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Harris Muskegon Surgical Associates, P.C. 1316 Mercy Drive Muskegon, MI 49444 231.739.9461 Contact Email: firstname.lastname@example.org 12/12/2012 Abstract: Healthcare costs are accelerating faster than the gross domestic product (GDP) and placing an increasing burden on the federal debt. We believe the essence of the problem to be a reimbursement structure limiting patient responsibility and provider transparency, neither of which has been addressed to date. Consequently, we propose patients be given virtual control of the healthcare dollars while providers compete with quality and price. The argument patients will save dollars instead of protecting their health only reinforces the point; simply invert the financial incentive to accomplish whatever desirable process they might otherwise avoid. The argument people do not think about finances when their life is at stake is refuted by the existence of the previous argument. The idea that given knowledge the vast majority of patients are not responsible enough to manage the healthcare dollars is about control not patient care. Further, we advocate all funding of healthcare be via taxes to replace and reduce the total healthcare “premiums”, provide ownership “stock” in the “healthcare corporation” owned by the people, and decouple healthcare from employment which in turn hinders both employment and the GDP. Our goal is equitable access and maximum quality while reducing total healthcare costs by 30%. Summary Part I: Where Healthcare Has Been: The interval from World War II to the present is an era of health insurance and accelerating healthcare costs. When both the receiver and provider of a service are insulated from the cost, both the supply and demand are inflated. This is the unintended consequence of health insurance. During this era, the attempt to oppose these forces
was indirect through the bundling and controlled pricing to modify provider practice patterns. The first time around, this was an easy target because at the beginning of this era, hospitals and doctors essentially had their non-competitive charges reimbursed. Thus both the Diagnostic Related Groups (DRGs) for hospitals and the resource-based relative value scale (RVUs) for physicians had an initial effect. These government sponsored programs in turn inspired the Health Maintenance Organization (HMO) in the private sector. Summary Part II: Where Healthcare Is: The Congressional Budget Office (CBO) in its 2012 Long-Term Budget Outlook1 has two projections. The extended baseline scenario (current laws) would reduce the federal debt and assumes the current laws will not change and the extended alternative fiscal scenario (current policies) would increase the federal debt to unsustainable levels and assumes the current laws are not politically sustainable. Healthcare financing plays a major role in each scenario. Summary Part III: Where Healthcare Is Heading: The Patient Protection and Affordable Care Act2 (ACA) removes all limits and risks for healthcare from the consumer. It then constructs two barriers in an attempt to limit the unlimited. These are Accountable Care (AC) and the Independent Medicare Advisory Board (IMAB). The vocabulary is more sophisticated this time around but in spite of a literature stating things will be different this time, AC is a variant of managed care while the IMAB continues essentially unaccountable price controls. Each has a history of initial success then failure. There are also private industry initiatives as in an Organized System of Care (OSC) with similar incremental improvements and fundamental defects. The problem is twofold. The reimbursements are to be bundled packets of zero sum wars but most important is that none of these initiatives significantly address patient responsibility or
3 . something the government must give to the individual. Summary Part IV: Where We Think Healthcare Should Head: Healthcare is about love and love is about responsibility. a right is something intrinsic to the individual. In this context. a right is something extrinsic to the individual. Liberty and the pursuit of Happiness. These goals guide our proposal abstracted above and elaborated upon below. and minimum cost and complexity. Our proposal takes the concept of respect for one another and the understanding that responsibility is fundamental to healthcare as basic principles. Part I: Where Healthcare Has Been: The recent era of our healthcare history began during World War II with two synergistic effects. something the government must not take away from the individual. On January 11.” These were followed by a Bill of Rights in 1791. in his State of the Union Message to Congress. that they are endowed by their Creator with certain unalienable Rights. In this context. Franklin Roosevelt introduced eight new rights in a “second Bill of Rights”. These principles then generate the goals of equitable access. that among these are Life. 1944. Among these was “The right to adequate medical care and the opportunity to achieve and enjoy good health”.provider competitiveness. that all men are created equal. which were the first ten amendments to the United States Constitution. Instead they continue attempts to control costs from central committees which are incapable of optimizing dynamic complexities. maximum quality. the gradual erosion of individual responsibility and the rise of health insurance. The Declaration of Independence states “We hold these truths to be self-evident.
