Health Care Needs Retail Solutions
3/23/2012 12:01:00 AM - Matt McCord
Imagine if air travel was like health care is in America. “Bags fly free” and you don’t know if you’re First Class or Coach. You likely don’t even know which airline you’ve booked or what your destination is. Never mind what the real costs are. You didn’t even notice when they charged you $120 for that bag of peanuts. This disconnect between Americans seeking healthcare and the doctors and health systems that provide it opens the door to all manner of waste and it shields the consumer from any improvements in productivity (i.e. costs).
We American’s find ourselves in this situation because of years of less control and less choice courtesy of government and insurer oligopolies. Americans need to think different about health care and demand more control and more choices, not less.
Health care in America needs to be retail, not wholesale. Despite what you have been led to believe, having less choice and 3rd party intermediaries like the government or insurers “manage” your health care does not decrease your costs or increase your access to health care. While academics and technocrats continue to promote this “top-down” approach to health care, I would suggest that, after many variations of managed care over many years we Americans have yet to realize any of the purported benefits. Need I remind you how much we loved HMOs?
Do you remember “The Patients’ Bill of Rights”? For example, have you had surgery recently? Now over 60% of all surgeries are now performed as an “outpatient”. This means that you are not hospitalized for your recovery. By comparison, in 1980, only 20% of surgeries were outpatient. This saves the hospitals money. Does it seem a bit odd that the consumer has not benefited from these significant gains in productivity from the supplier (i.e. cheaper insurance)? On the contrary, health insurance costs continue to rise and outpace inflation at 6-7%.
Who has benefited from these gains in productivity and health care costs? Not us doctors: doctor pay has dropped 10-20% over this past decade. According to CNN/Money this past January, doctors are going broke and taking out small business loans just to keep their practices open. In 2010, Time magazine reported that less than 5% of medical students are going into primary care because these young doctors cannot afford to pay their bills with a family doctor’s income and $200K in student loan debt. In contrast, the insurers are doing pretty well. To give you an idea of how well the LA times reported recently that the CEO of Kaiser Permanente, one of the nation’s largest insurers, received $6.7 Million in compensation in 2011 and the CEO of California’s Blue Shield earned $4.6 Million, and those examples are “non-profit” insurers. For profit insurers, according to the New York Times, enjoyed record profits in 2011 beating some analysts’ expectations by 30%.
Furthermore, since the intermediaries have your money, $1000.00 per month for the average American household, who do you think that the industry focuses on? You guessed it, the intermediaries. Let’s take the very recent example of the computerized Electronic Medical Record (EMR). In 2009, the government paid each practice up to $44,000 to install these electronic medical record systems into our practices.
If you have visited a doctor lately you have probably seen their heads buried in front of a monitor entering data. Curiously, however, you, the patient, cannot access this information. If this was truly a patient centered advancement you could take your record with you or securely access it on-line. That way when you developed chest pain hiking the Sierras, the Emergency Room doctor in Fresno could access your information and look at your most recent labs and studies. What your EMR provides is auditing and billing data for those “top down” technocrats.
If Americans had greater control of their health care expenses none of the above would be acceptable. Recall how innovators like Steve Jobs, Sam Walton and Henry Ford revolutionized entire industries by giving us what we want at prices we could afford? Consumer choice and price transparency drove down costs and allowed the best products or services to win. The very same could happen in health care.
Unfortunately, The Affordable Care Act is calling for just the opposite: less consumer control and more limiting of our choices by placing us all into programs like Medicaid. In this scenario, the waste will continue and the only mechanism to lower costs is rationing of care. You can only imagine what access to care will be like in 3-5 years under this scheme. And who would you complain to?
America needs to minimize the middleman and demand more choice and control of our health care. A consumer driven model for our health care industry has been championed by Regina Herzlinger of the Harvard Business School for decades. We at Docs4Patient Care agree and we have proposed the following prescription for health care reform:
1. Reform the Insurance industry and make the basic structure of our health care insurance model a Health Savings Account linked with a qualified High Deductible Health Plan (HSA/HDHP). No more “bags fly free” health care, American consumers will pay “first dollar” coverage and be paying attention to what is coming in and going out. They might even forego that $120 bag of peanuts or that 3rd repeat MRI. Allow them to “carry over” unspent funds into the next year. Unanticipated or catastrophic events or diagnoses would be covered by the linked insurance plan. This would make health insurance more like homeowners insurance where if your washer breaks, you find and purchase the best one for the money but if you need to replace the driveway you claim this through your insurance company.
2. Increase competition in the insurance industry by allowing consumers to purchase insurance across state lines.
3. Allow every American to buy insurance using tax-sheltered income. Employers can fund this but individuals are not penalized for being unemployed or self-employed. This gives Americans more mobility in the workforce and it allows small businesses to compete with large businesses.
4. Promote cost and quality transparency by creating an independent government agency that publishes cost and quality data on all doctors and hospitals. This would be similar to what the Securities and Exchange Commission did for securities. Make us doctors and hospitals compete for your care and trust.
5. Low or no income Americans that cannot afford insurance will be subsidized by the government to fund their own HSA/HDHP’s. Let these consumers have a choice in which plans they purchase as well.
6. Transform Medicare into a Defined Contribution Plan as called for by the Ryan-Wyden Medicare Reform proposal. In many ways this will be quite similar to the HSA/HDHP’s mentioned above and it opens the market up to seniors by giving them choices.
7. Make the cost of insurance risk adjusted so that individuals with chronic conditions (e.g. Diabetes, Asthma, Heart Failure, etc.) are covered and placed into management programs that they can choose based on cost, convenience and quality.
Making health care in America more retail would accomplish all of the things that we are looking for: better access, lower costs and higher quality. It would make us more physically and fiscally competitive and it may save an industry and our economy. I can assure you, the government or insurers will not be too accommodating to change—based on the numbers above can you blame them? Nonetheless, as we have seen with the Arab Spring, the internet and social media can be unbelievably efficient and effective in exerting change even in the most oppressive regimes.
We Americans should demand something different than Government Issue “bags fly free” health care. Go ahead, Tweet that, post it on your wall, call your congressman, and, most importantly, vote this November.