By GEORGE HALVORSON
The COVID crisis has shown us clearly that major portions of the American care system are extremely dysfunctional and some are now badly broken. We need to put in place a cash flow for American health care that can help our care sites survive and ultimately thrive, and we need to put that approach to save the sites in place now because a vast majority of hospitals and medical practices are badly damaged and some are financially crippled and even destroyed by their response to the crisis.
We have learned a lot in the COVID crisis that we need to use now in building our next steps and our collective response to the crisis.
The COVID crisis has shown us all that our care sites do not have good patient data, do not have good patient linkages, usually do not have team care of any kind in place, and most are so dependent on current piecework fee volumes from patients that they quickly collapse financially when that volume is interrupted.
We should be on the cusp of a golden age of care delivery that uses all of the best patient support tools to deliver continuously improved care — and we now know that the piecework way we buy almost all of our care today will keep that golden age from happening for the vast majority of American patients for the foreseeable future until we change the way we buy care.
We need to buy care in a way that both requires the use of those tools and rewards caregivers and care teams when they use them.
We need a dependable cash flow for care to anchor that process.
We are unlike most of the rest of the industrialized world in not having a dependable cash flow now to buy care. We rely on a hodgepodge and mishmash of unlinked, unaligned and uncoordinated payment sources now and that lack of coordination in payment creates a vast and damaging lack of coordination in the delivery of care.
We can make a huge improvement in that entire process and we can give our health care system a stable and functionally useful future cash flow by becoming a much more highly skilled purchaser of coverage and care. We need a flow of money to make that happen.
We actually can create that flow relatively quickly and fairly easily by imposing a payroll tax on every employee that exactly copies the approach we use now for our Social Security payroll tax process and then using that money in a health care purchasing pool to buy health coverage for every person who is not on Medicaid.
The numbers work.
A 20 percent payroll tax would generate enough money to create that health care funding pool and immediately give us universal coverage as a nation. We know the numbers.
We spend $3.7 trillion on care now as a nation — and the part of that expenditure that is spent on insured care today is $1.3 trillion. We can convert that entire insurance funded cash flow into a purchasing pool for health care coverage that covers everyone who is not on Medicaid by putting in place a simple 20 percent payroll tax, that is about what most companies spend now as an ongoing expense to buy coverage and care.
We need to keep Medicaid in place for the lowest income Americans. We need our Medicaid programs to be strong and effective. Everyone else who is not on Medicaid can be insured with good benefits with a relatively low deductible level that is funded entirely by an extremely affordable tax on wages for every employed person.
The 20 percent tax would be split 50-50 between employers and employees as the starting point for every work site, and then any sites that want to increase the percent spent by the employer can do so at their own discretion.
Most employers who offer health coverage to their employees pay more than that now for the coverage. We would freeze those higher payments from those employers at their current levels to keep that money in the system until the twenty percent tax is higher than the payment level for each employer. So that approach would reduce the cost burden over time for those work sites, and it would end the painful annual increases in those health insurance coverage expenses that most employers who offer health coverage now are unhappy about today.
For the 30 percent or more of the work sites who do not offer health benefits to their employees now, that new tax would only increase their current operating costs per employee by 10 percent for employers. In an age of major COVID responses and expenses, that 10 percent expense is a very affordable number and it is far less than a number of other COVID-related expenses have been and probably will be before we are through the crisis.
Individual employees will spend, at most, 10 percent of each paycheck and each employee will get team care, relatively rich benefits, and financial security from all health care costs because of their coverage. Most of those employees in work sites with no insurance would have been extremely happy under the pre COVID conditions if their employers had decided to offer benefits and had given them that opportunity to enroll in a group insurance program with that kind of 10 percent employee contribution.
That tax gives us a massive asset as a country.
That tax gives us the needed pool of money that we need to buy care and to provide a package of coverage for everyone in the country.
We would use that pool of money to buy Medicare Advantage coverage with a $1,000 deductible for everyone who is not on Medicaid. Medicare Advantage is an existing program and it is doing a very good job of providing coverage, care, and rich sets of benefits to millions of Americans today.
The Medicare Advantage program we use today has far better benefits than the standard Medicare program and it has much better-quality reporting and far better care linkages than both Medicare and most insurance plans.
The Medicare Advantage program — now renamed the “Medical Advantage Program” for the purpose of creating universal coverage — will cover everyone not on Medicaid, and will use the same payment model that is used today by Medicare Advantage for Medicare patients.
Each person who enrolls in the current Medicare Advantage program today is covered by having the government pay a flat fee each month to each Medicare Advantage plan for each patient who enrolls in each plan.
The Medical Advantage Plans will also be paid a monthly payment for each member who chooses them — and their cash flow as plans will be completely separate from the payment by the government of any fees for any pieces of care.
