and not the unconscionable owner of the healthcare system.

Stanley Feld M.D.,FACP,MACE

The hospital systems and the insurance industry have archaic and unscientific methods of determining price. The combination of the methods of pricing and the excess cushion built into the price leads to the excessive profits, salaries to executives and excessive building and remodeling. I look at this as creating a perfect opportunity for creating a competitive environment on pricing between hospital systems and between hospital systems and physicians practices. It also is a perfect environment for insurance companies to compete with each other. The result would be lower premium prices. If one insurance company made a move to lower prices, increase efficiency and decrease consumer grief, the others would follow. The insurance industry has some leeway on pricing because of their excess profits. Naturally, hospital systems and insurance companies do not want to give up this profit advantage. This is the reason hospital systems and insurance companies have lobbyists in State Governments and in the Federal Government. When consumers are in charge of their healthcare dollar and can profit from its wise use, they will force the insurance industry to lower prices.

All that is need is to pass a few rules and regulations by the politicians in government to create this price competition. The rules would include present price transparency, reporting on the methods used to determine the prices for hospital services and the price of premium creation, as well as the patients’ access to this pricing mechanism. If the politicians in government had the courage to act on these suggestions the mess in the healthcare system could clear up very quickly.

The people and not the insurance industry should have control of their healthcare dollar. If the people use the control over their healthcare dollar wisely, the money saved would grow in a tax free trust account each year to be used at retirement. This concept is embodied in my ideal medical savings account. The insurance companies would adjudicate the claim. However now it would be done instantly decreasing administrative costs for the insurance companies, the hospital system and the physicians. They would continue to negotiate the best fees for the patient. If they did it poorly the people would move to another insurance company. They would receive the privilege of holding the insurance premium and the trust account money. They would provide pure insurance if an illness cost more than $6,000.

Community rated group insurance would be available to all with pre-tax dollars. People would can not afford insurance would be supplemented by the government. This form of insurance would also apply to Medicaid and Medicare. It would be universal healthcare in a consumer driven and controlled system rather than universal health care in a single party payer system.
Doing all this at once would force the hospital systems, the insurance industry and physician to be more efficient. It would accelerate the development of the ideal EMR and decrease money wasting inefficiency in the healthcare system.

The most important stakeholder in the healthcare system is the patient. Somehow, the patient has been converted from a person with an illness and needs medical care, to a person who is a potential financial asset to the facilitator stakeholders. It is not uncommon, in the halls of facilitator stakeholders to hear patients referred to as clients, lives and eyeballs. “The more lives you have in your healthcare system, the greater the revenue and the greater the profit.

Without patients there would not be a healthcare system. The conversion of patients to economic entities is partly a result of the advances in technology and partly the dysfunctional evolution of the healthcare system. CAT scans, MRI scans, and stress echocardiograms and others have served to make the patient a commodity. All these test procedures generate revenue. The organization performing the testing generates the revenue. If patients owned their healthcare dollar, prices for services were transparent, and physicians’ offices were able to compete with hospital systems for procedures that are presently not permitted in the physician offices, all the stakeholders would be driven to more accurate pricing and more efficient care. The price of care would drop. The Lasik procedure is a perfect example of prices dropping in a consumer driven competitive marketplace.

At the same time, the government and the insurance industry are complaining that the physician does not practice evidence based medicine. Patients ought to have a mammogram once a year, a colonoscopy every five years, and a bone mineral density every two years, to name a few preventative screening tests.

The reality is that the increased technology has lead to increased accuracy in early diagnosis and early treatment. The result is a decrease in complications of chronic disease. The complications of the disease absorb 90% of the healthcare dollar. The technology has increased the diagnostic skills of the physicians. However, with the restrictions imposed by the facilitator stakeholders to not allow the physicians to do the testing in the office, and the inefficiencies of getting a hospital system scheduled procedure prevents the physicians from consistently practicing evidence based medicine. The implication is if the physician was permitted to do the test in his office, the physician would over test. This implies physicians are crooks and will take advantage of the patient. Ninety eight percent of physicians aren’t crooks despite what Pete Stark (D-Cal) says. It is easy to stop that 2%. However, the inefficiency in the healthcare system does not permit the physician to give appropriate preventive care to the patient.

