RTRP: CommentaramaCare Summarized and Priced

Last week we finalized the CommentaramaCare proposal. At the time, we posted both the final piece, reforming the way we pay for health care, and the conclusion. Several people have told us since then, that the conclusion got lost in being published on the same day. So today, we repost the conclusion to CommentaramaCare, which summarizes the proposal and puts a price tag on it.

The United States health care system is broken. It costs too much and achieves too little, its costs are out of control, not enough people have access to insurance, and it suffers from poor quality control. CommentaramaCare fixes each of these problems: it cuts costs dramatically, it expands coverage to 22 million people -- while still saving the taxpayer $245.7 billion, and it improves the quality of care.

Problem One: Cost Control

The primary problem with the American system is that it costs too much. The American system now eats up $2.26 trillion a year, and it is growing by the second. This problem is the result of (1) a payment system that has little incentive to control costs, (2) a regulatory scheme that generates excessive administrative costs, (3) the prescription of a vast number of medically unnecessary procedures/tests, and (4) an intrusive tort system. CommentaramaCare proposes the following solutions:

1. Fixing The Payment System

Under the current insurance system, buyers of health care (patients) do not negotiate the price of services directly with the sellers (doctors). This interferes with the parties’ incentives to keep costs under control. To solve this, CommentaramaCare proposes making health insurance more like car insurance or home owners insurance, where individuals make routine payments out of their own pockets and then use the insurance only as a form of quasi-catastrophic protection. This quasi-catastrophic coverage would kick in after a person had spent $5,000 on health care during the year, and would cover all remaining health care costs that person experiences during the year.

This change would give patients the incentive to keep costs down for most procedures, as they seek to avoid spending the first $5,000. At the same time, this system protects people from being bankrupted by serious illness. This system also should slightly reduce the insurance cost borne by the average American -- even before considering any specific cost savings that result under the plan.

To assist buyers in pricing their health care, CommentaramaCare requires providers to make available to any patient or potential patient, in advance, a price list for all procedures that they offer, so that potential patients can compare providers and seek competition. It also requires providers to use joint billing for individual procedures.

CommentaramaCare further proposes freeing providers to arrange their business and billing practices in more innovative ways, such as the fixed-price arrangement discussed previously.

Potential savings: Unknown

2. Eliminating Excessive Administrative Costs

According to Harvard Medical School, 31% of health care spending goes to pay administrative/overhead costs (this is nearly double the 16% percent spent in Canada). A reduction to even Canadian levels would save Americans $339 billion annually.

The primary reason administrative costs are so high in our system is that health care is regulated at the state level. Thus, every administrative function is repeated fifty or more times, often with different rules. Complicating this, the federal government provides health care through a half dozen agencies, each with their own bureaucracies, requirements, and rules -- many of which are enforced through state budgets.

To fix this, CommentaramaCare proposes:

• Removing states entirely from this process by replacing state regulation with one, consistent federal regulatory scheme to be organized under a Federal Medical Board (“FMB”). This will eliminate fifty state agencies.

• Allowing the FMB to issue licenses that are valid nationwide, so that providers can move freely and need only satisfy one regulator.

• Eliminating the half dozen agencies in Washington that control different (and overlapping) parts of the health care system and replacing them with one single agency and set of regulations, controlled by the Health Care Administration (“HCA”).

The potential cost savings from these changes could be as high as $339 billion.

Further, rather than trying to develop separate insurance plans for recipients of government-sponsored insurance (i.e. those currently on Medicare/Medicaid, etc.), the government would instead buy those persons the commercial catastrophic insurance, as discussed, and would subsidize some portion of the $5,000 deductible. Even assuming that the full $5,000 is provided for each recipient, this could save the government $3,700 for each of the 81 million current recipients, for a total potential cost savings to the taxpayer of $299.7 billion.

Potential savings: $339 billion
Potential savings to the taxpayer: $299.7 billion

3. Reducing Medically Unnecessary Procedures

It is estimated that $500-$700 billion is spent annually on treatments, tests, or hospitalizations that do nothing to improve health. Studies have shown the best ways to reduce these costs are to (1) change the billing method, (2) improve knowledge of the standards of care, and (3) establish effective tort control. Thus, CommentaramaCare proposes:

• Changing billing methods as outline above, which should reinvigorate the incentive for patients to control costs;

• Allowing the introduction of more fixed-price services (or other plans);

• Improving knowledge of the standards of care by having the FMB establish standards of care and disseminate them, and allowing doctors to use those as “legal safe harbors”;

• Reducing the filing of meritless lawsuits by (1) requiring all medical malpractice actions to be brought in federal court; (2) requiring plaintiffs to obtain certificates of merit before filing, and (3) shifting fees to the prevailing party; and

• Reducing outrageous jury awards by (1) eliminating punitive damage awards and (2) capping awards for non-economic harm at one million dollars.

