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A report by AFP states that the research of two Harvard medical researchers found lack of healthcare killed 2,266 U.S. veterans last year (http://ow.ly/BCVi). The study was conducted by David Himmelstein and Stephanie Woolhandler both professors at Harvard medical school. David Himmelstein is a founder of Physicians for a National Health Program. It’s a smart and well developed study on an important healthcare related phenomenon that should never happen in America. But, Himmelstein’s proposed solution drawn from the findings of the study must be examined and practical solutions implemented. No veteran, nor should any person in America for that matter, die due to lack of health insurance coverage; however, it’s important to develop policies intelligibly.
Dr. Charles W. Calomiris, AEI economist and PhD from Stanford, points out in his study, Banking Crises and the Rules of the Game, that historically government imposed rules set in motion the conditions for banking distress and failures (http://bit.ly/3bRbrh). His paper states that risk-inviting rules causing structural constraints restraining competition, preventing diversification of risk and limiting the ability to deal with shocks caused bank failures. Dr. Calomiris is a proponent of and points out the need for a properly structured centralized bank to reduce liquidity risk without perpetuating moral hazard. Often, banking and financial market failures insight critics to pronounce capitalism, free-enterprise and markets to blame. But, we must not forget that in America exists a unique blend between business and politics, regulators and regulated and government and industry. Therefore, it’s important to analyze all the variables involving all the parties and entities involved in a dynamic industry like banking or insurance before making decisions. It would be foolish to look to government as the solution while ignoring and refusing to at least analyze it as part of the problem.
The health insurance industry, healthcare delivery and healthcare coverage and the crisis we are faced with in our healthcare markets' distress in America today can be compared in some ways to the recent banking and financial crisis. Relative to private health insurance, a private market brings insurer and insured together. We have medicare and medicaid which are funded by taxpayers and managed by government. Thus, we have a hybrid government/free-enterprise system for healthcare currently. There is a government option in place. The private insurance portion of our current healthcare system is heavily regulated by government just as the banking and financial industries. There have been many government rules restricting private health insurers at many levels. These will be discussed in more detail later. The point here is that regulations imposed by government exist for insurers creating barriers to entry, restricting competition and restricting and altering products health insurance companies can offer their customers just as they did for banks. These restrictions on private companies, the customers demanding their products and the markets in which they come together doom the success of the industry to failure. When this happens, many , such as Dr. Himmelstein from Harvard Medical School incorrectly jump to the conclusion that free enterprise and capitalism are the problem and full sail government intervention and takeover of the industry is the solution. Let me remind you that the medicaid and medicare government option is headed toward failure as this is being written. Let’s not use this failing government option as a model to repeat failure on a more grand scale.
There are many government imposed rules and regulations that have actually lead to the inability of Americans to procure healthcare. Many states have only a small and restricted number of insurers approved to offer health insurance. Government imposed barriers to entry exist for these health insurance companies. From a pure supply and demand standpoint, there is a government imposed restriction on the supply of health insurance available to the citizens demanding or needing the service. This artificially inflates the price of health insurance. Also, the insurers have not been able to offer “smart policies” that cover insureds' needs excluding coverage for treatments and services not needed. They’ve not been given to ability to offer a basic plan, and like life insurance, the ability to offer a rider for a higher premium when it’s needed. Government has greatly restricted the ability of the insurers to bring affordable innovative products to market in order to cover everyone regardless of socioeconomic class. Further, health insurers have been restricted in the ability to manage risk. These are but a few of government imposed inhibitions either impeding or restricting insurers to bring affordable healthcare to those in need of and demanding their products and services.
Harvard’s Dr. Himmelstein actually found in his study that thousands of U.S. military veterans died from lack of healthcare coverage. These veterans relied on the military’s version of the government option for treatment and care, and by Dr. Himmelstein’s own findings, these veterans died awaiting treatment. Yet, the Harvard professor advocates placing more Americans in the precarious position of being forced to rely on a government agency for their healthcare only to be treated the same as these poor veterans. I’m not sure what Dr. Himmelstein is advocating; however, being a Harvard professor, we can assume he’s intelligent enough not to overlook the obvious. Is he actually proposing a system of delivering healthcare that will fail a statistically calculated number of us like the VA? Is he saying that since the VA failed these veterans resulting in their death we should have some other government agency like the VA manage the healthcare of civilians anyway? Is he actually oblivious to the probabilities that a government option on a more grand scale than medicaid and medicare as well as the VA will be even more deficient resulting in more deaths and negative outcomes?
