A Healthcare System for California That Could Work



This is doable. To get there, here are what I believe to be the primary considerations for making an affordable healthcare system a reality - in California, or anywhere else in the U.S. for that matter:

1. Controlling runaway administrative overhead.

2. Mandating the negotiation of uniform fees for all medical products, services and procedures.

3. Incentivizing positive health outcomes and preventative care, instead of perpetuating a fee-for-service model that maximizes profit instead.

4. Providing a secondary insurance market for boutique or elective medical products and services.

5. Ending direct advertising of healthcare products and services to consumers, and providing better vetted and participatory data for patients to make decisions about their own care.

6. Identifying a reliable source of revenue to pay for the new system.


What we are aiming for here is a way to maintain quality and choice for everyone who needs healthcare and wants to preserve options that are important to them, while containing costs and disrupting perverse incentives. Right now the opposite is increasingly true: choices can be limited, costs excessive, and both care providers and medical product suppliers are incentivized primarily by profit. Here is how we might address these core considerations, one at a time....


1) Controlling Runaway Administrative Overhead

Right now the administrative overhead of private, for-profit health insurers runs upwards of 20%, whereas, in contrast, Medicare administration costs are under 2%. Insurers currently have no incentive to lower these costs - which is likely why they have continued to rise, which has contributed to escalating premiums. Containing such runaway administrative costs does not, however, require us to create a single-payer system. In Switzerland, private (but non-profit) health insurers compete with each other for customers, under government regulations that - among other things - guarantee certain levels of coverage and cap administrative overhead. The focus, of course, is to shift healthcare itself from a for-profit enterprise to a non-profit enterprise. Why? Because illness and poor health actually increase profits in the current U.S. healthcare system, thus creating self-perpetuating perverse incentives.


2) Mandating Negotiation of Uniform Fees

To contain costs, there is no reason that healthcare providers and medical manufacturers should not submit to fixed price negotiations in order to participate in the California healthcare market. Fees can be indexed using a number of factors, such as the necessity for everyone's basic care, production costs plus a fixed profit margin, cost-saving innovations, and so forth. In other words, products and services that lower overall costs while healing chronic conditions and improving long-term health outcomes could be rewarded with higher profit margins, while the more specialized and expensive products and services that simply mitigate chronic symptoms in the short term, and are less curative overall, would be provided much smaller profit margins. The goal here would be to incentivize actual healing and wellness rather than a gravy train of ever-increasing profits. As just one example, pharmaceuticals are subject to price controls in every other developed country, so that U.S. consumer pay between 30% and 300% higher drug prices than everyone else.


3) Incentivizing Positive Health Outcomes

Along the same lines, why could healthcare providers and medical manufacturers be rewarded for improving patient health outcomes (say, above an established baseline)? For example, a primary care doctor who sees more patients and keeps all of them more healthy than his fellow practitioners with a similar patient demographic should receive a nice fat bonus, don't you think? Why should doctors be rewarded for seeing patients more often, or ordering more tests, or prescribing more drugs, if their approaches do not improve the health and well-being of their patients? Again, the system we have now is upside down in terms of incentives. In fact, there should probably also be mechanisms for disciplining doctors, service providers and medical product manufacturers who are either contributing to poor health outcomes, are ignoring proven curative but low-cost approaches, or are otherwise operating in a profit-centric, rather than wellness-centric, orientation.


4) Secondary Boutique Insurance

There will be folks who want special advanced treatments, alternative treatments with as-yet-unproven efficacy, more expensive pharmaceuticals, elective surgeries and so forth - so why should they not have access to those options? This is where the traditional model of health insurance could operate similarly to how it always has - except of course that the insurance would be targeted to inherently more expensive products and procedures. There will be a market for this - even if it is expensive and its related costs continue to rise - so it might be worth the experiment. At the same time, any patient should also be able to obtain a desired form of treatment as an out-of-pocket expense.


5) Ending Direct-to-Consumer (DTC) Advertising, & Providing Better Data

The U.S. is the only developed country on the planet that permits pharmaceuticals to advertise directly to consumers. This is, frankly, a ridiculous practice, and has led to countless problems in treating all manner of conditions - both real and imagined. Shouldn't a patient be made aware of all of the options available, including which are most effective, which are most costly, which have been in use the longest, etc.? Of course - but this is not what for-profit advertising offers consumers. Instead, a web-based information clearinghouse that is overseen by doctors and other medical professionals can provide educational information on the efficacy of all manner of treatments and technologies. In addition, patients could also weigh-in with their own experiences, ask questions, etc. It would then be incumbent upon California regulatory mechanisms to make sure the data was accurate, and that contributors are real and not just medical industry advertising bots.


