As Obamacare looks more and more as though it will collapse, there are some alternatives beginning to appear. Several years ago, I suggested using the French system as a model. At the time, the French system was funded by payroll deduction, a source affected by high unemployment, and used a national negotiated fee schedule which was optional for doctors and patients. The charges had to be disclosed prior to treatment and the patient had the option of paying more for his/her choice of physician. Privately owned hospitals competed with government hospitals and patient satisfaction was the highest in Europe.
Recently the French system has run into trouble.
French taxpayers fund a state health insurer, “Assurance Maladie,” proportionally to their income, and patients get treatment even if they can’t pay for it. France spends 11% of national output on health services, compared with 17% in the U.S., and routinely outranks the U.S. in infant mortality and some other health measures.
The problem is that Assurance Maladie has been in the red since 1989. This year the annual shortfall is expected to reach €9.4 billion ($13.5 billion), and €15 billion in 2010, or roughly 10% of its budget.
This may be due to several factors. The French economy is in terrible shape with high unemployment. More of the funding for the health plan is coming from general revenues. This was not how it was supposed to work. It was payroll funded, much as the German system is, with a wider source than individual employers. This allows mobility for employees and allows employers to distribute risk among a larger pool. Germany allows other funding sources such as towns and states. I think it is still a good model for us but, with the passage of Obamacare, it will take a generation before another large reform would be viable. Obamacare must stand or fall first and I think it will fall but, as in most government programs, it takes years before the sponsors will admit defeat.
Another proposal has been made by a serious study group.
1. The government should offer every individual the same, uniform, fixed-dollar subsidy, whether used for employer-provided or individual insurance. For everyone with private health insurance, the subsidy would be realized in the form of lower taxes by way of a tax credit. The credit would be refundable, so that it would be available to individuals with no tax liability.
2. Where would the federal government get the money to fund this proposal?
We could begin with the $300 billion in tax subsidies the government already “spends” to subsidize private insurance. Add to that the money federal, state and local governments are spending on indigent care. For the remainder, the federal government could make certain tax benefits conditional on proof of insurance. For example, the $1,000 child tax credit could be made conditional on proof of insurance for a child.10 For middle-income families, a portion of the standard deduction could be made conditional on proof of insurance for adults. For lower-income families, part of the Earned Income Tax Credit could be conditioned on obtaining health coverage.
3. If the individual chose to be uninsured, the unclaimed tax relief would be sent to a safety net agency providing health care to the indigent in the community where the person lives, so that it would be available there in case he generates medical bills he cannot pay from his own resources. The result would be a system under which the uninsured as a group effectively pay for their own care, without any individual or employer mandate. By the very act of turning down the tax credit for health insurance in choosing not to insure, uninsured individuals would pay extra taxes equal to the average amount of the free care given annually to the uninsured. The subsidies for the insurance purchased by the insured would then effectively be funded by the reduction in expected free care the insured would have consumed if uninsured. [See Figures II and III.]
The paper goes on to explain the proposal The trouble is that this is another major reform and I see no chance for it in the foreseeable future.
What then is the most likely development ?
Many physicians have chosen to drop out of insurance and Medicare. The AMA, contrary to its usual ineptitude, has come up with some proposals (pdf). It is also known as concierge medicine, a system of paying for medical maintenance with a monthly subscription.
This article suggests that cash practices are compatible with Obamacare. I doubt it.
Even surgeons, usually dependent on hospitals, are interested.
So in 2008, after 22 years of practice, Dr. Petersen did what many surgeons dream of—he dropped all insurance, federal and private, from his practice. Today, he operates on a strict cash-only basis, offering general surgery procedures to uninsured or under-insured patients for an all-inclusive, one-time fee.
“I have no regrets,” said Dr. Petersen. “Since I’ve dropped ER [emergency room] call and don’t accept any new patients with insurance, a workweek for me is really 50 hours, no nights, no weekends.”
This trend usually involves physicians who do not have student loans and are fairly well established.
A summary of insurance options was published in Forbes. It includes some interesting ideas.
Many of us in the health policy world warned Democrats that ObamaCare created a number of perverse economic incentives. In most cases they simply refused to listen. Now that the actuaries have started weighing in on the cost of coverage (here and here), pointing out that some young, healthy people could see their premiums more than double, ObamaCare backers are worried that millions of Americans will game the system. That is, remain uninsured until they need coverage and then sign up.
The perverse incentives of Obamacare are going to be fatal.
