I have considered many elements of the healthcare debate, and have renewed confidence that there are more practical ways to fix the system. The aim of this piece is to comment on the flaws of the current health care system, prove that these flaws will not be fixed by the Patient Protection and Affordable Care Act (PPACA), and suggest practical methods by which the health care problem can be improved.
A main issue of the health care crises is how we as Americans presently capitalize health care through an insurance model. This has over time turned into a private business oligopoly which has indeed made health care unaffordable for many Americans. The end result of PPACA will be to replace the current corporate oligopoly with a government monopoly. It fails to see the core problems associated with the health crisis. Instead, it uses the premise that healthcare is equal to health insurance. This is why everyone is arriving at the wrong conclusions and solutions. In any logical argument, if you start with an incorrect premise, you cannot arrive at a correct conclusion. An important myth that needs to be dispelled is that access to physicians and health services requires insurance. That is simply not true.
Insurance is supposed to protect someone from large and unforeseen expenses due to a disaster or unpredictable event. Over the past two decades our society has turned the concept of insurance into a monetary source for funding for all things remotely related to health. PPACA has turned into a grab bag of money for various self-serving parties to create a “wish list” of services that they “feel” is in the interest of patients. As a primary physician who feels strongly that preventive services are of value, I would nonetheless have to admit that it is a value decision, an investment in oneself that requires motivation to follow preventive recommendations. It is a fallacy (one made by the PPACA and now enforced by Health Secretary Kathleen Sebelius) that if we simply eliminate copays we can get more people healthy by making access to such services more affordable (“free” in the eyes of the consumer). Free or not, if doctors give an audience to a person who doesn’t care what they think and doesn’t plan on following their recommendations, no amount of advisement will result in a different outcome. In effect, the preventive services (which include free birth control pills) will not be appreciated nor have the intended outcome-because there was not a real investment made by the consumer. This seems all too obvious to the average person, but apparently in order to “do something” and to pander to the voters, this is the legislated plan.
A glaring deficiency lacking in our current third party payer model of health care financing is accountability. Accountability is the user principle which states those who benefit from a service should pay for it. Current insurance plans and our current government programs shield the patient/consumer from the true cost of services provided. Value judgments regarding services used are often waived if the service is “covered”. There is no real discussion about the risk/benefits or cost of a proposed service. Future solutions must include accountability by the individual as well as the providers or we will never get a realistic sense of true market need or cost.
Currently, we are surrendering too much money to the third party payers. We need to be allowed to keep more dollar resources in the hands of the individuals in order to properly align cost accountability issues. Health Savings Accounts are tax incentives for individuals to save for their healthcare expenses and follow the accountability principle. They allow individuals to increase their personal savings, instead of surrendering annually large amounts of money, often not used at all for personal consumption. HSAs give persons incentive to save for and shop health care services instead of forfeiting all dollars as premiums to health insurance companies. HSA’s should be allowed even without an insurance plan. Currently HSA’s require a first dollar cover style Preferred Provider Organization (PPO) insurance plan be paid for in order to qualify for a HSA. This was intentionally legislated to keep consumers paying overly expensive insurance premiums, relative to their risk. Price transparency for hospitals, physician services as well as medications is also critical to allow the accountability principle to function. Presently any price shopping is being done on collective levels between large provider groups, hospitals and the insurance companies. This isn’t nimble enough for this dynamic market and it promotes protectionist behavior in the market.
Price controls are artificially altering the supply side of health services, defying accountability. Price controls currently exist through the government run Medicare and Medicaid fee schedules. This country’s founding principles are predicated on the rule of law, yet the Medicare program violates the concept of contracting, an essential component of rule of law. Medicare schedules are not contracts nor negotiated at the provider level; instead they are recommended by a small government appointed committee within the Center for Medicare and Medicaid Services (CMS). Its job is to allocate and reallocate dollar resources based upon annual historic utilization of services. This is not how a market should work. The present system punishes the higher volume (higher demand and usually more efficient delivery) services by cutting the reimbursement per unit and rewards the less efficient, lower volume services with higher reimbursement. Due to these policies presently in the market, the very same services provided by the hospital system gets paid by Medicare several times what a private practice enterprise get reimbursed. This is not the hospital’s fault; this is how the system is presently set up. The reasoning, according to the payment model is that outpatient private providers are “churning” services and the hospital must be subsidized due to the lower volume. This defies what is really going on. The patients are accessing and utilizing the more readily available, more efficient and frankly, less expensive outpatient providers and avoiding the bureaucratic, less accessible hospital system, for the exact same services. If the committee were thinking clearly, they would allow the forces in play to continue by encouraging more access to the better system. Instead, due to accounting rules set up, they reward the less efficient and punish the better provider. A more individually driven, free market would resolve the supply and demand forces. The purchasers (patients) of the service would naturally choose the outpatient providers because the cost is less, the quality similar, and access far easier. More providers would increase their service base until the demand was met and hospital would likely lose outpatient market share, unless it can provide more competitive pricing.
