RFP, Arnold Kling et al
Consider this an official “Request For Proposals” from Arnold Kling to design a health care plan. And just so Dr. Kling doesn’t think I’m picking on him, what the heck, let’s hear from Tyler Cowan and René Herszinger, to0. While I’m at it, I have a certain health care policy rock star brother-in-law, Jim, and I’d love to hear what he has to say about it. Let’s toss in that blogger Maggie Whatever-Her-Name-Is, and why not invite one of the smartest guys I’ve ever actually chatted with, guy named Barry Cooper in Louisville. I’m ready to appoint each and every one of you, and anyone else who’d like to take a shot, as uncontested Health Czar for a large group of people. This is a Request For Proposals to design a health care plan from scratch.
Let’s see who’s got game.
This isn’t something I just made up; this is actually a real group and a real possibility, although it’s highly unlikely that the real players have either the imagination or the balls to really do something new. Nonetheless, it’s very cool to apply imagination and balls to this question. The group consists of 250,000 individuals, 95% men, between the ages of 20 and 60. The average age is 45. Once they become part of this group they essentially remain so for their entire working career. They have a single labor representation, and while they work for a number of different companies there are four major employers. Health insurance has been part of their negotiated contracts for decades.
You have carte blanche to design a health care program for this group. You are not bound by any ERISA regulations, and you will “participate” in any financial savings you might create. Let’s say that it will be a 10 year trial, and in year one you have the average amount of money actually spent on healthcare over the past three years for this group. Each year the funds available to you will increase by only the CPI, inflation in the general economy and no more. In years one through five any money that you do not spend is yours to keep. Remember, the members of this group do not come in and out, and any investments you make in the early years that reap savings in latter years will come to you and not another provider or payer. In years five through 10 you will share any savings with the employers, the payers.
As part of this proposal you must not only try to save money, to provide health care in a more cost–and efficient manner, but you must also achieve superior health. In years one and two the health outcomes of your 250,000 members must be no worse then the aggregate outcomes across the United States for individuals in a similar demographic. However, in years three through 10 you must demonstrate superior health outcomes for your group, each year better than the last. In other words, you must design a program that will not only save money but will also produce superior health.
That’s it. No other rules. You may use economic incentives with the members, both positive and negative. You may put together what ever type of provider group, physicians and physician extenders, hospitals and clinics that you wish. Pay the healthcare providers any way you’d like (probably ought to be sharing the lion’s share of any savings with this group, if you wish to be successful). You only have to do two, simple things: make these 250,000 men healthier, and spend less money doing so.
Wadda ya think, Dr. Kling? You in?
I don’t want to sound like I’m picking on Dr. Kling because it was actually his short manuscript, “A Crisis of Abuncance” that really got me to thinking about the barriers we have erected in our healthcare system to actually providing healthcare, providing for the creation of health. The best example of what you CAN do, as well as what happens now when you DO do, is the Mayo Clinic program designed to take care of patients with kidney failure. Given free reign to design a program that would accomplish exactly what I am asking for with my 250,000 member group, the Mayo Clinic did just that. By creating a team that was given free reign to utilize best practices, the Mayo Clinic designed a program for kidney care that resulted in fewer mortalities, fewer complications, and greater health, all with a lower price tag.
So why, you might ask, do we not know more about this program? Why is this not the gold standard for ALL medical care, let alone chronic kidney disease care in the United States? The sorry fact is that the Mayo Clinic actually LOST money on this program despite the fact that their patients had BETTER health by doing less and doing it better, thereby resulting in the need for LESS work still, The Mayo Clinic essentially cut off its nose to spite its face. Not willing (and reasonably so) to lose money, and unwilling to practice medicine any way less than what they have shown to be best practices, the Mayo Clinic has now declined to care for Medicare patients in some of its satellite locations.
But you guys don’t have to worry about that. I’ll let you keep the cash! So, what do you say, folks? Ask your friends. Everyone can play. We might even catch the attention of the real, live people who are presently negotiating new labor contracts for this very group. Here’s a chance to start saving the American healthcare system. This is a formal Request For Proposals.
The lines are now open…
Tags: Arnold Kling, economics, healthcare reform, heatlthcare, maggie, mayo clinic, reform, renee herszlinger, tyler cowan
This entry was posted on Tuesday, February 1st, 2011 at 11:23 am and is filed under Health Care, Healthcare Economics. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
February 6th, 2011 at 5:36 pm
Barry Cooper says:Darrell,
I apologize, but I can’t even give this one cigar’s worth of thought, but I have been thinking about it a bit.
The first thought that occurred to me is you need to divide the demographic into three groups: above average, average, and below average. The Above Average group gets price breaks.
Potentially–and this is a practical business issue, and not just something that is theoretically desirable–you could divide the population into three discrete profit groups.
