One Percent Health Care Solution

One Percent Health Care Solution

Solving The Health Care Crisis Today

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Full Proposal

THIS IS THE ORIGINAL TEXT OF THE 2007 PROPOSAL. IT WAS SENT TO ALL MEMBERS OF CALIFORNIA LEGISLATURE.  A SUGGESTION THAT THEY READ IT WAS MADE BY E-MAIL. THE ONLY RESPONSE I EVER GOT WAS REQUESTS FOR CAMPAIGN DONATIONS. I AM KEEPING IT HERE FOR PURPOSES OF NOSTALGIA. MEANWHILE THE COUNTRY’S ECONOMY HAS FALLEN APART.

THE ONE PERCENT HEALTHCARE PLAN

John E Byfield, MD, PhD

Dear California Citizen:

Greetings!

By now there are very few people in the United States that have not repeatedly heard the phrase “The US health care system is broken”. Congress has worked this topic over for years without doing anything about it. Washington has proven useless to us. There have been about 45 million working age Americans without health care coverage for as long as most of us can remember. We desperately need some form of guaranteed health care.

Governor Schwarzenegger recently brought forward a complicated solution for California involving a mixture of funding sources. That proposal, while to be applauded, now seems unlikely to be passed. The state legal division recently decided that “Provider Fees”, i.e. fees based on a percentage of moneys received for care to be paid by doctors and hospitals, are indeed taxes. Of course they are. The legislature needs to achieve a two-thirds majority in order to pass any new tax. Republican legislators will not support the Governor’s plan, not because of the Provider Fees, but because they envision its adverse effect on small businesses. The Governor’s plan would require small employers without a health plan to contribute about 4% payroll moneys to a state fund to cover part of the cost of their employee’s medical care.  Small businesses are the primary source for the new jobs we need to grow our economy. Thus the Republicans legislators have a point. However, if they don’t like 4% they will dislike a lot more the 7.4% tax now being proposed by the Democrats in Sacramento. A business would have to fire at least 10% of its employees to cover a 7.4% annual tax burden created by its remaining employees. That’s the math. Decimation has never had popular appeal. Moreover, the newly jobless (former) employees will still need healthcare coverage, plus a whole host of other unemployment benefits.

There is not much reason for us to like any of these plans because they will all just make our healthcare even more expensive. Why should we collectively add a new payroll tax when we are already paying around twice as much as we ought to pay? This statement is an absolute fact known to everyone remotely involved with American medicine.  Just because small business owners are “small” is not a justification to tax us further when the system really does not need more money. Furthermore, a 4% revenue tax on hospitals could bankrupt some of them.  A 2% tax on doctors will mainly benefit the Nevada, Idaho and Montana Medical societies as physicians give up on California. I once suggested physician provider fees at a California Medical Association meeting. The measure received a single supportive vote (my own). We can’t expect enthusiasm from any Provider for any tax.

I am now going to show you why most of this unnecessary. We can reach our goal of having a guaranteed health care system in California by creating a state-based tax system using the funds we already pay. This new system would require every provider to contribute 1% of revenue to a California Health Care Fund. The moneys would be used to cover those working age persons who lack employer- based coverage. By doing this we can easily have “universal health insurance” in California right now.

It is now well established that we Americans pay about twice as much for our healthcare program as citizens of other industrialized nations. Yet the benefits of our health care system are neither more nor better than those found in these other nations. There is not a single major medical parameter - life expectancy, infant mortality, fairness, satisfaction, you name it, that is better in the US when our data is compared to other major developed nations using accepted medical standards. Reviews of the topic have appeared in almost all of our prominent medical journals, in our major newspapers as recently as June, and can easily be found on the web. Working age Americans, the persons who pay for almost all of our entire health care system costs, are paying twice as much as they should be paying. And they are paying for a system that gives them no guarantee whatsoever that it will be there to help them when they need it.  If you want get sick in the U.S., i.e. ill enough to the point that you cannot work for while, you had better be rich - or wait until the government considers you elderly (65 years or older).  The U.S. government seems less concerned about the medical fate of its young and middle-aged workers than it does about the medical care of the criminals in U.S prisons.

Why do we tolerate this situation? Why are we willing to pay twice as much as any other major developed country for a system that routinely excludes 20% of us just when we need it most. What’s wrong with us? Maybe those stories were true when they told us in the 1950s that Fluoride in the water would destroy our brains!

