Everyone who doesn’t work for an insurance or pharmaceutical company knows the health care system we have is an abomination. But there is so much money involved that there are a lot of pressures to prevent drastic restructuring. And it is so complicated it is easy to fall into sloganeering, like "Single payer". A health care system invoves three somewhat independent issues.
- How is if funded? That is, where does the money that flows into the system come from.
- Who manages payouts? Who holds the fiduciary responsibility to collect the payments, manage funds prudently, prevent fraud, and pay the providers?
- How do we manage provider costs? How do we make the right services available in the right places at the lowest cost?
I have some suggestions. And I don't think single payer makes much difference.
Like most of you, I want all Americans to be able to get the health care they need without fear of consequences like bankruptcy, losing your home or job, or losing your lifetime savings.
A health care system needs to answer three questions: how is it funded? who pays the providers? and how do we control provider costs?
Some providers, like Kaiser, manage their own funds. You could have the government do all 3 tasks, including employing the providers. But mostly there is a lot of focus on the concept of "Single Payer", which means that there is only one, presumably very efficient, agency doing the fund management and making payments, in place of some 1300 "insurance" companies that do that now.
But the real problem in our system isn't that we have 1300 private insurance companies, even if they do make sinful profits and support greedy executives. It's that we have empowered the insurance companies not just to make payouts from our premiums, but to be cost controllers and gateways to the system. The biggest fix to the health system will come from taking that power away from the Payers - whether it's one or many - and putting it in other hands. In that sense the notorious "Conservatives for Patient Rights" ad is right: we don't want bureaucrats between us and our doctor - at least not ones that profit by denying service. We need to change the role of the Payer to just be a money manager between the Funders - citizens like us - and the Providers - like your doctor and hospital.
Health reform needs to start with cost management. Then let payers manage the revenues, and fund the system to match real costs. Everything outside of cost management is important, but it's pretty much just administrative.
Controlling Provider Costs
This is the real challenge: the one thing that can actually make health care affordable. How do we ensure that medical resources are accessible in the right place at the lowest cost?
I don’t think arbitrarily cutting medicare payments to doctors or hospitals is controlling costs. It’s just dictating a lower payment rate. It’s cost cutting by fiat. I also don’t think it makes any sense to assume that insurance companies, whether public or private, will actually drive costs down. Anything that results in less payouts, including dumping subscribers and refusing necessary services, works just fine for them. That’s not controlling costs, it’s controlling outlays; it's not health care and it’s uncivilized.
And I can guarantee you that letting insurance companies compete nationwide by removing state controls will do absolutely nothing to solve this problem. Neither will a public option or a single payer by itself.
I think the key to managing provider costs involves
• local community focus.
• consistent pricing
• provider competition
The case for local control
Residents of Minneapolis, MN and Baker, Oregon both need and deserve to have health care. People living in either place should be able to get most health care close to home. But these are two very different situations with very different needs. I think health resources should be managed at a local level, like a county.
Every county in the country should create a new Health Resources Board made up of citizens, providers, public health agencies, and payers. This Board is charged with maximizing health care in their geography at the minimum cost. So they will have to have the power to make investments in the right resources and prevent wasteful ones. They will have to help set rates paid to local providers. And they will have to publish cost information and work with payers to set insurance rates - funding requirements - for county residents. If it takes higher pay to get a doctor into Burns, Oregon, so be it, but local costs will go up. Every provider gets the kind of scrutiny the New Yorker article gave to McAllen and El Paso, Texas. The local Board is also the point of appeal for patients who are denied services.
While this creates a new bureaucracy, I think it is light on staff and it is made of local citizens, kind of like a school board. Of all the ways you could try to manage health costs, I think it is the least troublesome way to make the best cost and service decisions in a local area. It has to be better than letting insurance companies do the job.
End Cost Shifting
Second, each provider should charge everyone the same price for the same service. The cost of a service should never depend on who’s paying for it. Health care costs today include a significant amount of cost-shifting: paying for costs for one patient by raising rates on another one. This is extremely disconcerting. It means no-one can tell what anything costs. How much does a Tylenol cost? Depends on who’s buying it. There are abundant stories of people without insurance having to pay more than people with insurance because of “negotiated pricing”. Big buyers, like Blue Cross, can negotiate to get discounts on Doctor’s fees and drugs that little buyers, like some ordinary human being, can’t get. What an awful way to run health care. How can you control or manage something if you don’t even know what it costs?
