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The US Healthcare System

As promised here is the second step of my 10 stage plan to Fix America. In this section I outline, at a high, level my plan to repair the US healthcare system and drive down costs - not inflate them. I am working on a book to detail this plan and while it will not be ready soon I can tell you the statistical evidence is there to substantiate every point I outline in this plan.

US Health Care System


 As you all know if you have read my background or know me this is my field of expertise. I have studied and worked in US healthcare for over 32 years and while I learn more daily I do know a lot about it .(I have lots of scar tissue to prove it). This is the largest industry in the US and accounts for over 16% of the GDP. At over $2.5 trillion dollars it is a mammoth part of the economy. I think it is fair to say that if it is broken the economy is not going to thrive.

Well it is broken. Actually it is critical and needs surgery very badly or it may die and take the economy with it. How do we know? Well here are its life stats – it is inflating at over 9% per annum, it charges more than any other country on earth, its results are not even in the top 10 worldwide, it is scarred with greed and regulation and it will swamp the US economy in the next decade if we don’t fix it. This, my friend’s is a critical industry that is broken.

The current administration says we must fix it with PPACA, the landmark legislation passed in 2010 and just upheld by the Supreme Court last month. While there are a few decent parts of PPACA for the most part it is going to do nothing to fix US healthcare. Yes I said it and I can prove that I am right but we will save that for another blog entry.

Suffice it to say that PPACA is merely targeting access, taxes and guaranteed coverage and doing nothing about costs. (See my blog entry “Truths about PPACA post the SCOTUS ruling”). On average, health insurance administration accounts for about 10% of the cost of healthcare. PPACA is laser focused on this segment and not on the much more critical 90% which is the real cost of system. I will focus on how we fix the 90% and address the 10% another time.

So what makes up 90% of the US healthcare spend – the actual cost of care. This is physician charges, hospital charges, ambulance, prescription drugs, urgent care facilities, surgery centers, labs, X-ray, MRI and CT scans and more. I think you get the picture.

So how do we fix this system? Certainly not by adding more costs to it with new taxes, regulations and bureaucracies, as PPACA is suggesting. No we must address the cost of care. There are 5 major constituents in the US healthcare system. They are providers (drs, hospitals, facilities, etc.), insurers (insurance companies, HMO, ASO’s etc.), the government (Medicare and Medicaid), employers (they provide the majority of all private healthcare coverage in the US) and the consumers (all the US population).

Each segment has a role and adds cost to the system. As private healthcare system we need all the parts to work together to deliver high quality care. Unfortunately, over the last 40 years the system has become immersed in greed and regulation and is failing. Simply put every segment is trying to protect and grow there piece of the pie usually at the detriment of another segment. This internal conflict and lack of vision has led to the mess we are in today.

We basically have two choices to fix the US healthcare system – we can adopt a National Healthcare model like Canada or England or we can take the tough steps necessary to fix the private system we have. I choose the latter. So how do we fix it? Simply we have to cut costs, drive quality and access while limiting regulation and greed. Sounds simple enough – not!

Everyone in the system has to recognize that we have to make sacrifices to get the results we want - that is the foundation of change. Some may have to sacrifice more than others but life is not fair. However, all constituents should know by now that if we do not solve this problem through change and compromise we will soon get to the point where our only choice will be a draconian National Health Plan. It is no longer if- but when.

Here is how we fix it. We attack each constituency and force change and cost reduction so that the cost of care (the 90%) deceases while maintaining quality. Embedded in this equation is using some of that savings to ensure coverage for all legal Americans. The only way this can work is if the people of US demand that the politicians do what is needed. We can’t let them screw this up for political gain. Sure we need to have a very healthy national debate about the changes that need to be made but we also need a very strong leader to drive this process. The natural leader should be the President of the USA but I wonder if any candidate has the guts to do it?

Here are some of the changes that will need to be made:

·        Base all pricing for care on the current Medicare scale adjusted for geography

·        Eliminate all PPO’s and their outrageous access fees ( over $8 Billion last year)

·        Demand equity based drug prices worldwide

·        Eliminate most of the 1900+ coverage mandates across the country

·        Develop national licensing and coverage standards

·        Eliminate broker commissions and implement fee for service instead

·        Force technological integration and smart cards

·        Create subsidies for the poor and expand Medicaid with the States (not one size fits all)

·        Develop minimum coverage standards (we can’t afford Cadillac Plans)

·        Improve Medicare programs & change financing so it can survive past 2024

·        Provide 100% tax deductions for individuals purchasing Health insurance

·        Implement effective national Tort reform – stop expensive defensive medicine

·        Increase FSA,HRA and HSA penetration by expanding deductible categories and amounts

·        Allow cost penalties for medical non-compliance and destructive personal behavior

·        And legislate national transparency for pricing, quality and access

Some of this may seem far- fetched but I assure it is not if we have the will to make it happen. What is the prize if we do? First, I estimate we can lower overall healthcare costs in the US by over $350 billion a year. Yes, lower costs not increase them by the $1.76 trillion that PPACA would over the next decade. Please recognize what this alone would do for our GDP without factoring in the hiring that would have to happen to absorb the additional 40+ million folks who have no insurance today. Second, we can improve quality in delivery of care by paying for quality outcomes versus transactions. If we realign the incentives in the payment system we will see better care at lower costs. (Look at the Medical Home Models around the country). Next, through transparency we can bring natural US consumerism to the healthcare system for the first time and this will create much needed market forces that will check inflation and improve care. Americans are the greatest consumers in the world and if given the information they need about pricing and quality they will practically fix the system themselves. I know this will not be popular with providers but it must be done. How can you have the largest industry in the country without consumerism and appropriate competition?

Finally, we can cover all legal Americans. We will have enough savings to expand our subsidies for the poor and expand Medicaid in conjunction with the States. Also note that as we fix the American economy the number of uninsured will decrease with time and thus our subsidies will as well. Sadly illegal aliens will not fare well in the new system but with my new immigration policies they will have the ability to join us as tax paying citizens and enjoy all the privileges thereof. (see that section coming soon).
I am working on a book that will define all these fixes for the US healthcare system and show the American people that we can do this and in so doing show the world that a private system is viable and can deliver the best care in the world.

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