Okay. This is the part where we try to coin a new phrase: Trickle-Down Health Care. Tell your friends.

We’re borrowing the trickle-down term from the economic idea that benefits flow throughout a system if you tip it the right way. (Not going to argue about trickle-down economics in this post; they’re irrelevant but for the name we’re co-opting.)

Trickle-Down Health Care is a system where you align health care profits with health instead of risk tolerance, and let savings, innovation, and economic gains trickle throughout the system. In truth, it’s a combination of ideas that other people have come up with.

It means that if you do this…

If you shift the profits of health care away from abstracted third parties and toward the health care providers themselves, savings and better health will trickle down to patients.

If you shift the economics of health care toward preventing poor health versus simply fixing health problems after they get bad, long-term health and savings will trickle down to patients.

… then this results:

Better overall health, which leads to more productivity in the economy and higher GDP, which raises the quality of life for everyone.

Savings on health care frees up people’s income, which means people spend money on more diverse parts the economy and start more businesses, which leads to a happier middle class and more successful businesses across the country.

The theory itself is simple. The implementation, of course, will be tricky. It’s going to require a slight but important shift in the way we view health itself. We have to start thinking of it as it is: A war on sickness. A war that makes everything better when we’re winning.

Principle 1: Shift the economics of health care toward health providers

One of the tough things about health care costs is it’s hard to predict when you, as a healthy person, might get into an accident and need 10 times as much care as you usually do. This is why we spread the risk through insurance.

Unfortunately, as we’ve learned, spreading the risk via a for-profit third party removes us from the costs and profits. This hampers competition, capitalism, and market forces that might work in our favor.

Right now, when experts talk about the free market and health insurance, they basically are saying, “You are free to choose any craps table in the casino.” However, in reality you’re probably limited to just one or two tables that you can actually play at because your employer only works with one company, or your local area only has one affordable option. The tables almost operate in little monopolies. The fundamental economics don’t really change from table to table; profits don’t trickle down to health because they favor the house.

If, however, we built a casino where the house did not take a cut from the game at all, everything would change.

Say the house didn’t get a cut of the game. Suddenly, everyone could put less money on the table without changing their outcomes. The 50% who don’t get sick, still don’t get sick — they’ve just spent less money on the risk. The other 50% who get a little or really sick still get health care — and they’ve spent less money, too.

In that scenario, we’d probably even feel comfortable putting a little bit more in the pool to pay doctors and inventors to improve the quality of our care. We’d still be saving money versus before. In fact, if we paid the doctors a little more, we’d end up needing to go to the doctor less, which means we’d be able to pay less in the long run.

This would mean that we could build a casino that wouldn’t need so many craps tables. Maybe one for every state. Or just one big one for everyone.

But wait, you might be saying, this sounds a lot like that whole “single payer” health system I keep hearing people talk about.

It is. But before we react to the term itself, let’s talk through two important twists that don’t get talked about much with single-payer proposals:

First, our Trickle-Down system adds more free market choice than today’s health care system—before or after the ACA. Right now, choice is limited and transparency is nonexistent. By eliminating the inefficient layers in the system, we’ll eliminate the mini-monopolies that don’t allow you to choose which doctor you want to see. (It’s not really free-market choice if your insurance only allows you to go to certain providers, and if the best providers opt out of insurance because they get screwed on it (like one doctor I see does).)

If we consolidate the casino, we’ll be able to open up cost transparency to the public, so we the people (and watchdog groups) can effectively call out any bad deals, and the system itself can have the bulk power to negotiate better prices when necessary.

When we look at the fundamentals, this is really the same risk game we’re already playing, but the incentives have now shifted in a way that will trickle down to better health, savings, and GDP. With the casino redesigned this way — and with preventative health care incentives in place (which we’ll address the mechanics of in a minute) — we are prepared to add money to the economy. The Integrated Benefits Institute calculates that the US loses $576 billion every year to lost productivity from health problems, between sick days and worker’s comp. (Gallup reports that about 1/3 of that is just from people staying home from work due to weight related problems or chronic conditions like heart disease and diabetes, and the CDC has a similar estimate.)

If, through better economics for health providers and better preventative medicine, we cut that productivity loss in half, we’d add a quarter trillion dollars a year to GDP. Nearly twice as much as we’d be spending on preventative care in the calculation above. (This is on top of the cost savings in health care itself.)

Second, we should not operate this like a standard government-run industry, like the Postal Service. This is the fear a lot of people have about the government getting more involved in health care than it does already — that going to the doctor will be like standing in line at the post office, with depressed, underpaid workers slowly stamping things. Instead, we’re going to approach funding and managing health care like we approach the US Military.

The US Military offers us an extraordinary paradigm for Trickle Down Health Care because it operates on the following principles:

The military is about keeping us from dying (and helping us enjoy the quality of life we want). I.e. We don’t want bad guys killing us or taking over.

We are willing to pool together to pay for military protection because said livelihood is on the line.

Good military defense is less costly to society than waiting for catastrophe and going on military offense. Prevention is better than intervention.

Because of its life-and-death nature, the military’s budget is managed by one party (the federal government) rather than an inefficient web of third parties. But it still manages to be incredibly innovative because it works with private businesses who compete for contracts to develop technology for it.

Human health care should basically mirror this:

Health care is about keeping us from dying (and helping us enjoy the quality of life we want). The bad guys in this case are disease and accident.

We are willing to pool together to pay for health protection because our lives are on the line.

Preventative health care is less costly (to individuals and society) than waiting for catastrophe and going under the knife.

Because of its life-and-death nature, the health system’s budget is managed by one party (the federal or state government) rather than an inefficient web of third parties. But it will still manage to be innovative if it works with private businesses who compete for contracts to develop life-saving technology for it.

Basically, the plan would involve replacing health insurance with health tax that mimics military funding — resulting in lower overall cost — and shifting the capitalist/innovation competition to where it will make the biggest long-term impact:

Principle 2: Shift the economics toward preventing health problems

The CDC says that 75% of health care spending goes toward chronic diseases that can be prevented. These include diabetes, heart disease, and many types of cancer. If we spent more money on preventing these things, we could save money on treating them down the road — and more people would live longer, more productive lives.

But in a given year, only 13% of Americans go to a doctor for any kind of preventative care.

One of the reasons we don’t do more preventative medicine is our system pays based on “procedures” rather than on health. In other words, doctors have a financial incentive to specialize in treating the really bad problems. Heart surgery pays more than preventing heart disease. So, whereas many (I’d dare say most) doctors do what they do because they want to help people, if you’re trying to make a good living to take care of your family, you’re more inclined to specialize in complex procedures. The current system creates a perverse financial incentive to treat emergencies rather than prevent them, which ironically leads to lost productivity and a worse middle-class economy.

If we financially incentivized patients and doctors to prevent health problems instead, we’d reverse that.

The health care system can basically do *four things to help us prevent future problems:

Preventative screenings : We can screen for future problems by visiting a doctor regularly for tests even when we feel fine.

: We can screen for future problems by visiting a doctor regularly for tests even when we feel fine. Vaccines : We can block some diseases ahead of time with drugs.

: We can block some diseases ahead of time with drugs. Education and advice : Doctors can inform us what we individually should do to stay healthy and prevent problems.

: Doctors can inform us what we individually should do to stay healthy and prevent problems. * Make primary care more relationship-based: Experts have pointed out after the first version of this post that we were missing one of the biggest factors in preventative health care: developing an ongoing relationship with one’s primary care doctor. Someone who knows you and your medical history well will help you with long-term health maintenance better than going to different doctors every time.

These can really all be combined. Many people already go to the doctor annually for a “physical” checkup, but most people don’t get screened for diseases like cancer or scanned for common problems while they’re at it. A regular checkup that also screened for looming problems could be combined with a custom consultation where the doctor gives you advice on how to stay healthy and also administers any vaccines you need.

Let’s say that every American did this once a year. Here’s how much that would cost per person:

30 min of the doctor’s time to examine and advise: $75

60 min of combined doctor’s staff time to perform screenings: $70

Petty supplies like exam gloves and those popsicle sticks to put down your throat: $5

Lab work/supplies/machinery for screenings and scans: $100

Re-upping necessary vaccines: $75

Overhead costs for doctor’s office (same as before): $150

Total cost per person per year: $400

But of course, in our system, this would be free for patients. In fact, we’ll pay people to do it.

Note: We’re going to presume that offices will share machines like CT scanners, X-Ray machines, and other big screening equipment between doctors. Those costs are factored into the Lab work and Overhead calculations here. (A million-dollar MRI machine doing 16 scans a day over five years ends up being $50 per patient. Similarly, a 3D mammogram machine could take care of 32 patients a day, costing $12.50 per patient if the machine lasts 5 years. That’s without any price negotiation when buying the machines.)

Now how do we financially incentivize doctors and patients to do this once a year for everyone? This is a place we can have some debate, but a simple answer would be twofold:

Pay prevention doctors more.

Give patients a tax break every year that they get a prevention checkup. (If you get unhealthy, you are going to burden the economy and everyone else in it, so you should get rewarded for practicing preventative health.)

If a specialist who might make $300,000 a year specializing in treating heart disease was paid $400,000 a year to prevent heart disease, we’d see a lot more clinics offer prevention care. That would bump the cost per checkup to $500. (A nice side benefit of this is if doctor clinics bring in more money, the experience of going to the doctor itself will likely improve for people. Happier doctors, better facilities, etc.) I’d suggest that we actually pay the doctor’s clinic a $25 stipend or subsidy per successful prevention checkup, so the money can be spread between doctor, staff, and budget for facilities and technology that could make the experience better or more efficient.

If patients were paid $500 in their tax returns if they got an annual checkup, they would fill those clinics up. We’ve now moved both supply and demand in the right spot for Trickle Down Health to work.

Another thing that would happen if we shifted the economics this way is we would incentivize more research and technology companies to work on inventing more effective ways to take care of preventative health care. The innovation sector would then start to help reduce doctors’ costs for this type of work. (There’s lots of stuff we could discuss here later.)

With this math, the total cost of prevention checks for the U.S. population is $160 billion a year. Add on the tax refund for patients, and it’s $320 billion in total.

The big question now is what could go wrong?

IV. How we’d implement it, and what would happen

Truth is, this is not something we could implement overnight. This would be a big project.

The first step would be to get rid of health insurance. This has ramifications of course, which we’ll discuss shortly. But it immediately frees up a lot of money.

Next, we’d need to gather money into a fund. No small feat, but I like imagining jumping into a swimming pool of all of it first before we start spending it.

Basically we could get the funds in a couple of ways:

Redirect existing Medicare and Medicaid funding: We’d redirect money that’s already being taken out of taxes for health care and put it toward the new system. This spend will be more effective when we make the whole system efficient. Employers’ benefits plans: We’ll redirect the money that companies used to pay for their employees health insurance, and put it toward a payroll tax that goes to our health care fund. Employers that never paid for health insurance will start paying this tax. (A professor at University of Massachusetts named Gerald Friedman recently did math on this here. He estimates the payroll tax at 6% for high incomes and 3% for low incomes—which should save most companies money overall versus insurance.) Unearned Income: If we wanted, we could put a small tax on things that make money without humans doing work. Things like dividends and interest. (There’s a really interesting Medium post by Matt Bruenig here about how this kind of passive income could be used to fund a universal basic income, but though that’s way out of our wheelhouse in this post, the same concept could be a good potential source for health care funds.)

Remember again that even though this would be tax money, everyone would save money if we did this. Companies would end up paying just as much or less toward health coverage. And everyday people would pay less—rich and poor alike. Remember that insurance is required right now, so we’d be effectively replacing a tax with a lower tax.

Who would run the new system?

We would need the world’s smartest medical minds to come together in one department to run our new health care system. There are a couple of options for where we’d put it:

We could make a brand new agency and start from scratch, which might be a good way to get rid of systemic bloat. Or we could put it under the existing US Department of Health and Human Services, which already has infrastructure, talent, and know-how to do this sort of thing as it’s running the Medicare and Medicaid programs right now.

The easiest thing to do would be to simply make our new health system an expansion of Medicare under HHS, which 61% of Americans already think is worth the cost. But if we think the other 39% disapproving is too high, I am in favor of scrapping the old Medicare and building a new department underneath HHS from scratch—like a startup. We could redeploy the great people working on Medicare to help administer our new department.

What would the financial ramifications be?

