By Hunter Hastings and Murray Sabrin
Entrepreneurs solve problems for customers. There are few problems bigger than the horribly perverse medical care system under which patients suffer in the US. The system has evolved over time, with the stimulus of bad decisions, bad actors, and bad incentives. Entrepreneurship can solve the system problem with specific actions at the component level, each of which are practical and do-able, and can interact to create a new outcome at the system level.
Murray Sabrin has studied both the system and the component solutions, and he joins the Economics For Business podcast to enumerate his proposed actions.
Key Takeaways and Actionable Insights
Healthcare is a consumer good, and a consumer responsibility. Medical care is a provider proposition.
Consumer sovereignty is a cornerstone concept in Austrian economic theory. Consumers determine what is produced as a result of their buying or not buying. Does this principle apply in healthcare?
To answer requires us to differentiate between healthcare and medical care. Healthcare is an individual choice and a personal responsibility: we do everything we can to maintain a healthy lifestyle of eating and drinking, exercise and sound physical and mental health practices. In the internet age, there is plenty of knowledge available to help us in our decision-making. Medical care is what we turn to when sound healthcare proves to be insufficient to keep us off medication and out of hospital.
How do consumers realize value from medical care providers? To do so is very challenging due to (among other barriers) price fixing, price opacity, price inflation, monopolistic and duopolistic market structures, the misuse of insurance, bureaucratic management, perverse incentives, government intervention, and barriers to entrepreneurial entry.
Are there potential solutions in the face of this systemic dysfunction? Yes: solutions that come from the best countervailing source — entrepreneurship.
Entrepreneurial Solution #1: Direct Primary Care — Restoring the doctor-patient relationship.
Murray Sabrin recalled the $5 doctor visit of the past, characterized by a personal relationship with no bureaucracy or insurance forms. Entrepreneurs are now re-establishing that relationship via Direct Primary Care. DPC is retainer fee-based access to unlimited doctor visits, including office-based testing and additional services, with no insurance forms. DPC doctors have fewer patients in their practice and can consequently provide more time and attention. Stronger relationships are built, which is the essence of entrepreneurial value-generation.
Entrepreneurial Solution #2: Transparent versus distorted pricing.
Pricing is one of the most important bulwarks of free markets. In medical care, pricing is opaque to the point of invisibility, distorted, and inflated. It is unresponsive to the normal choice-based supply-demand mechanisms, and not indicative of value.
Some entrepreneurs are acting to change these pricing conditions via what is termed fee-for-service: transparent pricing for specific services. An often-cited example is Surgery Center of Oklahoma, where specific prices for specific surgical services are openly posted on their website. Other members of the Free Market Medical Association provide similar price transparency.
One of the results is revelatory price comparison: Murray told the story of a DPC practice patient who identified a 75% price reduction at Surgery Center of Oklahoma compared to a local South Florida hospital.
Entrepreneurial Solution #3: One stop shopping at local non-profit clinics.
Murray described the launch and success of several non-profit local and regional clinics, including one for which he was the founding trustee. These are philanthropically established and funded local clinics with volunteer staff, providing a range of services. Equipment and pharmaceuticals may be fully or partially donated by the manufacturing companies. The combination of direct primary care doctors and specialists can make these clinics one-stop shopping solutions for patients seeking quality medical care. With a little philanthropic assistance, they could eliminate the need for Medicaid.
Entrepreneurial Solution #4: Direct Contracting.
Insurance companies purposefully inflate medical care prices to fund their business model. Murray told the story of a large (4-500 employees) company that contracted directly with a service that brought a vehicle with an MRI machine to the employers location, and charged $400 per MRI to the employees. The same vehicle was utilized by a nearby hospital that charged $6,000 for the same MRI. Direct contracting saved $5400 per unit cost, or 90%.
Direct contracting has the potential to significantly reduce costs in the Medical Care system, while opening access and increasing convenience.
Entrepreneurial Solution #5: The 3-tier household medical care budget system.
