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Obamacare — I again tell you, Obamacare was falsely presented by President Obama, when he said in effect, “I keep asking Republicans for their ideas, but they don’t have any, so we are left with mine.” Unlike Social Security, The Civil Rights Act, and every other huge piece of social legislation Congress has ever passed, they were all passed on a huge bipartisan basis; both Republicans and Democrats signed on in huge majorities. Obamacare was different, being passed without a single Republican vote. On healthcare, various Republicans had many ideas, but not speaking with one voice, Obama used the divide and conquer technique and easily drowned out their voices. Then, as everyone knows, he sold “his bill of goods” with many false promises, such as, “if you like your… (whatever, just fill in the blanks), you can keep your (whatever).” So,he now converted a whole industry, valued at 12 to 15% of the economy, with many insufficiencies and problems, to one now in a real mess. So, what could have been done?
I used to believe it would be easy to legislate Obamacare out of existence, but in the spring of 2017 with President Trump in the White House and Republicans minimally in the majority in the Senate, attempts to end Obamacare failed. But amazingly, they were able to end the mandate which previously forced all to either join Obamacare or pay a fine. With Obamacare premiums skyrocketing on top of low popularity, ending the un-American forced-mandate spells the eventual demise of Obamacare.
Polls showed that the majority of Americans were deeply unhappy with Obamacare. Perhaps the 10 million or so previously uninsured became happier with Obamacare. However, Obamacare was only part of the healthcare problem that needed fixing. Medicare is destined to go bankrupt in the future, and Medicaid, the federal/state health program for the indigent, needs to be adjusted as well. Finally, the VA program, with perpetual scandals and disasters, can no longer be tolerated. America is looking for answers; here is an integrated approach to cover replacing Obamacare, fixing Medicare and Medicaid, and fixing the VA.
Here’s how I see what will replace Obamacare. While the government and insurance companies are still in charge, it was ludicrous to think that centralized planning of the healthcare by the government could ever make decisions for the millions and keep them happy; only the consumer knows what he/she needs and can afford. So, let’s accept the fact that government will never get it right. The first order of business is to put the consumer in charge. Let the consumer make tax-free contributions to a Health Savings Account (HSA) which is currently available (up to $3,350 for an individual or $6,750 for families), but increase the amount. The HSA rules say that the contributions stay in an account similar to a bank checking account, plus the account should purchase a high-deductible health insurance policy to cover the unusual but very high potential expense, and money not spent in the year can carry over to subsequent years. For those receiving their benefit from their employer, let the employer contribute to the worker’s HSA. Now, let the payment vehicle between the consumer and the provider be the HSA.
Medicare —This 1965 program was established without any cost-control mechanism, and costs immediately and forever ballooned. All experts agree that Medicare will eventually go bankrupt. Today it is not politically possible to change the Medicare rules overnight for all Medicare recipients, so I suggest offering to them the choice of either receiving their reimbursements as before, or electing the option of receiving vouchers to then forward on to their HSA, which would then pay their healthcare bill. So, no change, or make the change to cover their health expenses via a voucher/HSA (and associated high-deductible insurance policy), but design the terms so that if they change over, this would be a little more advantageous to them. Then set a date in the future when all reimbursement will be by voucher. Medicare already has all the recipient data, so their actuaries could easily make the necessary calculations.
Don’t believe that the Medicare recipient is getting a free ride, as he/she must pay a premium, typically subtracted from the Social Security check. This will be in the range of $1,260 at age 75. A supplement to pay what Medicare doesn’t cover may cost $3,000 out-of-pocket (which becomes an incentive to encourage the doctor to accept the patient, which is becoming more tenuous or uncertain as more and more doctors refuse to accept new Medicare patients). Then there’s the Part D Medicare premium for prescription drugs which will run about $2,000, and on top of this, the 75-year-old may well pay another $2,000 out-of-pocket for his/her prescriptions. So, while government’s Medicare at some point will become insolvent, the Medicare recipient still has quite a burden too, just to make the point that the status quo now is just not that good; reform of this program certainly has the potential to benefit both the government (really, the taxpayer) and the Medicare recipient.
Medicaid —This is the federal/state program for the impoverished. This most economic fragile group could be best served through 50 separate state programs; the state and local governments being the closest to the recipients, and thus most sensitive to their needs. Give federal block grants to the states and let them experiment how best to serve their people.
