Four years ago I had the good fortune to contribute to a Special Section in this very Bulletin to encourage psychologists to get involved in health care reform (“Who do you want to design your health care system?”, Independent Practitioner, Fall, 2003). That section presented two plans for health care reform designed by psychologists Kathy Rudy and Ivan Miller, with analysis by psychologist-experts in health care reform Nicholas Cummings, Arthur Kovacs and Pat DeLeon.
Dr. Miller subsequently refined his proposal, presented it during Kathleen O’Connor’s “Build An American Health System Contest” in 2003 where it was judged to be among the top 10 proposals. He has now published this as “Balanced Choice: A common sense cure for the U.S. Health Care Systems” (Miller, 2006). The IP has been gracious enough to request a review of Balanced Choice and to provide access to its pages and hopefully to its readers’ precious time and attention. In my view, Balanced Choice should be strongly supported by psychologists. It is good for psychologists and those for whom we care. Beyond our immediate interests, Balanced Choice solves dilemmas related to fatal structural problems in our current health care systems (Balanced Choice documents no less than seventeen health care systems operating in the U.S.). It provides universal coverage through a system that avoids the pitfalls of a government-based single payer system. It will be easy for health care consumers to understand, affordable for consumers to use while offering maximum choice. It will be easy and very cost-efficient for solo practitioners to small and large health providers systems to administer. Because Balanced Choice is not a health financing system and not a health care management system, it will greatly reduce intrusive “management” into daily health care practices, while at the same time including mechanisms to sustain quality care. Balanced Choice greatly reduces the current burdens on employers and provides a foreseeable promise of stability in employer costs. Most importantly, it offers a likely politically viable solution, bringing together health care consumers, practitioners and employers as the strong alliance driving change.

Key features of Balanced Choice

It is quite challenging to summarize Balanced Choice in a few pages, and there is a risk of oversimplification. Though the plan’s structure and funding are not complex, the implications are profound, and there many well-thought through and clearly presented examples in the book. At the outset I would like to acknowledge that any errors in the following are my own and not in the original, and the reader is strongly encouraged to read the 170 page Balanced Choice. The prose is very clear, and the book structure logical. The first chapter of the book is available for download at www.BalancedChoiceHealthCare.org. Any page numbers in the following refer to the text unless otherwise referenced.

Two Plans

Balanced Choice provides two plans, the Standard Plan and the Independent Plan, which are always available for all practitioners and consumers. Both plans provide comprehensive care including mental health benefits. The Standard Plan covers emergency room care, a pharmacy benefit and long term care. The first two primary care visits annually are covered in full to encourage preventative care. Additional primary or specialty care visits require a small copayment, and a modest “gap” payment is required for medications and some laboratory tests. Practitioners are reimbursed by Balanced Choice under a standardized fee schedule. Copayments are covered for consumers who cannot afford them due to low income or catastrophic health conditions. For example, if the Standard Plan reimbursement is $100 for a psychotherapy visit, the patient copayment would be $10 and Balanced Choice reimburses the psychologist $90.

The Independent Plan provides the same comprehensive coverage as the Standard Plan. Practitioners are reimbursed with a “base payment” from Balanced Choice, and consumers pay the “gap” up to the practitioner’s fee. The Balanced Choice base payment to the practitioner is a percentage of the Standard Plan reimbursement, not the full Standard Plan reimbursement, and the patient’s responsibility is the difference up to the actual charge. Practitioners’ charges are always expressed as a percentage of the Standard Plan reimbursement. For example, if the Standard Plan reimburses $100 for a psychotherapy visit, and the psychologist’s charge is 115% of the Standard plan reimbursement, the psychologist is indicating she charges $115 for an Independent Plan patient. Balanced Choice would reimburse 85% of the Standard Plan reimbursement, or $85, and the patient’s gap payment would be $30. By only paying a percentage of the Standard Plan reimbursement for an Independent Plan patient, Balanced Choice has a built in mechanism to minimize practitioners drifting toward taking only Independent Plan patients, maintaining quality of care and access within the system, and also limits inflation in health care costs. Under the Independent Plan, practitioners are able to set fees as they wish. Consumers have greater choice of practitioners who may offer incentives such as specialized training or expertise or unique features of treatment visits in exchange for a higher gap payment.

Flexibility between Standard and Independent Plans

Practitioners determine which plan to use when beginning care. Practitioners may transfer a patient from the Standard to Independent Plan with one year’s notice, or from Independent to Standard Plan at any time. Practitioners thus have flexibility to determine reimbursement “case mix” depending on their situation. Consumers have freedom of choice to select a practitioner accepting Standard or Independent Plan patients. It is quite conceivable a patient may have a Standard Plan primary care practitioner and be seeing a specialty care practitioner under the Independent Plan, or choose a less expensive Independent Plan specialty care practitioner for particular procedures.

