A Case for Prepaid Healthcare! Just because something didn’t work the first time doesn’t mean it was a bad idea. If you are reading this you are challenged to open your minds before rejecting a promising idea that did not succeed the first time it was tried. The HMO model introduced the concept of prepaid healthcare and broad public sentiment would tell you that it failed miserably. In truth it was the HMO concept that failed; prepaid healthcare was just unfortunate to be viewed as part of the HMO experience. As we have suggested throughout this blog and in my book, Radical Surgery: Reconstructing the American Health Care System, the problem with our healthcare system today is the middleman, whether that be health insurance, managed care (HMOs and PPOs), third-party administrators, Medicare, and Medicaid. If we are truly committed to providing universal healthcare, what value can possibly be provided by organizations that exist entirely to restrict access to care to only those people who are covered by a health plan and to limit care to only those services that are covered within that plan. Then, there is the fact that, depending upon whose estimates one considers, that anywhere from twenty-five to forty percent of healthcare expenditures go to pay for the middleman. The health plan outlined in Radical Surgery is a prepaid healthcare system that provides comprehensive medical care and prescription drugs to all Americans. It is vital that the reader understand why we believe that prepaid care is critical to the model’s success. Under the HMO model prepaid care did not work for several reasons. The first had to do with a level of reimbursement that was inadequate. Essentially the capitation rates that were paid to providers were such that the provider could make money as long as the patient was healthy. When patients were sick, however, the level of reimbursement created great financial pressure on the providers. As a result there were, indeed, providers who withheld care in order to avoid the associated cost. There is substantial research to show that such occurrences were no more prevalent, however, than excess utilization common in the FFS model. Some would argue that they were substantially less prevalent but that doesn’t change the fact that under- and over-utilization are equally bad for the patient. The second reason had to do with the fact that patients of HMOs were essentially captive except for annual enrollment period. In other words, dissatisfied patients could not exercise a consumer’s prerogative to select a new plan and, within the HMO, all providers were subject to the same utilization guidelines. Third, not only were patients captive, there was no direct accountability. Patients could complain to their providers but all the providers could do was forward the complaint up the line to policy makers within the HMO who were insulated by layers and layers of bureaucracy. In most cases the providers, whether physicians, institutional, and ancillary providers felt as helpless as the patients with respect to their ability to influence policy. There are three mechanisms for providing and paying for healthcare services. The most predominant mechanism is fee-for-service. As we have pointed out, the inherent flaw in the fee-for-service model is that the interests of the patients and providers are at odds and it is a conflict of interest that cannot be resolved within the logic of fee-for-service. Good physicians are concerned about preventive care but the demands of practice make it impractical to devote any significant attention to it. Of course a FFS system provides no incentives to provide preventive care. The second mechanism is one in which physicians and other providers are employees of the government and they are paid a salary to care for patients. In the US The last mechanism, and the one for which we are an advocate is prepaid care. The system proposed in my book, Radical Surgery, eliminates the middleman so that all revenues flow directly to providers. The system has built in incentives for providers to focus on prevention, find innovative solutions, and keep people healthy. Because all of the revenue goes to people who provide care, providers receive sufficient revenue to be successful even when people are ill; when patients are healthy providers enjoy even greater financial success. No system is perfect and it is inevitable that a few providers will cut corners in order to improve profitability. Unfortunately, human nature is what it is. What is different in this plan is that providers are directly accountable to patients with no distant bureaucrats to whom they can deflect the blame for questionable utilization practices. In addition, patients are free to change physicians at will. Physicians who provide substandard care, who cut corners, or provide poor customer service will be abandoned as quickly as restaurant will be abandoned if they develop a reputation for bad food or poor standards of cleanliness. Because providers are all independent entities they must be competitive in order to succeed financially thus incentives for preventive care, innovation, and excellence are inherent in a prepaid healthcare delivery system.
