A Lesson from History

Humans have always had a desire to fly. For centuries man developed ornithopters, machines attached to our arms like wings that beat harder and faster in an attempt to fly like a bird. No matter how much this design was refined, they could not produce enough lift because of the density of man. Consequently, flight was never possible with this model.

In 1891, Otto Lilienthal, an innovative German engineer, realized that an entirely new design was needed. So he built an aircraft that soared like an eagle, instead of flapping like most birds. In doing so, Mr. Lilienthal produced the first glider, which ultimately led to modern flight.

Our American model for healthcare financing is wrong

The problem with healthcare financing is that, just like the ornithopter, we are trying to flap our wings faster and force the wrong model to work. We in SIMPD truly believe that leaders in the healthcare insurance industry are sincere in their efforts to serve their customers and be financially responsible. Unfortunately for them, they are fighting a losing battle. We have a double digit annual rise in insurance premiums, frustrated patients, and doctors telling their children not to go into medicine. The situation continues to worsen. Americans are victims of a system, created by well meaning people, which just doesn't work. 

Where has our current model gotten us?

World Health Organization (WHO) 2004 statistics show that of the top 25 richest Nations, the United States ranks:

• #1 in per capita health spending - $6096 (almost double #2)
• #1 in the % of Gross Domestic Product (GDP) spent on healthcare - 15.4%
• #25 in the % of healthcare costs paid by the government. This is despte our government spending a higher % of our budget on healthcare than any other country.
• #24 in life expectancy

It's not working!  We spend at least twice as much and live shorter lives. We need a paradigm shift in the way we finance healthcare.

What are the ingredients of a financial model that works?

1. Effective preventive medicine through a medical home. Practicing wellness results in healthier patients. Healthier patients cost less to treat. This will be critical as baby boomers age.
2. Maximizing access to cost-effective care, not simply "putting out the fire" with an Emergency Room trip after a problem has already escalated.
3. Insuring the uninsured. 15% of our country has no health insurance. When problems inevitably arise, high cost emergency care is sought because the uninsured don't have a medical home. The uninsured usually don't seek treatment for high blood pressure. They wait until they have a heart attack or stroke. Not seeking treatment early will also allow a bronchitis to turn into pneumonia. 

Is implementing a single National Health Insurance the answer?

It isn't working in England or Canada. In Canada, access to care is far worse than in the United States and the number of doctors is diminishing. Canadians are coming to the U.S. and paying cash for care.

• In Canada, waiting times are 40 weeks to see an orthopedic surgeon and 6 weeks to see a cancer specialist. (1)
• Doctors don't want to practice in Canada. Despite having National Health Insurance, 1.4 million people in Ontario (12%) have no primary care physician, functionally making them uninsured. Their only source of care is high cost emergency care. This isn't much better than the 15% of uninsured Americans. (1)
• Even though private self pay services are illegal, doctors are offering them all over the country. (1)

Video: A Short Course in Brain Surgery   Run Time: 5:36
A Short Course in Brain Surgery highlights the plight of an Ontario man with a cancerous brain tumor who crossed the border to the U.S. to get the medical care that is rationed in his home country.  This experience is common, not just an exception to the rule.

A National Health Plan would certainly insure the uninsured. The flaw comes with implementing a plan where the consumer of care never sees or feels the cost of their care.

Dean Halverson, CEO of the Leede Research Group, a market research firm based in Manitowoc, WI commented, "When you have someone using a service and not paying for it, it will get abused. If your employer bought your groceries, how often would you have macaroni and cheese, instead of steak and shrimp?" (2)

• Back pain doesn't usually require an MRI. However, thousands are done yearly because patients want one, don't understand why most are not needed (after all, their friend got one) and human nature understandably makes them want to get their money's worth out of their increasingly expensive insurance premiums. Doctors don't fully understand the cost, don't have the time to explain why an MRI is not needed, and feel subconscious concern about the possibility of malpractice.
• If a consumer had to pay for the first $2,000 - $3,000 of their care, they would start asking whether a test is really necessary and demand price information.
• As has occurred in the Canadian National Health System, a U.S. National Health Insurance Program where patients don't directly pay for part of their care would result in even worse access to care than we have now. Costs would continue to rise at an unsustainable pace, resulting in much higher taxes.
• The free market will keep costs down because individuals who have to pay for their own healthcare will make wiser decisions and not spend money on unneeded or inefficient care. Transparent pricing will be demanded. 

The solution: redefine health insurance

If National Health Insurance can even be considered as an option we must first change the definition of "insurance".

When we buy homeowner's insurance, we don't expect our insurance to pay for a broken furnace or new siding. We don't expect auto insurance to pay for an oil change or a new transmission. We expect the insurance to protect us when major problems arise like a fire or auto accident.

If we feel new siding is needed, we find 2 or 3 reputable contractors, compare their prices and services, then pay the chosen contractor for their work. We don't expect our insurance to pay for it.

However, when we buy health insurance, we expect it to pay for almost everything and pay little attention to the cost of medical services.

The key to reducing rapidly rising healthcare costs is to define "health insurance" as it is defined in these other insurance industries. 

This is easily accomplished through High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA). 

High Deductible Health Plans (HDHP) - Health Insurance that typically has a deductible of $2,000 - $3,000. After the deductible is paid, the insurance covers 80 - 100% of additional costs. There is a maximum yearly out-of-pocket cost you incur.

Health Savings Accounts (HSA) - An interest earning account obtained through a bank that can only be used for healthcare expenses. Deposits are made pre-tax just like an IRA. Most major banks offer them now and funds can be accessed by writing checks or swiping a debit card. The account must be tied to an HDHP. 

How can HDHP/HSA both save your consumers money and reduce National healthcare spending?

• Employers and individuals can be encouraged, through a favorable tax code, to purhcase a High Deductible Health Plan (HDHP) that would protect them when big problems occur.
• These lower premiums ($100 vs. $600 monthly) would allow more employers to offer health insurance as a benefit, thus reducing the number of uninsured. Tax incentives to small businesses who offer insurance would help even more.
• Consumers and employers could then use this money broken free from the insurance premiums to put in an interest earning Health Savings Account (HSA). They simply swipe an HSA debit card to pay at the time of service for needed doctor visits and testing. There would be no claims, preapprovals, or rejections, and far less administrative costs.
• Since decisions are made by doctors and patients, tests such as coronary calcium scoring and fractionated cholesterols get paid. These tests help in management decisions, but many insurers have deemed them unnecessary and won't pay for them.
• With HSAs, transparent pricing becomes critical. We know how much a haircut costs before we get it. When consumers start writing checks for tests, they will expect to know the cost before paying for it. Pricing at reputable facilities is surprisingly variable (see Table 2). Physicians in direct practices have negotiated much cheaper prices for x-rays, labs, stress tests, and colonoscopies for their patients. These providers are very willing to deeply discount their fees when cash is paid at the time of service (a simple swipe of an HSA debit card). They avoid the hassle of collection process, delay in payment,  and uncertainty whether the bill will even be paid. Transparent pricing is possible for patients of direct practice physicians because we are able to take the time necessary to research and negotiate prices, but most doctors can't. Legislators would endear themselves to many of their voters by requiring x-ray facilities, labs, doctors, and other health service providers to post their cash prices. Just like at the barber, patients should be able to know the cost before receiving a service, not after. Perhaps prices could even be available on a county website as is available (although not required) in Long Beach, CA on www.healthylongbeach.org. It would create competition for services, lower prices and give more people the comfort level to purchase an HDHP/HSA.