Redesign the Paradigm

The U.S. healthcare system is currently the last remaining privatized healthcare system in the industrialized world. There is a strong possibility this will change over the course of the next 5 to 10 years. The new healthcare plan passed by the Obama administration is the first of many stages that could, over the next decade, lead us down the road to socialized or universal medicine. This is a similar path that many European countries followed along the way to creating a complete socialized medical system.  Many of these countries plans were initially met with strong public resistance but the end result was a socialized medical system.

This may not be as drastic a transition for the U.S. as one might think; we already have active programs of socialized or universal medicine, Medicare, Medicaid, and the U.S. military’s Tricare.  The U.S. Medicare system was the basis for the country of Taiwan’s recently redesigned socialized medicine health care system. Over the next decade U.S. citizens could see incremental legislative corrections to the new health care reform bill. These corrections could also result in a further expansion of Medicaid and Medicare and possibly the combining of both programs into one nationalized health care insurance program with a streamlined electronic billing process.  Taxes will likely have to be increased to help fund this. Existing for-profit healthcare insurers may find themselves competing against the new Medicaid system and may be downgraded to providing secondary insurance coverage. New legislation for price controls for medical supplies, medical equipment and pharmaceuticals can be expected by the end of the decade (2020). Medical procedure costs i.e. heart transplants, surgeries, cancer treatments, etc. could see rigid price controls with limitations on who will qualify for access.

These measures are expected to decrease healthcare costs for a large section of the population but if implemented will drastically change the corporate landscape of healthcare reducing profitability among a number of health care sectors. Regardless of ones political philosophies what almost every health care economist and the bulk of our lawmakers already know is that the system we had prior to the healthcare reform was unsustainable. The massive numbers of retiring baby boomers and the near exponential increase of obesity related health issues could overburden the old system within 10 to 20 years. Something had to be done to curb the increasing costs and profit taking at every sector before the system completely collapsed further damaging what is likely to be an already fragile economy.

Lawmakers believe that by being proactive there is a chance to stem costs and provide as much service as is financially possible to the majority of the population. Unfortunately, if you are over 75 or whatever the determined cutoff age is you may no longer be considered a viable contributor to society, therefore your tier of service will begin to decrease compared to the rest of the population. Another possibility would be to limit expensive healthcare programs and treatments associated with aging from the overall plan offered to the public. There will still be the option of purchasing what will certainly be very private supplementary insurance.

The US currently spends the most on healthcare of any nation on Earth and even with a social system the costs will remain high. It is the most medicated country in the world while having the highest mortality rate among preventable terminal illnesses. In addition, obesity rates due to poor diets consisting of refined processed foods saturated in fats, salts, sugars, and simple carbohydrates are the highest of any of the industrial nations and the primary cause of the US overall poor health.

Baby boomers of retirement age and those in their middle years are going to have to realize that their healthcare coverage into their 70’s may not be able to meet their needs. With limiting medical resources available and healthcare designed around providing drug treatments as opposed to preventive practices and cures, those in high risk tiers are going to need a different approach.

The future of US healthcare may eventually evolve into something similar to today’s European socialized medicine. The U.S. population should start taking responsibility for their health and change their lifestyles if they want to live into their 70’s and 80’s with any kind of quality of life. This means eating healthy and abandoning our unhealthy American food preferences, instead begin eating like our grandparents did, exercising at least 15 – 30 minutes per day (continuous movement), and weaning ourselves off of multiple drug treatments and their long term toxic effects and towards preventive measures and more natural remedies where applicable. Catastrophic health care costs associated with heart disease, cancer treatments, etc. may not be readily available once individuals reach the determined cut off age, if this becomes the case we will have to rely on our own ability to stay healthy.

The next series of blogs will discuss the options and difficulties of eating healthy in the U.S.

The U.S. healthcare system is currently the last remaining privatized healthcare system in the industrialized world. There is a strong possibility this will change over the course of the next 5 to 10 years. The new healthcare plan passed by the Obama administration is the first of many stages that could, over the next decade, lead us down the road to socialized medicine. This is a similar path that many European countries followed along the way to creating a complete socialized medical system.  Many of these countries plans were initially met with strong public resistance but the end result was a socialized medical system.

