Saturday, September 5, 2009

Bypass Procedures:   How Health Savings Accounts Reduce Costs

Yesterday, the reasons why health care and health care insurance are so expensive were reviewed and the idea of separating reimbursement for major medical care from payment for routine care was discussed. I hope the information about how health savings accounts can accumulate and provide for high quality individualized health care was helpful. I'm sure that many of you would still be quite concerned about the high costs of health care. Today's topic is the potential cost reductions offered by these accounts by bypassing the add on expenses that have evolved over the last several decades.

Immediately, the separation of routine care from major medical insurance allows tremendous reductions in health care costs since most of the add on costs could be eliminated as the patient-doctor relationship would be revived.

Managed Care Insurers would continue to make billion dollar profits from major medical insurance, as they do with our other types of catastrophic coverage (homeowners, automobile), but the excess billions in profits for all routine health care costs would cease.

The billions spent on bureaucratic control over routine health care would virtually disappear as doctors could return to private practice. Over the last several decades many doctors, collapsing under the triple whammy of increased regulation, skyrocketing malpractice premiums, and decreased reimbursements from managed care insurers under the protection of law (McCarran-Ferguson), were driven out of their practices and forced to become employees of hospital based groups, managed by well paid administrators. Here they lost control over their caseloads, their schedules and their assistants which both increased the risk of error, and greatly escalated the cost of every act of medical care – every office visit, every injection, every throat culture – as multiple levels of bureaucrats received compensation for their part in either making or enforcing “rules.”

The savings potential here is amazing. The salaries for the layers of administrators would disappear. The 8 to 10% fees charged by the billing specialists needed to navigate the complicated billing procedures imposed by managed care would vanish as patients would pay their doctor directly from their Health Savings Account (doctors could purchase electronic record systems from those savings after the first year). A physician would be able to hire and train his or her own staff promoting safer care and greater efficiency. Americans would have access to the practitioner they choose. Patients, more aware of costs, could choose, with their practitioner’s advice, what would be best for them, not necessarily the most expensive drug advertised on TV or an expensive screening test unnecessary to determine their individual health status. Patients could choose to decline care based on “sound good” initiatives currently being espoused by Congress: “cost effectiveness” whereby a treatment or procedure may be considered inappropriate because “not enough lives are saved to warrant the cost.” If it’s your life, it’s worth the cost. Patients might think twice about a doctor who strictly practices “evidence based medicine.” The evidence isn’t always that good and even well designed studies often have conflicting results and virtually never apply to everyone. Good practitioners know the evidence but apply it only as appropriate for each individual patient.

Physicians could offer reduced fees in exchange for patients agreeing to alternative dispute resolution in the event of adverse outcome that would guarantee just and generous compensation for preventable bad outcomes in lieu of enduring a long trial in hope of a hypothetical multi-million dollar jury award. Costs would be further reduced as both patient and physician would be spared from the practice of defensive medicine, which in some specialties probably contributes to 30% of all care.

Many physicians would continue to give fee reductions but these would go directly to patients based on need, not to managed care insurers based on coercion.

Patients could keep their physicians based on choice, not as required by a new employer plan. This promotes safer care as a doctor would genuinely know his or her patients, not just their written history e mailed from cyber space. Those wanting all-inclusive insurance could still buy such a policy from their account.

Expensive monthly health insurance premiums which include “everything” are misguided and misspent and simply drain the resources that patients may need in the future. Paying from their own accounts patients will be much more likely to take more responsibility for their health status and health care.

The interest rate of 6% proposed here is about average for the last 30 years, although currently quite high. If the Fed can decree a low interest rate so we can borrow but never own, it can most certainly set a higher rate enabling Americans to save and take control of their own health care.

A Few Notes:
These individual accounts need to be managed strictly as a "No Bureaucrats Allowed" entity. Outright fraud would be punished as a crime but there would be one rule: funds to be used for health care. Patients would pay directly from their Health Savings Account debit card, and licensed health care practitioners and providers would be directly compensated, the same as with any credit card.

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