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Harry and Louise redoux. This time let’s be innovative about healthcare and get facts and then go emotional

June 15, 2009

We’re about to return to the great national healthcare debate, where the forces of Capitalism will do battle with the dark forces of Leninism. The real issue is not who is paying for it, but how healthcare is paid for at all, and the private sector is already in place and functioning, but it does need to get its costs down to make coverage available to all.  Let’s focus on the facts before we go emotional.

Fact 1 – Single people and smaller businesses cannot obtain the same health care as larger companies, for any price. Huh? A person I know was divorced from a man who remained at his employer. Now that her Divorce COBRA has run out, she, even as a well paid professional, cannot get the same heath coverage because the insurance company simply does not offer that plan to individuals. Why is it that our Senators scream of the importance of small business and then do nothing about providing this supposedly crucial economic engine with equal access to healthcare?

Fact 2 – All healthcare studies show we spend a disproportionate amount of money in the final 6 months of a person’s life, often without measurable patient benefit, perhaps with the psychological benefit to the family of ”we did all we could”.  We spend nearly nothing by comparison on wellness and prevention.  In an effort to cut costs, insurers do weird things. One of our Managing Principals came down with a severe inner ear illness which left him deaf on his right side. A cochlear implant solved the issue, but this $5K procedure was deemed cosmetic and not covered. He paid for it out of pocket, but what if that meant missing 2 mortgage payments?

Fact 3 – Doctors hate the Via Delarosa they must traverse to get claims paid. Insurers often kick back claims seeking either clarifications or for some other reasons. There’s a well know number, 70%, which Doctors often cite as the percent of all claims which are then never resubmitted, Doctors focusing on getting paid for their larger claims, which is sort of pathetically obvious and provides an incentive to insurers to be a tad picky about forms.. How would we feel if our customers only paid us, after much hassle, on our largest invoices? And what about the extra $50K, all-in, they must payout for insurance experienced billers?

Fact 4 – Ask most people how much a procedure costs, and they most frequently say “the total bill was $100K, but I only paid $100”. This is one of the few times in life when there is a complete consumer disconnect between how much something actually costs and their need to pay for it. You know how casinos use chips so it doesn’t feel like you’re loosing ‘real money’? Why reform something that doesn’t affect you?

Now that our spleens are well vented, let’s focus on solutions, again fact by fact.

Fact 1 – Why not allow insurers to offer the same policies to all, or encourage local religious and civic groups to form groups? Capitalism requires access to free markets, why not insurance as well?  Why does each State have it’s own Insurance Dept, complete with Commissioner and bureaucracy? Why not allow insurers to gain 1 national license, not 50, with a single national Claims Reserve calculation and pass along the reduced compliance cost savings?

Fact 2 – Just like we have ‘good banks’ and ‘bad banks’, why not have healthy people and unhealthy people? Insurers should be able to transfer anyone who’s medical bills (based on actual spend or as projected based on a diagnosis) exceed the cumulative premiums paid for the past 3 years to a government funded bailout-insurer, keeping the main group/census low risk which then translates into lower premiums. To go even further, just as Olympians can submit to voluntary extra-refined drug testing to ensure their wins are legit, why not have people voluntarily submit to DNA testing and receive lower premiums should they not have the trigger chromosomes for various expensive to treat illnesses?

Fact 3 – Many Doctors, especially surgeons and other specialists, require up-front payments and then help you fill out the insurance forms for reimbursement (if/how you get reimbursed is your issue). Under Capitalism, it makes sense. HIPPA and advanced electronic systems should also clarify the problems. I worked on a Dental HIPPA and authorization system whereby a dentist would submit the patient’s insurance ID and instantly receive back a detailed list of payments, exclusions, etc.  Given information, it was up to the dentist and patient to figure it out on the spot. Again, Capitalism requires free markets and information, and a widespread use of a similar system would help provide both, and stop doctors being forced to triage their claims reimbursement processing to the larger bills.  As in any business, the less Reserve for Bad Debt you have, the easier it is to lower your prices.  If we can allow hospitals to be the blanket invoicer for all doctors and providers with affiliation, we can also cut out the multitude of individual billing offices, further taking cost out of the business side of healthcare.   Collect a 5% Admin Recovery fee and this could be a profitable revenue line to boot.

Fact 4 – Capitalism requires consumer’s to provide ’vote with your feet’ feedback, and if all they think a procedure costs is $100, this feedback loop if completely broken, which sort of explains our current ‘healthcare costs as an unguided missile’ situation. Perhaps the answer is to require a 50/50 split with the insurance company, so consumers know they will have to cooperate to get reimbursed, just like the various providers.  Even more importantly, consumers will have skin in the wellness game since regular screenings and safe behaviors will be cheaper than laying out their side of a $150K Heart Valve procedure.

Healthcare is not a philosophical battle between the forces of light and dark; it’s a knotty business problem that has to be tackled just like any other tough issue – by objective, apolitical operations oriented specialists who think end to end.  Let’s stop the positioning on all sides and treat this like any other business problem needing a solution.

Rich Eichen is a Managing Principal of Return on Efficiency, LLC, who’s website is and is one of their senior turnaround leaders/CROs, Program and Interim Executives with over 25 years experience reshaping companies and key initiatives as well as operating units of Global organizations. He can be reached at

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