But just because millions of Americans refuse to get ObamaCare-qualified coverage doesn’t mean they will be uninsured. There are policies available now that would work very well for the ObamaCare avoiders.
Some of these policies are built on a life insurance platform rather than health insurance — which, incidentally, means they are outside ObamaCare’s long arm of regulatory control.
The customer buys a life insurance policy that pays up to $250,000 upon death, which I believe is the current maximum available for this kind of policy.
Along with life insurance coverage the policy includes what’s called a “critical illness” component. If the policyholder needs, say, surgery, the insurer writes the policyholder a check based on a schedule. Let’s say, for example, it’s $10,000.
This goes back to the model of indemnity style insurance of the 1950s. Diagnoses lead to an estimate of the hospital costs. This is a bit like the French system. Hospital charges have ballooned out of sight since the “cost-plus” method of reimbursement became popular in the 1960s. What if hospital charges were limited by a flat fee, not rationing?
One existing policy pays 100 percent for heart attack, stroke, life-threatening cancer, major organ transplant, kidney failure, Alzheimer’s and paralysis, among other medical conditions.
The policyholder could also be part of a provider network that provides a discounted rate for the care — one of the most important current benefits of having health insurance.
How much would such a policy cost? For one company, a 30-year-old male would pay $1,438 a year, and for a 50-year-old male it’s $3,234.
Compare that to Obamacare. Obamacare bans physician owned hospitals.
Because of the new health care law, Dr. John Dietz has an empty building that he’s not sure what he’s going to do with.
Dietz is part owner of the Indiana Orthopedic Hospital.
“It is an expansion of our hospital that is three-quarters finished; it had three operating rooms for outpatient surgery,” he said. “Now it can’t be used for that purpose. We’ll have to figure out an alternative for it.”
Dietz and his fellow investors put $27 million into that new building.
Under the new law there are a host of bureaucratic hoops that physician-owned hospitals must go through to expand.
Ӣ The hospital must apply to the Department of Health and Human Services and can do so only once every two years.
Ӣ It must then wait for a period for members of the community to provide input.
Ӣ It must be in a county where population growth is 150% of the population growth of the state in the last five years.
Ӣ Inpatient admissions must be equal to or greater than the average of such admissions in all hospitals located in the county.
Ӣ Its bed occupancy rate must be greater than the state average.
These obstacles are intended to exclude private hospitals from Obamacare. OK, that sounds like an opportunity rather than a penalty. These specialty hospitals have been given very high marks for quality of care.
The American hospital association, which has endorsed Obamacare, supports the exclusion.
Ellen Pryga, director of policy at the AHA, said, “The provision is a good one that will stem the tide of an entrepreneurial approach to medicine that is potentially fatal.”
Fatal to general hospitals which are inefficient. I am in favor of big city hospitals that are trauma centers and serve the poor. They were ravaged by Medicare and Medicaid in the 1960s which had promised “mainstream care” even if it killed the recipients. They should be funded by general funds. Obamacare will only add to fraud.
The following comment thread shows how unrealistic the Obama supporters are and how resistant to reality.
A cousin of mine, who was a renowned neurosurgeon, died and we were shocked at the mess her accounts/receivable was in all because of insurance companies.
Don’t even talk about Medicare payments.
Apparently (at least in her case) they didn’t pay all at once but in installments – and if you didn’t bill them for each subsequent installment you didn’t get paid. At least that was my understanding (I wasn’t the executor)
And the amount owed had a time limit – don’t bill within the allotted time frame and the insurance company didn’t have to pay it.
She made the mistake of doing her own billing, (more accurately trying to do it) and lost a small fortune.,
I do believe that if everything were on a cash basis we would be paying a fraction of what is billed insurance companies.
Slow cash flow = higher costs, doesn’t it?
Can’t blame the doctors for opting out of all that.
The government caused most of this mess and their solution is….more government regulation.
This article suggests that cash practices are compatible with Obamacare. I doubt it.
You are correct. What will happen is a slow growth in privatization of medical care. The well to do will go for concierge care and cash payment for specialist services. The practice will slowly then quickly “trickle down” until only the poor are left on the two nationalized “health care” insurance companies that will be swallowed by the government in the name of efficiency and stamping out corporate greed to create an American NHS. The rapid “trickle down” will start when insurance companies start writing old fashioned catastrophic indemnification policies where the policy holder is reimbursed for expenses already paid to health care providers by the policyholder. The indemnification payment to the policyjholder will allow them to restore their rainy day savings fund.
