Question: What do we as individuals fear the most when it comes to the health care debate? As a physician who over 25 years of experience I will provide the answer. It is fear of becoming bankrupt from an unforeseen health care event and its unexpected costs. The prospect of short term financial difficulties is what keeps individuals “strapped to” the first dollar insurance model. This course of inquiry leads to an additional question (and an answer). What if people had the tools to allow alternative high cost event payment with terms allowing repayment at manageable costs over time? This is what credit is all about. The average person can easily arrange a car loan. Why can’t we have access to capital for a health consumption event?
Introduction: As society complaints about the rising costs of health insurance, government solutions have only made matters worse. Under President Obama’s Administration,the public abdicated its participation in the health care market to federal government policy, crying out for “Medicaid or Medicare for All”. This choice resulted in further government consolidation efforts, most notably the Patient Protection and Affordable Care Act (PPACA) a.k.a. Obamacare. Another balloon floated was legislation supporting Accountable Care Organizations (ACO).
The ACO model places significant cost restraint and additional bureaucracy on patient management. Effective January of 2017, the latest government legislation known as Medicare Access and Cobra Reauthorization Act (MACRA) is living testimony to how far government has necessarily moved in controlling the health care market. MACRA is a 2000 plus page monstrosity of federal regulation over Medicare and Medicaid. Its formula is one that the health insurance industry is frothing to adopt. (Government, 2017) Buried in the rules are so many twisted incentives, it would make a drunk blush in a bar.
Under MACRA rules, Providers will only get bonuses if they lower the cost of your care (i.e. ration services or products) or claim you are sicker than average. Doctors will be incentivized to falsely make patients’ health statuses appear worse to be credited for taking care of sicker clients. Hospitals will be under the same incentives. If federal government policy goes to “universal” care, we will have the worst possible scenario for delivering health care – one payer for 1/6th of the U.S. economy. (Foundation, 2012)
Present Policy is Not Helping the Average Person: Federal and state health care policy is worsening both availability of healthcare resources as well as costs. The current policies result in distortion of resources and efforts. Regional (including state) monopolies exist for hospital systems and insurance companies. Drug patent protections also create national monopoly behavior as well. These are not natural monopolies but rather crony capitalism monopolies. A natural monopoly would imply no regulatory rules that promote the monopoly’s existence.
Access points for physician services are diminishing. Due to preferential payment and price-fixing favoring hospital-based care, most newly trained doctors are finding employment as hospitalists. Hospitalists only manage patients who are in a hospital bed. Hospital beds are an extremely limited resource. In 2016, US citizens dedicated 32.3% of health care dollars to hospitals. 19.8% was spent on physician services and clinics.
If we divide the 2016 data of number of non-state run acute hospital beds by the total Florida population, we get 0.0024 beds available per person in the state. If we look at the Florida Health Charts data for 2016 we get a similar statistic of 254.7 beds available per 100,000 Floridians.
In 2015 the number of physician office visits was 922.6 million or 296.7 visits per 100 persons. The number of hospital outpatient physician visits was 125.7 million or 41 visits per 100 persons. The percentage of privately owned physician practices has dramatically dropped over the past 8-10 years.
Policies to date are promoting more incentives and payment to hospitals yet they offer less capacity and less efficiency. This is not how normal economic forces work.
Health Care Can Never Be Free-Goods and Services Involve Costs: Every 6th grader in America understands goods and services, from the water we drink to the haircuts we enjoy, are not free. A gift is free to the recipient but still cost the giver. How then can health care be free?
Health insurance lobbies have convinced society and policymakers that the best access model for health care is one which has turned health insurance into “all health care consumption”. I call this snow job “first dollar coverage” and it is a massive monopoly business model. The problem with the first dollar coverage scheme is that through insurance payments all the money for the healthcare market consumption has been paid to the insurance company. Result- the insurance company decides what each customer patient’s health needs are or should be. MD, www.thedoctorsreport.net, 2014)
Care resources necessarily are limited by realistic costs borne by the patient and/or their support systems. Besides income and savings, part of a patient’s financial support system likely (but not necessarily) includes various forms of insurance. Current widely available and used insurance products include: disability, workman’s comp, disease specific, accidental, fault/liability, hospitalization, business/income life and health care policies. Often health insurance is asked to pay for accident, disability or fault insurance because it is easy to push payment responsibility from legitimate “other” insurance onto health insurance and Medicare.
As opposed to the present “total coverage” health insurance model, affordable health insurance should be called upon on rare, unexpected health events or for chronically expensive diseases such as congenital anatomy disorders requiring numerous or lifetime procedures.
