Another Piece Of The Puzzle To Repair The Healthcare System
Stanley Feld M.D.,FACP,MACP
The government could solve the uninsured problem with a few effective consumer driven incentives. Previously, I have made the point that all of the incentives need to be initiated at the same time. They have to be made simple and clear without loopholes.
Mitt Romney plan in Massachusetts and Arnold Schwarzenegger’s in California plans fall short. They promote universal coverage in a market environment. Universal Health coverage is important but should be optional to the consumer. Both plans are complex. Both plans have several problems in common. Both are contaminated by politics and facilitator stakeholders’ vested interests. The more complex a system is, the more opportunity for abuse by savvy facilitator stakeholders. Neither plan creates a true market economy. If the plans were attached to the ideal medical savings account plus tax equalization for a group and an individual, along with true price transparency, they would have a chance to be effective. The plans would create a pure consumer driven healthcare environment. The consumers would own their healthcare dollar and force competition. In the plans proposed the consumer does not have any increased power.
Hillary Clinton’s program is not the answer. It is designed to fail. When it fails the Democrats will call for a government controlled single party payer in a price controlled environment. This will create a larger mess than we have now. Her plan will also create another unaffordable entitlement. Our government cannot afford another entitlement program.
We have seen in an effort to control prices (price controls) the government has made irrational decisions. One such decision severely decreases the reimbursement for DEXA (bone density) to the point of discouraging medical practices from developing disease management programs for this chronic disease (Osteoporosis). The result will be to undermine the ultimate goal of creating a focused factories for the treatment of osteoporosis. These focused factories would increase the quality of care delivered for osteoporosis and avoid the complications of this chronic disease.
It is much better to create an environment which lets the patients determine the efficacy of a treatment if they are given the appropriate information to decide on the purchase of a medical therapy.
It is my opinion that community rated healthcare premiums should be included among the changes I have outlined to repair the healthcare system. Everyone in a city or region should have his premium rated by the health experience in his community. The premium cost is based on the $6,000 deductible. The $6,000 premium will obviously be lower than the first dollar premium coverage.
The argument against community rating among many healthcare policy wonks is that young people are subsidizing the sicker citizens. Therefore the healthy people will be unwilling to pay the premium and will not participate in a community rated system. I believe this is a porous argument if we look at what is happening today with corporations that are self-insured.
We need to look at some of the principles of pricing life insurance and auto insurance. People at risk pay a higher premium than people with little risk for death or auto accident . This principle should be applied to healthcare insurance in the ideal medical savings account model. We need to convert the healthcare insurance model to a true insurance model.
In reality, community rating is the way large corporations are charged by healthcare insurance companies to administer their self insurance plans. The corporations are charged according to the healthcare insurance experience. If the healthcare experience was $1 million dollars last year the corporation deposits $1,100,000 in a healthcare trust fund the following year. If the employees spend more than $1,100,000 during that year, the corporation either adjudicates the trust fund for the insurance carrier’s administration at the end of the year or that difference is added to the next year’s trust fund payment. General Motors was self insured. It was screaming about their healthcare cost. With their new contract they have now dumped the insurance relationship off to the automotive unions. This move is not that bad for either side. It gets ownership of the healthcare dollar closer to consumers, the autoworkers. However it is less than perfect.
Human Resource officers are experiencing how their self insurance trust is priced by the third party administrator, the healthcare insurance company, and are unhappy. They are realizing the healthier their company is the lower the premium cost will be. They are beginning to set up contests among employees to lose weight, control their blood sugar if they are diabetic, and control their blood pressure if they are hypertensive, to avoid the complications of those diseases.
The reality is that large and small businesses’ healthcare insurance premiums are determined by that businesses community healthcare experience. Large and small businesses try to get rid of their sick people. However, there is great liability to this maneuver. I sense most corporations have walked away from trying to fire these people.
The issue of healthcare insurance has not been the concern of young healthy people when the corporations were paying for their healthcare insurance. Healthcare insurance coverage has become expensive. The argument is more young healthy people will elect to be uninsured if they were required to buy their own healthcare coverage. However, more and more employers are limiting benefits. Many young people are finding out that they have inadequate insurance if they get sick. Additionally, many employers are dropping their healthcare insurance coverage for all employees.