Accelerating the problem, insurance companies use the government price structure for their payment benchmarks. They reason, if providers are willing to work under the government fixed fees, they must be willing to work for them for similar payment. Meanwhile they tell the public premiums are rising because they are “subsidizing” Medicare and Medicaid- this simply isn’t true. The insurance industry is also involved in price controls. Some price protections result in overpayment for services, driving an artificial excess in supply for higher paying specialties, name brand medications, and hospital procedures. Price controls are also artificially underpaying many areas and explain the main reason adult primary care and general surgery are currently facing a provider shortage crisis. We can fix the Medicare access problem as well as the government’s Medicare budget problems tomorrow by returning private contracting and balance billing back to the Medicare program. Unfortunately, since the people won’t inform the legislators that access is more important than having a Medicare card, the legislators are afraid to make this legislative act.
Since our current insurance system is so flawed, there needs to be more realistic insurance pool products. For example, locally created, not for profit, insurance cooperatives. Co-ops could allow the insurance purchasers to be the shareholders. Instead of profits going to passive investors, actual purchasers could be rewarded with an annual dividend or a lower next year premium. Memberships into provider group arrangements that don’t involve insurance would likely be much more cost effective and should be enabled. Changing the present insurance contract terms would also result in significant positive changes in payment policies. Current yearly contracts provide insurance companies incentive to deny claims for short term profits. They also create incredible healthcare waste by promoting patients moving to new doctors annually because of network decisions. This interrupts continuity of care and promotes excessive doctor visits and testing. Longer term contracts would result in wellness promotion, improved vaccination services, lower claim/use, reward discounts and the like.
Funding an insurance company or healthcare infrastructure requires capital. Instead of investors buying shares in for-profit insurance companies or hospital systems, they could purchase health bonds which would provide a safe return on investment. Instead of mandated insurance we could have voluntary bond investment! These bonds could become a loaning source for new start up insurance companies, membership companies and healthcare businesses. 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 more stability to such a capital market.
To assist and subsidize the truly needy, catastrophic subsidies can be created (via tax incentives, special needs based insurance products and funding from health care bonds). The current credit markets should come up with products that assist persons who have inadequate money savings. If needed, having a capital source to “front load” the out of pocket risk of a higher deductible Health Savings Account insurance policy would make it easier for persons to use this option. This would allow low income persons to engage in more affordable, catastrophic insurance purchases while providing a time cushion of reassurance. While they save in their account, a person may require an expensive hospitalization that would use up their deductible. Being preapproved for deductible coverage by having access to a low interest credit line eliminates the fear of bankruptcy from an unfortunate healthcare situation. Low rates could be guaranteed if a health bond market existed. Credit equal to an individual’s deductible could be extended at appropriate levels and interest terms. If undercapitalized HSA holders had access to a credit line, they would then have several years to pay down their debt. This model would make the providers whole at the time of service and eliminate cost shifting.
If some or all of the above scenarios are employed, individuals are placed in charge of how services are demanded and who gets their business, not the current situation of insurance companies, prescription providers and the government. This will most assuredly result in more affordable healthcare. Helping individuals needn’t translate to a public option monopoly or federal mandate.
I would like to offer one final comment. Practicing legal medicine is bad for the public. People are being placed at personal health risk by being placed into protocol procedures and excessive testing. Countless amounts of radiation, intravenous contrast agents, numerous invasive procedures, etc are conducted daily in order to minimize the perception that malpractice isn’t being committed. Anything society does to lower the perceived risk a physician or hospital presently operates from will not only save a small fortune but translate to safer healthcare. Tort reform legislation is a start
Raymond Kordonowy MD ABIM ABCL
Internal Medicine, Fort Myers, Florida