Pro Bono 2.0 Reboot: Restoring Natural Private Universal Healthcare

As we lament the expensive, frustrating, bureaucratic mess that is the current American healthcare system, ’t’would be well to recall one reassuring fact:

At one time, we had a pro bono system in this country that worked.

My grandfather, Dr. E. Victor Littauer, served as an OB/GYN surgeon in Brooklyn from the 1920s through the 1960s. During all those years, he and all his colleagues treated patients who could not pay, for free. Pro bono… it was part of the medical ethic. A natural market mechanism unplanned by any politician or policy wonk, the pro bono system arose spontaneously out of the ethical nature and admirable traditions of the free market practice of medicine.

But the pro bono system vanished, done in by taxpayer-subsidized third-party payer systems: subsidized employee health insurance, Medicare, Medicaid, the assumption someone else would pay. Finally all that insurance money attracted an explosion of malpractice tort liability, making it insane for any doctor to treat a patient for free. Such are the unintended consequences of government intervention.

No coincidence then that the loss of the pro bono system and its ability to treat the poor coincides with the rise of our current healthcare woes: millions of the poor and uninsured, who had primary care pro bono, now jamming emergency rooms, seeking primary care at $4,000 a pop; doctors driven out of private practice by excessive third party burdens that destroy quality care and force them to hire medically useless clerks and practice excessive “defensive medicine”; medical costs out of control on both personal and federal levels and everything in between; horrendously long waiting lists and lines at VA hospitals and other public clinics.

To fix our healthcare mess, the Obama administration enacted a massive new program, the Affordable Care Act (ACA — a.k.a. Obamacare). Yet this “persistently unpopular” program only seems to have made matters worse, according to critics like Robert Moffit at the Heritage Foundation:

For the American public, there are ample reasons for dissatisfaction: higher costs; arbitrary and sometimes absurd rule-making; bureaucratization of an already overly bureaucratized sector of the economy; incompatibility with personal freedom and religious liberty; enormous spending and heavy taxation; and widely acknowledged design flaws, evident in the ACA’s hopelessly complex and unworkable subsidy schemes, boondoggle bailouts, and collapsing co-ops.

Every self-employed person I know now tells me their rates have shot up, 15% – 18% a year under Obamacare, and their plans have grown worse, covering less. So now it seems, not only must we fix our healthcare system, we must fix the government fix.

Perhaps the most effective, least intrusive cure for our healthcare woes may be simply to repair and reboot the traditional American pro bono system that once worked well. Much of our current problem would be greatly reduced if we could simply increase the supply of pro bono care for those who cannot pay, and make it reliable.

In fact, we CAN do that. Increasing the supply of pro bono care is essentially a supply-side problem, amenable to supply-side solutions. If you want more of something, tax it less. So if you want doctors and other healthcare providers to supply care to those who cannot pay, then simply reduce their taxes for doing so.

This would be very simple to put in place, requiring only two things: (1) a law providing that documented pro bono service to a qualified patient should reduce a health provider’s taxes by the amount a paying client would pay, in the form of a simplified tax credit the provider claims on annual tax returns. (Current rules allow no deductions whatsoever for donated time.) (2) The law should also include reasonable “good Samaritan” liability protections for pro bono service, to make good deeds risk free. If you get medical care for free, you may have a right to more free care if things go wrong, but you don’t have the right to sue (unless the doctor was, like, smoking meth). That’s reasonable.

Together, these two simple provisos would create a super pro bono system — Pro Bono 2.0 — capable of treating 100% of poor and uninsured patients for free for all primary, specialist, hospital, catastrophic, and preventive care, as well as all drugs, medical equipment and alternative therapies. So Pro Bono 2.0 delivers:

Private Universal Healthcare: 100% voluntary, with unlimited options.

So, to illustrate, let’s make some simplifying assumptions. Assume a doctor (or any for-profit healthcare provider or drug company) pays a 30% tax rate. Assume every patient pays $100, and our doctor has a maximum capacity of 1,300 patients a year. If the doctor treats all 1,300 patients for a fee, his revenue is $130,000. He then pays 30% tax, his after tax income would be $91,000. But under Pro Bono 2.0, if the doctor sees 1,000 fee-paying patients, he makes $100,000, owes $30,000 tax, but zeros out his taxes by treating 300 patients pro bono.