The Solution to Any Economic Problem is Natural Price Discovery and Fair Competition:
Time to Rethink Things: From where the model is, I must conclude that we need some way to compete with the present health insurance model and policy that is favoring the present primary beneficiary- hospitals. There are several steps needed to reverse the trends that have resulted from ever-expanding government interference.
The Role of Price and Money- rationing: Money is how we trade for goods and services. Price is how mankind “speaks preferences” economically. We decide what we wish to exchange our money for based upon present needs, priorities and desires. Like all resources, health care is going to be rationed. Wouldn’t it be more desirable to let the market of individuals do this for us through proper and free market price discovery?
A System That Works for the Original Payer-Patients: Patients as buyers and beneficiaries of health care should be the primary decision makers as to who from and where they seek care. Rather than an insurance company or the Federal Government dictating care, a diagnosed patient’s care should be determined by their medical diagnosis, and the physician recommended course of management, which may or may not involve a hospital admission.
Step One- Remove the Fallacy of Health Insurance Equals Health Care: The previous sentence is a radical statement of position. Government policy needs to remove the reliance of insurance to pay for normal and anticipated health care services and consumption. Health and wellness should not be insurable events.
We need market demand for local and individual hospital contracts. This involves price transparency at all levels of consumption; from the emergency room, hospital bed, elective surgery, emergency/after-hours surgery, doctor’s office, physician services, physician extender services, radiology center to the market price of generic and name brand medication. Providing market options will force downward pressure on prices of overall health costs and if placed in the proper context of the market, especially health insurance.
Competition is Healthy For Market Efficiency-Who can compete with Health Insurance?
Health Sharing for Starters: Most people are unaware of health share ministries as one alternative to traditional health insurance. The health share ministries are exempted from Obamacare/present legislation (Wikipedia, 2017). Some of them have been in existence and solvent for decades. A quick online search shows you several options including: Liberty HealthShare, Altrua HealthShare, Good Samaritan Ministries, Medi-Share and Catholic Health Share.
Accountability is a key element in economic activity. The one who benefits from a good or service pays for it. Lack of individual responsibility and accountability is a major criticism of the Obamacare legislation. Health share models have proper responsibility incentives.
These ministries can decline membership, and some provide probation periods if high risk behaviors are noted upon screening. If high risk exists, the ministry will agree to future enroll a person if the individual demonstrates responsibility for positive changes in health. Changes requested might be to stop smoking or lose a measurable amount of excess weight. Health sharing models provide participants assurance (and an optional insurance policy) that beyond “average consumption limits” will be supported by their fellow sharers. The group shares major and unexpected costs. Presently the models assist individuals in knowing or negotiating fair and reasonable prices in the various markets. If these programs were more common, individuals would add further price discovery information to the various ministries.
Recently I have been made aware of a non-faith-based health sharing company known as Sedera (SederaHealth, n.d.). Imagine if individuals were offered the option of purchasing true catastrophic health insurance within the model of health sharing. This could be an excellent way to allow many relatively healthy individuals affordable and responsible health care with real assurance and catastrophic insurance priced appropriately.
Enter the Other Potential Competitor: It is my proposal to seek policy inviting the banking, finance and credit markets the opportunity to fill this cost gap and be another form of competition to traditional health insurance. The credit/financing industry is not regulated solely at the state level and it doesn’t require federal subsidies to function. If credit were harnessed with individual managed Health Savings Accounts (HSA’s) and underwritten “stop gap/catastrophic” insurance policies, the present health insurance market would find itself in a beneficial and aggressive price competition.
Additionally, the credit extended to individuals based upon personalized financial risk would encourage price shopping for health consumption. The result would be further downward pressure on health insurance payouts and day to day health care costs. Choices for care will expand, not shrink as in the present market resulting from present anchored policies.
Other Problems Will be Addressed With A Credit Competitor: Some have calculated that as much as 31% of the health care dollar ($870 billion for 2014) a year is spent in the administration and collections process! (Kullgren, 2012) Point of care purchases using credit mechanisms would eliminate claims processing costs, further lowering the cost of health care in general. Imagine a credit card with a branded HSA and catastrophic insurance policy
Credit involvement would also improve accountability in instances of disagreement about charges or services. Demographic information can be digitally provided for health care transactions eliminating one of the most common claims errors consumers experience. The block chain (virtual currency) concept could theoretically lend itself to model participation as well. With more efficient payment for services, present overhead for collections processes plummets and everyone wins!
Price discovery pressure from individual consumer choices will provide the proper market signals to help straighten out the supply distortions that have resulted from decades of central command price-fixing. Many of the present health care suppliers and claims processing middlemen will resist this concept but individual patients will win big time. The market will adapt and with far less disruption than the mandated “one size fits all” universal payer concept. Free market exchange and price communication will voluntarily provide more supply as well as temper unnecessary or wasteful demand. It’s the very opposite type of experience than where present policy has taken our country.
