STRATEGIES TO ACHIEVE THE VISION a somewhat more detailed discussion _________________________________________________________________________________________________________________________
Strategy #1 REVERSE THE COST EXPERIENCE TREND
Current: Costs are increasing exponentially and outcomes have great variability. Future
: Average unit costs should begin declining and quality should become improved.
you wanted to summarize in one chart or graph that portrays what needs
to happen in health care it is contained within the Cost Experience
Curve, below. In
order to achieve the Vision, health care must go from experiencing
exponential increases in costs to having a positive cost experience trend similiar to most industrial sectors.
in health care should
be declining, not increasing, allowing prices and insurance premiums to
decline over time. Technology should contribute to this decline, not
cited as a contributor of the hyper-inflation. This will
only come about throughreintroducing "disciplining-forces" back into the health care market, including: economies of scale, better management,
selective use of labor-saving technologies, and systems integration.
Strategy #2 USE MARKET-BASED RISK-HEDGING INSTRUMENTS
Current: Third party payors, such as insurance, are used to socialize risk and induce cost shifting which distorts the market's functioning. Future: Use "health-futures-contracts" traded on a commodities exchange.
Traditional insurance needs to be supplanted with the use of futures contracts as an alternative to insurance. The current role of third party financial intermediaries puts small groups and individuals at a disadvantage and creates and unlevel playing field. Futures contracts would be a better way to hedge and lay-off risk in the health care
market-place; just as futures contracts are used to hedge risks in agriculture,
currencies, or other markets. A health futures commodities exchange needs be developed
along with a "health-futures-contracts" instrument.
Strategy #3 RATIONALIZE MARKET BY INTRODUCING DISCIPLINING FORCES
Current: Market is irrational because supply/demand is neutralized by role of financial intermediaries
Future: Reintroduce "rationalizing" behaviors of consumers and suppliers as market disciplining forces.
The health care market will not be considered "functioning" until the market, not individual players set prices. This strategy implies a shift back towards major medical plans with higher co-pays and deductibles to sensitize the consumer. Devices such as health savings accounts should be continued and expanded. It also demands that the oligopoly concentrations of power within financial intermediaries, multi-hospital systems and the doctor-guilds need to be challenged. Government can play the role of policeman and aid in disciplining the market in many ways; the best way is to create a level playing field.
Strategy #4 DE-REGULATE THE HEALTH CARE MARKET
Current: Government regulates by virtue of being largest payor, thereby precipitating cost shifting. Other payors damage the market through sheltering consumers and destroying the ability of the market to set prices. Future: All payors must strive to empower patients and doctors to behave rationally and get to a position whereby the "market-sets-the-prices".
Government, large employers, labor unions and insurors have created a paternalistic system of de facto regulation in which the market no longer functions. Prices are negotitated by an oligopolistic cartel, not set by the market. Consumers and suppliers are sheltered and buffered from market forces. Government should subsidize and use tax policy only to the extent of ability-to-pay and employers should contribute to their plans, not use health benefits as a negotiating chip. Financial intermediaries should insist on high co-pays and deductibles. Inefficient/low quality providers should be forced to exit the market and consumers should be penalized for not hedging their risks.
Strategy #5 EMBRACE A PHILOSOPHY OF DEFINED CONTRIBUTION
Current: Employer and other plaln sponsors are now on the hook for open-ended "defined-benefits". Future: Business and plan sponsors should only "contribute" to the funding of benefits based on the employee's ability-to-pay.
The current philosophy of defined-benefits and entitlement-by-right has created a dysfunctional health care system. Government, employers and insurors need to move to a system whereby contributions are made toward health benefits based on ability-to-pay. The right to health benefits must be traded off against personal responsibility for adopting a healthy lifestyle, acquiring insurance and being an informed consumer.
Strategy #6 SET UP A BAZAAR ALONG-SIDE THE CATHEDRAL
Current: Government research and laws are enabling monopoly of medical technology and knowledge.
: Public funding should be used to facilitate a public domain & creative commons of medical technology.
Most research into medicine and drugs is funded directly or indirectly by government. This enables health science centers to spin-off bio-tech firms and for-profit seeking drug companies and medical device manufactures to gain a strangle-hold on the market all the while financed by public monies. In the future, any research or development project that has had the participation of public monies should be put into a creative commons and fast-tracked into the public domain. This will invigorate market behavior rather than smother it.
Strategy #7 CHANGE THE HEALTH CARE MODEL CORRECTIVE==>PREVENTION BODY==>MIND/BODY/SPIRIT
Current: Major medical model focuses restoring health to the body after an episode. Future: Shift to a preventive model that is integrated with mind/body/spirit.