The other contributing factor will be that with patients purchasing care themselves they will become as cost conscious as they are with any other purchase. This will cause costs to fall for treatment in the cash system.
The risk is that the government will intervene to assure that we all get “quality treatment” at government priced levels of service. Regulation is the way the government stifles voluntary transactions.
The government may well try to shut this down but the elites, as you point out, will be among the first to adopt it. They can’t all get into Bethesda Medical Center where most DC politicians get care. The Canadian government, contrary to the delusions of PenGun, have recognized reality and allowed private care again.
Part of my point in this post is to suggest how hospital care can be provided on a cash basis. General hospitals are incredibly inefficient. I had my coronary bypass in Tucson Heart Hospital, one of the specialty types. It was not elective but they got me in.
As I have repeatedly pointed out, I wonder about comprehension here sometimes, the only private healthcare charges allowed in Canada are non essential procedures not covered by the national health care plan. Any charges for real health care must go through the national system.
Yes, we are very fond of our system.
As I have repeatedly pointed out, PenGun has no idea what he is talking about.
No medical association or government body keeps official track of private clinics at a national level but what evidence exists suggests that the numbers have swollen well into the hundreds. In Quebec alone, there’s been a big explosion of private clinics, says Dr. Zoltan Nagy, president of the Canadian Independent Medical Clinics Association, a lobby organization for private health care in Canada. The Quebec government does not keep a comprehensive list of private clinics operating in the province but Nagy estimates there are around 300 private clinics there, including several that focus on providing executive health and cosmetic services.
Verbauwhede notes that Quebec clinics are not only expanding in number, but also in size. “They’re becoming mini-hospitals,” he says, noting that one-day cataract, knee and hip surgeries are increasingly being performed in private clinics.
That is from the Canadian Medical Association Journal. Of course, what would they know ?
Any charges for real health care must go through the national system.
Correct. Being able to see and stand are indulgent luxuries of the idle rich, which are justly rejected by all goodthinkers.
White canes and wheelchairs are of course fully covered by the government. (Although I have heard rumors of sports stars and celebrities taking discrete trips across the border to take advantage of our superior wooden leg technology.)
PenGun
Yes, we are very fond of our system.
Paul Krugman found out differently.
As I have repeatedly pointed out, PenGun has no idea what he is talking about.
No need to do so. PenGun demonstrates (s)he has no idea what he is talking about every time (s)he posts. I often wonder if there is financial remuneration from a source ultimately ending in a Soros bank account involved.
Here’s an observation on the “free” public health care I noticed in Mainland China when I was in Guangzhou (1992-94):
Hospitals, even the supposed “best”, were primitive facilities to which the patient and family were expected to bring bedding and food.
Physicians hours were marked by logjams of people seeking help.
Despite criminal penalties, physicians held illegal private practices after hours just to make ends meet.
Rural healthcare was non-existent over much of the country. A migrant worker told me that in the village, the ‘barefoot doctors” (remember how they were praised by Rewi Alley and Anna Louise Strong and Edgar Snow?) gave shots of fructose for every ailment, and if you were lucky, there were still places where the little red book was placed on the afflicted part while people chanted slogans over the sick person.
I understand things are a lot better now, at least in some cities, and that there is a kind of privatization going on.
I do not understand everything about Obamacare (who does?). Here is what I do understand. My small business is preparing for a massive health insurance cost increase for employees and it is going to come directly out of their pockets one way or another. My company has absorbed a lot of policy increases but this cannot continue.
I was just on a cycling trip and was with 15 people, and four were doctors. Two were GP, one was a surgeon and one was an eye doctor. With Obamacare coming, two are retiring, and the other two are considering some sort of cash alternatives. All four were in complete agreement that this is going to be the most confusing thing, well, ever and that quality of care is going to plummet.
“I understand things are a lot better now, at least in some cities, and that there is a kind of privatization going on.I understand things are a lot better now, at least in some cities, and that there is a kind of privatization going on.”
One of my medical students several years ago was a young woman from China. Her mother was a professor at Beijing University and her father (trained as a physicist) was an auto mechanic (because he is Christian). Her grandfather had lived in the US before returning to China and had taught her excellent English.
She told me she had come to the US for medical school so that she could care for her parents. The implication was that there is no medical or reliable pension system in China. She is now a surgery resident here.
She is a very interesting person for many reasons. She, for example, is married to a Peruvian man. Once Chinese were very tribal about marrying only other Chinese and considered others lesser people. Two friends of my daughter are an American who was teaching English in China and his girlfriend (wife this weekend) who was one of his students. My daughter has spent time with them in China. He came back a few years ago to get an MBA and she came with him. They attended my daughter’s wedding.
