By Don McCormick, CooperativePlus CEO and Founder

Twenty years ago, Memphis, Tennessee and Birmingham, Alabama were economically depressed, but had two very rich enterprises: medical businesses and pawn shops. Pain and suffering had built the medical businesses and need served by usury had built the pawn shops. As the healthcare system continues to decline in value and performance due to increasing poverty and concentration of wealth, more cities may look like Birmingham and Memphis.

A declining system can be avoided but staving off decline will require grassroots organization and cooperation between patients and physicians. First, everyone must see the healthcare system as it really is. Second, everyone must support changes in the way the money is collected and distributed so that both physicians and patients get what they want and need.

Reforming and recreating the healthcare delivery system requires many basic changes in patient and physician education. It requires that healthcare be the primary goal and that payment for the services be understood clearly by everyone. If profit taking is a part of that then it should be limited within normal to moderate ranges for the type of services provided and not a part of the healthcare trust funds.

If the system improves through grassroots organization and satisfying the needs and wants of both patients and physicians, then the cost of care will fall to the levels seen in other developed countries, which is about 50% less than in the United States. Quality of care should be better too. The transformation will be the job of more than one generation, but not starting now is a mistake.

The healthcare system is unnatural

The healthcare financing systems in the United States do not enable people and patients to choose what they want, when they want it, and from whom they get advice, care and treatments. Development of the systems was built on the premise that adults had enough information and education to make intelligent decisions about the values of the products and services they chose. Further, the products and services were deemed to be affordable and readily available, but the measure of that was the profit of the enterprise and not the health outcomes of the patients.

These systems do not follow nature in having multiple pathways for communication and protection. They were not born of the step-by-step building of a living system, but out of convenience for the U.S. economy that was under the stress of depression followed by war.

The consideration that these systems were about the preservation of live, the complex interconnections between people, their labor, and their dedication to each other was set aside in favor of monetary exchange. The consequences have been poor economy, poor health, and unnecessary loss of life.

While other nations have given health problems more attention in the last five generations for reasons of economy they have done only slightly better in health outcomes. The main problem is about how to live and not about how to trade representations of goods and services for health advice and treatment.

The top-down management system has not worked

Regardless of the outcry about high costs and bad outcomes in healthcare from the most knowledgeable people in our society, a top-down solution to the problems has not and will not work. The solution, if there is to be one, will come from the bottom-up, from the patients, their interconnections with each other and the inclusion of knowledgeable caregivers in guild driven self-directed small communities. As E.F Schumacher told us in his book, Small is Beautiful, health is above economics. At present, people regard better economics as a cure for medical problems but that is not so. People need to be nudged into organizations that raise their level of understanding of healthcare and leave them empowered to act in their best interest about care and its rightful costs.

Healthcare providers are a class of people in our community that could have a positive impact. However, providers will be a small subset of physicians and other caregivers; those who deal with health and disease, acute and functional disorders, and have a strong desire to share knowledge and health maintenance to people in a comprehensive and reproducible way.

Life sustaining systems arise from the direct participants

The organization of guilds and communities into life sustaining networks begins with the patients and their providers of care and not with other agencies regardless of how well informed or well-meaning these agencies may be. Enrolling patients into Medicare, Medicaid, or private insurance plans does not solve healthcare delivery and cost problems.
Good health is about understanding health and healthcare problems and their solutions within a community of other people who share similar knowledge and concerns, some of whom are expert advisors and caregivers. Paying for all of this is a commitment made by each individual drawing on the resources they have available from their labor, their entitlements, and the gift circles to which they belong. In the words of Abraham Lincoln, “labor is prior to, and independent of, capital.”

The Imposition of Structure by government does not restore health

In most other industrialized nations, the organizational structures necessary are imposed by law and elite classes of administrators and medical care providers tend to have less opportunity for financial gain, but the general population suffers less expense and seems to have slightly better health outcomes. However, this top-down approach has not created a medical knowledge base that would allow the patient population to win against the relentless march of chronic illnesses that make us all old before our times. We seem to be wholly dependent on radical changes in the environment to get at the causes of our problems not addressed by acute care medicine. The interconnections characteristic of living ecological systems in which harmful elements are excluded and healthy nutrients created and supplied are not in the current medical/financial systems. In the case of the current systems, knowledge is not power but simply a fire alarm which we have become accustomed to ignoring.

Bottom-up organizational structure imitates nature and creates trust

It is time to take a step back and put into place through mutual help what we need and want as people and patients. The paradox is that the organizers and caregivers are patients too and can be properly empathic if empowered by their patients acting in concert. The nudge to physicians to act as teams and to embrace the solutions to both good healthcare and cost controls has been given through several programs from the government and the private sector. The programs presume that the people and patients are already organized into plans of insurance through which physicians must just become “accountable” by proper financial incentives, positive and negative. The financial incentives that are positive seem only to manifest about 20% of the time and only partially for the healthcare providers and not at all for the patients. However, the “nudge” has made a window where there was a wall and the possibility that the wall will fall as healthcare providers bring their patients through it. This is the paradigm shift that was needed. Prohibitions against voluntary association and mutual support seem to be few, but there are barriers to overcome in shifting trusteeship (a needed service within the guild) to new platforms.

