Health care policy is the most hot button issue in the country. It involves life or death decisions and impacts every American. The strength of nations has long been determined by how well they take care of their citizens. Presently, the best-rated health care systems in the world are Denmark, Sweden and Canada. If more people suffer or die from treatable illnesses, the health care system of a country is a failed one. If more people live better, healthier lives, then the healthcare system is successful.
To determine the health care system right for the U.S., we looked at the issues facing our country and contrasted those issues with what works best in other health care systems around the world. This plan is non-partisan and has a single rule at its core: It must result in fewer preventable deaths than current health insurance.
President Donald Trump and congressional Republicans can fix healthcare. They are the ones in power, meaning they have the responsibility and the opportunity to create a better system. They can and should transform Obamacare into the greatest health care system in the world. Passing this legislation will require partnership with Democrats. Trump might even need Obama’s support, but let’s not get ahead of ourselves. If the Affordable Care Act (ACA) were a startup, it is the beta test for better healthcare. Trump can create the 1.0 product and make health care great again.
How healthcare works: Health care is confusing. According to Morning Consult, 35 percent of people surveyed did not know that Obamacare and ACA are the same thing. To understand the health care debate, you need to know how it works.
Today, health care is driven by people going to the doctor for annual check-ups or as an emergency when they are sick. When people do go to the doctor, the doctor forms a diagnosis and refers them to specialist doctors, to a hospital, or he or she prescribes medication. If the patient has insurance, the insurance company picks up the check. If the patient doesn’t have insurance, the patient has to pay for his care. Doctors can deny seeing a patient if they can’t pay for the visit (with the exception of hospital emergency rooms.)
By law, hospitals are required to admit everyone to their emergency room. Consequently, people without insurance often go to the emergency room for everything including Advil. Emergency rooms are very expensive to operate and chaotic. They are designed to triage patients with actual emergencies. People who go to an emergency room for basic care are simply not receiving proper care either, since because ER’s are setup to deal with emergencies.
Unfortunately, the system is not equipped to handle patients who do not have the means to pay for their visit. Patients receive a giant bill after going to the emergency room, but if they don’t have money, they aren’t likely to pay it—which screws everyone. People with actual emergencies have longer wait time, patients without insurance are weighed down by even more debt, and hospitals lose money on their emergency rooms.
Why was Obamacare needed? Before Obamacare, many people were not provided insurance through their employers and did not have a private insurance plan. In a world moving towards freelance and an on-demand economy, more and more people would have been without health insurance. This is dangerous because many people may suffer or die from lack of treatment if they do not have coverage. The system needed to make it easier for individuals to get insurance. After a couple of technical obstacles, Obamacare succeeded in that. Sort of.
Obamacare, also known as the ACA, came along to offer health care access to everyone. Obamacare was designed to make emergency rooms operate better, provide health insurance to those that need it, and to generally keep citizens alive. The same way that police provide services to protect people from crime, the health care system should be designed to save people from poor health. Obamacare mandated that everyone have insurance or pay a special tax. Why require everyone to have insurance? Well, because insurance is all about a risk pool—a giant stew of people that all pay into one pool that covers health expenses. Your health insurance premium is not enough to cover the costs of health care when you are actually ill. So, for insurers to cover sick people, they need to have healthy people in the same pool.
Obamacare’s central idea is that combining young, healthy people with poorer, sicker people who didn’t have private health insurance would create a balanced pool that runs at a breakeven. Millions of people enrolled in Obamacare. The number of people insured by Obamacare grew and grew, but not enough healthy people joined, making it a high risk pool and money loser for insurers. Why didn’t healthy people join? There are differing opinions on this but for the sake of brevity let’s just say that the value proposition wasn’t sufficient. Many people either opted out and paid the tax or they used a private, non-Obamacare plan. Wealthier people tended to have employers that paid for better insurance, and poorer people tended to use Obamacare. Poorer people also tend to have more ailments, mostly due to chronic issues that were previously untreated or because of lack of access to quality food. Typically, rich people have better access to doctors and better access to better food choices. It’s a vicious cycle—depending which side you’re on.
People get access to health care through four main channels.
- Government: Medicare, Medicaid and the veteran affairs system provide mostly free or very inexpensive coverage to those who qualify. The quality of service works well enough, and the government is an efficient payer for health care. However, doctors hate the government as a client because they are cheap and impose significant reporting requirements, taking the doctors away from their patients. (The exception here is in pharmaceuticals, where the government is wildly inefficient.) Medicare is a federal health insurance program for the elderly (ages 65 and over) and some disabled people, regardless of income. Medicaid is a joint federal and state program that assists low-income families with coverage.
- Private insurance: Many people have private insurance. These plans come in the form of HMOs, EPOs and PPOs, and most are issued by employers. This started because employers are kind of the original risk pools. It turns out that people who work for the same employer have similar healthcare issues in aggregate. Part of this predictability also comes from being able to track employees as a single group, which allows insurers to understand the risk pool and enables them to score the risk over time. The risk pool has few people coming in and going out every year, so the pool population is relatively stable and can be underwritten as a single group. The difference between an HMO, EPO and PPO comes down to which doctors you can see—whether it is anyone or only a doctor referred by the plan. For the sake of this story, let’s assume these function the same way for now.
