Health reform suggestions

Next week, I have been asked to speak to a local Republican group on health reform. I have some ideas, as anyone who has read this blog knows, and will try to give some background, as well. What Obama and the Democrats are proposing will not work and will result in titanic deficits, rationing and probably rebellion by the public even more intense than the preview we got last month. What to do then ?

1. We must use market-style incentives to reduce moral hazard and encourage practical limits on what people want from the system. One way to do that is to separate insurance from pre-paid care. What we now call health insurance is a combination of the two. That is one reason why it is too expensive. People are willing to pay out of pocket for routine medical expenses, up to a reasonable limit. Let them do so.

2. Some people like HMOs, so let them join an HMO if that is what they want.

3. The French system asks the patient to pay the doctor, or the laboratory, first, then get reimbursed by the health plan. That is a way to reduce moral hazard.

4. Let the health plans (notice the plural) set a fee schedule and stick to it. That fee schedule is what the plan pays, not necessarily what the doctor is paid. If the patient wants to see a special doctor, pay more but expect only to be reimbursed the set amount. This introduces some negotiation between doctor and patient and some realism on what health care costs.

5. Fees and charges have to be public information, preferably posted in the waiting room or on the internet. Today, they are secret because insurance companies and Medicare compete to get discounts from doctors and hospitals. This locks in a medical fee inflation and keeps the “retail” charges unrealistically high.

6. What about the poor ? Gary Becker got a Nobel Prize for demonstrating that the poor are also capable of responding to incentives. Welfare Reform should have established that as fact. Many people are poor because they are young and are still getting educated. Their health costs are very low but they do run the risk of injury or occasional illness that needs to be treated. Many of the rest of the poor have behavioral problems or lack of education, or both, that will keep them poor most of their lives. They also, because of these behavioral problems, have higher medical costs. They should have access to community clinics and city hospitals that used to provide good care but have been neglected since 1965. Lyndon Johnson was going to provide “mainstream” care to the poor and so the big public hospitals were excluded from the Medicaid program and have suffered as they were overwhelmed by illegal aliens. The “mainstream care” was always a fraud because the payment was poor and the paperwork onerous. As a result, Medicaid is full of fraud and abuse. We need to provide medical care for these people and they probably cannot pay for most of it. Public clinics and public hospitals are the answer. How to staff them ? Too many young doctors emerge from years of training heavily in debt. This is an incentive to seek higher paying specialties and avoid the poor. Why not make a deal ? If young physicians will accept the basic fee schedule as full payment, or work on salary in public clinics and hospitals, forgive the medical school loans. It is already a popular idea and has worked for the military, which offers tuition payment for a commitment to serve as a medical officer. The objection to this sort of solution will be that it establishes a “Two tier” system. So be it.

7. What about employer-based insurance ? Here, I advocate some sort of coop, not a government coop because I don’t trust government, but a coop that is run by a board made up of members, providers and employers if it is work connected. It could be funded by payroll deductions but the members would not be employees of a single company. Maybe it would be organized along vocational lines such as engineers or pilots or unions. There should also be an equality of tax incentives. Either make all health insurance taxable or limit the deduction and make it available to all.

8. What about tort reform ? Some of this is a way to needle Democrats who are so dependent on trial lawyers. There is defensive medicine and there is a way to limit liability. California did a good job of this in 1975 with MICRA. A national tort reform could do worse than copy MICRA. When I began practice in 1972, my malpractice premiums were $3500 per year. Two years later, the premium went to $35,000 per year and my partner and I discovered that our insurance carrier was insolvent. We practiced without insurance for the next three years. Eventually, doctors formed a coop in which everyone agreed to be responsible for losses incurred by lawsuits against members of the coop. We each put up $20,000 to establish a trust fund and the theory was that the interest on the trust fund would be used to pay expenses and claims. We were also assessed each year with our assessment based on the estimated risk for our specialty. As general surgeons, we each paid about $6,000 per year. When I retired from practice 25 years later, I got the $20,000 back as a refund.

I’d say that speaks well for the system. There is one caveat, though. Because we were a coop and were personally guaranteeing the losses, we were allowed to exclude applicants with no explanation. When a new applicant submitted the paperwork, letters were sent to members asking if we had any objection to this doctor joining our coop. I personally submitted objections to a couple of surgeons that I knew had problems. They were not admitted. Doing this on a national basis would be more complicated. Those rejected doctors got insurance from somebody. Caveat Emptor.

Anyway, those are a few thoughts about where to go. This is a problem with a number of solutions. They are incremental and do not require the radical restructuring proposed by the Democrats.

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5 Responses to “Health reform suggestions”

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  2. I tweeted this post, lots of good ideas.

    Making better use of community clinics is something I’d been mulling, because I’ve written about them a lot. San Diego County has a good network that could be a template for the country. It has the added virtue of localizing health care, instead of creating a new federal bureaucracy.

  3. I fear that the administration and Congress will try to outlaw private practice. That is what killed doctors’ interest in Hillarycare. What I see happening is a parallel development of private care outside whatever system they cobble together. The market is the sum total of the wisdom of the people. The elites seem to have lost the sense of what the people want.

    My talk is Thursday night in Mission Viejo to the local Republican club. It will be interesting to see what the reaction is. My ideas are definitely not the conventional Republican or libertarian theme. I expect a lot of questions.

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