May I offer one suggestion that creates WIN-WIN while aligning all the forces: A hybrid system that incorporates universality and personal financial responsibility and gives incentives to government, physician, patient and hospital alike to take care of patients for the right reasons, while making sure everyone has access to life saving health care. It is a common sense approach to health care financing. And it is based on your adjusted gross income for the previous fiscal year ending April 15. Happy's utopia for a hybrid universal market based health care finance system.
- Determining Your Healthcare Tier: The financial responsibility for you and your families health care will be determined by your adjusted gross income (AGI) for the fiscal year ending April 15th. You and your dependents, as determined by your income tax filing, will receive a plastic ID card, indicating your tier of participation. That tier, one of six, will be determined by your AGI above the federal poverty guidelines. For example, the federal poverty level for a family of 4 is $22,050. For every 100% above that income level, you achieve a higher tier. See the following example for AGI of a family of four:
Tier 1: 0-$22,000
Tier 2: $22,001-$44,000
Tier 3: $44,001-$66,000
Tier 4: $66,001-$88,000
Tier 5: $88,001-$110,000
Tier 6: $110,000+
2. Universal Access means the US government will pay a defined fee for every CPT code,or a defined fee for a bundled service. It really doesn't matter if the payment if bundled or fee for service. The government will pay no more than its defined maximum for the year. And every American receives the same benefit. The US government will decide, based on its own solvency how much that fee is. It is the ultimate capitated government health care system. Think Medicaid for all. If the pot of money decreases, the payment rates will decrease as well. That means it cannot go unfunded. Base payment rates will rise and fall with the state of the economy. It is an entitlement mentality, but one that will never bankrupt our country. This sounds like a terrible idea (Medicaid for all) until you consider the rest of my proposal.
3. Market Prices. The provider of service, (a physician, hospital, pharmacy, HHC agency etc...) are free to charge market prices in a bid to compete with our providers on quality and cost. For example Dr Smith, a cardiologist can charge $300 for a new office visit. Dr Jones, a competing cardiologist can charge $400 if he feels he offers a greater service. In either case, both physicians are competing on price. The universal Medicaid for all government system may only pay $50 of that office visit. So how does the physician collect what he feels his service is worth? Well, how much you as a patient owe your physician (above what the government will pay) will depend on what tier you are in. Here is my proposal on how much you would owe your physician.
Tier 1: The patient owes nothing. The government would pay both physicians $50.
Tier 2: 20% of market fee minus government rate. For Dr Smith that means ($300-$50)*.2=$50 . For Dr Jones that means ($400-$50)*.2=$70
Tier 3: 40% of market fee minus government fee. For Dr Smith that means ($300-$50)*.4=$100. For Dr Jones that means ($400-$50)*.4=$140
Tier 4: 60% of market fee minus government fee.
Tier 5: 80% of market fee minus government fee.
Tier 6: 100% of market fee minus government fee. That means, what ever the government doesn't pay, the patient is responsible fully for the rest of the market based fee being charged by the physician.
What this does is encourage all providers, whether it's doctors or hospitals to compete on quality and price to drive patients to them rather than their competitors. If you are a tier 3 patient and you had the choice between paying $100 or $140 it is up to you to decide whether you want to pay the extra dollars to keep Dr Jones rather than switching to Dr Smith. If you feel Dr Jones is worth the extra $40, you may decide to pay the extra money and stay with him.
Some folks may suggest that having unlimited price potential is dangerous for patients. And it potentially is, except when you consider my proposals further.
4. Automatic Deductible. Every American has an automatic 4% withdrawn tax free from their paychecks and deposited into an account, to be used for all their health care needs. Your deductible is determined by your tier, but shall remain at 4% for all tiers.
Tier Deductible
Tier 1: No deductible. The government pays for everything
Tier 2: $880-$1,760 (this is 4% of your AGI)
Tier 3: $1,761-$2,640 (again 4% of your AGI)
Tier 4: $2,641-$3,520
Tier 5: $3,521-$4,400
Tier 6: $4,401- unlimited.
If you make 10 million dollars a year in AGI, your deductible for your family would be $400,000 a year. I suggest that 4% of AGI, tax free in and tax free out, is a reasonable contribution to ones own health care needs. This takes FREE=MORE out of the equation and places some reasonable personal financial responsibility into the equation. The contribution is required. Everyone in this country with an AGI of greater than the poverty level is required to contribute to their own health care needs. But what happens if you reach your deductible for the year? Who pays then?
5. Post Deductible Dollars. All employers are required to purchase post deductible insurance for their employees. If you are unemployed or retired disabled, the government will purchase the insurance for you on a prorated basis, based on your AGI. How much the insurance company pays the providers of care will be determined by the patient's tier with the same percentages applying. Let us imagine a hospital charging $20,000 for your hospital stay. I would imagine a lot more transparency in pricing if hospitals were forced to compete on price and a lot of the ridiculous pricing would disappear. How much would the private insurance company pay if you got a $20,000 hospital bill?