If we think it out in the ideal medical savings account, the corporation provides $12,000 to the employee. $6.000 is put in the medical saving account and the next six thousand pays for first dollar coverage above $6,000. If the employee does not spend the $6,000 that employee keeps that money in a trust fund for his retirement. The young employee would actually have incentive to purchase healthcare insurance and try to protect the health of his family.
If the healthcare system converted the present corporate community rating formula to a city wide or regional community rating system the risk would be spread to the entire area covered. It could result in a lower premium cost. If the individual communities or regions encouraged the creation of systems to encourage good health, community pressure would be put on the citizens to lose weight, control blood sugar and blood pressure similar to procedures currently being used by corporations. The communities would be encouraged to decrease local environmental hazards including restaurants, in order, to decrease the community healthcare costs and risks.
Local regions could encourage our restaurants not to serve 3,500 calorie meals. We have to support the efforts of TGI Friday. We need to have community pressure on us because we are responsible for our healthcare dollar and indirectly responsible for our community’s healthcare dollar.
Everyone should have the ability to buy a community rated ideal medical savings account with pre tax dollars. They should also have the right to buy any other healthcare insurance policy with pre tax dollars. This policy would increase competition among healthcare insurance policies even more. Some might have noticed that this quarter UnitedHealthcare’s profit went from very grotesque to extremely grotesque. It increased 15% taking advantage of their control of the healthcare premium and provider payments while increasing premiums for the employer.
If someone chooses to be uninsured he would have to negotiate the payment on his own and not enjoy the tax benefits of the ideal medical savings account. At the same time the government through regulation, would require the healthcare insurance industry, hospitals and physicians to have complete and accurate price transparency based on cost. If the facilitator stakeholders did not participate they would lose the privilege of insuring and serving the public in that state. If the government supplemented the insurance premium of people who could not afford the ideal medical saving account healthcare insurance policy the government would save money and enable the patient to have incentive to control their healthcare costs. It would inspire a new paradigm of competitive healthcare insurance and medical care. The consumer would control his healthcare dollar, have incentive to control his healthcare spending and demand a competitive environment necessary for a true market economy.
The Happy Hospitalist • November 1, 2007
What are your thoughts about a system where in one could buy and sell their HSA money in an open market voucher system, much like EBay’s auction system. If you are young and healthy and don’t want to send your $4000/year in premiums to an insurance company. Instead you buy a really high deductable HSA, to the tune of $20,000 or more, to really get the essence of catastrophic insurance.
I envisioned a corporate healthcare voucher system where in a set amount of health care dollars would be given to employees, in voucher form, to be used for health care costs in any way they choose. The employer would not provide insurance, they would provide vouchers. Say $4000/year. These vouchers would carry a 5 year life span, at which point they would expire.
In this system, I imagine the buying and selling of these vouchers in the open market, an ebay type system. If my unused vouchers will expire, and I have $10,000 built up, I can put them up for auction to the highest bidder. Of course, they will go dimes on the dollar. Instead of my $20,000 in premiums over 5 years going to an insurance company, it would be paid to me by my employer as a voucher. I can then choose to use it or sell it at auction.
It would be up to the patient/ employee to buy their own HD insurance plan. It could potentially cheapen the cost of insurance and remove a massive amount of first dollar health care from the insurance companies coffers, and into actual health care service.
Just some thoughts.
Jeff C • November 11, 2007
You are on the right track as a physician who is speaking out about the broken state of American health care. But I am puzzled by your apparent statist solutions. Government, whether local, state or federal is not the answer and I would submit are 1/2 of the problem of American health care. The answer is to restore the physician/patient relationship directly. Consumers should pay physicians directly for their services just as clients pay attorneys directly for their services. For catastrophic illness or emergency care, a catastrophic policy could be maintained much like a term-life insurance policy. 3rd-party payers should be eliminated as should Medicare. One group which has some experience regarding my post is the AAPS – American Association of Physicians and Surgeons.