“A Restored Retail (FFS) Medical Marketplace, Fix or Fantasy?”
Meeting Minutes MPPA Zoom meeting 4-17-25
“A Restored Retail (FFS) Medical Marketplace”
Those present: Dave Racer MLitt, Bog Koshnick MD, Bob Geist MD, Waynw Zuehlke CPA, Prof. Robert Kennedy PhD, Dave Feinwachs JD PhD, John Diehl JD (contribution read by RWG). {Bracketed comments are by the secretary.]
1. The Nature of a Retail Medical Marketplace.
1a. Dave Racer asked us to consider how a retail FFS medical marketplace
may be created, since currently only 2% of clinicians have a cash practice, and there is no clear path to creating or restoring a retail medical marketplace. He wrote:
Many MPPA followers are united in our hope to create a health system that provides access, quality, and affordability to patients. We seek a place where physicians can practice the art of medicine for the benefit of patients.
We recognize that the corporate models of health care delivery and payment consider patients a product that is treated like a commodity; the system in general produces relatively good patient care, but at an exorbitant price. The price of care and the prepaid health plans to purchase it may have already passed their point of affordability.
We have focused on reforms that require physicians and patients to have skin in the game. Our reforms are meant to leverage “patient power” to force the system to bend in a way that produces somewhat of a true, competitive marketplace for the delivery of medical and mental health services.
Overcharge, Why Americans Pay too much for Health Care (Charles Silver & David Hyman, 2018, The CATO Institute) attempts to analyze the problem and provide marketplace solutions. CATO, the Libertarian “think tank,” makes many assumptions about people and how markets act and react to inputs controlled by patients, just as John Goodman did in his classic Patient Power (CATO, 1992).
Would a true patient-driven, friendly health care marketplace “cure” our system? What would such a system look like? What are its features? Why has it not yet happened since that 1992 book? What are the barriers to creating such a marketplace? Can it be done?
1b. Bob Koshnick examined patient empowerment in a retail FFS retail medical marketplace.
He noted that HSA-HDHPs are now bought by 72 million people. He thought that the means Charles Silver and David Hyman suggested to fund a retail market were good, namely government social security, earned tax credits, [and akin to food stamps too]. These work to empower individuals and that the same means could work in medicine. Koshnick noted that this causes patients to pay attention to prices and would be prudent in seeking care. He found with that the current public sector defined benefits created infinite demand and that a better policy would be defined contributions insurance. He wrote:
David Hyman and Charles Silver, in Leveraging the Medicaid Expansion [1]: “We propose that Rather than adhering to Medicaid’s traditional structure, where states pay providers at unreasonably low rates for treating beneficiaries, expansion projects should be modeled on Social Security and the Earned Income Tax Credit, both of which distribute money that recipients can spend as they wish.”
Hyman and Silver point out that “This simple but fundamental design change would ameliorate or eliminate many of the major problems that existing third-party payment arrangements foster.” The article further points out that this would overcome the three major problems why states stay out of Medicaid expansion, namely the impact on Medicaid on states’ budgets, widespread fraud, waste, and abuse, and poor performance where costs exceed its value.
The way that it would work is that state legislatures would periodically deposit set amounts into recipients’ health savings accounts (HSAs) that are accessed by debit cards, thus changing from defined benefit plans with unpredictable costs to defined contribution plans with set costs. These state funds would be matched with federal funds using the same formula that applies to states that have opted in. Beneficiaries could use the funds to purchase catastrophic health insurance, join comprehensive care organizations, or pay directly for their medical care. They point out that catastrophic coverage plus direct primary care “might be especially attractive to many consumers.” States may force people to buy catastrophic coverage and deduct the premiums from future contributions to their HSAs to prevent people from gaming the system.
This approach is designed to empower patients by giving them direct control over their healthcare spending. By doing so, it incentivizes them to make cost-effective decisions and encourages competition among healthcare providers, ultimately driving down prices and improving the quality of care. Moreover, it simplifies the administrative burden on states and healthcare providers, allowing resources to be more efficiently allocated. As a result, this proposed model not only addresses the financial constraints and inefficiencies associated with Medicaid but also promotes a more sustainable and patient-centered healthcare system.
Hyman and Silver point out that Medicare could be handled in the same way. “The Veterans Health Administration (VHA) could “give veterans money and allow them to obtain services from local providers.” The CHIP program already allows the use of private care. Private insurers and employee benefit plans could also be similarly structured by contributing to people’s HSAs while requiring catastrophic coverage.