Practically, the healthy pay the premiums for the unhealthy. Yes, smokers pay a bit more, but I think that is about it. I don’t think insurers can charge the morbidly obese more money.
We need to change this. I think we could divide the groups as well by illness. People who have illnesses–like obesity–that they can fix, go into the bottom tier. People who have things like Type 1 Diabetes that they can’t fix, go into the Average risk pool. You are not denying coverage to anyone, but you are asking them to pay more.
Logically, the only way health care costs can go down is to cut into the margins of doctors and hospitals–which in the medium and long run will cause many of them to leave the profession, resulting in shortages, particularly of the specialists that are quite scarce everywhere but here–to work more efficiently (which is the job of the doctors and hospitals), and to consume less care.
If we charge the negligent–the “health negligent”–more money, then that incentivizes getting healthier. Currently, they just get folded into the same rate group as everyone else, as far as I know.
Now, if we are dealing with collective representation, then we are likely dealing with unions, or a union-esque organization. They take their money out of people’s paychecks, then buy insurance, put money away for pensions, and pay the union bosses salaries.
Finagle the numbers car dealer style, and you get this: healthy group gets an extra 10% put into their pensions annually. Average group is the same as they are now. Health Negligent group gets 10% LESS put in, to cover their added costs. They won’t like this, but as I have defined the situation, they can control it.
What this does is but gentle but very real pressure on both the average and health negligent groups to get into the top tier. This should increase what we might “health rates”, or “rates of wellness”. That in turn cuts costs.
Another idea might be to assign every person a fixed amount of money to spend on healthcare annually, and kick back to them–or roll over to the next year–whatever they don’t spend.
All patients and all doctors should know what things cost. As things stand, costs are all over the place. If you have one insurance carrier procedure X is one cost, another a different cost. No insurance you pay full price; or they cut you a deal. Or they don’t know what to do. I have a $5,000 deductible, and need a price on a minor procedure, and if it involves a hospital, getting a price for everything has been a nightmare.
The insurance company can demand of all entities with which it does business firm price schedules, that are published on a website that is at least accessible to covered people.
This is some out loud thinking. What happens when person Average gets sick? Rates stay the same. Same with the other groups.
If this is a union group, then this is likely a nice plan, that pays most costs. You get really sick, everything is covered. But again if you are given a fixed amount of funds, and get money back for whatever is not used, then that gives you a reason to question cost/benefit ratios.
Self evidently, the pool of money is less than what you take in, so that if they spend everything, you still make money. To these basic things the blocking and tackling of demographics and epidemiology still need to be applied, and I can’t pretend to understand that part of it.
Few ideas. Hope they help. Sorry to be scattered, but I’m heading off to watch the Super Bowl. I’ve been a Steelers fan in years past, but I’m pulling for the Packers this year.
February 13th, 2011 at 6:47 pm
darrellwhite says:Nice first pass, Barry! Knowing you I anticipate that you will re-visit this as things clarify, as you ruminate. From my reading I’m starting to believe that NEGATIVE re-inforcement is less effective than POSITIVE re-inforcement. If you take away something that is already on the table you create ill-will. The really effective weight loss programs that give someone something they did NOT have and make them earn it…creating an economic incentive, a positive incentive…have proven to be very effective. I’m tossing around some ideas along those lines, parallel with your ideas about moving folks between groups, or having them move themselves.
Thanks.
February 6th, 2011 at 5:38 pm
Barry Cooper says:Note, when I say “practically the healthy pay for the unhealthy”, I mean as things work now. In my scenario, the healthy would only pay for themselves.
February 19th, 2011 at 10:45 am
Barry Cooper says:Yes, that is my view. In the LONG run you get more output by praising people. But it has to be sincere, and has to be warranted. Think about military training. Yes, it is strongly negative to begin with, but don’t trainees who respond start to be “worth a shit”, and are not most soldiers proud of who they are in the end? Is honor really anything other than an expression of pride in who you are and what you stand for?
You need carrots and sticks. In this proposal, those who choose to do so can get themselves some kind of reward, over and above those that flow from health. Those who choose to neglect their health pay more, both as a psychological negative reinforcement, but also because they will in the long run COST MORE. Accidents happen. Chronic obesity and inactivity don’t.
Where insurance is concerned, we always have to have in the backs of our mind the analogy of no insurance, and the body as a car. If we driver everywhere in third gear, never change the oil, and ride the clutch, do we resent the mechanic when he has to bill more to fix the car? He had to do more work. He had more parts and pieces to replace. This is not profiteering: it is a rational synchronization of cost and sustainable retail price.
I’m on some other large topics, so don’t expect me back any time soon, but please accept this post as a validation that the idea you endorsed works on me too, up to a point.