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Cooperative Housing and Health Care

A Real Health Care System In Real Time

By Don McCormick (donmcco@tbt.org)

If there is a solution to the disparity in the distribution mechanisms for the exchange of values between people and between abstract entities, it must begin with the exclusion of transactions that do not need to be converted into money. Money is convenient but dangerously exposed to false representation and waste. It has become evidence of slavery without the moral consequences being revealed as clearly as they once were when humans were openly captured and sold on the block.

This condition cuts through every class of people and is the primary cause of conflict, injury, and death throughout the world, directly and indirectly. No form of government has yet offered a way to repair the damage. I would not be surprised if emerging artificial intelligence does not even recognize the problem, or if it does, simply eliminates the users of systems that require rest, food, transportation slower than the speed of light, and forms of value that erode, are too heavy to move, or are worthless for life and electronics. That fire alarm is sounding now.

There are an examples of both the problem and a solution in medical care financing. It grew from small groups of people designing their own exchange systems and removing unnecessary costs from transactions without simply pushing those costs down onto labor, which includes both the patient and the medical care provider. This type of solution has been enabled by law since the 1960s but has usually been corrupted by money managers. The groups that solved the problem have generally been nonprofit cooperatives or employer-sponsored trust funds.

However, when either of these systems uses insurance companies to manage ordinary exchanges, they mix funds needed to share unexpected catastrophic losses with funds that are predictable and should be paid directly to labor and material suppliers for required services. When that happens, the added load increases costs by 15 to 20 percent. Furthermore, it causes the users of the system to ignore their own responsibilities in choosing and managing care appropriate to their needs. When care is treated primarily as money, it is converted without meaningful agreement between provider and patient, and the conversion is almost always exaggerated in favor of the provider and the entity controlling the records and the accounting.

The correction of this system starts with organization through small groups of families in specific geographical locations in which these same people form a healing circle. They must be physically present with one another at least several times each year because governance of care requires real relationships and shared responsibility. The minimum size of a circle is about ten families, or roughly thirty individuals.

Within this circle is the governance of care. The members decide who will care for them, how much they will pay, and how they will mitigate large, unexpected expenses not included in their ordinary budgeted agreements.

These small healing circles then cooperate with other self-governing circles in order to contract directly with care providers. An example would be thirty-three circles of approximately thirty individuals each, or about one thousand people. A primary care provider has the capacity to diagnose, treat, coordinate, and refer approximately that number of patients under current rates of morbidity.

Yet almost no provider we have ever met has a practice directly contracted with organized patient groups of this kind. Instead, most practices maintain several dozen contracts with public and private insurance systems while having no direct economic agreement with their patients except assignment of benefits and liability disclosures.

If grocers and patients behaved this way, and insurers paid grocery bills, then the cost of food would likely double because prices would not be posted, insurers would add their sales and handling costs, and stores would never place items on sale. That is part of the reason Americans pay nearly twice as much for health care as people in most other developed countries while often experiencing worse outcomes.

We have experience with approximately sixty of these cooperative circles over the last ten years. Some have been employer-sponsored trusts and some have been self-organized families cooperating directly. The first steps in the system were:

• Purchase stop-loss reinsurance in excess of $50,000 to unlimited coverage at 130% of published Medicare rates. Current cost: approximately $60 per person per month.

• Purchase laboratory services from an international laboratory network covering all areas of the United States for fixed total test pricing. Current cost: approximately $5 per person per month.

• Purchase telemedicine services staffed by board-certified physicians available 24 hours a day, 365 days a year, with approximately ten-minute response times. Current cost: approximately $3 per person per month.

• Establish membership dues for operation of the cooperative. Current cost: approximately $25 per family per month.

Once catastrophic risk is addressed, which for a single adult currently costs approximately $93 per person per month, the direct cost paid to care providers is determined through direct payment agreements with the specific professional advisors chosen by each healing circle. The costs vary between individuals, but over the last ten years the experience has generally ranged between $250 and $400 per month per person. That amount has often been approximately 50% less than what patients were paying through existing public or private systems.

The program has not excluded people because of preexisting conditions. However, the process of organizing through small groups of families in specific geographical areas, where members actively participate in management decisions, avoids concentrating populations already selected because of severe disability or chronic institutional dependency. We are not enrolling nursing-home-bound populations, rehabilitation institutions, or taking assignment from Medicaid populations as institutional blocks. The risk profile therefore remains closer to the experience of the general population. The savings come primarily from eliminating corporate extraction.

As an example of a budgeted agreement between a patient group and a primary care practice, we know from records provided by practices that a physician may actively care for approximately one thousand individuals per year while replacing approximately 450 patients annually due to relocation, employment changes, aging, or death. Over twenty years, a practice may accumulate ten thousand files while only actively managing a much smaller patient population of 1,000  each year.

Practices also report gross revenues of approximately $475,000 annually, which means they collect, on average, approximately $40 per patient per month. If a cooperative has one thousand members, then the direct agreement with the practice would simply be payment of approximately $40 per member per month without third-party claims processing and without contracts involving fifty different insurance entities.

The practice saves substantial administrative expense, often approximately $100,000 annually. More importantly, privacy of the medical record remains substantially with the patient and the practice. In the current third-party system that privacy is lost.

Specialty care and hospital care costing less than $50,000 is managed through patient medical savings accounts and, when necessary, direct repayment agreements with service providers at the time care is delivered. This work is coordinated through shared labor within the healing circle by patient advocates chosen from among the members themselves.