I think there is a very simple solution to this dilemma. I call it THE ONE PERCENT SOLUTION. To understand the 1% solution you have to get a clear perspective of how different our medical structure really is now compared to  what it was 40 plus years ago. Because 42 years ago Medicare was invented.  Sacramento’s perspective of how California medicine works is not based on how our system works now in 2007 but rather how it worked in 1965. Lets look at what happened during the intervening period. By coincidence this writer and Medicare came into the American medical system at almost exactly the same time. I graduated from UCLA Medical School in 1965. In 1965 the Medicare Healthcare Program law was passed. Medicare then began in 1966. After 1966 essentially all US Seniors (65 years or older) received a guaranteed health care plan. The program also included Medicaid (called here in California “MediCal”). MediCal is a program for non-elderly, medically indigent persons who become chronically ill. MediCal is a much different program from Medicare. MediCal has always been a program whose help is “never soon and never certain”. Medicare was and remains one of the best programs our Congress ever passed. Don’t get me wrong.  MediCal can indeed be a godsend  – provided one never plans to work again, gives up all assets and can wait a couple of years for benefits to start!  Medicaid/MediCal does not in any way reflect a true form of a national health insurance.

In 1965, before MediCare was started, the United States had what was called fee-for-service medicine. With fee-for-service medicine you paid your doctor and hospital whatever you were able to pay, usually after you had been treated. It frequently took people a long time to pay off big medical bills. If you had any health insurance at all you were probably in a union or were a white-collar worker with a very decent job. Many people did not have any insurance and just had to make the best of it. In 1965 the fee-for-service system was hundreds of years old.  Remember St. Luke and his Gospel? St. Luke was a fee-for-service doctor. There is no mention of healthcare in the U.S. Constitution.

In 1965 antibiotics had been available for about 20 years. But, there were no CT scans, no MRIs, cardiac bypass procedures or angioplasties, remarkable orthopedic joint prostheses etc, etc - most of the other new technologies we now enjoy were yet to come. However, our average life expectancy was growing rapidly because of the introduction of antibiotics in the mid- and late-1940s. Medicare came along just when the biological and technical revolution in modern medicine was gaining full momentum. It probably came along because of this revolution. The American people, particularly older persons - who have a strong proclivity for voting - demanded post-employment (retirement) financial help to pay their growing healthcare bills. Our “old folks” became “senior citizens”, citizens with substantial political clout. Thus entered Medicare.

Medicare then changed the structure of American medicine. Traditional fee-for-service care began to slowly disappear. This accelerated when Medicare (i.e. the government) started to limit the payment for specific types of medical care.  Medicare administrators have never liked paying out money. Why?  Because there is no direct connection between the cost of any patient’s care and how that patient votes. This is a very undesirable political situation from the politicians’ perspective. Politicians also don’t like to be seen “rationing” anything. For-profit HMO’s came into existence to do the “rationing” for the politicians. The unique commonality of interests that doctors and patients had enjoyed for two millennia began to disappear.

As fee-for-service medicine withered new entities appeared to replace it. The result we have now in 2007 is an immense, unwieldy, and expensive concoction of health insurance companies, health maintenance organizations, big and small medical groups, multi-national pharmaceutical companies, multi-state drug store chains etc., etc., etc. It is a giant mess. And it puts a smaller  % of medical premium money into patient care, per patient, than any other national medical system. That’s what “most expensive system” means. Less  money for patient care. This was an inevitable by-product of market-based medicine.

It is certain that modern technology has dramatically improved medical care. However, no logical connection exists between modern medical technology and modern “ market-based medicine”. A “market” works as well as anything in controlling most costs for most industries and in most situations. This writer became involved in the U.S. stock market in1976 and has never regretted it. But a “market” does not work when one half of that “market’s” negotiating duet is in agonizing pain, unconscious, hemorrhaging, anesthetized, or broke. It is frequently in one of these conditions that the uninsured American worker meets his or her physician. One can’t have market-based medicine when one side of that market has no money because he or she has no job. What we have is not a “market” of medicine. What we have is a flagrant violation of both common sense and the “Golden Rule”.

This communication is not a nostalgia trip. The kinds of companies and institutions listed above are the real controllers and providers of health care in the United States.  Not Doctors, not Hospital administrators. We just work here.  I have nothing against our system other than it has an incredible capacity for abuse. And unlike the single level for abuse that was available in the fee-for-service system (e.g. venal physicians like me) the current system can be abused at level after level as the money trickles down. At each step money is drained from the system, the cost of insurance rises, and the benefits decrease.  I am sorry if you don’t like this kind of talk. But I believe this is a true description of the current structure of American healthcare. My perspective presents a much different view of who and what medical “providers” really are in 2007 compared to the providers of circa 1965. The real “providers” are completely left out of both the Democratic and Republican Health coverage proposals. Why? This omission is not an accident. But, as Grandma said “He who pays the piper calls the tune”. Well, we are doing the paying so we would like to call for new tune. We would like to hear the 1% polka now please.

