Healthcare Inc

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Healthcare Inc. A Better Business Model

Abstract

The hi st or y of heal t hcar e i n t he Uni t ed St at es has been a

movement t owar d equi t abl e access f or al l , wi t h i ndi r ect

payment f or servi ce. However , f ai l ur es of t he syst em,

i ncl udi ng uncont r ol l ed cost , have made r emodel i ng t he

syst em i mper at i ve. Wi t h no nat i onal consensus f or pr esent

pl ans such as HR3200, we pr opose a sust ai nabl e model t hat

i s owned by ci t i zens, f unded by a f l at t ax pai d by al l , and

pr ovi ded i n a compet i t i ve mar ket pl ace. The syst em i ncl udes

i ndi vi dual cont r ol , i ncent i ves f or r esponsi bl e ut i l i zat i on

by al l , and cost cont r ol t hr ough pr ospect i ve det er mi nat i on

of t he f undi ng pool as a set per cent age of t he gr oss

domest i c pr oduct .


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Introduction

At t empt s i n t he Uni t ed St ates House of Repr esent at i ves t o

l aunch heal t hcar e r ef or m ( HR) bi l l 3200 ar e f i ndi ng r ough

water s. Those who bel i eve t he pr esent syst em pr ovi des wel l

f or t hei r needs ar e di si ncl i ned t o vi ew r ef or m f avor abl y,

wher eas t hose who ar e di ssat i sf i ed wi t h f ai l ur es t o r ecei ve

appr opr i at e car e ar gue st r enuousl y f or r ef or m. Regar dl ess

of sat i sf act i on, t her e i s r i si ng concer n about t he

j uggernaut of i ncr easi ng cost s, present l y appr oxi mat el y 18%

of gr oss domest i c pr oduct ( GDP) and r i si ng r api dl y, 1 and

about t he f ai l ur e of HR 3200 t o cont r ol t hose cost s.

The mai n poi nt of cont ent i on appears t o be who wi l l cont r ol

t he al l ocat i on of money and servi ces not what wi l l

pr ovi de t he gr eat est good t o pat i ent s. I ncr easi ng

compl exi t y, cost , and popul at i on t r ends have made obsol ete

t he open mar ket , di r ect payment f or servi ce syst em t hat

pr evai l ed i n t he US unt i l t he 1930s. Whi l e ref or m opponent s

obj ect t o gover nment s r ol e i n heal t hcar e, t he hi st or i c

di r ect i on of heal t hcar e r ei mbur sement i n t he Uni t ed St at es

has been a pr ogr essi on t oward equi t abl e access ( def i ned as

equal among al l ) , pool ed popul at i ons t o spr ead r i sk, and

i ndi r ect payment f or ser vi ce. Unt i l t he 1960s, i nsur ance


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compani es r edi st r i but ed weal t h i n pr ovi di ng heal t hcar e.

Si nce t he i ncept i on of Medi car e and Medi cai d, t he

gover nment has been doi ng t he r edi st r i but i on. Pr esent l y,

60% of heal t hcar e cost s are f i nanced by t axes.

Al t hough we ar e not economi st s, as a physi ci an and as

busi ness peopl e, we have st udi ed syst ems, cr eat ed our own

busi ness economi es and i nnovat i ons, and par t i ci pat ed i n a

hi ghl y f unct i oni ng st at e syst em t o pr ovi de car e t o t he

uni nsured. We have al so l i st ened t o our pat i ent s and our

col l eagues, whose concer ns are not wel l - r epr esent ed i n t he

proposal s under consi der at i on. And so we have spent many

mont hs i magi ni ng and di scussi ng wi t h physi ci ans,

pol i t i ci ans, and ot her s ways t o i mpr ove heal t hcar e

pr ovi si on, pat i ent and pr ovi der sat i sf act i on, and t he

economi c wel l - bei ng of t he nat i on. The pl an pr esent ed here,

a wor k i n pr ogr ess, i s t he out gr owt h of t hat pr ocess.

Healthcare Inc.

