The American Health Care Plan
By John A. Lanzalotti, M.D.
The American Health Care Plan is a coherent strategy for comprehensive health care reform that integrates an economic plan which will improve access to affordable insurance and pharmaceuticals / prescription drugs, and a plan for lowering costs, improving access, and strategies for providing equitable care, making insurance portable, medical liability reform plan, medical education reform plan, a plan for improving medical outcomes and medical practice delivery reform. It is based on a financially and actuarially sound approach. Even though most would like our reform plan to be based on a demonstrated approach, there is no way to achieve efficiency, access to all, affordability and portability in our current paradigm. The economic plan which is designed to provide a major systemic transformation to the health care market that will result in a new patient centered, consumer driven market based system that is the keystone without which reforms in the other areas would fail.
The economic plan involves a market reform strategy that seeks to create a functional market in American health care where every American has affordable access to personally owned, portable, individually underwritten health care insurance and an ability to pay directly for all medical care personally at market price. We seek to achieve this goal with a free market approach rather than a top down government controlled and financed plan. We believe that we have the best health care in this country. However we need reform of certain aspects to make it more efficient, affordable, accessible and equitable. Our plan targets the inefficiency of our current insurance and financing design as well as our dysfunctional delivery system. We believe that correcting this inefficiency is the best way to make insurance and care accessible and affordable to every American and retain what is best about our system of health care delivery. Establishing a market in health care that is free of government regulation and interference is the best way to provide the best quality care for the lowest price. Establishing a free market in health care will will reduce costs dramatically and create a much more efficient system that is cost effective. It will also eliminate the current hostile atmosphere to innovative ideas that will produce efficiency and cost effectiveness. It will produce an atmosphere where many new non-government solutions to our social problems will arise. This is important because we need other non-market fixes to provide for the poor, the elderly and those with pre-existing conditions or chronic illness. Our current health care system uses government subsidies to pay for the full cost of the care of the elderly , the poor, and those considered uninsurable with pre-existing conditions and then shifting the cost to the tax payer. This is extremely inefficient and the least cost effective way to solve these vexing problems. However even if the economic reforms of the AHCP were used in our current government subsidy system to reform the financing and delivery of health care, it would reduce costs dramatically and increase efficiency and cost effectiveness. It will take political policy to ultimately determine how we will deal with the elderly, the poor and the uninsured and uninsurable. However, the AHCP does not dictate political policy. I don't agree that top down government subsidy is the best way to cover these costs. There is no way to predict what new and innovative ideas will arise in a free market and the new atmosphere that it will bring which is conducive to innovation. Also many of the current poor won't be poor in a free market which will provide the atmosphere for new jobs in the private sector to arise.
Our plan retains what works in our current system and adapts that traditional system to the explosion of knowledge, information, and technology that has arisen in the past fifty years and corrects key design areas that are currently creating perverse incentives, fraud, and market failure in the finance and delivery of health care making it optimally efficient and cost effective. The economic plan is specifically designed to lower and control costs on an ongoing basis. It involves a strategy for market competition that will operate at the doctor patient level based on both price value to create a power neutral, functional market in health care. This is necessary if every American is to able to achieve sufficient purchasing power to be able to have affordable access to health insurance and the ability to pay for medical care that he chooses together with the help of his physician without the help of insurance companies or the government and pay full market price for that health care.
The AHCP plan utilizes an expanded “health care account”, a lifetime savings asset, healthcare payment, and insurance premium payment account funded from a variety of current sources by a defined contribution of the money used to pay today’s current insurance premiums. Under this plan you will pay 25% of today’s insurance premium for your redesigned insurance and keep 75% of what you pay to the insurance company every year in a tax free account that you own. This 75% annual contribution will be used to pay for all routine care, discretionary care and care that is price sensitive or price elastic. It can also be used by every American to purchase long term care and disability/bad result insurance at a very low premium because so many Americans will purchase it.
This account is fortified directly by lump sum insurance payments made to the patient instead of to the providers. The patient will pay all medical and health care expenses directly from the account via an electronic debit card. The plan targets and eliminates all reversible cost drivers and the perverse incentives that are a part of our current health care finance and delivery system which is a third party payer, procedure driven, pre-paid health care system not insurance which deals with risks. This lump sum payment represents an appropriate budget designed by specialty physicians to cover all expenses arising from the insurable event and giving the patient enough money to pay for this care at full, fair market value. This payment is designed to pay for appropriate episodes of care and not a series of disorganized procedures. This payment design does not involve the government, does not expand government control or use government subsidies.
The economic plan introduces correctly designed incentives with checks and balances as well as competition based on both price and value to the health care market that will keep costs and prices low and quality of care high. The plan calls for the creation of a much more efficient and affordable type of health care insurance that pays into one’s asset account when an expensive insurable event occurs without out of pocket deductibles, co-pays and waiting periods.
