Just let the air out of the tires!

Insurance re-think

In order to fix the medical industry in six easy steps, we have to go further than stating it is broken. We have to accurately identify how it is broken. To do this, I have found it easiest to put things in a different light. Instead of thinking “Medical”, for just a moment, think “Automotive”.

We have come to accept that when we purchase automobiles, there's just a “cost of doing business”. We all have to buy gas, oil changes, and new tires every once in a while. So we just do that because it is an accepted expense.

We purchase Automotive Insurance in America so that if we have a catastrophic event, it will not ruin the lives of our family. If we hit someone causing life-changing damage, our insurance will foot the bill and keep us from financial devastation. This is an easy concept to understand. But for the sake of argument, let’s say that the customers started demanding that their automotive insurance paid for more common upkeep costs. Let’s say they wanted things covered like oil changes, tires, even gasoline. That would be great, wouldn’t it? If automobile insurance paid for, well, just the cost of doing business – just the cost of living.

They might do it, too. For a much higher premium, insurance companies would start covering things we would never expect them to cover. Then they would enter into back-room business agreements with gas stations and repair centers. They would cut deals and require their customers to use only certain businesses, restricting their freedom of choice. The price for things like gasoline or spark plugs would be hidden from the insured and the cost for the uninsured would go through the roof.

This is precisely what happened to the medical industry. Insurance was originally sold to cover unforeseen catastrophes. Patients, the insured, started demanding more services be covered by Health Insurance; things that used to be considered “just the cost of living”.

We used to understand that little Johnnie would get sick once a year and we would have to pay the doctor $45.00 for an office visit and buy prescription medication for $25.00. It was just the cost of having a family. But we asked them, and the insurance companies were more than happy to “give the customer what they want”.

 So, we are where we rode to – no great mystery here.

So, how do we fix it in six easy steps? Here is a model for Applied Medical Improvement (AMI)...

1. The Federal Government provides tax breaks to Insurance Companies for AMI Accounts, sets Tribunal Guidelines for malpractice mediation/arbitration, establishes a Flat Fee and Short Form Guidelines for malpractice claims, and sets up a Provider Registration for Medical Service Providers.
2. Insurance Companies provide Major Medical only accounts (AMI) to employees equitably, and provide malpractice discounts to Medical Service Providers based on the percentage of AMI patients treated.
3. Employees increase income dollar-for-dollar with savings (pure difference in cost), opt into agreements to Arbitration/Mediation for malpractice claims, and provide downward pressure on Medical Service Providers and Prescription Providers through cash buying decisions.
4. New/Independent Medical Service Providers and Prescription Providers can offer discounts to attract new AMI market share, and benefit from lower malpractice premiums.
5. Trial Attorneys can subsidize their ongoing traditional pursuits of settlements and judgments with a faster Short Form process and predictable Flat Fees.
6. Medical Mediation/Arbitration will provide, with swift decisions, a larger percentage of awards (lower legal fees) to the individual patient, some limits only to the punitive portion of the settlement, and a more predictable risk to Insurance Companies (thereby lowering malpractice insurance costs to health care providers over time).

The heart of AMI

This proposal creates a model for a solution. We have to introduce an option that does not presently uniformly exist. We need a new option between “no insurance at all” and “health insurance the way we expect it to be today”. We need a desirable option more akin to Major Medical Only with an optional Health Savings Account (HSA), but with a supportive twist. The twist is, we have to make the option desirable to 5 different groups of people that have a vested interest in its success: Citizens, Insurance Companies, Medical Providers, Pharmacies, and Litigants.

The Road Map will take 6 steps to implement: Tax Breaks, Required AMI Insurance Services, AMI-only Tort Limitations, Public Availability, Software to manage it, and Education.

The net result is a friction-less circle of downward pressure that will make progressive improvements over a period of time returning stability to the existing state of the medical industry.

So there is spending in this model. But I think you will find it to be far less spending than any other idea proffered to date. And the return on investment (ROI) will be easy to track and measure. After all, the government should always be good stewards with our tax dollars – we would hope that there is always an ROI identified before any money is spent.

Required Steps to Implement AMI

Tax breaks

To the Insurance Companies

This is the core of the AMI success story. The Federal Government will offer tax breaks/discounts to any insurance company that offers an AMI Major Medical account with an optional HSA. These AMI accounts will be offered as a choice through all companies that are customers of those AMI participating insurance companies to their employees directly (or to any Incorporated Entity). The AMI account will cost significantly less. For example, let’s say that a company of 30 employees pays $700 per month for Full Coverage per employee. Those same employees could choose to select an AMI policy for maybe around $200 based on market pricing. These savings of $500 MUST be realized as a $500 increase to the income for that employee – no exceptions or loopholes. If the business is paying 100% of the insurance cost for the employee, then that is in lieu of income and shall be paid as a direct increase to the employee. Also, AMI policies would not count against any quotas the customer companies have to maintain to get their price breaks. If that company of 30 employees had 5 employees choose AMI policies, then they would still have 30 policies total against an existing pricing-break level.

To the Citizen

There should be some incentive from a tax perspective to citizens, but keep in mind that most of the benefit to them will be in the annual savings by paying for their own non-Major-Medical expenses. Citizens that itemize have often complained that the amount of annual medical expenses you have to meet before you can deduct has always been too high (around $5,000.00 last time I checked). It might be a good target to lower this amount for AMI insured individuals. Lowering this cap would at least give the impression that if their expenses were a little higher than they had calculated, the government would at least not penalize them for it. Alternatively it may be a consideration to not tax the new additional income at all. If they had spent it on insurance, it would be removed pretax anyway. Some of this could go into an HSA – per employee decision.

To the Pharmaceutical Companies

Initially no tax break is necessary, but should the program need encouragement, this would be a good place to begin. Pharmaceutical Companies would enjoy savings from mailing bulk prescriptions as they do today with some insurance companies. Offering this to AMI insured might be a good target for incentive if it is deemed necessary.

To the Medical Providers

Income, Point of Service, Point of Sale, all of these could be considered for future incentives to correct a perceived logjam in the progress. But are mostly not necessary at the beginning.

Required AMI insurance service

In every place that makes sense to do so, a standard presentation table shall be adopted so that patients can easily compare information regarding choices. This table can be patterned from the USDA Nutrition Information panel now required on all food products in stores.

AMI Major Medical will cover certain large ticket items that would be seen as particularly damaging to individual families. It would be left up to the market to determine what these specific items are unless there is a pressing social reason for its mandated inclusion by law. An example to this would be an expensive curable disease that would pose a larger risk to society if not addressed due to a patient’s inability to pay for the cure regardless of the patient’s self-control. By this definition, the treatment of SARS might be required by law to be covered, whereas diseases that are acquired through risky patient behavior may not be required by law to be covered. More so to the point, the main idea here is not to cover trivial services like sprained ankles or allergy medicine for once-a-year ragweed.

There will be a required segment of coverage for some middle of the road services (i.e. Child Birth, Well Baby, etc) that would require insurance companies to initially pay for these services allowing patients to pay the insurance company back through increased premiums over time, that would go back done after balancing out. The services that are actually covered by this segment will be dictated by market demand. Further, 2 medical providers would be required to clearly predict the costs (with all predictable options) so that patients, as customers, can make more informed decisions about where they wish to go without the fear of unforeseen extra costs catching them by surprise. Estimates should be measured for accuracy and published for future AMI patients to consider. If a hospital or service provider is consistently under-estimating costs, AMI patients should be allowed to discover this and make their choices.

Pharmaceuticals would be covered over a defined threshold. The law would be simple. Select a value considered not to be devastating to a family during the course of one month. Let’s say that amount is $700. Any set of prescriptions for a single month to cure a single ailment that goes over that amount, would be paid by the insurance company after a co-pay of that exact same amount is paid by the patient. Pharmaceutical companies may be encouraged, through tax credits, to reduce the cost for AMI patients when this threshold is reached.

Tort Improvements and Limitations

Streamline Claims and Judgments

When clients/patients sign up for AMI, there will be specific legal agreements about how to settle disputes in a streamlined way. The client/patient shall agree (opt in) to follow this process for any remedy needed from a perceived event of malpractice or if they feel they did not get value for their fee.

A standard “short-form” will be used for all claims of malpractice. A patient may, through legal counsel, fill in all the required blocks necessary to prove their case. All details will be captured in the one folder.