Thi s proposal out l i nes a new heal t hcar e syst em busi ness

model t hat i s sust ai nabl e and bet t er ser ves pat i ent s t han


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t hose cur r ent l y on t he t abl e ( HR 3200, i nsur ance f or al l ,

and HR 676, Medi car e f or al l ) . I n t he pr ocess, i t creat es

bet t er condi t i ons f or physi ci ans and ot her heal t h wor ker s

t o pr ovi de car e. Bot h al t r ui st i c and pr agmat i c, t he pl an

uses a cor porat i on model owned by t he ci t i zens of t he

Uni t ed St at es i n whi ch each per son has a vot e. Ci t i zens

r et ai n r esponsi bi l i t y and cont r ol of i ndi vi dual f unds, t he

gover nment serves as a f i scal agent but does not cont r ol

medi cal car e, servi ce pr ovi der s compet e f or busi ness, and

cost s ar e cont ai ned as a predet er mi ned per cent age of t he

GDP. We envi si on i ni t i al l y i nst i t ut i ng t he syst em at t en

si t es around t he count r y, where the model s woul d be

eval uat ed f or ef f ect i veness and modi f i ed as appr opr i at e.

Hal l mar ks of t hi s syst em ar e:

i nt er nal l y cont r ol l ed cost s equi t abl e access maxi mum qual i t y mi ni mum compl exi t y

To our knowl edge, no ot her proposal has i ncl uded t he

obj ect i ve of mi ni mum compl exi t y nor devel oped t he l ogi cal ,


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not i deol ogi cal , concl usi on f or gover nment f undi ng ( not

cont r ol ) wi t h ci t i zen di r ect i on.

The key component s of t he syst em we propose ( see EXHI BI T 1)

are:

A si ngl e payment ( t ax) syst em col l ect ed and di sbur sedt hrough t he government

Fi scal , admi ni st r at i ve, and qual i t y- assur ancedeci si ons made by a st at e or r egi onal heal t h car e

boar d ( SHCB) , wi t h t r ust ees ( medi cal pr ovi der s,

ci t i zens, busi ness peopl e) el ect ed by pl an

par t i ci pant s ( t axpayer s)

Pr ospect i vel y det er mi ned heal t hcar e t ax rat e as aper cent age of t he GDP (e. g. , 10%) i n conj unct i on wi t h

ut i l i zat i on, det er mi ned by t he SHCB

I ndi vi dual l y- di r ect ed vi r t ual heal t hcar e account s t hatal l ow peopl e t o al l ocat e t hei r heal t hcar e dol l ar s ( and

r ecei ve di vi dends i f t he dol l ar s ar e wel l - spent )

Heal t h ser vi ce gr oups provi di ng ser vi ces asconsul t ant s of i ndi vi dual heal t hcar e spendi ng i n a

compet i t i ve market pl ace


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Assumpt i ons under l yi ng t he syst em ar e l i st ed i n EXHI BI T 2.

A br i ef synopsi s of some of t he syst em f eat ur es f ol l ows.

State or regional health fund, state or regional health

reserve

Thi s proposal f i nances al l heal t hcar e cost s wi t h a f l at t ax

on i ndi vi dual i ncome, sal es, and ser vi ces. Al l i ndi vi dual s

ar e equal owner s i n t he cor por at i on, and i n t hi s syst em, a

l ow- i ncome ear ner s r et ur n on i nvest ment act ual l y i s

gr eat er t han a hi gher - i ncome ear ner s. Tax dol l ar s

desi gnat ed f or heal t hcar e ar e hel d i n a st at e or r egi onal

heal t h f und ( SHF) , whi ch i s not accessi bl e f or ot her

gover nment uses.

Rat e- set t i ng and management . The SHF moni es and t hose of

t he i ndi vi dual vi r t ual f unds f r om whi ch each ci t i zen

di r ect s hi s or her own heal t hcare spendi ng and di vi dends

are hel d, managed, and admi ni st ered by a st at e or r egi onal

heal t h r eserve ( SHR) . Combi ni ng mar ket - dr i ven r at e- set t i ng

wi t h some cont r ol s, t he SHR sets and l i mi t s t he t ax r at e t o

a per cent age of t he GDP t o mai nt ai n vi abi l i t y of t he f und

whi l e devel opi ng an endowment t o reduce f ut ur e t axes. For

t hi s di scussi on, we wi l l assume t he tar get t ax rat e goal


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f or heal t hcare t o be 10% GDP, compared wi t h t he curr ent

18%.