Other advantages are that the unused money in your account can be invested, earn interest and roll over from year to year to expand your choices in the health care you select without having to be rationed by the government or the insurance company. The safest investment currently, is in “T” bills. Later in a free market this may change. This means that all 300 million people in this country will be saving money which will decrease our trade deficit. A higher savings rate generally corresponds to a trade surplus. A lower savings rate creates a trade deficit. As Warren Buffet has said "The U.S trade deficit is a bigger threat to the domestic economy than either the federal budget deficit or consumer debt. Right now, the rest of the world owns $3 trillion more of us than we own of them." This savings can help pay off the national debt.
This reformed insurance design uses doctor designed and developed protocols, based on the actual care of real patients to determine the appropriate prospective, lump sum payment to be made to a patient’s personal account giving the patient an appropriate budget from which to pay directly for all anticipated expenses associated with the insurable event. Each protocol is comprised of various complexity levels based of the severity of the primary illness or injury, the necessary procedures and the presence or absence of any co-morbidities. Each complexity level is tagged to a lump sum pay off amount providing the patient with the necessary funds with which to pay their medical bills for all care associated with that event.
The protocol is used by the insurance company to determine the appropriate payment only. It does not interfere with the doctor’s practice of medicine or dictate the doctor’s charge for his services. The use of protocol insurance precludes the insurance company from having to micro-manage every procedure done by every physician. It also avoids an unending, continuous payment of money form the insurance company for each procedure performed at every visit to the provider.
Each payment gives the patient an appropriate amount of money for the particular complexity of their illness or injury so that they have an appropriate budget from which to pay for all of their non-discretionary care at market value. Another advantage to this system is that this computerized system eliminates the need for the doctor to have to file claim forms to get paid. He can also eliminate several superfluous staff members that now handle all of paperwork associated with filing claims. This means less overhead for the doctor, lower doctor fees, and more time to spend with the patient.
The plan also calls for high risk pools. High risk pools is an actuarially sound way to lower the insurance premium for the chronically ill and people with pre-existing conditions without driving the insurance company out of business. They function similarly to health care insurance for those Americans that are chronically ill who have predictably high medical expenses year after year and who lack sufficient resources to finance them, have pre-existing conditions or are considered un-insurable by setting up catastrophic claims reinsurance pools. Under such a model, all insurers in a state or region would yield their catastrophic claims to the pool, and the cost of the pool would then be funded out of a per-covered-life assessment on all insurers. In that way, the burden of high-cost cases would be spread evenly among all carriers and insurers, who would have strong economic incentives to manage these cases, and not simply dump them on the taxpayer like they do now. In addition, there would be a private source who would administer a partial premium subsidy to keep premiums affordable for the non-working poor, the poor elderly and those with chronic illness and pre-existing conditions. This subsidy would cost less than the money the tax payer is spending now on the cost shifting and direct care for this group. By having the insurance fortify one’s asset account and having the patient pay all health care expenses from their account does not shield the consumer from the true costs of services the way third party payment does today which often results in inappropriate over-utilization of expensive high tech procedures.
The unique element of the economic plan which differentiates The American Health Care Plan from other “market” plans are these protocols. The protocols have several very important functions. First, they allow us to move from third party procedure driven insurance payments to a lump sum payment without requiring expensive legal contracts. Lump sum payment encourages the physician to assume total integrated management of the patient’s problem. This will discourage the fragmented, episodic delivery of procedures by various doctors associated with today’s system. Second, they allow us to move to the individual insurance market from group insurance removing the burden of managing health care from employers and eliminating job lock to create true portability for the consumer (take your insurance with you when you change jobs and not lose it the way it is now). The protocols obviate expensive administrative costs traditionally associated with the individual market. Third, the protocols allow us to use medical experience and broadly accepted standards by the medical community of what constitutes good health care and define episodes and the relative value of that care. Fourth, these protocols allow us to reduce administrative costs from 31% to less than 2%, showing significant savings. This means that The American Health Care Plan can be started today in the private sector by companies that are self insured under ERISA and at a minimum will be able to show significant cost savings with no changes in current law. This will validate the innovative The American Health Care Plan. The Plan will then be based on a demonstrated approach.
This economic plan not only creates a functional and responsive market in health care but addresses the continued absence of personal choice and control of health care options that exists in today’s dysfunctional market. It provides a more aggressive, comprehensive and fundamental approach to reform which is needed.
The plan also corrects the dysfunction of the health care market that is currently distorted by the government-health care industry complex that currently dominates the health care market place. It deals with the wealthy and powerful stakeholders who dominate the health care market and levels the power of the playing field through a design of the market institution. De-regulation of the market does not mean that the market runs wild with no oversight. It means that instead of layers of opaque and ineffective government regulation this plan uses a market institution. This market institution is nothing more than the rules of engagement that all market participants design and agree to. Our plan creates rules of engagement by designing incentives with checks and balances that are win-win for all market participants and will support the doctor-patient relationship rather than dominate it. Competition is introduced to both the health insurance industry, the hospital industry and the pharmacy industry. This means lower prices to the consumer. We are calling for repeal of the McCarran-Ferguson Act (1946) to allow purchase of insurance across state lines and make health insurance subject to interstate commerce and the anti-trust laws. We are also calling for legislation which will require all insurance carriers to provide the consumer with an accurate ratio of value per premium dollar. This will cause intense competition among insurance companies that will lower costs and prices and increase quality. It will make the competition be based on both price and valve.
