Central Payer Working Structure

Following my last essay on hospital interaction with a central payer for the American health care system, http://equalhealthcare.org/2014/03/hospital-interaction-with-a-central-payer/, I participated in a brief discussion on Twitter:

Garth Kirkwood ‏@garthkirkwood Mar 26
@kateloving Hospital Interaction with a central payer http://equalhealthcare.org/2014/03/hospital-interaction-with-a-central-payer/ … #healthcare #singlepayer

kateloving ‏@kateloving Mar 26
@garthkirkwood I so wish USA went #singlepayer instead of ridiculous ACA. We are about to pay the piper.

Garth Kirkwood ‏@garthkirkwood Mar 27
@kateloving I agree. But the question is, “Could it be run properly?”

kateloving ‏@kateloving Mar 27
@garthkirkwood not if the Feds run it– needs 2 run state by state. 

My feeling about states being involved in health care administration is that that would require at least another 50 sets of politicians being involved. Even the thought of that is energy draining and depressing. However, as I review my basic thinking about how I would run a central payer, the issue of 50 state legislatures doesn’t really apply.

For a central payer to really be a major part of the answer for our health care woes, it must function with direct human to human interaction between the people working for the payer and those working for the necessary health care businesses. Bureaucracy must be removed. Thus, politicians and all their unaccountable federal and state bureaucrats, lobbyists, and other manipulators must be removed. The business decision making regarding the price paid for service and product would be made by career-experienced people working for the central payer and interacting with, talking with current CEOs, CFOs and others working for the necessary health care businesses and then together arriving at an agreed upon amount. The ethos is make sure the necessary health care businesses are clearly profitable yet close the doorway to greed and keep the doctor patient relationship apart from and non-conflicted by dollar thinking. I believe sincere people can make this work.

The Congress will have to create the legislation for a central payer to function in a qualitatively similar manner as the Supreme Court, i.e., outside the influence of politicians, lobbyists, and other manipulators. There are many people in America, who have spent their careers in a health care arena and have by this experience accumulated a depth of knowledge about that arena as profound as the Supreme Court Justices have accumulated about the law. We should tap that knowledge base and make it work for us. What we don’t need is Washington, DC bureaucratic, make-work denizens or state-county politicians with their deal making middlemen  supplying rhetoric, which sounds important for health care but which leads us down into the quagmire of accomplishing ideologies, vote getting, payoffs and ensuring a continuing job for themselves.

Now to revisit the original question, “Would this be one federal group or fifty state groups (or more depending on the geographical size and population of the state) dividing the work load so that it can be accomplished?” Since the following apply:

  • politicians are not involved,
  • lobbying employees of the central payer would be illegal,
  • the same ethics as apply to the Supreme Court would apply,
  • the entire work load is huge,

it makes sense to have state located branches of the central payer.

Perhaps the most important aspect of this entire process is that it be kept simple, understandable and limited in scope and personnel involved at both the state branches and the federal organizing structure:

  • human to human interaction with effective decision making regarding price paid for service and product occurring in real time and being based on medical codes and the needs of the business,
  • limited number of medical codes,
  • as little bureaucracy as possible,
  • honesty, transparency, and good will between the businesses and the payer.

If there is a will for clarification and common sense regarding our health care system, we can make this approach work. The principal goal for the payer is to preserve the finest aspects of capitalism for the benefit of the necessary health care businesses and for the businesses is to remove the word, unbridled, from their lexicon with both groups remaining cognizant that dollar thinking must not interfere with or influence clinical decision making occurring within the context of the doctorpatient relationship.


R. Garth Kirkwood, MD


Hospital Interaction With A Central Payer

I do not believe that all the businesses, which operate in America with health care as some part of their mantra, are necessary. If I were directing the operation of a central payer system, I would endeavor to stop paying for them. My list of necessary health care businesses can be seen in the diagram above.

How do I see the central payer interacting with these businesses for the accomplishment of the two major goals of our health care system:

  1. non-conflicted functioning of sound, ongoing doctor patient relationships for everyone and that everyone can afford,
  2. absolute significant profitability of necessary businesses to a level short of greed?

