UNIVERSAL HEALTH CARE: A Proposal

Eric E. Shore, DO, JD, MBA[1]

 

The United States is the wealthiest and most powerful nation ever to have existed on Earth. We spend more for healthcare than any other country in the world, yet there are still more than 15% of the population (nearly 50 million people) that remain uninsured, and millions others that are so under-insured that their coverage frequently does more harm than good. What I propose, here, is an alternative system.

 

When a business decides to change the way it is doing business because its current method isn’t meeting its needs, the best companies do not merely “tweak” their procedures here and there and expect things to change, they take a different, market oriented approach. They look at the results they want to achieve, then at the resources they have available (both financial and personnel), and ask themselves; “How can we get from here to there? That is what we need to do, lay out our goals, examine out resources, and design our healthcare system on a clean slate, with no approaches automatically precluded.

 

MANDATORY HEALTHCARE SYSTEM GOALS

 

1. UNIVERSAL COVERAGE

It seems trite to have to say this, but the most important aspect of any legitimate healthcare system is that it provides everyone with healthcare. Without this, there is no real healthcare system. It is ironic, therefore, that while politicians argue over whether a central, uni-payer system or a decentralized payer system modeled after our current “patchwork” commercial carrier system is best, they have conveniently overlooked this part. Let’s be clear. This is a threshold element of any effective system and, without it, the entire discussion becomes academic.

 

Problems first arise when the politicians ask how we are to pay for such an enormously expensive system, when we cannot even afford what we have. The answer lies in the question. Look around you. Physicians’ “real” incomes have been substantially reduced. Community hospitals have either ceased to exist or become specialized appendages of larger healthcare “networks” as their only means of economic survival. Specialists are retiring early or moving from place to place to escape the burden of malpractice premiums they are unable to afford, and Family Physicians and Internists are becoming executives and changing to other professions, while less than 10% of new graduates enter primary care. They take these actions to escape the frustration and dissatisfaction with a once ennobling profession. Why? Because they are paid an insufficient amount to meet their needs, and are frustrated with insurance companies and government bureaucrats preventing them from doing what they always wanted to do – exercise their best judgment on behalf of their patients.

 

What has all of this to do with the funding problem? Think! If we, as a nation, pay a greater percentage of our Gross Domestic Product into healthcare than any other industrialized nation, yet don’t have enough to provide that healthcare for all or our citizens while other countries do, where is the money going? The answer is into the bureaucracy. Between 30 to 40 cents of each healthcare dollar is spent on pushing paper around, not on healthcare. Statutes prohibit physicians from owning labs they might refer patients to, because they might order a few extra tests to make money, so whole bureaucracies are established to police the application of these statutes; bureaucracies that soak up considerably more money than they purport to save.

 

An entire industry has developed around accountants and actuaries who provide insurance companies with the ammunition to declare your x-ray unnecessary, but their effect in both their direct costs (fees), and their indirect costs of compliance, is substantially greater than the money saved by anyone. Still, the geniuses in state legislatures and Washington, D.C. have been so programmed by the insurance lobby (paid?) that they are fixated upon tweaking our presently unaffordable and unworkable system instead of designing a new one that works. They seem unwilling or unable to see the obvious – healthcare decisions belong with the patient and their physician, not the insurance clerk. Moreover, for those who decry “government medicine,” they need only look at the levels of interference with medical care between Medicare and private insurance to see that there is much greater interference from private insurers than there ever has been from Fee-for-Service Medicare.

