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Open System Health Care

new-medical-distribution-systemI don’t know about you, but I’m growing a little tired of the lack of progress and new ideas coming forth for health care reform. I wonder if instead of making private citizens scream at their elected officials we could get those causing the problem to scream, instead? Here’s how.

Instead of reforming health insurance (which is what we mean today by “health care reform“) what if we reform the industries at the root of the problem? What if the government opens up distribution channels to the raw supplies so you can buy the stuff you need on the open market?

Let’s say you need a new knee. The doctor says, “I could buy the part and it’ll cost you $2500 or here are the specs on what you need, you may be able to find the exact same part cheaper.” (Take away the fancy titles, this is not unlike going to get a new muffler!) The doctor gives you the specs for the item you need, and you go to Amazon.com and price the part you need for the operation. Amazon.com works directly with the manufacturer in Warsaw, Indiana to carry the most commor specs and carries them in stock. Based on the laws of supply and demand, you are able to go to Amazon.com and buy the exact part you need for $800. A week later it is delivered to your house and you take it with you to your surgery.

Same thing works for medical equipment. The current system will not allow you to go to Walmart.com to rent a wheel chair that you need after your surgery. Instead, your doctor calls the local medical equipment distributor and they rent you a wheel chair for $500 that they’ve rented 25 times already but paid $322 for from the sales rep. Under the new system, since you can now work directly with the manufacturer, you go to their website and buy the thing for $280 or you go to Craigslist and pick one up for $50.

Naysayers will toss out this right away… “what about drugs? You can’t open up the drug market!” You actually can open this up as well. Your doctor could provide you with a unique code which grants you a certain prescribed drug. You make that purchase online and cut out the middle man, it’s delivered to your door. For drugs that are abused, have it delivered to the doctors office. Since the office won’t be meeting with endless drug reps and DMEs they should have plenty of time to sign for stuff from FedEx.

This really isn’t that complicated. It just opens the system up. Currently, everything you have delivered to you in the health care system is based on a closed distribution model. You have no ability to determine what the manufacturer made the item for, what the mark up was when they sold it to the distributor, what the sales rep made when he sold it to the hospital, nor what the hospital paid for the item. You only know what they are charging you for on the itemized bill. And you know that it is all negotiable because that’s what Medicaire, insurance companies, and private individuals do. So you may see that the hospital billed $5500 for the replacement knee but because it’s a closed system you have no way of knowing that the manufacturer in Indiana made it (at a profit to themselves) for $600. Consequently, the closed system is bloated with mark-up. It’s a closed capitalist system.

We’ve done this same thing in almost every industry. Why not do this to health care?

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8 Responses to Open System Health Care

  1. Matt Cleaver September 4, 2009 at 7:29 am #

    I like it!

    I actually just scheduled a post on the healthcare debate a few minutes ago, although I don’t come up with any good ideas like this.

    I’m going to go back and edit my post to link to this one.

  2. Matt Cleaver September 4, 2009 at 7:33 am #

    Oh, and something else. This was sort of (although and not near of an extreme scale) what Health Savings Accounts were supposed to do. It increased the amount of out-of-pocket expense so that people would shop around for the better deal. Didn’t really work out that way. And I’m not sure where HSAs stand in the current reform efforts, but in theory they are a great idea, they just need to be utilized by more people to take effect.

  3. Kevin Brangwynne September 4, 2009 at 8:29 am #

    Ahh, cutting out middle men, competition and the free enterprise system…Seems like it’s worked before! I like it!

  4. Stef September 4, 2009 at 10:30 am #

    We’ve done it in every industry so why not health care? Do two wrongs make a right?

    Really? Turn health care into consumerism? What happens when your $800 knee that was made by a child in India being paid $1 a day infects your leg because its bad quality and made in a plant with no safety standards? It doesnt sound smart to me. And purchasing drugs from who-knows-where? Maybe its the Canadian in me, but the American view of health care is so strange.

    The Canadian system isnt perfect, but its better than the American one. And no American media will tell you that because there is so much money in the American system.
    Check it out.

  5. adam mclane September 4, 2009 at 10:40 am #

    Ah, here we go to the extremes. I mean seriously? Did you even read the post? You think in the current system we allow that? Do you think that by simply cutting out 4-5 layers of mark-up you’re going to bypass say… the FDA? Yeah, don’t be silly. Don’t believe the crazy stuff on either ends of the spectrum.

    There’s no such thing as “death boards” or whatever wackiness the right comes up with. And there’s no socialism on the far left. (More than the socialist state we’ve had for more than 70 years in America.)

    By allowing consumers to buy from FDA approved manufacturers directly… you take a lot of the artificial inflation out of the system.

    Maybe this idea is too simple for people?

  6. alaina September 4, 2009 at 9:12 pm #

    this concept was debated on npr earlier this week. i wish i remember which show.
    i am wholeheartedly behind reform and am actually intrigued by this idea. at the same time, it isn’t just big health money behind these things. my family owns a few small pharmacies and medical supply outlets and that is their livelihood. they aren’t rich. they do well by their customers. this sort of change would destroy their livelihood.
    i’m a strong believer in a good pharmacist/patient relationship. a good pharmacist/medical supplier teaches the patient how to use their medicine/equipment in ways that amazon will never be able to do. i’m biased, obviously.
    and so i have to be concerned at a personal level, regardless of my cognitive and emotional knowledge that the health care system is very sick.
    the idea is simple, but the change and how it is carried out is hugely complicated by the fact that this system employs millions of people.
    i suppose i tend to think that the inflation of health care costs is in the insurance industry, the overuse of medical procedures to line pockets or to avoid lawsuits, and so on.

  7. Stef September 11, 2009 at 11:10 am #

    I guess we will agree to disagree. The idea of competition and a free enterprise system are not applicable to healthcare. It just doesnt make sense to me.

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