The doctor has seen the same number of patients, 23% pro bono, but his after-tax income rises from $91,000 to $100,000, and he has taken care of the entire problem of the poor and uninsured, who are only 16% of the population, not 23%.

That’s a powerful incentive making pro bono care reliable and available for a large population.

Everything Already Figured Out

We know the concept will work, because we already have one care system that uses the same idea: the huge and vibrant American nonprofit sector is driven entirely by tax deductions, and it works very well. The American Spectator would not exist without it. Pro Bono 2.0 is the same idea, only the pro bono tax credits are more valuable than charitable tax deductions because we need to make such healthcare completely reliable, and since we are already paying these providers (plus an army of clerks and middlemen) far more, the pro bono tax credits make sense to save money.

One of the coolest aspects of Pro Bono 2.0 is that not very much is needed to put it in place. Everything you might want is already there, already figured out. For instance, the reason the IRS does not allow me to take a tax deduction if I volunteer my time, is that the IRS has no idea what my time is worth. But that is NOT the case with doctors, or any health providers. Every treatment, test, procedure, drug, etc., is covered by a treatment code associated with a fee. Private insurance, Medicaid, Medicare, each in fact have their own systems of treatment codes, with associated fees and copays. The data is known, granular, tracked to the zip code level. So we know the costs right now. That is already in place, ready to go.[1]

We also know the populations that are served right now by government funded or subsidized programs: Medicare/Medicaid recipients, veterans, etc. All these can be given a pro bono care card in short order.

Simplifies Everything. Reduces Costs for Everyone

If one considers the likely impacts of Pro Bono 2.0, one sees it improves the quality of care for everyone, and reduces the cost of care for everyone… not just taxpayers, not just the poor, but even fee paying and insurance buying patients. Consider:

Pro Bono 2.0 would immediately end long waiting lines for care at VA and public health clinics, since veterans could simply go see any doctor whatsoever, for free.

Pro Bono 2.0 would be much less expensive for taxpayers than the current system where the uninsured skip primary care, get really sick, then get the most expensive possible treatment at overwhelmed emergency rooms. Pro Bono 2.0 would return these patients to primary care doctors for regular, personalized checkups, simultaneously slashing the cost and improving the quality of their care. In so doing, it would also take pressure off the emergency rooms, reducing demand, lowering emergency room costs and wait times for everyone, increasing quality of care for everyone, ending bad debt expense and intergovernmental transfers to cover the costs of treating the uninsured, reducing deficits and taxpayer expense.

Pro Bono 2.0 would indirectly reduce insurance premiums for paying customers, who now, under Obamacare, pay skyrocketing rates by picking up the cost of those who either cannot pay for themselves, or would be uneconomical to insure. With these groups going into the pro bono system, insurance rates can come back down for everyone else.

Pro Bono 2.0 would be massively cheaper and more sensible than any government run medical care programs, all of which entail massive taxes to pay bureaucrats to pay providers to care for the poor, paying clinic and agency bureaucrats to shuffle mountains of reimbursement paperwork back and forth, and then taxing the providers and bureaucrats — a convoluted tax-spend-and-tax-some-more system with lots of overhead that makes little sense. Especially when a single tax cut for pro bono service does it better in just one step.

Pro Bono 2.0 simplifies everything and cuts out the many middlemen, the multiple layers of bureaucracy, government and overhead. It removes anyone in between the doctor and the patient. It restores the primacy of the doctor-patient relationship and gives new economic vitality to private practice medicine by increasing after tax profits, and decreasing the need for office staff.

Reimbursement procedures shrink to a simple matter of reporting pro bono treatments on tax returns, with honesty assured by stiff IRS penalties for tax fraud.

No Incentive to Over-Treat

One related benefit of such an approach: it attacks one core reason U.S. healthcare costs have spiraled out of control: overuse of emergency rooms by the uninsured, plus system-wide over-treatment, driven again by Medicare, insurance and liability considerations, all of which reward over-treatment and the practice of defensive medicine.

By contrast, there would be no financial incentive to over-treat any given pro bono patient, and no legal reason to practice defensive medicine given good Samaritan liability protections for pro bono care. Without such distractions, most doctors are driven by a desire to improve their statistical outcomes, their batting average, if you will. Optimally treating more pro bono patients without over-treatment would improve a provider’s stats with less risk of iatrogenic illness. Good statistical outcomes (not defensive medicine or reimbursement considerations) will drive pro bono care norms system-wide, driving down over-treatment, and lowering costs across the entire healthcare system as treatment protocols follow best practice.

Since treatment protocols determine the treatment you and I get, more efficient treatment protocols will improve treatment for all of us, and reduce medical costs for all of us. Again Pro Bono 2.0, while only delivering treatment to pro bono patient groups, improves care and costs for all.

Ending Third-Party Interference, Promoting Health and Integrative Medicine

I am indebted to Grace-Marie Turner, president of the Galen Institute, for pointing out that Pro Bono 2.0 is very much in line with the growing movement among doctors to end private-practice-destroying third party interference in the doctor-patient relationship, led by such physician groups as the Association of American Physicians & Surgeons, Docs4PatientCare, and the Benjamin Rush Institute.

Indeed, Pro Bono 2.0 is a more powerful approach than the government (a.k.a. third party) voucher programs these groups suggest, since pro bono tax credits would do more to increase health providers’ after-tax income and eliminate all third-parties — including voucher-regulating third parties — from the doctor-patient relationship. Pro Bono 2.0 would powerfully help restore private practice medicine, more so than vouchers.

I am also indebted to Amory Lovins of the Rocky Mountain Institute for pointing out that Pro Bono 2.0 is similar to what Dr. Russell Jaffe calls “integrative medicine,” in its emphasis on boosting ethical, caring, private practice primary care medicine and direct doctor-patient relationships, in reducing bureaucracy and over-treatment. Dr. Jaffe points out that doing so focuses health providers on personally knowing the patient, and so, on long-term health promotion rather than quick-fix disease and symptom suppression. Jaffe argues that such an orientation improves care and health, and so reduces costs.

This similarity may not be a coincidence, since many of the new policy proposals advanced by the Grace Richardson Fund and through this column are predicated on the idea of promoting the natural supply of things we want, like pro bono care for those in need, while integrative medicine also focuses on promoting something we want: heath. That shared positive-side focus means we end up in a similar place.

One foreseeable critique of Pro Bono 2.0 may be that the tax credits would not influence nonprofit healthcare providers and hospitals to provide more pro bono care. But this challenge could be overcome, either by making pro bono tax credits trade-able to other tax payers who owe taxes, or by extending Pro Bono 2.0 tax credits to insurance companies that provide pro bono catastrophic medical insurance to those who cannot pay. Following the same after-tax logic illustrated above for doctors, medical insurance companies could similarly reduce their taxes to zero and increase after-tax profits by providing free insurance to the poor. That way direct pro bono service from doctors and other for profit providers would cover primary, specialist and preventive care for the poor, while pro bono insurance would cover hospitalization and catastrophic care.

Under the traditional American pro bono system, those who could afford to pay were really covering costs for those who could not. Pro Bono 2.0 repairs and reboots that generous, ethical American tradition. It restores the natural market mechanism we once had for offering free care to those in need, and in so doing, offers a superior, natural, private free market alternative to Obamacare, the VA, and other artificial government medical programs.

Pro Bono 2.0 is not a panacea. But is does take care of a big chunk of the problem very neatly, with spillover cost and care benefits for everyone. To the extent it strengthens direct doctor-patient primary care and integrative medicine, that would be a step in the right direction, delivering cheaper, better care for everyone. For those now paying too much for artificially scarce medicines and poor insurance coverage, steps also need to be taken to open U.S. medical insurance and drug patent systems to greater competition, since these are both protected, state-subsidized and bureaucratized, semi-monopoly systems that are too expensive and deliver low customer satisfaction. Interstate competition among insurance providers would be a good start, as would other free market reforms to bring down costs system-wide, and reduce bureaucratic burdens on private practice integrative care. So Pro Bono 2.0 alone won’t fix everything that needs fixing, but it helps.

Still, Pro Bono 2.0 has the potential to break partisan gridlock on healthcare by offering a solution with transpartisan appeal: for the right, a tax-cutting, private alternative to poor-quality, expensive, bureaucratic care; for the left, a universal healthcare system for all.

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PS — A few fine points, inserted here after some gratefully accepted prepublication review and brainstorming help from Jimmy Kemp, President of the Jack Kemp Foundation, and Grace-Marie Turner:

Pro Bono 2.0 contemplates a simplified pro bono tax credit, claimed on an annual tax return, for the full value of the service, reducing taxes by that amount. Some reasoning behind this specific parameter:

(1) As Grace-Marie pointed out, some tax credits are complicated to claim, requiring third party approval procedures. The reason for specifying that the pro bono tax credit be claimed simply on the annual tax return is to eliminate third party involvement entirely, to bring down costs and improve quality care, because third party interference is detrimental to quality affordable medical care. A licensed, board certified doctor or health provider should not need to hire extra, expensive staff in order to claim a credit, or get a procedure approved, or get paid, for that matter.

