MY HEALTH CARE REFORM PLAN, PART II: In my last entry, I described my scheme for health care reform, based around a federal health insurance voucher system (not unlike the idea of local governments issuing school vouchers to parents for the education of their children). Today I want to follow up on what could happen on the supply side, under such a scheme. To cut to the chase, I believe that a lot of good things could happen on that side.

My initial assumption was that when a citizen received their annual health voucher, good for so many thousand dollars worth of coverage as determined by Congress, that citizen would use their voucher to purchase a one-year health insurance policy which meets minimum federal coverage standards and regulations. I assumed that a number of different health insurance companies would offer a number of different policies tailored to customer preferences. The market would be nationwide, so that the barriers in our present state-by-state system would be removed. This would provide everyone with a range of competitive choices, similar to what exists for most other kinds of insurance products (life, auto, home, business, etc.).

Hopefully the insurers will compete based on quality of customer service, degree of choice in terms of selecting doctors and care institutions, options for extended coverage going beyond minimum federal standards, OR cash-back plans for participating in cost control arrangements (such as increased deductibles, increased co-pays, and use-or-keep account systems), etc. Unlike today, when most people just take whatever insurance their employer provides (or picks from three or four pre-selected options that are mostly alike), everyone will seek to find an insurance plan that suites their circumstances best. Health care consumers will finally become involved in the procurement of their health care; the market will become more rational and efficient. Not COMPLETELY rational and efficient, as there will be distortions due to federal regulations and minimum standards, and due to inefficiencies within the insurer bureaucracies themselves. But still much better than today.

But then it struck me; why couldn’t a “deal-direct” system evolve from a voucher market system? Why should we buy the majority of our health care from insurance companies? When you think about it, the present system of having one’s health care options determined by Blue Cross or some other health carrier doesn’t really make sense. In the good old days, YOU YOURSELF managed your health care. You decided which doctors to see and when. Together with your family doctor, you decided which tests to get, which procedures to receive, which specialists to see, which hospitals to go to and for how long, etc. Today, of course, this is gone (unless you are rich enough to buy a gold-plated insurance policy). Blue Cross or Aetna or whomever decides what doctors we can see, what clinics or hospitals we can go to, what tests and procedures we receive, and how often. Unless we can afford to pay thousands of dollars directly, Blue Cross directly manages our health care. (And, as I said above, we didn’t even pick Blue Cross and the particular kind of coverage we get from it; our employer picked that out for us). Our doctors lobby for us and play games with the insurers (I’ve been asked by my doctor’s staff to say that I feel tired, as it allows them to put additional “codes” on my record, and thus increase their reimbursement); but in the end, the insurer holds the bucks.

But under a voucher system, family doctors and specialists and clinics and hospitals can band together into fairly large health care provision networks. With the right management skills and software, these provider networks could accept the vouchers directly; Blue Cross or Aetna could be eliminated! These networks could sub-contract with other providers to make sure that all necessary services will be available to their customers. These networks would need to learn about financial risk management; they don’t want to be swamped with a lot of patients who give them say a $7,000 coupon each year but on average need $12,000 worth of care. If they have enough customers over a range of ages and circumstances, then the $2,000 patients will balance out the $12,000 patients.

But what about the occasional disaster patient, the patient who goes to surgery with follow-up intensive care in a hospital, who runs up bills in the millions? For that, the doctor/provider network would have to buy “secondary insurance” to cover its pool of customer-patients. So, insurance companies would still be needed to provide what they call “re-insurance”.

Under my scheme, things have been re-arranged according to WHO DOES WHAT BEST. Using our vouchers, we citizens would buy our annual health care coverage from an entity that actually PROVIDES health care, not from an insurance company. We would make our deals with networks owned and run by doctors, not by insurance actuaries. We would haggle with these doctor/clinic co-ops to give us the best deal for our vouchers (and whatever other money we want to put in as to extend our coverage beyond the federal standards, which as I said previously, would be set by “death panels” and thus would allow care to be denied once we’ve become expensive burdens to tax-paying society). Doctors and clinic managers are in the best position to innovate, to come up with more efficient and effective care routines as to compete for our business. As such, we might start seeing some real cost control and quality improvement! The insurance industry would be limited to what it does best, i.e. providing risk-spreading for disaster situations. The huge and wasteful cost-control bureaucracies that now exist in Blue Cross and other health insurers would no longer be needed, once Blue Cross is relieved from the responsibility to micro-manage our own health care !!!

This all depends on the ability and willingness of we customer-patients to drop one doctor/clinic co-op and go to another if we don’t like their service or hear about the bad experiences that others have with it, or if we can get a better deal from a different care provider. This would not always be easy or even possible; but with the advent of health records computerization (a key element of Obama’s reform plan, and my own), it would become easier for most of us.

However, companies like Blue Cross would be in for some big changes under my scheme. If my dream of a market dominated by a wide variety of doctor/clinic cooperatives were to evolve, then Blue Cross would hardly be needed any more. It might still be there to sell the “re-insurance” needed by the doctors groups, and perhaps it might still offer rich individuals the option of buying an old-fashioned “gold-plate” policy whereby you pick out your own doctors, specialists, hospitals, outpatient clinics, etc. and not have to stay within the co-op network. But its current run as the keepers of the gate for most non-governmental health care would be OVER.

And I’ll bet that “the Blues”, and the other insurance companies who are now involved in health insurance, would NOT like that. They have too much invested in the status quo. Too much equipment, too much info-tech infrastructure, too many employees, too many office buildings, too much stockholder equity. Too much POWER, real economic power. They obviously won’t give this power up willingly. Were my plan to somehow get a hearing in the White House and Congress, the health insurance company lobbyists would be after it like a cloud of angry hornets.

Problems with this aspect of my plan? Yes, there are some. The biggest involves regional “cherry-picking”. In some towns or counties, there may be a lot of unhealthy people, and for-profit co-ops might not form in those places. (The co-ops, however, would be subject to the pre-existing condition rules, so if they did make a go of it, they would have t
o accept all comers.) In the “cluster” cities or counties that might go underserved, the state or local government might need to set up its own care clinic accepting vouchers. The federal government might need to provide some support for an “underserved region” public clinic option (but leave the actual management of such clinics to state or local government).

But because of industry opposition, I doubt that my plan will see the light of political day, anytime soon. Too bad. But least I wrote it down; perhaps someday the stars might line up for it.