The 1965 law creating Medicare carried a one-paragraph item to pay for poor pregnant mothers and their children which was called Medicaid. It since evolved into a huge federal/state paid for healthcare system for the poor, or not so poor, depending upon where each state set the income level, and many states placed it above the federal poverty line. It now has grown so large as to be either the second highest budget item of each state (only behind the state’s university system) or the highest, and potentially large enough to threaten to bankrupt each state. Federally, last year it was $544.5 billion, the largest federal spending program other than defense, and now this year (for the first time),it’slarger than defense and bigger than both Social Security and Medicare, and growing faster than either of them. As of May 2018, Medicaid spending, which the S&P points out, is forecast to increase by 66%—or $958billion—from 2016 to 2025. That is almost a trillion dollars! Medicaid enrollment is up 25% since Obamacare, even though 19 states have turned down the Federal offer to expand. Texas had 4.6 million people covered by Medicaid as of last July. If Texas had accepted the expansion of Medicaid, another 1.2 million people would be eligible, at an added federal expense estimated at $10 billion a year. Besides estimated $20 billion a year of improper payments, there is also a tax scam built into the law and regulations for another $20 billion; a state passes a bill taxing health-care providers, hospitals, and nursing homes. Then, the state can use the revenues to increase its spending on Medicaid services. When the federal government notes the increased spending, it increases its payments to providers. Because the federal share of Medicaid spending is always more than 50%, the new federal money allows providers to pay state tax with money left over.
As I’ve already said, I believe Medicaid would be best approached separately by each of the 50states by receiving block grants. States would get some fixed pot of money annually, determined by how people are enrolled. The pots might be expensive in the early years, but states would become accountable for marginal per capita spending growth over time. Governors can be assuaged by ending Medicaid’s command-and-control regulatory model, freeing them to use new tools to control costs. How about a temporary enrollment freeze for new Medicaid? No new applications for the expansion would be approved, and gradually enrollment would fall as people naturally move up the income ladder and qualify out. This will all take presidential leadership to defuse the tensions and resolve the policy debates. Let the states experiment with individual approaches to best medically serving their indigent and economically disadvantaged people. I would offer one caveat here; we have had a poor history in the U.S. relating to state versus federal issues, where without uniformity, some states have neglected to offer what most people consider essential services. The Civil Rights Act corrected some terrible abuses, but some still remain. Women’s health issues would be a case in point today. With the caveat that Medicaid needs to have some basic uniform parameters, I still favor block grants to states
and let’s see what 50 state experiments can do to corral costs and better serve recipients.
Fewer and fewer physicians are accepting Medicaid patients today, and it is obvious that this trend must be reversed. Address pay scales. Current pay scales are so poor compared with reimbursement for treating other classes of patients, including what Medicare pays, not to mention those with conventional insurance. Then address efficiency. Put in place incentives for development of streamlined clinics, overseen by physicians but also staffed with para-medicals with varied specialty training geared to cover patients with chronic problems such as diabetes, high blood pressure, heart problems, arthritis, and so forth, and often with patients having multiple chronic disorders. Treating those with chronic disorders is where the real expense in healthcare is. Then see that the overseeing physicians and the para-medicals are organized as a team, and using a common communication system so everyone on the team knows what everyone else is doing. With that said, I’m not talking here about an electronic medical record which Obama forced on physicians, and which takes them more time to write than it did to see the patient. In other words, a model opposite of what so frequently occurs today, with the indigent seeking care at the hospital’s emergency department.
On the subject of chronic disorders, I think it well to enumerate what that term means. It would be better labeled as the increasing complexity of a person’s medical care as they age, which might be called a “health maintenance condition.” As we age, more and more abnormalities become apparent. Health insurance is age-adjusted and becomes more expensive for the older population. For example, a 75-year-old might have high blood pressure, a sun-induced skin cancer or two, and possibly glaucoma. Then there’s the glasses, hearing aids, and dental work. The annual tab is a far cry from the 30-year-old who most likely has no maladies.
The present system of states ever increasing eligibility standards and thereby increasing the numbers of Medicaid recipients, in tangent with a terrible doctor pay scale only ensures state bankruptcy and no doctor will be left willing to treat the poor and medically needy. Is that anyway for the rich and prosperous United States of America to treat so many disadvantaged citizens? We can do better!
Veterans Health Administration — The long waiting list for veterans at the VA should be the lastnail-in-the-coffin of this failed institution. It cannot be fixed. Again, centralized planning just doesn’t work. The most recent firestorm impelled Congress to give vets the choice to go to private hospitals if they failed at the VA, (with a lot of restrictions), but why not give all Vets vouchers to pay for private healthcare in the first place, and just abandon VA hospitals for routine care altogether? As with Medicare, the home office has all the data. It would be just the movement of conventional funds to the individual voucher payments. How have all vets with no restrictions became VA-eligible when it started for those having served in wartime and who were then impoverished (and, as mentioned in Chapter 16, the government couldn’t challenge a vet’s declaration of poverty) becomes a testament to creeping socialism permeating throughout our country. I repeat myself; the VA’s mess is beyond repair. Just close it down and give the vets a first-rate system to best serve their needs. I would say that the VA does have fine specialty clinics for war-related injuries like amputations and follow-up care, brain injuries from explosions, etc., but why should they be trying to cover traditional health issues that could be handled more efficiently and cheaply in all communities throughout the land if done privately? Then there is the tragedy of suicides, mental health disorders, and drug abuse. I don’t believe the VA has performed with distinction in these areas. How about soliciting ideas from the medical schools and holding debates on the best means of addressing these complicated problems?