Here the 4 . The second long term healthcare effect to develop during World War II was the rise of health insurance. the patients and providers are incentivized to maximize both supply and demand. since the provider of healthcare is reimbursed on production instead of value. While the “…right to adequate medical care…” has a benign veneer we are witnesses to the financial consequences while it progressively erodes personal responsibility. In 1975 Medicare began its price control system or the Medicare economic index (MEI) which is an estimation of physician costs and placed a cap on physician fees.The significance is that instead of the state being a guarantor of rights where a responsible people control the state. Medicaid. and the State Children’s Health Insurance Program (SCHIP) under the administration of the Centers for Medicare and Medicaid Services (CMS). This completed the main components for the healthcare cost conundrum which we face today. Moreover. This inexorable link to employment ultimately limits employment but there is a more ominous consequence. Then in 1965 president Lyndon Johnson signed the Medicare amendment of the Social Security Act which led to the creation of Medicare. In 1992 physician payments were modified by RVUs. Medicare compensated physicians3 on the basis of their charges through reimbursement plus balance billing. During the war. The retort that people do not want to get sick is countered by the fact that everyone needs healthcare. wage controls limited the competitiveness of industry for workers and an expedient was to increase benefits such as health insurance. from 1984 to 1991 the fee change was arbitrarily legislated. the state becomes the determinant of rights which control the people. Since this grew too fast for congress. For about ten years after its inception. Once a premium has been paid it is natural to maximize the return on investment by consuming the product.
by 1998 the total physician payment rate was changed from the MEI to the Sustainable Growth Rate (SGR) formula. these payments are politically determined and there was an initial success because the payment structure was so bloated. The payment depends on the “bullets” or instances of patient care that have been recorded and it is natural to shoot for the highest reimbursement. the effect is the same. In essence. To control hospital costs from charges or “cost” the 1980’s saw the institution of price controls in the form of DRGs which is a bundled hospital payment based on a disease process to encourage physicians to integrate care and be more efficient. This shifted reimbursement increases from a cost estimate to something more complicated but roughly following the GDP. The delay of the implementation of the SGR each year has led to the looming 27% decrease in physician Medicare reimbursements in 2012 and greater thereafter. The idea is to model medical care and the status of a patient and then compensate accordingly. However because of the volume and intensity of services. Consider the Evaluation and Management (E&M) codes developed around 1997 and recommended to be abolished in 2002 by the same advisory committee.attempt was to equalize physician payments based on clinical practice measures rather than to control costs. They remain in use today and though they are much simpler than the DRGs. Similarly private insurance attempted to control their costs with payment structures and HMOs. It is instructive at this point to examine an example of healthcare billing and its consequences. However. This game is facilitated by the Electronic Medical Record (EMR) driving up costs the EMR was supposed to reduce and nearly obliterating any possibility 5 . Of particular note are the failure and the persistence of the top – down method to control price and integration of services. spending for physician services exceeded the SGR target which because of compounding is much less than the MEI.
this will be the most difficult to correct. In Kentucky. 6 . The extended baseline scenario assumes the current laws will not change and would reduce the federal debt from its (Footnote 1) The United States gross debt is roughly 100% of the gross domestic product (Figure 1) while the United States federal debt is about 70% of the GDP. while each state pays the rest. but that is not the point. the existing Medicaid match is the second largest item in the state’s budget. In addition. The addition of 30 million individual to this program over the years 2014-2017 will push more states toward bankruptcy. our federal debt (Footnote 1) is now only second to that at the end of World War II.of figuring out how the patient is doing. we have inadvertently chosen to finance most of healthcare through employment based health insurance and the taxes paid by the employed. while at the same time beset with unacceptable levels of ineffective or inefficient care. The federal government pays between 50 and 83 percent. More important. Part II: Where Healthcare Is: Healthcare costs are accelerating faster than the GDP and accelerating faster than per capita spending for other goods and services. (Footnote 2) Unknown to most physicians. The difference is the money in “savings” or owed to ourselves such as the Social Security Trust Fund. Medicaid is a curious match between federal and state funds. the compensation is upside down. which reduces both employment and the GDP while exacerbating the problem. the objective should be to minimize the instances of care necessary to maximize the status of the patient. The CBO in the 2012 Long-Term Budget Outlook gives two projections. based a formula using the state per capita income and the national per capita income. If the federal government paid 100 percent of the new enrollees. It is this portion of the existing Medicaid “match” that is producing threatened bankruptcy in some states. advances in technology and innovation. the federal government would be pushed toward its bankruptcy faster than the present rate. Instead of incentivizing maximum instances of care. Since none of the other budget items have the unique combination of an aging population. Moreover. This entails a different thinking and payment structure.