That approach of being paid by the month and not by the piece frees the MA plans entirely from the perverse consequences of being paid entirely by piecework fees for each piece of care and of being dependent on individual pieces of care for their flow of cash.
Medicare Advantage plans benefit financially when people have fewer heart attacks, lower levels of diabetic complications, fewer asthma attacks and lower levels of chronic diseases. More than 70 percent of the health care costs in America today come from chronic diseases and it is absolutely clear that standard Medicare care providers make much more money when their patients are in poor health and make more money when their piece-work payment model patients have health disasters or even physical and medical setbacks of various kinds.
Medicare Advantage plans have strong incentives to reduce the number of congestive heart failure crisis rather than benefiting financially when those crisis happen. So the number of those heart failure crisis actually tend to be reduced by half or more when people enroll in Medicare Advantage plans.
Most hospitals have contracts now with the insurance companies, local health plans, and with the benefit administrators who will run many of the Medicare Advantage plans. Those hospitals do not know today in the heart of the COVID crisis who will be their source of revenue for their patients who will be admitted next year. That uncertainty about that payment flow will be resolved immediately on January1st— or whatever day we pick for the beginning of universal coverage and the MA plan — because everyone in the country will either be in a Medical Advantage plan or will have Medicaid coverage on that date.
We need to make sure that care sites have links to plans — and that they can choose, where appropriate — to become or create plans.
This particular path to universal coverage is not a new approach or unique to us.
Most of the countries in Western Europe today use payroll taxes to create protected separate streams of money that each country uses to buy care — and most of those countries also use Medicare Advantage like health plans to actually provide the coverage to each person.
Health plans are everywhere. There is not one single person in Switzerland or the Netherlands who has a government-run single payer department or program. They each have high functioning and directly competing health plans funded by a payroll tax to create the revenue stream for care for their people.
They very strongly link their national funding approach for care directly to employment for each person because they very much want people to be employed and to have employer linkages in those countries. The also use a shared payroll tax in each country because they want both employers and employees to jointly purchase care.
We can do the same — and we can use that payroll tax that creates universal coverage there to create universal coverage here as well. The finances work.
We can actually fund universal coverage for all of the people who are not on Medicaid here with a 20 percent tax — because that is more than we actually spend now on insured care and because we can use a capitation payment drawn from that fund to buy care.
That approach of buying care by the month and not by the piece uses a purchasing model that has very high levels of requirements for service levels, care quality reporting, and team care to deliver that care, and it encourages efficiency, health promotion, extensive systems support and more patient-focused use of health care dollars to sustain that program over time.
Medicare Fraud actually disappears entirely as a government expense with this approach because the payment for each patient in an MA plan is a monthly capitation and not a fee payment system, so there are no relevant piece work payments that invite, enable and allow most Medicare fraud today.
We can also reduce administrative costs as a country significantly by using this approach. The massive administrative burden that having a complex array of payors in that hodgepodge payment non-system creates that we use today will also shrink significantly — and we should make shrinking that excess administrative cost burden by a third or more to be an obligation for the Medical Advantage plans.
We can do this all very quickly to meet the need created by the COVID imperatives and their related financial damages.
We can build this approach immediately and we can build it well with tools we have in place today. That is a major asset in beginning any new program. We do not need any new infrastructure to make this happen. We already have a Social Security tax collection mechanism in place — and we can just change the tax percentage number on that current collection system.
We also already have Medicare Advantage plans in place with full supporting infrastructure as a buyer and payer — and we can just apply a new set of actuarial calculations to distribute the capitation payments from the new Health Advantage funding tool to each of the plans using tools and cash flow processes that are also entirely in place today for Medicare Advantage patients.
We need to help COVID damaged care sites, and it is clear that we need to do that relatively soon.
We desperately and urgently need a cash flow response to the COVID crisis to save care sites. We will need to do some immediate bail-out payments of various kinds very quickly that work for Congress to keep the care sites going temporarily and then we should add Medical Advantage universal coverage to the cash flow to keep all of those sites alive next year and into the future.
We have done a number of dramatic and sometimes heroic things to respond to the COVID crisis. This specific response to the crisis will give us a long-term benefit that we will look back on with pride and satisfaction, because the benefits are so huge and immediate and long lasting.
The proposal uses a very affordable and easy to accommodate payroll tax to create a risk pool fund that is used to buy capitated care for everyone who is not on Medicaid.
After we have used this approach for a couple of years and after we have deeply harvested and enjoyed multiple levels of team care, connected care, artificial intelligence supported patterns of care, and after we do it all for only 10 percent or less of our individual paychecks, we will wonder why we ever bought care in any other way and we will fiercely resist anyone who wants to screw that entire process up in any way.
We are very close to an approach that can benefit us significantly for a long time.
Let’s do it and let’s do it now.
George Halvorson is Chair and CEO of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002-14