A Health Care Reform That Might Work by Don McCormick

We in the United States are faced with a moral dilemma: to uphold the equal constitutional regard for each and every life in our country, or to slide further in the direction of survival of the fittest (the richest?). I have been in the business of setting up and operating health care delivery systems for the past forty years, and I feel I have some worthwhile recommendations to make to the many options being entertained.

1. Outsourcing: One of the best suggestions I’ve heard is to outsource the management of the programs through competitive bids to Canada, England, France, Germany, or Japan. Maybe some of the African countries currently working with Partners in Health should be allowed to get in on the bidding. Since outsourcing has such a poor chance of approval—in spite of the genius of it—I’ll make an alternative suggestion.

2. Pooling:

A. First, let the insurance companies compete with one another for administration and payment of claims—just as they have to do with large, self-insured employer groups. In the 70’s, 80’s, and 90’s, the companies bid as low as 2.5% to do all administration and claims–.5% lower than Medicare’s expenditures for the same services.

B. Second, allow no underwriting profits. Put all expected claims monies into a common pool and pay claims from that pool. As with self-insured employer groups, the cost for each person would not vary, and no big blowout claims would kill off the plan. Let us allow all Americans to pool losses rather than just suffer them. Real claims costs would be determined from current experience and certified by independent actuaries, who would then set a rate for each person. [Perhaps the population could be separated by age and sex, but that might be a waste of time if the pool is hundreds of millions of people. Medicare has not found it necessary to do such separation, and its customers are the sickest people in the country.] The competing insurers would then bill and collect the premiums for individuals and groups, keep their administrative loads, and pay the claims portions of the premiums immediately and electronically to the “Claims Fund Account” based on actuarially certified rates.

C. Third, let there be defined benefits for the health plan similar to the simple provisions in the Medicare Advantage HMO plans. For example, there could be several plans with different deductibles–$250, $1,000, or $5,000—with lower rates for the greater deductibles. People who choose a higher deductible, however, would have to show proof that they have sufficient capital or credit to pay the larger deductible.

D. Fourth, design a more controlled system for medical care billing and costs. The current system is based on an open-ended fee-for-service billing and, in the case of Medicare, involves DRG (Diagnosis Related Groups) based payment for some facilities and RBRVS (Resource Based Relative Values Scale) rates that are tied to diagnosis and CPT (Clinical Procedures Terminology) codes for generation of professional fees. That kind of system is subject to manipulation and much abuse by health care providers and contains the wrong incentives for delivery of quality health care services. The DRG system of payment — which Medicare invented to protect itself against hospital billing abuses — is somewhat effective if someone other than the hospital is keeping an eye on it. If there is no independent, interested party monitoring the number of admissions and discharges as they happen, then too many admissions continue to happen and people are often discharged too soon after a necessary admission.

What I suggest is that the physicians should be required to be members of a team of about thirty primary care physicians and twenty groups that represent the main areas of specialty. The team chooses which hospitals it plans to use and then elects a quality-assurance committee and/or hospitalists to “watch-dog” the use of the facilities. These physician teams would be paid, using the professional fees portion of the claims funds, (which are based on the numbers of patients in the practices of the primary care physicians). Some sub-specialties could service more than one team, if the patient population served by that team was less than necessary to fill the practice of that specialty. The members of the team could make their own policies in regard to payment of each member, but what works well is “division by capitation” if the patient numbers are at the 50,000 to 60,000 capacity of the thirty primary care practices. I can guarantee that no member in that small democracy of physicians will get more than his or her fair share of money or work. Physicians know very well the work required in caring for patients and billing will be among themselves, rather than to some “evil” third party or a uninformed patient.

E. Fifth, if the U.S. government is unable to cooperate in the development and approval of health care reform then the citizens ought to do as the government dreams it could do: form cooperatives of millions of people and accomplish the reforms collectively. This method is not complicated, sacred, nor forbidden. It has been done by many people at times in the past, usually after a government – and its owners – have failed its people, certainly as is happing now.

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