The Health Insurance Solution

Stanley Feld M.D.,FACP,MACE

The patients and their ability to be an effective free market consumers have to lead the way. I believe a system controlled by the government will not work. A Healthcare System has to be market-driven by consumers in order to work.

Presently, our healthcare system is any thing but consumer or market-driven. Price and access to care are totally controlled by facilitator stakeholders. Price is opaque. Despite calls for transparency change is very slow. The rate of change from price opacity to transparency will remain slow until State governments mandate price transparency. State agencies control licenses for hospitals, the insurance industry and physicians.

Presently, patients have no idea of the quality of the healthcare product they are purchasing. They also have no idea of the price until service is completed. Access to care and services are also restricted by the government and the insurance industry.

The various parts to the solutions to the insurance issue have to occur very close to one another on a time line in order to be effective. The two main repairs are price transparency and high deductible insurance policy.

A Healthcare System without price transparency and a high deductible option such as Health Savings Account represents a false hope and will fail.

The employer’s average healthcare cost for a family is twelve thousand dollars per year. Employers are providing medical insurance for the employee for $12,000 per year.

The Medical Saving Account plan would provide a six thousand dollar trust fund and a first dollar high deductible coverage plan for $6,000. The total $12,000 could be administered by the insurance industry. The plan could satisfy the insurance industry. It would not provide them with ownership of the first $6,000. However, it would save them spending the second $6,000 because patients would be motivated to be effective shoppers. The patients would retained some of the first $6,000 in their individual trust accounts by seeking cost-effective care and avoiding the complications of chronic disease.

The insurance industry is interested in primarily in two things. They want to control the first insurance dollar for investment. They are also interested in retaining the unspent insurance premium dollar. The original concept of health insurance was to provide an inexpensive job benefit to the employee and provide protection for the employee against the costly expenses generated by complications of chronic illness.

Presently the medical insurance industry wants to keep as much of the insurance premium as it can. It profits by the income generated from the money float of the insurance premiums and unspent premiums. It, therefore, makes the decisions on how the premium dollar is spent. The result is the restriction of access to care.

In my ideal formulation, patients would be motivated not to waste their insurance dollar. The insurance industry would still negotiate fees with hospitals, physicians and other healthcare providers. These fees would be available and transparent to the patient. Patients would make their own decisions on medical care spending.

If the patients do not spend the $6,000 in their trust, that money would accumulate tax free and be available at retirement. The six thousand dollars per year would serve as an incentive for patients to be careful consumers in a price transparent environment.

If the patient had a chronic illness, we have seen average costs as high as $20,000 to $300,000 dollars a year for the treatment of complications of the disease. This is not only a burden to the patient but also to the insurance company. Hospitalizations like recurring congestive heart failure could be totally avoided with the development of systems of care that teach the patient self-management. The patient could then avoid slipping into congestive heart failure and avoid hospitalization. The cost of care would then decrease.

The average cost incurred by a patient with diabetes mellitus is presently $15,000 per year. Some patients with diabetes mellitus do not go to the doctor. Those patients cost nothing that year to the insurance company. The next year each could cost $200,000 to treat the complications of their diabetes mellitus. If a patient with diabetes mellitus could avoid complications with maintenance of the disease the cost should be $4,000 to $5,000 per year. If the patients trust fund owned the first $6,000, the patient might be reluctant to spend the money on preventive maintenance of the disease. However, the insurance company or their employer could easily credit $2,000 back to the trust account complications were avoided. The insurance company would then be able to keep the remaining $6000 of the insurance premium as pure profit. It also would have access to managing the cash in the trust account until the patients retirement.

The government can make this happen with legislations and regulations. It can be done on the state level because states regulate licensure of the insurance industry, hospitals, and physicians.

I will next discuss how this plan can be implemented for Medicare, Medicaid, the unemployed and the self-employed. By increasing the insurance pool the insurance industry could increase profit rather than face increase cost, increasing premiums and decreasing lives covered.