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Solution Framework of Market Forces

Proposal for Healthcare Reform:

The best idea, from a management point of view is to pursue the solution to problems 40 years in the making, by pursuing a 3 year plan, starting with and enhancement to competition.  See this proposal for a starting idea.

One can easily increase competition in the healthcare industry, and the prices will come down and the customer service will go up. But many argue that this is not possible in healthcare for a variety of reasons. Well this video talks about this, and did so on prime time in 2007.

So why is the notion of using the markets to drive price so resisted within the government communities? It has to do with their incentives and their constituencies. In government it is all about setting up votes, not necessarily about solving problems.  One good summary is to take off the shackles that restrict market forces in healthcare.  Here is a good summary of the issues and 10 Steps to improve the overall healthcare system.

The proposal outlined here is about setting a direction, rather than setting a specific new policy.  There most likely are only two paths available:  continue the one we are on and adopt Obamacare or choose to intelligently apply competitive market forces to drive down costs.  This latter path is about putting the patient back in charge in a manner that doctors and hospitals feel and are affected.   It is about putting dollars in the hands of the citizens and letting them make good decisions on cost and quality.  

What could be more basic.  Let healthcare be as good in general as it is in elective surgeries detailed above.  It is about reestablishing the market forces first.   It is also about making doctors find ways to achieve better results and overcome their low satisfaction levels that exist today.  It is about freeing companies from managing our healthcare. 

There should also be about intelligent bridge processing, meaning while the healthcare relearns competition, there needs to be intervention to assist those in dire straits.  There are a variety of ways to achieve this, using community based approaches,, and example being clinics with special tax write-offs for owners and doctors.  The folks without healthcare are of large concern, but making healthcare "free" does not serve anyone.

To undo 40 years of intervention into the healthcare industry is not just a set of simple 1-2-3 policy changes.  It will require some good conceptual framework and a concerted effort on the part of the Federal and State governments, and a very deliberate approach.  This is not practical without a strong message from enough of the citizens throughout this period of change.  The healthcare industry also has to learn how to compete to the level that other industries do.   This would require not rushing to Washington DC for favors or lobbying, for instance.   There are however some specific things that would speed the ball rolling towards greater competition.    To take any approach involves risks and more challenges.   If we take a risk with national healthcare, or Obamacare as it is called, we run several risks that are quite significant.

To speed the return to the patient being frugal and managing their own healthcare, greatly expanding the HSA approach is a first step, as long the tax benefit goes to employers, this tax benefit should also go to individuals, to level the playing field.   This approach should also extend to Medicare and Medicaid in some pashed in approach.   Providing counselors or coaches could also be incentivized via taw write-offs, etc. 

Even the small business association is seeing the light of market based approaches, as they have faced compression in the ability to provide health benefits to employees.  Least it is forgotten, most of the job increases will come from this sector of the economy.. 

Health Reform Web Site: In related news, the National Small Business Association on Monday launched a Web site called Health Reform Today that promotes an overhaul of the U.S. health system, the Dallas Morning News reports. The organization, which voted health reform as its top priority for Congress, says that in 2008, the number of small-business owners who could provide health insurance fell to 38% from 67% in 1995.

The Health Reform Today initiative highlights the need to enact broad health care reform that places individual health care consumer at the center of the equation. NSBA’s health care policy, crafted back in 1993 and revisited in 2004, incorporates individual responsibility, modified community rating on a federally-defined benefit package, low-income subsidies, tax incentives based on the cost of the federal package, and enhanced quality, transparency and health IT. In addition to various policy recommendations, Health Reform Today features profiles of small-business owners and their every-day challenges to provide meaningful health care for their employees, as well as results from a recent survey of NSBA members on the state of the U.S. health care system.

Regulation also has to be addressed simultaneously.

The proposal here revolves around changing the boundary conditions that exist in healthcare, such as removing restrictions on innovation in providing services and publishing evaluations of their effectiveness.    There must also be an opening up of the business models for hospitals, doctors, and insurance companies, but also there has to be a liberating of the employers from managing the healthcare options for their employees.   Employees need also to be liberated, to better control their own healthcare.   The uninsured can be bridged to the new marketplace by various means that will work.   All of this is achievable in today’s political arena, but it would take citizens to demand it.   It would require groups to take a more educated and less expedient view of politics.   It requires real change.   Let’s proceed to an outline of what changes are needed, and some ideas as to how they can be achieved.  There are a great number of proposals out there, with some great ideas and a fair amount of specifics.   The important part however of any such change movement is to focus on the conceptual framework, and not argue initially fine details.  

Hospitals need to have all mandates removed in a way that allows for transparency and newer forms of delivery and doctor and patient management.   Doctors need to be freed to practice over a wider region geographically, and to own hospitals, etc.    So all of the mandates, regulations for doctors and hospitals, and even insurance companies, should have a 2 year sunset clause attached to them.   A major majority of all legislatures would then be required to enact a new version, which would have a 5 year sunset clause.   Of course lobbying would be a real issue here, and this would require some citizen groups to be the watch dogs, with full online transparency.   Tort reform would also have to be a highlighted effort, with claim limits enacted, and a process of looser pays fees enacted. 

Employers should see compensation differently, and should be freed to compensate their employees as they see fit.    Employees would receive healthcare, not on a mandated basis but having an allowance from the employer to acquire their own healthcare insurance or whatever they wanted.  This could come as Sears has done, or it could come as just increased compensation to the employees.  There would be no mandate for any person to have to receive healthcare insurance or even healthcare.   This would be seen by the social liberals as just unacceptable.   However it is the most compassionate and fastest way to a healthcare system that really works.  One that promotes cost cutting and innovation in new delivery and financial models while also promoting investments in new medical technology.   This is a big goal and would be hard to achieve politically, for the initial period of adjustment would see a number of changes done that might increase costs, before the market catches up.

The key is to put the patient in charge of much more of the financial arrangements and decisions than are done today.  This could be done in Medicaid and Medicare as well.   The competing idea of changing the fee for service to a fee for outcomes or even some other form of restriction on how the third party payment is to be done will not work.   It further restricts the market forces and makes it more difficult to establish market competitive forces.  More on this general political topic in the commentary section.  

There are links to a variety of specific proposals that add value to the debate, see Specifics as well as the links at right.   In any event, although some things need to be done quickly to start the process, it would take 5 – 10 years of diligent effort to enable the market forces to truly show their value, as consumers and providers learn what competition means to them and how to respond to these new forces.   What is not debatable is the efficacy of the financial construct that exists today in Singapore.  

The HSA approach does work and can lead to lower level of expense, and needs to be greatly expanded.  Consider what Safeway has done to lower its healthcare costs.   Consider also the political games that many companies are playing like Wal-Mart.   How to play well in this political arena is a most difficult challenge.   Doing the correct thing for keeping a “place at the table” is now at odds with what makes sense longer term.   If the country is to find its way of this self made problem then it must look at the structural issues and manage an increase in competition.

A lot can and should be done, and perhaps it will take some time.  Engaging the retirees to assist in the transition planning is also a good idea.  But to rely on the Kennedy staffers to in a matter of months tool the basics of Obamacare is a real slight to the sense of purpose and the sense of problem solving that exists in this country.   It is truly time to take back a big part of the economy and of our lives from the special interests.    NCPA published a list of items to include in any worthwhile healthcare reform, to make it more affordable.

There are many market-based approaches out there.   Here is a good sample: