Healthcare Solved in Seven Easy Steps!

by Devin

Everyone wants to solve the healthcare problem in America… Or do they? Politicians have been debating this issue for decades and all we have to show for it is one of the most dysfunctional healthcare systems in the world. We Americans used to have a healthcare system that was the envy of the world. Now we have a giant mess that any and every doctor who can afford to retire from is getting out of as fast as he or she can.

Thankfully, we still have enough young people still entering medical schools (without a clue of what they are getting themselves into) that the total number of physicians nationwide is expected to continue to grow; however, the American Association of Medical Colleges is predicting a shortfall by 2025 of somewhere between 40,000 and 90,000 doctors, depending upon the scenario that plays out between now and then. The Affordable Care Act, otherwise affectionately known as “Obamacare,” is only expected to increase demand for medical services by 2 percent over that time period.

As I previously described in my post titled, “Healthcare – the dirty little secret,” I explained how in the past the skyrocketing cost of medical care and the problem of uninsured patients didn’t exist. In this post, I’m going to hand you, free of charge, the solutions to fix them. Everything I describe in this blogpost assumes that Obamacare has been repealed in its entirety. I hope you enjoy reading this as much as I enjoyed writing it!

Problem 1: The uninsured

For the most part, I’ve already addressed this one extensively in my prior post as mentioned above. Let’s just say that if we were to put a little more trust and faith in the honesty of the majority of doctors and other healthcare providers, plus a requirement for full backup documentation in the form of medical records and accounting books, we could change the tax code back to its pre-LBJ form allowing doctors and other healthcare providers to write off uncollected patient debts on their taxes. (Note: This is already allowed for medical businesses that use the accrual method of accounting; however, you must have already paid taxes on the uncollected debts, so that when taking the deduction, you are really only going back to the pre-tax situation. You aren’t actually getting a deduction against collected revenues. Thus, there is no way to provide enough indigent care that no taxes are owed, or even reduced.)

Problem 2: medical malpractice

This one has been heavily debated and fought over by trial lawyers and liberals who hope to one day cash-in on the big medical malpractice suit and retire to the Bahamas where their money is safe from the American tax system. There have been many proposed schemes, some of them actually implemented, to avoid the problem of baseless malpractice lawsuits that have no merit; however, these schemes are nothing more than cleverly designed ways to allow lawyers and poor people to continue to pursue the big payoff. The State of New Mexico has one that I have witnessed in action firsthand.

The way it works (or is supposed to work) is that all medical malpractice suits must first be heard by a specially appointed panel that determines whether or not each case has sufficient merit to warrant being taken to court. After hearing both sides of each case, the panel makes its recommendation. Unfortunately, that is all that it is; a recommendation. The case can still be brought before a court even if the panel determines it has no merit. And I’ve seen it happen. Although I have not heard the full explanation as to why the panel can only make a recommendation, my gut tells me that the trial lawyer lobby successfully argued before their friends (and themselves) in the State Legislature that the only way for the merits of a case to be truly verified is through a full trial. In any case, as you can see, it’s a non-system.

The reason this is an issue at all is because many doctors (depending upon their speciality) are currently paying exorbitant rates for malpractice insurance. Since the money to pay these high rates must come from somewhere, the doctors have to charge enough for their services to cover it, plus enough to pay their staff and other operating expenses, and, at the end of the day, actually be able to make an income for themselves. Enough income to make it worth staying in business as a doctor rather than finding some other means of making a living. And in case you aren’t aware of how much doctors are paying for this insurance, feel free to take a look here. Check out the rates being paid by OB/GYNs in Nevada! Insane! For a much more detailed look at this issue, here is an exhaustive resource.

So here we are, back to square one. And the well-known, tried and true solution is to cap non-economic medical malpractice jury awards at something reasonable and bar attorneys from sharing in any percentage of the award. Attorneys should only be paid for the hours they worked. No bonus for winning. You work, you get paid for your time, end of story. Patients with legitimate cases and thus have a high probability of success will attract good attorneys because even if the plaintiffs are poor, they will be able to pay the bill from their award and good attorneys will win when the case is legitimate. In other words, eliminate the current multimillion dollar lottery for trial lawyers called the medical malpractice industrial complex in this country. (Note: If awards are capped, attorneys could alternatively be limited to a percentage of the award, but disallowed from also charging for time and expenses on top of the award percentage. As it currently stands where medical malpractice tort reform has not been enacted, attorneys are generally allowed to charge for their time and expenses plus take a percentage, typically one-third, of the award. This sometimes results in the plaintiff receiving little or nothing, and in some cases, finding themselves in debt after the award!)

