Tuesday, September 15, 2009

The Pro Bono Health Care Solution

21stCentrist Medical Reform: Free Care, Tax-Free
As Congressional health care reform stalls and sputters, as angry accusations fly over aisles and airwaves, perhaps now is a good time to recall one reassuring fact:

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

My granddad, Dr. E. Victor Littauer, worked as an OB/GYN surgeon in Brooklyn from the 1920's through the 1960's. During all those years, especially during the Depression, he took on many patients who could not pay. All his colleagues did too... it was practically part of the medical ethic. But the pro bono system has vanished, done in by subsidized insurance, medicare and malpractice liability. 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 health care woes: millions of the poor and uninsured jamming emergency rooms; medical costs out of control on both personal and federal levels and everything in between.

To fix our current health care mess, the Obama administration proposes massive new programs, new public insurance, and enormous new federal spending. But the most effective, least intrusive fix for our health care woes may be simply to repair the traditional American pro bono system that once worked well. Much of our current problem would be greatly reduced if we could simply increase and regularize the supply of pro bono care for those who cannot pay.

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 health care providers to supply care to those who cannot pay, then simply reduce their taxes to zero for doing so.

This would require a law providing that documented pro bono service to a qualified patient should reduce a doctor's taxes by the fair value amount a paying client would pay. (Current rules allow no deductions whatsoever for donated time.) The law should also include reasonable "good samaritan" liability protections for pro bono service, to make good deeds risk free. Together, these two simple reforms would create a Super Pro Bono system, capable of treating 100% of poor and uninsured patients for free for all primary, specialist and preventive care.

So if a doctor (or lab, clinic, drug company or other for-profit health care provider) pays a 30% tax rate (for illustration purposes) then if he treats 30 patients pro bono for every 100 paying a fee, his taxes go to zero. What is more, his after-tax income rises. To demonstrate and simplify the above scenario, let's assume the doctor gets $1 fee per patient, and he has a maximum capacity of 130 patients a year. If the doctor treats all 130 patients for a fee and pays 30% tax, his after tax income would be $91. But with 100 fee-paying patients and 30 pro bono, the doctor's after-tax income rises to $100, a 10% increase for the same amount of work -- while his taxes decrease to zero. That provides a powerful incentive to plan for a regularized provision of pro bono care to a very large population, if need be. Importantly, that includes pro bono primary and preventive care.

Such a Super Pro Bono system would thus be less expensive for taxpayers than the current system where the uninsured get the most expensive possible treatment at overwhelmed emergency rooms. It would take pressure off those emergency rooms, lowering hospital costs, bad debt expense and intergovernmental transfers to cover the costs of treating the uninsured. It will also be cheaper than proposed new programs which would entail shouldering massive new heath care taxes and insurance fees, paying providers to care for the poor, paying bureaucrats to shuffle mountains of insurance paperwork, and then taxing the providers and bureaucrats – a convoluted tax-spend-and-tax system with lots of overhead that makes little sense when cutting providers' taxes for pro bono service does it better in one step – without any of the insurance paperwork overhead. Super Pro Bono simplifies everything and cuts out layers of bureaucracy, government and overhead.

No Incentive To Over-Treat

One related benefit of such an approach it is attacks the core reason US health care 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 a pro bono patient, and no legal reason to practice defensive medicine with good 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. 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 health care system as treatment protocols follow best practice.

One foreseeable objection may be that the tax incentives of Super Pro Bono would not influence non-profit health care providers and hospitals to provide more pro bono care. But this challenge could be overcome by extending Super Pro Bono tax incentives 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. Super Pro Bono repairs and builds on that American tradition, and is a good private alternative to public insurance, which would inevitably require more and more taxpayer subsidy, and (many fear) more rules, rationing and long waits for needed medical care.

But Super Pro Bono is not a panacea. For the rest of us, steps still need to be taken to reform US medical insurance, a protected, subsidized semi-monopoly that is too expensive and delivers low customer satisfaction. The Obama administrations plans to open up interstate competition among insurance providers is a good start here, as are calls to make private insurance coops more widely available. Even so, Super Pro Bono repairs some of the fundamental distortions that have thrown our medical system off balance, and would be a good starting point for health care reform.


  1. Clear, well written, concise, smart, makes sense. My one question is whether it is fair to the poor to take away their right to sue if a doctor screws up royally. I can easily imagine, for example, an unethical doctor seeking to lower his taxes by providing shoddy treatment to poor people, and this resulting in a medical catastrophe. In such cases, is it right to exclude the patient from the same legal protections that anyone else would get? http://www.indigoprod.com

  2. Good Samaritan legal protections would not include protections from claims arising from gross negligence. But if someone is saving our life for free, it is reasonable to require we not sue the good samaritan, provided he has made a good faith attempt to deliver care up to professional standards.