Archive for September, 2009

Debit card Healthcare - one American’s answer to the healthcare crisis

Imagine a healthcare system that:

  • offers affordable healthcare to all American citizens
  • does not deny coverage to any American due to preexisting conditions, or cancels coverage because of a catastrophic condition
  • enables you to see any doctor of your choosing
  • has no insurance paperwork whatsoever for patients or doctors – no forms, claims — nothing
  • offers instant approval and reimbursement – no fights with insurance companies
  • offers a net decrease in health costs for most Americans
  • offers a substantial decrease in health costs for most major employers
  • significantly reduces state contributions to Medicaid, freeing up badly needed money for other needs
  • is not socialized medicine, but is a uniquely American system that promotes free market competition, efficiency, and healthy living

You may be thinking that I also have a lovely bridge in Brooklyn to sell you along with this healthcare plan. Given the extraordinary (and unnecessary) confusion and complexity of the healthcare debate, I can understand your skepticism.

I’ll present the plan and show you my math and my sources for information. You can be the judge as to whether this concept makes sense.

Before I present the plan, let me preface by explaining how I came up with it. As a businessperson, I focused on what the customer needed and wanted. The fundamental problem with today’s healthcare debate is that government is confused as to who the customer actually is. Government thinks the customer is the insurance industry and, as such, is focusing on their needs and wants when crafting a plan. I think the customer is the American citizen. Accordingly, I am focusing on their needs and wants.

I also wish to emphasize that this plan is not “socialized medicine.” As a businessperson, I believe in the free market and wish to encourage free market forces – competition in particular. The fundamental problem with current government plans under consideration is that they, ostensibly, promote the wrong kind of competition – competition among insurance companies. Even if a vigorous competition existed between insurance providers (which I doubt), it would do little to promote competition among healthcare providers to provide the best services and products at the greatest value. In essence, the insurance industry has become a significant artificial obstruction to free market forces and competition within the healthcare industry.

Finally, I feel that it is important to acknowledge that I have no financial stake in this plan whatsoever. I have no affiliation with the health insurance industry, beyond being a customer. I am not a healthcare professional. I am not a politician. I am not a lawyer. I am one of the fortunate Americans who can afford healthcare for my family. I have invested hundreds of hours researching and writing this plan for the benefit of those who cannot afford healthcare, as well as to eliminate what I perceive as extraordinary waste and inefficiency in the current system for those who can afford it.


On to the plan. First, let me state my goals. My plan needs to be the following:

  • Universal: it needs to be available to every American

  • Fair: the plan can’t deny coverage because of preexisting conditions or new catastrophic conditions. For example, the plan can’t end coverage to a patient simply because he or she has developed cancer

  • Simple: it needs to be easy to understand and easy to implement

  • Affordable: it needs to be affordable to everyone and spread the burden of paying for it evenly and fairly

  • Free market-based: non-socialized medicine. A plan that allows complete freedom of choice of healthcare providers and promotes true competition

Here’s the plan. I call it “Debit card Healthcare”. The concept is simple. Every American would get an annual allowance for non-catastrophic healthcare. The allowance is based on actuarial tables used by the insurance industry to determine average costs by age and sex. In general, the older you are, the greater your annual allowance.

Every American would get a Healthcare debit card. Every time they visited a doctor, hospital, or pharmacy, they would slide their debit card through the same card readers used for credit card purchases. The patient’s account would be charged for the visit.

For non-catastrophic care, there is no approval process whatsoever. No administrator at an insurance company would decide whether or not a particular procedure was valid and, therefore, reimbursable. Any debit made through any valid doctor, hospital, or pharmacy would be paid instantly. You make the decision whether and how to spend your healthcare allowance. This plan puts you in charge.

At the end of the year, if you have money remaining in your allowance, you may either roll it over to next year’s allowance, or you may request a refund.

What about catastrophic care? Simple. Your bills are paid – instantly and for as long as you live. Your non-catastrophic allowance is not charged. Catastrophic conditions would include certain chronic illnesses like cancer, as well as certain injuries sustained from catastrophic events. Catastrophic conditions would not include illnesses resulting from obesity.

