Healthcare Inc.

Healthcare Inc. A Better Business Model

Abstract The history of healthcare in the United States has been a movement toward equitable access for all, with indirect payment for service. However, failures of the system, including uncontrolled cost, have made remodeling the system imperative. With no national consensus for present plans such as HR3200, we propose a sustainable model that is owned by citizens, funded by a flat tax paid by all, and provided in a competitive marketplace. The system includes individual control, incentives for responsible utilization by all, and cost control through prospective determination of the funding pool as a set percentage of the gross domestic product.


the historic direction of healthcare reimbursement in the United States has been a progression toward equitable access (defined as equal among all). Until the 1960s. and population trends have made obsolete the open market. presently approximately 18% of gross domestic product (GDP) and rising rapidly. While reform opponents object to government’s role in healthcare. cost. and indirect payment for service. The main point of contention appears to be who will control the allocation of money and services – not what will provide the greatest good to patients. whereas those who are dissatisfied with failures to receive appropriate care argue strenuously for reform. Regardless of satisfaction.1 and about the failure of HR 3200 to control those costs. Those who believe the present system provides well for their needs are disinclined to view reform favorably. Introduction Attempts in the United States House of Representatives to launch healthcare reform (HR) bill 3200 are finding rough waters. insurance 2 . pooled populations to spread risk. direct payment for service system that prevailed in the US until the 1930s. Increasing complexity.Healthcare Inc. there is rising concern about the juggernaut of increasing costs.

and the economic well-being of the nation. created our own business economies and innovations. We have also listened to our patients and our colleagues. whose concerns are not well-represented in the proposals under consideration. and others ways to improve healthcare provision. we have studied systems. companies redistributed wealth in providing healthcare. as a physician and as business people. is the outgrowth of that process. This proposal outlines a new healthcare system business model that is sustainable and better serves patients than 3 . and participated in a highly functioning state system to provide care to the uninsured. Healthcare Inc. And so we have spent many months imagining and discussing with physicians. Presently. Since the inception of Medicare and Medicaid.Healthcare Inc. politicians. Although we are not economists. 60% of healthcare costs are financed by taxes. patient and provider satisfaction. The plan presented here. the government has been doing the redistribution. a work in progress.

the plan uses a “corporation” model owned by the citizens of the United States in which each person has a vote. In the process. it creates better conditions for physicians and other health workers to provide care. 4 .” and HR 676. and costs are contained as a predetermined percentage of the GDP. We envision initially instituting the system at ten sites around the country. “Medicare for all”). service providers compete for business. Both altruistic and pragmatic. those currently on the table (HR 3200. “insurance for all. no other proposal has included the objective of minimum complexity nor developed the logical. where the models would be evaluated for effectiveness and modified as appropriate.Healthcare Inc. Hallmarks of this system are:     internally controlled costs equitable access maximum quality minimum complexity To our knowledge. the government serves as a fiscal agent but does not control medical care. Citizens retain responsibility and control of individual funds.

business people) elected by plan participants (taxpayers)  Prospectively determined healthcare tax rate as a percentage of the GDP (e. administrative.Healthcare Inc. The key components of the system we propose (see EXHIBIT 1) are:  A single payment (tax) system collected and disbursed through the government  Fiscal. citizens. not ideological. determined by the SHCB  Individually-directed virtual healthcare accounts that allow people to allocate their healthcare dollars (and receive dividends if the dollars are well-spent)  Health service groups providing services as consultants of individual healthcare spending in a competitive marketplace 5 .g. 10%) in conjunction with utilization. with trustees (medical providers. conclusion for government funding (not control) with citizen direction. and quality-assurance decisions made by a state or regional health care board (SHCB)..

state or regional health reserve This proposal finances all healthcare costs with a flat tax on individual income. State or regional health fund. the SHR sets and limits the tax rate to a percentage of the GDP to maintain viability of the fund while developing an endowment to reduce future taxes. managed. Tax dollars designated for healthcare are held in a state or regional health fund (SHF). A brief synopsis of some of the system features follows. The SHF monies and those of the individual virtual funds from which each citizen directs his or her own healthcare spending and dividends are held. and in this system. Rate-setting and management. a low-income earner’s return on investment actually is greater than a higher-income earner’s. and administered by a state or regional health reserve (SHR).Healthcare Inc. For this discussion. All individuals are equal owners in the corporation. Combining market-driven rate-setting with some controls. Assumptions underlying the system are listed in EXHIBIT 2. we will assume the target tax rate goal 6 . and services. sales. which is not accessible for other government uses.