org WWII historic highs and reducing spending except for Medicare. Included in the reduced spending is a 27 percent decrease in US Gross Debt US GDP 2000 2004 2008 2012 2016 physician reimbursement which because the overhead stays about the same. The most intriguing parallel between the ACA and Congressman Paul Ryan’s proposal is an implicit philosophy based on faulty one-dimensional thinking. It would accomplish this by increasing taxes such that revenues relative to GDP would reach post Trillions 25 20 15 10 5 0 Figure 1 US Gross Debt vs. Medicaid (Footnote 2). His proposal reduces the federal debt from 70 percent of GDP to 10 percent in 2050 through a slight increase in revenues while lowering income taxes and eliminating many deductions. Social Security and interest. The extended alternative fiscal scenario assumes the current laws are not politically sustainable and would increase the federal debt from the present 70 percent of GDP to more than 200 percent in 2050 by keeping taxes and spending roughly at present rates.present 70 percent of GDP to 40 percent in 2050. slowing the rate of Medicare increases. change the reimbursements to vouchers to purchase health insurance and slow the rate of Medicare growth by linking reimbursements to the consumer price index. SCHIP. GDP Source: Data from UsDebtClock. and dramatically reducing much of all other spending. if you reduce healthcare reimbursements you will also reduce total healthcare costs. was also evaluated by the CBO4. His proposal for Medicare is to gradually increase the eligibility age to 67 by 2033. keeping Social Security as is. translates into a much higher decrease in physician salaries. that of Congressman Paul Ryan. 7 . dramatically reducing Medicaid and SCHIP. Another proposal.
deductibles.current laws and 48 percent under the extended alternative fiscal scenario . the ACA omits the word “right” but nonetheless resolves the lack of precision in President Roosevelt’s phrase “…right to adequate medical care…” in “Sec. but Social Security increases are much smaller and are more manageable because Social Security is not beset by changes in technology. the CBO estimates the excess cost growth of the major health care programs is 40 percent under the extended baseline scenario . not just that on the government books and to note that the citizens (not governments) ultimately fund all the healthcare costs through taxes. which will increase from 5 to 10 percent of GDP over the same period. In that respect. Medicaid. Both increase because of an aging population (Figure 2). In other words. Percent 40 Figure 2 Population Age 65 Scource: Data from CBO 30 20 10 0 2000 2010 2020 2030 Population Age 65 or Older as a Share of the Population Ages 20 to 64 It is important to also include total costs of healthcare. the federal government and the states pay 49 percent and private spending 51 percent. To calculate the total costs. innovation. 2711 No lifetime or annual limits” and “Sec. premiums. or inefficiencies.The rate of growth of Social Security spending relative to the GDP will increase from 5 to 6 percent of GDP over about twenty-five years and be much less than Medicare. 2702 Guaranteed availability of coverage”. and SCHIP. This opens a Pandora’s Box. the CBO notes that when considering the total expenditures for healthcare. copays.“current policies”. 8 . private pay and the no-pays absorbed by doctors and hospitals. essentially every citizen in the United States is to receive unlimited healthcare for life. Part III: Where Healthcare Is Heading: Curiously.
Without defined risks and limits. Once it is understood that “health insurance” is merely a method to collect and distribute money for healthcare. it becomes clear that it might as well be done as efficiently as possible and that multiple and overlapping administrations performing that function is not cost effective. the ACA officially ends the substantive existence of health insurance while simultaneously mandating its use. seldom discussed and easily dismissed effect of the ACA. Because the SGR formula does not reduce overhead. In a fascinating demonstration of agility. Without an internal structure.However before considering how the ACA attempts to limit the unlimited. both of which would dramatically reduce administrative costs. These observations might be dismissed as merely a question of semantics if the stakes were not so high but more important is that a clear understanding of the meaning of a concept is critical prior to the resolution of a problem. the decrease reduces physician salaries substantially more than 27% likely making 9 . health insurance exists in name only and this bill formally ends the lucrative health insurance era while beginning that of government managed healthcare. merely unlimited premiums and unlimited payments remain. This is an argument for a single payer system as in “Medicare for All” or our proposal which is a single payment system. A common denominator throughout the healthcare reform literature is health insurance. Since unlimited healthcare contradicts the word “Affordable” in the title of the ACA there is presumably something within the bill limiting the unlimited because it is absurd to believe both propositions are true. One assumption is the enforcement of the SGR reducing physician reimbursement 27% initially and more in the future. Every discussion about healthcare reform puts health insurance as the foundation and if that foundation is not clearly understood. a solution will be elusive. there is a far reaching. Insurance is compensation provided for an individual based on that individual’s risk and limited by contract.
