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HPUSA Quarterly Fifth Tuesday E-Letter, December 2002
HealthPlanUSA Quarterly Newsletter for December 2002
On the Fifth Tuesday every quarter, it is appropriate to step back and reflect on where we’ve been and where we’re going. This is the nine-month anniversary of the quarterly HealthPlanUSA. It networks on the fifth Tuesday of each quarter. If this has been forwarded to you or you have not been on our email list and would like to continue to receive these quarterly messages exploring the ideal universal HealthPlan for the USA, please send an email to Info@HealthPlanUSA.net.
This Month Was the Final Issue of GreSg Scandlen’s
Health Policy Comments
We were saddened to hear we will no longer be receiving Greg Scandlen’s Health Policy Comments from the National Center for Policy Analysis. We wish him well in his next endeavor. One of his health captions worth remembering: “Funniest Thing: 27% Increase in Health Care Cost When Patients Spend Someone Else’s Money.” Greg Favored Us with a Review of Gratzer’s Code Blue, Reviving Canada’s Health Care System in our second issue. This review, a revision of one that appeared in Medical Sentinel, along with his picture, can be found in the MedicalTuesday Archives. Click Archives and then April 16, 2002 at www.MedicalTuesday.net. Some of Greg’s other captions follow:
Small Group Coverage in Colorado in Crisis: Spencer Swalm writes in the Denver Business Journal, "Colorado's small group health insurance market displays all the symptoms of a patient 'circling the drain.'" He notes that premiums are rising, the number of carriers has plummeted, and the Legislature has, "gone off shift." The latter, we would add, is good news. A patient-centered affordable health plan will not and, in fact, cannot be formed by any legislative body. Only the business community working with our professional community using the latest information technology can solve the problems.
Small Employers in Colorado Cutting Benefits: Also in Colorado, Amy Fletcher writes, "Having faced several years of double-digit premium increases, employers are cutting health benefits and increasing the share that workers must pay." She cites a survey from Colorado . . . that found 16% of small employers cut benefits in 2002, 19% raised deductibles, and 38% increased co-pays. To which, we would add: that’s the only way any insurance premium will be reasonably priced and appropriately utilized. Any increase in benefits will always cause a disproportionate increase in premiums because of excessive usage.
Colorado Physicians Leaving Private Practice: The Rocky Mountain News is concerned about the effects of cost controls on physicians. It reports that more doctors are giving up private practice to become salaried employees in institutions. It gives as an example Dr. Sarah Sheiner who has just joined Kaiser-Permanente to make more money and to have more time to spend with her family. Dr. Edward Hill, the chair of the AMA Board of Trustees, says payment cutbacks from Medicare and private insurers are driving doctors out. "They are retiring early, changing professions, or moving to other areas where they feel like they can practice more independently with less frustration." Dr. Hill says, "People with insurance coverage think they have free health care, and sometimes act like shoppers on a no-cost spree."
Same Story, Another Verse Throughout Much of the
Daily, I find more than a hundred HealthCare reports in my inbox, many from friends overseas indicating that the same stories are repeated in each state and most nations. On a recent trip, I read the Financial Times for nine days and found nearly identical stories from the UK and Europe. So, who has the right answer? Unfortunately, most attempts reflect a basic misunderstanding of the medical process and the human condition.
NY Times - Higher Costs Lead to More Uninsured: On the national scene, the New York Times also notes the rising costs and the expected increase in the numbers of uninsured as a result. It attributes much of the cost explosion to new technology, and cites Dr. Janelle Walhout of a community clinic in Seattle as pondering the “mismatch between . . . very high-tech medicine . . . and our patients who can't afford (it), can't understand it, can’t get interpreters to explain it, and are just not accessing these things.” The article says, “Now many experts agree with Drew Altman . . . who said, 'No one has a big new answer on what to do about health care costs. . . .'”
The Problem Is Not Technology but Human Greed
With nearly every issue, HealthPlanUSA brings examples about increase costs which originate primarily with patient greed, although there are also hospital, physician, and insurance carrier contributions. However, the latter would all be neutralized by patient involvement in charges and decision making. In regards to the comments about high tech medicine and patient mismatch, this would all disappear in the Medical MarketPlace when patients shop for the doctor that provides the best medical care. If the doctor isn’t able to explain high tech medicine appropriately, in a language that the patient can understand, and whether it is cost-effective for the patient’s disease, the patient would simply find another physician who could do so. Medical care would gravitate to the best doctors. Health care delivery problems would decrease. The doctors that fit Walhout’s description of a mismatch with their patients would become less busy and eventually unable to meet their expenses. Very quickly they would learn what patients want, provide it, or find a new occupation. The time frame for physician learning in this case is about one month’s missed rent or payroll. In a socialized, HMO, or single-payer system, the worst and the best doctors get the same pay, and the patients have little choice.
