Any effort to reform health care, or more properly health care economics, must start with recognition of the core issues that must be addressed, and the problems that therefore must be solved.
To date, all reform proposals have failed in to address the core flaw in the current system. Specifically, consumers have become detached from producers in the health care sector of the economy.
The pre-ObamaCare system relied primarily on a third party payer model to cover almost all health care transactions. The reforms enacted under ObamaCare did not alter this fundamental model, however some of the mandates and regulations have made the third part payer model even less workable.
In either period, insurers acted as an intermediary between producers (health care providers, clinics and hospitals) and consumers (patients and their families). This insulation resulted in consumers with higher than expected demand and producers with no pressure to lower prices while maintaining quality of service.
In response to this reality, third party payers (insurance carriers) resorted to several methods to regulate consumption and attempt to control costs.
Deductibles steadily rose in order to create a reverse incentive to consumers, in the hopes that demand would be regulated. These deductibles only marginally effected consumption, and often resulted in accelerated demand by consumers once the deductible had been met.
Pressure was also placed on producers to reduce costs, however carriers have little real ability to pressure producers, for fear that they would leave the carrier network, and make the insurance less valuable on the market.
Products such as Heath Savings Accounts (HSA) and Heath Reserve Accounts (HRA) were developed in an effort to expose the consumer to the costs of the services they were purchasing. This met with only limited success, as the consumer shied away from such plans due to their cost. As such, producers never felt any real consumer pressure on prices.
ObamaCare has expanded the number of items now covered under this model, making resulting in more insulted consumers and producers. The rational response from carriers will be further rationing via the methods previously described.
The net result will be high premiums, deductibles, and out of pocket costs for consumers, continued insulation of the consumer from the producer, and no net reduction in the costs of care.
Finally, there is a significant political and economic issue related to uninsured individuals. These individuals are at significant financial risk, which translates into reduced economic activity. They are also at significant risk of poorer health outcomes due to delayed or refused care for otherwise treatable conditions.
The conservative solution was to rely on the efforts of insurance companies to finally reign in the costs of care, and reduce the consumption. These are largely unrealistic expectations., and does nothing to deal with uninsured Americans.
The progressive approach is to implement a single payer system, similar to Canada. This plan is simply all the worst of the current third party model (excessive demand, insulation from costs/price, etc.) combined with the most inefficient entity to administer the plan, specifically government.
The core issue of consumer insulation can only truly be addressed with what may appear to be a radical approach to health care economics – the Medical Finance Plan (MFP).
MFP’s offer near absolute universal access (addressing the issue of the uninsured), remove producer/consumer barriers (reducing costs and regulating demand), improves economic and administrative efficiency to near maximum, and provides for limited, controlled, and well defined social safety net.
In short, it addresses the core complaints related to health care of both conservatives and progressives.
This reform proposal leverages largely in place, proven models already comfortable to consumers in other areas of the economy, provides for reasonable protections from financial hardships due to severe or chronic illness (catastrophic protection), and will remove any third party from the decision making process regarding the course of treatment, provider, or any other element of the health care process.
Further, it reduces the administrative overhead of providers, simplifies the transaction process for both consumers and providers, and nearly eliminates most current methods of insurance fraud permanently.
Finally, this plan results in additional earned income for nearly all employed Americans, increased tax revenue to the Federal Treasury, increased FICA receipts, and reduced long term deficits on entitlement programs like Medicare, Medicaid and SCHIP.
The proposal consists of the following elements:
1. Medical Insurance companies will convert to Medical Financing companies. Third party payment for health care services will no longer be allowed by law, wit the exception of specific named government entities (i.e. HHS/CMS)
2. Legislation will require that employers will increase cash compensation to employees the equivalent to at least 75% of the total employer contribution (as of 2013) for health insurance premiums for that employee. Employers will be allowed to retain remaining share of employer contributions for health insurance premiums up to a maximum of 25% of employer contributions.
3. Medical Finance Companies will offer a low cost annual membership (perhaps as low as $100 – $200 per year) that includes preventative care. Memberships will work in nearly every respect like a typical consumer credit card (i.e. Visa). There will be no other “monthly premium” payment.
4. 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 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 by HHS/CMS.
8. Consumers pay their balance down as they would any other debt, with monthly means tested mandatory minimum payments. (i.e. no more than 7.55 of gross monthly income). Incentives for faster repayment can be offered at the Medical Finance Company’s discretion.
9. 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. (The are deposits of post tax dollars.)
10. Finance Companies can leverage their current in-force agreements with providers in order to 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.
11. Employers can provide the membership to their employees as an employer funded benefit (pre tax dollars) and would be responsible only for the payment of annual membership fees.
12. Employer funded memberships remain 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. In the event of change of employment, memberships are 100% transferrable between finance companies at the member’s discretion.
13. The Federal Government agrees 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 25% of household income per year (limitations will rely on income tax information from the previous filing year, not projected current year), with 100% Government payment following that (similar to a current Out of Pocket Maximum). Funds currently set aside for Medicaid and/or Medicare will be repurposed to finance spending related to the catastrophic coverage. Medical Finance Companies would notify HHS/State of eligible charges electronically (using current ICD-10 coding and electronic file formats) and HHS/State will provide payment directly to Medical Finance Companies via EFT.
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 (via secret ballot) 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 also 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, up to 100% of the cost of the membership.
15. Medical Finance Companies are permitted to market optional life insurance plans to their members that are tied to their balance and traditionally underwritten, providing protection from debt following the passing of an account holder.
16. Annual paid interest will be considered tax deductible 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 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 or limit procedure eligibility.
18. Consistent with current Federal law, abortion will not be considered an eligible procedure, preventing any public funds from ever being used to subsidize or provide payment for said procedures.
19. 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.
20. Medicaid (i.e. Badger Care, etc.) will be sunset, and current enrollees of Medicaid will be transitioned to medical finance accounts. An appropriate portion of Medicaid funding will be redirected to cover items described in #7, 11, 12 and 13 above.
21. Medicare will be gradually sunset. Any person who attains the age of 50 in the calendar year the legislation goes into effect will be eligible for Medicare, and will use current rules and procedures with no changes to their Medicare benefits.
22. Medicare funding and payroll taxes will be reduced as membership levels decline. When there are no more Medicare enrollees in the Medicare system, payroll taxes will be determined using traditional underwriting guidelines for the costs related to catastrophic/chronic care, reducing or eliminating the potential for unfunded spending/deficit conditions in this program. Should the program achieve a surplus of more than 25% in any given year, that portion of the surplus in excess of 25% will be refunded to taxpayers in proportion to their contributions for that year.
This plan addresses the current expressed core complaints of consumers as well as those expressed by both political parties, specifically:
- Universal coverage / access to quality care
- Elimination of any entity between a doctor and a patient
- Increased incentive for innovation
- Proper economic market pressure to reduce costs and improve quality
- Protection from economic or health hardships due to illness regardless of income
- Reductions in administrative overhead at multiple levels
- Increased economic activity, growth and productivity
- Reduced government spending
- Elimination of unfunded entitlements
- Reduction of the current deficit
- Elimination of most opportunities for fraud in the health care economy
This plan is relatively simple to enact, familiar to all consumers and providers, entirely constitutional, and resistant to lobbying efforts of any sector of the health care economy.
This represents a bold path forward in the best traditions of America. As before, we can blaze a bold new path and provide the world with a new and innovative solution to a problem encountered all over the globe.