A hyper-inflationary medical model is consuming all of the oxygen in the room, leaving few if any resources for alternative treatment modalities and preventative care that would alter the paradigm. Only by putting an obese medical system on a restricted calorie diet and sensitizing the consumer to market consequences can the paradigm be changed. Over the next ten years a complete flip in the priorities between corrective medicine and preventive medicine needs to occur.
Strategy #8 REPLACE INFORMATION ASYMMETRY WITH TRANSPARENCY
Current: Purchasers and intermediaries lack information on costs and quality. Future
: System becomes highly transparent, eliminating asymmetries.
It is well known that everything from the role of medicine, to the evidence basis of practice, the costs, the quality and the wide variations in patterns are obscured and obfuscated by the paltry lack of information. Well functioning markets send continuous feedback and signals as to how they are doing. Rationalized markets depend on transparency and the elimination of information asymmetries to function. A more computerized, network system, along with mandatory reporting requirements, similiar to the SEC filing requirements will be necessary.
Strategy #9 LEVERAGE THE INTERNET AS A FULCRUM
Current: Systems within hospitals and financial intermediaries are local, use proprietary software and have non-standard data sets. Future: Transition to a Web-based model, using electronic medical record and info exchange.
The hotch-potch of systems and technology within the health care infrastructure has evolved organically over thirty years of home-grown and purchased off-the-shelf, vendor-supplied solutions. Players in the health care market cannot readily exchange information between systems and no central pool of data for meta-analysis exists. With the advent of the Internet, the micro-processor and hand-held digital devices it is now possible to develop a national network that is based on advanced communications technologies. This will have to be funded as a public-private partnership.
Strategy #10 ELIMINATE THE ABILITY TO COST SHIFT
Current: Large payors are able to impose discriminatory pricing and shift costs to less powerful players. Future: Payors should be forced to pay average unit prices based on commitments to volume.
A rose is a rose, whatever name you use. And cost shifting is discriminatory oligopolistic behavior and when it is done by government it imposes a hidden tax on sick people who pay the retail price of services. Therefore, it is highly regressive in nature. Payors need to pay average unit pricing based on their volume commitments, not after the fact, but upfront. This will introduce an incentive for financial intermediaries to become rational purchasers and direct their volume into more efficient providers, thus invigorating the market.
Cost shifting is a regressive form of taxation
Strategy #11 CULTIVATION OF A MORAL ECOLOGY-NEGOTIATE A NEW SOCIAL CONTRACT
Currently: Health care is increasingly viewed as entitlement Future: Mandate purchase of insurance and insist on reforms.
Providing health care as an entitlement is currently stalemated because of gross inefficiency of the economic system, but, also, because of the social, political considerations. If personal rights are to be redefined and new entitlements implemented on a sustainable basis, there must be a new social contract that calls for greater personal responsibility, an agreement to acquire health coverage, and be a rational, informed consumer.
ALLOW FORMATION OF CONSUMER HEALTH CARE COOPERATIVES
Currently: Consumers in a co-dependent relationship with plan sponsors. Future: Consumers could band together and create consumer-governed/owned health plans.
our history we have encouraged farmers to create cooperative
organizations; we have also developed thousands of cooperatives for
rural electrification and telephones. This same strategy needs to be
employed in health care by the encouragement of consumer-owned and
governed health care cooperative plans. Below are some of the logos of cooperatives which are successful and recognized.
Can the vision be achieved if only some of the strategies are implemented? Maybe. What if government takes the role of the disciplining force in the market, rather than the consumer? Maybe. What if we stitch together a hybrid system? Maybe. But, like the car maker who only honors the warranty if you do the preventive maintenance as specified, I can only guarantee success if a principled approach is followed.
Remember, when America competes on the global stage, we are basically competing against socialized health delivery systems home-brewed and subsidized by the nation state on behalf of its citizens. All of these system control spending by reducing innovation and rationing care. When was the last time Canada invented the MRI?
The performance of nation-state sponsored systems will be judged at the macro level as to costs-per-capita, mortality rates and the like. They will not be transparent enough to judge whether the well-being of the citizenry is really optimal. But, even if they did, it begs the bigger question of how the U.S. is going to position its health care system to be an economic engine? If all you cared about was taking care of the domestic population that involves answering a lesser question.
So, if the U.S. does not do everything it possibly can to discipline and rationalize its health care system, it is unlikely to become an economic engine or an exporting sector, contributing positively to our balance of payments. Instead, health care will crash through the glass ceiling at 16% of the GNP and ascend to heights of 20-25%, just waiting for a big event to put it over the top. But, if health care were to become an export industry, it could go to 50% of the GNP and everyone would be cheering.
The twelve strategies are not rocket science and government and business have implemented far more difficult strategies, both in times of war and when we faced depression. The template for things such as deregulation, futures contracts, formation of cooperatives and the like are ready and available off-the-shelf. It only takes the political will to enact enabling legislation and the willingness to put someone in charge who has the leadership skills to get things done.
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