6) A Reliable Revenue Stream for the New Healthcare System

Prop 13 Reform

I think a main component of the solution is obvious and straightforward - because we can fix a gaping hole in California's tax landscape at the same time. Article XIII of the California Constitution needs to be amended to eliminate Prop 13 benefits for corporations, commercial property owners and developers, while retaining Prop 13 tax increase limits for residential homeowners. Since this initiative was intentionally deceptive when first proposed and passed - being sold as protection for retired homeowners with a fixed income, when really it was a huge windfall for corporations - it's long overdue to be amended. And of course the fact that commercial property ownership changes hands more slowly (or more deceptively, thanks to some sly legal maneuvering) than residential property just adds insult to injury - making those same vulnerable homeowners liable for a larger and larger share of the tax burden. The solution? A split-roll tax initiative (or legislative amendment) that keeps the protections for residential homeowners, but returns commercial property taxes to current values. One estimate (see http://www.makeitfairca.com/) puts the annual revenue increase from such reform at $9 Billion.


Closing Other CA Corporate Tax Loopholes


According to a recent review performed by State Auditor Elanie Howle
of California's six largest corporate tax incentives, there is approximately $2.6 Billion in tax breaks that have either never been reviewed to determine whether they are actually fulfilling their intended purpose. One of them, for "research and development," is $1.5 Billion all on its own. And, unlike most other states, California has no regular review process for these tax breaks!

And...well...the rest is math. Let's start with the estimated $400 Billion for the current single-payer proposal (SB-562). If $200 Billion can be reallocated from existing Federal, State and local healthcare funds, that leaves $200 Billion. And if administrative overhead can be reduced by 90% (as proposed above in item #1), then the rest of the funding required could be generated by some combination of: closing California's gaping corporate tax loopholes (#6); proposed pricing controls (#2); the transfer of high-cost or ineffective treatments and technologies to boutique supplemental insurance (#4); a reduction in advertising-generated demand (#5); and incentivizing lower-cost, more highly effective healthcare overall (#3). Whatever costs can't be met by these efforts could conceivably be covered through a variable, progressively tiered tax on all Californians. Also, the proposals I've offered here do not require a single-payer system - though that is certainly one framework that could integrate all of these variables.


Conclusion


There are a number of different scenarios that can successfully provide higher quality, lower-cost healthcare to Californians. The major barrier to such solutions has traditionally been the lobbying of medical service providers, insurers and product manufacturers who profit most when patients either a) don't get well, or b) otherwise require expensive specialties, drugs, medical devices or procedures in an ongoing way. But the current, corporate-controlled environment turns the priorities of healthcare upside down. Lobbyists should not be able to override a common sense approach to fixing these problems in California and other places in the U.S. To date, even well-meaning initiatives and State assembly bills have fallen woefully short of addressing some of these longstanding. If elected politicians cannot be swayed to do what's right for Californians, perhaps we need to approach this issue via the initiative process.


References

This approach to CA healthcare was inspired by the Level 7 philosophy and approaches: see http://www.level-7.org

Also, here is a thoughtful overview of how the current single-payer proposal could work, with some caveats: https://rantt.com/honest-thoughts-on-californias-single-payer-healthcare-proposal-c82c2d0b5d39

http://www.latimes.com/politics/essential/la-pol-ca-essential-politics-updates-first-fiscal-analysis-of-single-payer-1495475434-htmlstory.html

https://www.bloomberg.com/graphics/2015-drug-prices/

http://www.californiaprogressreport.com/site/proposition-13-tax-breaks-big-boys

https://www.thenation.com/article/have-california-voters-finally-had-enough-of-prop-13/

https://www.laprogressive.com/make-it-fair/

https://www.couragecampaign.org/press-releases/courage-campaign-slams-passage-ab-2372-smokescreen-fails-address-major-problem

http://www.sacbee.com/news/politics-government/politics-columns-blogs/dan-walters/article148716959.html

http://www.commonwealthfund.org/~/media/Files/Publications/Fund%20Report/2010/Jun/1417_Squires_Intl_Profiles_622.pdf






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