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Pre-Paid Health Care

The front page of the Wall Street Journal got a little buzz yesterday from the health care community, medical bloggers and the pathology residency program directors among them. It profiled West Virginia primary care doc Vic Wood, who has reinvented his practice by offering “prepaid” services:

For a monthly fee of $83 per individual or $125 for a family, the clinic provides unlimited primary and urgent care. Those who enroll in the prepaid plan get office visits, lab work, X-rays and as many generic drugs as the clinic can provide.

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“I’ll sign up one patient at a time if I have to,” says Dr. Wood, who has so far enrolled 100 people in his plan. The streamlined system, he says, cuts down on administrative hassles and costs, compels more office visits — and delivers better profits than one that relies on insurance dollars. “I can’t see my practice surviving for the next 10 years without this model,” he says.

From the article, one could be forgiven for concluding that this is some sort of revolution. It’s supposed to be some sort of alternative to typical health insurance. But this obscures the open-secret about typical health insurance - it is prepaid health care!

Now, there are differences to be sure. $125 a month sounds cheap until you realize it doesn’t cover hospital care; and it does not transfer to other providers, I assume. But fundamentally it is the same. The problem is that what we call “health insurance” is not true insurance (hedging against the risk of low-probability, high cost events). Instead it a payment of all expected health care costs for a given period of time in the future (with a minimal amount of cost sharing). If that is not prepayment, I don’t know what is. It is an assault on language that such distinctions without differences continue to be drawn.

No, what this guy has done is essentially offer cheap and very stripped down “health insurance” (or whatever term one wants to use). Ironically enough, the state insurance regulators initially came down on this guy for just that reason, but he subsequently got them off his back. Some thoughts:

• This is good, to the extent that traditional health insurance companies badly need some good ol’ fashion competition to bring their prices down.
• This is bad, to the extent that he might have an unfair competitive advantage by escaping the regulations.
• This is really bad, to the extent that he “found a lucky reprieve in late 2004, when he cornered Gov. Joe Manchin at an election fund-raiser.” The article made this sound like it was a good thing, but I’m skeptical.

I firmly believe that our various customs of health care financing need to change. Primarily, we need to dump the prepayment nature of health insurance, which ultimately insulates the consumers from true health care costs, not expand it. By treating these pseudo-changes as revolutionary, the true evolution that needs to happen is obscured.

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As a total aside, the article featured a chart of match rates in various specialties from 1998 to 2006, with pathology coming in second place at a 122% increase. As has been pointed out, this is slightly misleading due to the fact that this happens to represent the absolute nadir and peak for pathology. Still the trend is unmistakable. The question I’d like to know: under the assumption that pathology will radically change over the next 20 years, do all these people (myself included) know what they (we) are getting into?

In examining the chart of match rates, I was struck by what to me is an obvious shift away from traditional clinical disciplines. The specialties that increased (in the numbers of US graduates filling positions) were anesthesiology (150%), pathology, diagnostic radiology, emergency medicine, and dermatology. The biggest losers were family medicine, internal medicine, and obstetrics and gynecology. Given my own specialty choice, I am somewhat reluctant to comment about this, but it is worrying to me that so few American graduates are choosing bread-and-butter specialties in favor of what are perceived to be “lifestyle” fields with higher compensation. If the current trend of decreased reimbursement for primary care services continues, I don’t see this problem going away.

As long as we (the U.S.) think of health care as a market, ripe for making or losing money, we will have problems with “insurance” and underserved patients. There’s really no need for the public to lose money to someone else’s silk pocket when they are fortunate enough to not get sick. Non-profit, universally accessible health care coverage seems best fit in the hands of a benevolent government.

Of course, one has to be realistic enough to acknowledge that health care is expensive — especially “good” health care. There will always be pressures to decrease costs and increase throughput, whether for the benefit of a CEO’s pocketbook, the individual paying their own care, the physician or laboratory offering services, or the taxpayer. Unfortunately sometimes the most effective motivation is monetary.. which brings us back to where we started in the private/for-profit sector (but where we clearly have gargantuan problems).

“Primarily, we need to dump the prepayment nature of health insurance, which ultimately insulates the consumers from true health care costs, not expand it.”

I agree with this point. One interesting thing to consider is what would happen to the cost of health care if there was no insurance company “middle man” at all. If, instead of a $10 co-pay for a month’s supply of Lipitor, patients had to bear the direct cost of the drug (around $100), Pfizer would be forced to dramatically lower the cost of the drug. The current “pre-paid” system Trent mentions results in artificially inflated health care costs that are destructive and hurt patients in the long run.

I work for a HMO, a pre-paid plan. The principle is good, however, in the private sector, I don’t believe its in the publics best interest. If one pays into the plan, one has insurance, but if you don’t pay, you’re not covered. When do we need healthcare the most? When we are sick, and thats when we don’t make money and can’t pay the premiums. You don’t get better, approach becoming a disability candidate, and therefore no job, no healthcare, no ability to get better, you just lost your battle to keep up with a healthy society. Seem a little extreme? Think what would happen if you (all of us but the rich)lost there job or got a long-term illness. Pre-paid Healthcare is the answer, but incentives need to be in place to control costs, levels of care, and obscenely high levels of pay for executives and or physicians.

Out of curiosity, what constitutes an obscenely high pay level for a physician? How should a physicians pay level be decided?

This system is not meant to be a cure all. It is meant to give the public an avenue to gain the most basic of care i.e. acute care, preventive care, and chronic disease management at an affordable and predictable cost. Insurance should be reserved for the catastrophic and expensive care.

I am currently developing a business plan to provide this exact type of primary care. It is a Pre-paid membership,not insurance. Like the author states, insurance if for truly high risk and catastrophic care, not low cost predictable primary care. No one in the market place has yet to answer the “Walmart” phenomenon by reducing the cost to consumers rather than shifting it or decreasing benefits. Marginal improvements are retained by the insurance companies or hospitals and are not passed on to consumers. I plan to do that.

In india where healthg insurance is negligible,this system has been adopted by our Primary Care Service Providers.Here the amount is only for the Primary Care and no Lab tests of medications.I hv seen the model being succes as it gurantees the services of the Physician at a reduced cost and it ensures reular income for the Service provider.