A Better Way to Pay for Healthcare

The insurance mindset is the wrong perspective to use to pay for healthcare. Insurance was designed to be a way to help people, corporations (I know it is redundant to list them separate from people) and other interests “manage” risk. Insurance is for situations that are supposed to be fairly rare but would have catastrophic consequences if they happened to you, such as your house burning down or suffering a long-term disability. The idea is to spread the risk out over a large number of people, charge each person covered a defined amount of money each month and pay out when a covered loss happens. These situations lend themselves to probability theory. Statisticians calculate the probabilities of said events, their projected costs and set the rates so that the company is assured a profit. Conceivably, you could go your entire life without your house burning down, getting in a major car accident or suffering a disability. But you buy insurance to cover your bets. The job of the insurance company is to take in as much as possible in premiums and pay out as little as possible in damages. That is why they often put up so many hoops to jump through when you have to make a claim.

But what are the chances that you’ll need healthcare at some point in your life? If you include preventative services, the screening tests that we’re all supposed to get, for example, the chance is 100%. So what is the risk that is being managed? Perhaps the insurance mentality got applied to healthcare in the early days because at that time people didn’t go to the doctor that often. They were much more versed in home remedies and many believed that hospitals were places to go to die.

Early health insurance plans were almost exclusively catastrophic. Regular healthcare wasn’t that expensive and wasn’t covered. Over time, our society’s relationship with healthcare has changed, and what we want our insurance to cover has changed. Health insurance is no longer just covering catastrophic events; it is paying for regular services. By moving toward larger and larger deductibles, insurance companies are trying to move their role back to that which is more appropriate for insurance, only covering potentially ruinous catastrophes, but is that what we want?

Goals to Aim For –  

Healthcare costs have increased. People’s expectations have increased. It is time to reassess what we are doing and devise a better, more appropriate way to pay for healthcare. These are the goals I think we should aim for:

  • Universal access – that is, everyone is covered
  • Everyone has access to the same quality of care. No one gets discriminated against because of how their care gets paid for.
  • The cost gets spread out over the entire population
  • People who utilize more healthcare pay more
  • Financial incentives for everyone to be healthy are built-in
  • Competition and innovation are encouraged and rewarded
  • The system remains in the private sector and is not run by the government
  • Health insurance companies as we know them go away. They have done incalculable damage to our society and have abused too many people. For them, we need to institute a corporate death penalty.

Communal Services –  

There are several communal services that we as a society have decided to offer to each other and pay for communally. We have public roads, public education, public water, public utilities, public transportation, public libraries, police and fire protection and a public military. What would it take for us as a society to decide that healthcare is also something we are going to offer to each other?

If you look at any given stretch of road, you don’t know when or how it is going to need to be repaired, but you know that it is going to need to be repaired at some point. So government agencies in charge of that stretch of road set up a repair fund. Every time you buy gas, a certain percentage of what you are paying for the gas goes into that road repair fund. When you buy your gas, do you feel like you’re buying road insurance? (Public tax money also goes into those funds.)

A similar argument can be made for an individual. We don’t know when or how much healthcare that person is going to need, but we know that they are going to need some healthcare at some point. Instead of private health insurance companies to pay for healthcare, we ought to have public utilities that pay for healthcare.

One Idea –

One idea is to divide the country up into five or six geo-cultural regions. Within each region, three public utilities would be licensed to offer healthcare plans. The utilities would be not-for-profit and would be run by public boards and all their financial records would be open to the public. Each utility would devise plans that they think would meet the needs of people. The bare minimum plan would offer the same level of services that Congress votes for themselves and get fancier from there.

We would achieve universal access by compelling each person in each district to choose the utility and plan that best suits their needs. (Such compelling has already passed Supreme Court scrutiny.) Then each person, each month, would get their “health utility bill.” If your employer wanted to give you a perk, it could pay your health utility bill for you. If you qualified for public assistance, the government would pay your health utility bill.  There would not be different coverage for different classes of people, just as rich and poor alike drive on the same roads. We would be able to do away with Medicaid, Medicare, the VA, Basic Health and many of those similar levels of complexity that just add cost to the delivery of healthcare.