compared with the current 18%. the SHR also considers utilization of services. the population “votes” on the tax rate with each service utilization. Individual Health Funds Each person has a virtual individual health fund (IHF) account. They might comprise providers. In determining the rate for individual accounts. institutions. In some cases. Health Care Service Groups Health Care Service Groups (HCSGs) are the competitive and innovation-introducing free-market components of the system. or both. for healthcare to be 10% GDP. Each year. 7 . In effect.Healthcare Inc. Individuals allocate funds to the service providers they select. determined in part by past medical history and in part on projected needs for end-of-life or other costly care. The SHR determines the percentage of total funds to go into individual virtual accounts and a percentage to retain for other costs. funds are entered.

Healthcare Inc. individuals may need or choose to have an HCSG manage their accounts. In this system. There are no co-payments or deductibles. it is possible to reward individuals for judicious use of healthcare by issuing dividends as a taxfree payment in years in which an account balance remains at the end of the year. This allows providers to compete on 8 . Another measure of “judicious use” is using evidence-based approaches where applicable and feasible. The service providers return a small percentage of that money to the administrative component. It does not set prices but uses market driven pricing to determine whether prices are appropriate for a given locale. simplifying the system and again reducing administrative costs. and users will be able to influence health care service group providers in ways they are not able to now. State or Regional Health Care Board (SHCB) The SHCB is responsible for developing and overseeing the state or regional health plan and the Health Care Service Groups (HCSGs). the State or regional Health Care Board. This approach shows clearly the connection between cost and utilization. described below.

the SHCB organizes but does not determine covered or types of service. Each HCSG would be responsible for assessing intervals of care. who are in turn funded by patientauthorized payments from the SHF. and quality of service and reporting their data to the SHB. In other words. Types of service are then submitted to the taxpayers for approval. 9 . The SHCB may require HCSGs to correct deficiencies or meet standards. but it does not define the processes of the HCSG.Healthcare Inc. The SHCB would also have the task of accumulating and disseminating available evidence on the effectiveness or desirability of care and the optimal times of delivery. price. The SHCB is funded by administrative fees from providers in service groups. Covered Services. quality and a guaranteed price (published at the SHCB site) and eliminates the present system of price controls (administrative pricing). This is the responsibility of the owners of the franchise.

Limitations We present this proposal to initiate discussion of a more radically redesigned healthcare system based on the stated assumptions. some ideas are more completely formulated than others. but provider groups need to develop and compete with their own cultures of quality. Clearly. The rest are culturally determined and variable. The exact method of electing or appointing members to the state or regional health care board. for example. While we imagine a schedule to bring healthcare 10 . is open to further consideration. Quality The understanding of quality is incomplete. both the SHB and individuals will make determinations of quality and choose HCSGs accordingly.Healthcare Inc. utilization needs to include evidence-based medicine. and only 20% of quality measures are evidence-based. Thus. Our proposal does not address malpractice reform or funding for medical education. Accordingly. important components of any healthcare system.

not control Given the objections from many sources to government involvement in any US healthcare system. it is a more logical body to redistribute wealth than is an insurance company that is legally obligated to create profit for shareholders. Aside from the historic trend mentioned earlier.Healthcare Inc. Creating a state or regional risk pool and removing variable circumstances such as place of employment as determinants of cost reduces inequalities in the present stratified health insurance system. collecting taxes and distributing them from a central site to pay for healthcare reduces administrative costs and complexity. 11 . As the government is charged with the responsibility to promote the general welfare of all the people and is subject to the will of voters. The case for government fiduciary agency. we have not developed a timeline or implementation plan. but not in the collection and redistribution of income. it seems appropriate to address our decision to use government funding. Present day health insurance companies have a future role in a reformed healthcare system. providers on board over time.

it is not necessarily the best place to house service provision. 12 .Healthcare Inc. Acknowledgement Chris McLaughlin provided editorial assistance in developing this manuscript. or determine which services to use for individuals. But while the government is the rational single payment source for healthcare. This proposal differs from others in transferring control of healthcare from the government to the people. assure quality. while retaining the government as a financial agent and referee.

Reference 1. Forecast summary and selected tables. Centers for Medicare and Medicaid Services. National Health Expenditure Projections ads/proj2008.Healthcare Inc.pdf 13 . Available from: http://www.cms. US Department of Health & Human Services.hhs.

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