What Further Steps Are Required? First, we need to eliminate the notion of mandating health insurance. Arguing that we need to force more people to buy an expensive product for the rest of us to afford is a nonsensical argument for defending present federal government policy-mandated health insurance.
Certificate of need hospital protection rules should be abandoned. It is a shame to see patients sitting in hallway gurneys and our emergency departments. Allowing a new certification for 72-hour observation status for compliant ambulatory centers would allow a major shift in elective orthopedic and general surgery acces. This would open beds for the acutely ill which includes pneumonia, acute heart attacks, strokes, hip and shoulder fractures and other orthopedic trauma. To loosen hospital control of the price of services, I would be so bold as to suggest the first 5 years of such legislation should exclude hospital ownership of such ambulatory surgical centers.
Eliminate health expenditure tax benefits only for businesses. Presently, companies enjoy an expense deduction when choosing and buying insurance for employees. Having a tax-favored, business expense deduction diminishes the interest of value shopping relative to an individual level.
Current Health Saving Account (HSA) policy requires attaching a first dollar coverage style Preferred Provider Organization (PPO) insurance plan. This is intentionally legislated to keep consumers paying overly expensive insurance premiums, relative to their risk. This protectionism should be ended.
HSA’s should be allowed even without an insurance plan or employer sponsored program. Presently the tax and accounting rules favor such consumption at the business/corporation level. These benefits should be available to all individuals regardless of insurance or employment status. The reduced cost to businesses for their present contribution to the health insurance scheme could be passed to individuals either in the form of increased salary or benefits to competing entities.
Placing the option at the individual level will incentivize citizens to take personal responsibility for their health and health care consumption. Such an improved policy would allow people to keep more dollar resources in their control. Personal consumption choices more properly align cost accountability issues. Over time individuals will increase their personal savings for future consumption. The current first dollar insurance scheme forces persons and families to annually surrendering large amounts of money, often spent with no direct personal consumption. HSA’s promote personal choice and more accurate price discovery.
Instead of employer health insurance incentives only, provide a model/method allowing designated health/personal care benefits. Pass this money to the individual and let them decide how they will deploy this benefit. Competing “first dollar health insurance” entities would include: variable credit arrangements with variable combinations of Health Savings Accounts, group purchasing arrangements for common health services and networks, true catastrophic insurance and potentially even disability or other long-term care payment products.
Changing the present insurance contract time terms would also result in significant positive changes in payment policies. The yearly contract idea is likely an antiquated status quo that state regulators have never thought to question. Current yearly contracts provide insurance companies incentive to deny claims for short term profits (collect premiums but deny payment for services). Yearly insurance contracts create incredible health care waste by promoting patients moving to new doctors annually due to loss of contract and network. This interrupts continuity of care and promotes excessive doctor visits and testing. Longer term contracts would result in continuity of care, wellness promotion, improved vaccination services, lower claim/use, reward discounts and the like. By opening competing options to the present “status quo,” longer dated contracts could be offered.
Funding healthcare infrastructure and credit requires capital. Instead of mandated insurance we could have voluntary bond investment! Instead of investors buying shares in for-profit insurance companies or hospital systems, they could purchase health bonds which would provide a safer return on investment. These bonds could become a loaning source for new start up credit, hospital, and insurance companies. Group purchase membership companies, third party administrator services, healthcare businesses and other market facilitators could also be potential investment or bond seekers.
Having bond obligations instead of shareholder dividends and profits concerns would remove the incentive to undervalue physician/provider services yet force companies to run efficiently and successfully. The incentive for efficiency and success would result in favorable vs. unfavorable bond ratings for future investors. Such bonds could even be government issued and guaranteed to provide initial stability to such a capital market.
Concluding Summary: Individuals should drive the decision of how many dollars and to which provider of services they chose to spend their money on. Government programs or selected human resource administrators working for companies that employs individuals should be asked to get away from the bargaining table. Part of proper market engagement is individual preference statements demonstrated by purchases of goods and services and spoken through price and value propositions. Health care is no different than any other consumption decision. Instead of fixing what is presently a failing solution to health care access, being more creative towards competition and loosening inane regulatory control of the health insurance and hospital markets offers a much more exciting future for America and health care delivery. I would encourage State and Federal legislators to strongly consider these proposals when looking at state and federal health care policy.
Raymond Kordonowy MD ABIM
Doctor Kordonowy has written extensively on health care and policy predictions on his blog site: The Doctor’s Report. Doctor Kordonowy’s is also a member of the Association of American Physicians and Surgeons, National and Florida Chapters and the Free Market Medical Association. He offers a direct patient care membership model for optimal access to excellent physician care and services.