This has similarities to the old Soviet style of government and its planned economy. but obvious. These “advisory” instructions are to “…include recommendations regarding improvements to payment systems for providers of services and suppliers who are not otherwise subject to the scope of the Boards recommendations…” The IMAB has the ability to redefine healthcare payments as they desire and there are no appeals. These one-dimensional price controls view healthcare costs as a system of independent nodes. Healthcare is to a large degree under price controls dictated by the CMS. Commercial insurances then set their prices as a percentage of the CMS price. healthcare is viewed as interdependent 10 . However the ACA does allow for a more complex pricing in AC for Medicare which is also modeled as the OSC in the private sector. If those reductions are not implemented or not effective. with alternative equal size cuts. Their restrictions are to “…not include any recommendation to ration healthcare. 3403) whose purpose is to “…reduce the per capita rate of growth in Medicare spending…” in a most curious fashion. raise revenues or Medicare beneficiary premiums…”. the next barrier to the unlimited is the IMAB (sec. under severe limitations. In addition to the SGR there are other reductions. The euphemism for these price controls is “Administrative Pricing” which determines how much money goes where.physicians much less available. While it may limit the federal debt it will also limit healthcare and in turn increase total costs. restrict payments to the providers and thus limit access. This in turn clarifies “Subpart II – Improving Coverage” which is correct in that ACA will improve coverage but not access and contradicts the patient protection clause. Left unsaid. In these. Its “advisory” recommendations are compulsory unless Congress replaces them. is the only other option.
On the surface. Though the intentions are good. the AC will not succeed for many reasons but primarily because it lacks sufficient feedback.nodes. Since its implementation in 1992 and its initial success. Medicare’s administrative pricing5 is basically a linear control system (Figure 3) without feedback. more of a recipe than individual ingredients. and expects a different result. the “volume and intensity of services” 11 . each node controls its own pricing. Throwing additional resources at a failed attack is one of the tactics Sun Tzu advised against in The Art of War. Since CMS and by extension other payers base their reimbursements on the DRG/RVU system (Figure 5) it is necessary to understand its mechanics and its defects. Moreover. The DRG/RVU is generated by a coder who is bound by a controlled vocabulary reminiscent of 1984’s Newspeak. In AC the notion is to integrate the nodes and provide bundles of compensation for the network. The providers in turn determine the distribution of the payment. The feedback that does exist in healthcare is incidental and ineffective because the negative feedback of the deficit and possible SGR is overwhelmed by the positive feedback of politics. these are typical manufacturing ideas but the problem is with the execution. Homeostasis or health is the stable state of these functions while disease is an abnormal function and death ensues when a function is out of control and cannot be compensated. bundles them together. A function takes an input and generates an output while a feedback loop has the output of one function as the input of the other and vice versa (Figure 4). A biologic system might have thousands of these loops. physician incentives and the legislated unlimited unaccountably of the patients. in manufacturing as opposed to AC. AC takes these proven defects. In a fee for service model each node receives compensation without a link to the others.
Figure 3 DRG/RVU CMS Administrative Price Figure 4 Pituitary TS H T3.e) = x 12 .c.b. T4 Thyroid Figure 5 Clinical Data Coder DRG/RVU Figure 6 Clinical Data Doctor Dx Rx Figure 7 Clinical Data Plus Providers Tax Rate Competitive Price Figure 8 Dendrites Neuron Cell Body Axon Figure 9 Inputs Neural Network Figure 10 Vector Function Output f(a.d.