This may not be as drastic a transition for the U.S. as one might think; we already have active programs of socialized medicine, Medicare, Medicaid, and the U.S. military’s Tricare.  The U.S. Medicare system was the basis for the country of Taiwan’s recently redesigned socialized medicine health care system. Over the next decade U.S. citizens could see incremental legislative corrections to the new health care reform bill. These corrections could also result in a further expansion of Medicaid and Medicare and possibly the combining of both programs into one nationalized health care insurance program with a streamlined electronic billing process.  Taxes will likely have to be increased to help fund this. Existing for-profit healthcare insurers may find themselves competing against the new Medicaid system and may be downgraded to providing secondary insurance coverage. New legislation for price controls for medical supplies, medical equipment and pharmaceuticals can be expected by the end of the decade (2020). Medical procedure costs i.e. heart transplants, surgeries, cancer treatments, etc. could see rigid price controls with limitations on who will qualify for access.

These measures are expected to decrease healthcare costs for a large section of the population but if implemented will drastically change the corporate landscape of healthcare reducing profitability among a number of health care sectors. Regardless of ones political philosophies what almost every health care economist and the bulk of our lawmakers already know is that the system we had prior to the healthcare reform was unsustainable. The massive numbers of retiring baby boomers and the near exponential increase of obesity related health issues could overburden the old system within 10 to 20 years. Something had to be done to curb the increasing costs and profit taking at every sector before the system completely collapsed further damaging what is likely to be an already fragile economy.

Lawmakers believe that by being proactive there is a chance to stem costs and provide as much service as is financially possible to the majority of the population. Unfortunately, if you are over 75 or whatever the determined cutoff age is you may no longer be considered a viable contributor to society, therefore your tier of service will begin to decrease compared to the rest of the population. Another possibility would be to limit expensive healthcare programs and treatments associated with aging from the overall plan offered to the public. There will still be the option of purchasing what will certainly be very private supplementary insurance.

The US currently spends the most on healthcare of any nation on Earth and even with a social system the costs will remain high. It is the most medicated country in the world while having the highest mortality rate among preventable terminal illnesses. In addition, obesity rates due to poor diets consisting of refined processed foods saturated in fats, salts, sugars, and simple carbohydrates are the highest of any of the industrial nations and the primary cause of the US overall poor health.

Baby boomers of retirement age and those in their middle years are going to have to realize that their healthcare coverage into their 70’s may not be able to meet their needs. With limiting medical resources available and healthcare designed around providing drug treatments as opposed to preventive practices and cures, those in high risk tiers are going to need a different approach.

The future of US healthcare may eventually evolve into something similar to today’s European socialized medicine. The U.S. population should start taking responsibility for their health and change their lifestyles if they want to live into their 70’s and 80’s with any kind of quality of life. This means eating healthy and abandoning our unhealthy American food preferences, instead begin eating like our grandparents did, exercising at least 15 – 30 minutes per day (continuous movement), and weaning ourselves off of multiple drug treatments and their long term toxic effects and towards preventive measures and more natural remedies where applicable. Catastrophic health care costs associated with heart disease, cancer treatments, etc. may not be readily available once individuals reach the determined cut off age, if this becomes the case we will have to rely on our own ability to stay healthy.

The next series of blogs will discuss the options and difficulties of eating healthy in the U.S.

Perhaps a brief description outlining for-profit and non-profit health insurance companies is in order.

For-Profit Health Insurance Companies:

Profit is clearly the goal. These profits are generated to provide financial benefit to the company shareholders or are reinvested into the company or distributed to employees in the form of compensation. Taxes on profitability are incurred through both State and Federal Government. Note: Most corporations utilize tax attorney’s and government tax incentives to pay reduced taxes.

Non-Profit Health Insurance Companies:

The goal is to provide for the greater good of society. Profits are used to support this objective and are used primarily for operational expenses, and not for the benefit of any one group or individuals. There are no State and Federal Government taxes collected for non-profit entities. Note: I am not referring to non-profit companies such as Kaiser Permanente which acts more like a for-profit company.

Differences between for-profit and non-profit healthcare insurers:

 Mission Objective – For Profit Insurers:

• Profitability – return on investment for shareholders
• Provide healthcare insurance (service) for policyholders (customers) in manner that ensures maximum profits

    Mission Objective – Non Profit Insurers:

• Provide healthcare insurance (service) for policyholders (customers) in most cost effective and efficient manner

There exists a significant conflict of interest when a company is pushed to meet Wall Street expectations, while providing profit maximization and shareholder wealth, and having to provide healthcare for their policy holders. The pie isn’t big enough to meet all the needs when there are additional demands for executive compensation, which includes: base salary, bonuses, and pay for performance (i.e. bonuses based on stock price and stock option plans).

Non-profit healthcare insurance companies (modeled loosely after Switzerland, Germany and the Netherlands) are concerned about their policy holders and do not offer pay for performance packages.