Potential Savings: $500-700 billion

4. Tort Reform

It is estimated that an additional $11.3 billion can be saved in malpractice insurance premiums through the introduction of effective tort reform.

Potential Savings: $11.3 billion

** Certain problems are not addressed specifically at this time, including (1) medical innovation costs, (2) drug costs, and (3) long-term care costs. It is unclear to what extent the realignment of cost reduction incentives will influence those items. Thus, further reform may be needed after these effects can be evaluated.

Problem Two: Improving Access To Health Care Coverage

The second group of problems with our health care system are related to access to health insurance. Not only is there the issue of the “46 million” uninsured, but there are issues related to illegal aliens, uninsurable persons, and the problem that loss of employment currently also means loss of health care. CommentaramaCare proposes the following solutions:

1. The “46 Million Uninsured”

Of the 46 million uninsured, only 7.3 million persons fall into the category of those who cannot obtain insurance due to lack of income. Assuming the projected cost of $7,400 per person, providing these people with fully paid insurance and income subsidies (in other words -- no cost to them) would cost $54 billion dollars per year.

Projected Cost to Taxpayer: $54 billion
Additional People Covered: 7.3 million

2. Illegal Aliens

Another 9.7 million of the 46 million uninsured are non-citizens, whose health care expenses should be paid for by their country of origin. Only the federal government has the power to stem the flow of illegal immigration and to deal with foreign governments. Thus, CommentaramaCare proposes (1) that the federal government fully reimburse providers for the costs of providing such care, and (2) that the federal government seek to charge the home countries for the costs incurred.

Projected Savings: Unknown (should zero out)
Additional People Covered: 9.7 million

3. The Uninsurable

Another 5 million of those without insurance are considered uninsurable because of pre-existing conditions. CommentaramaCare solves this problem by requiring bidders on the HCA insurance contracts to accept all persons who apply, at the same fixed price, without regard to pre-existing conditions, and by prohibiting such insurers from terminating individuals who experience high medical costs.

Projected Cost to Taxpayer: $0
Additional People Covered: 5 million

4. The Link Between Loss Of Employment And Loss Of Health Care

Currently, 59.3% of Americans receive their health insurance coverage through an employer. The unemployment rate is 9.5% and growing. Moreover, the composition of the 9.5% changes every day. Thus, vast numbers of Americans are at risk of losing their insurance because they face the prospects of becoming unemployed. To solve this problem, CommentaramaCare proposes to break the link between employment and health care by:

• Making health care premiums tax deductible to the individual, but not the employer;

• Allowing the creation of HSAs wherein individuals can save unused deductible costs, which should eventually build up to cover future deductibles;

• Ensuring that the HCA plans are available to any person at any time, without regard to employment; and

• Continuing government subsidies for low-income and unemployed persons to obtain health insurance coverage.

This method should ensure that anyone can get access to such insurance, regardless of employment status.


Problem Three: Improving Quality Control

Finally, the current system exposes patients to an amazingly high risk of under-treatment and over-treatment, and results in an incredible number of preventable medical injuries. The existing mechanisms for monitoring quality control are simply inadequate.

According to a study by Dartmouth’s Institute for Health, patients had just a 50% chance of receiving the right treatment for common ailments. Other studies have shown that between $500-$700 billion in medically unnecessary tests or procedures were ordered in 2007, that nearly 200,000 avoidable hospital deaths occur each year, and that another 1.5 million preventable drug-related injuries occur each year. The costs of treating injuries resulting from preventable medical error could be as high as $520 billion per year.

At the core of each of these findings was the conclusion that the lack of clear national standards, and the fact that many doctors lack adequate information about the standards of care, were the direct cause of the majority of these failures.

CommentaramaCare proposes the following solution:

• Federalizing the oversight/regulation of the entire health care profession (doctors, nurses, psychologists, therapists, hospitals, etc.) under the FMB;

• Making the FMB responsible for licensing medical providers as well as investigating complaints against medical providers and disciplining those where necessary;

• Making the FMB responsible for issuing national standards of care, which the FMB would disseminate to doctors in the field -- the FMB also would issue best practices guidelines and would regulate continuing legal education requirements; and

• Reversing the legal changes that allowed hospitals to avoid liability for the actions of doctors who practice at the hospital, to encourage hospitals to conduct thorough oversight.

Projected Savings: Up to $520 billion


Conclusion

As outline above and as explained in greater detail in the prior posts on this topic, CommentaramaCare has the potential to dramatically improve each of the three main problem areas in the current health care system. Moreover, it does so without stripping patients, doctors or insurers of their freedoms -- in fact, each group is freed from considerable amounts of regulation.

