U.S. Healthcare: Cut Out Middlemen

Posted on September 13, 2013

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In the June issue of Fast Company, the article “Giving and Relieving” profiles GiveDirectly, an organization formed to better distribute aid to the third-world’s disadvantaged.

Their premise: research shows giving cash directly to needy individuals is the most efficient and effective way to improve quality of life.  The main benefit is no money or aid is siphoned off through corruption or the administrative costs of huge, international aid organizations.

The sum in play is $1000, distributed to families in two lump sums with no strings attached. This has worked well in Kenya, where GiveDirectly has been tracking their philanthropy.  Contrary to popular belief, destitute families receiving cash do not waste the money on frivolous purchases (‘alcohol and cigarettes’), but use the money responsibly to upgrade their homes and improve their diets—both of which lead to greater health, an increase in schooling for their children, and decreased reliance on expensive healthcare.

The generic term for this approach is called unconditional cash transfer.

It begs the question:  if the poor of Kenya can show very promising results with a small amount of money and no financial acumen, what results could the U.S. see if this model was applied to healthcare?

Why is the U.S. healthcare system so bogged down?  Because there are so many moving parts.  Imagine if the government (which obviously wants to be more involved in healthcare equity) were to determine each year everyone’s dollar value of care?  This is already done anyway through algorithms, caps and exchanges and all the inventions and machinations in the Affordable Care Act.  Instead of forcing the healthy to subsidize the sick, everyone gets a lump sum payout in July.  How you manage it is your decision.  All hospitals work off a debit card or credit card system.  No pay, no care.  Individuals can purchase additional insurance if they like, for catastrophic events that would likely cost multiples of each person’s yearly allotment, but you must provide proof of payment upfront.

Think:

  • Less emphasis on insurance as the engine and bottleneck of healthcare costs, which means…
  • …More retail-like (price-sensitive) care shopping by patients
  • Less reliance on government structures and administration, which means…
  • …More transparency and less fraud in Medicare and Medicaid
  • More motivation on the patient side to improve wellness and stay healthy, and…
  • …Economic stimulus for those who use less than their annual care budget

Perhaps the solution is not as linear as cash-for-healthcare.  Maybe it is as loose as the GiveDirectly model:  cash to individuals with no strings attached.  Maybe we trust in the entrepreneurial and creative energies of Americans to do what they see best to impact their lives, which would have an indirect, yet more meaningful impact on their life-long health and wellness.

This is radically simple, and may not work.  Such a viable and simple solution is likely complicated by cultural differences and beliefs in the United States.  Skeptics can tick off numerous examples where direct cash infusion to the apparently needy has made little difference—from economic stimulus checks and tax refunds from the Fed, to lottery winners and loose pocket change to urban panhandlers.  The homeless may not be guilty of this, but 48-to-60″ flat-screen upgrades will not improve health, quite the opposite in fact.

Conventional American wisdom says found money is often squandered.

Yet, this is not the case elsewhere in the world.  Less developed countries are proving even small amounts of money—a couple hundred dollars through microlending—can jump-start businesses and have a major economic impact by turning lives around.

Empowerment and independence are values that helped build the U.S., and Americans say they want to maintain them; yet it is naive to think the majority of Americans would responsibly manage a lump-sum payout for annual health expenses.  Unfortunately, too many would rather have someone else manage it for them, and pay that person (middle man) for their time and effort.  We pay others to manage our money, detail our cars, mow our lawns. And there’s the rub.  Until Americans find their Will to Power, so to speak, we will suffer in inefficient systems with sub-par results.

The economics of healthcare will change when driven by patients, but the system will not innovate on its own.  My hunch is more simplification, and less legislation, is part of the solution.

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Posted in: Miscellaneous