The American Health Care Plan addresses the changing role of the physician as well, from a seller of reimbursable procedures to that of a trusted professional whose job it is to exam, to diagnose and to treat illness and injury and within the context of appropriate treatment, provide the patient with information concerning the benefits and risks as well as the marginal value of various price options so that the patient can make informed decisions along with their doctor concerning their health care. The role of the physician is that of a broker of services rather than a seller of procedures as it is under the current paradigm. This will introduce the proper type of competition and incentives into the doctor -patient relationship that will produce high quality health care and not require many physicians in any one location or cut-throat competition and doctor shopping. This will make competition be based on value as well as price. It is a much more nuanced way to use our expensive and valuable physician resources. It is always better to change behavior through incentives than to trash the career of a physician that required a lot of money and time to produce.
The American Health Care reform Plan recommends the use of electronic medical records to reduce the number of mistakes as well as redundant costs from the unnecessary duplication of medical testing. It will also eliminate the filing of insurance claim forms when used with the software that is part of the American health care plan.
The Plan also addresses information technology. The plan calls for the establishment of a non –governmental and independent Institute for Pharmaceuticals, Technology, and Outcomes Assessment to systematically evaluate new drugs and technologies and quantify their health benefits in relation to their costs to provide legitimate information. In this way the physician can determine if the marginal benefit is justified by the marginal cost. Make these evaluations available to all practicing physicians at the point of service through computer access.
The Plan also recommends a re-structuring of the pharmaceutical market so that there is less duplication of the very expensive development of new drugs, more competition among the wholesalers of prescription drugs and the use of economies of scale with increased buying power to reduce costs and elevate quality of all medications.
The Plan recommends reforms in the training of physicians that eliminates the high Medicare costs that currently funds graduate medical education and transforms the residency training process from being an extended hazing period to one of efficient training of the skills, attitude and knowledge basic to being able to meet the needs of the patient.
Medical liability reform involves addressing the four major problems today with medical malpractice suites:
1. Patients aren’t adequately protected from medical malpractice,
2. The fact that most patients don’t have the money or insurance to pay for health care required when there has been a bad result of medical treatment whether it is a direct result of malpractice or not. Today the patient has no recourse but to sue the doctor.
3. The other major problem that exists is that as a result of the high costs of defending malpractice cases most of which the doctor wins, the medical liability insurance premiums are rising dramatically forcing many good doctors out of practice. Many of the current proposals for medical liability reform that include limiting punitive damages, pain and suffering awards, attorney contingency fees, the jury’s role in determining the amount of awards, class action suites and the fault and non-fault based systems of alternative dispute, fail to address these three major problems adequately.
4. There too many lawsuits against physicians that have no foundation and should never have been filed. Most of the time these doctors win these cases or they settle but it ruins the doctor emotionally and financially in spite of liability insurance. 200 billion dollars is being spent on “defensive” medicine, practiced by doctors in an attempt to prevent a lawsuit.
The American Health Care reform plan proposes :
1. The use of the American Health Care Plan's economic plan to provide affordable access for all Americans to health insurance and health care services in conjunction with eliminating the collateral source rule and
2. Procedural safeguards to prevent specious cases from being started, costing money which begins with filing of the claim. In our current system having the plaintiff's attorney certify to the court that a malpractice action has been committed by a physician is like asking the fox to guard the hen house. We propose that we adopt a special health or medical court that would be primarily administrative, eliminating the adversarial system in Med Mal Practice. We recommend adopting a similar system that is used in the Exhaustion of Administrative Remedies Doctrine that currently exists in the Federal Tort Claims Act and apply it to med mal cases.
This would require a panel of court appointed experts acting at the discretion of the judge to determine if there is probable cause that a deviation from the standard of care occurred. The experts, who may choose to use objective surveys of large numbers of physicians to help determine the standard of care, and if there was a deviation, will determine whether it resulted in causation of damages.
Filing a claim would depend on the issuance of a certification from the panel that would serve as a jurisdictional prerequisite to begin the suite. The panel would also act in an advisory capacity to the judge who would establish parameters for the jury.
This administrative court would use various pre-determined categories representing ranges of award payments. The judge would give the jury discretion to award a payment only within a particular range category depending on the case.
This system would be fairer to patients, result in less expensive and much shorter litigation and eliminate specious cases quickly and provide consistent rulings on the standard of care from case to case so that precedents are set and that like cases are decided alike. Unlike the current system, where jurors determine the standard of care on an ad-hoc basis.
This plan will cut costs, it will save one trillion dollars in the first year. It will give every American sufficient purchasing power in health care and create equitable delivery. It will fix what is broken with our system and keep what isn’t. It will turn around the economy. It creates transparency in the system so that the powerful can’t siphon money off at the consumer’s expense. This plan can be started in the private sector instead of in Washington. It eliminates all of the bad incentives of the current system. It replaces them with good incentives. It creates a sustainable, functional free market in health care without government interference and corruption.