Under CommentaramaCare, an additional 22 million people would be able to obtain health care. Yet, taxpayers should be able to save $245.7 billion, even as coverage is expanded.

The country as a whole should benefit as well. It is difficult to determine exactly what the potential savings would be, as many of the $1.3 trillion potential savings identified above likely involve duplicate costs. Still, it is clear that dramatic savings could be achieved. Also, a reduction on the order of one trillion dollars is not as outlandish as it sounds. That would reduce the amount Americans send on health care to between 9% and 10% of GNP, which would put us in line with the amounts spent by other Western countries.

If Washington wants a plan that works, here it is.

Thoughts?


[+] Read More...

[-] Collapse Post...

RTRP: CommentaramaCare Part III, The Coverage Plan

Today we finish the CommentaramaCare proposal. In this article, I will outline how the coverage system should be reformed to reduce health care costs, to save the government a fortune, and to improve coverage. In a second article, to be posted later today, I will summarize the entire CommentaramaCare proposal and outline its costs and cost savings.

The Coverage Plan

CommentaramaCare proposes making health insurance more like car insurance or home owners insurance, where individuals make routine payments out of their own pockets and then use the insurance only as a form of quasi-catastrophic protection. This quasi-catastrophic coverage would kick in after a person has spent $5,000 on health care during the year, and would cover all remaining health care costs that person experiences during that year.

Such a plan should:

• Reduce the cost of medical care by encouraging buyers of health care (patients) and sellers of health care (doctors) to deal directly with each other rather than through a middle man for most issues;

• Reduce the cost of insurance to the average person;

• Break the link between employment and insurance;

• Cover everyone regardless of pre-existing conditions;

• Dramatically cut what the government pays to provide health care to those on public programs (i.e. Medicare, etc.); and

• Allow the government to increase coverage to eliminate the uninsured problem.

Before we dig into the specifics, let us be clear. This proposal does NOT:

• Ban any form of private insurance -- you can continue to buy any type of insurance you want;

• Impose fines to force people to change their insurance plans; or

• Advocate that the government issue insurance -- not one penny is paid to the government by anyone under this plan.

Here are the details:

The Problem With The Current Scheme -- Runaway Costs

There are two broad complaints with the current system: (1) medical costs are out of control and (2) not everyone has coverage. Let's start with costs.

We have previously outlined several significant cost reduction measures, but we have not yet addressed the primary cause of out-of-control costs. There is significant evidence that the current insurance system is the main reason that health care costs are skyrocketing. Indeed, as the following graph from John Stossel shows, there is a dramatic and clear relationship between the increase in medical costs over the past fifty years and the increasing percentage of medical costs that are paid for by insurance:


Notice that as the percentage of health care costs paid directly by patients has declined, the cost of health care has increased. As Stossel states:

This interesting chart from the Goldwater Institute illustrates one of the main reasons health care costs have been skyrocketing: Americans have been paying less and less out of their own pocket. It's basic economics that the less you have to pay for something, the more of it you'll use. And yet the “reformers” keep pushing for MORE health insurance.

And this makes intuitive sense.

In a normal market, sellers want to charge as much as possible. But that instinct is held in check by the need to attract buyers, who want to pay as little as possible. When millions of willing buyers and sellers haggle over price, the resulting consensus tends to set the price most efficiently.

But under our current system, buyers (patients) don’t deal directly with sellers (doctors). Instead, buyers pay a small flat fee, and leave it up to a third party (the insurer) to handle the negotiations and the payments. Thus, the laws of supply and demand don’t work properly. Indeed, what you have is called a “moral hazard,” because the patient wants as much care as possible and doesn’t care what it costs, because they don’t pay for it.

Moreover, patients have no incentive to keep the costs of treatment down: why find a cheaper lab to run your lab work, or why run the MRI without contrast, or why engage in preventative care when it doesn't cost you anything not to bother? And that is the problem. No other field accepts such a pricing model.

The Solution -- Make Health Insurance Like Car/Home Owners Insurance

So do we ban insurance? Absolutely not. Not only does CommentaramaCare firmly believe in letting people satisfy their own consumer choices, but insurance is necessary to prevent serious medical conditions from bankrupting people.

Instead, we need to remake health insurance along the lines of car insurance or home owners insurance, so that people again begin to care what their treatment costs.

Thus, CommentaramaCare proposes encouraging Americans to abandon their current insurance in favor of obtaining a quasi-catastrophic policy that kicks in once a person has spent $5,000 on health care during the year, and which would cover all expenses thereafter through the end of the year.

Such a plan would give people an incentive to keep their costs down to reduce the amount of the $5,000 that they pay. But at the same time, it would also ensure that no one would be bankrupted by a sudden, serious illness.

What Would This Cost The Average American?