 

1. PREVENTION OF HEALTHCARE FRAUD AND ABUSE BY PROVIDERS

The next area that is hotly criticized is the avarice of healthcare providers. If we allow them, the story line goes, to determine what tests need to be done, do the tests, and then prescribe treatment, they will take advantage of the system to “rip it off,” and thus we need bureaucracies to oversee them. Hogwash! History has demonstrated that there is no greater control over this type of behavior than a free market system (OK, a “modified” free market system). It is ruthlessly efficient in eventually shutting down the frauds and abusers, while supporting the efficient and effective. It sometimes takes some time, but it does work because you, the patient, are in the best position to police how your money is spent (did you forget that it is YOUR money, and not the bureaucrat’s?). Would you pay a store for a refrigerator it didn’t deliver? Of course not! If a doctor charges for an ECG that he or she didn’t do, your option should be equally clear - DON’T PAY THEM! This “radical” approach would not only bring down the level of fraud, and make most of the bureaucracy unnecessary, but even lower current healthcare costs. How? Stay tuned and you’ll see.

 

1. ALL PATIENTS ARE ENTITLED TO AND RECEIVE THE BEST HEALTHCARE

We all know that while we, as a society, have a goal of a “classless” society, we haven’t even come close yet. There are the “haves” and “have-nots” whether we like it or not. On the other hand, this state of affairs doesn’t have to be the case in healthcare. As with Universal Healthcare, the most abused argument for a “tiered” system of healthcare is our inability to pay for maximum healthcare for everyone. Can you say, “Bull----?”

When we break healthcare costs into its component parts, we begin to see that our inability to afford the best healthcare for everyone is a consequence of the inefficiency of our current system rather than a lack of resources. Like the argument about fraud and abuse, it completely neglects the savings that a less bureaucratic system would generate, and the effect of market forces on the real[2] cost of healthcare. Let’s not look merely at what physicians, hospitals, and others “charge” for their services, but rather at the cost of billing, and the actual payments they receive. The media has made much of the cost of “defensive medicine” in relation to medical malpractice, but has completely ignored the effect of “defensive billing” in determining the actual cost of healthcare.

 

Imagine yourself in a business in which you produce “widgets.” Your cost of production, marketing, taxes, etc. is $10 per widget. Ideally, you would add a reasonable profit margin, say 15%, and sell your widgets at wholesale for $11.50. This is a simple, straightforward way to do business and, with variations throughout different industries, is the way business is conducted. Now imagine that the people who sell you the raw materials from which you make widgets, and those selling you the other products and services needed to produce, transport, and generally get your widgets to market begin raising their prices to you. Ordinarily, if your cost of production is increased by 10%, you would add that 10% to your price, to allow you to maintain the same profit margin or, you might be willing to accept a 10% profit margin to try to undercut your competition. Either way, your pricing strategy is simple.

 

Now imagine that what you get paid for your product is controlled by some outside force – your customer (a bureaucracy in this case). They tell you that no matter what you charge, they will only pay you what they want. Moreover, if they do allow an increase in the amount you will be paid for your widgets, it will be as an increased percentage of the price you actually charge, not an increase to what you charge. Now, are you going to charge $11.50 for that widget, or will you send a bill for $15.00, knowing that you’ll still only get $10.50 but that the percentage increase, if there is one, will be based upon your bill of $15, not $11.50? You know the answer – you’ll bill for $15! Then, when you read in the newspaper that the costs of widgets are rising out of control because of people like you who charge exorbitant prices like $15, you are left with your jaw hanging, knowing that you really only get paid $10.50 no matter what you charge, and that the $15 charge is merely the way you are forced to play the game.

 

This is the case in healthcare today. The cost of the bureaucracy managing payments to providers, and the remainder of the healthcare insurance industry being allowed to tailor their payments based upon government payments, free from the anti-trust laws that govern the rest of the country is never mentioned in the media, so you never hear about it. NOW YOU HAVE! Providers need to be paid a market price for their services; one that allows for a modest profit, not a percentage of what they bill, and the payments need to be adjusted each year to keep pace with inflation.

