THE FILET MIGNON OF HEALTH PLANS

Most people can tell you how much a gallon of milk costs at the grocery store.  But how many of us know the price of a common antibiotic?  Z-pak is $70 for 5 pills ($14 per pill). Or how about an MRI?  About $750.  If Americans had to pay cash out of pocket for drugs and medical services at these prices do you think these companies would still be in business?  No.  But you are not their customer.  Doctor's who prescribe treatments and employers who pay for your health insurance are their customers.  Insurance companies pay doctor's $24 per insured patient, and half that ($12) goes to pay the doctor's office administrator to handle all the insurance company paperwork.  That's why the doctor can only see you for 10 minutes; he has to see 30 patients per day just to stay in business.  The only reason health reform is happening now is because employers can no longer afford to pay for employee health insurance at these prices and insurance companies are now FORCED to make change or lose doctors and employers as their customers.  

Now where do you fit into this picture?  You don't.      

This year 177.4 million out of 300 million Americans (59.3 %) have health insurance through their employer and 39.3 million Americans (27.8%) are covered by Medicaid.  Some state government health plans charge monthly premiums of $621.53 for individual coverage and $1,551.64 for family coverage.  Family coverage costs $18,619.68 annually.  That's more than a minimum wage worker’s annual pay of $14,500 per year.  Now keep in mind the state plan is rich in benefits which is why is costs so much. Yet many cities and employees believe their coverage is the norm or middle of the road when, in fact, it is the filet mignon of health plans.  But how many people are sick that often or actually guided how to use these benefits to improve their health?  Under these plans the customer has minimal out-of-pocket expenses or "co-pays" for health services, so they have no idea what health care actually costs. It's not our fault.  The system has us trained to not ask questions because "my insurance will pay for it". This lack of education leads to unbelievable waste and has snowballed into an avalanche that is killing Americans, slowly.  We are less productive at work, less happy at home, and we take this personally instead of collectively demanding better health services that we understand and can implement into our daily lives. Ten minutes at the doctor is not enough to educate us. So while smart people in Washington are scratching their heads to solve the health insurance problem, this enormous amount of money spent on filet mignon "benefits" literally goes down the toilet because people either abuse them or don't use them.  

CASH FOR HEALTH is the solution.

THE HEALTH INSURANCE PAPERWORK FACTORY. HOW MUCH $ OF YOUR PREMIUM GOES TO MEDICINE VS PAPERWORK?

$200 BILLION ON PAPERWORK?  Are you kidding me?  $200 billion per year is spent on inefficient health insurance paperwork and administrative costs.

That is the same price the Obama administration is spending this year on war. 

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!  

Can you see the pattern?  How come the trillion dollar stimulus plan gets so much press, yet the trillion dollar per year health insurance industry has gone under the radar for so long?  We just continue to hand our money over.  Ask questions.  We waste $200 billion dollars every year in health insurance and doctors administrative paperwork costs; more than any other country.  Why? 

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.  

Ooo.  That's gonna be some paperwork.

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.  

A PAY FOR PERFORMANCE HEALTH CARE SYSTEM

Can health insurance premiums become a financial incentive to stay healthy?  

If you get one too many speeding tickets, your car insurance rates to go up. If you don't pay your bills, your interest rates on loans goes up. So how are health insurance rates determined?  What's the formula?  What are they measuring? Can you predict a car accident or a flood with more accuracy than predicting a heart attack?   

It made me wonder.  How exactly do health insurance companies come up with that "premium" number?  Your zip code? Your height and weight?  Your age?  What does that have to do with my current health status?   

How do health insurance companies make money? By hedging bets?  We hear in the news that to control rising costs of health insurance is to cut and cap costs.  Yet from a business perspective, how much money are health insurance companies losing by making bad underwriting bets based on archaic actuarial and probability models?  Given the information technology and diagnostic science available today, when batting averages, online poker, and Super Bowl Sunday have more precise analytical tools than what it takes to determine your health insurance rates, something here is totally out of whack.  Most of us bet around $400 per month that one day we are going to be unhealthy.  You hand that wager over to your health insurance company each month, and never question the price. Why? On a scale of 1-10, do you know how risky you are?  What exactly are the odds your health insurance company will have to payout a big catastrophic claim on you?  How many blind bets do these insurance companies make?