Right now, the average American spends $7,500 per year on health care. As just mentioned, we are proposing a deductible level of $5,000. Ergo, if the cost of the insurance works out to less than $2,500 a year, there will be no net cost increase to the average person.

My sampling of catastrophic plans has found that most plans currently run between around $100 per month to $200 per month, i.e. $1,200 a year to $2,400. Therefore, even if we take the high end estimate, the average American would save $100 a year under this plan.

And keep in mind, this assumes that you have more than $5,000 in medical bills during the year. Anything less than that will result in direct savings to the individual. Thus, a person who has no medical bills at all during the year, would save $5,100 over the current average. Likewise, a person who was on a flat rate plan (like the one discussed in the last article) and who had only routine medical issues, would have yearly medical expenses of only $3,600 ($200/month insurance + $100/month flat rate plan). This is less than half of the current average cost.

Further, it is more than likely that the cost of such insurance will fall significantly when the rest of the reforms kick in. As you will see in the summation, the savings under this plan could be vast. Presumably, some portion of that would be reflected in a reduction in the cost of insurance.

How To Encourage People To Switch Over

Now, it is easy to say, “encourage people to rethink”, but how do you actually get people to switch over to the new system? To encourage (NOT FORCE) people to make this switch, CommentaramaCare proposes:

• Making the premiums on the catastrophic policy tax deductible to the individual (I would suggest treating them like an HSA);

• Making medical debts non-dischargeable in bankruptcy; and

• Making the first year deductible limit $10,000 rather than $5,000 to discourage people from waiting until they are sick to sign up for the insurance. (This would be implemented in the future, after the plan is established and people had the chance to switch over.)

Moreover, to encourage (NOT FORCE) people to give up their current plans, which are distorting the pricing mechanism in the current system, we also recommend eliminating the tax deductions for any coverage that exceeds the catastrophic coverage. This would not prevent individuals from obtaining coverage that is superior to the catastrophic coverage, it simply won’t be tax deductible.

How Such Policies Would Be Created

Now comes the tricky part. To make this plan work, such insurance must exist. In fact, three things must be guaranteed:

• That such catastrophic plans, which cover all expenses after the $5,000 deductible, will exist and will be generally available to anyone who wants such a plan;

• That persons with pre-existing conditions can obtain such coverage, and at reasonable rates; and

• That providers cannot terminate individuals who experience high medical costs.

This could be achieved by imposing such mandates on the insurance industry. However, CommentaramaCare opposes mandates because people should be free to buy whatever insurance they want, on whatever terms they wish. Imposing coverage requirements violates that principle. It also could be achieved with a government-run option, but CommentaramaCare opposes that for obvious reasons.

So we favor a third alternative. Under this method, the federal government, through the Health Care Administration (“HCA”), will procure such insurance and make it available for the public. Here’s how this would work:

The HCA will divide the United States into geographic districts. For each district, HCA will open a series of $0 contracts for competitive bidding. A $0 contact is one under which the government promises no money. Any insurer in the country could bid on any of these contracts, without regard to state licensing requirements (subject only to obtaining HCA certification).

These contracts will require any insurer who submits a bid to agree to cover a certain number of people (specified by the insurer) at a fixed price (specified by the insurer). The contracts will specify the precise coverage terms, which would include the requirements detailed above, plus whatever other coverage requirements are deemed necessary by the HCA administrator to effect the coverage plan.

By bidding, insurers agree to accept any person who signs up for the plan (up to the number of persons specified in the insurer's bid) at the fixed price, without regard to age or medical condition or any other factor (although family plans should be allowed).

HCA would then accept all conforming bids, and would publicly list these providers and their fixed prices. After that, any member of the public can contact these providers directly and sign up at the fixed price bid by the insurer until that plan is full.

Here are the benefits of this plan:

• This method ensures that anyone can get access to such insurance, regardless of employment status or pre-existing condition;

• This method reduces insurance costs through the use of competitive bidding and large scale pooling;

• No money is given to the government under this plan; and

• Private insurance will continue to exist. Indeed, not only does this plan rely on private insurers, but it leaves private insurers free to offer superior or inferior (and presumably cheaper) coverage as they see fit. If you want more coverage than the minimum, you can buy it. If you want less coverage than the minimum (e.g. a $10,000 deductible or a plan with co-pays or limited coverage), you can buy that too. You can even continue under your current plan and ignore the new system entirely. And since there is no government-subsidized insurance to compete with, the government will not crowd out private insurers.

(** The government currently does something similar for its own employees.)

Saving The Government A Fortune AND Expanding Coverage

This biggest surprise in this program comes in the remake of government insurance, i.e. Medicare/Medicaid/Tricare, etc. CommentaramaCare proposes eliminating these programs entirely and replacing them with one program to be run by the HCA. This can save the Government a fortune, if done right. . .

