From: rrb@corona.CSS.GOV (Robert Blandford)
Newsgroups: talk.politics.medicine
Subject: An Approach to National Health Care
Keywords: entitlement national health care
Date: 18 Nov 92 13:24:43 GMT

Here is a rather new approach to national health care
provided for discussion.

Although the approach is rather radical I believe it fills
the bill. I do not believe that it can be easily categorized
as liberal or conservative since it is generous to the poor but
is strict as limits are approached and relies on a free market.

The approach rests on a fixed, lifetime personal entitlement.
I believe that this approach is very resistant to fraud, 
avoids most rationing problems, will strongly contain costs through
competition, minimizes the role of government control, 
and assures access to good care to the poorest.

I apologize for the length (7 pages) but there are a lot of points to cover.

----------------------------------------




                An Approach to National Health Care

               A Fixed, Lifetime Personal Entitlement


(1) Each person would be given a fixed, non-transferable, dollar amount
 (e.g. $50,000 to $100,000) health care entitlement at birth. For a discus-
 sion of the source of funds see points (14) and (15) below. For a discus-
 sion of this approach's substantial resistance to fraud see (21).
 Although this is a single payer system, the single payer does not control
 costs; see (4) and (6) below. For a discussion of the appropriateness of
 the $50-100,000 see (32). Rationing occurs only when the person
 exhausts his entitlement, see (9). Each person can choose any provider
 and the resulting very strong competition reduces costs. Catastrophic
 insurance could be purchased with the entitlement; otherwise all private
 insurance would not be tax-deductible; and persons could pay directly
 to avoid spending down their entitlement, see (10).

(2) The virtues of this approach are that costs would be contained through
 competition, the best health care would be available to the poorest,
 preventative care would be encouraged, and there would be no waiting
 lines as occasionally happens in Canada due to absence of price com-
 petition for the best doctors, (Consumers Report, Aug- Sept, 1992).

(3) A politically possible path to this system might be to first change to the
 Canadian system, (as recommended by Consumer's Reports), which this
 system resembles in its comprehensiveness, and in its daily routine
 from the patient's point of view; and subsequently lower costs and
 improve fraud resistance by incorporating the fixed entitlement which
 would do away with price fixing boards as found in Canada (and in
 practice in the US) and introduce competition.

(4) Each person would have an account for medical care. A large list of
 procedures and prescription drugs would be authorized to charge
 against this account. (Perhaps not facelifts, or extensive psychotherapy,
 but including glasses and dental care.) The person could use any doc-
 tor or hospital in the US. When the procedures were delivered the doc-
 tor would send the bill to the "Federal Medical Accounting" (FMA) pro-
 cessing office. They would check for fraud, but not control the price;
 would pay the bill, and charge it against the patient's account. Once a
 month the FMA would send a statement to the patient showing the
 costs incurred and the amount left in his account.

 The FMA might also include with the bill the median local, state, and
 national charges for the procedures used by the patient that month to
 help the patient decide if his doctor's charges are reasonable.

(5) The billed cost would be given not only in dollars but also as a fraction
 of the current total entitlement. In general the cumulative fraction of
 the person's current entitlement used would be kept so that if (when)
 Congress adjusted the overall entitlement to keep up with inflation or
 to control the budget then the patient would still retain the appropriate

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 fraction of his entitlement.


(6) The expectation is that a person would look for bargains and would not
 squander his entitlement because he would want to conserve it for
 some later need. The search for bargains would encourage competition
 and thus control costs.

(7) Also, each person would be given a "use or lose" allotment, say $250-
 $500, each year (stagger using birthdays to avoid a Christmas rush.)
 This would encourage preventative medicine.

(8) Only a fraction, say 1/3, of a patient's entitlement could be used in the
 first year of his life. That way a sick baby cannot put too great a strain
 on the society's resources; and the child will have something for the
 rest of his life.