Empowered patients and American families control of their medical money would be able economize and seek the highest value through Health Savings Accounts, Flexible spending Accounts, Health Reimbursement Arrangements, etc.
1c. Bob Geist related the way to create a retail medical marketplace in Medicaid.
It could be created to control the costs of Medicaid through empowering enrollees with cash on a debit card for use in a mini-OP retail marketplace where onsite payments make HMO-ACO corporations irrelevant and where TPA overhead cost of autopay for services is miniscule.
He noted that there had been two prior eras of a free retail medical marketplace, The first from 1875 to 1965 without inflation and the second for 2004-2009 after congressional law restored a free market for sale of real (non-prepaid) HSA-HDHP insurance. The affordability of HSA-HDHP insurance and related FFS paid for services dropped the rate of premium inflation to less than zero in MN by 2007 and by 2009 had almost broke the business model of high priced prepaid comprehensive “coverage” Plans. Obama killed the HSA-HDHP free market insurance model by regulation to make way for creation of Obamacare more powerful crony (government backed) corporate cartels to ration “free” prepaid coverage for cost control.
The pending MN Medicaid reform legislation (SF 1261 or “FMA bill”) is a true revolution: a mini retail FFS Outpatient (OP) free market in a public program. Geist outlined how this would work for enrollees (“follow the money”) and would create state fiscal sanity and transparency. He predicted that the results from eliminating MN Medicaid HMOs would solve the problems of huge expensive corporate bureaucracies profiteering from rationing care and upcoding. Simple TPA payments (Personal IDs redacted) would be available public information unlike the hidden destination of funds in HMO corporations.
If the pending MN Medicaid program became a paradigm for other states and the concept was tailored for Medicare, public program fiscal sanity would be restored with elimination of the MCO industry. Patient quality of care would be improved by professional clinicians practicing medicine instead of corporations practicing solvency scams.
Geist posed the Question: What would a restored FFS retail medical marketplace look like without the corporations? A: Source of funding the debit card is the state Medicaid program. A: 213D comprehensive benefits would still be mandated. A: Medicaid service rates would be the same as Medicare rates, about a 25% increase. A: The baronial hospital ACO insurance associated palaces for rationing care will not be empty. Why? The inhabitants will coalesce into small and large professional clinic corporations renting space to practice medicine. A medical building where lots of practices make it a one-spot shop. None will be burdened by the financial risk of being insurance corporation bedside rationers of care begging for higher capitation pay rates at mega-payer (CMS-HMO) auctions of patient populations to be serviced.
2. The Nature of the CPOM dystopias. Remedies? John Diehl.
John was unable to attend the meeting. But he had written for us:
The legal prohibition of the “corporate practice” of a profession is a universal and long-standing doctrine. It is essential to the protection of the people being served by the professional – patients in the case of a physician and clients in the case of a lawyer. By definition, a professional is one who has mastered a complex body of knowledge and related set of skills, and in serving a patient using his/her knowledge and skills plus a professional has an inviolate duty to always act in the best interest of the patient. This duty supersedes self-interest and duties to others.
In Minnesota, this was originally established as a common law doctrine in 1933, and the doctrine has been applied in various ways to the ownership of professional practices and payment for professional services. The focus whenever the issue has arisen has been whether the characteristics of a structure or relationship might compromise the professional’s duties to the patient, and the Minnesota Supreme Court explicitly summed it up by declaring that in a doctor-patient relationship, “there is no room for a middleman.” The court decisions that established this doctrine, one with a lawyer and the other with a doctor, both involved a business enterprise that arranged for the professional services and stood between the patient/client and the professional . . . charging the patient and paying the professional whatever was agreed upon between them, and, in turn, selling the professional’s service to the patient.
In the 1950s an exception was made in the establishment of Group Health, Inc. This exception focused on the probable effectiveness of certain features that were intended to maintain the protection intended by the corporate practice prohibition. In the model that was approved, the corporation was a membership-based nonprofit corporation and its corporate purpose was to arrange medical services for the members of the corporation. The members were the patients. So, no profit motive, and the entity was controlled by patients (to whom the professional duties run). Furthermore, the corporate documents (which, as a matter of corporate law, control the authority and activities of the entity) provided that no one could control or interfere with medical decisions in patient care.