Rather than trying to develop a separate insurance plan for these recipients, as is currently done with Medicare/Medicaid, etc., the HCA should use the money that would have been spent on such insurance to instead (1) buy these recipients commercial catastrophic insurance, as just discussed, and (2) provide some level of subsidy for the $5,000 deductible (depending on income-level, age, military status, etc.).

Consider this. . . if the cost of the new catastrophic insurance remains around $2,400 annually, and (for the sake of argument) the government chooses to pay the full $5,000 deductible for each of these recipients, and they all use the full $5,000 deductible, it would cost the government $7,400 per recipient to pay all of their medical expenses during that year. The government currently spends $11,093 per Medicare/Medicaid recipient. Thus, by switching to this plan, the government could save $3,700 per recipient. With 81 million recipients, that means a total saving of $299.7 billion dollars -- and this is an annual figure, not a fake 10 year projection.

Moreover, still assuming the projected cost of $7,400 per person, this means that the government could ADD another 40.5 million people to this program without spending a penny more than is currently spent. Since only 7.3 million Americans truly can’t afford insurance, this allows the government to extend coverage to those persons and still generate cost savings of $245.7 billion per year!

(** This assumes full 100% subsidies and full use of the program -- thus, the savings figure likely will be higher. It also does not include any cost savings from eliminating vast amounts of bureaucracy at the state and federal level.)

Finally, to make the deductible subsidy work, HCA would pay the insurers directly on behalf of those receiving subsidized policies, and HCA would issue a health insurance credit card directly to the covered individuals. Those cards would allow the holders to acquire only health care products and services (using product codes). And depending on the level of income subsidy desired, each card could contain any amount up to $5,000.

Illegal Aliens

Lastly, on the issue of illegal aliens, it is clear that these costs should not be borne by the states or by individual providers, as only the federal government has the power to stem the flow of illegal immigration and to deal with foreign governments. Thus, CommentaramaCare proposes (1) that the federal government fully reimburse providers for the costs of providing such care, and (2) that the federal government seek to charge the home countries of these aliens for the costs they have incurred.

CONCLUSION

Without forcing anyone to participate, without raising taxes, and without endangering anyone’s current plan or private insurance, this plan should reduce the cost of medical care within the country, reduce the cost of insurance to individuals, reduce the cost of providing care to persons on government assistance, and ensure that everyone in the country who wants coverage can get it at reasonable rates.

For further analysis, particularly related to costs, see the next post. . .

[+] Read More...

[-] Collapse Post...

RTRP: CommentaramaCare Part II, Reforming The Medical Profession

PelosiCare is dead. . . for the moment. But CommentaramaCare lives on! In the first part of our proposal, we took on tort reform. Today, we reform the medical profession itself.

The medical profession needs to be reformed (1) to improve oversight and ensure quality control, (2) to decrease the number of preventable medical injuries, (3) to decrease the number of medically unnecessary tests/procedures, and (4) to reduce costs.

To a degree each of these goals is related. As noted before, the primary factor in causing health care costs to skyrocket is over-treatment. The primary cause of over-treatment is lack of knowledge of the standards of care. Lack of knowledge of the standards of care also contributes significantly to the large number of preventable medical injuries. Improving oversight over the profession can lead to improved compliance with the standard of care and can reduce the number of preventable medical injuries.

Thus. . .


Reform One: The Federal Medical Board

CommentaramaCare proposes federalizing the oversight/regulation of the entire health care profession (doctors, nurses, psychologists, therapists, hospitals, etc.) under a new Federal Medical Board.

Right now, the medical profession is regulated by individual states. To practice within a state, a provider must obtain a license from that state’s licensing board and then comply with whatever regulations/requirements that state imposes. This system suffers the following defects:

• This system makes it very difficult and expensive for providers to move between states. This disrupts the ability of suppliers (doctors) to satisfy demand (patients), limits the available treatment for “disfavored” or "medically under-served" regions, and prevents creative business structures that could expand patient options.

• State boards are under funded, lack the personnel to conduct effective investigations, and often lack the expertise to promulgate effective regulations or enforce them consistently.

• State boards are highly politicized. Indeed, statistically, doctor disciplinary rates vary from state to state far beyond what one would expected from a “fair” system.

Moreover, anecdotally, I have seen hospital administrators admit (under oath) to holding up the expansion plans of competing hospitals by filing unwarranted objections with state regulators. I have seen license applications delayed or denied to protect local interests from competition. And I have seen medical boards allow highly dangerous, but politically-connected doctors to continue practicing unsupervised, while simultaneously revoking/suspending the licenses of out-of-state providers for minor infractions.