Let’s start with hospitals. Hospitals account for a major part of our health care expenditure in the USA. http://thedataweb.rm.census.gov/TheDataWeb_HotReport2/econsnapshot/snapshot.hrml?NAICS=622

Running a hospital is a complicated, difficult job and our hospital CEOs and CFOs and their entire staff should be commended. However, there are several things that I think should be corrected with regard to hospitals in our health care system:

  • They are functioning as independent business fiefdoms, and although that may be good, the non-profit status of the majority of them is bogus in my opinion. Calling a business with hundreds of millions of dollars in revenue and with exorbitant executive salaries non-profit is just wrong in my view. They should all be labeled for-profit and pay taxes.
  • Medical decision making is being greatly influenced by the dollar bill. http://www.ydr.com/ci_23012811/inpatient-or-outpatient-63-more-often-hospitals-decide                                        http://www.theihcc.com/en/communities/policy_legislation/the-new-health-law-bad-for-doctors-awful-for-patie_gn17y01k.html                                                                                                                                                                                                 Decision making in medicine must occur within the context of the equilibrium of trust called the doctorpatient relationship, and it must stay unencumbered and non-conflicted by the dollar bill. Otherwise, you wind up practicing dollar earnings and profit instead of practicing medicine. Doctors must rise against hospital administrators and tell them in certain English that medical decision making simply does not fall under their purview, ever. In my view, a hospital administrator’s job is to direct the operation of the cleanest, most well-run physical plant possible for the purpose of helping the doctors accomplish the clinical decision making of the doctorpatient relationship in a straightforward, comfortable, convenient manner. They need to make their hospital a lovely place for doctors to practice. However, any pressure to practice medicine a certain way, which places the financial well being of the hospital in a position to influence clinical decision making, is out of bounds. Examples of this are pressure for earlier discharge, managing illness in an outpatient setting when an inpatient admission is clearly the correct way to go and pushing home health nursing checks in favor of frequent follow up at the doctors’ offices. Hospital administrators must remember that doctors have one employer, the patient, regardless of who directly pays the doctor’s income. This doctor (employee) patient (employer) relationship takes superiority over business administrators’ machinations of how best to practice medicine. A central payer must recognize and accept this same concept. The job of a central payer is to administer payment of the bill for the work performed and not determine when, where, how often, or how that work is accomplishedIf this theme of the authority of the doctor patient relationship remaining free of dollar compromise is not central to our health care system, then what we currently have will never changeThe practice of medicine in America being socialized (obstructed, manipulated, controlled) by 3rd party payers, both private and public, and hospital administrators with their medical-business personnel.
  • I believe hospitals are often staffed by a spreadsheet mentality instead of by experienced knowledge resulting in safe patient to nurse ratios in various different units within the hospital.
  • Central payer approved certificates of need for that local community with regard to hospital construction projects are also a consideration.

With this in mind, how do I see a central payer interacting with individual hospitals in an effort to make sure that they sustain good profitability? The central payer should hire very experienced health care administrative personnel, doctors, nurses, technicians, physical plant engineers and private sector health care data mining experts thoroughly experienced in medical coding and in the costs of services and products related to those codes. These people should be older, mature with many years experience perhaps even retired from their health care career, and their job would be to discuss and negotiate payments with current hospital CEOs and CFOs. This negotiation is not an argument or a contest about saving money. It is an effort to determine the exact cost of hospital admissions for various medical codes in that locale and then to apply a payment amount which significantly exceeds that. I believe this can be accomplished in a straightforward manner. I would greatly simplify the medical coding system to help this process along and I would not hire unaccountable Washington, DC bureaucrats to work as part of a Central Payer.

There is an interesting (2006) article, which describes the state of hospital billing and gives some idea of the enormity of the task I have described.

There must exist a trust between the necessary health care businesses’ leaders and the experienced people working for the central payer, both of which groups share a common goal: To keep these businesses genuinely profitable while making the health care system affordable for the American people and while ascertaining that the decision making within the doctorpatient relationship remains free of dollar thinking.