HEALTH DISCRIMINATION?  

Do you tell your health insurance company that you smoke one pack of cigarettes every day?  As long as you work for a company who provides health insurance as a perk, go ahead, smoke away.  Yet if I want to buy health insurance on my own and I had a cancerous mole removed, or have heart disease or diabetes in my family, these same companies assume you will cost them money and will either turn you down, or may charge you a $1000 per month "pre-existing condition" premium based on out-dated actuarial data of a large group of people.  Again, do insurance companies know out of that large group of people how many of their insured eat Cocoa Puffs every day for breakfast vs. oatmeal?  Either way, I do not want to be forced to pay a premium based on assumptions.  I want it based on fact.  I want a fair price for exactly how risk adverse I am right now.  And with that data I want to be rewarded with a lower premium for maintaining good healthy habits that not only enhances the quality of my life, it saves the health insurance company money on decreasing potential catastrophic claims.  Then just like when I get one too many speeding tickets and my car insurance rates go up, next year, if my health scores become risky, I'll pay more. This is called risk equalization in Europe. There is all this "talk" about prevention and wellness.  Let's act on it.  Let's put our money where our mouth is and see exactly how many people are acting on preventing illness. Or not.  Needless to say, a wake-up call to face facts is the first step to health.  No one wants to die. That is how you save money on health insurance and control rising prices.

SOLVING THE PROBLEM AT THE RIGHT END OF THE STICK.  

Pundits say that reducing costs while increasing access are irreconcilable issues.  That "incentives" for preventative care and treatments of chronic diseases will sometimes result in better health but will always result in more spending.  Why?  I respectfully disagree for the reasons stated above. Right now each insured is paying top dollar for a "pre-existing chronic condition".  In this proposed "pay-for-performance" free market model, why not allow an individual's current health status to set insurance prices and measure health progress.  Then empower each insured to choose how much, in a dollar amount, they can afford to insure their health management and risk. The riskiest cases may qualify to ask for further aid and choose a health maintenance program subsidized by the government.  

If we measured each insurance applicant before billing to assess exact risk and associated cost, insurance companies will profit simply by including everyone as a customer. Also, by aligning per person costs with an annual action plan to achieve health vs. blindly wagering top dollar to expect the worst, in less than 5 years this will turn the whole system around. To the positive end of the stick. We require an health incentive plan, not a health insurance plan.  Perhaps begin with the hardest to cover "pre-existing condition" cases that insurance companies won't touch. If we required a health assessment diagnostic blood test first to determine exact costs to get you healthy according to an annual schedule, well, now we have a real health "plan" to work with.   

Employers don't have to offer health insurance anymore. Relieve them from this paperwork mess.  Work environments are essentially communities or similar to a "village". For employers who create healthy work  communities, determined by the health data of their employees, will be awarded health incentive funds from the government.  Employers will use these as perks in the form of "health gift cards" to distribute to employees to use specifically for health care according to their individual annual plan. This is simply a reallocation of the same "tax benefits" employers get now, but this is not just handing over money.  This creates a dynamic "community" health plan for individuals based on positive action with rewards for positive results

COMMUNITY HEALTH GIFT CARDS!

Let's take the burden off employers and put the individual consumer in charge. Give individuals tax credits and incentives for improvements on their individual health performance.  Let's provide the insured health guidance and coaching. Like the Peace Corps, this will be a nationally organized, community based, health corps organization, perhaps franchised across the nation.  Individuals who participate in employer based health maintenance an wellness programs will then be distributed health insurance credit as a "health gift card".  