(2) So while the pro bono tax credit could be claimed very simply, as are charitable tax deductions, it is not a tax deduction, which only reduces taxable income, not actual taxes, by the cost of the service. A deduction would reduce a provider’s tax perhaps only 30% – 40% of the true value of the service. A pro bono tax credit reduces taxes by the full 100% value of the service, increasing the provider’s after-tax income. This is much more beneficial for the provider, which is a very good thing from a public policy perspective, as follows.

(3) The reasons not to be stingy with the doctors and providers are four-fold:

(a) In order to restore the preexisting, natural pro bono system and make it reliable for everyone, it is a very good idea to make sure it is in the doctor’s and providers’ interest to provide pro bono care willingly, by raising their after tax income for doing so. Mere deductions would not work as powerfully or reliably.

(b) It is in everyone’s interest to strengthen private practice medicine and make it profitable again, because more unburdened private practice medicine means better care and lower costs for everyone. But private practice medicine is under financial and bureaucratic duress. So it makes sense to increase providers’ after-tax income as much as reasonably possible, and reduce their burdens and labor expense, in order to make private practice care easier, to reverse the destruction of the private practice system.

(c) The government is already paying provider’s (plus many medically detrimental clerks in both government agencies and medical offices) to provide these services, and the system is vastly inflating costs with layers of middlemen. So it makes sense to actually save money by not paying for any clerks to write, or beg for, checks, a portion of which the provider must then pay back in taxes, and to simplify everything by just allowing the provider to take the credit for the value of the service on annual tax returns. Since the government is paying more than full value (of provider plus clerks) for these services for needy populations right now, why not just give full value to just the provider, for just his services, as a tax credit, and save money by doing so?

Pro Bono 2.0 reduces costs in many ways, but removing clerks from the system is likely the most immediately important, and should bring down costs of each treatment system-wide, further justifying the use of the simple year-end tax credit.

(d) Unemployed medically detrimental clerks will need new jobs. The tax free nature of work as a medically useful health provider under Pro Bono 2.0 will doubtless attract many of them to transition to work as medical technicians, social workers, nurses, therapists and doctors. This should be encouraged, as it will further bring down medical costs. Pro bono tax credits will help encourage that shift. It may be that retraining of clerks should be itself an activity rewarded by pro bono tax credits, as the shift would be highly beneficial.

(4) Pro Bono 2.0, in the use of the simple, year-end pro bono tax credit for full value of service, capable of eliminating the provider’s tax liability, seems to be a different, more powerful beast compared to previous federal bills and state laws that either offer only very limited encouragement for pro bono care, in the form of limited tax deductions or credits, and do not aim at restoring the natural pro bono care system and ending third party interference in the provision of care to the needy. Grace-Marie was able to find the following bills and laws:

https://vacode.org/2016/58.1/I/3/13.2/58.1-439.22/

https://www.govtrack.us/congress/bills/112/hr5849

https://www.nhpf.org/library/details.cfm/2443

(5) Pro Bono 2.0 is fundamentally different from every other health care proposal, in that it restores natural market systems rather than imposing artificial ones, and it cuts taxes, spending, and the size of government rather than increasing them.  Instead of proposing complex constructs, like Obamacare or National Healthcare in the UK, it gets rid of complex constructs, replacing them with cost-reducing, care-improving simplicity that restores natural free market charitable care systems to full functionality.

(6) Jimmy and I both are leery of the use of tax credits and deductions for any for-profit activities, as these tend to promote failure, distort markets, increase costs, complexify the tax code and encourage crony capitalism. However, an exception to that rule, we both agree, is charitable care and the nonprofit sector. Health, education and welfare services can often be provided more beneficially and caringly by the private sector — as opposed to the public sector — using simple, well-considered tax credits and deductions. If the government is already paying for it anyway, with poor results, tax credits for private service might well improve cost and care. Such is the case with Pro Bono 2.0.

[1]          It would make the most sense to choose the treatment code system that most closely matches what providers actually charge, as that would give the greatest benefit to restoring private practice medicine.

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