David R. Henderson  

Cash for Health Care

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What's Right in Robin Hanson's... Slippery slope? Let's hope so...
Fed up with declining payments and rising red tape, a small but growing number of doctors is opting out of the insurance system completely. They're expecting patients to pony up with cash.

Some doctors who have gone that route love it, saying they can spend more time with and provide higher-quality care to their patients. Health advocates are skeptical, worrying that only the wealthy will benefit from this system.


So begins a CNN story titled "Cash-only doctors abandon the insurance system" by Steve Hargreaves. I just noticed that it's from June 11, 2013, but I missed it at the time and I think it's worth posting about.

Here's one of the things that pleasantly surprised me given my prior view about prices, a view based in part on asking around in the Monterey area:

So Nunamaker and his partner set up a membership-based practice called Atlas M.D. -- a nod to free-market champion Ayn Rand's book Atlas Shrugged. Under the membership plan -- also known as "concierge" medicine -- each patient pays a flat monthly fee to have unlimited access to the doctors and any service they can provide in the office, such as EKGs or stitches.

The fee varies depending on age. For kids, it's $10 a month. For adults up to age 44, it's $50 a month. Senior citizens pay $100.


Senior citizens pay only $100 a month? Holy cow. That's about half what my investigation showed locally. Of course, Wichita, Kansas ain't, cost of living-wise, Monterey, California.

And I loved this paragraph:

The office has negotiated deals for services outside the office. By cutting out the middleman, Nunamaker said he can get a cholesterol test done for $3, versus the $90 the lab company he works with once billed to insurance carriers. An MRI can be had for $400, compared to a typical billed rate of $2,000 or more.

Shortly after my book The Joy of Freedom: An Economist's Odyssey came out in September 2001, a doctor in Tennessee emailed me and told me that he was doing something similar and that the motivation for it was the same kind of thinking I had in chapter on health care. Unfortunately, when my office burned down in 2007, I lost that email.


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COMMENTS (8 to date)
MikeP writes:

Some assert that this "profession" can be empowering and that legalizing and regulating all aspects of health care will mitigate the harm that accompanies it. But I cannot accept a policy prescription that codifies such a pernicious form of violence against doctors. Normalizing the act of buying health care also debases patients by assuming that they are entitled to access doctor's time for curing ailments. If paying for health care is normalized, then every young person will learn that doctors and nurses are commodities to be bought and sold.

Far better than the government prescribes the allowed health care relationship between doctor and patient and strictly controls the payment process to hide the fact that health care is a service that could be provided on the market.

BC writes:

@MikeP, Ha. Are you saying that doctors shouldn't be punished for selling health care, but patients should be punished for buying it? Also, you forgot to mention that, once a doctor accepts cash from a patient, the doctor must perform whatever service the patient demands.

Benjamin Cole writes:

This post makes me wonder if we should not shut down the Federal Communist Health Care Program that covers nine million Americans and replace it with a voucher system. That is, we should shut down the VA and give veterans vouchers for medical services.

The VA has become a healthcare program for former federal employees , provided in federal hospitals and clinics, staffed by federal employee doctors and nurses and administrators. It is distilled communism, tho very popular with Paul Ryan.

Has anyone at Econlog suggested dismantling the VA?


s.

SS writes:

In my opinion, a better way to fix health care would be to combine the free market, personal responsibility, and Medicare.

To accomplish this, let us keep more of the money we pay, or our employer pays, for our health insurance. Why does our employer or why do we give 100% of our monthly premiums to health insurance companies who then decide which treatment they will pay for with our money? Not only do insurance companies receive 100% of our premiums (often $20,000+ per employee annually) we (the patient) also pay large co-pays and office visits payments. Could we create a system where employers send 50% of employees’ health care premiums to their employees’ health care savings account (HSA) and 50% to a new version of Medicare (coverage for everyone not just the elderly) instead of giving 100% of our premiums to health insurance companies?