Thus, state regulation should be replaced entirely by one, consistent federal regulatory scheme to be organized under a Federal Medical Board (“FMB”). The FMB will have three functions: (1) medical licensing, (2) establishing standards of care and best practice guidelines, and (3) regulating medical education:

1. Medical Licensing

The FMB will be charged with handling all aspects of medical licensing. To that end. . .

• The FMB will set up expert panels (one for each field of medicine: doctors, nurses, psychologists, etc.), who will establish standards for issuing medical licenses.

• A second set of expert panels will review license applications. If a candidate satisfies the requirements, that candidate will be granted the relevant license, allowing them to practice anywhere within the United States.

• A third set of panels will conduct disciplinary proceedings. This panel will have the power to investigate all complaints against providers, to conduct hearings, and to discipline providers as needed.

All disciplinary proceedings should remain confidential unless the provider is disciplined, in which event the details should be made public. To encourage full participation, all licensed providers will be obligated the report any violations of the standard of care (as previously discussed).

All panels will consist of five licensed professionals from the relevant profession, i.e. doctors, nurses, etc. (except for the disciplinary panel which also will include one expert from another medical profession and one layperson) -- no lawyers, no politicians. All panel members should serve three year staggered terms, appointed by the President and approved by the Senate, to reduce the ability of any one administration or Congress to influence the panels.

2. Standards of Care/Best Practices Guidelines

Standards of care represent the minimum level of care that physicians should provide to patients in a given situation. Several studies have shown that providers often do not know the appropriate standard of care. This is the primary cause of both under-treatment and over-treatment.

Right now medical standards are essentially set by juries after the fact. CommentaramaCare proposes using another set of expert panels, again within the FMB, to establish standards of care in advance for each aspect and speciality within the medical profession, e.g. nursing, GPs, cardiologists, OB/GYN, etc.

These panels would have the power to hear proposed standards, to investigate those proposed standards, and to establish those standards after public hearing, where a broad consensus exists within the specific field of medicine that the relevant standard of care represents the generally accepted method of treatment.

If no consensus exists, the panel should refrain from declaring a standard, though it may instead issue a best practices guide for educational purposes.

When a standard is issued, doctors may treat that standard as a legal safe harbor. In other words, if they comply with the standard, they will know they cannot be sued for failing to provide adequate care. Thus, for example, if the standard calls for doing an MRI, a patient could not sue the doctor for failing to order a dozen other tests that might also have found the problem, but which are not required by the standard.

However, it must be stressed that these standards represent only minimum levels of treatment and, as such, do not limit the types of treatment that can be provided. In other words, just because a standard exists, does not mean the doctor is prohibited from providing additional treatment. Thus, in the MRI example above, the doctor could order those dozen other tests if the doctor believed they were appropriate.

3. Education

Finally, the FMB would be responsible for the regulation of medical education. This encompasses two aspects:

• First, the FMB will be responsible for disseminating all standards and practice guides to providers. It will also implement and regulate continuing medical education and training.

• Secondly, the FMB will be responsible for certifying medical schools as offering acceptable programs for licensing candidates. It will also be charged with studying (1) whether the current system trains providers adequately, and (2) finding ways to lower the cost of medical education to students.

Reform Two: Alternative Business Structures

CommentaramaCare also proposes freeing providers to arrange their business and billing practices in more creative ways. Right now, doctors are often rigidly controlled by state regulation, which prevents them from offering new and innovate ways to provide better care at lower cost.

For example, last year, I discovered a local doctor who has done something innovative. He decided that he was wasting too much effort dealing with billing issues. His response was to calculate his monthly costs, estimate his number of patients, and offer a plan whereby he charges a flat monthly fee (well below $100) to anyone on the plan. Under the plan, the patient can see the doctor any number of times in that month, free of charge. Moreover, any procedures that can be conducted within the facility (e.g. cultures, blood tests, etc.) also are free of charge, as are certain generic medications (others are provided at cost).

This innovative plan has proven highly profitable to the doctor, has saved me a fortune, and could probably dramatically cut the costs of preventive and run-of-the-mill health care in the United States. But here’s the catch.

When this doctor first opened his doors, he was immediately shut down by the state because local insurers complained his flat monthly rate constituted insurance. He was even criminally charged twice for selling insurance without a license. When he finally beat those charges, other local doctors brought complaints against him with the state medical board, which took another year to resolve. Now he has a run-away success on his hands, but it took him two years and several hundred thousand dollars in legal fees to break through the hurdles put in his path. (His attempts to franchise the idea to other states have met similar resistance.)

By eliminating the state regulations that local interest groups use to tie up their competitors, CommentaramaCare hopes to free doctors to come up with innovative new ways to run their practices -- like flat rate plan or others not even considered at this point.