The first thing that would happen if we switched to Trickle-Down Health Care is we’d immediately cut the cost of US health care in half.

We currently spend $3.3 trillion a year on it. As we calculated above, we’d spend about $1.66 trillion on this new one without the prevention stuff. If we added a preventative health screening and incentives for every American each year—paying those doctors handsomely—our total bill would be just under $2 trillion. So right off the bat, instead of $10,000 a year on health, we’d each be paying around $6,700. This is close to the average business’s health insurance contribution per person. Which means we could probably fund the system without taxing individuals directly.

This doesn’t even include the potential for reducing exorbitant costs of drugs, devices, and further facility fees due to the lack of transparency in the current system. Putting everything under one roof will allow us to audit crazy pricing that doesn’t map to value. And we could negotiate bulk discounts with drug and device makers at a scale the old system can’t.

There will be some administrative costs of overseeing this system on top of what we’ve calculated, but they’re going to be offset by the savings in administrative costs of dealing with insurance. According to at least one study, doctors spend nearly an hour a day dealing with insurance. Fifteen percent of bills get denied by insurers initially, even though 80 percent of those denials get eventually paid by insurance anyway. We’d eliminate much of this money-wasting back-and-forth with the new system, an estimated $293 billion in admin costs. And we already have a Department of Health and Human Services with lots of staff overseeing Medicare and other things that we can largely redeploy on administering our new system.

What would we do with the savings?

There are two things we can do. We can either be satisfied with our new raygun, and let people keep the savings. Or we can plunge the rest of the money we were paying into R&D so we can develop the most kickass raygun ever.

I’d propose we do the first for now, but we also take a small amount of those savings and put them toward X-Prize style innovation competitions for private startups and contractors to win money for inventing technology and drugs that change the world and make costs lower for all of us.

But what about free riders? Won’t people abuse the system?

There are a lot of people in America who don’t have health insurance who go to the hospital for emergencies whose bills we end up paying for via higher insurance premiums right now. And there are 50 million people on Medicare right now whose care we all pay for through taxes already. If all our health care was pooled and managed through Trickle-Down, those groups would get pooled in, and the difference wouldn’t matter. The total tax burden would net out to less than we’re paying now. So Medicare would be gone, and those who are too poor to even have a tax bill would be taken care of like they are today — just now we’d get them regular preventative care, too!

Would making health care “feel free” result in a swarm of people just going to the doctor all the time and taking advantage of it? This is a valid concern. The good news is it’s not like giving out free beer. Most of us don’t love going to the doctor. The vast majority will only go when we’re sick or suspect we’re sick. We will probably go a little more often if it doesn’t cost, but we’re accounting for a 25% increase in doctor visits already, and all estimates point to those visits helping us to get less sick in the long run. Every person in America would have to go to the doctor 14 times a year (instead of 4) to add up to how much we’re paying today. This simply isn’t going to happen.

What about dental care?

I suggest leaving this one alone for now. We could roll it into the broader health care plan if we wanted to, but I would propose we consider this more of a “nice to have” or an “emergencies are covered” kind of thing. Let the current market and private insurance system continue for dental.

Will quality of care go down?

The simple fact is that a whole bunch of countries with single payer systems have higher quality health than America. Canada, United Kingdom, Germany, Australia — the list goes on — they’re all healthier than us. The key to keeping the quality up is funding it appropriately to incentivize good health.

The US Military is the best in the world because we invest a lot in it. For our any decent health system to work, we will have to pay doctors and nurses and hospitals well. The good news is that Trickle-Down Health Care encourages innovation where it counts, which will lead to higher quality care.

Yeah, but haven’t Canada and other countries done the single payer thing, and don’t they come to America for health care because theirs sucks?

These are common misconceptions, thankfully! Yes, Canada and other countries—in fact, every big first-world country with good health—has a single payer system of some sort. But as we’ve established, those countries have lower costs and better health outcomes than America already. Proof is in the pudding, as they say.

But yes, Canadians often travel to the US to get health procedures. That’s not because of Canada’s health care quality, though. It’s because Canada has 10 times fewer people, and therefore 10 times fewer doctors. It means that the population is too small to generate enough demand for some really specialized procedures. If there is one specialist in the world for a given condition, she or he is likely to be in a big metro area like New York or Los Angeles. That doesn’t mean that doctors in Canada are bad.

