Applying the Lessons of Criminal Justice Reform to Health Care

August 19th, 2016 by 4 Comments

By Kelly McCutchen


It’s been a rough summer for health care. Sixteen of the 23 federally funded, not-for-profit Consumer Operated and Oriented Plans (co-ops) have now failed. Humana reduced its Georgia coverage area and Cigna, UnitedHealthcare and Aetna have completely pulled out of Georgia’s federally managed insurance exchange. Most premium rate increase requests for 2017 are in the double digits – the weighted average increase is 27 percent. We got ours in the mail last week: 16 percent.

In some parts of Georgia, the outlook is worse. With little competition, rural Georgia has the dubious distinction of some of the nation’s highest health care prices and worst health care outcomes. Four rural hospitals recently were forced to close, including the one in Ellijay, my hometown, and two-thirds are operating in the red. Only nine states have fewer primary care doctors per capita. Several counties have no primary care doctor.

Even more depressing is that any attempt to talk about addressing this dreary situation is so mired in politics it’s almost impossible to have a logical discussion.

As with many issues, the media and political pundits paint this as a decision between two bad options: Do nothing or do more of what got us into this mess. Conservatives in Washington have some good ideas but can’t seem to get their act together. Liberals maintain that more money to expand Medicaid is the solution.  

Georgia recently addressed a sticky issue where costs were out of control, outcomes weren’t good and the politics were dicey. Yet Governor Deal, with unanimous approval from Democrats and Republicans in the Legislature, passed sweeping criminal justice reforms. Four years in, crime is down, millions of dollars have been saved by diverting non-violent offenders from expensive prison beds, and the savings have been invested in lower cost, more effective, community-based services. Most important: We’ve turned around the lives of thousands of Georgians. 

The themes are similar in health care. Like prisons, emergency rooms are expensive but necessary for some; expensive and unnecessary for many.  Consider that the average ER visit costs $1,000; the average clinic costs $29.

Hospital ERs are federally mandated to treat anyone, regardless of their ability to pay. This “free” care, an unfunded mandate, is expensive: The estimated 565,000 uninsured Georgians living below the poverty line consume, on average, $2,500 in health care services a year. That’s roughly $1.4 billion a year you and I are subsidizing in one way or another.

What if there was a way to spend that money more efficiently?

Primary care should be the first focus. A good option is direct primary care, which operates much like a Netflix subscription or fitness center membership. The monthly subscription is $40-$80, depending on age. It saves money and allows for innovation by removing government and insurers from the doctor-patient relationship. Washington State, one of 16 states allowing direct care, provides this option on its exchange and for Medicaid recipients. Early results show savings in overall health care costs of 20 percent.

Next, with Georgia the capital of health IT, it should be easy to aggregate several sources of funding to pay an individual’s health insurance premium. Although the primary funding will be from federal funds, government (taxpayers) shouldn’t bear the entire burden. Individuals, employers, churches, charities, friends and families could also contribute.

A survey found small business owners who don’t currently offer insurance would contribute an average of $1,400. If the federal government is willing to provide $2,500 (far less than the $7,000-plus per person cost for Medicaid expansion), that adds up to $3,900 — not counting other potential sources.

For those who don’t sign up or can’t find an affordable plan, the unused federal funds would directly fund qualifying care by safety net providers. Assuming the worst-case scenario, where none of the 565,000 individuals sign up for insurance, $400 million would be available for primary care and $1 billion could cover uncompensated care, exactly the amount Georgia hospitals reported in 2014.  Savings would be reinvested in evidence-based public health programs to further reduce costs and improve quality.

Focusing on primary care, creating multiple sources of funding for insurance, fully funding safety net providers and reinvesting in public health is not a bad start. Even better, the cost to government is no more than what we are already spending in a very inefficient manner. The result is a plan clearly better than the status quo and an opportunity for Georgia to lead the way in solving our nation’s health care challenges.

Kelly McCutchen is President of the Georgia Public Policy Foundation, an independent think tank that proposes market-oriented approaches to public policy to improve the lives of Georgians. Nothing written here is to be construed as necessarily reflecting the view of the Georgia Public Policy Foundation or as an attempt to aid or hinder the passage of any bill before the U.S. Congress or the Georgia Legislature.

© Georgia Public Policy Foundation (August 19, 2016). Permission to reprint in whole or in part is hereby granted, provided the author and his affiliations are cited.



4 thoughts on “Applying the Lessons of Criminal Justice Reform to Health Care

  1. Great information, where can I get more. Information. I ran for office three times in New York beforehand. Moving to Georgia in 2003. Am an attorney and served as general counsel of a number of high tech companies. graduated Harvard, major. Economics and earned law degree from N Y U after some other studies at University of Hawaii while serving in US Navy ar Pear.l Harbor, as communications officer at FourteenthNaval District Headquarters.

  2. The Washington data claiming 20% savings to which Kelly McCutchen refers comes from a press release from the direct primary care provider, Qliance. ( See URL at bottom on this comment.) It shows a GROSS savings on medical care claims of $679 per patient per year. But the spreadsheet computation in that very press release leaves out Qliance’s membership fees, which average about $78* a month or $933 a year. At that rate, Qliance would appear to have produced a NET loss of over $250 per patient per year, a 7% net cost.

    * Qliance’s actual membership fees are a lot higher than the $40-80 Mccutcheon mentions. They are: $59 a month up to age 19; $79 up to age 49; and $99 for 50+. Even at $59 a month, Qliance would produce a net loss of $29 per patient.

  3. Updated: 2/18/2017. Qliance – the Washington plan that reported the miraculous 20% cost reductions to which Mr. McCutchen refers above – has a public request out explaining that it has now taken to begging the public for donations, through ” gofundme” , to save its business. They have somewhere north of 35,000 patients.

    What happens to primary care in the Seattle region if Qliance cannot find the $1,000,000 it needs in the next few weeks?

    Meanwhile, the Georgia Public Policy Foundation is backing legislation that would exempt direct primary care practices from being regulated in the same way as are other health care risk bearing entities. This would leave companies exactly like Qliance free to sign up tens of thousands of Georgia citizens without a legal requirement that they maintain adequate reserves to prevent their going belly-up and leaving health care chaos in their wake.

    In the very articles linked on the GPPF health care issues webpage, advocates of direct primary care like the Heritage Foundation, Forbes, and the John Locke Foundation have all pointed to Qliance as a poster child example of direct primary care. Sadly, they appear to completely correct; it is a perfect example.

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