Monday, September 14, 2009

Bart's Healthcare Plan

My friend Bart is a Radiation Oncologist, as well as a character of the first order. He is a very sharp guy, and when he puts his mind to a problem, he generally solves it. Bart has now turned his attention to the insurance and healthcare debate. The original text from Bart's healthcare plan is presented below, and he discussed it (rather briefly) with Ed Schultz on MSNBC. Mr. Obama, you wanted alternatives to your plan for Governmental Medicine; here's a good one:


1. This plan calls for every family in America to be covered with catastrophic health insurance paid for by the Federal Government. This policy would cover each family from $200,000 to $1.5 million. Statistics suggest it would only be accessed by less than 1.3% of the population. The purchase price of this plan is $60/month/family. Assuming there are 90 million households in America, the price of this would be approximately $5.5 billion.

2. The short-fall incurred by families and individuals from $0 through $200,000 would be covered by a separate policy. This policy would be furnished by businesses, individuals, or in the case of Medicare, the disabled and other retirees, the federal government. The deductible and the terms of the policy would be put out to bid with every insurance company having the ability to bid on the contracts. This bidding process would involve being able to go across state lines and could include large volume discounts. If a company is satisfied with their present agent, they could choose to continue with their own coverage. An example that I use is a $2000 deductible with a maximum exposure to the insurance company of $200,000. Assuming a company has 5,000 employees this policy could be purchased from my local BCBS for $250/month. The savings are realized to the insurance company because their maximum exposure is only $200,000/ policy.


1. The total cost of the catastrophic plan covering every household in America would be approximately $5.5 - $6 billion. The insurance companies would be able to offer vastly discounted rates due to the size of the pool being insured. The insurance companies would profit from this because statistics show that no more than 1.5% of the population would ever use this amount of insurance in a given year.

2. Open competition between the various insurance companies would come into play with the individual policies. They would have to include pre-existing conditions, portability, and could be shopped across state lines. Individuals who could not afford the cost of this policy would be subsidized through the federal government or through tax credits for businesses. Obviously, the provisions and restrictions on these policies would have to be negotiated with the help of the government.

3. If the government was required to pay for 1/3 of the population or 100million people at $250/month ($3,000/year) this would be $300 billion.

NOTE: The cost of Medicare alone in 2007 was $440 billion.


1. Every man, woman and child in America would be covered.

2. The cost of this program would be less than Medicare alone thus eliminating the need for higher taxes or surcharges on businesses and individuals.

3. Insurance coverage remains in private hands and is not controlled by the Federal Government. HR3200 called for the formation of 53 new federal agencies. This would no longer be necessary.

4. Additional savings could be obtained from dismantling some of the bureaucracy now associated with the administration of Medicare.

5. This entire bill could be written in a 10 page document that even the busiest member of Congress would have time to read.


1. The reimbursement of fees to both physicians and hospitals would have to be negotiated with the input from multiple parties. This would include, but not exclude, representatives from physicians, hospitals, insurance agencies, and state and federal governments.

2. It should be noted that the present bill (HR3200) calls for Medicare + 10%. This is totally unacceptable as no hospital or medical practice could remain open with this low level of reimbursement. This would only represent approximately 33% reimbursement of the total charges. Today Medicare's reimbursement rate of approximately 30% of the total charges would only climb to 33% if this was instituted. It takes approximately 45% of total charges for hospitals to remain profitable. An example of this is in a $100 charge for a drug, Medicare allowable is $80 when the actual cost of the drug to the practioner is $90. Without supplemental insurance the physician loses money while trying to help his patient.

3. The reimbursement rate must be sufficiently high to ensure previous obligations made by medical practices and hospitals for equipment, land, andemployees can still be met. It should also be high enough to allow for the purchase of new or replacement equipment.

4. Medicine must continue to attract the best and the brightest we have to offer. This has to be done by making the practice of medicine financially feasible. The government must subsidize the individual to help defray the cost of a medical education. It should be noted in European countries the cost of Medical School is free.

5. Finally, the issue of TORT REFORM must be addressed. I would propose that each case be reviewed by 3 independent physicians. These physicians would then recommend their opinions independently to a Board composed of physicians and lawyers. This Board would then decide (based on the three physicians recommendations):
(a) no case
(b) blatant malpractice
(c) or negotiation.

Caps on the total award would also have to be considered. This would save on insurance premiums for physicians and hospitals as well as help eliminate unnecessary tests performed due to the practice of defensive medicine.


Jon said...

A quick math check:

If the federal government pays for claims by 1.3% of the population per year, of $200,000 each (the minimum payout and average frequency of claims), how much will it cost?

300,000,000 * 0.013 * 200,000 =
780,000,000,000 =
$780 billion.

Since $200,000 is the bare minimum for these claims, you'd have to find out the statistical distribution of such claims to get an actual estimate. Depending on the distribution, the actual cost could be several times higher.

