Tuesday, December 14, 2010

Wherein I Fix The Healthcare System - No Need to Thank Me

I got to thinking about Healthcare reform the other day, and realized something about our overall discussion. Specifically, we all posted some solutions to the healthcare problem quite some time ago, but recently have been more focused on saying “no” to what is being passed than offering up any ideas as to what else could be done – and rest assured, ladies and gentlemen, SOMETHING needs to be done. Here is what I’ve got.

Health insurance used to be quite affordable, and healthcare was once also quite inexpensive. It was the 1970’s or so when the cost started to go up, but they really went up in earnest around the 80’s, and since then, we’ve been paying increasing costs for our healthcare, while wages haven’t gone up a commensurate amount to cover these costs. Here are some of my ideas to fix the problem.

1.) De-couple healthcare insurance from employment. The reason that healthcare is coupled to employment rests on the shoulders of a democratic congress post-WWII. They put price controls on employment, meaning that for any one job, a person could only be paid X amount in actual monetary wages. Thus, the birth of “fringe benefits” in the form of non-monetary compensation packages. Businesses could no longer compete with each other in obtaining the best-qualified people for the job on wages – they were mandated to all pay the same – and so they competed by tacking on additional compensation in the form of insurances and so forth. Thus, the birth of healthcare insurance being provided by the employer. This will help in a couple of ways. First, a person between jobs or unemployed will not lose health insurance with their job. The insurance stays with them. Second, it will help people to realize what the true cost of health insurance really is, which leads to my next points.

2.) The vast majority of costs for health insurance companies comes from routine care. To me, having insurance to cover your yearly checkup and your glasses prescription is akin to having your auto insurance company pay for gasoline and tires for your car – believe me, you aren’t going to get those tires and gasoline for a lower price that way! Checkups and the like are routine maintenance items to staying healthy, they are not unexpected expenses, which is what insurance is actually intended to hedge against – the catastrophic implications of unexpected, massive healthcare expenses. The cost of health insurance is greatly reduced when you do not expect the insurance company to pay for your gasoline and tires (oops, I mean, routine checkups). This brings me to my next point, because if people are going to start paying for checkups and such on their own…

3.) …they need to know what they are paying up front so they can shop around and make sure that they are getting the best deal. I can’t think of another single service in America where people have no idea what some service will cost until the bill shows up. Can you? These companies need to, for lack of a better way of putting it, have “menus” of services with prices for those services clearly posted, and provide quotations to people for these services when requested. This will bring competition back to the healthcare industry (as this confusing process of billing has virtually eliminated it). For instance, I had an MRI a few years back for my back problems. Prior to having had it, I had no concept of what it was going to cost, and what is more, not a single person could tell me what it was going to cost. All they could do was assure me that “my insurance would cover it” and proceed. The MRI cost something like (if memory serves) $5,000, of which I was responsible for a $750 deductible. I found out that there is a company in town that provides MRI services to the lower lumbar region for $1,200 a pop. If I had been allowed to shop around, I could have reduced the cost of my MRI by almost 4/5. That being said, THE ONLY REASON THAT THE FIRST COMPANY COULD CHARGE THOSE INSANE RATES IS BECAUSE NO ONE KNOWS WHAT THEY WILL CHARGE UNTIL THE SERVICE IS RENDERED. People do this all the time. They shop around and buy the cheapest available, and my guess is that services would spring up that would shop around FOR YOU for a nominal fee, assuming that this was enacted.

4.) Medical malpractice lawsuits have driven the cost of liability insurance to astounding rates. I spoke with my rheumatologist the other day, and found that his expenses for rent, bills, and staff were approximately 85% of his cost for insurance per year. That means that his insurance costs are 115% of his operating costs every year!!! This is driven, according to industry experts, by the massive reward amounts being given for punitive damages in malpractice lawsuits. Here is the thing – punitive damages don’t work, because they punish the wrong guy! They insurance company pays, not the doctor who cut off the wrong leg! That being said, there should be NO CAP on actual damages, including pain and suffering, loss of consortium, loss of wages, medical expenses, future living expenses, etc. Punitive damages, however, should not just be capped – they should be abolished altogether.

5.) Democratic congresses, under influence from insurance lobbyists, passed a bill making it illegal to sell health insurance across state lines, creating monopolies in many states, and oligopolies in the remainder. Washington state, for instance, is served by two – count ‘em – two, insurance companies. This stifles competition in the industry, which allows prices to be inflated massively. This must be repealed, as it benefits only the health insurance companies.

That being said, here is my proposal for what should be done with the health care problem…

1.) De-couple health insurance from employment. I do not believe that this will reduce costs, but it will make insurance more portable and ensure that people do not lose insurance just because they lost their job.
2.) Provide insurance policies that are just that – INSURANCE against huge, unexpected losses. Routine and preventative care should not be an insured against item, as it undermines the entire idea of insurance. This would reduce costs of an insurance policy by 75% (taken from the difference between “catastrophic care” policies and “Cadillac” policies).
3.) Make healthcare providers compete against each other by mandating that they post prices – just like everyone else. This one is hard to decide how much it will reduce costs, but with one guy in town charging $5K for something another guy charges $1.2K for, I think that you will find that a 25% reduction in prices overall will not be unheard of, and possibly even as much as a 50% reduction is possible.
4.) Eliminate punitive damages in malpractive lawsuits. This will reduce the cost of doing business for healthcare providers by an average of 25%, which will reduce healthcare costs (assuming perfect competition – which is safe to assume given item 3) by exactly that much.

In total, this will reduce costs of health insurance by 75%, and of healthcare by as much as 50 to 75%. That being said, a family currently paying 12K per year on health insurance will only be paying $3k per year for the same amount of services.

Now, here is where I start losing my heartless conservative cred. Since costs will be reduced so much, the average family can now afford to pay a tax on services rendered, and on their insurance policies. I don’t know how much it would need to be, but I can’t imagine that it would be so much that it would put them back up to what they were paying before this plan is enacted. Say, it doubles their cost to $6K. They still save $6K over previous years.

Use this revenue to provide free routine care clinics to those who qualify for them, so that every person in America has access to routine care. Put in a graduated system that gives the worst off folks free routine care, with a graduated system of pay percentages going up from there, so that as many people as possible have at least some “skin in the game” to prevent abuse of the system. That covers routine care.

Then, have a taxpayer-paid catastrophic care insurance policy, either through a private company or through a government setup (although I would prefer competitive bid contracts through private companies) to cover the catastrophic care of people who can’t afford it, with the same “graduated system” in place here. That covers bigger, catastrophic care.

Any comments?

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