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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.
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.
Medicare is the healthcare insurance program for retired and disabled individuals who have paid enough into the system to become eligible for coverage. It consists of Parts A (hospital), B (physician), and D (drug) coverage, each with separate deductible and coinsurance provisions. Part A is free; parts B and D are optional and require payment of an additional premium, generally withdrawn monthly from one’s Social Security payment. Some beneficiaries choose to enroll in Medicare Advantage (HMO or PPO) plans, which replace their Medicare coverage with a private insurance plan with limited choice of providers.
The majority of beneficiaries who keep traditional Medicare enroll in private Medigap plans to cover part or all of their Parts A and B annual deductibles and coinsurance. Popular Medigap plans include Blue Cross and Blue Shield, United Healthcare/AARP, United American, and USAA Life. Those whose income is below a certain level are eligible for Medicaid coverage, and military retirees and their spouses are eligible for Tricare. A few retirees of large corporations have retiree health benefits which may pay some or all of their deductibles and coinsurance; because this coverage is often only partial, many of these retirees also purchase a Medigap policy.
After a claim for services is processed by Medicare, Medicare is supposed to electronically forward the claim to Medicaid, Tricare, or the Medigap insurance company for processing and payment of any additional benefits. In the case of retiree health plans, it is up to the provider of service or the patient to copy the Medicare explanation of benefits and submit a claim to the health plan.
A consequence of this system is that each claim for medical service is processed twice (or even three times!) by different bureaucracies, costing extra postage each time and utilizing additional paper. Each bureaucracy, in turn, has its own claim processors, administrators, and human resource people to support out of the premium dollars it is paid.
A more efficient system would be to eliminate the secondary insurers. For a Medicaid-eligible beneficiary, Medicaid would pay to Medicare a fixed amount per month; likewise, for a Tricare beneficiary, the armed forces would pay to Medicare a fixed amount per month. An employer which offered retiree health benefits would pay Medicare a fixed amount per month per retiree. Other Medicare beneficiaries, instead of paying a monthly premium to a Medigap insurance company, would pay a comparable, likely lower, premium to Medicare for the level of coverage they desire. Medicare, in turn, would pay 100% (perhaps less, in the case of Medicaid beneficiaries) of the covered amount for each claim, without any need to transmit the claim to another insurer. By receiving the additional premium revenue from Medicaid, the armed forces, employers, and beneficiaries, Medicare would cut its losses. Medicaid, the armed forces, and employers offering retiree health benefits would save the costs of processing claims. Beneficiaries might see a reduction in premiums. Lastly, providers of service would receive payment sooner and save the bookkeeping cost of posting two or more payments per claim.
A downside would be loss of the jobs of those who work for the Medigap insurance companies and those who process claims for Medicaid, Tricare, and some employers.
The United States healthcare dollar is paying the salaries of many people who are not directly involved in providing healthcare. Some examples:
• Creators and publishers of direct-to-consumer print and live media advertising for prescription medications.
• Creators and publishers of advertising for professional and institutional providers of healthcare.
• Employees of insurance companies (medical, auto, workers compensation) which cover healthcare.
• Creators and publishers of advertising for healthcare insurance companies.
• Insurance brokers who sell insurance which covers healthcare.
• Employees of companies which process healthcare claims.
• Personnel department employees who handle group insurance enrollment for employers who provide health insurance.
• Employees of hospitals, pharmacies, medical equipment companies, physicians, and other healthcare providers whose jobs are to submit claims to insurers and communicate with insurers regarding eligibility verification and prior authorizations.
An efficient healthcare system could eliminate most of these jobs, at the price of increased unemployment.
Johnny was born while his father, Sam, was away in the service, so his first health insurance was through Tricare (1). Sam came home and went to college, obtaining student health insurance (2) that covered Johnny as a dependent. Sam graduated and went to work for a large corporation, obtaining employer-sponsored health insurance (3) that covered Johnny. A year later the corporation changed insurance companies (4). Sam left the corporation and started his own business, obtaining small business health insurance (5). Sam died in an auto accident, and Johnny’s mother, Jane, was left in debt. She had to sell their house and move in with her mother, and Johnny was now covered by Medicaid (6). After a few years, Jane was able to go to work and get benefits (7).
Johnny graduated from high school and enlisted in the service, where his health care was provided for in military facilities (8). His unit was sent into combat, and he was injured. His body recovered, but he was left with a post-traumatic stress disorder and discharged medically with a 20% service-connected disability, for which he sought treatment at a VA Medical Center (9). He found work and started college, where he enrolled in the student health insurance (10). One night he had too much to drink and lost control of his car, suffering a broken leg. His hospital treatment was billed to his auto insurance (11). He graduated from college and went to work in a bank as a loan officer. After a waiting period he became covered by its medical insurance plan (12). He met, fell in love with, and married the female letter carrier who brought mail to the bank, and he now had secondary coverage through her insurance (13).
However, one day a disgruntled client whose loan application Johnny had turned down returned with a gun and fired wildly, striking Johnny in the shoulder. He was taken to the hospital and treated, the costs being billed to the bank’s workers compensation carrier (14). His injury wasn’t too bad, but he decided he didn’t want to work for the bank any more. He went to the state Vocational Rehabilitation department for help in re-training to be a real estate salesman. His PTSD, which had been under control, had flared up, but the VA wouldn’t treat him because the latest trauma wasn’t service-related, so his treatment was paid for by VR (15).
Johnny finally found his niche and did well in real estate. He started with a large agency and obtained coverage thru its health insurance (16), but he did so well he left and started his own agency, purchasing a new policy for it (17). He and his wife traveled a lot, and once while in Mexico he came down with Montezuma’s revenge; his emergency room visit was covered by his traveler’s insurance policy (18). When he turned 65 he went on Medicare (19) and purchased a supplemental policy (20) to cover its gaps.