- Cash: People that are not insured have to pay cash for services. Part of the major shortcoming of the medical industry is that the prices vary from practice to practice and aren’t known to customers until after the service is performed. What other industry operates this way? Would you hire someone to fix your car or build your house without having an estimate? Why should health care be any different?
- ACA Marketplaces and exchanges are websites that allow people to shop for health care plans online.
Obamacare essentially created a hybrid of government powered insurance (#1 above) and private insurance (#2) through the ACA marketplace (#4). This had the unfortunate effect of creating a risk pool that was too small and risky for private insurers to properly cover, which led them to raise their rates for everyone to make up for their financial losses. Obamacare gave vouchers to some people to cover part of the costs of their coverage. In effect, the government was partially funding private insurance—but in a way that still didn’t work for insurers. So, insurers left the program, and premiums went up for everyone. Still though, people have some coverage.
Now the technical BS about health insurance. Just because someone has health insurance, doesn’t mean they can afford to use it? The ACA never solved for this issue. Yes, insurance has several parts to it. You have the premium (what you pay every month), the deductible (how much you need to pay out of pocket before the insurance kicks in, co-insurance (what percent of each bill you need to pay even after your insurance kicks in), and copay (the minimum amount you pay for each visit). This creates a complex system in which health care is often more expensive than it appears to be.
Democrats want more people to have health insurance that they can afford to use.
The main issue with Obamacare is that it doesn’t actually work. The risk pool is bad, healthy people opted out and got taxed, and unhealthy people participated. Insurers lost billions and stopped offering coverage. It needs a bigger risk pool with more patients to work. It is successful in that more people have coverage and can use it. It fails in that it made insurance for everyone more expensive, and insurers aren’t profiting. The insurers that remain are propped up with government incentives and venture capital. In the long run, it will fail in its current form.
Republicans want limited health care mandates.
Republicans want to mandate fewer requirements and allow people to opt-in to coverages that apply to their families. While in theory rolling back Obamacare would lead to things being similar to how they were before Obamacare, the net impact is that people may suffer as a direct consequence. Let’s say Debbie has diabetes and has medicine and doctors thanks to Obamacare. If she loses her insurance, she may die. Republicans also want people to have the option to pay for the services that fit their situation. They want to remove mandates for maternity and contraception. While these coverages would be available, people would need to opt in, which means that only people who need them will pay for them. This sounds great, except it isn’t how health insurance is designed. The impact will likely be that these opt-in services will become extremely expensive, since they will be used a la carte instead of across an entire pool.
We need a non-partisan solution.
Obamacare was a great prototype and kudos to Obama for passing it. Now, like all great prototypes, it needs to be replaced with a permanent solution. This is Trump’s opportunity to define health care for generations to come. This new plan, which we will call TrumpCares, would include everyone on Obamacare subsidies and those with preexisting conditions, and they would automatically qualify for a new version of Medicare—TrumpCares. This system provides coverage for everyone and encourages people who can afford private insurance to get it. This solution lies in six, simple steps.
- Tier the system and align incentives: Everyone should be mandated to have some sort of coverage. The only way to make the system work is to balance care. People can qualify for free health care at the base level. TrumpCares will be like Medicare but with a few edits:
- TrumpCares: You can go to select doctors, clinics and hospitals that participate. Patients will be seen on an urgency based system. This is the key to the health system in the UK and Canada. This ensures patients receive service and creates an incentive to upgrade to a private plan. You will still be seen and get care, it just will be from a limited selection of doctors and times. Very sick people and poorer folks will be covered by the government, funded by insurance premium taxes, leaving the better risks to the insurance companies, who will then be able to afford to cover everyone else at reasonable rates.
- Private Plans: If you can afford it, you can upgrade your care to a private plan. The government would recommend a Health Savings Account (HSA) based plan with a high deductible if you are healthy. This allows for part of your premium to go into an account that accrues interest, a rainy day fund which you keep for health expenses like covering your deductible when you have an issue in the future. People can always upgrade to a better private insurance plan if they want to spend more money.
- Deductible Financing: If someone has an HSA plan and can’t afford the deductible, the government should offer government sponsored financing programs so people can fund their deductibles. This would work similar to student loans with a private issuer and a government guarantee.
- Strip out costs from Medicare and lower the cost of drugs.
- Ban all pharmaceutical ads. We banned cigarette ads, and we can ban drug ads, too. The impact of all of these drugs ads are people rushing to the doctor asking for meds. Americans are more medicated than any other population on earth, yet our lifespan is decreasing. Banning pharma ads will do two things. First, it will get people to stop asking their doctor for more medicines. Secondly, it will get people to stop asking for brand name meds, which are more expensive than generic versions. This will also remove the effect on the P&L for the pharmaceutical companies. The prescription drug industry spends more than $5 billion annually on advertising. Removing advertising could cut health care spending by $5 billion or create $5 billion in new healthcare research—maybe even into fixes that don’t require a pill.