No One Has a Big New Answer Or No One’s
I like Greg Scandlen’s addition to the NY Times final note above: “Or no one’s listening.” Although the big answer has not been well clarified, we think it’s mostly the latter. Everyone has an answer, but they all involve government participation and politics will destroy any worthwhile plan. Doctors have the largest number of answers. When I was the editor of Sacramento Medicine, one of our members sent me a six-page handwritten letter in which he outlined a number of possible health care plans for our country. His postscript indicated that if I didn’t like any of them, he had a large number of additional plans he would like for us to propose to Congress. I thought that would be a lost cause. So let's clarify the answer.
Social Security Free Market Comparison
In regards to “no one’s listening,” we are reminded of Lew Rukeyser who must feel the same in regards to retirement plans that would solve the social security problems. Most business and professional people, I presume, have been receiving Rukeyser's periodic promotional newsletter wherein he quotes the overall average of the US markets and their return on investments. As I recall, he stated that an investment of $2000 (the standard IRA at that time) in Intel when it went public would have grown to approximately $2 million; a similar investment in Microsoft when it went public would have increased to about $800 thousand; a similar investment in Sun Microsystems when it went public would have increased to $400 thousand. If an individual invested for the average working life span of 40 years, an $80,000 investment at current IRA patterns would be worth between $5-10 million, even if one missed great selections during 30 of the 40 years. Taking a lifetime annuity at 6 percent on $5 million would be a retirement benefit of $300,000 per year or $25,000 per month. Why isn’t this financial security happening? Everyone seems to be waiting for Congress to reform Social Security so they can deduct it from income. But can we wait another 60 years for Congress to act? By then, many of us will be beyond retirement or even health care.
Free Market Returns May Be Twenty-five Times Social
Let’s look at it from the free market concept. Despite the fact that we have paid from $7,000 to $9,000 per year in Social Security taxes for 40 years, about a $320,000 investment, would anyone trouble themselves and go to the Social Security office only to take a number, find a relatively clean chair in which to wait, fill out forms, etc., et. al, to obtain $1000 in monthly benefits having already secured a retirement account at $25,000 per month? I think most of us would bypass that potentially exasperating experience even though four times the investment to the government program gives only 1/25 the return. By not collecting those benefits, more Social Security money would be available for more needy individuals. Gradually the Social Security System would revert to what it should be in the first place, welfare for the needy–the poorest 15 percent of society. And this would all come about without any government interference or largess simply by investing a fraction of what we send to Social Security in an open market instead of a tax-free IRA account, where once it is received, it is fully taxed. This needs promotion on a national level, after which SS taxes would fall and all but disappear. The above figures are approximations but probably more reliable than any government projections, inasmuch as the costs for Medicare, Medicaid, and the renal dialysis and other entitlement programs all exceeded their initial projections by hundreds and sometimes up to a thousand percent. If single-payer health care is ever foisted upon us, we can safely assume the actual costs will also be several hundred percent higher than the government projections or the media reports.
HealthPlanUSA in Progress
We have been interested in the health care delivery problem for more than three decades. We have made a concerted effort to look at all forms of hospital care, having worked in VA, military, prison, state, county, city, university and private hospitals. We have personal experience in health care delivery in solo, partnership, group, HMO and corporate practices, having served as CEO for eight years. This has given us exposure to nearly every health plan available during the past three decades. Our increasing concern about the lack of direction in the United States and globally has, this past year, caused us to reduce our practice hours from the usual 70-80 hours per week that most physicians work, to about 40 hours per week. We spend the other 30-40 hours per week making sense of the conundrum we face–to see if we can convince Americans to think rationally about health care coverage. We have been developing the HealthPlanUSA in order to help solve the health care problems for Americans. Since this is a global problem, it can be exported. Plans are already underway to develop HealthPlanUK.
No Current HealthPlan in the United States Is Truly
We conclude that there are no HealthPlans that are truly market based, wherein all parties involved have a financial stake. In fact, some have made proposals that the patients, about whom all of this is for and about, should not be involved in the decision-making process at all. We think this impugns their motive. Meanwhile, one of our sources of information, the Mercatus Center at George Mason University, has a Nobel Laureate Economist, Vernon L Smith, PhD, whose research found that people don’t have to know anything but their own needs and circumstances for markets to work efficiently. So what is the new (old?) answer to which no one is listening?
Yes, HealthCare Costs are Increasing
The above series of headlines from past Scandlen Health Policy Letters and the NCPA daily reports indicate that health care costs are increasing. This is not surprising. We obviously need health insurance like we do any other liability, such as home insurance, car insurance, life insurance, or business liability insurance. But there is no health insurance that restores the Medical MarketPlace at this time. Many have no significant co-payment ($5 to $45 is not significant) by the insured. Martin Feldstein has estimated that by being relatively free, utilization is increased by up to 250 percent. At that rate, human greed working on a $1.2 trillion health care industry would drive health care costs to $3 trillion per year, unless the Medical MarketPlace is restored or severe rationing is implemented as is found in the rest of the globe. Our current HMO rationing would only be a mild warm-up phase for the serious 60 percent cuts that would be necessary to reduce $3 trillion back to the current $1.2 trillion level. So what does an appropriate HealthPlanUSA look like?
