Competition is the Only Way to Improve U.S. Healthcare and Reduce Cost

This is costing way too much

The only way to improve U.S. healthcare while bringing costs down is to introduce serious competition for healthcare dollars.

This post is for U.S. citizens since the federales are going to tinker with our health insurance reform very soon. This would be a great opportunity to make helpful changes  to the system. I have no faith they will do it.

Healthcare in the U.S. consumes one of every five dollars spent in the economy. We are not getting our money’s worth, at least judging from average lifespan.

Karl Dennnger has put a lot of thought into the problem over the last decade, and has a concrete legislative proposal that makes a lot of sense. I endorse it. As you consider the possibilities, you need to keep in mind that the cost of healthcare will drop drastically. Not just by 50%. More like 80% or more. Healthcare will be so cheap you won’t even need insurance to pay for most of it.

How are these price reductions possible? Because the Dennniger plan introduces competition and moves us closer to a free market situation without third-party interference from insurers and government.

Here are the major points:

  • All healthcare providers must publicly post (e.g., on the web) prices which apply to everyone. E.g., not  a price depending on which insurance you have, whether you are paying cash up front, etc.
  • All customers must be billed for actual charges at the same posted prices at the time services or product is rendered. This removes the third party (insurer or government). You file the claim and every one pays the same price. In a way, medical care isn’t too expensive; too often it’s “free,” because someone else is paying. So there’s no comparison shopping. You see posted prices and you pay them yourself when you buy gasoline, groceries, cell phones, computers, TVs, cars, and houses. A valid and collectible bill must be consented to in writing before the service or product is provided. Actual price, no open-ended add-ons.
  • No event caused by or a consequence of treatment can be billed to the customer. (I’m not sure I like this. What about unforeseeable complications like C diff infection after antibiotics, or anaphylactic reactions to drugs? Providers could eventually get insurance to cover those costs, but it would be a brand new insurance market.)
  • True emergency patients who are unable to consent must receive the same price for same service as a person who consents to said service.
  • All medical records belong to the patient and shall be delivered to the patient (customer) at the time of service.
  • Auxiliary services (e.g., x-rays, lab work) may not be required to be purchased at the point of use. Example: an orthopedist wants you to get a knee MRI scan on his machine. You can shop around other places for a cheaper or better-quality MRI scan.
  • All anti-trust and consumer protection laws shall be enforced against all medically-related firms, and any claimed exemptions are hereby deemed void. Stiff penalties and fines for violations. Private lawyers must have access to sue.
  • You are free to purchase any medical test you want if no radiation or drug is required to perform the test. (You can already do this in Arizona, but in many states you need a “doctors order” for the test.)
  • There will be no government payments for care or products when a lifestyle change will provide a substantially equivalent or better benefit, when the customer refuses to implement the lifestyle change. (This point needs some fine-tuning. Who decides when and which lifestyle change would provide an equivalent benefit?])
  • Health insurance companies must sell true insurance, to sell any health-related policy at all. No insurance coverage for an event or condition of which you received treatment over the last 24 months.  If an adverse event occurs, insurance pays for all of it. E.g,, if you get an expensive cancer, the insurance company cannot drop you. The insurance must cover, with a selection of available deductibles, all accidental injuries and true life-threatening emergencies. Medical underwriting is permitted (e.g., insurers can charge higher premiums for smokers, couch potatoes, obese folks, etc. I have long thought that people in the top 25% of fitness, determined by a treadmill exercise test, should get a discount on insurance premiums).
  • All health insurers providers selling true insurance, in whole or in part, must provide within their “true insurance” the ability to replace like with like.” (I don’t know what Karl means by this.)
  • Medicare becomes just another insurance provider. No more Part B (outpatient services).
  • Medicaid is repealed entirely.
  • What about U.S. citizens and “lawful permanent residents” who can’t pay for care but still need attention? For true emergencies, the hospital or Emergency Department bills the U.S. Treasury, who pays within 30 days. For non-emergencies, the provider bills the U.S. Treasury and will be paid within 30 days except no billing for government payment if the condition resulted from a lifestyle decision the patient made. After the Treasury Department pays the provider, Treasury will send an invoice to the customer (patient or taxpayer), which may be settled within 90 days at no penalty. If charges are not paid, they become a tax lien subject to collection from refundable tax credits, tax refunds, other entitlement checks (except Social Security retirement), and windfall amounts (either money or property).
  • Repeal all aspects of Obamacare/PPACA.

You need a break after all that. Almost done. Hang in there!

I don’t recall Karl recommending a specific deductible amount, but often saw mention of $2,000 as a deductible. “Deductible” is what you pay out of pocket before insurance pays anything. I like a high deductible over “first-dollar” coverage, because the high deductible automatically creates 200 million shoppers who are going to check prices for sure before buying healthcare. (Of 320 million people in the U.S., I’m guessing 200 million are adults.)

Karl favors “catastrophic” policies, as do I. Your car needs new tires every few years, oil changes much more often, and periodic repairs, but you don’t expect car insurance to pay for those non-catastrophic costs.

Who would get hurt by this plan? Lobbyists, insurance and healthcare administrators, drug reps, pharmacy benefits managers, and those who refuse to make healthy lifestyle changes.

I don’t recall Karl addressing unreasonable insurance mandates, managed care plans (like Kaiser Permanente in CA), accountable care organizations, liability reform (we need the English Rule), tax parity (businesses buying insurance for employees get a tax break, but private individuals buying their own policies don’t), or much about enforcement. But he may have; Karl’s a very smart guy.

Steve Parker, M.D.

 

5 Comments

Filed under healthcare reform

5 responses to “Competition is the Only Way to Improve U.S. Healthcare and Reduce Cost

  1. Shane

    If it’s as great an idea as it sounds, are there special interests who will quash it because it means less money for them? (It’s kinda like the idea of a flat tax . . . yes, it simplifies things incredibly, but CPAs and tax attorneys will never permit it because it will put them out of business!)

  2. Richard

    Yes, to Shane’s post and your reply: But the problems are that the current system “works” well enough, most of the time, and the final true costs are hidden from both the patient and the rest of us, as taxpayers, etc. I do not believe that hiding the costs from the public or anyone was part of the objective, at the outset, but it is a somewhat natural and unremarkable result of the government stepping in to help people with health expenses; just like the government stepping in to help with college expenses by guaranteeing the student loans or by any other means. Such help greatly relaxes or perhaps eliminates the need for individual oversight of the expenses and creates a whole class of people attempting to exploit the guarantee. In theory one might expect insurers to do all they can to minimize costs, but somehow that objective has been diminished, in practice, to the point of invisibility. I hope my post is not taken as some anti-government rant, because I do not mean it that way. It is more about the well known road paved with good intentions.

    • Hi, Richard.
      In a way, U.S. healthcare is too cheap. The average insured patient doesn’t pay most of the bill, especially after the deductible is met. Only a small part of the bill is out of their pocket. What the patient pays is relatively cheap compared to the total cost. Let’s say your primary care doctor sees a spot on your chest x-ray and says, “I want you to see Dr X, he’s a lung specialist. Who bothers to check and compare the cost of Dr X, the chest CT he orders, and the bronchoscopy he performs? Most patients just go along with the flow knowing that insurance will pay for most of it.

      Insurance companies ultimately can (and do) pass their costs along to the consumer via premium increases. (Yes, this is an over-simplification, and insurers do take measures to reduce how much they pay out.)

      -Steve

  3. Yes you are right but i also don’t think the situation will be fine, they just to get high taxes from civilians
    however, i hope everything will be well soon

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