Also, if you live in Winnipeg and need to see a specialist, it’s easier to get to Minneapolis to see one than it is to get to Toronto.

Anyone who says that health commuting means that Canada’s health system doesn’t work probably just doesn’t know Canadian geography—or they’re deliberately twisting facts.

How do we make sure that our health system doesn’t end up with long wait times, rations, or any other horrible thing that makes it resemble the post office?

If you work for the US military and you get sick or hurt, they take care of you immediately. That’s because we spend real money to make sure the supply of medics and medical care is high quality and highly available. If we take care of the actual providers of medical care, we’ll be fine on this front.

Who’s going to make sure things like prices don’t get out of hand?

The downside to the military analogy is we occasionally hear stories about contractors charging the government $1,000 for Army toilet seats. For better or worse, we continue to fund the military in a big way despite this because it’s worth it. But the biggest way to avoid this sort of thing is to practice radical transparency with the costs of our system. Just like many cities post their employees salaries and their budget expenses on transparency websites, we’ll require that every piece of health care spending be published openly on the web.

There will be a market competition dynamic in many areas, too, like we see with military contractors and to some degree with doctors’ reviews on places like Zocdoc, that will help us maintain quality and costs.

One thing that will make a big difference is having the oversight of the whole system be overseen by doctors, hospital administrators, and medical technologists. Just like the military is run by generals who know it inside and out. We would want to have the upper levels of administration be much more transparent with patients and doctors than the generals of the military are today, as there will be no valid reason to keep secrets like the military leadership might need to.

How can technology make this system even better?

This part gets me excited.

Apps that allow you to get diagnosed and prescribed by a doctor over FaceTime can end up saving us tons of money—and making doctors’ lives nicer. (This would be great for doctors who need to spend more time with their families or work part-time.) Essentially, routine checkups for things like coughs and depression could be done like Uber does for black car service.

In the era of big data, we can prove that we make healthy choices by wearing Fitbits and other monitors. Those who wanted to share that data with their doctors could be eligible for more tax refunds, etc. (One downside to this is it’s easier to be healthier if you’re wealthy, so we’d need to think hard about this one and how to make it unfair to less privileged people.)

We should definitely set aside funding for investing in companies that develop groundbreaking tools and technology. Like I mentioned before, I love the X-Prize model. A recent report explained by The New York Times indicates that as much as 2/3 of the increase in health care spending over the last few years is because of technology that improves health care but costs a ton. On the one hand, inventors and private companies should be rewarded for innovation that saves lives, but on the other hand, because the costs of life-saving new technologies today are buried behind layers of insurance and administration without transparency to the end-consumer, some of these costs are unnecessarily inflated. A transparent system with a single payer can help with price negotiation to keep such costs from skyrocketing, while an award system a la X-Prize can make sure innovators still get paid. This is an area that deserves a lot of discussion. (I would love to hear the health technology investor’s point of view, or a technology economist’s, for example.)

What about the insurance industry and all the people working in it?

There are lots of types of insurance. Trickle-Down Health Care won’t touch life insurance, auto insurance, dental insurance, travel insurance, renter’s insurance, pet insurance, disaster insurance, business insurance, and so on. So most of the insurance industry and its jobs will remain intact.

But in truth, it would be the end of the health insurance industry. And that means jobs would be lost. Including the jobs of people I personally know and care about and work with. This is the hardest part for me to stomach in writing this post.

About 460,000 people worked in health insurance at last count. (Many of them work on life insurance at the same time, though, which wouldn’t be affected.) In utilitarian terms, the benefit of a better health system for 320,000,000 people outweighs that of the jobs of 460,000 people by a lot. But it’s cold to just leave it at that.

I think the right thing to do would be to fund a way to redeploy people from health insurance to new jobs, and to otherwise take care of them as we switch to Trickle-Down Health Care. First, a lot of these employees would move to the public sector to help administer the new program. But we could (and probably should) offer a host of things for displaced health insurance workers, including free retraining for health R&D and health tech jobs, a break on the health care taxes, special unemployment stipends and free higher education as people are looking for new jobs, and early retirement for everyone over 50. It would not cost much in the grand scheme of things.