As is the case with non-catastrophic care, you would simply swipe your card and your healthcare charges would be instantly paid, but your non-catastrophic allowance would not be deducted. Healthcare providers would enter the appropriate code for your catastrophic condition. Checks would be performed by healthcare system administrators to minimize fraud. Penalties for catastrophic healthcare fraud would be severe under this plan.

Benefits of this plan:

  • To patients:
    • It offers fair, universal healthcare to every American citizen
    • It allows complete freedom of choice of any valid healthcare provider. As such, it offers even greater freedom than many insurance plans that restrict patients to approved lists of doctors and healthcare providers
    • It is fast, easy, and simple. No forms. No claims. No approval process. No fights with insurance administrators. Your charges are paid instantly with a swipe of your debit card
    • It costs significantly less than current employee contributions to employer-provided health insurance plans
    • It promotes healthy living – the healthier you are, the bigger your year-end refund
    • No death panels. I’m not referring to the fictional enclaves that grimly reap within the exuberant imaginations of wing nuts. I am instead referring to the very real insurance bureaucracies whose purpose is to find contractually valid excuses to end healthcare to patients with potentially terminal conditions. Under this plan, your cancer treatment could not end because you failed to disclose a preexisting acne condition

  • To employers: If you already provide insurance to your employees, your annual contribution drops, this plan drops your annually contribution by an average of $3,660 - $6,036 per employee

  • To doctors and healthcare providers: no more insurance paperwork — your charges are paid instantly, as they would be with any other debit or credit card transactions

  • To States: this plan significantly decreases state money currently spent on Medicaid, freeing up these critical respources to be spent elsewhere

  • To insurance providers: my great affection for my insurance provider notwithstanding, I regret that there are no obvious upsides to insurance providers in this plan. Based on my research and personal experience, I do not believe health insurance companies introduce any significant benefit into America’s healthcare system. However, they do appear to inject significant waste, inefficiency, and unnecessary suffering.

Plan administration

One of the beauties of this plan is its set up and administration. Because there is no healthcare claims or approval process, no associated organization or process is required. Payment is made instantly using the same infrastructure of debit/credit card readers already in place in doctors offices, hospitals, and pharmacies nationwide. Bank debit accounts would be set up for every citizen, and debit cards issued. For minors, parents would be authorized to use debit cards on their behalf.

Much of the setup of the plan would involve determining which medical conditions would be considered catastrophic, and creating the associated debit codes for these conditions. These codes would be distributed to healthcare providers (and also available via web) for providers to key in when making a debit transaction for a catastrophic condition. The plan would allow for a team to investigate catastrophic charges to ensure their legitimacy. Severe criminal penalties for fraud would be an aspect of the plan.

How is the plan funded?

Debit card healthcare is projected to cost $1.746 trillion annually [1]

The plan is funded from the following sources:

Sources ($billions):

Federal Medicare and Medicaid:


State Medicaid


Employer contribution:


Tax on employer contributions


Offset from Insurance company administrative & marketing costs and profit:


Negotiated reduction in drug prices


Fat tax - fast food, junk food, sugar, soft drinks


Personal contribution


Insurance bureaucracy dividend:




Surplus reserve:



  • Medicare and Medicaid – Debit card healthcare would replace Medicare and Medicaid. The current budget allocated to Medicare and Medicaidwould be allocated to Debit card healthcare. Contributions by states to Medicaid would no longer be required under the Debit card healthcare plan

  • State contributions to Medicaid – this plan shifts $100 billion in state Medicaid funding to the plan. Medicaid is eliminated in the process, while providing healthcare coverage to all uninsured Americans. This represents a significant reduction in current state Medicaid funding ($126 billion in 2006).

  • Employer contribution – this plan requires an annual contribution from employers of $1,200 per employee. Per the Towers Perrin 2009 Health cost survey, for employers that already provide health insurance to their employees, this represents a net decrease of $3,660 - $6,036 annually per employee!