The SHR deter mi nes t he percent age of t ot al f unds t o go i nt o

i ndi vi dual vi r t ual account s and a per cent age t o retai n f or

ot her cost s. I n det er mi ni ng t he r at e f or i ndi vi dual

account s, t he SHR al so consi der s ut i l i zat i on of ser vi ces.

I n ef f ect , t he popul at i on vot es on t he t ax r at e wi t h each

servi ce ut i l i zat i on.

Health Care Service Groups

Heal t h Care Servi ce Gr oups ( HCSGs) are the compet i t i ve and

i nnovat i on- i nt r oduci ng f r ee- mar ket component s of t he

syst em. They mi ght compr i se pr ovi der s, i nst i t ut i ons, or

bot h.

Individual Health Funds

Each per son has a vi r t ual i ndi vi dual heal t h f und ( I HF)

account . Each year , f unds are ent er ed, det er mi ned i n par t

by past medi cal hi st or y and i n par t on pr oj ect ed needs f or

end- of - l i f e or ot her cost l y car e. I ndi vi dual s al l ocat e

f unds t o t he servi ce pr ovi der s t hey sel ect . I n some cases,


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i ndi vi dual s may need or choose t o have an HCSG manage t hei r

account s. The servi ce pr ovi der s r et ur n a smal l per cent age

of t hat money t o t he admi ni st r at i ve component , t he St ate or

r egi onal Heal t h Care Boar d, descr i bed bel ow.

I n t hi s syst em, i t i s possi bl e t o r ewar d i ndi vi dual s f or

j udi ci ous use of heal t hcar e by i ssui ng di vi dends as a t ax-

f r ee payment i n year s i n whi ch an account bal ance r emai ns

at t he end of t he year . Another measur e of j udi ci ous use

i s usi ng evi dence- based appr oaches wher e appl i cabl e and

f easi bl e. Thi s appr oach shows cl ear l y t he connect i on

bet ween cost and ut i l i zat i on, and user s wi l l be abl e t o

i nf l uence heal t h car e servi ce gr oup pr ovi der s i n ways they

are not abl e to now. There ar e no co- payment s or

deduct i bl es, si mpl i f yi ng the syst em and agai n reduci ng

admi ni st r at i ve cost s.

State or Regional Health Care Board (SHCB)

The SHCB i s r esponsi bl e f or devel opi ng and overseei ng t he

st at e or r egi onal heal t h pl an and t he Heal t h Car e Ser vi ce

Gr oups ( HCSGs) . I t does not set pr i ces but uses market

dr i ven pr i ci ng t o det er mi ne whet her pr i ces ar e appr opr i ate

f or a gi ven l ocal e. Thi s al l ows pr ovi der s t o compet e on


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qual i t y and a guar ant eed pr i ce ( publ i shed at t he SHCB si t e)

and el i mi nat es t he pr esent syst em of pr i ce cont r ol s

( admi ni st r at i ve pr i ci ng) .

The SHCB may r equi r e HCSGs t o cor r ect def i ci enci es or meet

st andar ds, but i t does not def i ne t he pr ocesses of t he

HCSG. Each HCSG woul d be r esponsi bl e f or assessi ng

i nt er val s of car e, pr i ce, and qual i t y of ser vi ce and

r epor t i ng t hei r dat a t o t he SHB.

The SHCB i s f unded by admi ni st r at i ve f ees f r om provi ders i n

servi ce gr oups, who ar e i n t ur n f unded by pat i ent -

aut hor i zed payment s f r om t he SHF.

Cover ed Ser vi ces. The SHCB woul d al so have t he t ask of

accumul at i ng and di ssemi nat i ng avai l abl e evi dence on t he

ef f ect i veness or desi r abi l i t y of car e and t he opt i mal t i mes

of del i ver y. Types of ser vi ce ar e t hen submi t t ed t o t he

t axpayer s f or appr oval . I n ot her wor ds, t he SHCB or gani zes

but does not det er mi ne cover ed or t ypes of servi ce. Thi s i s

t he r esponsi bi l i t y of t he owner s of t he f r anchi se.


