Saturday, August 30, 2008

"US Healthcare on the Edge: A Prescription for Cure"

Jonathan Lorch and Victor Pollak, two physicians with plenty of experience and accomplishments in America's health care system, have suggested the steps they think will go a long way toward making our system work.

I am pleased to post a brief description of their plan and a link to the full proposal.

US Healthcare on the Edge:
A Prescription for Cure

by Jonathan Lorch and Victor Pollak

The US Healthcare system has many problems. At its heart are three that prevent better outcomes, waste vast amounts of money and hinder understanding of optimum cost effective treatment: (1) misaligned risk, (2) ineffectual infrastructure, and (3) minimal leverage with the pharmaceutical industry. All three need be changed simultaneously, or in very rapid succession.

Misaligned risk

The Problem:
For long-term outcomes in chronic disease, that account for 75-80% of costs, the objectives of insurers and employers differ from those of physicians and hospitals. Costing relatively little when first diagnosed, diabetes, hypertension, and vascular disease become increasingly expensive as complications mount. Caregivers try to prevent long-term complications, but payers have no motivation to provide the resources to do so. This misaligned risk represents lost savings from preventable complications. If the savings are only 5% a year this represents $125 billion.

The Solution: A single defined insurance policy
  • Defined minimum benefits, credible, applicable over a lifetime.
  • “Belongs to” the individual and stays irrespective of good times or bad.
  • Competition based only on cost of the policy not its quality.
  • With a single policy, and all covered, insurers will have a single vast risk pool including healthy individuals.
  • Obviates the need for Medicaid and SCHIP .

The Problem:
A currently balkanized process wastes $60-100 billion on billing, collecting and administration. Briefly, insurers strive to keep from paying claims, so the more complex and difficult the billing process, the more money providers and patients will be unable to collect.

The Solution: A single claims processing and administrative system
  • A uniform medical practice code set and a known set of application programming interfaces.
  • This system will be the start and finish of every claim processed.
  • Payments will be routed directly from payers to the provider’s bank.
  • Claims will be settled electronically and instantly, as by American Express.
  • Elimination of back-office provider employees who try to pry funds from insurers, and of insurer employees whose job it is to deny payments.
  • The cost will be borne through small transaction fees.
The Pharmaceutical Industry

The Problem:
The third core problem is minimal leverage with the Pharmaceutical Industry, which as of 2005 represented 10% or $200 billion a year of the US Healthcare system.

The Solutions: Increase leverage and independently evaluate new medications
  • To bring greater market power to bear, payers and providers should be allowed to organize purchasing organizations.
  • Development of ongoing studies on the optimum utilization of drugs and on whether or not new drugs are better than existing treatments.
  • A modest tax on pharmaceutical industry sales to be used entirely to study the additional value actually provided by new medications and how best new medications can be used. NIH could be charged with this responsibility.
  • Change in, and capping of, the marketing costs of pharmaceuticals, allowing for bringing them to market but excluding direct-to-patient advertising, high honorarium to physician speakers, etc.
This is a summary of an in depth prescription for the US Healthcare system. The full text is available here.

The authors:

Jonathan A. Lorch, MD, FACP
Associate Professor of Clinical Medicine
New York Presbyterian Hospital-Weill Medical College of Cornell University
Director, Medical Informatics. Director, Nocturnal Dialysis, Co-Medical Director
Hemodialysis. The Rogosin Institute, New York, NY

Victor E. Pollak, MD, FACP
Emeritus Professor of Internal Medicine, University of Cincinnati
Professor of Clinical Medicine, University of Colorado
Senior Vice-President & Medical Director. MIQS, Inc. Boulder CO


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