Using the 50/50 health care plan, health care costs would be reduced, risks could be managed, and everyone would be covered. There would be no disagreements with insurance companies over services or payments. Patients and doctors would decide the treatment that is necessary and the patient would pay for the services through either their HSA or if their HSA was depleted then payment would be through the new Medicare. This would encourage more patient engagement and responsible behavior, and better patient-doctor relationships. The payments would be as easy as sliding your HSA card (like a credit card or ATM card) through a card reader at doctor’s offices. The payment would be made and you would receive a printout/text/email of the services, the costs, and the remaining balance in your HSA.

Currently, if you lose your job, then you might pay enormous sums under Obamacare for health care or you become part of Medicaid (if you are poor enough) or Medicare (if you are old enough) programs. It would be helpful to have a HSA to draw upon when unemployed in addition to Medicare and Medicaid. For example, if the health insurance premiums your employer pays for you cost $20,000 annually and you worked for 30 years, then you could potentially have $300,000 ($20,000/2 * 30) in a health savings account. HSAs would be portable and preventative care would be paid through the 50% that goes to the new Medicare. The new Medicare would also cover the indigent or others who do not have and/or have depleted their HSAs with the 50% of the premium Medicare would receive in addition to the current payroll taxes that go to Medicare. This would also help shore-up Medicare.

In the early 1990s health insurance companies converted from not-for-profit companies to for profit companies traded on Wall Street. Ever since the conversion health insurance costs have skyrocketed and health insurance stocks have been some of the best performers on Wall Street. Health insurance executives are some of the best paid executives too.

Do we even need health insurance companies? Health insurance companies are raising premiums, raising co-pays, lowering coverage, and lowering reimbursements for health care providers because health insurance executives seem more worried about making money for themselves and their shareholders than using our money to pay for our health care needs.
Furthermore, the Affordable Care Act/Obamacare requires everyone to purchase health care coverage from the same health insurance companies who have gotten us into this mess. If the government can require everyone to buy health insurance, then the government should regulate the health insurance companies by banning health insurance companies from being traded on Wall Street and mandating that health insurance executives/employees may not be paid more than $1 million per person annually. Obamacare should not be a windfall for insurance companies and their employees.
Health insurance companies, in the end, obstruct health care. Not only do they take our money with a promise to pay if we are sick or injured, when the time comes, they often refuse to pay. Health insurance companies have numerous excuses for not paying while at the same time charging a small ransom to be covered under their health plan.

Under my health care plan when you reach 75, you can use your HSA as a supplement to your pension or 401k. This would encourage everyone to take great care of themselves.

We pay into the health insurance companies for years and then when we need care the health insurance fight us for our own money to pay for our care. We need to go in a new direction for health care coverage that does not include the greedy, unnecessary middle man/insurance companies. My health care plan eliminates the middle man so patients and doctors can engage directly with each other for better health care for everyone and at a lower cost.

Khodge writes:

Anything that changes the argument that healthcare = health insurance is a step in the right direction.

One piece that I'm of mixed mind about is the side deals with labs, MRI services, &c. A large part of the problem with the current system is that the non-transparency of individual costs creates asymmetric information bias in favor of medical service providers, aggravated by government involvement.

AS writes:

If these gain traction, it is only a matter of time until the government begins regulating them out of existence. They don't like competition with their communist health care system.

mico writes:

I have paid out of pocket for health services in Germany. They have always been able to give me a cash quote. An MRI scan was about 250 Euros all-in.

I do not understand why medical insurance need pay out for procedures at all. Why can it not simply give me, say, 2,000 Euros cash if I break a leg, which I can spend how I like? The bundling of risk levelisation with provision management seems weird to me.

Such a system would also eliminate a lot of the portability problems, as there would be no need to insure pre-existing conditions. If you have a pre-existing condition, you already got your full pay-out.

Garrett M writes:
MikeP writes: Some assert that this "profession" can be empowering and that legalizing and regulating all aspects of health care will mitigate the harm that accompanies it. But I cannot accept a policy prescription that codifies such a pernicious form of violence against doctors. Normalizing the act of buying health care also debases patients by assuming that they are entitled to access doctor's time for curing ailments. If paying for health care is normalized, then every young person will learn that doctors and nurses are commodities to be bought and sold.

Hilarious. For anyone who doesn't get it, he's quoting Jimmy Carter on prostitution.

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