One recent reform proposal blends elements of consumer driven healthcare with universal coverage. The author’s background as a health economist provides a perspective that supports market-based solutions. Hal Luft’s recent book, Total Cure (Cambridge: Harvard University Press), should be required reading for industry participants.
Background
Regardless of whether the public or private sector pays for patient care, all manner of healthcare reform proposals will almost certainly rely on private industry to administer the system. As such, implementation of any major health reform will require active private sector participation.[1]
Today private industry administers most of the health payment system even when the check ultimately clears out of a government account. Medicare, for example, contracts with insurance and technology companies to provide the actual insurance policies, processing, and payment of claims. At the other end of the spectrum, when individuals pay for medical care out of pocket, private industry also tends to perform a broad administrative function.
Increasingly, banks coordinate payments from custodial accounts (HSAs, FSAs, HRAs) to maximize the tax advantage of their customers and shorten care providers’ revenue cycles. Among the marketing slogans designed to convey the value of the bank to the provider network are “revenue cycle management” and “realtime adjudication and settlement”. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 was largely responsible for these new niches for the banks. In response, insurance companies created their own banks as an end run around the competition. The insurance companies began functioning like banks while the banks were functioning like insurance companies, regardless of the government or a private party was ultimately responsible for payment.[2] Reform ought to focus on changing the way that private industry functions holistically rather than simply shifting cash flows from the insurance companies to the banks.
A Path Forward
Prompting private industry to adopt new standards often involves an iterative process of consensus building. Making think-tank ideas safe for consumption may involve large consulting engagements to “productize” knowledge in a digestible format for the public and private sector. Total Cure, a new book by Hal Luft of the Palo Alto Medical Foundation, evangelizes key shovel-ready healthcare reform concepts, and will likely influence the direction of public policy. For starters, Luft has created a sound byte-ready working title for his set of proposals: SecureChoice. The flowcharts littered throughout the book are ready-made for animated PowerPoint slides. Importantly, Luft takes his cue from B-school curriculums and articulates his vision of the future in present-tense; the SecureChoice platform is described as if it already exists. While as a public intellectual Luft’s acerbic wit may stymie consensus[3], SecureChoice provides a real roadmap for political and private sector implementation.
With years of experience as a healthcare economist and researcher, Luft has developed a keen eye for the practical side of system. A career of studying Medicare data sets allows him to speak credibly to professional implementers of technology, with comments like “coding improved once it made a difference in payments and quality assessment”.[4] The Total Cure spells out concepts in big blocks easily understood by decision-makers. First, everyone who experiences a major health problem will be entitled to superior medical care, as defined as care that is better than average. While readers outside of the business world may not be familiar with the increasing predictive power of empirical data, books like Super Crunchers have been on CEOs bookshelves for a few years now, so the idea of comparing outcomes between care providers should not cause too many blank stares. Superior care, then, is simply getting access to the providers and procedures that are likely to create an outcome in the top half of the distribution curve.
More generally, SecureChoice concepts are likely to be easily understood in the private sector because they are grounded in terms of economic incentives already familiar to managers. Every businessperson who has listened to a surgeon recommending surgery in a borderline case must wonder at how doctors and hospitals balance professional ethics against a strong economic incentive to recommend clinically aggressive procedures. Some legal prohibitions against remuneration for referral exist today, but if a treatment is provided by the same doctor or practice group that made the diagnosis, a possible conflict of interest exists. Because everyone is entitled to medical care for major problems under SecureChoice, the doctor providing the diagnosis would be forbidden from sharing any economic interest with the doctor providing the treatment.
Few incentives are better understood in the private sector than self interest. Accordingly, SecureChoice supports new growth markets for private sector capital. By formally splitting diagnosis from treatment, SecureChoice would be a boon for medical tourism, one of the fastest growing segments of the healthcare industry.[5]
The key tenet of SecureChoice is that health insurance should be for truly unpredictable events rather than for the routine care that is often covered under traditional health plans. This philosophy is likely to endear the platform to fiscal conservatives, as well as those entities that have already invested in high-deductible health plans. Business leaders do tend towards fiscal conservatism. Moreover, those who have invested in a high-deductible health plan approach will recognize this common vision of insurance as a backstop for catastrophic incidents.
Remaining Hurdles
The main challenge with SecureChoice is defining those medical conditions for which citizens are entitled to care. In an effort to distinguish the proper scope of the guaranteed coverage, Luft distinguishes major acute interventions and chronic conditions from minor acute interventions and preventive medicine.[6] While this distinction aligns with a conservative view of the purposes of insurance and incentivizing efficient behaviors, Luft does not provide guidance on resolving the disputes that implementing such a distinction would entail.[7] Practitioners and patients engaged in a holistic approach, for example, that focuses on the interconnectedness of physical and mental systems will find difficulty in separating minor from major conditions. SecureChoice is shovel-ready in many respects, so lack of detail on the distinction of major from minor medical conditions raises a red flag.
It may be that the line between distinguishing coverage for acute conditions should be revised to include both minor and major conditions, so long as the cost of the care does not exceed that average cost to deliver a superior outcome. While insurance theory purists may argue that because an occasional doctor visit for a sore throat or some other minor common condition ought to be anticipated and budgeted as an non-insured expense, covering these incidents will eliminate the more contentious debate over the distinction between a minor and a major condition.
[1] When ideas don’t gain traction with private industry, implementation becomes difficult. See the sad history of the CMS’ efforts to find a private-sector custodian of Medicare Savings Accounts.
[2] See, e.g., health FICA and other technologies where banks and other financial services have intermediated themselves into health carriers role as a provider of value to provider networks.
[3] On a 6/12/09 appearance on NPR’s Forum, Luft remarked that Visa would have “no problem” handling an enhanced healthcare payments system, which may overstate Visa’s competence. In response to a query on European health systems, he quipped that adoption of an European model would be as successful as adoption of the metric system.
[4] At 141
[6] SecureChoice would also entitle citizens to preventative medicine in some circumstances.
[7] He does, however, explicitly defer consideration of politically charged issues like abortion and end of life care.