A simple way to build in “user pay” and at the same time financially incentivize healthier lifestyles would be to add a “poor choice tax” to foods, alcohol, tobacco, motorcycles and such in the amount statisticians calculate that using that item adds to the burden of healthcare for the population. For example, the lifetime healthcare cost of a pack of cigarettes is estimated to be around $10 per pack. That tax would be added to the price of the cigarettes. Each month, the poor choice tax that was collected in each region would be divided among the health utilities proportionately to the percentage of people in that region that are signed up with that utility. This money would be used to help defray the cost of healthcare for everyone. Organic fruits and veggies would have no or low poor choice tax, while foods full of processed junk would have a higher tax. We have the data now to calculate lifetime healthcare costs of most lifestyle choices.

When we all have healthcare and it is easy to trace the money through the system, the financial incentive of the whole society would shift to real prevention. Right now, nearly every player in the healthcare system profits more the sicker you are. This is the real, unspoken reason for run-away healthcare costs that no one can seem to get a handle on.

Could something like this really work?

For a system like this to really work, though, we would have to also heal healthcare. People would need choices. I do not think it is right to compel people to participate in a system of healthcare that is currently the major cause of death in our society. That’s right. Today, going to your doctor for conventional medical treatment is now the third leading cause of death in our society. What would the medical profession look like if it were ethical to compel us all to participate in it? To be continued.

Copyright 2012 Steven M. Hall, MD

Healthcare Crisis Solution - Letter

During President Obama’s mid-term State of the Union address, he issued a call for ideas about how to heal healthcare. The following is a letter I sent him. I have no idea who read it, all I heard back was a form letter. But this outlines the basic ideas I think could cure our healthcare system. Please let me know what you think. Thanks. 1/30/10

President Obama 1600 Pennsylvania Ave Washington DC,

Dear Mr. Obama,

You issued a challenge during your state of the Union speech that I’d like to accept. I have been in practice now for over 25 years and have spent a considerable amount of time thinking about the terminal illness that is afflicting our healthcare system and how to treat it at its root causes.

Unfortunately the root causes of the healthcare crisis, as I see them, are beyond the reach of public policy. But public policy is what we have to work with and the right public policy can create the right environment and motivation for the healing of the healthcare system.

I believe that the solutions I’m about to propose would give all Americans good coverage, fix Medicare, the VA and DSHS, lower the cost of healthcare, keep the paying for healthcare in the private sector, keep competition and innovation alive, allow everyone to have the physician and hospital of their choice and motivate Americans to live healthier lifestyles. Please bear with me as I explain because, like the solutions to most complex problems, these ideas cannot easily be reduced to sound bites.

I believe that universal access to healthcare would not only benefit individuals but also society as a whole. This puts access to healthcare into the same category of social needs that we as a society traditionally meet through social solutions, e.g., public roads, public water, libraries, public education, electricity, trash collection and the most socialist of all organizations, the Military. Most often, the solutions to challenges that we all have in common are solutions that we all share.

I propose that we move the paying for healthcare into the public utility sector of the economy. The country can be divided into five or six geopolitical regions. Within each region, three public utilities would be licensed by the government to manage healthcare payments. The regions would have to be large enough that each of the utilities could be financially sound. Three utilities would balance the need for competition and innovation without excessive duplication of administrative costs. Each utility would be not-for-profit, run by public boards, transparent to the community.

Each utility would devise perhaps three to four coverage packages, the simplest being a minimum agreed-upon level of coverage (I might suggest that be the level of coverage Congress has chosen for itself) and then other combinations of coverage the utility might think would be popular to people. Each person in each region would be required to choose one utility and one of their plans. This would achieve universal coverage. The plans would have to compete with each other to get people to choose their plan. By providing universal coverage this way, there would be no need for Medicare; we would “fix” Medicare by transcending it. The same goes for the VA and DSHS. The rates for each plan would be set by the public board of each Utility.

The utilities would then contract with providers, hospitals, labs, pharmacies, home-health agencies, etc. just as insurance companies do now. Since there would only be three organizations to contract with, providers would be highly motivated to sign up with each one, thus helping to contain costs. And just reducing the administrative duplications from so many insurance companies offering so many plans could potentially free up 10-11% of the current healthcare budget to help cover the presently uninsured.

