Wednesday, November 03, 2010

Should I Do Any Thing With the Medical Savings and Loan?

I started a poll: "Should I do anything with the Medical Savings and Loan?"

The goal of the project was to show that it is possible to fund health care in other ways than pooled insurance.

The Medical Savings and Loan simply breaks apart a group insurance pool into individual savings and lending accounts. Sam Granato said his insurance costs were $18,000 per employee per year. The MS&L would put half this amount in a savings account. A quarter in a loan reserve and the rest in a grant program. The loan reserve would go into the savings accounts if unused.

The system simply takes the money that goes into an insurance pool and gives the bulk of the money directly to the policy holder with the rest going into a combination of loan reserve and grant programs.

This mathematical model lets people directly contrast the merits of individual and pooled funding of health care.

People could take this model apply it directly to real world data and ask the question: Are people better off with pooled financing of health care or individual financing of health care?

My goal during the last two years was simply to find a group to discuss the model.

I failed to achieve my goal. Hundreds of letters, blog posts and tweets have received nothing but cold shoulders.

The Medical Savings and Loan is a real model. It is very easy to implement. I believe in the scientific method. It would be very easy to put together a Medical Savings and Loan program.

Health care financing is an interesting business because a program can underwrite itself. Lets say you had a group of 3000 policy holders paying $10,000 a year in premiums. Well, you have a starting point of $30,000,000.00 of yearly income.

The ideal experiment would have 10,000 victims policy holders. That would give a yearly base of $100,000,000.00. Over a ten year period, one would process a billion dollars through the program.

The administrative cost of the Medical Savings and Loan is significantly lower than insurance. Insurance companies have to have a big claims approval process, expensive actuaries and massive legal departments.

The Medical Savings and Loan puts the savings accounts in a local bank. Policy holders pay their medical expenses directly from their accounts. This eliminates the costly claims approval process.

Legal costs would be lower as well. Insurance companies have lawyers who sue doctors and defend against lawsuits from policy holders. The Medical Savings and Loan steps out of legal picture. Patients would still need to sue doctors, employers, etc.. The Medical Savings and Loan, itself, simply moves money between accounts.

The administrative cost of a Medical Savings and Loan would probably come out to around 1% of the premium. An experiment with 10,000 people over ten years would have about $10,000,000.00 to pay for the work of a half dozen middle class employee/owners. (The best corporate structure for the Medical Savings and Loan is the buyer's co-op with employee ownership).

Did anyone hear that? Administrative costs for The Medical Savings and Loan might be as low as one percent.

Assuming that people are more careful with their money than they are with other people's money, the Medical Savings and Loan could realize up to a twenty percent decrease in health care expenses than insurance.

It is unlikely that the medical savings and loan would cost more than insurance. So, it would be a good experiment for a company wanting to control its health care expenses.

Although my goal of the last two years was simply to find a group to simply discuss the idea ... a group that experimented with the idea just might find giving people direct control over their health care dollars is a fun experiment.

The Medical Savings and Loan would be a great paradigm for discussing health care. One can also use it as an experiment to compare pool funded health care with individually funded health care.

I have tried for two years to get anyone*, anywhere to discuss the idea. I have enough money to drive as far as Arizona, Colorado, Nevada, Idaho, or even Texas.

(*By anyone, I mean a group committed to sound rational thinking. It would be a waste time to discuss an idea with a group seeking to project false images on the idea.)



Dr. Joe Jarvis said...

I have occasionally weighed in on your musings about health system reform, so I guess I take exception to your statement that 'no one' has responded. I do agree with the need to reduce administrative waste in our health care financing. But I find it unlikely that your proposal will reduce the more significant kind of waste found in American health care: Quality waste. Simply put, patients are not shoppers. Even if their illness or injury left them with the time and strength to look into various possible providers, they would not know good quality care from bad, or even necessary care from clinically useless care. We do need to improve the quality of health care in this country, but we will not see that improvement by relying on individual buyers of care, no matter how much of their own money is at stake. Health care is paid for in the US principally by public dollars. In fact, we have more than enough tax dollars spent on health care already to provide high quality, efficient health services to all citizens. What we need is a mechanism to create better public accountability for health care delivery, reducing preventable injury of patients in hospitals and improving the timely delivery of clinically significant care.
Medical savings and loan, for all the potential administrative efficiencies, just will not get that job done. And there are other ways to achieve the administrative savings.

By the way, I join you in discovering that the vast majority of Americans are both uninformed and unmotivated to learn about our health system problems.

y-intercept said...

The system actually assumes that buying health care is dramatically different from shopping. The system also assumes that people won't spend adequate time on their health. It assumes that people are not acquainted with local medical resources.

A central feature of the Medical Savings and Loan is a position called a "Health Care Advocate."

This advocate is a non-medical clerical position that replaces the claims adjuster. Like an insurance agent, the HCA is a financial position.

The HCA will do things like promote preventative care as that makes sense financially.

The primary job of the advocate is to help direct people with their savings. The HCA will have computer simulations that show anticipated medical expenses and will help the policy holders save for the expenses.

The HCA will help assure that people have adequate resources available for care at any moment.

If a person does not have adequate savings, their HCA secures a loan. If a person does not have adequate income, their HCA secures grants.

The advocate does not provide care, but will have information on what care people need and where to get it. So, an advocate will learn about the local medical community and help make recommendations to the patient.

The advocate might help patients with decisions. For example, the advocate might help a patient decide when they need a second opinion and could help patients decide what to do if two different doctors have different opinions.

In the Medical Savings and Loan, payments go directly from patient to doctor. The advocate will be familiar with medical billing and could help protect a patient from over charges. The advocate will also follow prices and would give the patient info like Doctor A charges x amount and Doctor B charges y amount.

The advocate will have contacts with the law community will help patients with small claims or real malpractice cases.

The HCA also helps patients with records. (insert long discussion)

From a public policy perspective the advocate does a great deal.

The advocate separates the people who can self fund their care from those who cannot. This allows the public and charitable health sectors to concentrate their money where it does the most good.

There is a weird economic issue going on here. When people self finance their care, it shows up differently from publicly financed care. Self financed care shows up as productivity, publicly financed care works on the economy as a tax.

If we moved a few billion dollars from the public financed column to the self-financed column, we would transition those billions of dollars from burden to productivity.

I have not written a great deal on the Health Care Advocate because it is a position IS easily misunderstood.

A good analogy is the doula. A few decades ago obstetricians rejected the doula. They saw the doula as a nosy busy-body who just got in the way of a delivery.

Today, many obstetricians openly embrace the doula and have found doulas reducing C-Sections and improving the birth experience.

This Health Care Advocate position is necessary to make the Medical Savings and Loan work, I've only written a dozen or so posts on it.

The position replaces several layers of bureaucracy in the current medical system and helps optimize care by assuring expenditures are focused on the priorities of the patient.

The HCA flips the question of administrative waste on its head. The advocate is a clerk whose charge is to make sure each patient has adequate funds and that the funds are spent to the patient's benefit.

Not all administrative work is waste. Administrative work that is done to the patient's benefit is an efficiency.

Administrative inefficiency happens when clerks are working at cross purposes to the patient's needs.

The reason you see so much inefficiency in public health care and insurance funded care is that the funding of the care works at a cross purpose to the patient's needs.