High Tech Medicine Reduces HealthCare Costs
Let’s take a critical look at the frequent assertion that it is high-tech medicine that makes health care unaffordable. Remember, it was the open technology market that reduced the price of the huge 1950's $5 million IBM Ramdac computer that required 20 technicians to operate, to the current $500 Pentium III that has more memory, power and speed at 1/10,000 the cost. Similarly, my radiology colleagues tell me that an open market for CT and MRI scanners would bring these prices from multimillion dollars to less than one-half million dollars, thereby reducing the cost of a scan to about twice the cost of an x-ray. Thus, technology makes diagnostic health care more affordable just as it made computers, VCRs and digital cameras more affordable. It is government controlling who can own a CT or MRI scanner that keeps the costs of the scanners, as well as the prices of the testing, out of reach.
Health Insurance Premiums Should be Related to
Our preliminary research indicates that the vast increase in health care costs is personally incurred from patients’ own excesses, not from technology. Readily available data indicates that obesity increases health care costs by 160 percent and no high tech equipment is involved. Preliminary data suggests that cigarette smoking increases costs well over 200 percent. Alcohol and substance abuse also cause a marked increase in costs. HealthPlanUSA feels that the employer should not be saddled with more than the cost for a lean, nonsmoking, non-drinking and non-drug abuser worker. If the combination of personal habits increase one’s health care costs by the sum of 300, 400 or even 500 percent, that additional premium should be a deduction from the worker’s paycheck, not a shared deduction from the coworkers paycheck. For example, should the basic premium be $100 per month, the additional $160 per month for an obese person would be a payroll deduction from his wages and not be distributed to all employees.
Group Health Insurance Premiums Should Average Risks
for Preexisting Conditions
We would not want to penalize anyone for “Acts of God,” such as having diabetes or gout or hypertension, which are averaged out by the group plans. We are only assessing “Acts of the Individual” for his excessive eating, excessive drinking, excessive smoking, or abusing the body with drugs. Bad personal habits should not be distributed from the irresponsible workers to those who are responsible and maintain good life styles. Preliminary data suggests that this would make the basic premium for a person with a healthy lifestyle in a range that most employers would be willing to cover. The self employed would be able to afford health insurance for themselves as well as their one or two workers–which makes up the vast share of the uninsured.
The Yearly Physical Examination is Not an Insurable
The deductible portion of the insurance before benefits are paid is still being devised. We think that the California Public Employee Retirement System (CalPERS) has made an appropriate start in the right direction. There is a $500 deductible per person, arrived at by the cost of a basic annual physical examination including appropriate laboratory and x-rays. This is about equal to the deductible that most of us have on our car and house insurance. Annual examinations are not insurable, any more than preventive maintenance or our car or home can be insured. The problem is how much of the balance should be paid by the insurance. CalPERS has also come up with a relatively good solution of 80 percent or 90 percent coverage for the balance. However, this has not been popular because of the expectation that health care should be basically free. It is not fully comprehended that the taxes required to make it free will cost more. CalPERS prescription plan is still unrealistic. With the cost of new drugs at $3-5 per pill, a three-month or 90-day supply can cost $450 and require only a $45 co-pay. This small co-payment is not any inducement to use the previous generation of drugs which generally are $1-2 each or about $90 to $200 for a three-month supply. The co-payment should be a significant percentage rather than the fixed dollar amount which provides little impetus for patients to ask their doctor for the previous generation of a similar drug (e.g. H2Blocker @ $2 vs a Proton Pump inhibitor @ $5 for severe peptic ulcer disease) or a generic which is usually cheaper, although government involvement has also increased their prices.
It’s Time to Restore Accountability
We at HealthPlanUSA think that it is now time for people to demand the above type of accountability in health care insurance. We are adding staff from personal funds to work on this model. Hopefully we’ll have more scientific and clinical data on our next Fifth Tuesday report from HealthPlanUSA in April. The progression of the HealthPlanUSA will be posted at www.HealthPlanUSA.net as new information becomes available. HealthPlanUK will be activated later in the year and will be located at www.HealthPlanUK.net.
Have a Happy, Healthy, and Prosperous
On this New Year’s Eve, we wish each and every one of you a Happy, Healthy and Prosperous New Year in 2003, as we seek to restore the Medical MarketPlace for the benefit and Health Enrichment of Human Kind.
Del Meyer, MD, CEO & Founder
6620 Coyle Avenue, Suite 122
Carmichael, CA 95608 USA