 

1. PRESCRIPTION DRUGS MUST BE COVERED

When an elderly woman from Detroit crosses the border into Canada to buy her medication because it is 50% cheaper there than in the US, we have to ask “why?” Not just why they need to do it, which is fairly obvious, but why it is cheaper there. Why can people in other countries buy the same medication, from the same companies, at the same dosages, manufactured in the same plants (many of which are in the US) at substantially lower prices than we can here? The answer is simple. Other countries have capped what companies are allowed to charge for their medication. If company A wants to sell its antibiotic in country X, it can charge no more than $0.40 per pill, otherwise it can’t sell it. What does company A do? It sells the antibiotic for $0.40 in country X, but makes up the difference by charging $2.00 in the US!

 

We should not stand for requiring our elderly and infirmed to subsidize the rest of the world, when there is a better answer. I do not believe the US Government should cap prices the way other countries do. Free enterprise is at the heart or our system, and it should remain so. On the other hand, there is nothing more a part of our free enterprise system than making use of market forces to improve your bargaining position.

 

The United States, in all of its various guises (the federal government, the military and state governments) is the largest single purchaser of healthcare, and drugs in the world. Now, when a company deals with its best customer, it is axiomatic that it always offers that customer the best deal, in order to keep its business. That, in a nutshell, is all I ask. We should never tell a drug company what it should be allowed to charge for its products. On the other hand, we should demand that we get the lowest price that each company charges for its products anywhere else in the world; we are their biggest customer, we get the best price. If they really believe that they need to charge $2 per pill, that’s OK, as long as Canada, China and Rwanda are paying the same price. If not, then we will stop buying form them and, if they are the only maker of the product, will enable others to produce generic equivalents even before their patents expire. We have the market strength to do just this, and, although the price may be $0.65 per pill instead of $0.40, it won’t be $2 either!

 

 

THE PROPOSAL

 

It is estimated that the current expenditure for healthcare in the U.S. is approximately $7000[3] per capita. Now, obviously, some people use several millions of dollars in a year, while others use nothing, but that is the average. So, how can we use this money ($7000 x 300,000,000 = $2,100,000,000,000) to provide all of the benefits we’ve been discussing?

 

First, a medical expense account, with $5,000[4] in it, would be established, from the general tax fund, for every citizen in the United States (yes, I know we provide healthcare for non-citizens, but that falls under a different category and we can discuss it later). This would essentially be a checking or debit account, from which funds could be drawn to pay for medical expenses. How this money is used would be entirely up to the consumer, so long as it is paid to a “real” healthcare provider. The checks could only be deposited (or debits transferred) into the accounts of such providers, thus preventing them from being “sold” like food stamps.

 

Next, whatever money is NOT spent for a particular person during the course of the year, they get to keep half of in either cash or tax credits, whichever they choose. Let’s be clear about what this means. When you go to your physician for a checkup, you will be spending YOUR money, not just “the government’s money” or the “insurance company’s” money. So, let’s see what effect this system would have on the goals we laid out above.

 

First, by its nature, this proposal provides Universal Healthcare Coverage for every citizen of the United States. Everyone gets an account, everyone gets covered; no exceptions. Why should be pay the same amount for a billionaire as we do for a homeless person? The answer is simple – they are both citizens of the United States, and entitled to its protection. Presumably, the billionaire is already paying more in taxes, so the coverage is fair anyway (the discussion of the unfairness of our current system of taxation is a topic for another day). It must be admitted, from the beginning, that this is not the whole proposal. There would still be an indemnity element to the coverage that would allow for catastrophic coverage of hospital bills, major surgery, etc., but that can be discussed later and in greater detail. Additionally, we can further reduce the seeming inequities with this system by tying the level of co-payments to income, thus causing a wealthy individual to pay more “out of pocket” for their health care, or purchase supplemental insurance to cover it.

 

How, though, does this provide for the best healthcare? Once more, we need to admit that the billionaire can afford to hire nurses around the clock to care for him or her at home, the best cooks to prepare their therapeutic meals, and so forth. This, however, begs the question. We must remind ourselves that our goal is to make the best healthcare available to everyone, not to make everyone equal. In order to see how this system would both provide universal care and allow the best care to be available by lowering costs, we can examine another example of how things work now, and how they would work under this plan.