Cognitive services are essential to accurate diagnosis and treatment. Yet, the skills these cognitive services have been devalued in recent years. In fact, if payment for cognitive services was the only revenue a physician could generate he would not be able to pay his overhead. This is presently a crisis Family Practitioners are now facing. It seems obvious, that in order to increase ones revenue, one must do indicated ancillary procedures. The counter argument is the physician will be given the incentive to over test. If a test is done in the hospital systems the cost of the procedure is usually higher than when it is done as an office procedure. (remember Dr.David Westbrock’s example). Physician office testing would drive the hospital system prices down if the hospital system wanted to be competitive. It is in the vested interest of the hospital system not to permit a competitive environment. If purchasing of healthcare services was in the hands of the patient they could choice the provider and force a competitive environment.

Physicians have the privilege of helping patients who are ill get well. They also have the obligation to prevent disease. It is not only a privilege, it is an awesome responsibility. Physicians are medical doctors that provide medical care. Medicine is a princely profession. Physicians must be given to tools to provide efficient and effective care at an affordable price. The marketplace through patient control should decide the price. Hospital systems and insurance companies arbitrarily made up the price in the past. This has to stop.

Stanley Feld M.D.,FACP,MACE

If we as a society do not become innovative about healthcare delivery, medical care in this country will deteriorate.

The Medical Savings Accounts described in the last posting can be utilized as a motivational tool for patients. A true Consumer Driven System can have a positive impact on cost and quality. I hope to demonstrate that total cost will decrease and quality of care will increase.

With 46.7 million people uninsured, America has a problem. I estimate that 30 million people can afford to pay the true cost of a high deductible insurance. The cost of insurance to an individual not in a group plan is not tax deductible. The group plans are tax deductible to the employer.

A simple change in the tax law would correct this. Additionally, if an individual has a preexisting illness, presently the insurance industry can elect to refuse offering a policy, rate the premium or exclude that illness from the insurance offered. The insurance industry can not do that in a group plan. If they have a group with many patients at risk they can try to raise the premium.

The insurance premium for individuals should be the same as corporate rates. The insurance rates should be transparent in order to shop for rates. The rates should also be calculated as a community rate rather than as and individual rate. A fifty year old male with hypertension, high cholesterol and moderate obesity is at increased risk for a myocardial infarction and the need for chronic cardiac care. In the present system he would be refused an individual insurance policy. If he could get one any care related to his heart disease would be excluded.

A simple regulation mandating community rating would correct the problem of discriminatory rates and ratings. In the Medical Saving Account System, the 55 year old patient would be guaranteed a high deductible policy which could be purchased with after tax dollars.

The system could be set up so that patient could apply and receive state or federal subsidy. This simple change could cure our Medicaid problem. The Medicaid system presently spends more per patient than it would cost the government using an effective Medical Savings Account system. The Medical Saving Account system would also encourage patient compliance. The patient would not longer be a burden to the state because costs could decrease.

The key is motivating the patient to be responsible for his care. He would be in control of purchasing his care and to adhering to the care recommended. There have been many pilot programs rewarding expectant mothers on Medicaid. If the mothers participated and fulfilled their obligations for prenatal care, the fetal and post partum complication rates fell dramatically. The neonatal and post partum care costs plummeted. The reward of some pilots was simply free formula for the first year of the infant’s life.

Consumer driven responsibility for one’s medical care is an invigorating concept to patients long abused by a hierarchical bureaucratic power seeking healthcare system. The power should be given back to the consumer.

One can see how the system could work in Medicare patients. The government subsidizes the insurance of people over 65 years old. Constantly, the government must raise the insurance premium the elderly pay. Ninety percent of Medicare’s payments are for the complication of the chronic diseases. If the system were set up to reward the elderly for effective self management of their chronic disease many unnecessary costly complications could be avoided. The patients could be motivated by the money accumulating in their Medical Saving Account. Since they are retired they could use the unused trust money as a supplement to their Social Security. More on the mechanism of the various plans in the future.

Will it work? Absolutely!!

We will see “Patient Power” in action when Wal-Mart rolls out the $4 per month for generic drugs nation wide. The elderly will force their physicians to order generic drugs. The CVS and Walgreen will also be forced to decrease the cost of their generic drugs. The Medicare Part D fiasco will evaporate. There will be no need for Medicare D. It will be cheaper to buy the medication from Wal-Mart. The price of brand name medication will decrease because of the price competition. Adherence to medication regimes will increase because patients can once again afford their medication.