In the 1960s another exception was allowed to give professional groups the flexibility needed to establish pension or deferred compensation plans that, under the tax laws, could only be created by corporate employers for their employees. The accommodation in that situation was the adoption of laws allowing the creation of professional corporations. The prerequisite for this is that no one other than members of the profession for which the corporation was established could be owners or members of the board of directors. Obviously, those individuals are subject to the same professional duties, so by this requirement the integrity of the profession is assured. Also, the professionals’ licensing agency is a part of the establishment of each professional entity.
In 1973 the HMO Act in Minnesota addressed this issue simply by declaring that operating an HMO is not the practice of medicine, which sufficed to get that service delivery/financing model off the ground without being stopped by the corporate practice prohibition. However, in the fifty-year evolution of that model it has become apparent that the original system design has been abandoned in favor of federally controlled ERISA plans, without the strategic imperative of the HMOs, i.e., the organization, coordination and financing of a comprehensive array of health care services with incentives for prevention, early detection and accessible service appropriate to maintain health. This distortion of the HMO model has given Americans poor access to service in a very expensive system, often with the loss of all on-going professional relationships, and with a monolithic payment arrangement and/or practice settings that are controlled by interests other than the patient or the professional, and that are openly used to control treatment settings, and treatment decisions.
The hoped-for benefits of the HMO model have been removed from our system and the prohibited “middleman” now pays physicians for piece-work according to lay managers’ production/revenue plans, and the middleman reaps unimaginable profits.
The profession has been corrupted. The purpose of the corporate practice of medicine prohibition is now on full display. It is time – actually, we are long overdue – for another look at this prohibition[1] and, possibly with some practical accommodations current practice arrangements, the enforcement of the prohibition to put an end to our corporate practice mess.
It is time to amend ERISA, and the state laws in the fifty states, to refresh and enforce a prohibition of the corporate practice as it now exists.
3. The Nature of Professionalism in a Retail Medical Marketplace
Prof. Robert Kennedy PhD.
There is now tension created between the professional clinician practice of exclusive loyalty to the patients and the corporate practice of medicine (CPOM) [seeking corporate solvency.] He noted we live in an age of disruption and cost problems, not only in medicine but also in higher education. He submitted to us that the key characteristic of a professional is the capacity to make sound judgments about important matters in conditions of uncertainty.
Physicians—but I think not all—are uncomfortable with the Corporate Practice of Medicine. This is because they find that their freedom to exercise their professional judgment is at times constrained within the systems in which they are employed and perhaps even at times distorted in ways in which they believe do not serve their patients well
- In brief, the professional in any field, and especially in medicine, must possess a body of special knowledge, a knowledge not only of how things happen but more profoundly of why they happen the way they do. This knowledge separates the professional from the technician,
- As second factor is professing, that is, making a pair of public commitments. One commitment is to practice according to the norms and standards of the field, and the second is to place the interests and well-being of the persons served above the personal interests of the professional. Both of these commitments can be threatened by the Corporate Practice of Medicine, if that practice gives priority to profits over patients
- A third factor is trust, which is built upon the acknowledgement by patients of the physician’s commitments and which, in turn, results in a grant of autonomy which only then allows the physician truly to exercise sound professional judgment.
Hyman and Silver (among others) have advocated a turn to a retail marketplace for some medical services which would be characterized by price transparency, competition, and vouchers controlled by individuals who would have incentives to spend wisely.
A key to understanding this is to recognize that modern medical practice is a victim of its own success. To put it bluntly, medical professionals have opened the door to their successors, who in one form or another will be technicians, who may have highly developed skills that permit them to perform sophisticated yet routine functions but lack professional knowledge. Artificial intelligence simply carries this one enormous step further.
Subsequent unbounded demand in principle for medical services, prompted not only by past developments but also by promises of more to come. Addressing this demand requires funding for research, capital investments for equipment and infrastructure, and not least, some plan for securing access for many in the population.
Modern medical practice is necessarily a system, which makes it different from most other professional fields (though there are analogies with higher education). That is, a physician must now collaborate with a wide variety of service providers, some professional and some technical. This is a situation ripe for consolidation. A homely analogy would be that most of us would prefer to do our grocery shopping at one store rather than to shop at several different stores
I believe that many young physicians have made peace with the corporate environment and indeed value some of the benefits (stable hours and incomes, limited administrative duties, and so on). However, medicine, like education, cannot escape its personal character, it can never be merely technical or robotic.