And finally, lest you be concerned that bad doctors would never be driven out of practice under such a solution, we could pass a three strikes law that automatically suspends a doctor’s medical license if he or she is successfully sued for malpractice three times within a 10 year period.

Problem 3: delayed payment by health insurance companies

This problem is really only known about by healthcare professionals and hospitals. You may have noticed that you typically receive an explanation of benefits from your insurance company several months after having received the medical care described in the EOB. This is because there isn’t a health insurance company out there that pays in anything like a reasonable amount of time. Most people would agree that 30 days is a reasonable period of time to expect payment. In the health insurance industry, you’re lucky if the bill is paid within 90 days. Furthermore, some insurance companies are expert at giving doctors the runaround, claiming they never saw the claim, there was an error in the claim, et cetera, et cetera, et cetera. In fact, a friend of mine briefly worked for Blue Cross Blue Shield as a claims processor and she told me that they employ an army of people whose sole job is to reject claims for as long as possible! This results in doctors having to pay someone, often several someones depending upon the size of the practice, full-time, to pursue payment for insurance claims. The cost of the additional staff gets passed on to the patients, as it must be because money does not grow on trees.

The solution here is to require, by law, health insurance companies to settle claims within 24 hours of receipt. This would vastly reduce the number of people employed by doctors whose sole job is to get the insurance companies to pay and employed by the insurance companies whose sole job is to find ways to avoid or delay payment. Elimination of these costs would substantially reduce the cost of health care in the U.S. The money saved could and would be better spent on products and services that would re-employ these people elsewhere.

Problem 4: Limited competition in the health insurance market

It is a well-known and discussed fact that health insurance companies are not allowed to sell health insurance across state lines. Ever wonder why? While I haven’t spent even one minute researching the answer to this question, I think it is pretty obvious that the insurance lobby was very successful in protecting its interests by getting this gem of a law passed. I imagine that it was argued that if they had to face much competition, they would be unable stay in business, or some such BS. I mean, who wouldn’t want to limit competition in their own market???

The solution here is, like for Problem 3, obvious: allow health insurance companies to sell insurance across state lines and allow individuals to buy insurance from any health insurance company in the world. This would create real competition among health insurance companies by forcing them to increase coverage and drive down costs and premiums to win business. A simple market solution easily implemented. If necessary, state governments could create health insurance company oversight panels to give patients a place to go to file complaints and seek recourse against their insurance company if their insurance company fails to meet its obligations. The government could also set up a website that compares heath insurance policies and costs as well as allows individuals to rate and provide reviews of their insurers. This last idea could easily and probably far more successfully be set up by a private company (no need for Healthcare.gov or government run healthcare exchanges), which could conceivably even be a non-profit.

Another thing that could be done here is to require health insurance companies to write their policies in such a way as to keep them greatly simplified and following a rigid organizational format that makes it very easy for consumers to compare competing policies line by line.

The most important thing is to modify existing laws, or eliminate laws and regulations, that inhibit free market competition. Competition equals lower costs and better service.

Problem 5: Lack of tax incentives to buy health insurance / medical expenses not fully tax deductible

Allow everyone to deduct their health insurance premiums and health care expenses from their federal taxes. There could be a cap on the deductible amount for premiums if necessary to prevent abuse (so called Cadillac plans only affordable by the wealthy). Allow anyone to deduct the cost of health insurance for anyone else, so long as they pay for it. For example, if I were wealthy and needed a tax deduction, I could pay for someone else’s health insurance and deduct the full amount from my adjusted gross income on my federal taxes. This would create an incentive for parents to insure their kids even if their kids elect not to insure themselves, thus increasing the number of young, healthy people with insurance that are helping to pay for the older, less healthy people who need insurance more. At the age of 21, or as soon as a child is no longer being claimed as a dependent by a parent or guardian (whichever comes first), children may no longer be insured through their parents’ insurance policy.

If the federal government is so bent on making young people get insurance, make parents liable for their children’s medical expenses should their children not be able to pay their medical bills up until they turn 21. Change bankruptcy regulations so that people cannot declare bankruptcy just because they chose to spend their money on something besides health insurance.

problem 6: the federal government middleman

I know that this is going to sound absolutely crazy to some, because Medicare and Medicaid are considered by so many as absolutely and critically indispensable, but hear me out on this one. They are NOT a necessity and there is a better way.