 

Joe, our hypothetical patient, has high blood pressure (hypertension). Today, one of three scenarios plays out. First, Joe is in an HMO, and so his “Primary Care Physician” (if he can still find one that hasn’t retired or changed professions) tells him to come back to be rechecked in 4-6 months by the Nurse Practitioner, even though his blood pressure is “borderline high” and he should be seen in a month, because it is the only way the physician can keep costs down enough to remain in practice. Remember, the HMO system is designed to encourage the provision of the LEAST POSSIBLE CARE in order to hold costs down. This means that Joe may go many months before his blood pressure is checked again. Hopefully, he won’t have a stroke while he’s waiting.

 

The next scenario is one in which Joe is “fully Insured” by an indemnity or “Fee for Service” policy. When Joe goes to the doctor, he is really welcomed because the fees for his visit help to buffer his physician’s medical practice from the losses incurred treating HMO patients. When his blood pressure is slightly elevated, he is scheduled to return for follow-up in 2 weeks, even though he could be equally well managed by being seen in a month. Joe gets great care, but at more than twice the cost than would really be needed to pay for it.

 

Finally, there is the uninsured patient, or the patient on Medical Assistance. Most of these people are seen in “mills” where care is provided in an “assembly line” manner. This is the only way they can be cared for without going bankrupt. Yes, most physicians see a percentage of Medicaid and uninsured patients, but when they show up, their blood pressure would be taken by an assistant, and they would probably be cared for my a “physician extender” like a Nurse Practitioner or a Physician’s Assistant. Even then, their visits are brief, to the point, and without the inquiry into other aspects of their health that could have a major impact.

 

Now let’s see what happens under this proposal. Joe shows up at his physician’s office (we’ll call him Dr. Jones for convenience) for his blood pressure check. Like years ago, before HMOs, he is not tied to any one provider. He is a free agent, and can go to anyone, so Dr. Jones follows the age-old wisdom of the marketplace – the customer is always right. He makes every effort to see Joe at the time of his appointment, spends time talking with him and so finds out more about his physical and emotional condition, and schedules him for his next visit.

 

When Joe is handed the bill for his visit, he is disturbed because he doesn’t really think the care he has just received, however good and caring, is worth the $50 office visit fee. He may or may not argue, but when he is scheduled for his next visit in a month, decides to check around. Joe really likes Dr. Jones, and thinks he is a great doctor, but Joe also knows that it doesn’t take a great doctor to check his blood pressure. He discovers that there is a physician (Dr. Smith, who else?) down the street who charges only $30 for the same office visit. If he really needs to be seen monthly (an assumption made just for the sake of this discussion), he will save $20 per visit by seeing the Dr. Smith. That means he will have saved $120 per year. More importantly, is that he gets to keep $60 for himself at the end of the year. It is now his choice whether to see the other physician and save the money, or stick with his current physician.

 

Let’s suppose, though, that Joe and 30 other patients decide to see the other physician for their blood pressure checkups. These are what physicians call their “bread and butter” visits. They are usually not complicated or time consuming, and leave them with income and time for their more challenging patients with diseases that are difficult to treat. When Dr. Jones sees that he is losing his “bread and butter” to Dr. Smith, he has only three choices. He can accept the loss and continue along his present course – a path not likely to be followed since it will lead to bankruptcy. He can maintain his current fee, but somehow increase the value of each visit, perhaps by having more evening hours, doing extra tests for the same price, spending more time with his patients, etc. In other words, try to make his “product” worth the extra money (what we have come to call “Concierge Medicine”). Or, he can lower his fees to match or even exceed those of his competitors, so that his patients do not have to go elsewhere to get the $30 fee for this simple visit. My guess is he would choose the last option but, frankly, no matter which he chooses; the market will sort it out for him.