I think I see a trend of Chinese women, who are already in short supply in China because of the one-child policy, marrying non-Chinese. My student has a brother who is younger. Her answer to my question was, “They aren’t very smart,” but I suspect it doesn’t apply to high status people. I wonder if the sex selection question has caused many high status women to choose non-Chinese spouses.
Krugman must be having one of his episodic periods of sanity.
I’ve been saying this will lead to concierge or a long line at the ER since 2009. That’s the “choice”.
As far as ACA itself, also predicted FannieMae/Freddie Healthcare…and lookee here. No proofs required for subsidy, we’re on the Honor System again.
Life Insurance? Why not Liars Loan Heathcare LLC. This is not a bug, it’s THE FEATURE. It always was. The Crony’s are already cashing in and the same degenerate cast of sub-prime loans is lining up.
“ObamaCare backers are worried that millions of Americans will game the system.” NO. THEY’RE WORRIED THEY WON’T. They’re not signing up fast enough, but the get out the vote efforts will change that.
Worried? They’re supposed to gain the system. That’s the entitlement economy.
My father was a small-town family practice GP his entire career; he started practicing in ’64 right before Medicare was enacted. He was very concerned about the status and quality of rural healthcare. He was also politically active for a while. In some contexts he welcomed government aid and involvement in providing healthcare, but he also spent a significant proportion of his political activity pursuing what was basically in-the-field damage control ameliorating various problems in the delivery of health care to rural communities caused by government programs that were otherwise meant to help.
As for Obamacare, as he said, he was “glad I’m already semi-retired.” On the one hand he wanted some sort of health care insurance reform and figured government involvement was inevitable. On the other hand he was sure it was going to be bungled on a large scale. He didn’t see anything about it that indicated the Government had learned from past mistakes, and he knew too much about how healthcare programs go wrong to expect enduring positive results from any of its components. The notion that the ACA would lower costs he found especially cruel and delusional.
He was a medical university adjunct, hosting medical students in their third year rotations. He told me that several of his students were pretty much terrified of what was going to happen; he said that among other things they “didn’t want to end up working for the government.” They also told him – he said every single one that brought it up – that they knew people who were either dropping their plans to attend medical school, waiting to see what happened before they started, or even actually withdrawing after their first year for the same reason.
TK, in two weeks, I go back to teaching second year students. I teach in a course called “Introduction to Clinical Medicine” where we start to integrate basic sciences and introduce such things as diagnostic decision trees and physical exam skills. I am one of the “old guard” instructors in a program of small group teaching so there are about 30 of us. I’ve done it for 14 years, since I stopped teaching surgery residents. I am very reluctant to bring up anything about politics or the future of medicine with them. A few years ago, knowing that I was into health policy, the kids who favored single payer or some other reform, asked me to be faculty adviser for them. I gave a couple talks on health care economics as part of the curriculum. I have favored a reform using the French plan as a model.
I don’t know if that single payer group is still in existence. I think they are all afraid.
Obamacare has reversed almost all the incentives I favored. It will never work and will destroy what we have.
Kepha,
“‘barefoot doctors” … gave shots of fructose for every ailment,”
In southern Sudan in the ’80s, I witnessed a single shot of Penicillin G being given for a diagnosis of Malaria. But China is supposed to be more advanced than the poorest country in Africa 30 years ago…
Quacks R us is still around. And they know how to twitter.
[Sorry, I deleted the spam comment to which the above is a response. Jonathan]
Obamacare has reversed almost all the incentives I favored. It will never work and will destroy what we have.
What we have is not without serious problems. What replaces obamacare may be better than what we have now.
“What replaces obamacare may be better than what we have now.”
I fear that Obamacare will be around and slowly decomposing for a generation. The alternative will coexist and stimulate pressure to shut it down because it is “unfair” that some people can buy their own health care.
There are good alternative reforms that could have been devised but, as Instapundit often points out, there probably wasn’t enough opportunity for graft.
Nobody ever gets a clean sheet of paper to re do anything. In a system like the American health care system, there are simply to many people and too much money that is dug in and will fiercely resist changes. But, good luck.
The French got an unusual chance because of the war. When Vichy took over, they uprooted all the traditional French societies, including medicine. The Free French in Britain worked out an entire new social model during the war. It was amazing that they focused on not only winning the war, but the post war government.