As many of you know, I believe that the current healthcare delivery model which is dominated by third party payers leads to the high cost of healthcare. The following is a brief suggestion of a simple way to move away from that model.
Many people are afraid of buying high deductible health insurance because they would be unable to meet the deductible if they are involved in an accident, or if they require extensive healthcare services one year. Because of this, most people opt for higher coverage, lower deductible insurance plans. These plans actually lead to higher overall healthcare costs because the third party insurance company ends up paying for routine services. This leads to skewed prices of services and increased premiums (because the insurance company’s goal is to make money). Total healthcare costs would decrease if we had a free market system where patients themselves paid for services. This would eliminate a large stream of money going to insurance companies and lead to lower prices (simple supply and demand economics). High deductible, and/or true catastrophic plans would help create this free market force.
The question becomes,
“how do we get people to choose high deductible insurance options?”
By limiting their risk of having to go deep out of pocket to meet their deductible.
How do we eliminate their risk?
By offering them credit.
Credit markets should be created that give beneficiaries a line of credit that can only be used to help them meet their deductible. If these existed, people wouldn’t need to forfeit a good chunk of their salary for a hospital stay. Instead, they would be able to pay the creditor back over time. It eliminates the worry and risk of having a high deductible plan.
Additionally, the credit company’s risk could be reduced by backing their credit offerings with ‘Healthcare Bonds’. These bonds would be sold worldwide to investors, and the capital raised would go towards healthcare infrastructure such as this ‘healthcare credit market’.
True catastrophic and/or high deductible insurance plans make sense for most people. Most healthy people only go to the doctor for a checkup every few years. It is estimated that the average person will be admitted to the hospital every 17 years. Why do people throw thousands of dollars away to insurance companies every year to be covered for services that they don’t even use? It seems rather wasteful. If true catastrophic plans were available, premiums would be much lower, people would be covered in case of an emergency, and the price of outpatient doctors visits would decrease.
Instead of sticking with the Affordable Care Act, we should be working towards replacing it with reforms that actually help the people. Reforms that effectively reduce cost and lead to better care. This healthcare credit market is just one suggestion out of many that help to reach this goal.
Written by Matthew Kordonowy, Ideas by Raymond Kordonowy MD