Tuesday, January 29, 2008

Health Care - Leaving the insurance model

Currently health care provision comes in two major modes: a self-pay for system in which individuals pay for service and per service, and receive some income tax break if they spend over a certain percentage of their income and an 'insurance' based system of paying monthly amounts for non-set number of visits but at a reduced cost (or no cost) per visit. In the first system medication is pay for prescription, the second offers a reduced cost (or no cost) pay for prescription. In the second systems the reduced cost concept is a 'co-pay', in which an individual buying 'insurance' pays a small, set fee per visit by either primary practitioner or secondary practitioner (specialist) with some 'insurance' offering dental care, hospital care and forms of catastrophic injury and sickness care.

The first system is full, free market capitalism at work.

The second involves the concept of 'insurance' in which companies accept payment for coverage and the bet is that you will not get sick while your payment is in case you do get sick. The system has many variations, but is one that does not seek to manage health care, itself, just the cost of health care. By putting in a third party to vet the need of certain procedures, the cost of each visit has overhead attached to it, and that cost has been rising as the number of people using such systems increase. This is an asymmetrical growth in overhead seen for non-scalable systems: something that may be accomplished on a small scale may prove to be unwieldy at 10x or 100x or 1,000x the scale.

Both systems have a problem of needing to incorporate the cost of medical malpractice lawsuits in them, which have also been proliferating as more money gets involved in the system. Again this is a system that has not scaled well as juries, more sympathetic to those bringing such suits than with the doctors defending themselves, have added to the burden of health care by practitioner insurance above and beyond the simple cost of doing paperwork. That 'simple cost of paperwork' has also increased the need for clerical, non-medical staff to track such paperwork which is a medical inefficiency: these individuals are not directly providing care and are 'infrastructure' to handle the payment and receipts system.

With this, the overall cost of health care rises not due to the increased cost in drugs and treatment, but due to the structural overhead that comes with such 'insurance' systems. What works well for 'life insurance' and 'one-time incidents' does not work well for continued medical work. Thus, no matter how many people are covered by 'health insurance' the cost of the entire medical system rises due to structural cash and payment accountability. To get 'universal coverage' one must get 'universal accounting and crediting' above and beyond anything that mere credit card companies do or insurance companies offering more standard forms of insurance.

From that, it is time to leave the insurance model of health care and stop subsidizing it as a Nation.

The following is a proposal that is simple in concept, but deep in ramifications as it utilizes the free market system, and allows for new forms of getting health care that currently do not exist due to the 'insurance' model.

Subscriber Based Coverage

This is not the current concept of subscribing to an 'insurance' plan.

In a subscriber based system an individual contracts, up front, for set amounts of health care coverage and *no more*.

This leaves individuals to pay on their own and actually think about and manage their health care beyond the financial part of it and assess, personally, the lives they lead and the likely need of health care.

This is not a plan for the destitute and poor: the State (in this case the individual States not the Nation) must address that problem separately. This can be done in the form of support for State owned and run, State owned/contractor run, or State pay for contractor owned/run systems or other variations of that. Beyond that States can offer income tax breaks to those that donate to charities that offer direct medical services to the poor and destitute. I state this up front as the social and societal needs of the poor are best addressed at the local level by towns, cities, counties and States than by the federal government. These individuals often need personalized care that is beyond the means of even middle class individuals, and that can only be done as a social and societal responsibility.

For those able to gain any income on their own either by working, investing or other means of earning money, the subscriber based system offers positive benefits:

  1. A 'voucher' system for medical visits. Unlike 'insurance' plans, an individual may pay for a set number of visits per year to a medical subscriber plan. Payments for the subscriber ship can be done in: lump sum, quarterly, bi-weekly or weekly amounts depending upon plan. Plans may offer different numbers of visits to primary and secondary (specialists) based on the payment plan type. As money 'up front' can be more useful over the long-term, a premium in extra vouchers may be offered for additional amounts paid up front as compared to a more regularly spaced schedule. While actual, physical vouchers may be issued (with serial number, authorization number and redemption code and such for cross-checking) most of these systems would be done electronically. Thus a transaction to expend a voucher may be as simple as swiping a card by the patient, one done by the physician (or office staff) and a PIN number entered by the patient or actual phone call if necessary for identity verification.

  2. Medical tests. Medical tests go hand-in-hand with modern medicine and can be included in the voucher system. Doctors may be given leeway for a set of tests per visit with provisos for the need of each (routine, chronic routine, investigative, acute investigative, etc.). Specialists would also be allowed to authorize or do such work as part of their voucher expenditure. The cost to the patient is the time necessary to get such tests done.

  3. Medical specialists. As diseases and specialties proliferate, the need for specialized medical care increases. For those with known ailments and conditions, a rough approximation by that individual on what they will need in a given year then allows them to look at the cost of their medical care up front. By accounting for likely need of specialists and, possibly, giving leeway by over purchasing, they can then afford to have some peace of mind if their condition starts to worsen.

  4. Medication. Here a subscriber based system almost perfectly matches the need by long-term chronic care treatment. Those needing daily medication are not in need of an 'insurance system' but a subscriber delivery system which sends them the medications they need at a set price throughout the year. Voucher systems can offer forms of 'tiered drug' payments so that those needing drugs to manage chronic diseases can be assured of their medications sent monthly to them without the hassle of mandated re-visits. Those who have suffered things like infections or practice leisure activities that may injure them can also remember to factor that in so that various sets of tiered drugs (say for infections or alleviation of pain) can be purchased up front and expended at pharmacies with a medical prescription.

