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jjshabadoo
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May 04, 2012, 02:43:52 PM
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I am writing a research paper for a Medical Economics class at Johns Hopkins Carey School of Business as part of my MBA program. As a bitcoin miner and supporter, I would like some help in discussing and/or defining what role bitcoin might play in cutting healthcare costs for healthcare providers and institutions. Here is the crux of our paper:

 " We would like to analyze in depth the current amount spent in the healthcare system on credit/debit transactions and compare those cost with the expected cost of using purely bitcoin transactions. We will analyze the costs/pitfalls/advantages associated with implementing a digital currency system for these transactions to determine the ultimate savings which might be obtained. We will draw from available data in trading of bitcoins since its inception and analyze how it is being used currently. We will also discuss its inherent deflationary nature and comment on whether or not this is ultimately a positive or negative aspect to any currency. We would like to compile data about smart phone use and internet access to determine how feasible this technology would be for the average user and determine if existing digital infrastructure in medical systems could handle this form of transaction and what would be needed, if any, in terms of upgrades or upfront costs. "

Of course I realize there are existing resources such as the wiki, etc. but some insight into the technical aspects of implementing such a system would be greatly appreciated. Does something already exist which could be used by a hospital system ? Is it secure and easy to use for both the hospital and consumers ? I am aware of bitpay, but do they have a robust product which could handle thousands of daily transactions ?

If I were to garner any legitimate support for this idea following the submission of this paper, I would surely pass things along to those in the community which could act on it. My professor is a highly regarded member of the Johns Hopkins community and is VERY interested in Bitcoin in general.

Thanks in advance for any help/contributions. PM's also welcome.




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May 04, 2012, 03:50:59 PM
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(This is slightly off the topic of transaction costs)

I was thinking that the greatest benefit Bitcoin might bring to the health care system might be that now it's technically feasible to set up free market health insurance companies, or even decentralized health prediction markets.

Right now in the USA, you're forced to buy health insurance from one of many heavily regulated companies. With each one, the entity who determines whether or not the claim is paid is the SAME company who would have to pay it - talk about a conflict of interest! If you don't like it, your only option is to challenge them in court. Up until recently, the insurance companies could even wait until AFTER insurance was quoted and AFTER a claim was made to assess "preexisting conditions" and then deny payment!

I think a better alternative would be to separate the entity deciding who "wins" and the entities accepting the financial risk. You would bet on being sick, and a neutral person (or company) of your choosing determines if it's true when you file a claim. Free competition could lower health insurance costs drastically.
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May 04, 2012, 06:27:15 PM
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(This is slightly off the topic of transaction costs)

I was thinking that the greatest benefit Bitcoin might bring to the health care system might be that now it's technically feasible to set up free market health insurance companies, or even decentralized health prediction markets.

Right now in the USA, you're forced to buy health insurance from one of many heavily regulated companies. With each one, the entity who determines whether or not the claim is paid is the SAME company who would have to pay it - talk about a conflict of interest! If you don't like it, your only option is to challenge them in court. Up until recently, the insurance companies could even wait until AFTER insurance was quoted and AFTER a claim was made to assess "preexisting conditions" and then deny payment!

I think a better alternative would be to separate the entity deciding who "wins" and the entities accepting the financial risk. You would bet on being sick, and a neutral person (or company) of your choosing determines if it's true when you file a claim. Free competition could lower health insurance costs drastically.
An interesting idea and all, but I don't see what it has to do with Bitcoin.

If there is something that will make Bitcoin succeed, it is growth of utility - greater quantity and variety of goods and services offered for BTC. If there is something that will make Bitcoin fail, it is the culture of naive fools and conmen, the former convinced that BTC is a magic box that will turn them into millionaires, and the latter arriving by the busload to devour them.
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May 04, 2012, 07:11:23 PM
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Thanks, but yeah I'm already stuck with this topic. So the key element is to discuss potential savings with bitcoin's low transaction costs. Also, to consider the efficiency for healthcare providers and especially hospitals or healthcare systems. It could be a tremendous advantage for hospitals to not have to worry about chargebacks, bounced checks, etc. Hospitals still take a considerable amount of payments by check and I know they get a fair amount of insufficient funds.