  • Tax on employer contribution – one of the options under discussion in current congressional plans to pay for healthcare reform. Employer contributions to health insurance are currently not taxable. They would be taxed as regular income under this plan

  • Offset from Insurance company administrative & marketing costs and profit – depending on which study you choose, the percentage of insurance company revenue accounted for by administrative costs, executive compensation, marketing costs and profit range from 20% - 40% (25% is used for the purpose of this plan). This is burdened cost on the current healthcare system which is eliminated under this plan

  • Negotiated reduction in drug prices – government-negotiated reduction in drug prices. Pharmaceutical companies want a cap of $80 billion in reductions. This plan stretches the cap to $100 billion

  • Fat tax - fast food, junk food, sugar, soft drinks – the reports of serious health condition resulting from poor diets and chronic obesity are legion, ranging from hypertension, strokes, and diabetes. Fat and sugar-laden food certainly represent a health risk – perhaps as great as cigarettes. The current federal tax on cigarettes represents approximately 20% of the average price of a pack of cigarettes. Per a recent study from the University of Virginia and the Urban Institute, a 20% tax on fattening foods could raise $937 billion in revenue over the next 10 years. A 20% tax is used in this plan

  • Personal tax – average of $1200 per person/year ($100/month). This represents a decrease for the average employer-insured employee contribution of $876 - $1224 ($2,076 - $2,424 average employee contribution) per the Towers Perrin 2009 Health cost survey. This uses the same graduation as income tax, substantially reducing the burden to the poor, while still representing a net gain for most employed Americans in higher income brackets

  • Insurance bureaucracy dividend – this is the amount of money estimated to be saved by health care providers as a result of the elimination of paperwork and other bureaucracy associated with completing insurance paperwork and working through insurance company bureaucracy. The idea is that the non-catastrophic allowance would be reduced after a grace period (1-2 years is proposed)

It is very important to note that, if the cost of American healthcare was inline with most major industrialized countries, it would be possible to finance this plan with no contributions whatsoever from individual Americans or employers. Per the 2007 Kaiser Family report on Health Care Spending in the United States and OECD Countries, 0 individual or employer contributions to the plan would be required if the cost of American health care was as low as any of the following countries: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Iceland, Ireland, Italy, Japan, The Netherlands, Sweden, or the United Kingdom. Per the Kaiser report, the average annual per capita cost of American health care is $5,111. This is roughly double the average of the afore-mentioned countries. The question, of course, is: are we getting our money’s worth?

Time for authentic change

America spends more on health care per capita than any nation on the planet, yet the life expectancy of Americans ranks 50th among other countries, behind the Wallis and Futuna Islands and just ahead of Guadeloupe. Canadians can expect to live 3 full years longer than the average American. Medical debt is the principal cause of personal bankruptcy in the United States. 46 million Americans are uninsured – 15% of our population! Based on the facts, no reasonable-minded person can make the claim that our uniquely American insurance-based system is successful for anyone but insurance providers. Insurance-based healthcare is inefficient. It is expensive. It impedes true market forces and competition. It denies coverage to millions of Americans, particularly those with the greatest need. Current congressional proposals invest more taxpayer money into a demonstrably failed insurance-based system, enabling insurance providers to increase their wealth at the expense of American citizens. The Debit card healthcare system proposed here addresses the healthcare needs of every American in a fair and efficient way. Now is not the time to invest in failed legacy systems masquerading as change. Now is the time for authentic change.

[1] 304 million Americans * average annual health care cost of $5711/person. Sources: Kaiser Family Foundation, Health Care Spending in the United States and OECD Countries, January 2007, and Projections: 2007 to 2017; U.S. Census Bureau

[2] Government Printing Office, Budget of the United States Government for 2010, 2009

[3] Medicaid and State Budgets: Looking at the Facts, Georgetown University Health Policy Institute, May 1, 2008. 13.4% of all state fund expenditures - $126B in 2006

[4] $1,200 annual employer contribution per employee - based on workforce of 155M (Source: US Dept of Labor, Bureau of Labor Statistics

