Sunday, July 26, 2009

Reducing Health Care Costs


President Obama: don't spend $1 - 2 trillion of our tax dollars supposedly fixing health care by replacing what we already have... with what we already have. Here is my plan to expand health care and lower overall costs... by doing four things for less than $50 billion annually or less than the cost of the war in Iraq or annual Congressional pork projects:

  • Eliminate lawsuits for medical mistakes
  • Pay for medical school educations [$15 billion - 100,000 x $150,000 annually]
  • Fund free clinics for those unable to pay for medical insurance [$25 billion - 5,000 x $5 million annually]
  • Provide catastrophic insurance coverage for those unable to pay for it. [$5 billion annually]
That's all that needs to be done... along with the implementing the corresponding requirements for those actions.

First, remove entirely medical malpractice from the court system.
Analysis of trends in medical malpractice claims and payments reveals
that the total dollars in paid physician medical malpractice claims have
approximately doubled in the past decade. Average defense costs per claim
have increased substantially, also doubling. As expected, there is substantial
variation across states in these measures.

Further analysis shows the growth in dollars paid on malpractice claims is
mainly due to increases in the average size of claims. The total number of paid
claims has been relatively stable, despite a sizeable increase in the number of
physicians. The overall increase in total medical malpractice payments was only
slightly above the rate of medical care inflation, but somewhat greater than the
general rate of inflation.

The impact of medical malpractice law reform on the appropriateness of
malpractice awards, rising malpractice premiums, and the availability of
coverage is often unclear. And while medical malpractice continues to be a
focus of state legislatures, the U.S. Congress, and the Bush Administration, little
agreement exists on what approach best addresses the problems of medical
malpractice. Whether reform of tort law or changes in the malpractice
insurance system provides better solutions is debated. But better
understanding of these complex systems and their interaction could lead to the
most appropriate proposals for change. [p. 28 of Summary and Conclusion]
Replace that with boards of review composed of medical experts, legal experts, and patient advocates [eliminate adversarial environment] that determine if there was medical malpractice or fraud.
  • If a doctor has made a medical decision that inadvertently harmed a patient while taking a reasonable course of action that has an uncertain outcome due to circumstances, the doctor is held harmless and catastrophic insurance will cover all of the patient's medical expenses and extended care... including both at-home care and nursing home care and, possibly, loss of income as a provision of patient-purchased or government-provided coverage.
    For example, the patient suffers a stoke due to the doctor taking proper action to treat a life-threatening breathing problem or heart condition.
  • If a doctor has made a medical decision that was based on incompetence or applying unreasonable approaches, suspend/revoke the doctor's license and catastrophic insurance will cover all of the patient's medical expenses and extended care ... including both at-home care and nursing home care and, possibly, loss of income as a provision of patient-purchased or government-provided coverage.
    A pattern of harmed patients is considered evidence of incompetence, but not absolute proof in a specific instance, except for known high-risk situations where treatment cannot be reasonably guaranteed to succeed. For example, the doctor fails to take appropriate action for a situation where the problem is obvious and the treatment is standard. If the review finds that the harm was done maliciously... intentionally withholding necessary treatment, the finding should be grounds for criminal prosecution.
  • If a patient was not harmed, but knowingly attempts to receive financial gain from the system, the patient may be subjected to fines or jail sentences as de facto fraud.
Secondly, remove the cost of medical training and education from the patient care equation to bring more doctors into the system so that care can be given before the problems of so many patients becomes too serious and care extremely expensive.
Doctors can elect to earn, but are not required to do so, their free medical training and education through a contractual term of service at free clinics, after which they may compete for jobs or establish their own practices. Foreign doctors wishing to practice in the U.S. would also be required to be certified within the U.S. system and provide a lesser term of service at free clinics.
Individuals remain free to pay for their own medical training and education and avoid any contractual obligation to the government. This is similar to the military program of providing an education in return for service. Universities still would be able to offer scholarships for particularly deserving students... academically deserving.
  • The cost of medical training and education will be borne by the taxpayers as a necessary cost of maintaining a highly functioning medical system under a mandate to provide expanded health care to those unable to pay for it [shared costs].
  • Doctors still will earn, through a merit system and judgment by the medical establishment, the privilege of entering medical training and further specialize into more advance areas [maintaining quality].
  • Doctors retain the right to higher compensation based on their qualifications and services rendered [increasing incentives].
  • Fees will be lowered by not limiting the number of doctors who are general practitioners or within an advanced specialty [increasing supply] and by removing the liability coverage costs associated with higher risk specialties [reducing disincentives and costs].
In return, the government will provide minimal catastrophic insurance coverage for those unable, not unwilling, to pay for their own health care insurance.
  • Those who are able to pay for catastrophic insurance coverage [based on a percentage of their income] are free to elect to not do so, but they will cover such costs personally until their estates are exhausted. The income standard for coverage will make adjustments for the number of dependents similar to the way income taxes adjust gross income.
  • The government will fund free clinics for those who qualify for government assistance that must be used instead of hospital emergency rooms to treat common illnesses or injuries unless no free clinic is within a reasonable distance... say 10 miles. [$25 billion]
  • Free clinics may transfer patients to hospitals as medically required after initial evaluation; however, those clinics that routinely transfer patients for non-emergency care will be subject to penalty and staffs will be subject to disciplinary actions. Patients who simply bypass the system could be subject to refusal of service or may simply receive assistance to get to the local free clinic... a taxi to be paid for by the local free clinic. The government can figure out what to do after that.
  • No persons illegally in the U.S. will qualify for any such assistance at either free clinics or hospitals... period. They may receive medical assistance through funds established by non-profit groups dedicated to that purpose or from funds provided by the Department of Homeland Security that has the responsibility keep out illegal aliens in the first place.
Taxpayers are given the most for their money and not forced to pay for:
  • Unnecessary legal actions,
  • Medical actions that are "cover-your-ass" only because of fear of lawsuits,
  • Those who abuse the system, and
  • Those who do not belong within the system.
Insurance costs must reflect the significantly reduced liability risks and the government's intervention in catastrophic medical costs for those unable to pay... who would otherwise still receive payment from private health care facilities, regardless.
Individuals will always retain the right to seek and pay for their own medical services without resorting to the government contributing toward the payment of those services... or limiting access to those services.
Treat the causes, not the symptoms, of high medical costs. Everyone will win except those who seek to gain from fraudulent lawsuits and those who raise the cost of medical care by promoting excessive compensation demands for medical mistakes... including incompetent doctors.