R. Garth Kirkwood, MD


A Central Payer for the American Health Care System: Financing

Presuming that over the coming election cycles we choose candidates who place common sense over ideology, civil service over serving corporate masters and who therefore get their politics right, I am hopeful that they will arrive at a structure for our American health care system which resembles the structure I have drawn above. Please see my two previous posts for a general explanation of this figure and how it should be created:



How do we finance a 2 trillion dollar health care fund which I say should pay for everyone’s entire health care bill without the need for deductibles, co-pays, cash out of pocket at the place of service, insurance premiums, health savings accounts or any other business derived dollar garnering mechanisms? Is 2 trillion dollars annually enough? I have a reference, which states that health care spending in 2012 increased 3.7% to 2.8 trillion dollars ($8,915 per person).


My feeling about these figures is this: If you can’t run the American health care system with an annual budget of 2 trillion dollars, there is something wrong with you. I believe I could. Actually, I believe I could do it for significantly less than 2 trillion dollars while keeping all the necessary health care businesses very profitable and while leaving the doctorpatient relationship alone to do its work.

What are my specific ideas for financing? I have discussed this at length in my first health care book, Equal Health Care For All.   http://equalhealthcare.org/books/  However, since the publication of this book in 2007, my thinking regarding the financing of a central payer has changed for a couple of reasons:

  • Some of the ideas in this first book promote, inadvertently I would add, the redistribution of wealthThis concept, I think, encourages further anger, resentment and discrimination towards the impoverished.
  • I avoided the concept of a national sales tax on all our purchases as contributing to this health care fund believing, at that time, that it would be quite regressive for the economically less-well-off and noting the adage, there is a big difference in living when you don’t have to worry about how much money is in your pocket when you go grocery shopping. Given the absolute plethora of people now receiving food stamps, my thinking regarding this mechanism of financing has changed, i.e., I think it is an important consideration. http://www.trivisonno.com/food-stamps-charts
Some specific ideas for financing a 2 trillion dollar health care fund annually and for reducing unnecessary health care spending:
  1. Do we really need the Department of Education? Send that budget to our health care fund.  http://www2.ed.gov/about/overview/budget/index.html
  2. Can we not identify some more of the government waste, fraud, abuse and unnecessary spending and send those monies to our health care fund? http://www.washingtonpost.com/business/capitalbusiness/federal-government-continues-to-lose-billions-to-waste-fraud-and-abuse/2013/03/08/a3fb7736-82b5-11e2-b99e-6baf4ebe42df_story.html                                                                               http://www.heritage.org/research/reports/2013/08/tight-budget-congress-can-save-42-billion-by-eliminating-bad-government-programs
  3. Should we reduce our government’s annual charity to other countries, at least until we have clarified how to pay for our own health care expenses, and send those public monies to our health care fund?                                       http://www.globalissues.org/article/35/foreign-aid-development-assistance
  4. Unhealthy choice taxes: tobacco products, alcohol, gambling.
  5. I bet there are many other examples of federal, state and local politicians just wasting cumulative totals of hundreds of billions of dollars of our money on unnecessary, self serving discretionary spendingIt needs to stop and all that money be directed to our national health care fund or be accounted for by future significant reductions in required tax payments in those locales.
  6. A national sales tax on our purchases. This spreads the financial burden across all economic strata in America, i.e., everyone pays by being taxed on what they consume. Nothing is free in the USA.
  7. Efforts to reduce the total annual required amount of our health care fund by eliminating unnecessary health care businesses, greatly simplifying the coding for health care payment, removing the bogus not-for-profit status of the majority of our hospitals, i.e., since they function as independent business fiefdoms, then they pay taxes like other businesses. Send this money back to our health care fund.
Some potential benefits of creating a central payer, which is funded by ideas like these, are that the Medicare portion of the FICA tax can be deleted; no more taxes for Medicaid; auto insurance premiums can be greatly reduced (no more health care liability in their policies); and removal of the words, indigentpoorunable to afford it from our health care lexicon
Future essays will discuss actual mechanisms of how a central payer should interact with necessary health care businesses.
R. Garth Kirkwood, MD