Radical, poorly thought out, and middle-man free health insurance idea

Great Debates
1

I have ideas some time and I play around with them. Here’s one, with numbers gleaned from the following sources:

A small Washington community hospital budget: www.doh.wa.gov/Portals/1/Documents/5300/BUD2013-150.xlsx

Percentage of people who need an overnight hospital stay per year (7.3%): FastStats - Hospital Utilization

Googling the average length of a hospital stay – 4.5 days.

My idea is this – people in a community will pay their local hospital directly, per month, and all needed care would be covered by this payment.

So according to the hospital budget, it’s revenue is about $37 million per year (if I read it right). Let’s round that up to $40 million. This hospital has 25 beds (again, if I read the budget report right). About 7% of people in America require an overnight hospital stay per year – let’s round that up to 10%. The average stay is 4.5 days – let’s call it 5 days.

Doing some math, let’s assume we want 20 of the 25 beds occupied, for about 300 days per year. That should leave open beds and extra time for mass trauma and other unexpected hospital needs. 300 days per year divided by 5 days per visit = 60 visits per bed per year. 20 beds * 60 visits per bed per year = 1200 5-day visits per year for the whole hospital. Since 10% of people need a hospital stay, on average, in a given year, we can multiply 1200 by 10 and get 12,000 total people – this little hospital looks like it can serve a town of 12,000 people. $40 million divided by 12,000 people gives us $3333 per person per year, so the monthly payment for each person is $277 per month, covering the entire budget of the hospital. That seems like a pretty low payment for someone to have all medical care covered without the need to pay for each procedure and visit.

First, is my math correct? Secondly, what am I leaving out? I know there are a lot of things that hospitals do that don’t use up beds – radiology, checkups, scans, etc. How could that be factored in? Are there any such health care systems/options in America, or elsewhere, today?

2

I like your idea. Whenever I hear of a new idea, I try to think if there is something like it already in existence.

It seems to me that your idea is similar to the way public schools are run, and I think your idea would need to be modified to fit that model more closely. You would be looking at $1000 plus per month for a family of 4. Some families could cover this easily. For others it might be hardship. School districts solve this by placing the taxes on property owned within their district, rather than as a per capital tax. That way it lessens the effect of having poor folks pay a larger portion of their income than they could afford.

3

Are you including outpatient surgery, clinic visits, and pharmaceuticals in this?

And it wouldn’t be $3333 per person, since not everyone who uses a hospital pays for it. For instance, my wife is covered by my health plan but we file our taxes jointly. And low-income people would have to be paid for by everyone else.

In any case, congratulations - you have invented capitated payment health insurance. And you are going to live or die by your case mix. The more elderly and sick people you got, the more you are going to lose, and vice versa.

There was a guy named (IIRC)_Robinson, who used to be head of the American Hospital Association, who formulated Robinson’s Law. “Any trauma center more than three miles from a major highway will lose money”. Because, less than three miles means most of your patients will be blunt-force trauma, meaning traffic accidents, and those folks usually have health insurance. More than three miles, and they have penetrating wounds - meaning gunshots and knife wounds. And they never do.

Regards,
Shodan

4

My first reaction was “what about all the times you don’t go to the hospital but still need medical care?”

The hospital doesn’t cover when you get your meds at the corner drugstore, it doesn’t cover your annual well-visit at your doctor (who isn’t necessarily affiliated with a hospital), it doesn’t cover when you go to a specialist outside the hospital.

This seems like a fine way to cover a single hospital but it doesn’t cover the entire medical system that would serve that community.

Plus, I don’t know how well that would scale - maybe it works fine for that small town hospital, but how does it handle the hospital system for a major city, where there are multiple hospitals? When a new hospital needs to be built, is the tax increase to cover a new system going to be voted on? What if the residents vote it down? (I realize that currently the question is “what if there aren’t enough investors for a needed hospital?”)

The last issue I see is what’s covered “out of network”. Say you’re in the next county over, and that county doesn’t have a hospital. Does that mean you need insurance anyway so you can go to your closest hospital? Or does the hospital get tax privileges over multiple jurisdictions? What if you’re traveling and get hit by a bus? Or what if your cousin is visiting and a tree falls on her?

I don’t think it’s entirely unworkable but I think you’re just going to create a single payer system or insurance system de facto by the time you’re done covering all the edge cases.

5

As Shodan pointed out, this is just a single-payer system in microcosm and the smaller scale it is the greater the risk of it not working. You are better off pooling millions of people into it across the country.
Also bear in mind that many in your town are not going to be able to afford that amount per month so you are stuck with either not treating them or including them anyway and spreading the cost some other way. Perhaps it could be funded by part of the tax revenue gathered so that those who earn more will contribute more?
It is definitely on the right lines but overall it is too small-scale and unaffordable for some.

6

Yeah, as far as I can tell what you’ve got there is single-payer health insurance, except with none of the benefits of national-level implementation.

7

Here’s my crazy idea: I save my money. If I want to go to the hospital, I can pay for it. If I don’t need to go, I go spend it somewhere else.

If I get cancer and can’t afford treatment? Well, then I die, same as I would if I did get treatment, just a little sooner.

8

You are right, that is a crazy idea. That’s the sort of thinking that leads to bodies in the streets. Still, at least you are OK eh?

I like the cute idea of wanting to go to the hospital. As if people currently treat the place like a theme park.

9

Once upon a time in the UK, there were a number of hospitals run by the local authority (city/county), as well as those run privately or as charities or adjuncts to medical schools. But however attached people were (and are) to their nearest local hospitals, it was often a struggle in the poorer areas to keep them sufficiently well-funded not only to meet the basic demand for patch-up medical care that were common before the 1930s or so, but also for constant reinvestment in new equipment and techniques as medical science advanced. This became particularly acute as a result of the material and financial consequences of WW2, but it’s still an inherent problem as medical science and people’s expectations develop today.

So particularly the local hospitals were only too relieved to be nationalised into the NHS so that risk and investment are pooled across a much wider national resource base. Also, instead of patients having to re-navigate a patchwork of different services, organisations and payment methods across the country if they moved, there was now a single system for accessing and paying for the service.

But in the longer term, a nationalised system, for good or ill, facilitates the concentration of more advanced medicine into fewer, larger specialist centres (as well as the less potentially controversial process of delegating less specialised and more routine tasks to GPs, nurse practitioners and other community services).

10

Hospitals are about 1/3 of national health care expenditures. 972 billion out of three trillion. The other two trillion is spent on outpatient, long term care, pharmaceuticals, etc.

So your numbers basically are 1/3 of health spending to cover 1/3 of health care.

11

I’m not familiar with all the details, but in St. Louis both the city and the county had public hospitals. By 1979 the city hospital system was broke, so they closed one of the two hospitals. By the mid-1980s the county hospital was broke, the two systems combined, closed the old hospitals and opened a smaller, centrally located one. By 1998 it went broke and closed, as well.