There are many smart and innovative people that stand poised, when given the freedom, opportunity and leeway to do so, to study, organize the people and resources and execute common sense and smart solutions to deliver healthcare to all Americans. Business, free markets and capitalism can and will provide the solutions under the direction of the proper people and with proper leadership. Without profits, there will be no tax dollars to run government nor retained earnings to grow the businesses that provide the care to citizens. Innovation and creation through research, development and profits have given Americans the best healthcare in the world right here in the United States. Next, I will discuss a few people whom definitely should be tapped because they are innovative and smart people able to solve the difficult problems required to revamp the healthcare industry to deliver care to all Americans.
I would first look to Dr. Srikant M. Datar, professor and associate dean of Harvard Business School, to head up organizing those with the capital to move into ventures involved in the private re-vamping of healthcare (http://bit.ly/4ywwiJ). Dr. Srikant is on the boards of Stryker Corporation, Novartis and many other companies. He is also a managing partner in a venture capital firm and he is intimate with free enterprise delivering the best solutions to patients needing them. Stryker Corporation employs some of the industry’s best minds and greatest business people to work hand-in-glove with the doctors to heal patients. There are reps on the ground delivering service to the doctors delivering care like Steve Anderson, from the University of Georgia, who’s been bringing patients Stryker’s most innovative orthopaedic implants for 25 years. Stryker seeks out good people like Brian Daigle down in Durham, North Carolina and delivering care at Duke (http://bit.ly/1QgIPD). Brian is a graduate of Harvard and served the United States as an agent within Homeland Security prior to joining Stryker Orthopedics. The bottom line is, Dr. Datar is one of the smartest minds in business, he knows free markets and how capital is raised and directed and is familiar with organizations getting the absolute best people to give the best service with the most innovative and superior products. These are all things the American people deserve and Dr. Datar can help solve the problems to deliver them.
This paper is not intended to be a commercial for Stryker Corporation, and competition is paramount to efficiency in free markets delivering what’s demanded. Thus, on the topic of orthopaedic implants I would be remiss to fail mentioning Synthes, Inc. and describe how two great companies like Stryker and Synthes competing result in the best solutions for patients. Sytnthes, too, is renowned for seeking out the best reps to bring the best products to the doctors giving care to patients. These are people like the late Ben Jupiter, son of the renowned professor and trauma surgeon from Harvard, Dr. Jesse Jupiter. Synthes is known as the gold standard in orthopaedics, and all orthopaedic surgeons are trained with Synthes systems as residents. Thus, like Stryker, putting into place the very best talent to work hand-in-glove with the physicians to provide the very best equipment and care is what capitalistic and profitable companies like Synthes do.
Delivering healthcare to every American efficinetly through the use of free enterprise and capital markets will require constructing, expanding and maintaining an IT network and infrastructure more sophisticated than any in history. This type of endeavor requires the direction, oversight and implementation of an innovative and smart person like Dr. Maggie Johnson from Stanford (http://bit.ly/1PD7PY). Dr. Johnson is a professor developing and teaching many innovative courses to students at Stanford. She also happens to be the Development Manager at Google. She is in the company of a very few that are developing and implementing the most cutting edge and greatest computing power in the world’s history. Dr. Johnson could definitely organize the right group of smart people to build the infrastructure and link the networks to give healthcare facilities and providers the ability give every patient the coverage they need.
It cannot be overlooked that business operates in a political environment. In order to relax state laws to allow insurers to come into a state and cross state lines to compete and to develop specialized and innovative products not previously offered requires the decisions of the legislature. Many state legislatures will not consider revolutionary change to allow businesses the ability to deliver care to every citizen until they see it done successfully in another state. Thus, there must be a model of success. Given the stiff debate in the U.S. congress currently, the passage of healthcare reform by the house and the almost certain passage of the act in some form by the senate, there seems to be few legislatures and governors willing to take on the task of implementing innovative change. However, Virginia stands poised to provide America the solution for healthcare and to become the model of success.
Bob McDonnell is Virginia’s Governor-Elect (http://bit.ly/1AaAUS). He has built significant political capital in Virginia. He garnered more votes in this past gubernatorial election than any other election in Virginia’s history. He was formerly the Attorney General in Virginia and spent more than 10 years as a Delegate in Virginia’s house. He authored a great deal of legislation in Virginia, and he has a history of being able to get legislation passed with bipartisan cooperation. Bob is also very smart about cutting through bureaucratic and complex issues to figure out what makes since. He’s not averse to being innovative if what’s proposed or what needs to be done is right for the people. Also, he understands the complex relationships between government, businesses and individuals and how all exist under the umbrella of the constitution. He’s been able to consistently develop and implement policies that are effective yet fall within the framework of America’s unique partnership between government and people. Bob is poised to be the leader to get businesses and brilliant minds together to build the successful model to deliver all Americans affordable healthcare.