Step-by-step reorganization leads to open systems

Assume that the existing Physician Associations that contracts with Medicare, Medicaid, HMOs and Commercial Health Plans are open to contracts between providers and their individual patients to carry the “nudge” physicians have gotten from government into the general marketplace. The physicians’ goals would be to: (1) determine the health status and profile of each patient and (2) personalize care and treatment so that most of it can be managed by the individual patients. The main barrier to that goal is: time spent between the patient and the health care provider is compressed so much that the patient cannot learn and the provider cannot share. The next barrier is that communications within the community are restricted in silos that retard learning and stifle healing.

Financial and medical education of people and patients are the keys to reform

As a comparison, people think that language and math literacy is a benefit for the whole population. A few hundred years ago that was not the case. Medical literacy must catch up with language and math literacy and just paying for services does not accomplish that goal. So, step one is to let the patient pay directly for their basic care so that the patient and their chosen provider can act freely in the quest to restore health.

Insurance policies try to accomplish direct payment by having large deductibles and coinsurance clauses, but that amounts are so high patients fail to see their primary care providers frequently enough to avoid serious illnesses. Physicians and patients are already enabled by the established practice of “Cooperative” medicine and medical saving accounts. Many physicians who have begun to use direct payment methods (sometimes called “Concierge”) are not doing it within a Cooperative and often grossly overcharge their patients for routine services. They also reduce the number of patients they serve to an elite class and, in effect, remove themselves from the community at large.

When direct payments are done through agreements that have been written for the cooperative members, the costs are fair and the classes of patients are not segregated. This is because the goal for patients is quality healthcare for the members as a collective and not profits for the practice. Interestingly, the practices using the cooperative model are paid more than they usually earn from insurance systems and prices are not arbitrary.

We have not addressed the possibility that a patient could fail financially in their agreement with the provider, but a gift circle within the community, managed by the Cooperative, is an easy remedy for that problem. It is done frequently in catastrophes and there is no good reason why it cannot be done routinely in self-organized groups.

The Accountable Care Act is a nudge to reform but is not a natural solution

Government assistance in an overall healthcare program in which the patient’s saving account is driving their access to healthcare and in which there is price control and insurance against large expenses is needed, but that is not the substance of the Accountable Care Act and unlikely to be in any reform of that Act. This type of system, if a top down approach were used, is like what was done in Singapore at ¼ of the cost in the U.S.A. with better health outcomes. Singapore is a society in which people see community responsibilities as a prior condition of free enterprise. The U.S. is not yet that kind of society. However, we need not await political change to have such a high performing system, we can use the “nudges” we have gotten to “seize the day” and make our own patient-centered system.

Labor is cheap

In comparison to the high cost of healthcare in the U.S., the cost of primary care is a small part of it. Consequently, an individual patient can pay a physician for primary care services, laboratory, imaging, health education and care coordination for less than 4% of a minimum wage or 2% of an average wage. The Singapore model set their saving rate at 3% of wages. Perhaps the difference between the 2% we need for primary care and the 3% they collect is a surplus to assure that all the people in Singapore have basic healthcare. In the U.S. that surplus would be our gift circles within individual cooperatives.

Paying a little more for labor stimulates changes that produce better health and economy

The peculiar thing about our proposal for the primary care physicians is that the “concierge plan” pays the practice more than they usually collect from insurance of all types. This includes the patients’ copayments and deductibles they may add to the money from the insurers. The concierge payment is 35% more than the Medicare rates. Yet, the access to care issues are eliminated and so are the frequency of acute care episodes. The utilization of hospitals and emergency facilities drops and so do the attendant costs.

Patient and Physician friendships create medical homes

The incentive for maintenance of the patient’s health works best when the patients know the bill has been paid in advance and the provider they need is ready and available to serve. The incentive for the provider is the established patient relationship and the knowledge that the patient regards them as his or her Medical Home. With these conditions in place any bonuses earned by the provider because of good care coordination and reduced spending on other medical and hospital services is the seal for continued participation as a “concierge” Medical Home.

State regulations are imposed on natural systems

An organized patient–centered healthcare system requires an association of patients and physicians that is approved by the various state departments of insurance as a purchasing group. It some cases the states license these entities as Discount Medical Plan Organizations. One such group, CooperativePlus, was started in Texas in 2004 as Senior Patient Association, dba Patient Physician Cooperatives (PPC). The members of PPC made “concierge” payment agreements between the individual patient member and the individual or group practice provider. Additionally, PPC, as a qualified Association, purchased group health insurance for its members that was as limited or comprehensive as they required. The purpose of the group health policy was to fund the specialty and hospital costs that were beyond the funds available in the “concierge” payment plan. The result was to have all the resources needed to obtain healthcare without exclusions and for a price that was below the usual market price.