Before the 1965 transformation began the true identity of our providers was quite clear to us. We could see and touch them. On our 12 inch TVs our doctor was the wise, kind, and intelligent Marcus Welby, MD. The Marcus Welby character portrayed the ideal American physician. If you did not like the way your own Dr Welby behaved you could just go out and find some other MD more to your liking. Without authorization! Ironically, the Marcus Welby MD television show began to air when fee-for-service Medicine had already begun to die. Today we have Dr. Gregory House. That ought to tell us something. At least Dr. House has retained the intelligence component of  Welby’s wholesome triad.

Understanding this transformation in American medicine is depressing but vital. It is vital because we can use this knowledge to start to find our way out of our medical mess. What we can understand we can fix.

First, we need to state simply and clearly what are the two most immediate problems we face as American payers and American patients.  Well, American Medicine has two huge problems: (1) It doesn’t meet our needs and, (2) it costs too much. It is like having a fine coat that is too small. It doesn’t “fit” because 20% of the people who are paying for it are not covered at any given time. Try to wear it and it squeezes painfully.  But, we protest, we paid a lot for our fine coat. Fine, we will just let out the seams a bit. Our first step will be to use the “it costs too much” factor to solve the “it doesn’t fit” problem!

To do this we will make the bloated state medical budget (i.e. the sum of all of our private medicine premiums) pay for ALL of us. Why not – it is our money! That is essentially the plan. The One Percent Healthcare Solution. We should tax every provider, from the top to bottom, 1% of their revenues, and use that money to give us all an insurance card. Thus, when we are paying into the system, i.e. the 80% of us with a job at a “big ”company, we will still know we have guaranteed health care if we get sick or lose our job.

Why will we do this? We will do this out of self-interest. Because we never know when we might join the dreaded 20% of uninsured workers. No matter how smart and how successful we are we can become a traffic statistic in a matter of seconds. Because although this plan will inevitably be a 1% increase in our health insurance cost, it  will be the only increase we are likely to see in our lifetimes that we know will benefit us.  Because we know our health insurance cost is going up a whole lot more than that anyway don’t we? Because we want a guarantee of health care NOW!

All we have to do is convince our legislators and Governor to tax every provider at the rate of 1% of their revenue. We can only do this by making a giant and continuous noise until we get what we want. Making a lot of noise to get what we wanted is the first thing all of us learned. We know how to do it. I’m sorry but this is the only way we will make sure the folks in Sacramento enact laws to create the 1% Provider Fee.  We will have to drown out the hue and cry of the lobbyists and their jingling purses, their rustling packs of thousand dollar bills, their corporate jets, and – most importantly-their coercive and corrosive media propaganda.  We can do this.

The moneys from the Provider Fees tax will then be used to insure the 20% of workers that are now left out. The provider system funds will be used to pay for the medical care required by the (formerly) uninsured. This can be done simply in analogy to the MediCal system. We can have complete and “universal coverage” with the moneys we are paying today. And it could add a large number of persons to a price-controlled program like, but better than, the price-controlled MediCal program. Or the new program and MediCal could be merged, something that would dramatically improve the MediCal program. Once the plan has been in operation for several years it will be possible to compare how a large number of “small business” workers fare medically compared to the group funded by “big business” employers. My prediction is that there will be very little difference found between the groups at least in terms of the quality of their lives as it relates to their medical care. Just as there is no real difference between us now and all other industrialized nations.

The flaw in the governor’s plan is therefore its identification of doctors and hospitals as the main “providers” of health care. Doctors and hospitals are largely at the bottom of the medicine food chain. The organizational and corporate classes listed above are just as much the real “providers” of health care as are doctors and hospitals. They dominate the cash flow sequence. The reason for this is the step-wise nature of the flow of funds in health care. Think about it. You and/or your employer don’t send your premium to your doctor or to your hospital do you? That was fee-for-service medicine. No: Your moneys go first to an insurance company or its surrogate, then to an HMO or Health Plan, and then to a Medical Group.  Finally, some reaches your doctor or hospital.  By taxing each step at the low 1% rate one can create a substantial pool of money with very little pain. That’s the 1% plan. We do not require any new money or any new taxes.