Reform Three: Open Pricing/Single Bill

Finally, to control health care costs, we need to allow the disciplines of supply and demand to function (more in next article). To achieve that, buyers must be made aware of the prices they will be charged. This requires two reforms:

• First, we must require open pricing. In other word, providers must make available to any patient or potential patient, in advance, a price list for all procedures that they offer, so that potential patients can compare providers and seek competition. Right now, patients don’t learn the cost of procedures until well after the procedure is finished (if ever).

• Secondly, we must end the virtual shell game of allowing multiple providers to bill separately for their involvement in the same procedure. If you have an operation right now, you will be billed separately by the doctors, the hospital, the radiologists, the anesthesiologists, etc. Requiring one joint bill per procedure, not only is necessary to allow patients to accurately assess the costs (a necessary ingredient for competition) but likely will also cause providers to look for lower cost suppliers/partners or to seek more competitive rates.

Conclusion

Taken together, these reforms should (1) improve the quality and consistency of oversight, (2) improve compliance with the standards of care, which should decrease the incidence of over-treatment and under-treatment, and reduce the numer of preventable medical injuries, and (3) reduce medical costs by allowing market discipline and innovation to restructure the doctor/patient relationship.


[+] Read More...

[-] Collapse Post...

RTRP: Health Care Reform, Tort Reform

As we wait for more details to emerge about Obamacare, let's talk about reforms that can actually fix the problems with our health care system. . . call it CommentaramaCare.

Over the next three or four posts, we will lay out the entire reform package. Today we begin with tort reform. Next time, we’ll address structural reforms for the medical profession. Then, we’ll talk about the coverage plan and the program’s costs. Read on. . .

Tort Reform

As we’ve discussed, tort reform is not THE answer to the problems with our health care system, but it is necessary. With that in mind, CommentaramaCare proposes the following:

1. Health Care Must Be Federalized

Alright, calm down, nobody said “nationalize.” We said “federalize.” There is a big difference. Nationalize means to take over the industry. Federalize means to subject the industry to federal regulation rather than state regulation.

Even though health care in the United States accounts for 16% of our GNP (with the federal government spending the lion’s share of those dollars), health care is basically regulated at the state level -- though there are some federal requirements. This means that our health care system is run by fifty different regimes, each with different rules and different interests.

This complex framework of state regulations imposes significant administrative costs on providers, makes it extremely difficult for providers to move between the states, and is highly susceptible to manipulation by local politics -- not to mention that the government’s health care bureaucracy is duplicated fifty times.

States have shown that they are poor managers of the health care system and programs like Medicaid are breaking their budgets, even with federal support.

The only way to fix this is to federalize health care, to remove states from this process. Under the commerce clause, Congress has the power to regulate the health care industry. When Congress speaks, it can supplement state law or it can replace state law in its entirety. In this instance, Congress should replace state law entirely by passing one set of regulations for health care providers. In this way, the complex net of regulations would be eliminated, the burden on state coffers removed, and medical providers would gain the same freedoms that virtually every other industry in America enjoys.

Moreover, if this is not done, then none of the reforms proposed here can be effective because state law would continue to dominate.

Federalizing also will allow Congress to require that medical malpractice actions be brought in federal court. Unlike federal courts, state courts are subject to intense political pressures. State judges often run for election, and those that do require the financial support of local organizations like trial lawyers or hospital groups. Federal judges, by comparison, are appointed for life (hence no need to satisfy contributors) and are generally considered to be higher quality judges. Similarly, federal juries are drawn from much larger pools and thus are less likely to be subject to local influence.

2. Stopping Bad Lawsuits

Now that we’re federalizing health care, let’s talk about specific changes to tort law. The first goal of tort reform should be to discourage bad lawsuits. In that regard, CommentaramaCare proposes:

1. Requiring Certificates of Merit: Prior to filing any malpractice suit, the plaintiffs must obtain a certificate, under oath, from a medical expert of similar or greater qualification to the defendant doctor(s), stating both that the medical expert has reviewed the record and has concluded to a reasonable degree of medical certainty that the defendant doctor failed to satisfy the appropriate standard of care. Without such a certificate, the plaintiff cannot file suit. In my experience with medical malpractice suits, this requirement more than any other eliminates bad lawsuits.

2. Fee Shifting: Fee shifting (making the loser pay the winner’s attorneys fees) actually does little to deter bad lawsuits. Indeed, it is common knowledge among plaintiffs’ attorneys that even where fees are shifted to losing plaintiffs, they are rarely paid. Nevertheless, fee shifting is a good idea, because it does have some deterrent effect and because it is fair to legitimate plaintiffs whose awards are often largely eaten up by attorneys fees.

