We hear about the cost for war on the news. So why does this $200 billion cost for health insurance paperwork that comes out of American's wallets go under the radar?
How do we relate to that number? By comparison, Bill Gates, the richest guy in the world is worth only $40 billion. What can you buy for $200 billion besides a war?
The health insurance system proliferated in the 1940's when wartime wages were low and employers offered it as a perk. It was a fringe benefit that could be expensed by employers; a cheap throw in. However, the structural administrative problem of paying the everyday medical expenses of those insured is at the root of rising unchecked health care costs.
Never buy insurance for something you can afford to replace. Do you pay for routine maintenance on your car or home insurance?
A good analogy of how screwed up this system is to ask what would happen if car insurance or home insurance paid for routine maintenance? Would it be a good deal to pay an insurance company every time you changed your oil or had your HVAC system quarterly maintenance done so they could pay the bill instead of you? This is no different than going to your pharmacy to pick up medication and handing over your insurance card instead of your credit card. Just think of all the extra steps and people involved that adds to the cost of the average prescription. And who pays for that? Yes. You. Why?
The quickest way to fix health care costs is to make health insurance have a minimum deductible of at least $5,000.00. If government wants to get involved with helping people who can't afford to pay the first $5,000 of medical expenses through a tax credit or direct payments, great. At least we could get back to a free market for routine medical expenses where people determine the optimal price they want to pay and doctors would not have to run a giant paperwork factory for routine tasks.
Do we shop around for the best price for a routine doctor visit? No.
Do we shop around for the best price of a specific medication. Generally, no.
Most of us just say "my health insurance pays for it." After surgery have you ever asked for an itemized bill from the hospital? Why not? Isn't this America? We are shoppers! Why does health care fall into this black hole? At least when I buy my Americano at Starbuck's I know why it costs twice as much as McDonald's coffee; ironically it's because Howard Shultz, Starbucks CEO, pays more for health insurance for his employees than on coffee to make all those espressos! If we solve the national health care problem, even your coffee will be cheaper!
Here's the deal; no matter what, we are all going to pay for routine health maintenance anyway, one way or another, like changing the oil on our car. But I do not want to pay for the doctor's and insurance companies costs for having to deal with each other and their costs to hire administrative people (on my dime!) to manage all that paperwork. I rather pay the doctor cash! And when I do, I negotiate, and ask for a discount for no paperwork.
There are two components to the typical health insurance policy. The first is coverage for a catastrophic event or non-normal event. This would apply to issues where expenditures in excess of $5,000-$10,000 are involved when you get really sick or you need surgery or get some major chronic disease. This part of insurance is similar to car insurance or hazard insurance on a house. Yet just an overnight stay in the hospital is $7500. This is covered so that if something happens, you are not wiped out financially. The premium for this portion of health insurance is arrived at by calculating expected chronic expenditures for a large group of people. For every 10,000 people a certain number will get cancer, heart problems, strokes, etc. in any one particular year. Average cost for treatment is x (around $100,000). So premiums for 10,000 people have to be high enough to pay expected claims plus cover insurance company overhead plus earn a profit.
The second piece of insurance covers routine health maintenance. These include prescriptions, physicals, cholestoral checks, OB/GYN, dental etc. The insurance companies use the same routine. They figure how much the average person spends per year, put on additional funds for overhead, and add a profit. The problem with this part of insurance is that when you have routine annual expenses and you pay to have them covered by an insurance company, you have built in extra costs.
This is because now you have to pay for the costs for the doctor to deal with the extensive insurance company paperwork and the insurance company in order to gain payment, you have to pay for the personnel at the insurance company who will review the doctors paperwork, you have to pay for the personnel at the insurance company who will process the check to the doctor, you have to pay for the personnel at the insurance company to keep track of how much they have taken in from you versus how much they have paid out. All this is bad enough. However, there are other insidious side effects.
FORMS FORMS FORMS!
One, you were going to spend x thousand dollars per year on health care no matter what. When you get insurance to cover it, you are basically paying for the same stuff you were going to buy anyway but also paying the doctor's and insurance company's markup for dealing with each other and going around in circles trying to outplaster each other in paperwork.
Two, the doctor charges more because he has more expense associated with getting paid by the insurance company.
Three, since "the insurance company is paying", there is no incentive for the patient to shop around to get the best price for the best service. The only assessment we use to find out what medication or a doctor visit costs is how much the insurance company will pay. The insurance company has little incentive to hold down what something costs because they are charging you for these expenses plus mark-up for overhead and profit in the premiums they charge you.
It is an indirect charge, but make no mistake, insurance companies night not know your health scores but they have forecasting models estimating medical inflation and the inexorable rise of their own fees. In fact the more you and the average person spend per year the more profit the insurance company makes per customer per year because their profit is a percentage of what is annually paid out.
This issue also applies to prescription medicine. How much of the cost of the typical prescription has to do with paperwork and profit instead of the actual medicine?
We need a system based on facts. And we have the power to do it.
No comments:
Post a Comment