A Hybrid, Public/Private Model of Health Care

Occupy Healthcare is a movement to influence and impact the future of healthcare, as well as an online community to discuss healthcare reform issues. Recently they invited me to submit my perspectives, and below is what I sent.

Occupy Health Care – a proposal from Wayne Caswell, Modern Health Talk

Occupy Healthcare logoHistorically, the biggest impact in health outcomes has come from public health initiatives such as clean water, sewage systems, and immunization programs. But that success is minimized by a “sick care” system that is profoundly broken, with perverse incentives to view patients as customers, treat symptoms, and pay practitioners for each test, drug and procedure.

ACA is meant to fix that, with more emphasis on positive outcomes and overall health & wellness, both to minimize the need for medical care in the first place and thus reduce costs, and to maintain a healthy and productive workforce that contributes to a vibrant economy. ACA is a good start, but there’s still more work to be done, and it won’t come from private industry or the insurance model, because natural incentives prevent it.

Contrasting Incentives

I believe that the key to health reform is getting the incentives right, and that means getting private insurance companies out of BASIC health care entirely. Their profit motive gives them an incentive to increase costs, knowing that higher costs = more insurance customers paying higher premiums. What I propose instead is a hybrid public/private model that capitalizes on contrasting incentives, eliminates the need for health insurance, and saves over $1 trillion per year.

In a free-market society, private companies are most efficient when there’s vibrant competition on a level playing field, because that competition causes them to improve service & product quality and drive down prices. These private companies, answering to shareholders and driven by profit motives measure success in terms such as Revenue, ROI, Payback Period, Stock Price, etc.

Public entities measure success differently and over much longer time periods. As a result, they can make more strategic and longer-term investments and fund them with bonds and tax revenues. Their objectives can focus on lifestyle improvements, on nurturing that skilled, healthy and productive workforce, and on infrastructure as the engine of economic growth to benefit all. Some people see public services as generally having large and inefficient bureaucracies, but the public sector can actually be more cost effective, because there’s no need to make a profit, and their relatively large size is due to the scale of their operations.

The Hybrid, Public/Private Model

Under a public sector model for basic health care, doctors and nurses work as government employees. Basic services are provided at cost to all, including the poor, foreign visitors and illegal aliens, partially to prevent the outbreak of disease.

The added costs of today’s system should disappear or at least be diminished greatly. There would be no incentive to practice defensive medicine, and an oversight committee could monitor care and complaints. There would be no reason to pad bills or commit fraud since the doc makes the same money as an employee regardless of what they do with that patient. Thus they can focus on care, outcome and treatment only. And, there’s no need for Medicare or Medicaid or private insurance programs.

Anything beyond the basics can be addressed by private options that extend care. Examples might include retail clinics, dial-a-doc services, concierge services, and elective procedures. These private options would need less regulatory oversight and might even include medical tourism.

The public portion of this hybrid model, with its focus on health & wellness, would include education on smoking, nutrition, exercise and sleep, and also address the health effects of poverty & obesity. Smoking is important because it adds 20% to annual medical costs, and evidence shows the smoking cessation programs have generally worked. Even though some people still smoke, it’s far fewer than in the 1960’s.

Obesity adds at least 50% to medical costs, but they aren’t evenly distributed across social classes. According to HBO’s documentary “The Weight of the Nation,” public health officials can reliably predict a community’s weight by zip code and have noticed lifespan differences of more than 20 years between poor neighborhoods on one side of town and affluent ones on the other side just 8 miles away.

Billing at Cost

In the older HMO model where preventive care was free, and in the evolving insurance model afterwards, patients contributed to the abuse of the system, because they didn’t know about or have to worry about the cost of each test or procedure, until they were surprised by dozens of bills afterwards. But in the basic public health model, such abuse is discouraged because services are provided at cost, with total costs known up front, and no need for health insurance.