Gap payment

This is defined as “Payments a patient makes to cover the difference (or gap) between a set base payment made by Balanced Choice funds and the actual cost of a service” (p. 159). Gap payments are “last dollars” because they are paid after Balanced Choice has made its base payment. This approach is critical to the system because it introduces cost-consciousness for consumers and practitioners as well as elements of a true free market system, both lacking in the current insurance-based system. Because Balanced Choice has made the base payment, practitioners using the Independent Plan will want to set their fees at a level the market will bear so that consumers will choose an affordable gap payment. Consumers will bring pressure to bear on the market through purchasing choices.

Balance between Standard and Independent Plans

Balanced Choice includes a mandatory funding split. This requires setting Standard and Independent Plan funding so that 60% of Balance Choice funds supply the Standard Plan reimbursement, and 40% supply the Independent Plan base payments. A Balanced Choice Governing Board operating similarly to the Federal Reserve Board evaluates and adjusts reimbursement to maintain the 60/40 funding ratio six times per year so that “reimbursement adjustments are gradual and responsive to changing markets” (p. 35). This mechanism is essential to ensure that Standard Plan care does not drift to become of lesser quality and that patients seeking Standard Plan care do not begin to encounter difficulties in access. Providing a greater proportion of funding to the Standard Plan side of the Balance Choice also takes into account that more funds are likely to be spent under Standard Plan reimbursement, with all emergency room care reimbursed through the Standard Plan and the likelihood that those with catastrophic or chronic health conditions are more likely to seek care under Standard Plan reimbursement.

Funding Balanced Choice

In my view this is the most creative and ingenious dimension to Balanced Choice The funding structure solves systemic problems that seem intractable. At the same time estimated savings in the proposal are so great that $108 billion becomes available to cover all who are currently uninsured, reduce employers’ contributions by $100 billion, while freeing up an additional $50 billion of unallocated funds which could be directed toward research or other key initiatives. If this sounds “too good to be true,” I can only encourage you to read the proposal fully. Dr. Miller addresses the “too good to be true” sense these numbers cannot help but raise more than once in the book: “It is not that Balanced Choice is too good to be true, but that the current insurance-driven and managed care system is so bad that there is plenty of money for a sensible system” (p. 12).

How does Balanced Choice solve the funding conundrum? “Balanced Choice would obtain funds from sources that are already paying for health care in generally the same proportions they have been paying” (p. 43). That is, funds are contributed to the Balanced Choice fund from employers, state and federal governments. Consumers also continue to contribute to the purchase of health care in the form of gap or copayments as well as in the form of employee contributions – though those are likely to be less than the amount consumers currently spend for health insurance coverage and medical portion of automobile insurance, with the added security that the same Balanced Choice coverage continues should a person become unemployed or move to a different job. The tremendous savings comes from the fact that all health care funding is contributed to a single Balanced Choice fund, eliminating multiple redundancies and waste in administrative costs.

Lest the reader think this could not possibly create the “too good to be true” savings estimates, Balanced Choice addresses these estimates in Chapter 4, “An outline for financing Balanced Choice.” As an example cited in the book, administrative costs have been estimated to be 31% of all health care expenditures in the U.S., which may be comparable to about 17% in the Canadian system (Woolhandler, Campbell & Himmelstein, 2003). In terms of actual dollars spent, converting to a single fund system (though with several two “source payers,” not a “single payer,”), based on 2004 National Health Expenditures figures, this translates to a conservative estimated savings of $258 billion. Balanced Choice proposes moving to the single Balanced Choice fund, creating the potential to distribute the amount saved to immediate reductions in employers’ contributions, to funding care for the uninsured, with additional funds “unallocated” and potentially available for research or other needs.

Why Balanced Choice Works for Psychologists

Balanced Choice places psychologists firmly within the funded health care system. A mental health benefit is a part of the comprehensive plan. This is no small critical feature. We only need to look to other universal health care systems in which doctoral psychologists are not included or where inclusion has only recently begun. It is not too difficult to imagine health care reform designs which take the shortsighted approach to “saving” costs by minimizing or eliminating coverage for mental health conditions. Indeed, this is precisely what has occurred with insurance policies with meager mental health benefits which are additionally aggressively “managed.” A hidden risk in federal level parity legislation which may be moved forward in the near future is a definition of “parity” which includes equivalent coverage for mental and physical conditions if the policy includes mental health coverage. Likely some insurers will opt not to include mental health benefits at all.

In addition, because coverage is universal, Balanced Choice makes access to psychological services available to a much broader population including those who currently are under- or uninsured. This immediately greatly expands practice opportunities. Balanced Choice includes built-in, professionally driven mechanisms to define “necessary care.” Definitions of “medical necessity” are not tainted by profit-driven insurers with limited short-term horizons. The overall health care system is adequately funded and there is systemic incentive to maximize health across the lifespan. Psychologists have much greater opportunity to participate actively in providing health care at a reasonable level of reimbursement and so that one of the clearly known values of psychological treatment – “cost offset” – is actualized in a way not possible in the current system. While these are strong arguments generally for universal health care, Balanced Choice has unique features which prevent problems in most other “universal coverage” plans. Funding is not primarily solely government-based controlled. Unlike universal health care voucher plans, there is no risk of creating an unbalenced “two-tiered” system of care, separating those afford to purchase more costly plans from those who cannot.

