Posts Tagged Health insurance

Rollerball and the Public Option

I’m a sci-fi movie fan, and “Rollerball” is a favorite of mine. Mind you, I’m not talking about the disposable 2002 retread, but instead the original 1975 classic with James Caan and John Houseman, in which an oligarch of giga-businesses have done away with archaic traditional governments and now run the world, well, like a business. To maintain their employee citizens’ contented complacency, the corporate regents have provided a modern bread-and-circuses in the form of Rollerball, a violent fusion of roller derby and basketball. Rollerball starts as an action flick, but it quickly peels away deeper layers, revealing the corporations’ evil mass social management agenda. Rollerball’s opening music, Bach’s Toccata and Fugue, sets the incongruous tone, intertwining levitas and gravitas as we watch the stage set, literally, for the movie’s first rock ‘em sock ‘em Rollerball match.

The oligarch seems pretty scary in Rollerball, invisibly pulling the strings that control the commoners’ visible universe. But it’s not the notion of businesses running the world that I find most frightening. What really scares me is the fact that those businesses don’t have any competition. What history has shown us countless times is that when companies coalesce into monopolies, wringing out competition along the way, their priorities pivot away from creativity and innovation, twisting instead toward entrenchment and status quo.

Take health care reform, for example. Despite the fact that a clear majority of Americans want a public option, there is none in the Senate bill passed this week. Why? Because the industry doesn’t want competition. Insurance companies have spent a fantastic amount of money excising competition from their world. There’s no way competitors are going to be permitted back into the industry’s zany idea of a free market economy. Apparently competition, even that from an organization as uninspired, wasteful, bureaucratic, and inefficient as our federal government must look like a sleek rocket ship from the future in the eyes of Flintstone-era insurance industry execs.

Those executives don’t have a lot of incentive to rock the boat. The captains of the top three companies in this particular industry average over $15 million a year in total compensation and their shareholders are perfectly content with the status quo. There’s no real competition within the oligarch, so life is just about perfect. As a businessperson, the only thing I would note (besides the little detail that their business model is unconscionable), is that you don’t need to pay someone $15 million a year to maintain the status quo. For that matter, it shouldn’t require a full time job. Heck, I’d be willing to do it in my spare time for under a million.

What should you expect from a CEO that hauls in $15 million a year? Inspiration. You should expect a company to create innovative goods and services that people really need and want. Actually, for that kind of money, you need to go way beyond simple innovation. You need to provide brilliantly creative offerings that people love. I don’t often hear “love” used in customers’ vocabulary used to describe their health insurance experience. I do hear other four-letter words, though.

As a businessperson, I don’t have a problem with businesses earning a reasonable profit in exchange for the investment they make to bring quality products and services to market. As maddening as are their apparatchik bureaucracy and sphincter-like cheapness, that’s not what troubles me the most about the health insurance industry. What really disturbs me is the nature of their business model. At its core lays a fundamental conflict of interest between the needs of the customer and the needs of the company. It’s one thing when that conflict involves balancing customer demands for, say, better cell phone coverage, against the money required to make that coverage happen. It’s an entirely different thing when the conflict involves balancing corporate financial objectives against a human misery quotient. My bias for capitalism notwithstanding, I think that businesses that trade in human lives should not be left up to the free market. The irony is that an unfree market is precisely what we have in our 400 billion dollar Rollerball insurance industry, with that industry spending hundreds of millions of dollars to keep it that way. Bizarrely enough, their only real competitor is their customer, the American taxpayer, who has made not one, but multiple Herculean attempts at landmark, groundbreaking, game-changing legislation over decades to force an industry to do nothing more than what all businesses should do: give customers what they want.

, , , , ,

No Comments

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.

Goals

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:

742[2]

State Medicaid

100[3]

Employer contribution:

186[4]

Tax on employer contributions

37[5]

Offset from Insurance company administrative & marketing costs and profit:

101[6]

Negotiated reduction in drug prices

100[7]

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

94[8]

Personal contribution

365[9]

Insurance bureaucracy dividend:

40[10]

Total:

1,765

Surplus reserve:

19

Detail:

  • 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 http://www.bls.gov/news.release/empsit.nr0.htm)

[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 http://www.commonwealthfund.org/Content/Publications/In-the-Literature/2009/May/What-Does-It-Cost-Physician-Practices-to-Interact.aspx. 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.

, , ,

No Comments