Imagine you’ve just been named Healthcare Czar of the United States. Your mandate is to achieve highly effective primary care. The road-map to effective primary care includes eliminating barriers between physicians and patients, including bureaucratic inefficiencies, while simultaneously decreasing the over-all cost of primary care.
Source: A Marriage Made in Healthcare Heaven (Part 1)
By Robert Nelson, MD
Within many of the posts regarding the challenges facing healthcare, someone – usually out of frustration – will inevitably pose the following: “So what is the solution?”
Well, the answers won’t be found in repeating partisan talking points. Especially the ones based on economic fallacies and socio-economic myths, so often repeated they have become dogma for the healthcare surrogate we call a “health plan”, despite its sub-par effect on mortality and health when compared to other socio-economic factors. This industrialization of healthcare has been orchestrated to be over-priced by pundits and politicians, on the right and the left, who pander for influence, money and votes. They claim that we need more of it, covering more items for more people. By design, it crowds out more cost-effective alternative sources of funding. It is the ultimate healthcare inflation machine.
The solution is to utilize different financial strategies for different segments of healthcare, using tools to maximize their effectiveness. This begins with the deflationary & stabilizing effect that real prices have when they are known in advance for the vast majority of healthcare services exchanged between buyers and sellers, most of which takes place in a non-emergent scenario.
Georgia Chapter Free Market Medical Association spokesperson, Dr. Bob Nelson, had the honor of addressing the 3rd annual Citizens in Action, Palmetto Panel held at Clemson University on February 25th about healthcare freedom and the importance of liberating markets with price honesty in healthcare.
Panel: Dr. Bob Nelson, Free Market Medical Association</a> from <a href=”https://vimeo.com/user1416051″>Thomas
Hanson</a> on <a href=”https://vimeo.com”>Vimeo</a>
Standard economic theory in healthcare assumes that demand for medical services is inelastic. Simply stated, inelasticity means that demand for certain medical services remains fairly high and constant despite rising prices; whereas with a commodity that is elastic, higher prices will cause demand to fall and vice versa.
While inelastic demand applies to high acuity and critical illness, a large portion of the medical care consumed in this country is habitual and learned based on flawed assumptions about treatments and effectiveness of intervention. Over-utilization is further exacerbated because of our perverse payment and billing model which drives artificially high demand with minimal price considerations beyond a small co-pay.
A peculiarity of our healthcare system that contributes to lumping the vast majority of medical services into the inelastic category is the fact that PPO health plans require virtually all encounters with providers to be billed under the health plan, regardless of how minor or regardless of necessity. This forces analysts and economists to look at aggregate utilization and spend; or average per capita costs and utilization rates based on claims and generally irrespective of medical necessity.
In reality, a significant portion of our medical care consumption in this country is elective, non-emergent and in many cases unnecessary – or at the very least forced into unnecessarily expensive venues such as urgent care or ER. This spans the gamut from colds to constipation and backaches to boo-boos and a whole lot of unnecessary visits in between (like work excuses for mental health days).
Indeed, this same segment of medical care consumption has the potential for much more price elasticity of demand than we have been led to believe. The problem is, our current method of buying and billing for healthcare services has resulted in neutralizing the market forces that would normally allow prices to be affected by demand in these areas.
Nowhere is this more evident than with the millions of annual visits to doctor’s offices, Urgent Care centers and Retail clinics for colds and other upper respiratory illnesses.
Read entire article via Common Sense Economics: Aligning Incentives with Evidence-based Care | Robert Nelson, MD | LinkedIn.
While I am an unapologetic advocate of free markets and know, truly know, that the mutually beneficial exchange of unfettered competition is the only moral and utilitarian method for humans to trade, I must admit that I was in awe watching this process unfold at our inaugural Free Market Medical Association (FMMA) conference. It was one thing to hope that the various buyers and sellers would find one another. It was quite another thing to witness the speed with which the parties found each other and also how rapidly and naturally actual solutions emerged after these introductions were made.
My friend, Dr. Lee Gross, told the audience that rather than finding himself in a group of malcontents, he was amidst problem solvers. This, I think, is why the energy was palpable at every moment in our two-day event. “Who knows what will come of this next?!” I found myself saying this repeatedly. Jay Kempton, Charles Sauer and I watched as physicians and pharmacy vendors brought market solutions to light, ideas quickly seized upon by benefit plan designers and administrators. Various legal fears and questions were dismissed or dealt with by the legal experts in the room within seconds of these issues being raised. Every sector of the health industry present was indispensable in order for these solutions to unfold. I would characterize these proceedings as random but well ordered at the same time. Everyone present was witness, I believe, to a very raw yet beautifully ordered market process.
These were the conversations and introductions the cartel keepers never wanted to happen.
via 2014 FMMA Conference Wrap Up | Free Market Medical Association.