Then, each person, each month would get their “healthcare utility bill.” (HUB) If an employer wanted to give their employees a perk, they would offer to pay their employees’ HUB. If a person was on public assistance, the government would pay that person’s HUB for the base plan. If a person were retired and needed the assistance (not all retired persons do) there could be a program to pay part or all of that person’s HUB.

By spreading the cost of healthcare over everyone, the cost for each person goes down. People who can’t afford it could then get public assistance to pay for the lowest-tier plan. I don’t have access to the financial data to do the calculations, but my gut sense tells me that this approach would not cost the government any more than it now pays for Medicare, DSHS, the VA, State health insurance pools and the like. Perhaps many of the people now employed by private health insurance companies could work for the utilities.

There is currently a grotesque and horrific form of discrimination being practiced in the United States that is receiving very little discussion: people are treated very differently by the healthcare system depending upon their insurance coverage or lack of it. This discrimination results in many preventable deaths and untold levels of human suffering. Also, I watch as my patients spend dozens of hours of their time just trying to get their insurance companies to meet their contractual obligations. In this plan, everyone from the homeless to the wealthy would have nearly the same insurance. Veterans, the elderly, rich or poor, everyone would be treated nearly the same by the medical profession. This plan would free practitioners to focus on caring for patients, not worrying about reimbursement rates. Since the health payment utilities would be not-for-profit and the rates they charge and pay would be publicly and transparently set, there would be no financial incentive for them to try to wriggle out of paying for care. This would save millions of hours of people’s time and the administrative costs in every doctor’s office would decrease, realizing further savings.

The defined benefit packages would be de facto rationing of care, but no different than we have in our current system. To avoid the need for further rationing, we need real wellness throughout the entire population. How to accomplish this? By my observation, the threat of potential disability and disease is not, by itself, enough to motivate many Americans to take good care of themselves. We Americans are more motivated by our wallets.

We now have the actuarial data to calculate the lifetime healthcare costs of many products and practices. For example, the last figure I heard, the lifetime cost of a pack of cigarettes is around $7. Similar costs could be calculated for beer, wine, Twinkies, donuts, motorcycles, etc. This amount would then be added to the purchase price of the product as a “poor choice tax.” I envision the poor choice tax posted on the grocery shelf on the same label that says how much per ounce, etc. so people can make informed decisions at the point of product selection. No poor choice tax would be levied on products such as organic produce. The numbers could be calculated to level the playing field between junk food and nutrient-rich food. One might also consider stopping the public subsidies to crops that make junk food so cheap. Suddenly…eating well would make financial sense to people.

Then, the money within each region that is collected from the poor choice tax would be divided among the three Utilities proportionally to the percentage of the population from that region that is signed up with that utility. That money would go to lower the cost of everyone’s HUB. This system builds in a statistical probability of “user pay.” As the population starts making healthier lifestyle choices, the revenue from the poor choice tax would decrease, but so would the level of healthcare utilization thus decreasing the cost of healthcare for everyone.

Once we commit to universal access, then society is suddenly motivated to optimize everyone’s health. Right now, there is no financial incentive within the healthcare industry for wellness. I think that the medical profession would respond by being less reliant on the pharmaceutical industry to tell them what to do and more become more interested in pursuing real preventative medicine. Currently, most physicians think preventative medicine means immunizations and statin drugs. During my career I’ve been led to explore not only conventional medicine but also the wide range of concepts and treatments encompassed by what we refer to as “alternative medicine”. Believe me, there are some valid concepts not currently embraced by conventional medicine that, if they were, would save the national healthcare industry billions of dollars. I believe universal access would give us the social will we need to overcome the profit-motive grip that healthcare corporations have on the practice of healthcare and really heal the healthcare crisis. The cure is out there. We just need to take it.

Thank you for listening. I realize that eliminating private health insurance companies and instituting something like the poor choice tax would mean that you’d be fighting a third war, but it is one that is worth fighting. I would love the opportunity to discuss these ideas further with anyone you think might be able to help use them.


Steven M. Hall, MD

Copyright 2012 Steven M. Hall, MD