The solution–a non-governmental single payer health plan

Rather than the hodge-podge of insurance plans that pay for health care, all the money would be paid into a single pot. It would be funded, call it a premium or a tax, by:

• Individuals–based on income and actuarial risk based on preventable health risk factors (weight, smoking status, compliance with treatment for chronic conditions, etc.)
• Businesses–based on number of employees, instead of group insurance and worker’s compensation premiums, and based on hazard of work
• Licensed drivers–based on driving record
• Owners of motor vehicles (cars, trucks, motorcycles, etc.), boats, and planes–instead of the medical part of their vehicle insurance
• Owners of guns
• Purchasers of bullets
• Purchasers of tobacco and alcohol products
• The Pentagon–instead of Tricare and the Veterans Administration system
• States–instead of Medicaid
• Medicare–which would transition into the new plan

The assessment for each would be adjusted periodically, based on its relative contribution to total health care costs.

The plan would be truly portable, cradle to grave, without medical underwriting, and without the need for determining which insurer was primary or secondary for a given expense (ex, workers compensation vs. major medical vs. Tricare).

The plan would be non-governmental, to reduce political bias in how it was operated. Administration of the plan would be based on the doctor-patient relationship. It would be run by a coalition of provider (American Medical Association, American Hospital Association, and associations of nurses, pharmacists, chiropractors, physical therapists, psychologists, skilled nursing and rehabilitation facilities, etc.) and patient (AARP, unions, etc.) organizations, working together for the common benefit. Best practices and practice guidelines would be reviewed and revised on an ongoing basis, considering both the scientific evidence and the patient’s point of view. A fee schedule would be negotiated, with adjustments for geographic area-specific factors (similar to the current Medicare resource-based relative value units system) and revised on an annual basis.

Providers would set their own fees and would have a choice of accepting or not accepting assignment, but reimbursement would be based on the negotiated fee schedule. Providers first starting out in practice would likely choose to accept the fee schedule until building up their practices, but those well established or with special expertise could opt not to. Market forces would maintain access to care.

Fraud would be easily eliminated. Because all claims for a provider of service would be processed by one payer, billing for more services than was humanly possible to provide would be quickly identified and addressed. There would also be oversight of patients for over-utilization, and outliers would be referred for mandatory case management.

The problem–the insurance model does not really apply to health care

When we think of insurance, we typically think of property/casualty insurance (auto, homeowner’s, personal articles, fire, flood, windstorm, business, etc.), life insurance, and disability insurance. Each of these insures against perils which are relatively rare and unexpected, such as fires, hurricanes, theft, accidents, disability, and death, and against these insurance policies we hope to live our whole lives without ever having to file a claim. Most of us will pay far more in premiums for these kinds of insurance than the dollar amount of the benefits we will obtain. However, when these events occur, the financial cost can be catastrophic, so we gladly pay a premium to spread the risk.

On the other hand, medical insurance covers losses which we fully expect to incur. People typically do not expect to live their entire lives without ever becoming ill. Medical insurance also covers some expenses which have nothing to do with illness, such as pregnancy, birth control, screening procedures, and preventive care. When we have medical insurance, we try to get more benefit from it than the cost of our premiums. In other words, we believe someone else should pay for our medical care.

Indemnity insurance was generous in paying claims and permitted costs to escalate. PPOs (preferred provider organizations) offered discounted fee for service and temporarily slowed the inflation of health care costs. HMOs (health maintenance organizations) tried to cut costs by limiting the demand for services by requiring referrals before patients could see specialists, requiring prior authorizations before obtaining diagnostic and therapeutic procedures, and using financial incentives to encourage the use of cheaper medications. Some used capitation (paying the primary care physicians a set fee per member per month) to discourage overutilization. However, too much of the premium dollars for these plans went toward administrative costs and profits for owners of these plans, and both patients and physicians were unhappy with the hassle factor. Accordingly, there has been a backlash, and open access plans and PPOs have become more popular, but costs continue rising.