The defendants shall be allowed to respond in a reasonable amount of time. This must not be allowed to drag on. The patient’s remedy must be guarded against inflation with this time limit. Ten days to a month should allow medical defendants the time they need to research and prepare their case. This may be viewed as tough, but we are about to fix the very problems the medical professionals have been complaining about. They will need to share in the solution.

A tribunal recognized and established by local government will review the two standardized folders promptly and 3-out-of-4 votes with a fifth available to settle all ties shall determine the outcome. The tribunal shall be comprised of a prosecutor, a citizen juror, an insurance representative, a medical representative, and judiciary representative to break ties. Grounds for appeal should be limited in scope and only if corruption of the tribunal is suspected. The prosecutor and the insurance representative, following existing juror selection guidelines for that court, shall select the citizen juror.

Compensatory damages are automatic and complete. The patient shall be returned to a state like before the contentious event occurred.

Punitive damages should be an option exercised by the tribunal arbitration as a tool to teach health care providers a lesson and to demonstrate that misconduct, neglect, or malpractice shall not be tolerated within their jurisdiction. These punitive damages will have realistic limits. The goal is to correct a problem, not to put a service provider out of business for one case of malpractice. Even if the limits are high, the impact on malpractice insurance and liability will be significantly positive.

Since this form of litigation is not argued but rather settled on facts presented in a standard way, lawyer fees will be a flat rate per decision and modest in nature (suggested $200.00 but open for debate – but one gets the idea). Trial lawyers should look at this as a fast and stable way to provide services while making a sustainable income with limited time investment between the larger, standard trial cases. New attorneys would see this as a way to become established with cases that offer fast turn-around, predictable income, and low risk of legal malpractice.

The vast majority of the money shall go directly to the AMI patient. Only the flat fee for legal costs shall be deducted. And they shall get their money swiftly enough to avoid further loss. There may even be some protection extended from creditors while an AMI case is pending – possibly a form of Chapter 11.

By streaming off a percentage of cases currently flowing into our judiciary, the program will reduce the growing burden on the judiciary and help decrease backlogged dockets. Therefore, local judicial systems that play host to such cases shall see the benefit of setting up these Tribunals at a local level. A flat fee paid by the losing party shall financially support tribunal activity. This fee shall be lower than a fair percentage of the flat fee for legal representation and shall not be prohibitive in nature except to act as a deterrent to abuse from frequent and frivolous claims.

Predictable costs to Insurance Companies

Simply by taking the cases that we all know to be silly ($11 million for spilled coffee and the like) we allow Insurance Companies to gain a more predictable cost in regards to malpractice. This predictability and measurable cost savings could translate into savings directly to the health care provider.

We would expect that doctors and hospitals that treat a higher number of AMI patients would place downward pressure on the insurance companies. Likewise, we would expect the insurance companies to covet health care professionals treating more AMI patients. This joint cooperation in downward price pressure would deflate costs while maintaining existing profit margins.

The idea here is to make the same or greater profit with less required capital investment or liability for both the medical provider as well as the insurer, while providing a new revenue stream for legal.

Available to public in groups

Sponsored by Insurance Companies

AMI accounts shall be required to be sold directly to the public in blocks or groups of individuals as if they were corporations. An independent broker shall be engaged to manage these blocks for profit much like an HR group administrator does today within corporations. This would allow companies in such a business already (like payroll companies that manage benefits for groups of small businesses) to extend these benefits to individuals or families in blocks. A block shall be established and filled in within a limited amount of time (like 30 days). The idea is that clients/patients will not have to wait for an unacceptable amount of time before being covered or released to attempt to join another forming group.

Sponsored by Local Municipalities

Since insurance companies participating in tax credits will be required to make this new insurance type available to any incorporated entity - small cities, municipalities, or townships are eligible. The idea here is that at the same counter where citizens of a local incorporated entity can purchase fishing license, marriage license, and the like, may also purchase their AMI insurance at the same location.

This is an easy and simple way for a local township to attract new citizens and engender local growth. People will move to locations where they can buy AMI insurance for catastrophic health care. It will be a draw. The local authorities in partnerships with an insurance business of their choice would decide the best way to implement this solution. How they set it up will be a local decision. All the Federal law will do is permit this kind of coverage with minimal regulation with the expressed purpose to prevent corruption only.