 

Equally important is that Joe’s doctor CAN decrease the fee for these types of visits, because he no longer needs to maintain the staff, equipment, and ancillary services required to bill, wait weeks or months to get paid a portion of his charge, and then spend additional weeks or months in a futile attempt to argue for the remainder. His billing overhead consists of handing Joe his bill, and accepting Joe’s payment. But the savings don’t end there.

 

The next time Joe comes to see Dr. Jones, he is having headaches. Dr. Jones believes that since 85% of headaches are “muscle tension headaches,” and there is nothing to suggest that these are different, all Joe needs is simple treatment. On the other hand, Dr. Jones has been conditioned to practice “defensive medicine,” and so he suggests that Joe have an MRI of his head to rule out any tumors or other things, that he doesn’t believe are there anyway. “Do I really need it now,” Joe asks? The answer, of course, is no. Even if a tumor were present, waiting a week or two to see if the treatment works would have no effect. Suppose the study would have cost $1,000; Joe has now saved $500 that he can keep at the end of the year, and lowered the cost of healthcare by $1,000 as well.

 

But suppose Joe really needs the MRI. Well, he doesn’t want to go to a “fly-by-night” place to have it done, but there are several Tertiary Care and University Hospitals in the area with very high quality Imaging Departments. After spending a half hour calling around, he finds that the prices for the MRI he needs range from $660 to $1100. Since they are all high quality places, he chooses the one for $650, thus saving $450 - $225 for the system, and $225 for himself. And what of the institution that charges $1,100 for the test? You guessed it, they lower their fee, thus regaining “market share” and reducing the cost to the entire system.

 

Finally, after determining that Joe actually has Migraine Headaches and prescribing appropriate therapy (for which Joe also shopped around), Joe develops a severe headache at about 5:30 PM. He calls Dr. Jones, who is just on his way home. Today, Dr. Jones would tell Joe to go to the Emergency Department, where he would wait for 6 hours before being examined and treated at a cost of $300 – 500 dollars. But now, Dr. Jones tells Joe that he will meet him at the Emergency Room on his way home. A few minutes are spent making sure that Joe’s headache is the same as always, then Dr. Jones gives Joe an injection to help his headache go away, and sends him home to rest. Time saved – 5 hours. Money saved - $400 ($200 for Joe and $200 for the system).

 

I could go on and on, but I don’t feel the need to bore you any more than I already have. Suffice it to say that there are equal or greater savings to be realized throughout all of healthcare. I do, however, need to mention two things. First, this is not a complete system as I’ve presented it here. There are people who require $1,000,000 in medical care in a year, and these would need to be dealt with on an individual basis using a modified indemnity concept. The second thing is the argument that a system as I’ve discussed would encourage people to skimp on medical care in order to have money left at the end of the year. This is a valid argument, and probably true, but not relevant. As a society, it is our duty to make the highest quality healthcare available to ALL of our citizens. It is not our obligation to make them use it. This is a free country (so far), and the choice of using the money for healthcare or not should be up to the individual, not the government.

 

As you can see, we CAN afford to provide high quality healthcare for everyone if we change our present system, but don’t expect it to happen soon. Your congressperson is being lobbied by the insurance industry and, more importantly I know of no history of ANY bureaucracy ever being voluntarily downsized in human history. But if you want good care, call or write to your legislators, the President, and anyone else who will listen. We can all have Cadillac-level health care and still pay less as a nation, but not as the system currently functions, or with the current proposals in Congress.

 

 

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[1] Dr. Shore is an Internist, currently practicing Health Care Law. He is also a Fellow of the American Academy of Family Physicians (FAAFP), the American College of Legal Medicine (FCLM), and the American College of Utilization Review Physicians (FACURP).

[2] Included in the real cost are not just the costs of providing the care, but the “opportunity costs” of people being out of work for longer periods than they should be, exorbitant health insurance premiums, etc.