Murray has a well-constructed and eminently practical household medical care budget system. There’s a version for families with at least on member in employment and an alternative for those on Medicare today. There are three elements:
- Direct Primary Care for a monthly fee, covering unlimited office visits and routine tests.
- A Health Savings Account to cover costs of specialists, prescription drugs, medical equipment, major tests and brief hospitalizations.
- Catastrophic insurance coverage for major operations and hospitalizations and long term care.
Greater detail is provided in Murray’s book, Universal Medical Care From Conception To End Of Life.
Download our corresponding PDF, which features an adapted table from Murray’s book: Mises.org/E4B_137_PDF
In a system of personal responsibility, we would all manage our household medical care budgets with these kinds of tools.
Entrepreneurial Solution #6: Voluntarism And Mutualism.
Voluntarism has a long tradition in America. Mutual aid societies were prevalent before the New Deal. Ethnic, religious and trade groups joined together for mutual support. The Federal Government co-opted these functions and now people look to Washington DC to solve their problems.
But young people today are more interested in voluntarism and non-political social activism. 30 years ago in the Wall Street Journal, Peter Drucker argued for the non-profit sector to replace the welfare state. Creative and innovative people find ways to surmount institutionally-erected barriers in all phases of life, and medical care is certainly one of those. There’s a liberating and energizing sense of acting as the custodian of one’s own life and helping others who need it. It’s the entrepreneurial ethic.
Entrepreneurial Solution #7: Distributed Knowledge.
There is so much available knowledge today about healthy life habits and about the symptoms and characteristics of various medical conditions, and about options for treatment. We as individuals are free to explore, and responsible for gathering our own store of knowledge. The outcome of the research may not be definitive, and we may find ourselves making a choice between alternatives. But doctors and hospital administrators make choices too, and they are not infallible. It may be possible for an individual to gather more knowledge about their own specific condition from the internet than any single doctor can know, simply as a consequence of concentrated effort. Each of us can take responsibility for our own life.
Summing up: Murray Sabrin’s prescription:
- Eliminate employer-based insurance.
- Make a single exception for the case in which the employer pays the direct primary care fee for the patient.
- The resultant employer savings are deposited in employees’ health savings accounts.
- Employees determine their best medical care options.
- Phase out Medicare and Medicaid.
- Let young people create super health savings accounts so that they don’t need Medicare in the future.
- Hospitals price at realistic market pricing, not insurance-inflated prices.
- All prices are transparent.
- Get the government out of medical care — it’s none of their business.
- Free up resources from the medical-pharmaceutical-insurance complex and redirect them to savings, investment and philanthropy.
Listen to Podcast HERE.
Read Murray’s book, Universal Medical Care from Conception to End of Life: The Case for A Single-Payer System: Mises.org/E4B_137_Book It’s self-published and all proceeds go to charity and non-profits.
“Individual Single-Payer Alternative For Employer-Based Insurance” (PDF): Mises.org/E4B_137_PDF
Surgery Center Of Oklahoma: surgerycenterok.com
Direct Primary Care Coalition: dpcare.org
Volunteers in America: vimamerica.org
Note: The views expressed on Mises.org are not necessarily those of the Mises Institute.
Hunter Hastings is a member of the Mises Institute, Business Consultant, and co-chair of the Rescue California Educational Foundation. He is also host of the Economics for Entrepreneurs podcast. You can find Hunter’s writings on entrepreneurship at hunterhastings.com.
Murray Sabrin is professor of finance at Ramapo College and the author of Why the Federal Reserve Sucks and Tax Free 2000: The Rebirth of American Liberty. He blogs at MurraySabrin.com and other sites, including EconomicPolicyJournal.com. He wrote and produced the documentary, The Federal Reserve: 100 Years of Boom and Bust. He is currently working on a documentary about the income tax. Dr. Sabrin is president and co-founder of Inversquare LLC, manufacturer and distributor of Conger LH, the world’s first Lubrihibitor.