Of course, simply by eliminating huge lawsuits, the cost of medical services can be reduced significantly... without other government subsidies.


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There is always an easy solution to every human problem—neat, plausible, and wrong.
Henry Louis Mencken (1880–1956)
“The Divine Afflatus,” A Mencken Chrestomathy, chapter 25, p. 443 (1949)
... and one could add "not all human problems really are."
It was beautiful and simple, as truly great swindles are.
- O. Henry
... The Government is on course for an embarrassing showdown with the European Union, business groups and environmental charities after refusing to guarantee that billions of pounds of revenue it stands to earn from carbon-permit trading will be spent on combating climate change.
The Independent (UK)

Tracking Interest Rates

Tracking Interest Rates


SEARCH BLOG: FEDERAL RESERVE for full versions... or use the Blog Archive pulldown menu.

February 3, 2006
Go back to 1999-2000 and see what the Fed did. They are following the same pattern for 2005-06. If it ain't broke, the Fed will fix it... and good!
August 29, 2006 The Federal Reserve always acts on old information... and is the only cause of U.S. recessions.
December 5, 2006 Last spring I wrote about what I saw to be a sharp downturn in the economy in the "rustbelt" states, particularly Michigan.
March 28, 2007
The Federal Reserve sees no need to cut interest rates in the light of adverse recent economic data, Ben Bernanke said on Wednesday.
The Fed chairman said ”to date, the incoming data have supported the view that the current stance of policy is likely to foster sustainable economic growth and a gradual ebbing in core inflation”.

July 21, 2007 My guess is that if there is an interest rate change, a cut is more likely than an increase. The key variables to be watching at this point are real estate prices and the inventory of unsold homes.
August 11, 2007 I suspect that within 6 months the Federal Reserve will be forced to lower interest rates before housing becomes a black hole.
September 11, 2007 It only means that the overall process has flaws guaranteeing it will be slow in responding to changes in the economy... and tend to over-react as a result.
September 18, 2007 I think a 4% rate is really what is needed to turn the economy back on the right course. The rate may not get there, but more cuts will be needed with employment rates down and foreclosure rates up.
October 25, 2007 How long will it be before I will be able to write: "The Federal Reserve lowered its lending rate to 4% in response to the collapse of the U.S. housing market and massive numbers of foreclosures that threaten the banking and mortgage sectors."
"Should the elevated turbulence persist, it would increase the possibility of further tightening in financial conditions for households and businesses," he said.

"Uncertainties about the economic outlook are unusually high right now," he said. "These uncertainties require flexible and pragmatic policymaking -- nimble is the adjective I used a few weeks ago."

December 11, 2007 Somehow the Fed misses the obvious.
[Image from:]
December 13, 2007 [from The Christian Science Monitor]
"The odds of a recession are now above 50 percent," says Mark Zandi, chief economist at Moody's "We are right on the edge of a recession in part because of the Fed's reluctance to reduce interest rates more aggressively." [see my comments of September 11]
January 7, 2008 The real problem now is that consumers can't rescue the economy and manufacturing, which is already weakening, will continue to weaken. We've gutted the forces that could avoid a downturn. The question is not whether there will be a recession, but can it be dampened sufficiently so that it is very short.
January 11, 2008 This is death by a thousand cuts.
January 13, 2008 [N.Y. Times]
“The question is not whether we will have a recession, but how deep and prolonged it will be,” said David Rosenberg, the chief North American economist at Merrill Lynch. “Even if the Fed’s moves are going to work, it will not show up until the later part of 2008 or 2009.
January 17, 2008 A few days ago, Anna Schwartz, nonagenarian economist, implicated the Federal Reserve as the cause of the present lending crisis [from the Telegraph - UK]:
The high priestess of US monetarism - a revered figure at the Fed - says the central bank is itself the chief cause of the credit bubble, and now seems stunned as the consequences of its own actions engulf the financial system. "The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.
January 22, 2008 The cut has become infected and a limb is in danger. Ben Bernanke is panicking and the Fed has its emergency triage team cutting rates... this time by 3/4%. ...

What should the Federal Reserve do now? Step back... and don't be so anxious to raise rates at the first sign of economic improvement.
Individuals and businesses need stability in their financial cost structures so that they can plan effectively and keep their ships afloat. Wildly fluctuating rates... regardless of what the absolute levels are... create problems. Either too much spending or too much fear. It's just not that difficult to comprehend. Why has it been so difficult for the Fed?

About Me

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Michigan, United States
Air Force (SAC) captain 1968-72. Retired after 35 years of business and logistical planning, including running a small business. Two sons with advanced degrees; one with a business and pre-law degree. Beautiful wife who has put up with me for 4 decades. Education: B.A. (Sociology major; minors in philosopy, English literature, and German) M.S. Operations Management (like a mixture of an MBA with logistical planning)