I see these aspects of bitcoin as major advantages:

1. Immediate payment - credit cards take at least 24 hours to clear
2. Reduced fraud - no fraudulent cc payments and the ability to possibly stop taking checks
3. Reduced fees - credit cards take a much higher percentage of each transaction
4. Reduced infrastructure - no more cc terminals, use pre-existing computer systems to process payments

Possible liabilities:

1. Security risk - someone gains access to hospital account or patient's bitcoin wallet
2. How much will bitcoin transaction fees rise and will this make smaller transactions more expensive?
3. Adoption - Will consumers adopt this system and can we make it easier for average users rather quickly if a large healthcare system wanted to use bitcoin?
4. Currency conversion - Hospitals will want to convert to local currency and I believe there are systems already which can calculate bitcoin value at the time of payment and convert instantly.
    Now what about consumers? Can they get the same service and simply have an exchange/payment system linked to their fiat currency account and make instant conversion based payments at current market value? Will bitcoin pricing stabilize enough that consumers would feel comfortable holding bitcoins? Will these instant conversion services raise the whole transaction cost past credit card fees?
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May 04, 2012, 08:38:28 PM
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(tangentially related idea above)
An interesting idea and all, but I don't see what it has to do with Bitcoin.
Because what I just described would break a whole bunch of laws and threaten bloated insurance companies. Without the option of anonymity and really low transaction costs it probably wouldn't even work at all.

Possible liabilities:

1. Security risk - someone gains access to hospital account or patient's bitcoin wallet
2. How much will bitcoin transaction fees rise and will this make smaller transactions more expensive?
3. Adoption - Will consumers adopt this system and can we make it easier for average users rather quickly if a large healthcare system wanted to use bitcoin?
4. Currency conversion - Hospitals will want to convert to local currency and I believe there are systems already which can calculate bitcoin value at the time of payment and convert instantly.
2. Transaction fees probably won't rise significantly for a long time, as there isn't much deterring miners from including every transaction that has any fee at all. And even if the average transaction fee does become significant, you'll be able to pay a smaller fee and just get it confirmed more slowly. For smaller transactions the hospital can just accept them unconfirmed.
3. If this large healthcare system is the first big business to adopt Bitcoin, most consumers would probably just interpret it as more trouble than it's worth and just use Bit-Pay or something.
4. That is correct, Bit-Pay does this. You don't need to expose yourself to "Bitcoin the store of value" if you just want to use "Bitcoin the payment mechanism".

    Now what about consumers? Can they get the same service and simply have an exchange/payment system linked to their fiat currency account and make instant conversion based payments at current market value? Will bitcoin pricing stabilize enough that consumers would feel comfortable holding bitcoins? Will these instant conversion services raise the whole transaction cost past credit card fees?
Bit-Pay with instant USD payout is 2.69%, versus at least 3.5% for VISA. Unless consumers are willing to hold Bitcoins (and it does seem to be gradually stabilizing IMHO) they very well could end up paying more. But depending on how many times the money changes hands using VISA, those 3.5% fees could really add up. With Bitcoin you only face significant fees while entering and exiting the system.
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May 04, 2012, 09:14:41 PM
 #6

Thanks, but yeah I'm already stuck with this topic. So the key element is to discuss potential savings with bitcoin's low transaction costs. Also, to consider the efficiency for healthcare providers and especially hospitals or healthcare systems. It could be a tremendous advantage for hospitals to not have to worry about chargebacks, bounced checks, etc. Hospitals still take a considerable amount of payments by check and I know they get a fair amount of insufficient funds.

I see these aspects of bitcoin as major advantages:

1. Immediate payment - credit cards take at least 24 hours to clear
2. Reduced fraud - no fraudulent cc payments and the ability to possibly stop taking checks
3. Reduced fees - credit cards take a much higher percentage of each transaction
4. Reduced infrastructure - no more cc terminals, use pre-existing computer systems to process payments


Advantages:
1. Credit cards can be reversed for at least 90 days later (sometimes more).  You just cannot trust that any money you receive from a credit cards is completely yours for 180 days.
3. Credit cards charge 3%, bitcoin transactions cost a flat quarter-of-one-cent.  ($0.0025)  You can probably do the math to see how much expense 3% of the health industry is. (This should probably be your biggest point).
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May 04, 2012, 09:47:37 PM
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Not to be negative but people who sell certain things really benefit from people using credit. Of course you could potentially have a bitcoin denominated credit card in the future, but there goes the low/zero fees and irreversability.

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May 05, 2012, 12:58:59 PM
 #8

Not to be negative but people who sell certain things really benefit from people using credit. Of course you could potentially have a bitcoin denominated credit card in the future, but there goes the low/zero fees and irreversability.

In what way?

I have spoken to a couple of shopkeepers. Each independently claimed to pay $800-$1200 in fees every month to banks for creditcard costs and on top of that you have the chargeback problem.




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May 05, 2012, 02:10:30 PM
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Bitcoin _currently_ has low/zero fees, this can be expected to change in the future, to an equilibrium that is composed of network security (= hashing power) vs. people wanting to pay low fees.

Also, where should BTC be used in healthcare? Just as the regular payment from patient --> hospital? For health insurance? Doctor --> hospital? Hospital --> other hospital?

It might also be a problem to get a serious amount of bitcoin at the moment, if just a single average clinic would only accept and pay in bitcoin from today on, MtGox tickers would look quite different.

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May 05, 2012, 02:13:34 PM
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Not to be negative but people who sell certain things really benefit from people using credit. Of course you could potentially have a bitcoin denominated credit card in the future, but there goes the low/zero fees and irreversability.