[5] Average of 20% federal income tax applied to employer contributions

[6] 25% of $404B. Sources: Highline Data Health Industry Aggregate (HCOMP), 2007; Highline Data Health Industry Group Report (revenue statistics), 2007; PricewaterhouseCoopers’ Health Research Institute 39, “Beyond the Sound Bite: November 2007 Review of Presidential Candidates’ Proposals for Health Reform”, November 2007

[7] Cap of $80B in reduced drug prices endorsed by pharmaceutical companies increased to $100B

[8] 20% fat tax. Source: Carolyn L. Engelhard, et al. REDUCING OBESITY: POLICY STRATEGIES FROM THE TOBACCO WARS, University of Virginia, Urban Institute, July 2009. 10% excise or sales tax on fattening foods could raise $522 billion over the next 10 years. A 20% tax could raise $937 billion

[9] Average of $1200 per person/year ($100/month). This represents a decrease for the average employer-insured employee contribution of $876 - $1224 ($2,076 - $2,424 average employee contribution) per the Towers Perrin 2009 Health cost survey)

[10] $32B for physicians. Additional allowance budgeted for pharmacies L. P. Casalino, S. Nicholson, D. N. Gans et al., “What Does It Cost Physician Practices to Interact with Health Insurance Plans?” Health Affairs Web Exclusive, May 14, 2009, w533–w543.

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A Virtual Office and No Need for VCs

This is Part 2 of my podcast interview with ZDNet’s Phil Wainewright. In it, I discuss our  virtual office and other lean & mean business practices that enabled gwabbit to achieve profitability within 6 months of launch in a major recession with $0 venture capital. You can hear the podcast at

The transcript of the interview appears below:


PW: Todd, we talk a lot about software as a service here on the Connected Web and one of the things, of course, with Gwabbit is that you don’t provide it as a service — because that doesn’t make sense for something which actually runs in the inbox client. It has to be there on the client to do its job. It would run in the cloud, obviously, if the client was running in the cloud — if, for instance, you were working with Gmail. And we were talking also about the potential to aggregate contact information in the cloud, with these Gwabbit clients reporting back to a sort of Gwabbit cloud, which I thought was a very interesting idea.

But one of the things that I think is quite prevalent these days is that when software companies are getting established, this ability to reach volume very quickly is very front of mind. Now, you’ve taken, not a novel approach, but one that is a little bit out-of-fashion with your product, because you charge for it, I believe?

TM: Yes, we actually charge money for our product, which is apparently an extraordinary, or novel, concept within the industry.

Do you ever meet people who try and talk you out of doing it that way?

Oh yes, absolutely. And I’ll just tell you a quick story. When we introduced the product at the Demo conference in March, a VC walked up to me and, without introducing himself, he just got in my face and said ‘Where do you get off charging 19.95 for your product?’ And I was really taken aback. I mean I did —

These VCs are quite parsimonious, aren’t they? They don’t like to pay $20 for a software product.

[laughs] Well, I think that this really had less to do with the pricing of our product. I think it had more to do with trying to get a pantsload response out of some young hungry entrepreneur. I’m neither young or hungry and so I didn’t give him the response I think he was looking for. So instead I just replied to him, ‘I’m not looking for money.’

His response was interesting. He literally took a step back. It was as though somebody had sucker-punched him. And then he started making some small talk and — I think he was looking for his own exit strategy — and then he just walked off.

So what is your model? What’s your — the strategy you’ve got for growing the business?

You know the — our model is pretty fundamental. We make a product. It costs us money to make the product. We charge money for it. We believe that the pricing of the product is commensurate with the value that we’re offering to the market — and fortunately, we’re finding that, in fact, appears to be the case.

So in terms of growing the business, our plan is to fund the growth of the business out of the operations. And so far, that appears to be coming to pass.

So how are you managing to keep your costs down?

Well, that raises another very interesting point. We have taken, I think, a very different approach than the norm on Silicon Valley, where I think that normally what you do is you go out and you raise a bunch of venture capital and then you spend it. And I think that there’s a tendency to promote waste in that kind of model.