This is an interesting facet in that it may actually allow smaller centers of population to draw a certain percentage (no matter how small or seemingly insignificant) of population from denser urban areas. This redistribution of populace may actually bring about a greater benefit than the rest of the program, as it will reduce the burden on large municipalities whose infrastructure may be overwhelmed or even mismanaged presently.

Software

In every instance, the software packages listed below shall be designed, built, delivered and maintained by bidding contracted American companies according to guidelines to be established. The one requirement is that the software shall actually be profitable in that interested parties shall pay to participate and to gain benefits from being listed. This profit shall be channeled directly back into AMI programs at the Federal, State, and local level to defray or even eliminate all costs. Any overage shall be spent on preventative programs in the area of public health only.

National Software Initiatives

A National Software Program will be written and extended to different required stakeholders. The public at large will be able to study what AMI is, what companies in their area offer it, what service providers and pharmacies will provide discounts, what the law does to protect them, and links to their State AMI sites. We can certainly re-purpose existing ACA site, but only if there are overall cost savings. Unlike ACA, this site will be a profit center and not a complete expense. Since profit centers will benefit from this, there will be a charge to be listed making this software profitable and self-supportive. For companies, there will be statistics, resources, enrollment, legal guidelines for participation and any other required information. No personal information will ever be provided to any system involved and privacy of all users shall be maintained with anonymity for those that visit or use the software.

State Software Initiatives

The public at large will be able to study what AMI is, what companies in their area offer it, what service providers and pharmacies will provide discounts, what the law does to protect them, how to file a grievance, and gain a referral from their local Bar for legal representation. Since profit centers will benefit from this, there will be a charge to be listed making this software profitable and self-supportive.

Also included will be support programs for State judiciary to assist in setting up and managing the tribunals, and a fair method for collecting damages awarded and distributing them to the plaintiff if judgment is granted in their favor. The representing counsel will have separate funds distributed to them and the remuneration shall be paid directly to the patient in total and with haste. A bank of deposit will be part of the required information from the plaintiff before the case is considered. If a plaintiff does not have a bank of deposit, a local financial institution can volunteer or be selected to accept and maintain until withdrawal any settlement. These settlements shall be distributed with ACH payments (standard electronic deposits) so that they are swift and secure. This will not require any new infrastructure and will free the government from being a paper-manager.

There shall also be an automated ability to collect information from both the plaintiff and the defendant. Strictest confidentiality and security will be provided and this method for entering and disputing claims shall be only an option to the direct method where legal counsel is involved. This will allow for some cases to be considered from remote locations and will expedite decisions from arbitration.

States that purchase and implement this software shall be listed automatically with the National software.

Local Software Initiative

Local incorporated municipalities, townships, and small cities will be able to purchase and implement a local version of the AMI software. This will allow them to extend such services as online enrollment, service information, updates and FAQs, as well as listing for local service and discounts.

It will also allow the local group to be listed on the State and Federal programs once they are established and certified by federal guidelines. These guidelines shall remain minimal and easy for local townships to follow and implement without undue difficulties.

Part of the program will be a wizard that will walk local authorities through the required steps to become AMI certified.

Education

Public Service Announcements (PSA), a web site, and other normal distribution channels should be used to make people aware that there will soon be choices for them on insurance. People that are better off financially will have the ability to save money if they so choose and those less fortunate will be able to purchase security at a reasonable price with the support of trusted and certified entities.

What it means to Citizens

Choice at Employment

Increased Income

The vision is that once in place and the initial offering has been made within a prescribed limit (say one year), a person starting a new job with a new employer will be given a choice up front by their Human Resource (HR) representative: Participate in complete coverage (or whatever that company typically offers) or participate in an AMI program. If they choose the AMI program, they will be taking upon themselves the responsibility for paying out-of-pocket for a lot of services they are used to having covered by insurance in the past, but they will also see an increase in pay that will compensate for the responsibility. 2 This pay increase can be funneled in part, or in whole, into an HSA. These additional responsibilities must be clearly spelled out by the insurance company. Standardization templates will help here. The idea is not to have insurance companies confuse the client/patient by twisting offers around. Flexibility can be achieved within a standard framework so people will be accustom to seeing the same type of information presented in the same area of the Explanation of Benefits (EOB).

