Healthcare Cost Regulation

How can federal payments for healthcare avoid being turned into a pipeline of taxpayer money to wealthy investors?


Previously, we talked about whether having a single public insurance company would result in reduced access to or quality of care. The answer was “no”, as long as that entity paid the private healthcare service providers enough money to ensure that healthcare practitioners are well compensated, there are enough employed in the industry, and researchers have ample funds to explore new treatments and technologies.

Corporate Greed

One concern over all of those generous payments to healthcare providers is that the corporations could cap expenses (i.e., employee pay) and keep the profits. However, the providers don’t need to become government entities to resolve that possible issue. A simple(ish) regulatory solution is sufficient.

That regulation would (1) cap executive compensation for healthcare providers – maybe they cannot make more than the president of the United States or something akin to that and (2) cap the total profits a healthcare provider can generate (including payment of dividends) to something like 15~20% of net revenue.

So We’d Punish Highly Efficient Healthcare Providers?

As stated so far, that could happen. There would be no incentive to become more efficient. That can be mitigated as well. A solution to making sure we’re not over-paying for services AND we are rewarding increased efficiency could look something like this.If a healthcare provider exceed the limit on profits for a year, they could have 2 choices.

  1. They can simply return the excess earnings so they remain in compliance.
  2. If they want to keep the excess earnings, they must demonstrate how they operate more efficiently than their peers in such a way that others can adopt their improvements. Over a few years, payments for those services would decrease for everyone so that after a few years that efficient clinic becomes compliant and everyone elseelse is forced to match their efficiency or lose profits. This way efficient providers can exceed the profit cap for a time and everyone else will be forced to match them or take a loss.

That Sounds Almost Workable

Almost would be the key word there. The end solution would need to take into account a lot of factors to ensure compensation for services is fair. An individual rural internist could not reach the efficiency of an urban practice of 7 internists. We also wouldn’t want to decrease the rural practitioners compensation because they are less efficient than the urban counterparts. If we did that, we’ll end up without doctors in rural areas.

The basic idea of rewarding efficiency and requiring everyone else to adopt those practices can hold true, but there would be a lot of details to figure out in regards to determining what is “equal” compensation for services across the United States. Rural practitioners and small practices could not be held to the same efficiency standards as a major hospital.

The Greatest Risk

Hopefully, by now it is clear that universal health insurance won’t cause a sudden degradation of the system. The primary counterpoint to a single payer healthcare system is that wealthy people may need to wait longer for appointments so that sick people can go to the doctor.

However, there is one very real risk to the idea that could cripple the entire healthcare system that is not frequently noticed. We’ll talk about it and the solution another time.

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