Hospitals do not currently price their products and services according to any scheme that would make sense in any other business. There must be an IT system and infrastructure built, which they can subscribe to, that will allow adequate pricing. This is one of the first tasks for a team of thinkers like those that Dr. Johnson could bring to the table. Often, a hospital or facility will arbitrarily charge $1,200 for an MRI. When you research it, the price is just arbitrary. Every other business model would build pricing based on a price which after costs would bring a reasonable profit margin. It is difficult to determine, given that hospital services are unique; however, it’s not impossible. Wall Street calculates and accurately records billions of transactions a day accurately. Hospitals, healthcare facilities and providers can accomplish the same. A system with the power and capacity of those used on Wall Street must be built that the hospital clients can subscribe to that could process the data, take into account market differences such as location, costs, etc., and generate accurate price-points for a specific hospital for a specific patient and procedure.
A patient should know up front what the costs will be for their treatment. This will lend to them being able to make decisions. Also, one centralized finance department, again, with smart people like those mentioned earlier that are reps delivering services, and every bit as smart as those working on Wall Street, should be implemented in each facility. The old system of getting multiple bills from multiple providers will go away. All billing, collections and reimbursements will be managed through the central finance office. These functions could be outsourced, and firms providing these professionals independently of the facility or providers could set up in the hospitals.
The endeavor of upgrading and building the IT infrastructure and filling the roles of the healthcare facility finance departments will put a significant number of Americans back to work. These will be good paying professional jobs. Among these, a smart force of statisticians and actuaries will need to be employed. They will help develop new products. These products need to include smart policies. For example, computer programs can statistically calculate what health issues are most likely needed for a 23 year old healthy male. The young man should be able to buy a ‘smart’ policy that is affordable because it only covers what is needed. This is contrary to our current policies that include coverage for things the insured doesn’t need.
Also, an emphasis should be placed on higher deductable or catastrophic plans. With these, riders should be able to be added. Again, I would refer to the powerful IT structure that will be necessary to calculate pricing for these new smart policies and help insurers manage their risk. Since hospitals will be pricing accurately, insurers will have more accurate information to manage the said risk and to negotiate reimbursements. The disconnect that currently exists between patients’ bills and providers’ reimbursements needs to go away. Billing should be transparent and to reiterate, so should pricing.
Emergency ‘point of service’ pay forward plans should be developed. Again, we have the talent and computing power to calculate the risks of these policies so that they can be managed and insurers can offer them profitably. For, example, a young male might fracture his tibia. He comes to a hospital emergency room. He needs a surgery for a tibial rod. He and his family should know the price of that service right then and there. He should be able to pay cash, get a loan from a rep in finance, use his own insurance or purchase a ‘point of service forward paying’ policy. In our example, we’ll say he takes the point of service policy. Again, the new healthcare IT super system will be relied upon by the insurer underwriting the policy for this young patient. The patient and/or his family can be told at that time, you have to purchase this policy for your treatment, it will be $25/ month and you’ll need to be contracted for 3 years to pay the premiums. Then, the insurer can have its risk of the patient defaulting over the 3 years insured by an institutional investor. The forward paying policy default insurance becomes a marketable security.
A central health insurer willing and able to manage and take on risk, thus maintaining liquidity in the forward paying point of service health insurance market, must be established and implemented. Just like the flow of currency and capital is paramount to the banking industry, the providing of care through underwriting a policy for a patient in need is paramount in the healthcare industry. The centralized insurer needs to be private and independent of government. A chairman of insurance similar to the chairman of the fed will be necessary.
There will be debate on the risk taken when an insurer underwrites a point of service forward paying policy. Some will argue that the patient should be mandated under stiff penalties to pay the insurance for the contracted period. Technically, since they aren’t purchasing a policy including coverage for things they don’t need , and they’ve actually received the service and benefitted from it, there is a stronger position for a mandate to keep the forward paying policy in force for contractual period. I have my opinion that no government mandate is ever justifiable. But, there is a certain amount of uncertainty that will come with the new forward pay policies until they have been in force long enough to analyze and generate statistics. So, this will be policy maker’s toughest decision, to mandate or not to mandate.
Simply stated, the free market system, capitalism and smart people coupled with good leadership will solve Americas healthcare problems and put Americans back to work. Higher taxes and big government mismanagement of the problem is not the solution to the problem. I would just remind you of the study by Harvard professor, Himmelstein, that shows clearly that relying on a government agency to give you the care you need will get you killed.
Copyright Kevin P. Felty