Computer science models the neuron with neural networks (Figure 9) and both are instances of vector functions familiar to mathematicians (Figure 10). The diagnosis or treatment is a rough indicator of the appropriateness of care.has gradually increased but it is our opinion this is far more likely secondary to the learning and computerization of “Newspeak” than it is to changes in the delivery of healthcare. it retains its non-competitive heritage from the charge based era. Fuzzy logic includes the numbers 0 and 1 and every number in-between. rather it should be the degree to which the appropriate care was rendered. The DRG/RVU is a classification system for a state of or for a procedure performed upon the patient. 13 . the consequence is that the present coding systems should not be the primary drivers of payment. decisions upon which AC depends. Contrast the DRG/RVU payment with what happens when a physician sees a patient (Figure 6). This in turn requires individual. Both the neuron and the computer are voltage regulated binary systems. The concept of “appropriateness of care” is necessarily fuzzy in the logical sense (Footnote 3) but it is also dependent on each individual (Footnote 3) Boolean logic includes only the numbers 0 and 1. While a physician makes a diagnosis the treatment can be very different with the same diagnosis between doctors and even with the same doctor. In addition. not population. this largely ignores the appropriateness of care which should be the true metric of reimbursements. Besides the structure for the reimbursements. there is another difficulty with its foundation. This will take time to develop and the codes will remain for a while but we feel they will eventually be replaced with natural language as they are currently when talking with the patients and colleagues. the fundamental problems with the DRG/RVU system are that the price controls are political in nature. a bit of background is provided by a stylized neuron (Figure 8) which combined with feed-back suggests our proposal (Figure 7). and the basis of payments by DRG/RVU is wide of the mark. Interestingly. the commonality of these structures goes even deeper than the graphics suggest. However. While there is some nibbling at the periphery with quality measures. Notably.
This individualization and competitiveness is what leads to the schematic of our proposal (Figure 7) to be discussed in greater detail later. it will be divided up in a zero sum game where one partner wins by having another lose. not a population. since CMS has already demonstrated the inability to get the payments correct there is no evidence they will succeed this time. The idea that incorrect payments sent into a group of highly knowledgeable. Initially the plan is for the providers and the government to divide up the “shared savings” resulting from improved productivity without risk. If and where there is already waste or payments are excessive. The doctors and hospitals need to cooperate in a collegial manner or the systems will function poorly. the doctors and hospitals win. Since CMS has under the present system failed in its task to align payments equitably. it is the supply and 14 . the pent-up demand drives up prices due to the “shortage”. receiving a reward for past inefficiency and some collusion. Next the idea within the ACA is to take these reimbursements and for an AC to design a system for healthcare delivery which is a complex process. and financially sustainably (to be fair that task is impossible for a central committee). However. justly. Then it gets interesting. Hence when that incorrect payment goes to an ACO. poorer and less efficient care.patient. In addition. the next attempt is to bundle the payments so that an Accountable Care Organization (ACO) receives a lump sum and then that ACO presumably wisely and cooperatively divides up the payments among themselves. These internal zero sum wars will result in the mutual destruction of most providers and patient care. decreased costs. in the present circumstance of political pricing where the pricing is variable across classes and the patient and doctor are insulated from the cost. Often price controls artificially reduce supply and create a shortage because the payments are so low that when the prices finally float. and increased quality is ridiculous. and worst of all. competitive individuals for arbitrary division will result in harmony.
Moreover this completely ignores any responsibility for one’s health. are only pieces of the great healthcare endeavor. This inflates the supply for the better paying patients while discarding access for the poorer patients. The ACA introduces another “war is peace” vignette which is more ironic. this is not allowed anywhere in the universe. However in the ACA there is no limit or risk. This inflates demand. Governments and corporations fail to grasp healthcare because they are outside of healthcare and consequently they are incapable of its experience. in effect the ACA legislates the abolition of patient responsibility. sorrow and loss. as far as is known. instead of mandating responsibility. there is an unlimited return.the demand which are artificially inflated and poorly distributed. When the prices are reduced. The doctors as manufacturers in effect receive subsidies because they are not responsible for the total cost while being compensated for production. Thus for a discounted amount. In the ACA “Subtitle F – Shared Responsibility for Health Care” and “Part I – Individual Responsibility” deals with everyone buying health insurance which the Supreme Court uncloaked as a tax. Tying the physician and hospital reimbursements together only makes sense if they have control over competitive pricing. The Supreme Court was never asked if it is constitutional to get something for nothing but it is nonetheless a violation of the Second Law of Thermodynamics. health and disease. love and respect. does not pay or pays a discount for the product at the time of service. Since. Part IV: Where We Think Healthcare Should Head: Life and death. Throughout the 15 . the ACA cannot survive under its present formulation. In this Accountable Care era the patients are not accountable. having already paid for the service with a “premium”. the physicians increase productivity to make up the difference in compensation. Concomitant with this the patient. In the meantime.
