I am not a health care expert, congressman or a brilliant inspirational president. I really have no political credentials. I graduated from MIT with expertise in engineering, innovation and economics. I worked in the defense industry researching, designing and building extraordinarily complex systems. I invest in technology companies. I have led several successful technology businesses. My primary lesson in dealing with systems, people and technology in complex environments is that nothing ever goes as planned. The best solution is normally not the one some expert divined. The most affordable solution is often the highest quality solution. The right solution results from market feedback rapidly inserted into a product or service. But really, what could I understand if I have not been on the cover of Time or Newsweek?
To fix Healthcare perhaps we should concentrate on some fundamental principles:
- Discourage bad behavior (pre-existing, tort, free rider, overweight)
- Encourage good behavior (wellness, cost innovation, direct pay, savings)
- Implement national strategies derived from successful state strategies (Beta test)
- If a third party is paying, doctors won't innovate to meet needs of the patient
- Innovation is the only way to truly reduce cost of care
- If people don't take care of themselves, it raises the cumulative cost of health care
There are many ideas and issues within the overall health care discussion, many misdirected:
Catastrophic Limit: We are all going to die. Some of us younger than others. Everyone, except those that die suddenly like my father, impose some level of high and predictable cost at the end of life. But no one who is young fears this cost. The power of compounding interest is the answer. If each of us puts a little money each year (say $100) into a common pool, over many years, there would be enough money to cover the few of us whose healthcare exceeds 100k. Setup as a mandatory investment vehicle, it would cover any cost of individual healthcare that exceeded 100K. Purchased as a 401k/IRA/HAS, insurance companies would manage it like they do an annuity, leveraging the stock market and other instruments to grow value. We could each chose to pay additional premium to lower the catastrophic limit to 50k, 20k, 10k or whatever.
Low Cost Transactions (HSA): All low cost high volume transactions (wellness visit) should be direct pay. Most doctors offices operate with 180-240 days of aging for receivables. That means there is a bunch of profit wasted in the payables process (i.e. interest on 500K of average receivables). Though direct pay seems like a burden (out of pocket), it eliminates the cost of oversight and receivables management. A transparent process at the front end (i.e. I know what my doctor visit costs) imposes proper price dynamic, currently perverted by third party pay.
High Cost of Healthcare: That we pay more for healthcare is irrelevant. We pay more for media content should we regulate revenue in that market? The U.S. market prefers to pay more than other countries for care because we like to eat at McDonalds. If you are over weight, have high blood pressure, etc. the insurance company should be able to charge more.
Pre Existing Condition: If someone goes off insurance or never has it, they should take responsibility for their pre-existing condition. The catastrophic insurance (govt plan) should impose no limitation on pre-existing condition, but it will only cover costs above say 50k-100K. Practically I think the market will overtime accept pre-existing conditions, it already has on some policies – basic concept is a business will offer a service (insurance) until marginal revenue = marginal cost, so why not collect on pre-existing conditions especially if patient has catastrophic care. Alternately there could again be a form of government re-insurance in which a portion of Medicare fee is put into a pre-existing condition re-insurance pool. Any insurance plan that eliminates a pre-existing condition test would have access to that pool. Fundamentally though, we need to use the market to motivate free riders to join a plan. Some plans offer retroactive discounts for wellness behavior – so if you have high blood pressure and reduce it, you get paid back the premium delta for the last couple of years from a normal vs. high risk plan. For more serious pre-existing conditions the reinsurance pool is a logical way to cover people without making one insurance company over the other carry the cost.
Health Savings Accounts: There should be a tax code preference offered to forms of HSA, in which consumers pay in pre tax to a savings account (IRA like) to help eliminate front end costs. A Health Savings account could be used for wellness efforts and all healthcare co-pays below deductible cap. HSAs savings could pay the premium while unemployed, eliminating coverage loss.