(9) When people use up their entitlement they would drop into a
 medicare/medicaid system in which, if they could not pay from their
 own resources, there would be only a very restricted set of procedures
 authorized. They would still have their $250-$500/year use or lose. If
 this "medicare" list of procedures is not substantially less than that
 available under the entitlements then all the cost control features of the
 system will be lost. Likely this list of procedures will contain many
 fewer procedures than is available today under medicare.

 For example it might not include operations whose total cost is more
 than 5% of the current lifetime entitlement; or daily hospital or long-
 term care daily costs more than 50% of the median.

 However, it is worth noting that even the procedures available under
 this version of medicare will have their costs contained by the larger
 number of regular bargain-seekers.

(10) Those who were cautious and/or middle-class might purchase private
 insurance, either comprehensive or catastrophic, especially in anticipa-
 tion of the birth of a child. Since a basic level of care is available these
 expenses, or other health care expenses, would not be tax-deductible.

 Catastrophic insurance (e.g. $10,000 deductible) could be purchased
 (tax-free) with the entitlement, but comprehensive insurance could not.
 This restriction is in order to ensure that patients constantly monitor
 the cost of their health purchases. The costs of the catastrophic
 insurance purchased with entitlements would not be controlled; only
 fraud would be guarded against.

 The entitlement could be used to purchase catastrophic insurance only
 for one year at a time. This restriction is in order to ensure that the
 government is not eventually required to pay off for bankrupt health
 insurance companies who have offered expensive long-term plans
 which they could not deliver on.


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 If very many persons purchased comprehensive care so that prices con-
 tinued to spiral out of control, consideration might be given to taxing
 comprehensive insurance as a luxury, although this would seem likely
 to be very unpopular.

(11) Since rich people will more often purchase catastrophic insurance, they
 and their children will still usually have better medical care if they are
 seriously ill. But this program will ensure that everyone who does not
 encounter a major medical disaster will have equal access to the best
 health care they choose to seek out for most of their lives.

 The best doctors' incomes would probably increase since they would be
 free to raise their rates over those currently paid by insurance com-
 panies; but the income of the average doctor will probably decline.

(12) A patient could always pay the doctor directly and not draw down his
 entitlement if he wanted to. Perhaps to save for his old age.

(13) The entitlements (pro-rated, see point 19 below) should be introduced
 for everyone, not only for just-born children as might be suggested to
 save costs.

 If the program is introduced piecemeal, the US would not save for 50
 years the costs of the many people (many of them doctors and nurses)
 engaged in cost control and billing.

 Perhaps there is no way to soften the blow on insurance companies.
 They would still have the market for catastrophic policys. But it seems
 that they would be out of the mass market.

(14) To pay for the program all businesses would cease paying for private
 health plans, and business tax laws would be adjusted as follows: Esti-
 mate all the money that businesses currently pay for health insurance.
 Take 90% of that as taxes from all businesses. Allocate the taxes to the
 businesses in proportion to their total payroll.

 This way companys that offer little health care today, e.g. McDonalds,
 would not have to pay much per person. And employers that do offer
 good health care with high salarys would probably pay less since their
 original plans strongly subsidized the hospital bills of persons with no
 insurance; those costs are now shared by companies like McDonalds.

 The taxes would be collected right along with Social Security; just
 increase the percent of salary that the business pays as the "employer's
 share" since that would correspond to the "unseen" payments that
 employer's currently make for health care. The employers could, of
 course, indicate on the paystub how much is being paid for health care
 so that the employee-voters could judge if they were getting their
 money's worth.

(15) In addition, since people would not be using their own money for
 health care any more, Federal Income Tax rates would be increased by

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 the amount needed to bring in 70% of the amount that people currently
 pay out of pocket for health care, comprising insurance payments,
 minimums and co-payments, and expenses of those with no insurance.
 Taxes would be further increased to bring in an amount equal to that
 raised by the states for medicaid. (States would no longer offer medi-
 caid.) These increased taxes should acceptable since people will not
 have to spend much of their own money on health care any more.

