Smart Patient Credits, where patients are empowered to make a choice and benefit from it, are the key to lowering the cost of healthcare. Under our current healthcare system there is no incentive for any stakeholders -- hospitals, doctors, drug companies or patients to reduce their costs.
By both legislation and the backing of the Supreme Court, Obamacare is the law of the land regardless of what anyone thinks about it. But that is not the gist of the matter. Though the focus of Obamacare is to provide healthcare for every citizen, this only addresses part of the picture. The rest of the story involves a simple, yet critical, question: “Why do the costs of health care continue to rise so dramatically?” An even more helpful question would be: “What can we do to reduce the high cost of medical care so that it is affordable for everyone?”
For starters, it is instructive to consider the general rules of the game whenever someone needs treatment. Typically, hospitals do not tell patients how much money their visits or procedures will cost. However, the patient is contractually obligated to pay whatever the amount may be. If the patient fails to pay, the bill will be referred to a collection agency. Doctors follow this procedure as well.
Where is the transparency in any of this? And where does patient choice come in?
The reality is that both transparency and choice are absent from this process, and Obamacare does nothing to change it. What I propose, therefore, is a major paradigm shift that not only reins in medical costs but can be implemented without government approval or regulations. To initiate this shift, the doors of free market competition must be allowed to swing open. Once this happens, doctors, hospitals, insurance companies – and most importantly, patients – will benefit as never before.
The way SPCs will work is that insurance companies would give policyholders contracted pricing with their approved healthcare providers – their doctors and hospitals. Moreover, the insurance companies would require their contractors to make those prices available to their customers as well. The customers would then receive SPCs of one dollar for every two dollars in savings if they can get service for less than the contracted price.
For instance, a patient who saves $1,000 for a given procedure compared to what his or her insurance company is willing to pay should be given $500 worth of SPCs. The patient can use these credits for other health issues not covered by his or her policy or against the co-payments.
The SPC program would empower and incentivize patients to shop, evaluate and decide on what is best for them, just as any consumer would in any market. At the same time, insurance companies would benefit by having millions of their policyholders in effect serve as their auditors and cost controllers. The companies would enjoy significant savings in their outlay, which can in turn be used towards lower premiums. Medicare, which provides coverage to a significant part of our society, can apply the same concept by giving patients similar incentives to dramatically reduce costs.
By having the incentive program offered by insurance companies, as mentioned above, businesses that provide health insurance can further reduce their health insurance costs by providing the contracts and costs from their carriers to their employees. In addition, they should inform their employees about how much the healthcare cost per employee is allocated in their company budget. Again, if the employee chooses to buy lower cost coverage and saves $1,000 from the budgeted amount, then that employee should be rewarded $500 worth of SPCs to be used towards the co-pay or uncovered categories.
Because one-half of total medical costs of $2.6 trillion can be attributed to hospitals and doctors, at least 50% of our healthcare delivery system will become more efficient, cost effective and will result in a significant amount of savings. Also, the consumers, insurance companies and the employers who provide health insurance to their employees will all benefit. Additionally, hospitals and doctors will benefit by being encouraged to focus on managing their resources more efficiently and reducing waste.
As a father of a son, who was born with cancer, Munir Moon has over 28 years of first-hand experience with our healthcare system. He is a graduate of UCLA with MBA in finance and MS in Business Economics and is a social entrepreneur.
Thursday, 30 May 2013