FEBRUARY 9, 2015 – A free trade zone (FTZ) is a region where a group of countries has agreed to reduce or eliminate trade barriers.
The world’s first Free Trade Zone was established in Shannon, Ireland (Shannon Free Zone). This was an attempt by the Irish Government to promote employment within a rural area, make use of a small regional airport and generate revenue for the Irish economy. It was hugely successful, and is still in operation today. The number of worldwide free-trade zones proliferated in the late 20th century. In the United States free-trade zones were first authorized in 1934. http://en.wikipedia.org/wiki/Free_trade_zone
So, if FTZ’s have been so successful and if their stated purpose was to “reduce or eliminate trade barriers”, then it would beg the question: why do we have trade barriers and why are they are still tolerated? For the cynical and the politically astute, that seems like a rhetorical question. But nonetheless, it is a sincere and serious question that we need to wrestle with.
The answer, of course, is that there is an endless list of political justifications for tariffs, taxes, customs regulations, quotas, safety and public health laws. Some of these may even have a degree of validity, but most are a shrouded form of protectionism where industries and trade associations hide behind government regulations to give them an unfair advantage in the market. Not only do they hide behind government regulations and laws “for the general welfare” but they actively lobby and spend billions to ensure those regulations and laws never go away.
Examples abound. For instance, there is free market-friendly Uber vs. the taxi cab industry with its outrageous business license fees and regulations, which amounts to a payoff to the municipal governments while conveniently making entry into the market nearly impossible for competitors. Law suits from taxi drivers have already began in an attempt to outlaw Uber. Or, the art of African hair braiding which faces an uphill battle with restrictive trade practices caused by government-industry collusion, where in many states the practice requires an expensive cosmetology license and time-consuming “training” ostensibly to protect the public.
Another notable example is the market controlling oligopoly of health plan networks that leverage the tax-favored treatment of employer-sponsored benefits to guarantee a subscriber base of between 160 to 180 million people. This market-cornering position, catalyzed by our tax code, has been further solidified by passage of PPACA which mandates “coverage” for the so-called 10 essential benefits; and provides limited financial protection to insurers against adverse selection of risk and the expense of mandating guaranteed issue despite health status. Recall, with the exception of self-insured employers, there is no mechanism in PPACA to be in compliance with the law short of having a compliant policy (or pay the fine, uh excuse me… the tax).
But these government-given advantages enjoyed by the health plan networks are just the icing on the cake compared to the fact that these network health plans utilize strictly defined benefits that rely on a totally separate provider contract that must be in force in order to use those “benefits” (really mostly pre-paid health maintenance plan that is heavily restricted)!
And, to make matters even more economically perverse, a non-negotiable cumbersome and expensive claims process is required by the payer and must be filed by the provider for each encounter used by a subscriber, no matter how minor or inexpensive. It is only after the properly documented and coded claim has been filed with the payer that the doctor gets paid.
Does anyone else see a problem with this arrangement? And yes, it is all very legal. But that doesn’t mean it is prudent or even ethical to continue this convoluted, monopolistic, expensive, and restrictive method of accessing and paying for healthcare!
I contend health plan networks and the infrastructure that supports them, are simply a cartel. They are definitely not part of a healthy functioning free-market.
Look carefully at the characteristics of how health plan networks operate and follow the money flow from start to finish. What holds it all together? Despite its byzantine complexity and 40+ years of being entrenched into our national psyche, there is one linchpin that holds the whole perverse system together. Any guesses?
The secret ingredient is the physician contract! The provider (or provider’s employer) buy-in is what propagates and guarantees the survival of this behemoth. Without provider network agreements, the whole thing collapses like a house of cards!
Imagine about 220,000 independent primary care doctors connecting with about 160 million patients. Interestingly, that comes to about 720 patients per provider, which is very similar to the panel size of many Direct Primary Care doctors. Who knew?
So let’s play this out. What would it look like if physicians and providers pulled out and became independent, leaving the contract between the subscriber and the insurer?
First, the current health plan policy as written would be useless and the benefit structure would have to change. No one would pay the exorbitant premiums if the rules of engagement changed. If patients are paying directly for routine, non-catastrophic care and then seeking reimbursement for more expensive or unexpected occurrences, then you can bet terms would change and premiums would fall. It is likely patients would demand a defined contribution plan combined with catastrophic coverage from their employer where they could shop with their own money, thus exerting consumer pressure on prices for a change. Or, maybe critical illness plans would come into favor which pay a cash benefit directly to the patient based on events and certain diagnoses.
What would the response be from doctors? They could immediately reduce over-head costs of filing, billing and A/R and reduce fees between 25 – 40%. Or they could stop charging for services rendered and instead chose to use a subscription model (membership) where patients pay for nearly unrestricted access with a low monthly fee. With advance pricing capability finally operational, we would see price transparency dominate instead of being a rarity. And since it is impossible to know value without real prices, it would be easier for patient-consumers to determine where to best spend their healthcare dollars. Online price posting would become the norm, not the exception.
I think you get the picture. If physicians were to opt out of contracts and stop acting as the billing agent for the payer, it would have a deflationary effect on healthcare industry prices. Now, would that be disruptive and even chaotic for a while? You bet it would. But the market will figure it out if people are steering the ship and sending accurate signals to suppliers of care with their own money.
If doctors collectively decide to drop or not renew contracts over the course of two years, and say “no” to the manipulation of costs and the control wielded by network cartels, and take back their professional autonomy, then we can have a paradigm shift to Fair-Healthcare Zones where the doctor-patient relationship is central once again and routine care is more affordable and accessible.