Companies must not be allowed to make AMI savings part of the original offer. Example: You make $40,000 per year plus you can make an extra $5,000.00 if you take AMI insurance over Full Coverage. Companies must not be allowed to say you are making $45,000 per year unless you elect full coverage and then you would make $30,000. That would be counter-intuitive and may negate the desired effect. This would be easy to accomplish with the standardized format like the one used for Nutritional Information on products in a store.

Choices at the Doctor

Patients that have AMI insurance will be told up front by the medical provider what the charges should be and will be allowed an opportunity to transfer to a different medical service provider. The information rights to the patient’s records are the patient’s private property. They will be allowed a method to have them transferred or otherwise made access through identity mechanisms such as block chain if so desired. There’s likely a dovetail here for participation in ID2020 out of the UN.

Patients that do not feel that they received value for their paid fee or that feel that the fee was greater than the estimate shall have a standard way to report this. This data shall be compiled to allow other patients to review the ratings of service providers before visiting them. A standard API will be made available for this data so that existing ratings sites may leverage this information.

Choices at the Pharmacy

Pharmacies shall be permitted to offer discounts or organized group discounts to AMI insured people. Further, they shall be able and encouraged to handle long-term or recurring AMI prescriptions through established direct-mailing programs. No new law here, just extending to individuals the same ability to save that people with Full Coverage enjoy.

Choice of Litigation Paths

When a person makes the choice between Full Coverage and AMI, they must be informed of the different paths to legal remedy. They will be told that Full Coverage will allow for a more traditional route of complaint where the AMI coverage will allow for arbitration by a five person panel within a time limit, that they will get the majority of the remuneration after a standard flat fee for legal representation if any is used, and that there are limitations to punitive judgments and what those ranges are.

What it means to Insurance Companies

A new product to offer

Every salesperson loves a new product. It gives them a reason to call on new and old clients alike. The AMI compliant product will allow insurance companies to offer such a new product. If the burden load on an existing product for Full Coverage is $580 and they sell at $700, the new product may have a burden load of $80 and be sold for $200. This is just an example, but regardless of the actual values, the same profit can be made for less money set aside to cover claims.

A new profit potential

Lower overhead will eventually be compensated by greater competition. During the initial offering it is fully expected that margins will float high for a while. It will take a while for competition to bring them back into proper alignment. During this time, insurance companies would expect to make a certain amount of windfall. However, the better educated the public is on the initial offering, the shorter this process will take. It would therefore be beneficial for the Federal Government to be extremely interested in education on the front end of this process.

Security in Tort Limitations

The initial possibility for windfall should allow the insurance company to manage doubt about the security in punitive limitations. As confidence increases in the strength of this protection insurance companies will begin to shift dollars into competition through reduced margins. The windfall will mitigate the effects of this initial period of doubt or concern. With more predictable awards brought by the opted-in mediation by the patient/client, insurance companies shall be able to dramatically reduce malpractice insurance premiums to medical service providers based on the percentage of AMI patients they treat. This will then make it even more attractive for medical service providers to desire AMI patients thus giving them incentive to offer deeper discounts to them.

What it means to Medical Providers

A completely new market for new and established practices

Many doctors have shuttered their private practices, which may be bad for long-term costs. This new approach may encourage new practices to open up.

Having a segment of cash-only patients will decrease paperwork while increasing immediate cash flow to a practice. Doctors can concentrate more on medicine and less on paperwork. It is fully expected that medical providers would communicate with the public that they offer discounts or special pricing for AMI patients. Young doctors attempting to start practices would have a channel for developing the practice faster while enjoying the benefits of lower costing malpractice insurance. Established practices can augment their patient lists with this additional segment. It would present a new facet for balancing accounts receivables and payables.

It is fully expected that with the new mediation system and more predictable awards, costly malpractice insurance premiums through natural market evolution shall be reduced based on the number of AMI patients the medical service provider treats. This reduction in the single largest portion of a medical service provider’s overhead will encourage them to attract even more AMI patients by offering deeper discounts.