How will this be paid for by $6 billion in revenue?

Dalai said...

Bart's response:

No the insurance company has the risk. The government only pays the premium. It should be noted that only 1 % exceed $200000 in claims per year. IT DOESN”T MEAN 1% TAKE THE POLICY TO THE 1.5 MILLION LIMIT. Every dollar from 2000 to 200,000 is covered in a separate policy paid for by business or the individual thru tax credits.

Jon said...

I see, I misunderstood. This policy would only cover the amounts over $200,000 per year, not the full amount if you go over $200,000. Now I'm really interested to know the statistical distribution of claims, to know how far off my numbers are.

So, let's figure out how much coverage this plan will give us:

(90,000,000 * 60 * 12) / (300,000,000 * 0.013) =

So, if the average person that has to make use of this policy can get a check for $16,000. If the average bill is larger than that, then the insurance companies will lose money. I'm skeptical that this is a practical and attractive plan.

Dalai said...

Bart's response (really, not from Dr. Dalai! I'm just transcribing):

Jon: I would ask you to reread the plan. You may not have realized that there is a second policy that insures each person from $2000-$200,000. The numbers are: with a $2000 deductable, and a $3000 premium * 100 million households equals $300 billion to the insurance companies each year. Even assuming you pay out $75 billion, this should be a good risk for the insurers.

Mary Ann said...

Your plan makes some sense to me. My family has recently been faced with over $560,000 in medical bills. (bone marrow transplant)Our insurance paid a large part of it (but my company was self-insured and this is really hurting them)

I am sure that I have caused the companies insurance rates to skyrocket - which then will cause the company to cut coverage - and so it goes.
I think your plan would also help small businesses who suffer if one employees has the type of illness that frankly you are right - most people will (hopefully) never face.

Sardonicus said...

I am very intrigued by this. One of the benefits is that it is simple.

IF the govt pays the $60 per family that would cover everyone from 200k to 1.5 M, that implies that currently about $60 of my premiums go for this. The rest covers the 0-200k. That means that the premiums are not much lower than I am paying now (if you assume no change in the competitive landscape.)

This doesn't address the overutilization of services. The cost of this can't be emphasized enough. I don't think that the American public will accept a reduction of the amount of service that they receive.

Excellent and much overlooked point about the fact that medicare payments are far to little to cover the care given under medicare. When politicians point to medicare and say this is an example of how govt can run a program that is popular, they are entirely missing the point that it is not viable. Sure, if you gave away food for free, that would be a popular and nonsustainable program.

Sardonicus said...

BTW - it is hard for me to believe that 1.3% of the population has medical bills of over 200k every year. Sure this wasn't 1.3% of claims?

Mary Ann said...

what this program he proposes (I think)would do is allow companies to move someone who is suffering a disasterous medical situation to a government insurance bank. This should cut costs for the rest us should then have to have insurance. I see all of these people in hospital only because they wait till they get so sick -that they have to go to emergency room.

By the way, someone clearly spent a lot of time in the math IMC - Mr Larson would be so so happy!

you were his "merry band of algebraic lads" Apparently it worked.

We only hung out there hoping to absorb your intelligence!(and get a date) (neither happened!)

SpideyKnows_Sales said...

I'm in the 85%. Please watch this.

I bet everyone reading this is in the 85%.

Will said...

I think there are a few small math errors that, while not detracting from the overall attractiveness of the plan, do need correcting.

1) According to the latest census data, there are 111 million households in the US not 90 million as stated

2) If the catastrophic plan costs $60/month/household, annual cost (using 111 million households) is just under $80 billion (I think you used the monthly rather than annual sum in your estimates)

Pankit Parikh said...

This is a good plan because it is closer to real insurance. Healthcare insurance as it stands today is not insurance, it is a private or public subsidization program. Real insurance should cover catastrophic illness rather than basic health maintenance. What if we did this:
1. Government funded castastrophic from 200,000 to 3 million
2. Private insurance with mandated minimum deductable of $3000/or commensurate with income except in the case of economic hardship, i.e. Family Income less than $X...Why? This would reduce moral hazard, patient driven over-utilization (how many "URIs" do FP/PCPs see/day?) I once had a guy come in with a cut on his finger. I put a bandaid on him.

3. Interstate policies as stated. But, also some measure to increase bargaining power for self-employed/small a bargaining collective. If they want a public option than fine. But it has to be able to compete with private options

4. TORT REFORM. Exactly, what Bart has suggested. Let's be honest, informed consent is a joke even when administed by the best. What does the average college-educated individual (best case scenario) on a jury understand about medicine? Also, hold clients and lawyers who bring fivolous suits accountable.

5. Finally, elimination of insurance company and pharma lobbyists. A 1 billion dollar compensation package for a insurance company ceo? Are you kidding me?