Stanley Feld M.D.,FACP,MACE
Obamacare is already proving it is going to fail. By President Obama’s own admission, it will not achieve universal coverage. It will not provide affordable coverage because the healthcare insurance industry is already raising the price on private insurance and the fees it charges the government to administer service for Medicare and Medicaid.
Seniors will notice that their Medicare premiums for Part F has increased starting August 1st. Seniors can also expect premiums for Medicare Part D, Ordinary Medicare and Medicare Advantage to increase on January 1st 2011.
Why would premiums increase? Physician reimbursement has decreased.
There will be an increase in the fee the government pays administrative service providers (healthcare insurance industry) to subsidize Medicare and Medicaid. The reason for these increases will be non- transparent.
To many the name Newt Gingrich is a dirty word. Nonetheless, he is perceptive. In his recent book “Real Change: A Fight for America’s future”, he explains why the current third party payment system for healthcare is inefficient, ineffective and leads to fraud. I will amplify his model in order to point out the dysfunction in the healthcare system and its solution.
He explains why a “buyer-seller model” in healthcare is more efficient than a" “buyer-seller-receiver bureaucratic model”, whether it is a public or private system.
In the third party payer system (buyer-seller-receiver system), the buyer (insurance company, employer or government) receives no direct value for its payment. Its goal is to pay as little as possible. The seller (physicians or hospitals) knows the buyer suspects the seller of greed, and incompetence. The relationship is adversarial.
The receivers (patients) have little concern of cost. They have first dollar coverage. They have no incentive to save money. They have been conditioned to believe the medical care is an entitled service. Patients want more service with more convenience. They have no accountability for their habits. They have no incentive to lose weight or exercise consistently. Obesity leads to chronic disease and its complications. Patients have no incentive to care for their chronic disease.
President Obama’s healthcare reform plan does not provide these incentives. Yet the key to repairing the healthcare system is patients being the keeper of their health and the manager of their disease.
On the other hand, in a buyer-seller system, the buyer (patients) can be given incentive and educated to be a wise buyer of a service (medical care). The buyer (patients) has freedom of choice. Patients decide whether a service is worth the price. They decide whether they want to avoid the cost by taking care of their health.
The sellers (physicians, hospitals, or pharmacies) can choose to sell at the offered price or refuse to sell. The seller has a free choice. The seller’s freedom is not shackled by government regulations. The price is determined by previously negotiated prices. Prices are transparent.
Patients must be made aware of the negotiated prices by the government.
The buyer-seller-receiver bureaucratic model with the government being the buyer in a single party payer will lead to;
1. Fraud, abuse and administrative waste.
2. Lack of individual freedom of patients to choose their medical care.
3. Bureaucratic control of healthcare which undermines personal responsibility for health and medical care.
Fraud, abuse, and administrative waste.
There are many examples of fraud. The easiest examples to comprehend are the occasional physician or physician’s clinic billing for services not performed.
There are examples of hospital systems overbilling Medicare and Medicaid for non-rendered services. These actions seem to have political overtones. It is usually private hospital corporations or management companies and not faith based non-profit hospital systems that are accused of this level of fraud.
Medicare and Medicaid outsource the administrative services to the healthcare insurance industry. There are many examples of the fraud and abuse by the healthcare insurance industry.
The public perceives the largest cost is physician abuse. Physicians are the weakest stakeholder. However, if the government looked closely enough it would find the largest area of fraud and abuse comes from the healthcare insurance industry.
A popular notion in congress is that 40 cents of every healthcare dollar goes for administrative costs to the healthcare insurance industry. I believe this is a low estimate. Some economists have demonstrated that administrative services expenses are 60 cents of every healthcare dollar.
Congress has chosen not to change the accounting rules used by the healthcare insurance industry. These defective accounting regulations lead to the largest area of fraud and abuse. An estimate is $250 billion dollars a year.
The Government Accounting Office estimates that 10% of Medicare and Medicaid spending is lost to fraud and abuse. Ten percent of Medicare and Medicaid cost is $80 billion dollars a year. Over the next decade, the cost would amount to $800 billion dollars if both programs were not expanded. With the entitlements being expanded it could be 2 to 3 trillion dollars over the decade.
I believe if we created a buyer seller system, the fraud and abuse would decrease to less than 1% of healthcare expenditures. Every patient would be a police officer for his own healthcare dollar.
Lack of individual freedom to choose.
Bureaucracy can only function by creating rules and regulations to control the receiver and the seller. This leads to an increase in the number of regulatory agencies. The result is many unenforceable and conflicting rules and regulations. The rules and regulations usually lead to unintended consequences and greater budget deficits.
The receivers’ (patients’) medical needs might be unfulfilled by these rules and regulations.
Americans love the free market and their ability to make choices. We love to be consumers and admire incentives, bargains, and choices. One only has to look at consumer products such as electric products and automobiles. Consumerism drives our economy not centralized bureaucratic control. Healthcare should be driven by consumers and not by the system, which President Obama and Dr. Donald Berwick advocate.
Bureaucratic control of healthcare will undermine personal responsibility for health and health maintenance.
The buyer (the government bureaucracy) pays for the receiver (patient) to receive care from the (physician). The patient is forced into a passive position. The government defines what care the patient can receive. The physician must provide the care the government dictates.
Patients are conditioned to believe that someone besides themselves is responsible for their health and healthcare.
The government should provide the appropriate information and education for the patients to make wise hea
lth decisions. These wise decisions must be encourage by giving patient control and ownership of their own healthcare dollars.
This can be accomplished through the ideal medical savings account.
Patients should make healthcare and medical care decisions for themselves.
Patients must play an active role in the management of their health and disease.
I believe the bureaucratic single party payer system will not Repair the Healthcare System.