What we’re doing instead is, we’re growing the company organically. And the way that we keep our cost under control — or the principal way that we do it — is through virtual officing. And this is something that I picked up through my previous company, which I sold last year. That company and this one are 100% virtual offices. So there’s no bricks-and-mortar whatsoever.

So everyone works from home and you don’t even have a reception desk with a receptionist and a meeting room somewhere?

Exactly right. It’s 100% virtual. It’s interesting. I think that when I tell most people about virtual officing, their comeback is, ‘Well, you must save a lot of money in rent.’ And certainly, that’s a benefit, but I would say that it’s not in my top ten list of benefits for virtual officing.

The great big benefit for virtual officing is really productivity. So we find that we’re about twice as productive as a traditional office. And what we have found by looking at other companies and organizations that have attempted virtual officing, they’re reporting similar kinds of numbers.

For example, I’m writing an op-ed piece right now. And in the course of doing this research, I came upon a study from an Arizona healthcare co-operative. They sent four employees home for seven months, and what they found was that these employees — they would normally produce, or process, 2,100 healthcare claims — and while they were virtual officing, they actually produced 4,700 healthcare claims. So they more than doubled the number of healthcare claims that they processed.

And they couldn’t believe those numbers. So they actually went out and they started studying other companies and organizations that had done the same thing, and they were reporting similar kinds of numbers. For example, AT&T did a pilot study and they actually found productivity boosts of about 75%.

But why is that? What are people — how are people able to find so much more time, or work so much faster, just through being at home?

It comes from a variety of sources, I think. One is that certainly, they’re not wasting time in commute — and then the preparation for commuting, getting ready for work — which can easily chew up a couple of hours each day. You find that virtual employees tend to spend more time on the job, simply because it’s convenient to do that. So they might tend to start work a little earlier. They might tend to work a little bit later.

Virtual employees typically do not have nearly as many distractions. So they don’t have people dropping into the office to chat. They don’t have as many watercooler conversations. They tend to have fewer meetings, and the meetings that they have tend to be more productive; they don’t tend to last as long, they tend to get over much more quickly than in the traditional office.

So added up, it makes a tremendous gain overall in productivity and a huge savings in opportunity cost. My company could not be profitable at this point, if we were running a traditional office.

And do think the model scales? Do you think you can become a big company and still operate virtually rather than needing to bring people in to some kind of location?

Yes. And my experience with my prior company, WebFeat, suggests that the model does scale. We were not a huge company. At the time that I sold the company, I think that we had about 40 employees. I saw no reason at the time that the company could not scale to 100 or 1,000 employees. And it’s interesting you bring that up, because that’s one of the chief complaints or arguments against virtual officing that I get, that, ‘Well, it just can’t scale.’ But I just don’t see it. I haven’t seen any reason why the model can’t scale into a large company.

So Todd, one final piece of advice for our listeners. If there was one thing that you could pass on about how the Web is changing business, especially the software business, what would you say?

Well, I think that the biggest thing that I would recommend to entrepreneurs and to business people is — as we’ve seen in recent years — circling back to the revenue model. In recent years, I think that advertising has borne the burden for revenue in the software business. And I’m not quite sure where that changed, in time. Back when I got started in the industry — and this is in the prehistoric days, back in the Comdex era — it wasn’t something that you thought twice about. You made a software product and you charged for it.

Yeah. I think, to be fair, advertising — in the Web 2.0 space and the start-up space, people have been attracted by it. But I think the companies that are more in the business space tend to look to more traditional mechanisms. But I think — I would certainly concur with you that — now that we’ve got to an era where people are thinking more carefully about the value for money that they’re getting and the reliability of the products that they’re using, then they’re looking for products where they hand over an amount of money and they get a contracted amount of value back.

Yes. And circling back to your question and any advice that I could offer. I think that the advice would be, when making decisions about a revenue model, I would encourage business people to evaluate the revenue model based on what is appropriate for the product or service in the market — as opposed to being swept up in the inertia of whatever happens to be fashionable at the time. I think that, certainly, an advertising revenue model makes sense for certain kinds of products and services. But at the end of the day, it’s simply another option in the revenue matrix that is available to business people. It may be appropriate for some products but it’s not appropriate for others.