One of the key strengths of Balanced Choice for psychologists is the flexibility in deciding whether to accept patients under the Standard or the Independent Plan. Under the Standard Plan, psychologists will have a known level of reimbursement which will always be balanced to keep pace with market factors driven partly by consumer choice and by the number of patients being accepted under the Standard Plan – influenced by practitioners. Furthermore, psychologists will have the choice to set rates at a level which can be determined individually, based on the psychologist’s own practice circumstances. Flexibility is complete in the sense that this may be done on a patient-by-patient basis, or by providing some services under the Standard Plan and some under Independent Plan reimbursement, for example should the psychologist have additional training or expertise or perhaps a particular geographic circumstance (i.e., a market condition) makes a service valued differently. This flexibility eliminates one of the key problems under Medicare, with practitioners having the possibility to opt in or out for all covered patients and services, and opting out for a minimum period of two years. Psychologists would have the potential to vary reimbursement decisions proactively and in response to both short- and long term business planning.

Psychologists should not underestimate the relief and cost savings they may see as small or large employers. Psychologist-employers who currently contribute to health care coverage for employees would see the same levels of relief as other employers currently funding health care, and would share in the estimated $100 billion savings in current health and worker’s compensation insurance and related health care burdens American employers now have. For solo or small group practitioners with one a few employees who might not currently be providing contributions to employees’ health care coverage, contributions to Balanced Choice will be phased in at a rate not likely to cause increased expenses at a greater than the cost of inflation, while eliminating state and federal worker’s compensation payments.

Perhaps a less visible but nevertheless extremely meaningful relief psychologists will experience with Balanced Choice is the elimination of most of the onerous micromanagement of mental health benefits seen under current insurance and managed care systems. Though not previously described, Balance Choice proposes to create a “Consumer Health Advocacy Organization,” designed to remain independent from Balanced Choice, taking a consumer-first orientation in providing information and research into effective treatments. This organization improves quality through education, not coercively managing treatment. Balanced Choice identifies principles for limiting the development and implementation “treatment guidelines” such as the importance of professional judgment and consensus; “full disclosure and transparency” (p. 76) in the development of practice guidelines; flexibility in use of useful treatments when professional consensus is not yet fully developed; and allowing patient choice and self-determination in selection of treatment alternatives. These principles put psychologists firmly in the center of decision-making in collaboration with patients and in development of guidelines, not passive recipients of proprietary definitions and guidelines developed by those with financial incentives to limit access to care. Balanced Choice has sufficient other built-in mechanisms to minimize health care cost inflation and does not interfere in the patient-psychologist collaborative relationship in order to control costs. In addition, it will be important for psychologists to bear in mind that Balanced Choice is not a traditional single payer or government-based controlled health care system. It will not replace a multitude of insurers managing care with one central payer managing care, with no “opt out” choice. That is a much feared “solution” to our current system that is unacceptable to many psychologists practicing independently. Balanced choice is a financing system designed to fund care provided by independently operating practitioners. Reimbursement comes from both the Balanced Choice fund and from patients, and psychologists will have the potential to set their own fees. It does not intervene in health care decisions, and practitioners have independence in fee-setting via the Independent Plan.

Finally, and for a very basic practical matter, I imagine none of us would overlook the time and administrative cost savings and relief we would experience submitting claims to one location, knowing in advance how much will be reimbursed and with certainty that it will be reimbursed.

Future Questions

Among other issues, Balanced Choice will need to examine in more detail some of the fundamental financial assumptions to determine how much it can save; whether the 60/40 balancing split between the Standard and Independent Plans is the right proportion to maintain quality of care; how inevitable future cost increases in health care can be contained; whether the cost-sharing model of copayments and gap payments in the context of the potential for independent fee-setting and universal coverage will introduce sufficient free market incentives to limit health care cost inflation; and to identify priorities for the savings that will be realized. In the short term Balanced Choice will need to develop support from practitioners, consumers and employers, all of whom stand to benefit substantially from such a health care financing system. I hope that this brief introduction to Balanced Choice raises sufficient interest among psychologists to examine the proposal fully, understand how it works for psychologists, and ask the question, “How can I get involved in moving this forward?”

For more information visit www.BalancedChoiceHealthCare.org

References

Herz, G. (2003). Who do you want to design your health care system? Independent Practitioner, Fall 2003, Vol. 23, No. 5, 182-193).

Miller, I. J. (2006). Balanced Choice: A common sense cure for the U.S. health care systems. Bloomington, IN: Author House.

Woolhandler, S., Campbell, T, & Himmelstein, D. (2003). Costs of health care administration in the United States and Canada. New England Journal of Medicine, 349, 768-775.