In an effort to find a pragmatic, feasible solution to the health care crisis I posted my first diary,
Retired M.D. & HMO administrator speaks out, and met a wonderful reception, thanks to you. I posted a
second and
third diary outlining why and how we must proceed.
I introduced myself in part by saying that my colleagues and I, through managed care, as much as waged war on our local health care distribution system. We closed out competition and tried to corral our patients. This kind of health care feudalism has to stop if we are to implement a sound single payer health care system. This fourth diary shows you the second step of two that the Health Security America plan will take. Step #2: Breaking the lock on health care distribution with 8 inviolable rules.
I have explained the mechanisms for governance but there remains another part to the by-laws that simply can not be violated. I will list them and then discuss them. To keep the diary as short as possible I again have to refer you to the book
Health Security America: Fixing the health care crisis for more extended explanations if some of the terms are confusing.
The following eight rules will have to be in effect as by-laws of Health Security America (HSA) or the plan will quickly fail. Here one can see the mistakes that I observed in my practice and management experience. Any provider (physicians, hospitals and others) who accepts payment from HSA will live by the following rules. I will dissect each rule after listing them, as follows:
- There can be no non-compete clauses in any physician's or any other provider's contract.
- Any hospital, clinic, or insurance company taking HSA fees may not have any association with a closed panel of physicians or other providers
- The initial fee schedules (set fees) and method of determining such fees will be the same as Medicare currently uses. The rules, procedures and diagnosis codes will be the same initially as Medicare. These rules, procedures and codes all may be adjusted later on by the regional representatives and citizens at their discretion, as discussed earlier.
- Regulations will be implemented allowing all citizens acceptance in the plan during the first year following its inception. (There will be open enrollment with no pre-existing conditions clauses) After the first year, those who did not sign up initially will be subject to a six-month waiting period. The waiting period will help equalize the risk by preventing people from signing up only after they become ill. In essence, 295,000,000 people--our entire population--will be eligible for this program. HSA is a voluntary plan.
- New HSA regulations will require participating hospitals to have an open staff policy. (Anyone licensed to perform medical procedures and credentialed to receive payments from HSA will be allowed on the hospital staff to perform his or her work)
- Regulations will allow insurance companies to buy policies from HSA and resell them with a minimal mark-up. Insurance companies will be allowed to resell these policies with added benefits at whatever premium the market will permit. These added benefits could include international coverage, air ambulance from other countries back to the US etc. The financial risk to the added benefits would be born solely by the insurance company not HSA. The basic HSA policy must be available from this same insurance company with the low markup to be determined by the regional representatives. The basic policy is the coverage and premium determined by citizens through the HSA governance process to give us a health secure America and satisfies the three mandates of HSA.
- After completing a procedure, a provider will electronically bill HSA and receive payment within two weeks.
- Hospitals will have financial expenditures and services determined by citizens through the HSA governance process. (This is outlined more thoroughly in a chapter in the book Health Security America: Fixing the health care crisis)
THE RULES DISSECTED
1. Non-Compete Clauses:
In today's medical practice, most clinics have non-compete clauses. To review, agreeing to such a clause means that if the physician chooses to leave a group practice and go into solo practice, he or she can not practice in the same community in competition with the clinic of prior employment. There is usually a time and distance limit from the employer's clinic.
HSA can not permit this clause in the contract of anyone taking payment from it, and the reason is simple. Non-compete contracts prevent the physician from doing his or her own administration, a change necessary to lowering the cost of his or her business up to 40 percent, as I discuss later in chapter 9 of my book. The lowering of administrative cost is core to making HSA work. If the non-compete clause is not removed, administrative costs will still be eating up a great portion of the provider's business income. Although the revenue will be determined initially by Medicare's set fees, the monies received from HSA will eventually total roughly 50 percent of the usual and customary fees. Some of the administrative cost saved will go to the provider, who is now by necessity doing the administration without the help of a large support staff. He or she will need to be able to compete and retain his or her old group of patients to maintain income and support his or her family. If the physician is unable to compete adequately in his or her place of residence, we will have increasingly fewer physicians and other needed providers. This new rule banning non-compete contracts will encourage more people to go into the medical profession and stay in it, and thereby provide us with more health care for the money.
Ultimately, the citizen-participants in the HSA governance process will determine fees. An added bonus of eliminating non-compete contracts will be to enable providers to migrate to areas where there is a greater need for medical services, and still get compensated adequately for the work. Poorer areas should be much better served than they are today, and will be, under HSA. HSA will allow freer movement of providers and allow easier competition in communities, which will in turn foster better service.
2. Closed panels:
Closed panels are a way to keep other physicians from being a part of a given HMO or similarly managed health care model. The pool of patients in a given practice area is finite, and by disallowing payment from the insurance plans of a large set of potential patients, closed panels discourage choice of physicians, and effectively impose health care trusts. The resultant obstacle to competition among practitioners must not continue if HSA is to lower health care costs.
3. Fee Schedule:
The Medicare fee schedule (set fees) will be the initial schedule used, with its tested rules, procedures and diagnosis regimens. I say only initially, since the regional representatives and board of information, according to the prescribed process, will modify fees, as there is demand or reason to change. To start with, the Medicare schedule is a good model.