And in any event, I think that it would make good sense for business people to make evaluations based on what’s best for their product and services, as opposed to what happens to be trendy or in vogue at the time.

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I Haven’t Grown Accustomed to Your Face

myfairladyI rarely meet people before I hire them.


The reason why I lead off this installment of Virtuality with this particular factoid is because, in some 12 years of virtual officing, this is the one that has consistently drawn the greatest surprise from others. Actually, I would never have given my blind recruiting a second thought if not for the shock and awe reaction I typically receive in response to this particular revelation.

Why do I pass on face interviews? I think the better question is: “why conduct face interviews?” My rationale is this: if the employee is not going to have a public face, what do I care what they look like? My primary interest is in results. If an unattractive person gets the job done, that’s terrific. In 12 years of virtual officing, I can say with confidence that there is no correlation between looks and job performance.

Of course, there’s much more to our virtual recruiting practices than what doesn’t meet the eye.

For example, we not only don’t care what our employees look like; we don’t care where they live either. When we recruit new employees, we don’t constrain our net to a particular area, we draw from the entire 50 states. This enables us to search for talent in less competitive places, which substantially drives down our payroll expense, while driving up our retention. For example, we have successfully recruited from small college towns with little local industry. Graduates may love the town, but may find the local pickings slim. They’re often willing to give up some premium in compensation in order to enjoy college town life rather than pick up and move to the big city and swim with the sharks.

Another factoid: I never look at a software developer’s resume until they’ve passed a test.

When we place a job ad for a software developer, it’s not unusual for us to receive hundreds of applications. Over time, I found that there tended to be an inverse relationship between a software developer’s job-hunting skills and their development skills. The slicker the resume and the smoother the interview, the worse the code. After getting burned a few times, I asked my developers to assemble a test to probe the skill sets we needed from our recruits. Our job ads informed prospective employees that their applications would be screened by test results. Overnight, our world changed for the better. From the hundreds of respondents that applied, only a dozen or so would bother to take the test. From that number, only 3 or 4 would deliver satisfactory results. Suddenly, instead of spending dozens of hours vetting resumes only to be disappointed with the eventual hires, I might spend 30 minutes reviewing resumes, another hour or so in interviews, and I was almost always happy with the new additions to our team.  It’s worth noting again that I have never met a software developer before hiring them.

Job jumpers need not apply

Early in my virtual management career, I was confounded at the number of resumes I received from job hunters who, although relatively young, had already had scores of jobs on their CV. It was rare for these people to last a year at a job, yet it did not seem to be a particular impediment to their career. People kept hiring these job jumpers despite the long odds against them being around to celebrate a single anniversary. Why invest in someone who is going to leave, either voluntarily or involuntarily?

Then it finally dawned on me: the people who are hiring them are job jumpers too!

These managers may rationalize their hiring behavior – perhaps they actually believe that those who exhibit loyalty and longevity are complacent or even lazy, when the reality can usually be filed under one of the following categories:

  • The employee left voluntarily for a better opportunity – i.e. a shortcut to better compensation and status
  •  The employee left voluntarily because he/she just didn’t like the job
  •  The employee left involuntarily because he/she did not perform well on the job

Which of these would you prefer as your dream employee?

Of course, there are situations where things just don’t work out – the company downsized, the job was a bad fit, etc. However, if I see a consistent pattern of short-lived job experiences, it instantly hoists a big red flag for me. It costs money to recruit and train. Moreover, there is enormous opportunity cost associated with the organization trusting an employee to be on the job and supporting their proportionate weight of the company workload. It is extremely disruptive to an organization (and, therefore, costly) to replace an employee in midstream.

No adult supervision required

As I’ve written previously, one of the principal objections to the virtual office is management’s inability to physically supervise employees. My response to this is: why would you want to hire an employee that requires supervision?


Professionals will deliver professional results without the additional overhead of constant supervision. If you treat employees like children, you can expect childish behavior in return.

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