In conjunction with converting healthcare to a consumer-driven model, there are other issues that must also be addressed: a medical shopping list that consumers can understand, cost-accounting for medical procedures and services, and lack of bundling of charges.
There must be an easily understood medical shopping list for consumers —Converting the payment side of Obamacare, Medicare, and the VA system from third parties to the consumer is only half the battle, the other half is encouraging the development of a rational pricing system for the consumer that is both visible and understandable. Recipients have been kept out of the loop by government and insurance companies making decisions for them. The consumers, without skininthegame, were able to get services paid for by third parties, but with no concern over price. Was it any wonder that costs exploded? This has to end. Only the consumers can pick and choose what is best for them at a price they can afford.
The second order of business is to give these new consumers shopping lists they can understand. The latest ICD-9 Coding system is about 10,000 entries long. Not only is that list too long for a medical novice to wade through, but the entries are also too arcane to be understood by the layperson. Let entrepreneurs (or software companies—Google, Apple, IBM, Microsoft, etc.) develop transparent fee schedules for consumers that an average person can understand, that reflect actual costs without hidden subsidies and artificial groupings, and without invisible pricing regimes negotiated between government and hospitals. Ever wonder what’s going on if you’ve been hospitalized, and months after discharge, you get a bill that says you ran up charges of $33,000, yetMedicare settled for $20,000, and you owe nothing? You have no way of knowing what’s really going on. (And what happens to the poor guy without Medicare or insurance?) So, end government’s incomprehensible coding system. Only the competitive marketplace can do this. Of course, there will always be a place for insurance companies, which will then be needed to offer products such as high deductible health plans to HSAs.
I need to expand the discussion of subsidies, hidden agendas, and complexities obfuscating medical costs which make medical billing impossible to understand, thus making comparison shopping also impossible. I’ll divide this into two parts; the lack of cost-accounting, and the lack of bundling charges.
First, the lack of cost accounting. Let me explain by giving you two examples, relating to CAT Scan or CT charges, and laboratory charges for analyzing blood samples.
The CAT Scannerwas invented in 1973. Like penicillin, it was immediately obvious that it was revolutionary in usefulness, and therefore every medical facility wanted one overnight. As a radiologist, I pleaded with the hospital I was associated with to buy one, but they feared the unknown and declined. I decided to forge ahead and bought my own, which went into service in 1980. There was no history of charges and expenses, so I developed my own fee schedule from scratch and designed it to break even, performing 3-5 scanning exams per day. After two years, the hospital realized that they missed out on a real moneymaker, and took over my CT department. Over time, machines were periodically replaced, and of course upgraded. When I retired in 1998, we were doing 35 CT patients per day, at $1,000 hospital charge for each patient, six days per week. I went back and tried to break out costs, including the machine, space, expendables, and with two full-time equivalent technicians. I don’t recall the exact numbers I came up with, but the profit was unconscionable; in the millions. I was told the hospital charged a lot for the radiology department to make up for “selling” nursing service at a loss. Fine, but was anyone concerned about the outpatient who didn’t need a hospital room at a discount?
Then there was the lab. When I trained, most blood samples had a chemical analysis done by a lab technologist, who mixed blood with various chemical reagents in a test tube. Resulting reactions then might turn a certain color that could then be measured in a machine. This involved a lot of labor. Then technology advanced and tiny samples of blood were fed into computerized devices that magically spat out the numbers, and then many different blood tests could be performed on just one tiny blood sample. Costs for each test plummeted like in an order of $100 down to 10 cents. But did the hospital pass on these savings? Not at my hospital.
I’ve only given two examples of whe
re high charges occurred in my experience, but know that this probably is going on throughout all the departments within a medical center. Why haven’t Medicare, patients, the news media, various consumer groups, or think tanks demanded that health providers produce cost accounting numbers to justify their charges? Did the complexity intimidate them? Most likely, no one could figure out where to start. Any attempt to understand faced overwhelming complexity.
Bundling — Now let me switch gears to a story I read years ago in a business magazine. This is about bundling charges; that is, a final product being offered for sale at one total price, instead of the consumer having to make multiple choices, and each choice coming at a separate price. During the period when Detroit was being savagely out-competed by Japanese car manufacturers, some thoughtful analyst in Japan was trying to figure out how to successfully compete in U.S. truck sales. U.S. trucks could be bought in many different sizes. The buyer then had to choose among various engine sizes, then pick out a transmission from many choices, and on and on. Every component had a unique price. To say the buying experience was confusing is to understate the situation. Along came this Japanese truck company, who offered three sizes; large, medium, and small, and each had only limited choices. And each truck package came with one final, total price, so the buyer didn’t have to add up all kinds of different prices to arrive at what the final bill would be. The bottom line was that the U.S. shopper without confusion could easily pick out his truck, and Japanese truck sales ballooned. Now try to carry over this idea to the healthcare area. Think for example, of the patient newly diagnosed with breast cancer. She needs a bone scan, a liver scan, a chest x-ray, some blood work, and so forth. How about one of our software companies putting together a package all for one price?