    Financial objectives – For-Profit Insurers:

• Meet Wall Street analyst’s profit expectations
• Generate profits for shareholder distribution
• Generate profits for operational expenses
• Generate profits for reinvestment
• Provide compensation suitable to attract top employee and executive talent

    Financial objectives – Non-Profit Insurers:

• Generate profits for operational expenses
• Generate profits for reinvestment
• Provide compensation suitable to attract appropriate employee and executive talent

Management styles also differ. For profit insurance companies are focused on profit maximization and shareholder wealth. Non profits are also concerned with profits to ensure surplus holdings in case of emergency, however, their style is geared to running the leanest, most efficient companies with reduced overhead (administrative and compensation).

    Capital & Revenue Sources – For-Profit Insurers

• Financial markets to raise capital in form of bonds and stock issuance
• Policy premiums from policyholders

    Capital & Revenue Sources – Non-Profit Insurers:

• Financial markets to raise capital in form of bonds and stock issuance
• Government outlays in forms of grants, 0% loans, other initial subsidies
• Policy premiums from policyholders

For-profit insurers are more effective at raising capital by issuing stock and current insurers have cash surpluses already on hand. Their size and cash flows alone make for significant barriers of entry. Non-profits start up capital must rely on issuing tax exempt bonds (similar to municipalities) or government grants, loans, or some other type of subsidy with possible strings attached.

    Expenses – For-Profit Insurers

• Insurance claims
• Operating / administrative
• Stock dividends or private debt repayment (i.e. bonds)
• Taxes

    Expenses – Non-Profit Insurers

• Insurance claims
• Operating / administrative
• Private debt repayment (i.e. bonds) and / or Government debt repayment

    Policyholder selection – For-Profit Insurers

• Qualifying examination to determine pre-existing conditions for exclusion or increased rates
• Credit history

    Policyholder selection – Non-Profit Insurers

• Qualifying examination to determine pre-existing conditions for treatment and preventative care

Policy holder selection among for profit insurance companies is centered towards reducing risk among the overall pool of customers. Measures are utilized to prescreen customers and restrict coverage of pre-existing conditions. This tactic becomes more severe and may include drastic rate increases when the individual is not privy to a group plan and relies on private insurance. Non profits implement prescreening as well but to determine high risk candidates for ongoing monitoring and treatment. Preventative care is also available and in some cases required.

    Policyholder risk – For-Profit Insurers

• Denial of claims
• Denial for non-essential or experimental procedures
• Increased rates and deductibles beyond affordability
• Policy removal

    Policyholder risk – Non-Profit Insurers

• Denial for non-essential or experimental procedures (less likely than for profit insurers)

The risk for policy holder’s, of for profit insurance, is having claims denied requiring large out of pocket expenditures that can result in bankruptcy; denials of expensive claims or expensive proposed procedures. If the policy holder is utilizing a private for-profit plan they risk being dropped or having their rates increased.

For a proposed non profit insurance plan, policy holder’s pay the insurance premium for the basic plan based on a percentage of their personal income. If additional premium is required, the government provides a subsidy to make up the shortfall.  Insurers are required to offer this basic insurance to everyone, regardless of age or medical condition. Premiums are based on an area’s income and only adjusted for sex and age. 

In essence, this topic is not about a for-profit vs. a non-profit company or capitalism vs. socialism model. It is about providing for one of the basic staples of life. It’s about walking away from a profit maximization system that has for to long benefit the few at the expense of the many. It’s about utilizing non-profit insurers to meet the collective needs of American citizens in the most cost effective and efficient manners.

As a society we are not doing what is right for ourselves. We allow ourselves to be divided along emotional and ideological lines all the while its business and profits as usual. We allow negative influences to create belief systems that do not benefit us, and we in turn will defend those beliefs to our utmost. We are not even analyzing what we are being spoon fed. Let’s face it; we are the only industrialized country left with solely for-profit healthcare.

We are failing our citizens by not including basic health care as part of the formula for protecting and caring for our citizens. We have substituted one of our greatest qualities, compassion, for net profits and we are now paying the price. It is time we take the profitability out of healthcare and demand that companies be created that operate in a TRUE non-profit model, with patient care and coverage being the first priority. It is time to give the non-profit healthcare insurance a chance and let’s see how the for-profit insurance companies compete against them.

Our tax dollars provide for the military to defend our borders, for law enforcement to protect our streets, for schools to provide basic education, public libraries to enhance learning, streets / roads / highways to provide infrastructure and it is time now for it to provide for the basic health necessities of a society. We, the American people, can require that our government use some of our tax dollars to help create and initially fund the first non-profit healthcare insurance companies.