and quality. They also have the same problem with exponentially increasing costs relative to GDP. This should apply to both patients and providers. some type of functionally restrictive access model. are not independent. This philosophy then suggests the healthcare objectives which we believe are equitable access. cost. In addition. 16 . and better quality measures (Footnote 4) than the United States. The problem is to find an optimum solution to access. The word responsibility implies both accountability and action so that someone is accountable for what is done or is not done.world industrialized countries have government sponsored healthcare. the countries with best results for medical care are very homogenous. We suggest words such as “respect” and “responsibility” to classify a distributed method to optimize access. Nonetheless there is still a great deal we need to improve. half the cost. (Footnote 4) We believe much of the “poor quality” frequently reported is likely due to our heterogeneous population. Such a dramatic difference in philosophy develops a dramatically different healthcare system. 3) minimum cost. cost. This philosophy in turn guides the selection of the routes to those objectives. The values 1) equitable access. Accordingly. and minimum cost and complexity. 2) maximum quality. there must be some measure of accountability for comparison and goal purposes. In fact. and quality. Words such as “control” and “management” classify centrally planned healthcare systems. This is too complex for top down methods. they are highly and mutually dependent. and 4) minimum complexity. maximum quality. Most proposals advocate some at the expense of another. The design of a solution must take all these relationships into consideration. Thus since the ACA is a similar top down system of controls it may have an initial success because of the excesses in our system but it is headed for failure.
we propose patients and providers be responsible for the cost and quality of healthcare. The objection patients will not choose wisely is dependent upon a philosophy that suggests patents are not responsible and therefore must be controlled. balanced billing. Their performance determines whether their individual budget generates a profit or loss. no-insurance. patients need to control the healthcare dollars while the providers compete through quality and price. A percentage of a profit could be returned to them while a deficit would not incur a penalty which is similar to the present circumstances. no-pays. If you have personally earned 17 . This single payment system could eliminate the present deductibles. subsidies. We feel responsibility means everyone must “own” the “healthcare business” and thus pay for it. The objection that some patients will save dollars instead of obtaining needed healthcare is actually an argument for the patients controlling the money. coinsurance. The objection that patients do not shop for healthcare is refuted by existence of the initial objection. This self-perpetuating stance is why we are in trouble today. While we do not have the capability to generate hard numbers. we estimate this first step would reduce total healthcare expenditures by 10%. co-pays. insurance. What we envision is that every person would have a dynamically allocated virtual budget based on their medical conditions. and bad debt. They in turn “purchase” services from the providers based on price and quality with a swipe of their card. Simply give the patients a credit instead of debit for the behavior one wishes to modify. Healthcare funding would be through taxes and we propose a flat tax on income. and services. While resolving the tax fairness debate is beyond our abilities we have chosen these flat taxes because of their relative simplicity and their inclusiveness. sales. collections. To accomplish this.
not the amount of tax the individual paid. Similarly. However the emergency room will know its performance 18 . the elimination of classes of care. it has more value and meaning.and own something. Whatever the final “feed-back” tax structure. The rates must be competitive and each state or region would be expected to participate with its own administration and tax rate. no one would be forced to participate in or fund this proposal as long as they can demonstrate funding for and participation in a credible alternative. For instance. and the fact that the bonuses to be paid are based on performance. These funds should be sequestered only for healthcare and out of the reach of government for other uses. A flat tax is more difficult for someone to pay if they do not have much disposable income but under this proposal there is a greater return on the investment for those who pay less. We feel equitable ownership is important to controlling costs. This does not preclude running our plan at the federal level but we tend to see this implemented at the level of the states. Any taxes paid for this proposal would be applied to an alternate health plan if the individual desires. The providers in turn would need to develop competitive products and “sell” them based on price and quality. The rate of the tax would be set to cover expenses plus the possible additions of an endowment for future expenses so that next generation does not bear the burden for most of the cost of their parents. the idea is to define an individual’s economic footprint and propose that as their relative proportion of the healthcare “premium” for their “insurance”. The idea is not so much for the patients to shop for services but to have the providers compete. in an emergency situation. the patient will go to the nearest emergency room without regard to the price. Our goal is to achieve equitable access along with equitable burden.
