Did you know there’s a health care reform plan out there that provides universal access, reduces taxes, increases wages, reduces cost of hiring, and lowers actual costs of health care? There is, so read on.
The left and the right agree on some basic principles when it comes to health care: cover the most people (ideally everyone) and minimize the cost all without reducing quality and availability.
The left advocates “universal coverage” underwritten by the tax payer, while the right advocates for largely more of the same present system with limitations on elements of costs (i.e. lawsuits). With all due respect, both positions are wrong and do not address the core cause of the problem of rising health care prices.
The solution is to eliminate 3rd party payer insurance, whether it is provided by private firms or the Government.
Consider this. When a consumer goes to his provider and is covered by insurance, he has little reason to consider the costs of his “purchase”, save perhaps his co-pay. The provider likewise has very little incentive to keep his prices low, as it has little impact on his “sales”. Both parties are acting as they should, and it’s all because they are insulated from each other by the 3rd party payer (insurance companies, Medicare, etc.).
Try as they might, insurance companies can only put minimal pressure on providers to reduce their prices. In the end, they understand whatever reductions they cannot achieve through provider negotiations, they will simply pass along to the insured in the manner of higher premiums. Only then does the consumer see the impact of his or her purchasing decisions.
Today every major insurance company could be converted to a more market driven and economical Medical Finance Company without forcing them out of business.
Here’s the plan:
1. Medical Insurance companies will convert to Medical Financing companies.
2. These companies will offer a low cost annual membership (perhaps as low as $100 – $200 per year) that includes preventative care.
3. Legislation will require that employers will increase cash compensation to employees the equivalent to at least 75% of the total cost of health insurance premiums for that employee. Employers will be allowed to retain remaining share of health insurance premiums up to 25% of total premium costs of health insurance.
4. Potential members are not subject to credit checks to qualify.
5. Each member is provided a “credit card” tied to their Health Care Financing organization. They will use this card to pay for services at the time they are rendered, regardless of provider or type of service, subject to the cardholder agreements.
6. The Finance Company charges a minimal interest on the balance (i.e. Prime plus 1) and the debt is legally non-dischargeable in the same manner student loans are today.
7. A limited once per lifetime means tested repayment by the Federal/State Government of total incurred debt will be made available. This would be the only forgiveness of such debt allowed by law. Repayment would be made directly to the Medial Finance Company.
8. Consumers pay their balance down as they would any other debt, with monthly means tested mandatory minimum payments. Incentives for faster repayment can be offered at the Medical Finance Company’s discretion. Members can also deposit cash funds into their account for use as prepayment. These funds would be able to be withdrawn as cash at any time by the member.
9. Finance Companies can leverage their in force agreements with providers and offer their members the ability to use their “volume discount pricing” if they so choose. These providers will not constitute a limited network and will only be presented to members for the purposes of offering additional discounts over “street” prices.
10. Employers can provide the membership to their employees as an employer funded benefit and would be responsible only for the payment of annual membership fees.
11. Employer funded memberships are the property of the Member, and can be taken with them should they change employers or become unemployed. Members will be responsible for annual fees should they leave their employer in this case.
12. The Federal and/or State Government(s) agree to assume the costs for child birth and for 50% of catastrophic/chronic care for specified conditions (i.e. Cancer, HIV/AIDS, etc.). Personal obligations for covered conditions will be limited to to 25% of household income per year, with 100% Government payment following that, using funds previously set aside for Medicaid and/or Medicare. Medical Finance Companies would notify HHS/State of eligible charges and HHS/State will provide payment directly to Medical Finance Companies.
13. Catastrophic/terminal conditions eligibility and definitions will be enumerated specifically through the controlling legislation. The initial list of conditions and all subsequent member appeals for procedures not on this list will be reviewed by a panel consisting of appointees of the Executive Branch, Legislative Branch, AMA, and medical finance companies in equal proportions. The panel will make recommendations on a majority vote of the total board. Review panel member’s term durations to be set forth in the controlling legislation. Additions or removals from the list of covered conditions must be approved by a vote of 60 Senators and 261 members of The House of Representatives (super-majority) and signed by the President of the United States.
14. Low income individuals will qualify for Federal/State subsidies on their annual membership costs in the form of income tax credits.
15. Medical Finance Companies are permitted to market optional life insurance plans to their members that are tied to their balance and traditionally underwritten
16. Annual paid interest will be considered a tax deduction for income tax purposes, graduated based on income level, further reducing the liability of the low income consumer.
17. Medical Finance Companies are free to provide financing for any medical related procedure, including dental, vision, discretionary, cosmetic and/or non mandated procedures. The costs are borne by the member in the same manner as any traditionally covered procedure. States retain the right to regulate minimum procedure eligibility regulatory oversight.
18. Members choose where they wish to have their prescriptions filled, and the costs may be charged to the Medical Finance account or paid out of pocket, at the discretion of the member.
19. Medicaid (i.e. Badger Care, etc.) will be eliminated. An appropriate portion of the funding will be redirected to cover items described in #7, 11, 12 and 13 above.
20. Medicare will be gradually phased out. Any person who does not attain the age of 50 in the calendar year of passage will be ineligible for Medicare, and will use this program in future years. Anyone age 50 or older will remain eligible under current rules and procedures with no changes to their Medicare benefits.
21. Medicare funding and payroll taxes will be directly tied to membership levels, eventually fully phasing out at the passing of the last eligible Medicare member.
This plan provides low cost of entry for the consumer, places the consumer in total control of their health care decisions and give them the added power of full knowledge of price as a component of their decision making.
The costs to the taxpayer for heath care will be reduced significantly over time, and coverage will be available for nearly 100% Americans, regardless of age, income level, or employment status. Furthermore, disparity of quality of care between the lowest and highest incomes is reduced or eliminated.