 The remaining 30% is left in the taxpayer's pockets to pay for patent
 medicines and for private payments and health insurance.

(16) With resulting efficiencies and competition, the money raised by the
 above two sources is hoped to be enough to cover the demand. Detailed
 analysis should be performed to see if this is true.

(17) As mentioned above, people could continue to buy comprehensive
 health insurance with after-tax dollars if they wanted to save their enti-
 tlement for their old age. Also, employers could offer such health
 insurance; but most would not, I presume. Contributed premiums from
 such employer's programs would be taxed.

(18) Children are born with an entitlement; their parents would naturally
 administer it, say till the children are 15. Since children will not neces-
 sarily know when their entitlement is being depleted they might be
 defrauded by their parents, so their accounts should be closely watched
 by the FMA, perhaps by requiring a second opinion for long-term drug
 prescriptions or any expensive procedure for children.

(19) When the program is initiated people currently alive should receive a
 pro-rated entitlement. A suitable method might be to pro-rate accord-
 ing to the proportion spent after a given year in the life of a relatively
 well-off middle-class person of the same age. Consideration should be
 given to allowing current medicare recipients to remain in the medicare
 system. Since they are old, the costs might not be long-term, and many
 might opt for the new system especially since many doctors would
 likely prefer the new system.

(20) There would likely be a rush to get care right away because of all the
 things that poor people need to have done. Prices may go up in the
 first few years. Healthy people, for the most part well-off people, will
 put off procedures that they do not really need, until prices decline
 again. Sick people, especially including poor sick people, will use up
 more of their entitlement to finally get the care that they need. It is
 better for the society that they pay more in the early rush in order to
 regain health, cutting down their lifetime entitlement, than that they
 remain sick and unproductive.

(21) There have been medicaid frauds with patients falsely claiming diseases
 in collusion with doctors to, for example, obtain drugs to resell. This
 would be *less*, not more, likely if there were a fixed entitlement
 because someone's entitlement, probably the false patient's, must be
 reduced, and that person, when notified of the loss, will not want his

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 entitlement reduced. In present frauds only the government loses
 money. Also, central monitoring will make fraud more difficult, and
 rewards of increased health care limits could be given to persons whose
 information about overcharges to their account resulted in convictions.

 Despite the above remarks, a common reaction to the entitlement
 approach is to believe that it will be vulnerable to fraud. Logically how-
 ever, this approach is no more vulnerable than any current plan, includ-
 ing company supplied health plans, not to mention medicaid and medi-
 care. The current penalties of trial and jail terms should be sufficent to
 deter fraud which is even less in the person's interest than before.

(22) There will be privacy problems, the government could have a complete
 record of a person's medical history. However this is already the case
 in principle for people on medicare, and with respect to states for medi-
 caid. Perhaps this problem could be alleviated by requiring federal
 records over, say, 5 years old to be discarded. The total fraction of the
 entitlement remaining would, naturally, have to be retained in the files.
 A person could still assure privacy by paying personally for care.

(23) Much of a person's entitlement might still be used in the last year of his
 life, a waste from society's point of view. However, in many cases much
 of the entitlement will have been used creating a productive life; then
 as those persons drop into the medicaid category with its reduced list
 of approved procedures, money may in fact be saved by the society.

(24) Visiting nurses and nursing home care should also be approved pro-
 cedures. This will encourage people to not squander their entitlement
 while they are young. Long-term care available under reduced list of
 procedures will have to be very basic.

(25) To minimize the number of heartbreaking cases, catastrophic
 "insurance" should be federally funded for accidents and assaults as
 normally defined by insurance companies. This would cover, for exam-
 ple, the next $200,000 after the first $10,000 for injuries sustained by
 robbery and assault victims; and in auto accidents, fires, floods, torna-
 dos, earthquakes, etc. Police and firemen could be covered in this way.
 So long as the concept of accidents is not extended to genetic
 "accidents" or the "accident" of catching tuberculosis or AIDS, the total
 cost of such insurance should be small. Presumably, emergency life-
 saving procedures with a good prognosis would be included under the
 restricted list of procedures, so that a criminal, injured during a crime
 and convicted of that crime, would be covered even if he had exhausted
 his fixed entitlement. The fact that he might exhaust his entitlement if
 injured in a crime and convicted of that crime should act as a further
 deterrent to crime.

