Wednesday, November 05, 2008


With Democratic majorities in Congress and the election of Barack Obama there is at last a possibility of universal health coverage in our immediate future.   Absent significant changes in our health care system the costs of private coverage will continue to grow substantially and employers will increasingly drop health insurance coverage.  

Barack Obama has proposed a new system establishing initially required coverage for all children.   His plan has various incentives to encourage/cajole employers to have private health care for their employees.   His proposals rely upon having federal employee health plans eventually available for all as a backup to private health insurance plans.

Our current healthcare system relies upon employers and governmental entities paying substantial amounts of money to pay both for health insurance coverage and for medical treatment in general.    Healthcare costs in the U.S. are substantially higher than elsewhere because of various reasons such as: the extremely high bookkeeping/billing expenses, our high usage of various expensive diagnostic equipment, our high drug costs, the relative accessibility of (more costly) medical specialists easily, as well as a reliance upon many without health coverage upon emergency rooms for basic medical treatment.

While healthcare providers are often squeezed, there are few incentives to be highly cost-effective in general.   When I go to a physician and my cost is $20-30, I will logically choose to get “as much care as possible” for this relatively small amount of money.    Others who have poor or no healthcare coverage can not afford treatment at all.

Why shouldn’t employers be taxed based upon their revenues and incomes, rather than by the number of (full-time) employees they have?   Why should they need to be involved in medical care and treatment at all?

I would like to suggest a radically different model for health care reform which I think is better than any proposal I’ve heard elsewhere.    Much of what follows was initially in my blog entry of May 11, 2006 (

Assume the following:

1.] Each citizen of the United States becomes entitled to national health insurance which includes a Family Identification Code and Individual Identifier within it.

2.] Medical Providers and Suppliers have their own separate identification codes.

3.] A Federal Agency is established to handle the new health care system probably through the existing HCFA (Health Care Financing Agency) which handles Medicare and Medicaid.

4.] The Federal Agency either independently or in coordination with the Internal Revenue Service (IRS) has a new taxation management system.

5.] The Federal Agency together with contracted insurance companies handles the entire payment and reimbursement program with all medical providers.

6.] Individuals and Families pay their medical expenses on a yearly basis either as a part of their federal income tax or in a parallel tax tied to the income tax.

7.] The medical tax payments due are based upon the expenses incurred as well as the taxable income of the family/individual taxpayer unit.

8.]  Individuals and couples are responsible for paying for their medical costs for the prior taxable year by April, 15th similar to their income tax liabilities.

9.] Individuals have a series of costs for medical treatment. Examples of this might be:

a. Deductible - $500 - Year - Total Expenses
b. Co-Payment per Doctor Visit beyond the deductible- $35
c. Co-Payment per Hospitalization beyond the deductible- $200
d. Co-Payment per Prescription beyond the deductible- $25

10.] (Catastrophic) caps on Costs might be:

a. Family Deductible - $2000 (would only apply if family had 5 or more members)
b. Prescription Costs - $300 once $500 deductible had been met
c. Individual Total Expenses - $2000
d. Family total Expenses - $5000

11.] The deductibles, caps and some other costs for the individual or family would be reduced as their taxable income was below certain levels - perhaps $30-60,000/year taxable income for a family of four. Thus a family with taxable income of $20,000 might end up paying a total tax of a token amount such as $100 perhaps.

12.] Medical providers would accept their patients based upon various guidelines and reimbursement policies, but with no necessary concern of them having health care coverage or any particular kind of such coverage.

13.] Cost containment policies, audits and related procedures would attempt to minimize fraud and waste.

14.] Liability issues for workers compensation would need to provide a simple method of requiring employers to reimburse the federal government probably only in cases of extremely high expenses (if liability for medical treatment would exist at all).

15.] Other than related to worker's compensation, if determined applicable, employers would have no expenses for medical insurance.

16.] Individuals could choose to pay 100% of the costs of any medical care outside of the national healthcare system if they chose to do so for whatever reasons they wished.

17.] Certain medical care might be not-covered by the national healthcare system such as elective plastic surgery that had no clear medical value.

18.] Medical providers could choose to not participate in the national healthcare system.  If they wished to treat both participants and non-participants in the system, they could Only treat patients outside of the system for conditions not covered by the system (example: routine cosmetic surgery).


In such a healthcare system:

 1.]  Poor and chronically ill people could get more equal medical treatment.

 2.] Almost no one would be bankrupted by catastrophic medical expenses.

 3.] Employers could afford to hire employees with pre-existing medical conditions.

 4.] Where individuals are healthy, there would be incentives to not "overspend" with the deductibles and co-payments they would need to pay.

 5.] Medical care providers – could have a single, coherent billing system

 6.] Cost containment and reviews for efficacy, efficiency etc. would be much easier to do with a single national record keeping system.

 Congress and President Obama could come up with a comprehensive single payer health plan based upon a model such as this by the end of 2010 which might be able to begin to be phased in starting in 2012.

The healthcare plan might initially  include all who are currently covered by existing federal health plans including Medicare, most Medicaid,  civil service and perhaps the military.    After several years others could be added so that the plan would include all of us within a few years.   Whether we should keep our veterans healthcare system or not is beyond the scope of this writing.

Obviously such a system is far more complex than my explanation can cover. It is a model for a future national health plan that I hope others will consider.


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