Increase Provider Competition
Third, providers should compete. Providers don’t have to all charge the same rate, and insurers don’t have to pay all of the providers. Providers should bid on their rates for services, and the Health Board should set local rates at some mid-point in the bids. Any provider can be paid at that rate, and if some want more, they have to get it outside the insurance system, from private patient payments or supplemental insurance, for example. This should prevent unfair payments, and ending up with areas that have no providers.
Pharmaceuticals need to be made more competitive too. The easiest way to do this is to reduce the monopoly time resulting from patents to a few years after marketing. The system is horribly unbalanced in favor of pharma now.
The Payers
The role of the Payer should be to manage the collected premiums responsibly at the lowest possible cost. I don’t really care much if it’s a government option or a private company, provided the incentives are the right.
• Don’t lose the money. Invest conservatively. No shopping malls. Your goal is safety, not earnings.
• Don’t lose the patients. Your goal is to minimize overhead, not kill customers.
• Don’t waste money. Spend resources on fraud prevention.
Insurers should be simply caretakers of the money, and completely out of the loop on any medical decisions. They need to be set up to reward good management without turning into someone’s piggy bank. They could be regulated like savings and loans used to be. Minimize risks. Reward right behavior. Maybe they're non-profits or mutual funds or co-ops. But they're about money, not medicine.
They should profit by the amount of money they control, so the more customers they have, the more money they have to manage, and the more they can make. Every new patient is a gain for them, not a potential loss. There is never a reason to refuse a customer, because every customer generates more revenue.
They should never lose money from underwriting, because their revenue is set to match the health costs of their customers. In this sense they would be more like a public utility then anything else.
I don’t think it matters much whether they are private or public corporations, or whether there's one or many.
Funding
Today medical care is funded in so many ways that it is probably nearly impossible to determine where it’s all coming from. We all recognize the problems with voluntary employer-funded programs, with self-funded programs many can't afford, and with complex government use of taxes and grants and benefits to try to make it all work.
Health care should be a new program like FICA, and it should be funded with a separate tax like FICA. I think the healthcare, medicare, and disability systems all need to rolled into it.
FICA is a retirement system, so it make sense to fund it with employment related taxes. But health care, including disability and medicare, are universal programs. Everyone benefits, and everyone with any income at all needs to pay into it. I’ll exempt the truly destitute. But if I believe health care is a right and shared responsibility, I also believe it’s everyone’s responsibility to help support it. Maybe I’m getting conservative in my old age.
It has to be simple, like FICA. Premiums are withheld out of most people's paychecks or paid on quarterly returns. None of this hire-an-account-to-get-tax-credits or fines if you don’t buy and get caught. It's just a bloody tax. It's simple.
There should be a local component. Because some localities will have higher costs than others, there should be a variable local component to the tax. The should encourage the local Health Resources Board to work harder. I'm basically saying that insurance "groups" become everyone that lives in a county. Everyone pays the same for the same coverage, and some of it is a localized charge because your "group" costs more than some other "group". If you could get all the drunk drivers off the road, your rates would go down.
Finally, I don’t think employers should have anything to do with it. Gosh, I guess I am getting conservative. I support having some health-related income tax on businesses, but not having them pay a tax for every employee they hire. Employers should pay more when they make more money, not when they hire more people.
Focus on the important part
Ultimately, how health care is funded and how payments are made are important, but they are not the cause of the conundrum. The key to fixing health care is to move the power of medical decision making away from the payers - whether it's single or multiple - and into local Health Boards that are focused on maximizing health at minimum costs. Providers should compete with each other to set local rates, which puts them directly in the cost management role. And every community is focused on total health costs in it's own area. Pollution has a direct cost. The Payers simply need to be responsible money managers, and it doesn't matter much whether its 1300 private companies or one government agency. That's not the tripping point for success.