3. Stopping Outrageous Awards

The second goal of tort reform should be to reduce outrageous awards, without reducing the ability of plaintiffs to obtain fair compensation for their injuries. In that regard, CommentaramaCare proposes:

1. Eliminating Punitive Damages: Punitive damages are intended to discourage truly egregious behavior that affects society at large by allowing juries to punish defendants far beyond the specific harm caused in that instance. However, there is little reason to believe that punitive damages encourage doctors to take greater care, and there are other mechanism in place to punish doctors for misconduct. Thus, there is no justification for continuing to allow punitive damages and they should be banned.

2. Capping Non-Economic Harm: Non-economic harm is better known as pain and suffering. Capping these damages at a reasonable level is a decent way to prevent juries from being swayed by emotion. However, you need to establish the cap level carefully.

If the cap is too low, old people and poor will be unable to find lawyers, because their economic harm will be too small to justify the expense. A medical malpractice suit typically costs a plaintiff’s attorney around $100,000 (out-of-pocket) to bring to trial. If there are few economic damages and the non-economic damages are capped around $250,000, as they are now in many states, it is not worth the risk for the attorney to take the case.

Moreover, you must ask if this cap is just. Consider the case of a 20 year old computer programmer who loses both legs as a result of medical malpractice. Because the programmer does not need his legs to continue in his profession, there is limited economic harm. Thus, his damages will primarily be pain and suffering. Would $250,000 compensate this person for being legless the rest of his life?

For these reasons, the cap should be set at $1,000,000.

3. Bad Faith Surcharge: To counter balance the changes above, judges should be allowed to impose an additional sanction of up to 20% of the final award, if the judge finds that the insurer denied the medical malpractice claim in bad faith. This is necessary because certain medical malpractice insurers have begun refusing to settle any claims, even where the doctor wishes to settle, because they believe they benefit from litigating all claims. This clogs the court system, wastes time and effort, abuses injured plaintiffs, and needlessly harms doctors. And this will get worse as the potential verdicts shrink in size.

4. Removing Legal Considerations From Medical Decision Making

The third goal of tort reform should be to remove the threat of lawsuits from the day to day practice of medicine -- reducing the need for so-called “defensive medicine.” In that regard, CommentaramaCare proposes adopting each of the defenses commonly allowed in common law, plus specifically guaranteeing the following two by statute:

1. Standard of Care: As will be discussed in the next article, a new Federal Medical Board must be established to regulate the medical profession. That Board will be responsible for establishing national standards of care for most conditions. Where such a standard is established, doctors may not be sued for failing to go beyond that standard.

2. Failure To Comply With Recommendations: If a patient refuses to comply with a doctor’s order/ recommendation, the patient may not base their suit in any way on that order/ recommendation; the doctor, however, may raise the patient's refusal as a defense (where relevant). In other words, if the doctor recommends a test/ procedure and the patient does not have it done, the patient cannot use that test/ procedure to prove malpractice, but the doctor can use the refusal to prove that the patient interfered with the doctor's ability to render adequate treatment -- although, such refusals will need to be noted in writing in the patient’s records, with a clear explanation that the patient was advised that the particular treatment or test is required by the standard of care.

5. Reviving Hospital Oversight

The final goal of tort reform should be to reconstruct the relationship between doctors and hospitals, which has been severed by prior tort reform.

As we noted previously, hospitals have lobbied states to change the law to allow them to avoid liability for the actions of doctors who practice at the hospital by treating the doctors as independent contractors.

This is a form of protection that other fields of commerce do not share, and it has destroyed the role of hospitals in overseeing doctors. In fact, under the current system, hospitals have an incentive to keep doctors at arms length and to avoid taking any role in supervising those doctors.

To reverse this, hospitals must again be held jointly responsible for the actions of any provider who practices within the hospital. This change will give hospitals an incentive to again oversee doctor conduct. This should lead to increased oversight by hospital staff and likely will result in physicians again being made into employees of the hospital, which will result in cost savings (to be discussed in next article).

Moreover, to encourage hospitals to conduct thorough oversight, we must remove the fear that their efforts will be used against them. Thus, the work of any oversight committee must be made inadmissible at court and not discoverable by patients/plaintiffs. In other words, it remains confidential.

However, to obtain that protection, the results of these reports must be disclosed to the new Federal Medical Board, which will oversee medical licensing. This will encourage full voluntary disclosure. (Federal Medical Board records also must be treated as inadmissible and not discoverable by patients/plaintiffs.)

Finally, in addition to protecting records from patient suits, the oversight committees/hospitals must be granted immunity from suit by the doctors they oversee and/or discipline. This is to prevent physicians from avoiding discipline by threatening to sue the committee or hospital.

Conclusion

Taken together, these reforms should (1) greatly reduce non-legitimate suits, (2) prevent outlandish jury awards, (3) greatly reduce the practice of defensive medicine, and (4) revive the system of supervision, thereby reducing medical errors.
[+] Read More...

[-] Collapse Post...