The uninsured are, by and large, young and middle-aged people who usually don’t need much care. But when these folks do need it, and they don’t get it from their employer, they are cast into a system that is cruel, complicated, and incredibly expensive. In just a few days a family can be forced completely out of a health care system into which they have been paying almost twice as much as equivalent persons in other countries. Frequently these citizens have been paying for their healthcare for many years. They can within days to weeks be put into a situation where they are denied any support whatsoever. What savings they may have can disappear almost overnight. I see this happen all the time. The cruelest irony is the “COBRA” system. The Federal Government’s COBRA law reassures us that the family breadwinner can continue his or her insurance coverage for several months if they pay for it themselves (both their employee share and their former employer’s share!). Pay for it? You are sick and/or unemployed and you probably have a family and a mortgage! Good luck with paying for anything very long.  COBRA is a good name for this process.

Again, all of this could be changed by requiring ALL “Providers”, not just doctors and hospitals, - to pay a flat 1% tax on their California revenues. Not 1% of profits – 1% of revenues. By California revenues we mean to include any moneys that a multi-state or multi-national organization/corporation receives from California (i.e. our premiums) or disburses within California. When the recipient and the disbursing agent are the same entity the total fee would remain at the (single) 1% level. The same will be true at each and every step in the payment distribution process.

We do NOT want a tax on profits. Taxing profits will make the system subject to the loophole worms that infest our state and federal tax codes. No loopholes. The tax must be on revenues, all revenues, originating in California and used for any aspect of medical care in California.

The 1% Provider revenue tax would easily cover California’s non-insured population. And by the way it’s a “Flat Tax”. Remember, the Flat Tax? If you make or sell a pill or a medical device, you will pay a 1% of revenue Provider Fee. If you receive, deposit, or transfer a dollar of medical premiums you will pay a 1% Provider Fee. If you transport, receive, admit or care for a California patient you will pay a 1% Provider Fee. This would be a truly Flat Tax.

California Provider Fees would also keep a large amount of money out of the hands of our friends in Washington.  Provider fees would be tax deductible at the both the state and federal level. Unless you are a non-profit the tax savings would make most Provider fees effectively around 0.65%. All entities that are either non-profits or tangible providers (doctors, hospitals, ambulance companies, therapists etc.) would recover more than their fees by caring for the newly insured persons. Most would be caring for the same people they now care for free or at a substantial loss. By the way I define a tangible provider as one who has a heartbeat. Or, at the least one who, with a minimum of persistence on your part, can be encouraged to have your phone calls answered by a real live person.

Please note: (a) This plan does not involve any disruption of our current health care system. Nobody has to move anywhere. People will keep their same doctor if they have one. If they don’t have one they can now get one. Nothing else changes!  (b) This is NOT a single-payer system; it is NOT socialized medicine. It is “sensiblized” medicine. (c) Most doctors and hospitals will more than recover their fees by caring for the newly insured. That means more paying patients in our Emergency Rooms. Our ER’s will finally stop closing down. (c) No small business has to be asked to pay a dime. No business will leave California. Indeed, every other state will have to follow California’s lead. But if the Legislature and Governor wants a 1% contribution from small business, – amen. Any business that can’t afford a 1% (tax deductible) payroll tax to help solve this dreadful problem should probably consider getting a new business plan!

Will a 1% “provider fee” kill the big time corporate care providers. Not likely. They will simply increase their fees (again) just as they have been doing for years and years. So, if you are in bottom 99% of income-earning Californians what’s not to like in this plan? Nothing. On the other hand, if you are a fat cat at the top of the corporate medical provider food chain and will have to settle for $90 million a year in salary instead of  $100 million, you may not be pleased.  You will immediately start calling your lobbyists, PR folks, et al. and get Harry and Louise back on television. But be warned –“ special interests” – it’s not going to work this time. Because we have special interest in this too -and there are a lot more of us.

Is this plan completely fair? Not really. American workers will still being paying too much for their health care. If it makes us feel better to make small businesses pay 1% of payroll - so be it. But at least their workers will have their health care guaranteed if they get injured, sick, or lose their job. Completely fair or not this program would be a big and easy step forward. Once enacted we will have started a grand experiment in the modern delivery of medicine. Maybe this is all we have to do. Small businesses can get big and then may want to use health care as a recruiting tool as is now the case. The proposed program is non-political, non-ideological, and non-theological. But it is the both the correct political and moral thing to do.

We need to get every Democrat and every Republican in Sacramento to support this measure.  After all there are elections coming up.  And when the corporate Masters of the Universe start calling Governor Arnold with their threats and tears – no worries mate! We know we have a Governor with the courage and vision to Terminate those phone calls.

Respectfully submitted:
07/12/07
Bakersfield, California