A Public-Private Hybrid Healthcare System

American Healthcare is Going Public, and Private. (Click to read article)

I published this article back in 2012 but updated it now because Senators Bill Cassidy and Lindsey Graham just introduced a bill they aim to ram through Congress without a CBO score or public hearings. Senator Bernie Sanders also has an Obamacare replacement. It’s a form of Medicare-for-All, and it’s gaining wide support among Democrats and the public.

GOOD NEWS UPDATE: Republicans failed to get enough votes to pass the Cassidy/Graham bill.

As founding editor of Modern Health Talk, I think both sides need to step back from partisanship, look at the big picture, consider all stakeholders, look to other advanced nations for inspiration, and combine the best properties of each into a public-private hybrid healthcare model.

Is Health Care a Right? — Dr. Atul Gawande, a surgeon and public-health researcher, wrote an amazing article for The New Yorker that asks a question that’s been dividing Americans. His interviews offer important new insights that were missing in the Republican push to repeal and replace the ACA without a single public hearing. Not only do we need to understand what other nations do, but we also need to understand the different perspectives of our own citizens. This amazing must-read article is a good companion to my own article on Single-Payer.

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

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

Historically, the biggest impact in health outcomes has come from public health initiatives such as clean water, sewage systems, immunization programs, and smoking cessation. But that success is minimized by a “sick care” system that is profoundly broken. Perverse incentives cause practitioners to view patients as paying customers, diagnosing and treating their symptoms to keep them coming back and paying for each test, drug, treatment or procedure.

The Patient Protection and Affordable Care Act (ACA, or Obamacare) was meant to fix that. It emphasized positive outcomes, wellness, and prevention, both to minimize the need for medical care in the first place, and to maintain a healthy and productive workforce. The ACA was 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 that, or work to sabotage progress.

Contrasting Incentives

As I often say, 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 causes them to increase costs, knowing that higher medical costs lead to more customers paying higher premiums. What I proposed instead is a public-private hybrid model that would capitalize on contrasting incentives, eliminates the need for health insurance, and would save over $1 trillion per year.

Private-sector incentives — In a free-market society, private companies are most efficient when there’s vibrant competition on a level playing field. That competition causes them to improve service & product quality while driving down prices. These private companies, answering to shareholders and driven by profit motives, measure success in business terms such as Revenue, ROI, Payback Period, Stock Price, and Quarterly Stock Price. That leads to relatively short-term decision making often questionable corporate behavior, as described in the Canadian documentary, The Corporation.

Private-sector incentives — Public entities, on the other hand, measure success differently. They can make longer-term investments that are more strategic in nature and fund them with bonds and tax revenues. Without profit constraints, their objectives can focus on lowering healthcare costs and improving average longevity and lifestyle. While some people may see public services as having large and inefficient bureaucracies, their large economies of scale and lack of profit motive can actually make them more efficient than in the private-sector.

The Public-Private Hybrid Healthcare System

Under some public healthcare systems, 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 U.S. can greatly improve care quality and lower costs without going quite that far. We could simply provide government health insurance, or even a public insurance option, and still keep capitalism among care providers.

The excessive costs of today’s “sick care” system should disappear under such a system, or at least be diminished greatly. With proper regulatory oversight to establish and monitor care costs, quality, and complaints, there should be no need to practice defensive medicine. And, with a single-payer system, there would be no need for Medicare or Medicaid or private insurance programs.

As with Medicare today, anything beyond basic coverage could be addressed by private options that extend care. Examples might include retail clinics, dial-a-doc services, concierge services, functional medicine practices, and elective procedures. These private options, which could also include medical tourism, would need less regulatory oversight.

The public portion of this proposed hybrid model would focus on health & wellness and include education on smoking cessation, nutrition, exercise and sleep. Addressing the smoking habit 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.

The public portion would also address the health effects of poverty & obesity. 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 body mass index 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. A single-payer hybrid model would encourage policymakers to introduce public policies that improve overall health, thus saving even more money.

Combining the Best Properties from the Best Healthcare Systems

I think most Americans would be satisfied with President Trump’s repeal & replace promise if it actually:

  • Provided [Better] Health Care For All
  • At Lower Cost
  • Without Harming Medicaid

Unfortunately, our Republican Congress hasn’t offered anything close to that, and that causes me to question their motives. Not only have they not come up with anything better, but each attempt at repeal would just make things worse — much worse. Their proposals would knock tens of millions of people off of health insurance altogether, according to the nonpartisan Congressional Budget Office. Millions would likely die early without the healthcare they need, based on mortality studies at Harvard University. And without the preventative measures that are included in Obamacare, each of the Republican plans would increase overall costs pretty dramatically. So much for fiscal responsibility and compassionate conservatism.

