How We Once Provided Medical Benefits
Our country suffers from amnesia about how we used to solve problems in the not-so-distant past. It is something I hope to help correct in a new paper published by the Citizens’ Council for Health Freedom, “Safe Haven: How Mutual Aid Can Protect Families in Times of Trouble.”
This paper shows how fraternal associations once provided the vast bulk of medical benefits and life insurance in the United States and Britain. These associations were formed by working class men and women from all ethnic groups. In some cases they owned and operated their own hospitals. They also provided schools and orphanages for the children of deceased members, sickness funds for members who were unable to work, relocation assistance to help workers go where the jobs were, and moral support to families in times of trouble.
In the early 20th Century, these organizations came under attack by the Progressive Movement, which opposed self-help as interfering with the preferred dependency on and loyalty to the State. The Progressives also disparaged traditional values such as thrift, which got in the way of an economy ever more dependent on consumer spending. One leader of the Progressives is quoted as arguing in 1916 that, “Democracy is the progress of all, through all, under the leadership of the wisest.” The idea that common workmen could provide for their own needs was offensive to those who thought only an educated elite could order the affairs of society.
But today the Progressive Era is collapsing under the weight of promises it made that can never be kept. The American social welfare system currently has unfunded promises of future benefits that are double all of the wealth of the entire world. As the reality of our inability to keep these promises hits in the next few decades, the old models of neighbors helping neighbors may come back into vogue. The paper offers some ideas on what that might look like in health care.
So true Greg this is very well said. I’m impressed. Now we have non profit hospitals that charge the poor uninsured 10 times more than those with insurance.
Why are these hospitals non profit?
Press on!
Yes, the times they are a changing…and for the better in some instances. Here’s another example: Doctors and hospitals competing on the basis of price and quality via http://www.medibid.com. This approach was tried earlier this century but the time wasn’t quite right. Now with Obamacare and a market that is increasingly receptive to alternatives, a bona fide private enterprise solution to America’s ailing health care system seems possible…
One of the beneficial functions that unions have traditionally performed for their members is similar to Benevolent or Fraternal organizations. For instance, helping members save for retirement, providing workers comp, unemployment/lost income protection and health insurance. Granted, I think unions are sometime guilty of doing their members a disservice when unions demand Cadillac health benefits that unnecessarily reduce take-home pay. For example, most working people would benefit more from HSAs than from Cadillac plans that are generous, but have a use-it-or-lose-it benefit structure.
Health Sharing Ministries are probably modern day examples of fraternal organizations. I would argue that a necessary feature of fraternal organizations is the ability to police their members utilization. This is sort of like saying… “we’re here to help you, but our benevolence is not unlimited.”
You need to complete that story. In the early 20th Century, health care was often basically palliative. We had no MRIs, no CTs and no US machines. No antibiotics. Also, you had a built in work force to care for these patients as women rarely worked outside of the home. Add in the fact that you had larger families to begin with, so they could also assist in the care, and there is not much similarity between then and now. Last of all, life expectancy in the early 1900s was in the low to mid 50s. We just didn’t have that many elderly, sick folks to take care of.
(We can mostly ignore your nonsense about Progressives preferring dependency on the State. It was mostly a recognition that the care was inadequate. I work at one of those hospitals founded by workers (miners). I have access to the records and have talked with the elderly who were around during the early days of the hospital. Funding was a constant problem and during economic slowdowns the hospital was cut to bare bones.)
In which other area of our lives has technology dramatically increased over the last century?
Pretty much every single one. Even when I go out for a walk in the woods I wear an incredibly better designed and built boot than my great-grandfather did.
And we did not rely on government to buy these things for us.
Steve, if you read the paper you will see that the Progressive animus isn’t something I just made up. It is well documented. I take it your hospital was a union sponsored facility. I don’t doubt that funding was a constant problem. That was true of ALL hospitals everywhere. The Depression slashed their revenues and was part of what prompted them to form Blue Cross to better ensure cash flow.
But the essential point you are making is that relying on the government is a better deal. That has been true for the past 50 years, but have you looked at the unfunded liabilities the government has wracked up? There is no way the promises can be kept. For your own sake you may want to prepare.
Insurance is one of the best forms of mutual help ever designed.
Each person is important for the pool, and the pool, itself, is important.
How insurers have traditionally pooled their business is not only expensive for the insurer, but also very damaging for the consumer.
Insurers should look at their participants as partners, and figure out ways to keep the pool intact and growing, over at least 20 years.
Today, people switch insurers every 3-5 years.
That is extremely expensive to form a new clientele every 3-5 years.
Design plans in which premiums reduce over time, instead of increase.
Realize that every dollar not spent on claims is potentially available for reserves.
Share those reserves with the lower claimants.
Build customer loyalty by treating people fairly and respectfully.
Don Levit
Don, John and Steve,
The immense cost of modern technology-intensive medicine is partly why I said fraternal organizations that insure members should be allowed to police their members’ utilization. For example, if you are truly a fraternal organization, wouldn’t everybody in the pool care about protecting the pool? I would think protecting the pool would involve communication by the administrators to members about low-cost providers, which imaging centers offers the best prices, etc. Caring about the risk pool would also include members who tried to save money for the pool as well. Abusers could be ejected by a vote of the members for various infractions. Having HRAs, risk-based premiums and reference pricing could (hopefully) mitigate some of the tragedy of the commons.
It’s an interesting thought experiment. We know that enrollees don’t care much about the cost of treatments their employers or insurers pay on their behalf. Maybe a fraternal health organization with the appropriate incentives could encourage members to care more. But, everything I’ve described would be a major HIPAA violation. To police members, your health spending would have to be known by other members. Otherwise, peer pressure could not be used to police behavior.
That’s exactly right, Devon. Members of the fraternals were very directly involved in the well being of other members. It wasn’t so much guarding against fraud as helping them recover. There was a strong sense of responsibility among all the members and insistence on pledging to a set of shared virtues.
Devon:
You have very interesting suggestions.
“Policing” at the individual level would be the ultimate protection, individually and collectively.
We need to encourage everyone they are part of a partnership, and their “cooperation” helps ensure the partnership’s existence and vitality.
We do not have risk-based premiums, as the self-funded employer market, as you know, is community-rated.
What does happen when claims are made, however, is that his Health Matching Insurance balance reduces, thus increasing the exposure from NPLH to the employer, which transfers into higher employer reserves and premiums.
Of course, the opposite is true as his HMI account builds.
Reference pricing seems to be a very cost-effective way to set prices, and at the same time, eliminate networks.
Any willing provider that accepts the reference price would be encouraged to solicit.
Those charging more will, I assume, balance bill.
If anyone has any material on how to incorporate reference pricing, I would appreciate their input.
You can E-mail me at donaldlevit@aol.com
Don Levit