Many Americans now believe that it is a violation of their rights to use tax dollars to provide basic health care benefits to citizens in any manner. However, all Americans act as if they have the right to healthcare if they become seriously ill and will exercise that right whether they are insured properly or not. Lack of insurance or proper coverage result in delayed visits, escalated problems, and emergency room visits. This in turn, ends up requiring more expensive treatment.  These costs are eventually passed on to the tax payer when the state is forced to pick up additional costs. This has contributed to deficits in the States budget which causes debt. Taxpayers are then straddled with the interest payment as well. It can be deduced that in our current healthcare system essentially everyone has access to healthcare even if they cannot pay for it and the burden is still born by everyone.

To be successful, non-profit insurance companies may have to begin at the State levels. Requiring citizens to vote on pre-drafted proposition or amendment. I feel that having a private law firm to draft the legislation will be a necessity. I am strongly convinced that our current federal or state legislative branches would utterly fail in creating a law free of pork, needless and unrelated amendments, and closing the necessary loop holes that would enable the for-profit insurance companies to sabotage the plan.

Please provide constructive comments, additional sources of information, or any ideas that might be effective in making non-profit healthcare insurance a reality.

Large private health care insurance companies have a few things in common: they remain profitable despite economic conditions, they consistently increase their policy holders co-pays, deductibles and policy rates to keep pace with the rising costs of health care, and if a person experiences serious injury or prolonged illness they will look for any method available to decrease the coverage.  Are we as Americans really adequately covered by our for-profit health care insurance providers? Are these insurers our best option?

Health care insurance is considered a necessity in our society. Growing numbers of people look for employers that specifically offer health care coverage as part of the compensation package. Employer sponsored group plans generally provide better coverage at less cost less than those purchased privately.  There are approximately 160 million Americans who have health care insurance through their employer sponsored group plans and an est. 14 million who have purchased private plans.  The remainder of the insured utilizes Medicare or Medicaid if they qualify.

Among both the group and private plans, co-pays and deductibles continue to increase, rejection of claims for subjective pre-existing conditions are also increasing, and denials of claims for non-medically necessary and experimental procedures are also on the rise.

Most people believe they have great health care until a problem develops. Then those same individuals can be faced with insurmountable debt. The debt overload is usually due to: a prolonged sickness of a family member or an accident resulting in catastrophic injury. Although the person or family is insured, the insurance company has the option to deny claims  or previously approved treatment which will require out of pocket payments for continued care. This is more prevalent in expensive treatments.

There are numerous methods employed by the insurance companies to avoid paying for care: denial of claims for subjective interpretations of pre-existing conditions, policy holder’s failure to disclose a seemingly unrelated issue previously recorded in their medical history but not documented in the insurance application questionnaire, and policy cancellation due to a late monthly payment.

In addition, insurance companies tend to bonus their Medical review Doctors (Doctors with final approval / disapproval of claims) for their denial of claims rate.

As many have discovered, having good health care insurance is not a guarantee that the policy holder will be able to afford their medical expenses once the insurance company begins to decline payments. If denials are met with to much legal resistance the insurers still can increase future policy rates beyond the ability to pay.  Even if neither of these possibilities takes place, most insurance policies today max out at around one million dollars, and in today’s high costs of care , that limit can be quickly exceeded.

Sustained chronic illness or catastrophic accidents generally results in bankruptcy – almost 2/3 of bankruptcies in the U S are the result of medical bills.

It is increasingly difficult for policy holders to fight against claim denials, even with attorneys. The for-profit insurance companies have their own staffed attorney’s dedicated to defending  denials, and are prepared to bury cases in litigation if necessary.

To those of you who do not believe this is a reality I encourage you to do your own research and read about the multitudes of people who have suffered this very scenario. The reality is that the system is set up for those who do not need the coverage and rarely get sick. They are the preferred client. For those of you who actually need the coverage, you are left at the mercy of the insurance companies and the medical reviewers.

Consider what might happen if you or a family member has a serious illness or accident?  Not only will you have your illness to deal with but the very real possibility that your insurance company might reduce or drop your coverage because your coverage has become too expensive. What’s more, no one thinks that they will ever reach their $1 million or max coverage limit. But with the continuing rise of health care costs, how long do you think you can stay in the hospital before that limit is surpassed and large out of pocket expenses are incurred? Do you think the insurance company will even allow you to reach the maximum limits before employing the practices mentioned above? In order to protect their financial position, they place you, the individual, in a position to lose everything.