What troubles me is that miopic partisanship is keeping Republicans from looking at others for inspiration. There’s a lot to learn, for example, from Japan, which has the cheapest healthcare in the world even with the oldest population. They also have the best longevity, infant mortality rate, and are tops in almost every other health measure. Obviously, their public-private hybrid system serves them well, but other nations are doing well too, and the U.S. is ranked 37th among them.

Healthcare Spending by Country

Elderly Population by Country

A Look at Other Healthcare Systems

Several years ago, T.R. Reid hosted a PBS Frontline episode where he traveled to the United Kingdom, Japan, German, Thailand, and Switzerland to study their healthcare systems and find out what people there thought. He learned that most people were very happy with the care they got and that no one there gets in financial trouble or files for bankruptcy because of unexpected health problems. That would be scandalous.

Reid also looked for examples of nations that had successful healthcare reforms. Thailand was one of them, first studying many other systems and then designing a hybrid model of its own that combined the best properties from the others, and avoided known problems. Why haven’t we been able to do the same? I think that’s because the Medical Cartel is working to keep costs high.

Cap Profits with Negotiated Prices

Before 1973 it was illegal in the U.S. to profit off of health care, but that changed with former President Richard Nixon’s passage of the Health Maintenance Organization Act. It was done as a favor for his campaign financier, Edgar Kaiser, then chairman of Kaiser-Permanente.

The profit motive is killing US while enriching healthcare companies.The new HMO model kept preventive care free but introduced profit into everything else and encouraged patient abuse of the system. With insurance, patients didn’t know about or have to worry about the cost of each test or procedure — at least not until they later got dozens of surprising bills.

In a single-payer hybrid model, such abuse could be discouraged with services provided at a standard negotiated cost, with total costs known up front, and with no need for private health insurance. That’s how healthcare works in most other nations, so why not here?

America already has two main public health-insurance programs: Medicare for the old and Medicaid for the poor. Senator Bernie Sanders’s new “Medicare for All” bill would eventually eliminate private health insurance and have the government pay for 100% of all health services. Private competition among hospitals, drug companies, testing companies, and equipment providers would be encouraged but with the government negotiating prices, as is done in other countries.

Bernie’s bill will unlikely pass any time soon in our divided Congress, but it at least points the way toward a Japan-like public-private hybrid. The bill could satisfy all of Trump’s repeal & replace promises and even those made by Republicans in 2016 elections, so passing it could let them declare a victory. But they’d have to quit calling it socialized medicine, and I’m not sure they’ll do that for many reasons.

Expected Opposition

Republicans are unlikely to embrace a single-payer hybrid, like Medicare-for-All, and here’s why. Besides my concerns cited in Politics: Modern Killing Fields is intense political pressure from a Medical Cartel that is working to keep costs high. You see, $3.5 trillion/year is now going into the cartel’s pockets, and if a disruptive new healthcare model were to cut that in half, they’d scream about losing over $1.5 trillion in revenue. That’s where the opposition will come from – the incumbent insurers, hospitals, drug companies, testing companies, and medical equipment providers – and it won’t matter if that money could better help the economy elsewhere. The cartel will and fiercely defend its current revenue positions and oppose any public-private hybrid initiatives, and Republicans will defend those positions and argue that corporate profits will trickle down to consumers somehow. That’s a shallow argument, however, and I think it’s just one of the Republican motives to Repeal Obamacare.

What’s the Proper Role of Government in Healthcare? (added 2/24/2017)

5 thoughts on “A Public-Private Hybrid Healthcare System

  1. *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.    

    1. 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.

  2. 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


    How well does Jimmy Kimmel understand the GOP health-care bill? — It turns out better than the authors, according to this Washington Post fact-check.

    The 4 steps for Republicans to repeal Obamacare in the next 2 weeks — (Vox) The Obamacare repeal clock runs out on 9/30/2017, according to Senate rules, and Republican senators are using that deadline to ready one last shot at the health care law.

    The resistance wants you panicking over the GOP’s latest health care bill — (Vox) Health care activists are battling confusion and exhaustion as they try to mount yet another stand — the last, they hope — against Republican efforts to repeal Obamacare.

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