For decades I ran a small business that employed 45 people — give or take a few. When I took over the family business, the cost of healthcare for our employees was insignificant. According to the Henry J. Kaiser Family Foundation, the annual cost of healthcare for each citizen in America was $356 in 1970. In 2016, the cost of healthcare for each American was $10,545. Now, that’s significant, folks!
Five years ago, my children put me on a permanent sabbatical and changed the locks on the door of the shop. I then became involved in trying to help small businesses reduce their cost of healthcare. People at the University of Utah Health Sciences asked me to participate in a project to change healthcare for the better. We had a number of meetings that included a group of so-called “experts” in the field of medicine. The best ideas that came out of the effort, I thought, was bundled pricing and patient-centered care. There were no answers proposed on how to reduce the cost of small-business healthcare.
I just read an article in the Wall Street Journal titled “Insurers’ Policy Warnings Raise Stakes in Health Fight” that informed us: “Hundreds of thousands of consumers across the country are getting letters from insurers warning that their health plans bought under the Affordable Care Act will be terminated at year-end, raising the alarm at a politically sensitive moment when Senate Republicans are struggling with trying to pass their own healthcare legislation.” Now is the time to enforce a “shot clock” on our Washington congressional delegation to create an effective healthcare plan for the nation.
When it comes to healthcare, everything is cheaper in the rest of the world. Global doctors, hospitals, clinics and prescription drug companies charge less than their U.S. counterparts. For example, primary-care doctors in Germany earn $120,000 a year before taxes. That’s about one-third less than the U.S. average.
But high salaries, costly medications, etc., are only part of the reason why America spends twice as much on healthcare than the rest of the world. The U.S. is on a fee-for-service payment plan, which means the more services you provide, the more fees you get.
The only possible restraint on our present system is for insurance companies to tell the healthcare system not to charge so much and not to provide unneeded services. Do you think that they really want to do that? I don’t. So, let’s take insurance companies out of the equation.
So, here’s our plan, folks. Each state will contract directly with its healthcare providers to provide quarterly healthcare for those individuals — 10 percent of the population — who are not on employer-sponsored healthcare plans, Medicaid, CHIP or Medicare. If the providers run out of money two weeks before the end of the quarter, so be it. The feds can do the same thing with Medicaid, CHIP and Medicare. This covers another 30 percent of our population. Employers can also contract directly with healthcare providers, which covers the rest of the 60 percent of our citizens.
As an employer or part of an employer group, I would contract with our local providers to provide our employees with all their healthcare needs. For this service, I would pay a quarterly fee for each employee. Again, if a provider runs out of money, that’s just too bad. This is a powerful incentive for the healthcare system to provide only the services that are needed. Rather than health insurance sales reps calling on me, it would be healthcare providers’ sales reps calling on me.
This concept is being used over and over by industry. In my case, it was called a “guaranteed maintenance agreement.” Our customers paid for all consumables and we paid for the maintenance of the equipment and any breakdowns. That’s not a bad way of doing things.
Robert S. Pembroke is chairman of Pembroke’s Inc. and describes himself as a small-business owner on permanent sabbatical.