Universal coverage: I am not a lawyer, but it seems that if Federal Law mandates universal coverage, that the Constitution then requires universal application/availability to all persons (not just citizens). That means anyone in the United States, legal or not, is afforded health care. This creates a range of weird incentives that opens a Pandora’s box driving costs out of control. Other countries with universal coverage do not have the concept that citizens and non-citizens are equally protected under the Constitution.
DNR: Just like someone can sign a Do Not Resuscitate order, they could sign a “Do Not Save” order. The opt out would basically say, “I understand I will not get care unless I can prove I have means to pay”. People could self insure and certify ahead of time, perhaps validated through some credit worthiness service. If you no longer are credit worthy then perhaps you fall under a mandate penalty provision given your imposed burden on society.
Tort: I don’t love the lawsuits, but it seems freedom of speech trumps tort reform. In an effort to reduce the cost of one's policy, a patient should be allowed to opt out of tort, or allow form of arbitration, sort of like how workman’s comp limit claims. As you get a discount on homeowners insurance if you have a burglar alarm, you will get a premium discount if you accept a tort limitation clause.
Taxes: Do not introduce new special taxes on those that innovate (Drug companies, device manufactures, etc). We need the innovation to improve quality/cost of care. Either Eliminate deductibility of corporate plans, or permit deductibility of all health care plans (i.e. self employed). Maybe only allow tax deductibility for elements of a basic plan for plan costs associated with wellness, insurance for first 100K, retroactively pays back portion of premium for reducing weight, or motivates direct pay (i.e. the portion of an insurance plan that allows third party pay for initial costs below $5000 would be taxable).
Poor: For people that cannot afford healthcare, they should be put on a HSA. The deductible portion should be paid in via welfare with some form of lifetime cap on govt. funded portion of savings account (i.e. 50K). Participants should be means tested, and their portion of payment related to their salary. Perhaps work this a bit like the micro loans in India/Africa in which a portion of the money paid into the savings account is used to pay premiums.
Corporations: I liked getting insurance when I was in a big company. It would be nice if they could take care of my car and house insurance. But really corporations don’t add a lot of value to the whole health care system. Its not their “Core” mission. If your primary source of health care is the corporation, then you are also more locked in to the corporation. If you want to take that cool job in a startup, corporate healthcare tugs at you and holds you in their clutches. Government insurance rules like “More than 50 employee” creates odd incentives for business that have nothing to do with making product. Frankly, we each should take care of our own health care. As we switch jobs, we don’t need to switch health care providers. If corporations get a deduction buying health care for us, individuals should be allowed to deduct the cost. If the system were allowed to change, corporations could easily gross up our salary by the current amount they pay, or offer to pay your insurance while you work for them. When you leave, an HSA should permit use of your “Savings Account” to pay the premium if you are laid off or in transition. Eliminating corporate involvement removes a bunch of transaction costs and keeps your employer out of your personal affairs. I would not ban corporate programs, just remove the incentives.
Innovation: Innovation occurs when there is a market for early adopters. The best innovations (balance of technology and price) are always best incubated through market pressures. The public is well served by Judge Green’s decision (Telco ruling in 1980). Universal coverage forces universal solutions (equal to all). The American Care Act substantially constrains the right of end-users to buy what they want. Oddly that constraint is a bit like antitrust. If Government wants to apply the commerce clause, it seems government needs to stay in the regulator role rather than “I am also in the services” role. It also seems government should not take action that inhibits federalism (in as much as federalism is a principle of differential approaches to governance).
Conclusion: In Summary….
- Everything above $100K is covered by a universal mandated Catastrophic/Re-insurance plan administered or authorized by government. Private plans could be made compliant under the government plan, to act as agent on governments behalf.
- Private insurance plans for everything below $100K
- Government pays for premium (COOP, Private or Govt) if person is on Public assistance
- Do Not Save – DNS: anyone who opts out of private must sign a DNS order or pay a penalty
For innovation to thrive, government needs to be on the sideline. We cant have innovation if changes to care require congressional approval. Scaling the current bad system will locks in costs, opening up innovation reduces cost and expands availability in a fashion that meets each of our unique needs.