The goal is to eliminate Medicare and Medicaid and replace them with a refundable tax credit that could be used to pay for private health insurance. To receive the credit, you have to be able to present proof that you bought health insurance. Your plan does not have to be “qualified” by the government. You read the policy, you buy it, you live with it. If you don’t understand it, find another one you can understand, or go to the aforementioned website or panel for information that can help you find the plan that is right for you. The government should cover the additional cost of pre-existing conditions. Forcing insurance companies to insure people with pre-existing conditions will simply encourage people to wait until they have a medical condition before buying insurance, which defeats the whole purpose of insurance.

There really is no need for these government programs. None. Everything they do can be done better by the private sector if it is allowed to freely compete. I’m convinced that the insurance lobby was responsible for the creation and expansion of these two programs. Obviously, the health insurance industry wants to insure young, healthy people and does not want to insure old, not-so-healthy people. Just had another idea. Suppose each elderly person who buys a private policy is (see solution for Problem 5 above) encouraged to also buy a policy for a young person. They get to deduct the expense of the young person’s insurance premiums and get a refundable tax credit for their own policy. Perfect. Now the young person’s premiums help defray the cost of the elderly person’s healthcare.

problem 7: too big to fail

This is a very important piece of the puzzle. Companies like Blue Cross Blue Shield, Aetna, and a few others have gotten so large that they dominate the market and make it impossible for smaller competitors to start up and offer better policies at better prices. There’s too much potential for collusion between the insurance companies when there are so few. Eliminate the exemption from anti-trust law that the health insurance companies now enjoy. (I bet you didn’t know they had that, did you?) There is absolutely no logical reason for this exemption. Break up the largest health insurance companies if they hold monopolies in any given markets.

Also, outlaw lobbying by the health insurance industry. Period. I’m not generally against lobbying, per se, but this is one lobby that has proven itself to be utterly untrustworthy. It should be banned.

summary

If these seven problems were addressed as I have suggested in this blogpost, wholesale, with very little modification, so that the purpose of each one is achieved, there can be no doubt that the United States of America’s best days in health care would be ahead of us. We would once again rise to the top in high quality, low cost health care where everyone has the opportunity to be covered by insurance at reasonable prices. Doctors could thrive in private practices. Patients who are victims of REAL medical malpractice could be appropriately compensated and frivolous lawsuits would disappear. Bad doctors would be forced to find some other way to make a living. The government would stay completely out of the treatment decisions made between doctors and their patients.

I should add one more thing to this post because it bears being brought to everyone’s attention. There is a situation in the way most health insurance policies work in that there is a disconnect between the user and the payer. The user spends the payer’s money and thus pays little or no consequences for seeing doctors for even the most mundane issues. Most current policies address this with co-pays and deductibles, but there is already a vastly better way to fix this problem.

We now have in this country available to us now, although many employers do not yet offer it as an option, high deductible plans coupled with a Health Savings Account (HSA). The way these work is your employer pays a very low premium for each employee’s health insurance and puts a healthy chunk of the cost savings into an HSA for each employee each year, something like 1,000 to 2,000 dollars. An HSA is specially designed to allow the owner of the account (the employee) to roll over unused portions into subsequent years, thus the account has the ability to accrue a balance if the money is not entirely spent in any given year. The deductible is usually something like 8,000 dollars; however, if you are young and healthy, you can save up that much in your HSA in just a few years. Furthermore, when you reach retirement age, you can spend this money on non-medical things. AND, as your balance grows, you can manage it like a retirement account, even putting it into mutual funds if you so choose.

You have an incentive to not go to the doctor every time you get a cold. You have an incentive to maintain your health. You have an incentive to save that money. But if you ever really need to see a doctor, you will most likely, unless you have a catastrophic illness or accident, be able to pay for it in full with money from the HSA, thus spending no money out of your own pocket.

Obviously, there is some up front risk involved with these plans and odds are there will be some people who lose the bet and wind up paying a few thousand dollars out of their own pocket; however, they are still covered for the rest of the expenses and nobody loses their house and/or retirement savings over it.

If everyone had a plan like this, that might just be all it takes to solve the entire health care problem in America.

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