The public debate around the Healthcare crisis has accelerated discussions of the waste in the system yet there seems to be little public discussion of why healthcare costs so much.

While labor can account for as much as 50% of total operating costs in a hospital, the cost of materials management and supplies can exceed 35% of operating costs and is the second largest expenditure.

Often opportunities can be found to reduce existing inventories of expensive high tech supplies and devices, especially in the Operating room and Cardiac Catheterization lab, to deliver a one-time savings, sometimes in the millions of dollars, directly to the bottom line by simply implementing proven, industry standard practices that are not employed as frequently as the public may believe.

Failure of hospitals to understand the true cost of providing clinical services and to link supply and labor cost to the revenue cycle patient charges can result in costs exceeding reimbursement to the detriment of hospital operating margins. We’ve all heard the stories about the $40 aspirins but few of us realize that sometimes facilities are also undercharging for some procedures and eroding their margins.

Some facilities underutilize existing technology that they already own which may have the potential to reduce unnecessary labor cost from their business processes.

Standardization of costly physician preference items presents one of the greatest opportunities to reduce cost while maintaining positive clinical outcomes. Implementation of an effective value analysis committee with physician and clinical representation as well as representatives from risk, finance, reimbursement, clinical education, infection control and materials management can effectively insure that products are appropriate, cost effective and contribute to positive clinical outcomes.

Optimizing the healthcare supply chain is certainly a business opportunity that has the potential to create significant organizational value by removing unnecessary cost from the administration of healthcare.

There would need to be several modification in the current laws for this plan to be viable. I would allow the CMS administer the program, the IRS to collect taxes for the program and issue vouchers, but I would have a special commision to exchange credits for vouchers from the insurance companies that would assure that the payments for credits were safe and available to pay claims.

There would be a Basic Health Insurance Plan. That plan would cover exactly the same things the Medicare parts A, B, D or Medicare Advantage. Medicare advantage providers would not be able to collect more than the average cost of care per child or adult. I would also add long term care insurance.

All US citizens would be required to be insured by this Basic plan as a minimum plan. An insurance company may add to the plan but may not provide less than the Basic plan.

A calculation of the cost of all of the projected health care needs of children and adults using the Medicare fee schedule should be obtained and increased by the margin of error. Label that number total USA Health care costs children and adults

Divide the cost number of each group children and adults to obtain the USA health care costs of children/number of children = cost per child and USA health care cost of adults/number of adults = cost per adult.

Collect payroll taxes to cover a proportional amount in a regressive way so that the program would be self funding.

Issue vouchers for Basic Health Insurance and allow insurance companies to compete for the vouchers

Publish data on quality for providers and insurance companies.

Set the fees for service at the Medicare fee schedule. Ban or repeal the sustained growth formula. Limit any future adjustments to not more thn a 1% change in RVUs per year.

No discrimination for health pre-existing conditions.

All approved providers are eligible no networks or discounts.

Reform malpractice laws constitutional amendment bringing licensed professionals under the federal tort claims act and have arbitration panels to investigate and compensate for legitimate malpractice claims.

"Federal Tort Claims Act or FTCA program, created a medical malpractice insurance program for Federally Qualified Health Centers (FQHC) that offer full medical malpractice protection for health center activities at no cost to grantees who participate"

Porter, Michael E.&Teisberg, E.O. (2004)Redefining competition in health care. Harvard Business Review; Jun2004, Vol. 82 Issue 6, p 1 - 17

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Busse, Reinhard & Annette Riesberg (2004). Health care systems in transition Germany 2004. © World Health Organization 2004, on behalf of the European Observatory on Health Systems and Policies. http://www.euro.who.int/document/e85472.pdf

National Coalition on Health Care. (2002). Health care in Germany. © National Coalition on Health Care. http://www.nchc.org/documents/Germany.pdf