Finally, no one is required to participate. If any individual chooses, they may pay on their own, but with the benefit of the market driven downward price pressures reducing their costs to the same level as those participating in a plan.
This is a proven plan in ways we see daily, but perhaps fail to recognize. Today Lasik Eye Surgery costs a national average of $1,800 per eye. In 1997, costs per eye were far more expensive, sometimes up to $4,000 or more per eye.
But since insurance does not cover Lasik, providers were forced to compete with each other on price, as well as other factors, and reduce costs. In the end, consumers and providers both win with higher quality, lower costs and lower prices.
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I find this proposal very intriguing. I have argued for years that the cost side of the health care equation needs to be attacked. Health Care costs have continued to increase while costs for other highly technical services/goods have gone down. This is because there is no market pressure to compete since people don’t care how much healthcare cost because they are not paying for it. I would be interested to know what the net impact of this plan would be on the federal governments expenditures for healthcare. Has a financial analysis of this proposal been performed? Can you share it? The other side effect of this plan would be a boost to the economy as employers and employees alike would have additional money available to spend or invest or grow.
Thanks for the feedback. I would love to see a full financial analysis done on this proposal, and others like it. Unfortunately I am not a finance professional by trade (IT guy) and as such would not even know where to begin.
I can say that the anecdotal evidence is strongly in favor of huge downward pressure on the price curve. If you examine similar industries such as Lasik eye surgery and cosmetic medicine, both of which are generally not covered by insurance, you see that over time the costs for procedures actually goes down. Lasik was 4 times more expensive at its introduction than today, and the current procedure is far more effective while still costing much less. Cosmetic procedures are also far less expensive (in real dollars adjusted for inflation) than 20 years ago. At one time, only Hollywood celebrities and the wealthy could consider such procedures, and now they are affordable enough that many people have had cosmetic procedures done. This has not come at a cost to quality either, as the procedures are largely more effective today, and also safer.
These examples are in the general health care marketplace, and there is little reason to believe that common procedures in traditional medicine would be immune from such market forces.
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The fact of the matter is, health care cost is going down. The cost of the drugs and the medical procedures is going down. Pick any 50 drugs and any 50 medical procedures and look at the price 15 years ago compared to today. They are lower today. What is different is the volume of drugs and procedures available today that weren’t available 15 years ago. We have an expanding market of goods and services. Obviously we are going to spend more of our GDP year after year on this new market. Consider this, in 1938 there were 2.8 million people with insurance by Blue Cross, by 1950 it was 20 million. In 1950, you could not get heart valve replacement. It wasn’t until 1967 that you could get an artifical valve. Bypass suregery didn’t start until the late 1950′s. We are beginning a new epoch of science in medical fields. How could we possibly spend less when so much is now available to us? How about laser surgery to fix vision issues? How does that figure in? It is cheaper now then when it started, it is less than half the starting cost. Reality is, it is a non problem. So most fixes cause damage.
Your use of Lasik as an example of costs coming down over time refutes the idea that 3rd party paid care (insurance cos. or government entities) is not an issue.
Lasik is not covered under almost any insurance plan. People who choose to have the procedure pay 100% of the costs, and therefore are price sensitive and conscious. Providers are also aware of this sensitivity and look to reduce costs and therefore prices wherever possible.
If the procedure were covered by insurance, consumers (patients) would not consider price in the purchasing decision, and providers would not work to reduce costs and prices. Insurance companies would try to negotiate lower rates, but would be largely unsuccessful as they cannot risk losing providers in their network without damaging their product (which is insurance not health care or treatment).
3rd party payers destroy the market mechanisms that naturally regulate price and demand, and actually restrict and harm innovation in treatment and care. In an economy without a 3rd party payer, providers are incentivized to innovate because they can charge a premium price for a short time at higher margins. Those procedures are not patentable, though, and would soon be replicated at lower prices elsewhere in the marketplace. This innovation makes older procedures less expensive as it reduces demand for them, bending the price curve downward.
There is no reason medicine would not or should not respond to market forces in a manner any different from consumer electronics, food, shelter, clothing or any other product or service. Unless and until we eliminate the 3rd party disruption in this economy, it will continue to malfunction as we have seen.
People choose Lasik. People do NOT choose to have a disease that will make them sick, disabled, or dead.
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There are a few incorrect premises here: Nathan Sass states that, “I have shown that the middle man (insurance companies OR the government) is virtually powerless to control price, and can only slow the spending down by limiting access to ever more expensive care (commonly referred to as “uncovered procedures” rationing”, respectively).” Nothing can be further from the truth. Third party payers have ALL the control. Medicine is the only industry where the amount billed has absolutely no meaning. The third party payers (both private insurance companies and Medicare/Medicaid) dictate what they will pay for a service or device, or medicine, regardless of what the doctor or hospital charges. The doctors and hospitals charge huge amounts, because they are not reimbursed enough from the third party players to survive, and the huge bills fall on those who are paying privately. Those paying privately have no insurance because they cannot afford the high premiums of private health insurance, so that is the reason that illness and medical bills are the most common reason for bankruptcy. Most folks can not afford the cost of health care when they are seriously sick, so the financing idea simply won’t work. How’d you like another mortgage because, you got sick?
Patients are NOT customers. The premise that they are is simply wrong. Patients do NOT choose to have a disease. That is fundamentally how medicine differs from any other industry. People can choose what, if any, commercial product they buy, but they cannot simply choose not to have a disease or injury. This is why standard commercial economics/dynamics simply don’t stand in medicine. Yes, we have a broken system, but applying commercial ideas to something that’s not fundamentally a consumer industry will not work.