It should be noted that if a provider signs up to be a part of HSA, and a patient appears with HSA insurance, the providers will only be able to accept the fee from HSA. Fee schedules work using the procedure and diagnosis codes set by the CPT and ICD books, respectively. The books are published yearly by the American Medical Association, under contract to Medicare. The fee schedule is approximately 50 percent of the usual and customary fees; that is, fees set by the individual provider.
No new countrywide health care system like HSA could be held hostage to a usual and customary fee system. We do at present hold the uninsured persons hostage to a usual and customary fee schedule, and it amounts to incredible discrimination. Why would two people having identical procedures pay a radically different fee? In some cases, one of them might pay a fee 100 percent and in some cases 500 percent more than the other must pay. If a patient is one of the unlucky who neither has insurance nor a small deductible insurance policy, he or she will be taken to court to pay the bill, if necessary, knowing that a neighbor probably paid substantially less through Medicare for a similar procedure. This kind of selective soaking is common, yet we do not blink an eye. I have found that, if people have adequate insurance and everything is paid for, they tend not to question the bill at all, even though it may come to an outrageous sum. This inequity has to change, and HSA will change it.
Is the problem that our health care system faces now becoming clearer? I am reasonably sure that this kind of overcharging is pervasive. I suggest that those interested look at the Medical Advocates of America web site. You too will be convinced that some people are being bilked.
Fixed fees (set fees) for everyone, by itself, will lower costs of the health care system and will force administrative reform. The set fee system is the only system that will function in the health care system of the future. This very simple rule will change premiums, coverage, salaries, and most of all the business models. Each of these items will be discussed in its own section.
4. All citizens will be accepted into the plan:
There will be no age, disability or other impediment to obtaining the HSA health insurance policy. The premiums will be free for all children through 18 years of age. It has been known for a long time that health care costs for the group younger than 19 years are very low and these costs will be absorbed by all of the rest of us. We simply must not allow our kids to go without health care. Moreover, there will no longer be exclusion because a person has lost his or her job or has moved to a different part of the country. There will no longer be increased premiums because one's spouse has diabetes or any other disease. Finally, we will have rid ourselves of the fear of living without a safety net--having no affordable health insurance. If you do not know what that fear feels like, ask a friend who has. He or she will give you a terrible story, and an all-too-common one. We have to try to get through this social logjam.
5. Open Staff:
This is a significant item when there is only one hospital in a given area. To keep the competition open and free there can be no private hospitals. If they do not accept HSA payments (remember, HSA is voluntary) and are not providers, then an exception would exist. There also could be some exceptions to this stipulation if a hospital was primarily research oriented. Open staff policy will be one of the very first items on the agenda of the state regions' hearing process
The Mayo Clinic hospitals, St. Mary's and Methodist, are not open to physicians who are not part of the Mayo Clinic system. It has a closed staff. To what extent will HSA make payments to a closed staff hospital, thus preventing open and free competition? If one is a physician and not part of the Mayo Clinic one can not practice at the two hospitals mentioned above and will have to go another hospital. This opens up a pandora's box of waste, excess facilities and duplicated services. I wonder if our citizens will allow this sort of waste. The Mayo Clinic will have to present some good reasons for their closed staff policy to continue, but perhaps there are some, other than a marketing ploy or exclusion of physicians whom Mayo might not like. In communities with multiple hospitals that are not research oriented, the rule must stand that no physician licensed and credentialed with HSA to perform procedures can be excluded from its staff. Mayo Clinic physicians make a very good living at least partially dependent on revenue from patient care, not just revenue from research or foundation gifts. In view of the research, this sort of hybrid health care institution will have to be looked at closely and a judgment made by all citizens through the regional representatives and the hearing system. And there are other research centers that function as the Mayo Clinic does.
6. Insurance Companies will buy policies from HSA:
They will buy the basic policy given all citizens and will sell them for a very low markup, determined by the regional representatives and board of information decision mechanism. They will have no risk here of loss; the risk will be assumed by HSA, as addressed earlier. The insurance companies will add some of their own benefits, such as extensive plastic surgery coverage, international coverage, international air ambulance coverage, or any other benefit that they think will sell. They also, of course, will accept the risk as well as the profits from their own part of the policy. The basic HSA coverage will have the premiums paid to HSA by the insurance companies who have purchased the policies for resale.
The HSA health plan will need to have premiums paid by policyholders, and the money has to be collected. Insurance companies collect money better than most organizations, as anyone who has ever been late paying a premium can attest. We do not need to create a new bureaucracy to collect premiums. The set of rules just laid down will accomplish this collection of premiums task
7. A provider after completing a procedure will electronically bill HSA and receive his payment within two weeks. The new billing system will work to eliminate accounts receivable and insurance battles, thus enabling a provider's office staffed with far fewer people.
8. Hospitals will be community assets no matter who is the controlling body for day-to-day operations. Hospitals will be subject to a regional planning agency run by citizens and approved through the HSA governance process. I describe hospital planning more thoroughly in Chapter 10.
Follow the eight rules that correct the mistakes that I have elucidated, and Americans will live free of fear--the fear of no affordable health insurance
What comes next?
I know you're wondering how these rules and governing mechanisms will lower premium cost. Stay tuned for the next diary on premium savings of 50% or more.
Fred Bannister, M.D.