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Private Treatment Account FAQ

What about Fraud?

Of course, there would still be opportunities for fraud. The most obvious is in diagnosis. Because of this, all diagnosis and related tests would be made anonymous – but public. Members of the public (and most probably specialists) would be enabled to sue providers and still-anonymous individuals for fraud. If they are found to be right, they’d collect a portion of the damages (even if they aren’t recovered from the criminals who may have already spent them) while the criminals could face prison. In order to prevent frivolous attacks on providers and the sick, those who file a single frivolous suit would be banned from another suit for multiple years while paying for the provider’s or health care consumer’s defense.

A second area for ‘fraud’ would be people choosing to die rather than be treated and thus passing the savings to their heirs. This isn’t actually fraud – it is a market opportunity. Providers are not giving patients good enough results to pull them in to treatment.

More nefariously, patients’ heirs or guardians could choose to let patients die rather than agreeing to treat them. This is easily addressed by making the accounts non-inheritable or, in the case of children, releasing funds to the child upon independence.

What about patient education?

Doctors have concerns that people don’t know enough to be involved in choosing care. This is a side-effect of our current system. Most people don’t know anything about compression ratios or interface technologies – but they can still buy phones and cars. The packaging of healthcare to enable individual decision-making will follow from this sort of change and transparency, quality and price will all improve.

What about the limited shopping market for emergency services – particularly in non-competitive markets?

Emergency treatment facilities might be able to charge significantly more because patients can’t shop around. There are elements that blunt this. First, in some markets, patients already pre-select their preferred ambulance and hospital services. For example, in New York and London, Jewish community members request Hatzolah response teams rather than normal teams. This is because these teams have particular insight into the needs of community members. Hospitals could encourage people to pre-select their services based on the cost relation to the median – driving customers towards lower cost providers.

With regard to non-competitive markets, the median would still exist. Similar areas would be brought under the same cost measurement umbrella. However, in non-competitive markets (e.g. rural markets), customers would be unable to choose alternative services – allowing hospitals to drive up prices. To prevent out of control pricing in these markets, a maximum ratio could be established for competitive vs. non-competitive markets. For example, non-competitive market compensation might be allowed to float to the smaller of 90% of similar markets or 120 or 130% of competitive market medians. Non-competitive hospitals would be free to charge more than this. But if prices are too high, there would be two side effects. First, it would attract other market participants. For example. others might set up small specialized clinics to serve heart attack patients. Second, if people are captive consumers and public compensation is far short of what is charged, then the healthcare providers themselves would find it very difficult to collect on their bills.

To summarize, Private Treatment Accounts will provide payments for life-saving health care at 90% of median cost for the conditions being considered. In addition, potential saving health care could also be subsidized at the lower of 90% of median treatment or 90% of future expected individual productivity.

How would potential earnings be calculated?

Rather than reinventing the wheel, mechanisms used to determine actual damages in injury or workers compensation cases could be used. The process would not be immediate, but these sorts of medical interventions are not life-threatening. So long as the process is not onerously expensive, it can be reasonably pursued.

Why wouldn’t codes overwhelm this system?

Codes metastasize for a few reasons.

First, providers want new codes (in the current systems) for new treatments. Unless there are new conditions (which do pop up, especially as old conditions are better understood), this wouldn’t result in new codes in this system.

Second, a single code might under-compensation for a particular activity. For example a ‘bee sting removal’ code might not compensate for a particularly difficult bee sting removal.  The same thing would happen here – a simple heart attack might be less expensive to treat than a complex one. In the main, the goal would be to even out these costs within groups by having larger groups. In the case of emergency medicine, that is easy. People with more complex problems won’t seek out a different provider than those with simpler issues. But what of non-emergency medicine? What if a patient needs heart surgery but is extremely obese. Would there be a “heart blockage – obese” vs. “heart blockage – normal”? After all, providers could simply refuse to treat the obese patient because their case is more complex. I believe the answer to this is essentially to merge codes, as discussed in the write-up. A person can have more than one condition (e.g. obesity and heart disease) and the combination would automatically come up with a new compensation level based on modeling for the given condition set. It won’t be perfect, but the body of data available would make it possible to assign a number of discrete codes to a patient without those codes multiplying. This would set an appropriate compensation level which could be appealed if it is too far off base.

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