- Require federal price negotiations for drugs. Require drug prices to be negotiated. Medicare is one of the largest payers in the world for drugs. It should always have the lowest price. Mandate the government to go with generic options when available.
- Make it less expensive to practice medicine and reform malpractice.
- Reform lawsuits against doctors. One of the most expensive parts of running a doctors office is malpractice insurance. This is because it is so easy—and lucrative—to sue a doctor. Being a doctor is a noble profession, but doctors are human and sometimes make mistakes. Make it more difficult to sue a doctor by requiring there to be a pattern of gross negligence to sue in most situations. This creates an incentive to only sue in the worst situations and will lower the cost of care.
- Increase the supply of doctors.
- Make it less expensive to go into medicine. We need more doctors. Make it easier to start medical school by providing low cost loans to entrepreneurs who want to start medical schools. Then, make medical school less expensive by offering a rebate if the doctor works in a TrumpCares accepted clinic for five years after graduating—a special residency of sorts. This way, doctors will be able to give back to the community at a lower cost and get free medical school, incentivizing more people to become doctors.
- Open more clinics. Provide low cost loans to entrepreneurs to open TrumpCares clinics in neighborhoods that need more clinics that accept medicare. The more access, the healthier people will be. Figure out the right radio of people to health care access by hiring someone from Starbucks or McDonalds to figure out the optimum places to place clinics.
- Inspire Wellness. The best way to lower the cost of health care is to have healthier people. There is no such thing as a great health care system for a population of unhealthy people. We need to create policies to encourage people to be healthier.
- Wellness Clinics: We should encourage entrepreneurs to open wellness clinics by providing Medicare billing payments for wellness services and low cost loans. These clinics would focus on preventative care, provide annual check-ups, STI screening and wellness workshops around nutrition, weight-loss and fitness. They would be staffed by registered nurses whose job it is to perform routine screens and check-ups and provide low cost training on how to get into the best shape. Nurses can provide a majority of daily services, allowing doctors to focus on ill patients. Invite nutritionists and fitness professionals to teach workshops.
- Launch a WellBot. The government should partner with an artificial intelligence system such as Watson to help people get wellness advice online or via SMS by asking questions to a chatbot. There can also be an in person Wellbot that can do initial screening of people at the clinics. The goal would be to lower the cost of health care by using technology to provide screening and wellness content.
- Create digital health, wellness and fitness content. Create videos and articles about health and fitness. Give away vouchers where the government will cover up to 80 percent of the cost of workout videos and low cost digital nutrition plans. Encourage everyone to sign-up for a nutrition plan and a digital fitness program. We’ve seen benefits from tobacco prevention campaigns. This type of social norming can work, and may be cost neutral when the avoidance of future costs is factored in.
- Digital Support Groups. Sponsor technology to make it easy for people to create and join digital SMS support groups where people can go to get daily positive encouragement for their health and wellness.
- Fresh Food Programs. Mandate that any meal paid for directly or indirectly by the government be fresh food. This includes school and hospital lunches. If the government is giving away a meal, it should be good for the person—especially children, the elderly and the ill.
- Incentivize the creation of new technologies. The government should encourage entrepreneurs to start businesses and develop technologies in health and wellness. The government should sponsor accelerators and provide student grants to build products for health and wellness. Even if these grant companies don’t succeed, it will inspire people to focus on health and wellness. The government can do this by creating tax incentives for companies that invest. The government should also sponsor prizes for people who achieve breakthroughs in health and wellness technologies. Enable innovation fast lanes for new technologies to get approved by the regulatory bodies fast and efficiently for trials.
How to do it legislatively:
Partnership. Position this as a non-partisan partnership where the Democrats get credit for creating the prototype and the Republicans get credit for building the latest version. Everyone wins.
Repeal and simultaneously replace Obamacare. This will satisfy the Republican base, but no one will lose coverage.
Ask: Will this be better for the person effected than the current plan? This will result in the best plan for the American people, regardless of political orientation.
Startup Opportunities: This new health care plan will present many startup opportunities for entrepreneurs to create great businesses. The trends that this will be inspire will be new health plans that use technology to better service users, greater use of telemedicine and more advanced implementation of artificial intelligence in health care.
At the end of the day, we need to make sure people are covered, strip out costs, and use technology to create efficiencies and train people to be well so they need health care less. With this combination of factors, we can reform and transform our healthcare system to provide more coverage to people with lower premiums and better care.
Richard Hecker is the CEO of Traction + Scale, an investment holding company that builds companies transform their industries. He is also the co-founder of @RichieBlueEyes.. You can follow him on twitter
Brandon Sather is an experienced life insurance strategy and corporate development manager. He received his MBA from the University of Minnesota.