Credit cards have HUGE fees.  They're just not paid by the card holder. 

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May 05, 2012, 06:51:49 PM
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Not to be negative but people who sell certain things really benefit from people using credit. Of course you could potentially have a bitcoin denominated credit card in the future, but there goes the low/zero fees and irreversability.

In what way?

I have spoken to a couple of shopkeepers. Each independently claimed to pay $800-$1200 in fees every month to banks for creditcard costs and on top of that you have the chargeback problem.



Maybe you don't have $4000 for that huge tv, broken arm, or complicated laser eye surgery but you really want it so you put it on a card. That's a sale which the vendor would never see without people having access to credit.

Of course as regards OPs specific thesis I guess it will lower costs, people will spend less and get less perhaps.

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May 06, 2012, 02:35:47 PM
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Thanks, but yeah I'm already stuck with this topic. So the key element is to discuss potential savings with bitcoin's low transaction costs. Also, to consider the efficiency for healthcare providers and especially hospitals or healthcare systems. It could be a tremendous advantage for hospitals to not have to worry about chargebacks, bounced checks, etc. Hospitals still take a considerable amount of payments by check and I know they get a fair amount of insufficient funds.

I see these aspects of bitcoin as major advantages:

1. Immediate payment - credit cards take at least 24 hours to clear
2. Reduced fraud - no fraudulent cc payments and the ability to possibly stop taking checks
3. Reduced fees - credit cards take a much higher percentage of each transaction
4. Reduced infrastructure - no more cc terminals, use pre-existing computer systems to process payments


Here's what I can think of:

1. Privacy. Right now, there's a strong disincentive for many against getting checked for conditions or even buying medicine because the results might find their way into insurance companies' databases and you'll get a much higher premium if you ever want to change your plan. But imagine if you could buy drugs to treat your medical condition or get a checkup without giving out your name at all. If you want to limit sales to prescription-only, you can even do that while retaining privacy by using Bitcoin addresses as pseudonymous medical IDs - doctor wants to prescribe you $10 worth of a certain type of pill per week for a year, you give him one of your addresses, he types in to the system that that address is allowed to buy up to $520 of that pill, and the patient deposits money into that address first and uses the value stored in that address to pay if he wants to buy some.
2. Brain wallets (see guide here: http://bitcoinmagazine.net/brain-wallets-the-what-and-the-how/) - if you have a seed for a private key memorized you can pay on the spot no matter what condition you're in, even if you don't have a credit card on you.
3. No national borders - if you have to buy healthcare in some other country you happen to be travelling in, there's (1) no risk that you'll have no way of paying and (2) no undue fees or payment waiting delays due to the international money transfer bureaucracy. Selling worldwide health insurance plans also becomes a piece of cake.

Argumentum ad lunam: the fallacy that because Bitcoin's price is rising really fast the currency must be a speculative bubble and/or Ponzi scheme.
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May 06, 2012, 03:01:11 PM
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if you have a seed for a private key memorized you can pay on the spot no matter what condition you're in [...]

amnesia?

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May 06, 2012, 06:52:01 PM
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If you want to limit sales to prescription-only, you can even do that while retaining privacy by using Bitcoin addresses as pseudonymous medical IDs - doctor wants to prescribe you $10 worth of a certain type of pill per week for a year, you give him one of your addresses, he types in to the system that that address is allowed to buy up to $520 of that pill, and the patient deposits money into that address first and uses the value stored in that address to pay if he wants to buy some.

The next day on Silkroad:
"Private Key for up to 520$ of drug X for sale"

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May 06, 2012, 06:57:29 PM
 #15

If you want to limit sales to prescription-only, you can even do that while retaining privacy by using Bitcoin addresses as pseudonymous medical IDs - doctor wants to prescribe you $10 worth of a certain type of pill per week for a year, you give him one of your addresses, he types in to the system that that address is allowed to buy up to $520 of that pill, and the patient deposits money into that address first and uses the value stored in that address to pay if he wants to buy some.

The next day on Silkroad:
"Private Key for up to 520$ of drug X for sale"
Lol.

jjshabadoo
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May 06, 2012, 08:27:55 PM
 #16

Thanks for the responses so far. I appreciate the dialogue to help me stimulate ideas.

It would be great if someone could provide me with some research level sources to help me back up some of these claims as there is VERY little research on the subject in traditional databases.White papers would be great as well.

I was hoping to get some developers to chime in or point me to some resources as this would help with the credibility of my paper. I'm not suggesting Hopkins is waiting for this paper to make any consideration of bitcoin, just simply that I'm hoping to do a solid job on the paper and it will be in the hands of a reputable economist(my professor). Who knows, if I do a decent enough job he might discuss it with his peers.

Well my deadline is mid June, so when I'm done I'll try to post the result.

Keep the responses coming!

Thanks again.
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