Better community relations

Medical Service Providers will gain positive public relations by expressing their support for patients that must shoulder the burden that comes along with their monthly savings. Patients will appreciate the implied message that the providers support them in a way that will largely be viewed as personal.

Better understanding of individual needs

Doctors that understand how and why a patient makes decisions will gain a deeper understanding about that patient in general. There is certainly a mental side to medicine, but when was the last time a doctor asked you non-medical questions in an effort to better understand the person? The very fact that a segment of population chooses to have AMI accounts will eventually evolve statistically measurable metrics that can be studied. These can supplement the data gathered during evaluation by the physician and may even help in diagnosing problems.

What it means to Pharmacies

New packaging possibilities

Pharmacies can begin offering package discounts to AMI patients. Also they can offer mail order for bulk orders of 3 months of meds like they do for Full Coverage. The difference is that the patients would have to pay for them, but this would actually increase cash flow as most insurance companies work on a “Net 30” plan that often becomes an additional expense in Accounts Receivables.

New market potential

AMI patients would provide a new target market. The chains will address this, but it would also give the Mom & Pop Pharmacies a new opportunity to get in touch with local patients.

What it means to Litigants

New law to implement for established clients

Corporate Clients

Corporate attorneys will have new areas of work as they interpret the opportunities and draw out plans for their corporate accounts.

National, State, and Local Government Programs

Lawmakers will have to interpret the national law into implementation at a State and Local level. This additional work will provide politicians a new vein of communication and a new topic for discussion. This plank will offer a new debate as candidates vie to represent their constituents and shape public opinion.

Individuals

Individuals that feel harmed by acts of malpractice will have a new streamlined process to seek compensation. They will also enjoy larger portions of the settlement with a standard flat fee going to pay for legal representation. Complete compensatory as well as fair punitive damages will be available as well as a clear and fast appeal when corruption in the process is suspected. Streamlined litigation rules for AMI clients will make for faster judgments with statistically predictable settlements over time as well as a reduction in loss to insurance companies due to unbalanced awards.

Reduction in risk instead of sweeping Tort Reform

Reducing the risk that makes up 100% of the current process will provide for a minor adjustment to the present system without removing choice from the public. A person that chooses to participate in AMI does so with a complete awareness of the features and benefits as well as the self-imposed limitations. It is believed that any impact no matter how small will have a significant effect on the judicial system. Easing the pressures on the overburdened system will yield great results in overall civil savings without requiring sweeping Tort Reform.

Trial lawyers will see this as a way to consistently subsidize their more traditional pursuits with fast and predictable flat fees with limited risk or time invested. Since the court fee paid by the losing party will be only a percentage of the flat fee it may even encourage some to take on some cases offering to pay the fee should they lose. Based on the understood merits of the case the risk should never be higher than the potential for reward. A balance between dissuading abuse to the system versus encouraging support for the indigent should be our main goal for fixing this flat fee and the court cost.

Natural Comfortable Downward Pressure on Medical Industry

This proposal has demonstrated a model for a solution. We have introduced an option that does not presently uniformly exist. There shall be a new option between “no insurance at all” and “health insurance the way we expect it to be today”. We have presented a desirable option more akin to Major Medical Only but with the required supportive twist that we have made the option desirable to 5 different groups of people that have a vested interest in its success: Citizens, Insurance Companies, Medical Providers, Pharmacies, and Litigants.

The Road Map presented 6 steps to implement: Tax Breaks, Required AMI Insurance Services, AMI-only Tort Limitations, Public Availability, Software to manage it, and Education.

The required spending is far less than any other idea proffered to date. And the return on investment will be easy to track and measure.

All of these aspects in this proposal when combined and present in the current system will create a friction-less circle of uniform and fair downward pressure on prices industry-wide without requiring a loss of profitability for all interested entities. This downward pressure will bring prices back in line with the perceived value of the services being provided. We all agree that an aspirin is a wonderful thing, but an aspirin that costs $20.00 is not. Competition will give providers a reason to bring the price back in line with the perceived value over time.

It took us about 45 years to make this mess and it may take a decade before we will begin to see the leveled-out results of this solution. But the price of inaction is far greater than the investment opportunity you have before you to fix it right now.