The goal of the for-profit insurance company is to maximize profits and shareholders wealth, their customers are the means to that end. They act in their own financial interest, not necessarily in the interest of their individual policy holders. If greater profits can be gain by denying  expensive claims or procedures or limiting long term care they will follow that course of action unless met by significant legal opposition or negative publicity. These measures have resulted in consistent profitability among the larger insurers and extremely lucrative pay for performance packages for their senior executives.

High profitability has also enabled a very strong health care insurance lobbying arm resulting in nearly 4x the number of lobbyists than congressman. This in turn has lead to quite a number of favorable laws and regulations.

Currently, there is an argument on the airwaves about a potential US public health care insurance program becoming available. Many fear this will result in the government deciding what type of care you will receive. While I do not believe a public insurance policy in the United States will work, due to aggressive lobbying pressures, I also no longer believe that the decision should remain with our current health care insurance providers.

If executive compensation is tied largely to bottom line profits and stock prices, it seems inevitable that in addition to generating revenue through acquiring additional policy holders, insurance executives will attempt to elimate expenses as much as possible.  Here is the crux, the best way to curve expenses is to be selective of who is insured, reducing coverage for individuals that become high risk, and finally to deny claims. These are simply good business practices to ensure continued profitability, raising the stock’s price, and increasing executive compensation via pay for performance packages and stock option plans. Read more…

Why can’t I, as a consumer and a tax payer, have access to quality health care that hasn’t over the past seven years consistently increased in price, required higher co-pays and deductibles, and provided diminishing levels of care? I consider myself fortunate that my family has been under an employer’s group plan during this time and that we have not experienced a serious accident or chronic illness. Otherwise I am fairly confident that my insurance costs would have increased substantially while benefits would have been decreased.

In the past seven years I have noticed:

• My health care costs have increased
• Insurance company profits have increased
• Insurance company Executive Level pay and incentive packages have increased.
• Administrative (billing / payments) inefficiencies have increased.
• Doctors and Hospitals are increasingly capped by the insurance companies as to reimbursement for services but expected to provide the same level of care.

I have no issue with for profit insurance companies. If some segment of the population wants them, they should have that choice. I am also not convinced our US Government could run a public program as efficiently as Germany or Switzerland’s Governments.

I do have concerns about the increased number of mergers resulting in a few, very powerful insurance companies setting industry standards and pricing. Competitive pricing is limited since the smaller insurance company’s appear to be following the lead of the larger companies relying on being more exclusive in their selection of the insured to make a profit.

The national debate on healthcare seems to be largely consumed with whether we are going down the road of socialism. It is my perspective that our current system of health care insurance disproportionately benefits the health care industry, its senior executives and shareholders. All of which, do not represent me or the vast majority of Americans. There seems to be considerable misinformation that from a strategic sense seems to be geared towards maintaining the status quo.

If there are other systems out there such as: privatized non-profit health care insurance options, why can’t we seriously consider these? I’ve read many of the arguments for how it is really a public program in disguise, it requires funding by the government and therefore there are strings attached, how the private, non-profits and /or co-ops could never compete against the top for-profit companies, etc….

There are other countries around the world that have non-profit, private companies. The first thing that happened once the programs were in place was a considerable decrease in administrative costs and executive compensation.  These companies within months ran more efficiently, provided transparency to their insured regarding prices and availability of service and lowered the overall cost paid by the consumer for coverage and services. I think that this is our most viable plan.

As a tax payer I would like to see my dollars pay for something that will benefit the majority of insured American’s by providing funding for the startup of non-profit, private insurers which in turn will generate strong competition within the health care insurance industry. My tax dollars are already subsidizing and financing major industries, such as: banking, oil, and agriculture, perhaps we should pull some of the dollars from these already profitable industries and put it towards something as vitally important as health care.  What I believe is needed at this time is management  focused on providing paying customers with the most efficient, cost effective plans not the most profitable. I would also like to see no strings attached from any federal financing, low interest loans or subsidization.

I am not advocating the removal of for-profit insurance companies. I am looking for the best option that I, as a consumer, can have. I now believe that the priorities of the for-profit insurance companies have shifted so far into profit maximization that they no longer provide myself or our American society the value they once did. Perhaps its time to consider an alternative that is focused more on the care than on generating shareholder wealth and stock option plans for executives.

I have read many of the reasons for why this type of plan or any plan outside of our current system will not work, and they were not convincing. The purpose of this blog is to generate ideas or discuss the viability of options; let’s make that happen by providing your constructive comments.