(26) If fixed, lifetime health care entitlements are a good idea it does not
 necessarily mean that vouchers for schools is a good idea. There is no
 "community" question in health care.



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(27) What if there is a rush for health care and, despite the suppression of
 demand due to rising prices, more money is going out than coming in?
 Studies will be needed to determine the details.

 If young persons are getting healthier, it might well be regarded as an
 investment and the nation should be allowed to run a deficit. If older
 persons (>70) are having expensive operations which help younger
 people but after which they die in less than a year; or similarly, if babies
 (< 1) are having expensive operations and never having productive
 lives, remove those operations from the list of approved procedures for
 those age groups. These guidelines do not appear to conflict with the
 Americans with Disabilities act.

 If these approaches do not sufficiently constrain cost within budget
 then the list of approved procedures would have to be further reduced.

(28) For political reasons, some existing expensive procedures, such as
 dialysis and kidney transplants, would probably have to be "grandfath-
 ered in" to the list of restricted procedures either for those alive today
 or for those with symptoms today. However, for other persons, if they
 could not pay by themselves or pay with catastrophic insurance that
 they have purchased, it seems plausible that procedures for these
 diseases should be like all others; either they are or are not in the
 reduced list of procedures available free to those who have exhausted
 their entitlement.

 To control costs such expensive procedures should not be in the
 reduced list of procedures.

(29) This entitlements approach has many of the cost-containing and
 humane features of the Canadian system with the additional cost- con-
 taining feature that costs are set by competition and not by government
 boards who have various conflicts of interest. This should result in
 better cost containment than in Canada and thus for more medical care
 delivered.

 By comparison to the Canadian system the entitlements approach does
 have the defect that a disastrously ill person who has not purchased
 catastrophic insurance will be worse off.

(30) It may be objected that this approach to National Health Care is not sen-
 sitive to the needs of those who become very ill. However, those who
 become very ill will receive more funding than the average citizen; after
 they exhaust their entitlement they continue to draw tax dollars from
 the reduced list of procedures. Also, the citizen who enjoys good
 health until his death, or who buys insurance and therefore does not
 exhaust his entitlement, never receives the full value of his entitlement.

 The problem is one of degree; the society should provide the seriously
 ill citizen some extra funding, but should that citizen be allowed to

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 seriously compromise the health care available to the average citizen by
 placing a tremendously disproportionate drain on tax dollars taken
 from all?

(31) This approach has the benefit that in the entitlement phase it does not
 discriminate against the disabled; they receive the same resources as
 others; there is no rationing.

(32) The figure of $50-100,000 is thought by some to be too small. It has
 been tentatively selected for the following reasons.

 It is comparable to what is spent per capita for a life's public education;
 to protect that investment it seems reasonable to spend a comparable
 amount.

 If the amount is too high people will not conserve.

 Prices will be lower with competition, so current prices may not be a
 reliable guide; more will be bought with this entitlement than would be
 possible currently.

 To the extent that we are protecting a public education investment, we
 want healthy working people, not necessarily healthy retired people; so
 we want at least enough money to carry people up to a healthy retire-
 ment but we may save as a society on funding health care after retire-
 ment.

 To prepare for medical care in retirement people are still free to buy
 insurance if they have worked hard enough to afford it; we leave some
 responsibility for people to care for themselves in old age. Also,
 insurance can allow for disasters requiring more than $100K if people
 will buy it.

 It is thought that for a large percentage of people $100K is more than
 enough for a lifetime; most people do not have the very expensive
 operations nor spend much time in a nursing home; but data on the dis-
 tribution of lifetime costs would be useful.

 rrb: 92/11/18


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