Expected Opposition

The $2.6 trillion in annual health care costs are going somewhere now. If a new model reduces that to half or less, then over $1 trillion can go into the economy elsewhere. But SOMEBODY is going to scream that they’re no longer getting their part of the $1 trillion that’s no longer being spent. That’s where the opposition will come from – the incumbents who will naturally and fiercely defend their current positions and oppose public health care initiatives. They’ll argue that their profits and what they personally spend trickles down to others somehow.

9 Responses to “A Hybrid, Public/Private Model of Health Care”

  • Robert Fuhr:

    *Simply put you offer a socialistic system, somewhat.  Doctors, nurses are not going to settle for a determined wage by a bureaucrat, and this system is what it boils down to.  Your system would have to start at ground zero.  The price of education would have to be taken into consideration, a potential doctor or nurse isn’t going to invest in years of time and money to receive a meager wage.

    At this time the health care system, the insurance end is completely out of control.  The fraud and abuse in rates for service received.  Again, I’m for profit, but when profit turns into greed than we have a failed system.  A major overhaul of the insurance end of the health care system would be a first step forward.  The medical end of the health care system would be a necessary second.

    The entire system is too large to control and should be broken down into either regional or specialty fields.  Granted there are already specialty fields but even these will need tighter policing.  The bottom line is to make people feel that health care is more user friendly and they can be included in the system without criticism and being treated as second class citizens.    

    • Thanks, Robert, for your critique and comments. I do think we’re in sync in many ways, including the negative role of greed and fraud. It’s always easier to envision a system like I proposed than to actually implement it, but I do want to respond to one thing — pay. I said nothing about paying doctors and nurses a meager wage. That would make no sense, given their education commitment and responsibility. Most people think government workers make more than the same job in the private sector, and that’s entirely possible with the public side of this hybrid model.

      What I tried to do here is address the vastly different motivations and incentives of private and public entities to address different parts of healthcare delivery. Because basic public healthcare is NOT profit-driven, more focus can be placed on prevention through health & wellness, regular exams, telehealth programs, and innovations that help drive DOWN costs or eliminate them entirely.

      I don’t know if it was clear, but I support the Affordable Care Act (Obamacare) and see many useful provisions that are consistent with wellness and positive outcomes. I would NOT recommend replacing the ACA with something so radical as what I proposed and would favor instead some sort of phased in implementation. One way to start is to extend Medicare to more people. It’s similar to the insurance model but without the profit motive of private insurers.

  • [...] single payer universal healthcare, like the other wealthy nations have. I think he’d buy into the hybrid public/private healthcare system that I [...]

  • Don Warner:

    I have a few ideas re: healthcare and the folly of supply side economics. Lets talk.

    Don Warner, MD, MBA

  • Don Warner:

    I have a few ideas re: healthcare and the folly of supply side economics. Lets talk.

    Private for profit healthcare insurance carriers and Medicare basically navigate DRGs (diagnosis related groups) and CPCs (current procedural codes). They do the same job.

    Health care insurance companies have an overhead of 20% or more. Medicare has an overhead of 2%.

    Healthcare coverage could be done by the government or privately, not for profit, using the business model of Medicare but funded by premiums in a way that it is more affordable for more people

    Don Warner, MD, MBA

  • [...] MY PROPOSAL: I believe the key to health reform is getting the incentives right. Where private companies measure success in terms (revenue, profit, ROI, payback period, stock price, etc.), public entities measure success differently and over longer time periods. My hybrid proposal blends the two: a public sector model of wellness & basic care (doctors & nurses work as government employees) but allowing. for capitalism, innovation & risk taking. See http://www.mhealthtalk.com/2012/08/hybrid-model/. [...]

  • [...] an ideal healthcare system would recognize that and work to maximize the strengths of both. (See http://www.mhealthtalk.com/2012/08/hybrid-model/.) If a hybrid public/private model actually reduced our $2.7 trillion/year of healthcare expenses [...]

  • [...] size is due to the scale of their operations. That’s why I proposed a hybrid model proposed a Hybrid, Public/Private Model of Health Care and argued that the key to health reform is getting the incentives [...]

  • […] earlier proposed a hybrid model of health care designed to exploit the best incentives of both public & private sector […]

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