  5. Hospital stays. Where this system comes out ahead of 'insurance' in the long run, is the ability to identify the need for hospital stays, either in emergency situations or for sudden ailment. Plans can provide a certain number of days in the hospital *free* of charge as part of subscriber coverage.

The first and most major benefit of subscriber/voucher healthcare is that the vouchers do not expire.

This, alone, allows for a free market voucher trade system to be set up separately or in coordination with voucher issuers. With this there is transportability of health care coverage Nationally, as vouchers can be traded from organization to organization. If one issuing organization does not offer a certain doctor, service or other needed care, it is possible to trade vouchers between issuing systems so as to allow individuals to get that care under this system.

Thus at the end of the year unused vouchers accumulate, allowing individuals to do one of three things:

  • Cash them in. Get back a set price per voucher from the issuer, no questions asked. Older vouchers may, however, accumulate in price value so hanging on to them may be prudent.

  • Trade them. If someone is moving or taking a trip, using a voucher trade system to cover such things allows for individuals manage their health care on the road. While medication vouchers may sit with an issuing organization, even those are available for trade from system to system. This allows individuals to pay for additional medication via a private trade system for those medications and medical care they need, and at a possible lower price. This would also allow for transfer from person to person within geographically distributed locations so that children could purchase more care for an elderly parent and have that dedicated to that care.

  • Keep them. Very simple, if you are relatively young and have a chronic ailment, keeping medical vouchers may be a very prudent thing to do. As one gets older or retires, the sudden need for increased medication, hospital stays and such may pay off via kept vouchers to cover one's own old age.

What insurance is *good at* is covering things like catastrophic care, sudden injuries and other forms of low probability and yet debilitating problems in life. By removing these from the health care system, individuals could get individualized additional insurance for these specific problems without the worry of having to scrap entire health plans just to get to one set of perceived needs, or to let other areas of needs go wanting to get basic care.

What this does is multi-fold, but the most important thing is the removal of the State or Nation from mandates upon its citizens and companies for health care. This is a purely individual need and some individuals will choose poorly, as seen in the recent sub-prime mortgage problem that consists of less than 1% of all residential loans made and less than 0.01% of all property loans made when business and industry is included.

  • As this is not 'insurance' there can be no mandates for 'coverage' placed upon it: individuals choose the specialized care they need.

  • Low cost of overhead: this is a 'coupon redemption' system for automatic payout to physicians, not a brokered system of payments with intermediaries requiring 'pre-authorization' or a company to allow visits to physicians. Some subscription vouchers may offer more services and thus have a 'premium' status, thus making them less available on the open market.

  • Individuals could expend 'fractional vouchers' just as there is fractional stock and bond abilities via trade systems today: keeping a medical account of basic worth type and collecting additional vouchers to augment that account becomes a part of an individual's management.

  • Individuals could subscribe to *multiple systems* for low level accounts so as to accumulate the medical care they need via vouchers. Special 'introductory offers' may become a low end way for the market to deal with accumulation of care at to price that along with other care.

  • Subscriber care networks, themselves, may have 'premium' status, so that a subscriber network of offered visits may offer a better set of practitioners and services, which can be brokered by those outside the network to get care inside of it for ailments not well served by other networks.

  • Physician time management is a plus on this system as a doctor may set aside a certain number of set appointments per day/week/month to care for these subscriber based visits. Thus physicians with high capability and limited time move into a 'premium' category as regular physicians and specialists, yet getting necessary time to deal with an ailment would allow individuals to gather smaller worth based vouchers to purchase such 'premium' or 'super premium' vouchers.

  • Physicians, although offering time to only one (or a limited set of) plans, are thus made available regardless of *any* subscriber plan. Medical tests may vary depending on which plans the doctor subscribes to, but that is up to the doctor on which plans they subscribe to.

These are things the current 'cost management' systems do not address and, by their very view, limit patient input to their medical care and put a third party (the insurance company) into the loop in deciding if an individual gets treatment or not. A subscription/voucher system removes the third party for authorization and leaves treatment and care to physicians and patients.

Finally businesses could offer 'incentives', 'bonuses' or 'regularized subscription' for workers to cover some of these costs. But that is a *voluntary* contribution considered as a *payment* or *gift*, not a coerced State level requirement. In this way businesses may either give such things directly to workers, or may, itself, accumulate such coverage for on-the-job medical needs and specific and job-related needs.

The current, subsidized 'insurance' system is removing money from the wallets of patients and putting it in the hands of paperwork processors and, hopefully, some health care is rendered from this system. By addressing the infrastructure cost and removing it, the free market can be given play to deal with it in ways known to many in the form of subscribing to magazines, wines, coffees, teas, periodicals and other cable television.

By allowing doctors and those forming companies to help consolidate physician care but changing the way it is viewed, the current 'insurance' networks can shift over to this subscriber based system and slowly phase out the higher cost system in favor of the lower overhead, but higher profit system of investment for health care needs. From that individuals will be able to judge the *value* of each set of doctors and procedures and find the lowest cost to themselves for getting their needed coverage. And end this idea of having bureaucrats decide who gets what coverage and what medications, and leave that in the hands of the individual citizen.

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