Let's imagine Medicaid for all paid $3,000. That leaves $16,000 to be paid for.
Tier 1: The government would pay nothing more than $3,000. Since there are no deductibles for the patient to pay, there is no private insurance payment. Payment in full is $3,000
Tier 2: The government would pay $3,000 (to guarantee universal access, it must be cheap), the patient would pay 20% of the remaining $17,000 up to a maximum $1,760. That leaves $20,000-$3,000-$1,760=$15,240. That means the private insurance company would be responsible for 20% of $15,240, or $3,048. Total bill paid $7,808 on a $20,000 market price hospital stay.
Tier 3: The government would pay $3,000. The patient would pay 40% of the remaining $17,000 up to a maximum of 4% of AGI ($1,761-$2,640). That means the private insurance company would be responsible for 40% of $20,000-$3,000-$2,640, or $5,744. The total bill paid would be $11,384.
Tier 4: Government would pay $3,000. The patient would pay 60% of $17,000 up to a maximum of $3,520. The private insurance company would be responsible for 60% of $20,000-$3,000-$3,520, or $8,088. Total bill paid to the hospital would be $14,608.
Tier 5: Government would pay $3,000. The patient would pay 80% of $17,000 up to a maximum of $4,400. The private insurance company would be responsible for $10,080. The total bill paid to the hospital would be $17,480
Tier 6: Government would pay $3000. The patient would pay 100% of $17,000 up to a maximum of 4% of their AGI. Potentially the private insurance company would pay nothing, if the patients income was great enough. Hospital collects $20,000
You might read this and suggest that hospitals and providers may simply build in rich areas or close down in poor areas, or doctors may turn away poor folk. You'll have to read on to understand why that wouldn't happen.
6. Earning Cash Back. Since deductibles are determined yearly by your adjusted gross income and you are required to contribute 4% every year to your account and since your maximum out of pocket per year is 4%, what happens to your dollars if they are not spent? Good question. You cannot purchase other goods and services with your health care deductible dollars, but you can sell them back to the private insurance market These deductible vouchers (as good as cash to the insurance companies), sold to insurance companies (EBAY style auction) at discounted rates can be used by private insurance companies to keep their costs down. If you had $3,000 in unused pretax health care dollars, you may get $2,000 in cash by selling your health care dollars to your private insurance company, who can then use it to subsidize their premiums. Once again, the healthy are subsidizing the unhealthy by helping to keep private premiums down. And the money patients earn from selling their unused deductible dollars is tax free as well. And can be used for anything. Patients have an incentive to shop around for the lower priced physicians, the lower priced radiology suites, the lower priced hospitals to get their elective procedures. They have an incentive to remain healthy, to stop smoking and exercise. If they can prevent their own illness, they have an opportunity to recover a percentage of their deductible dollars. Private insurance companies may use their voucher money to offer lower cost premiums or to offer programs to keep their premium payers out of the hospital.
7. It pays to take care of poor people. What's to keep hospitals from only building in rich neighborhoods. What's to keep physicians from only filling their clinics with rich people? Well, first of all, if most of the population was rich, we wouldn't be having this discussion. That's not to say there aren't rich and poor neighborhoods. There are. But as it stands now poor people don't pay anything and rich people don't pay their fair share. That's why I would propose minimum standards for the number of Tier 1 or Tier 2 patients. If these minimum standards were not met, no physician in that practice (or hospital for that matter not seeing enough poor people) would receive any payment of any kind from the US government. That would free up money to increase payments to other physicians and hospitals who do see a fair number of Tier 1 or Tier 2 patients. And the higher your percentage of Tier 1 and Tier 2 patients in your practice, the more the government would give you for all your patients, including Tier 6 patients as well. In other words, If Dr Jones had no Tier 1 patients in his clinic or if his hospital on the lake had very few Tier 1 patients neither would get the $50 for the clinic visit or the $3,000 for the hospital stay, and that money would be used to increase payments to hospitals and doctors who were. If you aren't going to see your fair share of patients with little or no money, then you shouldn't get any government payment. Most physicians and hospitals I know would gladly see poor patients, I suspect even for free, if they knew they were receiving fair price from those who could afford it.
My scheme has it all. A market based universal access approach that would distribute physicians into critical access areas by nature of the market based pricing principles. If you are the only cardiologist in a 300 mile radius, you have every incentive to move to critical shortage areas because you can charge more. If you are one of 300 cardiologists in a 10 mile radius, you have every incentive to move as well because your competition will be fierce. It allows the government to provide payment for the poorest of the poor while allowing those with more financial means to subsidize the government's low price points. It forces patients to make good choices on price through transparency and competition, knowing they may very well get some of their deductible dollars back if they stay healthy, don't smoke, and exercise.
My market based approach to universal access in our health care system. A way to subsidize the care of inconvenient patients who can't pay from those who can.