Back to the future in health care

10/17/99

By Paul Mulshine

If telephones didn't have hold buttons, the modern HMO simply couldn't exist.

That is an unfortunate fact of modern health care. The way HMOs save money is by making the rest of us -- doctors and patients alike -- line up and await the attention of a bureaucrat.

Various politicians have various plans for getting around this problem. The patients' bill of rights is the latest. It can't work. If it succeeds in its goal of making HMOs more accountable, then it will also make them more expensive. And that means more Americans will go without health coverage. A study by the Heritage Foundation found that in those 16 states where HMOs were most highly regulated, the number of people without health insurance increased eight times faster than in other states.

The great minds of Washington are trying to do the impossible -- regulate a bureaucracy. You can't regulate a bureaucracy; you can only add another level of bureaucrats.

Some doctors out West have come up with an alternative. They've developed a system that is brilliant in its simplicity. Here's how it works: You go to the doctor. He sees you and diagnoses your problem. You pay him.

That's that. No membership card. No co-pay. No authorization from your primary care physician.

The leading proponent of this new approach -- which is being adopted on an informal basis by doctors all over the country -- is a Seattle-based nonprofit group called the American Association of Patients and Providers. They call the system SimpleCare (check them out on the Internet at http://www.simplecare.com).

I discussed the system the other day with Dr. Vern Cherewatenko, one of the founders. At his practice, a 10-minute visit costs $35. That same visit, if billed to a health insurance company, would cost $79.

The cost of dealing with the bureaucracy is so great that Cherewatenko says he would actually lose money on the $79 visit paid by insurers while making a small profit on the $35 cash visit. This is not hypothetical. Cherewatenko's prior practice had 55 doctors and was losing $80,000 a month while handling insurance claims.

"We said there's just so much bureaucracy and we're being distanced farther and farther from patients. The cost was going up and quality was going down. We couldn't spend any time with the patients because we were so busy doing paperwork," Cherewatenko said.

So he and three other doctors decided to start SimpleCare. Both the doctors and the patients like it because the doctor can spend the entire visit with the patient.

"If you come in and pay me $35 for a 10-minute visit, then I can spend the whole 10 minutes with you. I don't have to spend two minutes on paperwork and three minutes figuring out what antibiotic your insurance plan allows."

Older readers might note that this new system, which is also being adopted informally by doctors all over the country, is not new at all. It is exactly the same system that America used to have in the days before the health-industrial complex arose. Look back to those days just after World War II and you'll see where American health-care policy went wrong.

It wasn't greed that created our current problems. It was a quirk of the tax code. Employers were permitted to give their workers health insurance without adding the cost to their salaries. So everybody wanted health insurance as a fringe benefit. Before long most people got it. Doctors' fees shot up, both because there was more money in the system and because doctors had to cover the costs of handling all the paperwork.

Government has no idea how to break this inflationary spiral. But a system like SimpleCare could return control to doctors and consumers. The concept would fit perfectly with the idea of medical savings accounts that is being pushed by free-market think tanks like Heritage.

Here's how that would work: Say your employer currently pays $10,000 a year for health insurance for your family of four. You elect to spend $5,000 for a catastrophic coverage policy with a $5,000 deductible. You put the remaining $5,000 in a medical savings account (MSA for short).

During the year, you make 10 doctor visits and pay for them with $350 from your MSA. That leaves you $4,650 to roll over to next year in your interest-bearing account.

The advantages are obvious. Say in 10 years you get laid off. You will have about $50,000 as a cushion to cover you until your next job. Or say you retire early. You'd have even more to tide you over until you reach Medicare age.

Though this concept began with conservatives it could be popular with liberals as well. Many people on the left are skeptical of the medical establishment -- often with good reason -- and would prefer to spend their health dollars on naturopathic medicine, acupuncture, and other forms of alternative medicine. With MSAs, they could spend their money however they please.

Actually, the only people who would dislike the system would be the kind of people who enjoy listening to the music that you get when you're put on hold. And for them, we have HMOs.