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Quality

The underst andi ng of qual i t y i s i ncompl et e, and onl y 20% of

qual i t y measur es are evi dence- based. The r est are

cul t ur al l y det er mi ned and var i abl e. Cl ear l y, ut i l i zat i on

needs t o i ncl ude evi dence- based medi ci ne, but pr ovi der

gr oups need t o devel op and compete wi t h t hei r own cul t ur es

of qual i t y. Thus, bot h t he SHB and i ndi vi dual s wi l l make

det er mi nat i ons of qual i t y and choose HCSGs accor di ngl y.

Limitations

We pr esent t hi s pr oposal t o i ni t i at e di scussi on of a mor e

r adi cal l y redesi gned heal t hcar e syst em based on t he st at ed

assumpt i ons. Accor di ngl y, some i deas ar e more compl etel y

f ormul ated t han other s. The exact method of el ect i ng or

appoi nt i ng member s t o t he st at e or r egi onal heal t h car e

boar d, f or exampl e, i s open t o f ur t her consi der at i on. Our

pr oposal does not addr ess mal pr act i ce r ef or m or f undi ng f or

medi cal educat i on, i mport ant component s of any heal t hcare

syst em. Whi l e we i magi ne a schedul e t o br i ng heal t hcare


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pr ovi ders on boar d over t i me, we have not devel oped a

t i mel i ne or i mpl ement at i on pl an.

The case for government fiduciary agency, not control

Gi ven the obj ect i ons f r om many sour ces t o government

i nvol vement i n any US heal t hcare syst em, i t seems

appr opr i ate t o addr ess our deci si on t o use gover nment

f undi ng. Asi de f r om t he hi st or i c t r end ment i oned ear l i er ,

col l ecti ng t axes and di st r i but i ng t hem f r om a cent r al si t e

t o pay f or heal t hcar e reduces admi ni st r at i ve cost s and

compl exi t y. Cr eat i ng a stat e or r egi onal r i sk pool and

r emovi ng var i abl e ci r cumst ances such as pl ace of empl oyment

as det er mi nant s of cost r educes i nequal i t i es i n t he pr esent

st r at i f i ed heal t h i nsur ance syst em. As t he gover nment i s

char ged wi t h t he responsi bi l i t y t o pr omot e the gener al

wel f ar e of al l t he peopl e and i s subj ect t o t he wi l l of

vot er s, i t i s a mor e l ogi cal body t o r edi st r i but e weal t h

t han i s an i nsur ance company that i s l egal l y obl i gat ed t o

creat e pr of i t f or shar ehol der s. Pr esent day heal t h

i nsurance compani es have a f ut ur e rol e i n a r ef ormed

heal t hcar e syst em, but not i n t he col l ect i on and

r edi st r i but i on of i ncome.


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But whi l e the gover nment i s t he rat i onal si ngl e payment

sour ce f or heal t hcar e, i t i s not necessar i l y t he best pl ace

t o house ser vi ce pr ovi si on, assur e qual i t y, or det er mi ne

whi ch ser vi ces t o use f or i ndi vi dual s. Thi s pr oposal

di f f er s f r om ot her s i n t r ansf er r i ng cont r ol of heal t hcar e

f r om t he gover nment t o t he peopl e, whi l e ret ai ni ng t he

gover nment as a f i nanci al agent and ref er ee.

Acknowledgement

Chr i s McLaughl i n pr ovi ded edi t or i al assi st ance i n

devel opi ng t hi s manuscr i pt .


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Reference

1. Cent er s f or Medi care and Medi cai d Ser vi ces, USDepar t ment of Heal t h & Human Ser vi ces. Nat i onal Heal t h

Expendi t ur e Proj ect i ons 2008- 2018, Forecast summary

and sel ect ed t abl es. Avai l abl e f r om:

ht t p: / / www. cms. hhs. gov/ Nat i onal Heal t hExpendData/ downl o

ads/ pr oj 2008. pdf

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