[3] Neither this, nor the numbers that follow are entirely accurate. They are used to represent amounts that can be more accurately determined later, but their lack of accuracy has no effect upon the concept.

[4] This may not be the actual dollar amount used, but it is illustrative for our purposes.

HEALTH CARE” When Credentials Count

   There is currently a Health Care bill pending in Congress that would, hopefully, provide medical care for most of the people in the United States. Even if it passes, though, there remains a significant problem. Fewer than 10% of the 2008 medical school graduating class chose a Primary Care Specialty. In essence, there are barely enough people in Internal Medicine and Family Medicine as well as Primary Care Pediatrics to treat the patients that we have now. Adding the remaining fifty million uninsured into the mix will require many more Primary Care Physicians than we will have.

   Why should a young man or woman graduating medical school enter “Primary Care?” Suppose I presented the “job” this way: would you like to enter the exciting field of Primary Care medicine where you are paid a fraction of what procedure oriented specialties are paid (e.g. surgery), work longer hours than nearly any other field, spend half of your time dealing with insurance bureaucracies, and are the figurehead who, since you are most visible, gets blamed for everything that’s wrong in medicine today? What if I added that these specialties carry with them the lowest prestige from both the general public and your colleagues, and that at least 30% of the time you will have to spend hours every week arguing with a teenager with a checklist at an insurance company, just to “allow” you to treat your patient properly (and usually lose)?

   Would you want to enter such a field or would you opt, as most do, for a high paying, high prestige job? By the way, when thinking about these “low pay, low prestige” jobs in Primary Care, remember what they had to go through to get there. There was four years of college, four years of medical school, and at least three years of internship and residency (at least 11 years after high school). An Internist does not begin to earn a living (and pay back hundreds of thousands of dollars in loans) until they are well past age 30, while their friend who began as an investment banker after college may already be a millionaire. A general surgeon, who has an additional two years of residency, will make several times what the Internist makes, and spend many fewer hours doing it while maintaining that high prestige that is so important to a physician.

   So, what will happen? The void will end up being filled with Nurse Practitioners. Now, let me state at the outset that I am in favor of such “mid-level” practitioners. They usually do a wonderful job and can treat most lower level problems and chronic illnesses while reducing some health care costs; but with only about six years of education after high school, they should not be allowed to practice independently, without supervision. They simply do not have the educational background or experience to do so.

   Finally, there is the question that will inevitably arise at some point. When they make a mistake, will they be held to the “standard of care” for nurses, nurse practitioners, or physicians performing the same functions? I’m sure the initial answer would be to hold them to the standard of a nurse practitioner because that is what they are, but if they are performing functions that have traditionally been considered part of the practice of Medicine, and the patient is given no choice, shouldn’t they be held to the same standards as the physician whose role they usurped or were given? If I were prosecuting such a case, that would be at least one argument I would use and, if successful, it would find that Nurse Practitioners (“CRNP’s” and “CRNA’s”) malpractice insurance premiums may be even higher than a physician’s. I don’t think this solves the problem for anyone but the insurance company who gets to pay the CRNP significantly less for doing the same things as a physician.

   The answer is simple; value medical services by the credentials and experience of the physician and the complexity and time spent providing the service, as well as the use of preventive medicine and outcome analysis. That would mean that, for practical purposes, an Internist and a General Surgeon who each spend an hour with a patient, will get paid for that hour based upon the criteria noted above. Clearly, the internist will get substantially more, and the surgeon would get somewhat less, but the system would become more equitable and encourage more physicians to enter Primary Care specialties. Moreover, if physicians were considered to be Federal Employees, and are eligible for malpractice coverage under the Federal Tort Claims Act as well as Cost of Living fee increases and a federal pension, then overall medical fees could be reduced and the entire system cost less, yet the physicians would make more and therefore it would be a win-win situation for everyone but the insurance companies.

   Should we worry about the insurance companies? CAN YOU SAY, ‘AIG?”