Existing Insurance Pools can use the natural systems of cooperatives

Patients who are beneficiaries of Medicare, Medicaid, Employer Sponsored Trusts or private insurance can combine the PPC Group Association Plans with the patients’ “concierge” payment plans and the result is better access to care and lower medical loss ratios. Physician Associations can also form their own HMOs to contract with Medicare, Medicaid, and Employer Sponsored Trusts as plans through which the patients will have coverage and service advantages. These service plans should be able to have a lower administrative burden than the 15% usually charged by the currently competing HMOs. At least, if there is an administrative profit margin, it can be shared with the patients and physicians.

Focus on education, trusteeship, and physician incentives to make improvements

The fundamental changes needed in the healthcare system are in the areas of education, trusteeship, and proper incentives for physicians who advise and treat patients. An educated patient’s point-of-view about his or her healthcare could be a desire for help when needed and avoidance of harm at each encounter. The knowledge and skill of the physician is the main concern even if their personality does not match well with that of the patient. Since physicians are trained in many different types of practices the patient, for reasons of economy, should pick a primary physician within the type of practice that suits the patient’s needs and wants. Since the patient is paying directly for these services in a private agreement with the physician that choice has little or no impact on the financing through insurance of the other types of care needed episodically. The way in which the system will maintain health is by the diversity of its interconnections and the capacity of its members to share information and labor. The costs of care for any group will be commensurate with their needs. The greater the carrying capacity of the organization the more likely they will be to maintain health and control their economy.

Rapid change is possible

Healthcare costs in the U.S. are double that of almost every other industrialized nation because of lack of knowledge, corporate greed, bad laws and regulatory policies. Oddly enough, patients can fix these kinds of problems rather quickly by joining together locally and teaching each other medicine, finance, and good trusteeship.
As an example, should an educated old person subject themselves to extreme medical care and surgeries in the last few weeks of their life? And what guardians would allow that to happen? At such times a helpful person can show their love to dying relatives and friends by attending them, holding them and thanking them for who they were and what they did for others. These acts are superior to extreme medical care and surgeries. It is unfortunate that sometimes the decisions about medical care are vested in those whose lives are not seen in the context of their time and condition but in the imaginary time of their care givers and their younger relatives. The saying, “First do no harm” begs repeating. Yet, doing nothing is contrary to nature, even when it is right. The record of more than 400,000 people per year killed by medical care in hospitals is the mark of our wrong notions about the needs of infirm patients.

People want to live a long life but in good health, free of pain, and independently. So, good medical care is advice and treatment leading to those conditions. Measures of quality from people other than patients are checks on the skills of the physicians by his or her peers and they may or may not be important. They do not improve care, they only measure it.

Cooperation between the patients within a practice is the first step

Financing healthcare requires cooperation: first, between the physician and the patients who regard him or her as their primary care provider; second, between the all the patients and primary care physicians in a community. In the first case, the patients of a physician support the practice and the physician makes time for all of them. This does not rise to the level of needing to be shared in a larger population to be affordable to each patient. In the second case, the patients need to pool their money to be able to pay catastrophic costs. They need a qualified non-profit Association to purchase group insurance that would be all inclusive of their needs. If their group were large enough they could probably form their own company for this insurance, but usually that is unnecessary and more expensive.

Restore trusteeship

Within cooperatives, trusteeship of the money is the central issue. The predominate system in the U.S. is broken because the trusteeship is poorly structured and corrupted by a transfer of ownership of the trust funds to third parties. This transfer allows the money that was intended for healthcare expenses to be converted into inflated administrative expenses or corporate profits. The Medicare trust funds could be an exception to that transfer except the payment system in Medicare is based on fee for services or derivatives of that, such as bundled payments or capitation. The consequence of this faulty payment system is that the trust funds are simply plundered by frequency of use of unnecessary services that are very difficult to challenge by regulators. Also, the distribution of the Medicare funds is handled by contractors who benefit from the volume of transactions they process.

So, the Medicare trust funds are not really in the hands of the trustees in a practical way. In the case of premiums paid to commercial insurers by individuals, businesses, Medicare and Medicaid, those funds become the property of the private company and what they have left from the premiums belongs to that company as an underwriting profit. The new healthcare law (PPACA) has attempted to address the unfairness of this by limiting the Medical Loss Ratio (MLR) to 85% of group business and 80% of individual business. It is not applied universally and it can be manipulated by the companies. 15-20% is a large percentage of the premium for administration and marketing when compared to other financial management, especially when compared to the 2-3% paid by self-insured large employer groups. The solution is for the funds of the patients that can’t be budgeted and paid directly to their providers to be pooled in a trust fund that pays the lowest of administrative fees and returns the balances from claims to the Trust. Those funds can be returned to patients and shared with their physicians as an incentive to get better care and to not waste any money on unnecessary services and supplies.

Carpe Diem

This is the best of times for taking control of the inflated healthcare system because the wasted money can be applied to correct both services and distribution of funds. There are few if any barriers to correcting the payment and delivery systems when it is being done for self-identified groups of patients and physicians. The shrinkage of the funds will affect unneeded medical services and overpriced administration. The potential financial gain for the patients and physicians is to substantially lower the cost for patients and to increase the revenue for their chosen physicians.

  1. July 17, 2018

    Thanks for this interesting and enlightening perspective.

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