There are not different levels of insurance or coverage. Moreover. In these cases.relative to its peers and justify its costs and quality. any plan should recognize that some relatively well to do families will pay personally extra fees for “concierge services” or for uniquely skilled physicians. the effect of 19 . Medicare and Medicaid. state based care would make states competitive while federally based care would make regions competitive. the patients will have this information for future elective services. As a concept. the first dollars only apply to services accessible to everyone. the present workers fund most of healthcare which in turn inhibits employment. Our plan does not offer basic levels for everyone and higher levels for those who can afford it. The ACA continues the employment link to healthcare funding and third party payments. Thus. Of course former workers paid their share but since it is a defined benefit instead of a defined contribution type. the unfunded liabilities are not sustainable particularly given the aging population and improvements in technology and innovation (Figure 11). We foresee that a state based coverage would provide a major portion of expenses in a neighboring state but that the individual patient could have to pay something additional or possibly less. while not traditionally thought of as being employer based. Consequently. In this case we apply a “median sticker price” to pay for the service for most patients but allow that to be the first dollars for an appropriate “concierge service” if the individual desires to pay additional last dollars. similar to the above first dollars. In addition. are also linked to employment through payroll taxes plus income taxes. However. Many communities border state lines and a long established referral pattern will for some time determine choice of doctor and facility. What exists now is not an insurance model but a third party payment model largely funded by employers and their employees.
The key to physician acceptance of these processes is honest risk adjustment while the key to patient acceptance is adequate information. Trillions 100 50 0 One advantage of employer based health insurance is the control employers have over their employees to incentivize health.org 150 Medicare + Drug Liability Social Security Liability 2012 2016 participates. We propose 20 . and owns healthcare with the decoupling of healthcare from employment though this would probably include some “grandfather” clauses. Social Security Liabilities Source: Data from UsDebtClock. Encouraging improved performance and frequent reassessment of those performances against regional norms or a competing doctor or hospital. Clearly physicians. Every healthcare proposal claims this as a goal. The next consideration is quality. Ultimately we see an “appropriateness of care” based on the individual’s personalized treatment but for now take a more traditional approach. There is also another piece of information is missing. and patients need to participate in these processes. As noted above. For example. any incentive can be part of our proposal though we advocate the “carrot” instead of the “stick”. hospitals. over time. risk adjusted death rates for elective operations have been somewhat helpful in the last two decades with two separate effects: Embarrassing some doctors and hospitals into abandoning procedures with overtly poorer outcomes than their neighbors. Evidence based processes need surveillance and outcomes need to be reported along with patient satisfaction.the value “equitable access” suggests proportional funding by which everyone Figure 11 Medicare vs.
We must also consider geography and a unique multitude of circumstances (other than cost and quality) that will influence patients’ final decisions. In fact. More sensible is for the publication of the provider determined prices along with the above quality data. The present system considers pricing to be a top down management problem. avoiding evidence based care counts against any possible bonus (Footnote 5). Once the patients have control of the money. Of course. they determine the services they receive putting the providers in a competitive environment which minimizes cost. comparison to peers. bad. There would be reports perhaps each quarter with each patient’s costs. looser 2009 B-blockade in elective surgery: bad. good Screening mammography: when to begin and how often Prostate specific antigen: gospel or discarded Colonoscopy: when to begin and how often 21 . Every individual would have a virtual budget. the evidence changes from year to year. pricing is a complex optimization problem requiring constant feedback not amenable to any group of experts or special interests to allocate appropriately. One major reason is correlation is not causation and as a consequence there cannot be a weight or amount of the effect. The overall tax rate is adjusted up and down to maintain solvency. This is a “pay for performance” for the patients. and a budget. if a patient smokes or has appendicitis. Tight glucose control in ICU patients: tight 2001.a public listing of the doctors that treat other doctors and doctors that treat nurses for this summarizes a great deal of information not otherwise available to the public. For instance. the overall financial viability. Doctors and hospitals need to eliminate preposterous “charges” from the equation and emphasize their honest cost and return on investments. In fact. now good Post-menopausal estrogen replacement: good. as well as the providers. and tax rates. they receive a bonus if they come in under budget but there is no direct penalty for failing to make (Footnote 5) Evidence based medicine is a useful concept and in its best form should be promulgated.
Patients with emergencies will typically go to the closest emergency room without consideration of the cost. Under this method. and sixty days of care including complications related to the appendicitis. In later conversations with his primary care physician.their budget. Moreover. by so doing the employed individual significantly lessens his or her current monthly premium. The price is the “sticker price” or average for appendectomies. For example a patient with obesity. However each emergency room would know its costs relative to others and this is where competition will be the most intense. hardly worth the trip but he consequently gives the hospital a less than 22 . the physician explains that if had he gone to a hospital thirty miles away the cost would have been $500 less and he would have received a $25 bonus. This information would be published and annually updated in a uniform format at an independent website. This covers the cost of the surgery. chronic back pain and hypertension has a routine appendectomy for appendicitis. not just the first dollars as in the high deductible plans. Ultimately the competition is for the patients but the effect is not so much that the patients shop for the best deal but that the providers compete against each other. It is our estimation that this competitive step will save an addition 20% in total healthcare costs. the hospital. the anesthesia. the number of employer insured people who are accepting higher deductible health insurance plan is increasing rapidly. when the patient receives the invoice. His card is swiped and there is a lump sum transfer of funds from his virtual account to the providers who have previously determined their competitive price. competitors prices and quality will be listed which will influence future elective decisions. At present. the collaboration envisioned by Accountable Care would leave the zero-sum arena and become cooperative and competitive because the doctors and hospitals would form their own alliances and effectively compete. The idea for a “budget” is to make all the dollars competitive. diabetes.