And they will still need to meet their patients as persons. They will need to embrace technology as an instrument for this judgment and to resist allowing it to become a substitute. The details will change over time but, alas, the challenge to protect professional judgment will remain.
Kennedy noted that we need to keep in mind that there are positive rights and negative rights. Positive rights obligate others to provide something to the right-holder, such as a right to education or healthcare. In contrast, negative rights are a right not to be subjected to an action of another person or group such as a government, usually occurring in the form of abuse or coercion. [The constitutions of most liberal democracies guarantee negative rights.]
Dave Feinwachs pointed out that one current political figure, Dr. Oz, promises that healthcare ought to be a right for all. Feinwachs pointed out that this brings out the difference of average cost of tax-subsidized “free” pre-aid care insurance (in Mn $25,572) from the cost of retail free market auto insurance prices ($2,581). Bob Geist suspects that the $20,000 gap is the unnecessary costs of huge 3rd party bureaucracies that profiteer from rationing care for the social engineering goal of fantasy “cost control”. The gap is gone if the corporations practicing rationing of pre-paid care are eliminated.
Bob Koshnick brought up the cost of the current explosion in mental illness and its needs.
Bob Geist asked, Why do very complex industries arise in free markets? His answer: free markets evolve spontaneously [1] to create a market where millions of people with millions of different goals make millions of transactions daily. No planned economy can make such a complex system work. If a microeconomic system is not working, it means that social engineers are at work. John Cassidy pointed out that social engineered systems have a fatal flaw: no central authority, however brilliant [or good willed] the managers, can accomplish the functions of freely determined prices for the allocation of labor, capital, and human ingenuity. [1]
Bob Koshnick brought up the cost of the current explosion in mental illness and its needs.
Bob Geist also asked, Why do very complex industries arise in free markets? His answer: free markets evolve spontaneously [2] They can supply a marketplace for millions of people with millions of different goals make millions of transactions daily. No planned economy can make such a complex system work. If a microeconomic system is not working, it means that social engineers are at work.
Meeting summary. Dave Feinwachs
Dave heard the group’s aspirations were for a free retail marketplace of professionals practicing medicine controlled by the consumer/patient as in all other retail microeconomic sectors. A better system than the tax-subsidized appearance of “free” pre-paid care access controlled by the corporate practice of self-interested solvency.
[Some post meeting random thoughts.] Feinwachs asked for help in finding a way to contact congress. At May 15 hearings, Tim Walz will be questioned about MN “sanctuary” status but the hearings could also expose the Walz provider tax fraud that loots CMS. [Bob Geist described the concept of a retail FFS “Mainstreet” medical marketplace as being akin to every other FFS microeconomic market sector including law. (We can discuss another time how and why the medical microeconomic sector abruptly became a government-like fixed budget macroeconomic sector.) A retail medical marketplace may be frightening to corporate docs, the public, and health gurus. They can’t imagine a system without 1-stop corporate palaces.A problem remains. HC planners and social engineers have wrought a financially failed system like those abroad. The social engineered Soviet union’s economy went broke economically and politically in 1991. The 1948 UK’s social engineered NHS for planned rationing of free care is close to breaking financially. We can avoid such fate for our planned US medical dystopia. A retail medical marketplace promises a sane economic path to our future.]
Respectively submitted,
Robert W. Geist MD, secretary pro tem.
[2.] Zhu JM, Rooke-Ley H, Brown EF. A Doctrine in Name Only — Strengthening Prohibitions against the Corporate Practice of Medicine. N Eng J Med. 2023;389;965-968. https://www.nejm.org/doi/pdf/10.1056/NEJMp2306904
[3.] Hayek FA. Chap VI. The mysterious world of trade and money. In:. The Collected Works, Volume I. Bartley WW, editor. The Fatal Conceit—The Errors of Socialism. Chicago, IL 60637: The University of Chicago Press; 1988:99-100.
[4.] Cassidy J. The price prophet. The New Yorker. February 7, 2000:44-51.)
[5.] Hayek FA. Chap VI. The mysterious world of trade and money. In:. The Collected Works, Volume I. Bartley WW, editor. The Fatal Conceit—The Errors of Socialism. Chicago, IL 60637: The University of Chicago Press; 1988:99-100.