More importantly. the physician explains. the patient. back pain and hypertension. but more important is that nothing happens without a patient’s authorization. and the hospital come up with a competitive price and product agreeable to all. A problem here is the physician is the consultant. Likely the organization will be around primary care with specialty support. Since the outcomes of care are linked to all the providers. and hospital can all win. There must of course be some losers and some winners but you win by trying to win. expenditures and total projected healthcare costs compared to his peers and the population as a whole along with the amount of taxes which he has paid. An implicit theme running through the AC structure is that physicians have the knowledge and thus physicians should be managing patients. At the same time. Clearly organizations like AC are an improvement and nothing should happen without a physician’s order. The previous patient has a dynamic virtual account for which he receives a regular accounting of his expenses. the primary care doctor. and elimination of waste because other groups are doing the same. Physician’s orders are in the final sense subservient to the patient. Here the patient replaces the government or a corporation in transferring the funds and indirectly setting the price and to some degree his own tax rate. not the receiver of. ACOs are designed to address waste within the system but not address the system waste. Physicians do not control the patients. it is nearer the other way around. diabetes. Consequently he gives his back pain a longer trial of non-operative management but ultimately selects a competing hospital for his back surgery with excellent quality and at a substantial discount. doctors. On the other hand. not by trying to have someone else lose.perfect score on his evaluation (quality = evidence + outcomes + evaluations). Healthcare is ultimately the 23 . the back surgeon. innovation. the physical therapist. this will lead to a cooperative arrangement. the service. there are evidence-based and discretionary expenditures also influencing his bonus relative to his obesity.
We act responsibly or we are controlled by events which may include the deterioration of American medicine or possibly our economy. In either case. the patients. not the other way around. minimal cost and minimal complexity. essentially all healthcare reimbursements and consequences. Our proposal is less complex and more transparent than the present system. Tweaking an old broken system and expecting a new result is wishful thinking. except for self-paid concierge services. This will further erode the physician’s position as patient advocate. A new system must be designed. We believe that if we. 24 . In addition.patient’s responsibility. Regulation is the referee. We propose that foundation be used to develop a sustainable healthcare solution with equitable access. It levels the playing field. We know healthcare is based on respect for one another and responsibility. maximum quality. ACOs attempt to manage the patients back to health. we will succeed. The continued subsidies for sickness and central control will lead to the demise of AC and its obituary will read something like a Pickett’s Charge for managed care. After front loading the system with illness. Without personal accountability. We have two choices. it is going to be dramatic. healthcare will never control costs without limiting access. will ultimately follow the same path. the patients whose money it is in the first place. A walk through today’s complex environment inundates you with the artificial complexities of control. since most reimbursement follows Medicare’s lead. we are all patients. It is we. This is not an argument against regulation but it an argument against control. have control of the money and the information. who should control the system. Furthermore. There are going to be dramatic changes.
cbo. Sustainable Growth Rate Formula for Setting Medicare’s Physician Payment Rates: http://www.pdf 3. The Patient Protection and Affordable Care Act: http://www. CBO’s 2012 Long-Term Budget Outlook: http://www.gov/sites/default/files/cbofiles/attachments/06-05-LongTerm_Budget_Outlook_2.gov/fdsys/pkg/PLAW-111publ148/pdf/PLAW-111publ148.gpo.cbo. Spending specified by Congressman Paul Ryan evaluated by the CBO: http://cbo.aspx?id=11164 25 .pdf 2.org/WorkArea/DownloadAsset. Medicare DRG/RVU Summary: http://amcp.1.pdf 4.pdf 5.gov/sites/default/files/cbofiles/ftpdocs/75xx/doc7542/09-07-sgr-brief.gov/sites/default/files/cbofiles/attachments/03-20-Ryan_Specified_Paths_2.
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