PAY FOR PERFORMANCE HEALTH CARE SYSTEM

Yes, technology to track health progress will make administrative process easier, but a blood test can empower any patient and health insurance company to pinpoint exactly how risk adverse you are, or no and base costs on real datat.  To qualify for health insurance you will take a biophysical diagnostic blood test each year and pay your premium according to real-time individual health data, not an arbitrary premium.  Let's give doctors real health data scores to work with to create an annual health plan for each "universal" insured patient.  And can insured's have an incentive to stay healthy to save money on insurance premiums?  Yes.  To start what if we took that same $4700 per year or $400 per month and invested it in a day-to-day health plan to bring your health scores to optimal levels.  The cost for the annual diagnostic biophysical blood test will be amortized into your monthly premium. Then your your doctor can use your annual health scores to map out a plan of action for the coming year to get your numbers in healthy range.  Then just like when I get one too many speeding tickets and my car insurance rates go up, if my health scores become risky, next year I'll agree to pay more.  When I improve next year, I pay less.  This will be a practical use of your annual premium, but now it becomes an investment in yourself; not a payment. Once you have real data to determine exactly what your costs are to bring your health scores into healthy range you can buy insurance for a price based on real cost; just like you do for your home.

Right now doctors only make money if you stay sick! This is because the current health insurance system pays doctors per treatment...the more tests and treatments they order, the more money they make.  One doctor told me he makes $24 for every health insured patient he sees. And $12 goes to his office management costs before he ever gets into the room with you, the patient. It is now a volume based business. He has to book 30 patients per day (1 patient every 15 minutes) to stay in business.  With this new plan, doctors will be rewarded financially by putting them on the prevention side of the fence rather than being paid on volume, per treatment. Under this pay for performance plan doctors with the most patients that show progress of getting health scores within range will help health insurance companies save money and allow them to offer lower premiums by reducing risk on the number of payouts on expensive claims. 

NEVER BUY INSURANCE FOR SOMETHING YOU CAN AFFORD TO REPLACE

Yes, it may be best to exclude coverage of health maintenance services with low priority or value.  For instance, your car insurance company does not pay for changing the oil on your car.  These common health maintenance services would be itemized in your annual health incentive plan that you receive when you apply for insurance.  In most cases for teeth cleaning or remedies for colds or minor infections, you will save money paying for yourself rather than paying for all the insurance paperwork involved with a co-pay.  Only buy catastrophic insurance and buy it based on a specific number.  The health status report from the diagnostic blood test will give you levels of potential risk that a hospitalization may occur and the price for treatment for various scenarios.  This will enable the customer to purchase insurance based on exact risk for their individual health status from $100,000 (covering an average cost for one week in the hospital) to $1,000,000 (for one year of cancer treatments).  When your health improves each year your annual investment in catastrophic health insurance can be reallocated to your annual health maintenance costs in "points" in a health gift card.  

Let's expand the system and manage it so anyone can apply. 

HEALTH INSURANCE RATES LIKE CREDIT SCORES

Congratulations to Bill Gates for Health Vault, and his op-ed piece in The Wall Street Journal on October 9, 2007. We all play a role in making this happen. We need a solution for garbage in, garbage out diagnoses, the trial and error, "here, try this drug" treatments that doctors provide based on fragments of information, and that patients endure like guinea pigs. As patients, who feels like filling out all those forms and reciting your health history to a doctor when you are doubled over in pain and not at your best and most reasonable state of mind? My 80 year old Dad bought himself a copy machine, and made 50 copies of a handwritten 8.5" x 11" piece of paper with all the drugs he takes now, his cholesterol and other stats, and the history of treatments and surgery's he has ever had. When any doctor asks him the usual questions he simply pulls the folded paper out of his pocket and hands it over. The look of relief of the doctors' face says it all. Health Vault Beta? 

So what if I handed over a piece of paper like that to my health insurance company? Or gave them access to my Heath Vault account? Since we get interest rates for loans based on credit scores, why not base our health insurance rates on health scores. If preventative, personalized medicine is to be taken seriously, can we be inspired to put our money where our mouths are? Eat well and save money on health insurance! I want to be rewarded for the great care I take care of myself. 

I am a 40 year old type 1 juvenile diabetic, and I recently contacted 10 companies about getting individual health insurance. Eight out of 10 said they won't cover juvenile diabetics. The other two said for any pre-existing condition they can only provide limited insurance (up to $100,000 per occurrence vs. $1,000,000 for a "healthy person"), they didn't have prescription drug coverage for insulin, and they suggested I am better off with a group plan. Why? My HbA1C is 5.9. For diabetics, the HbA1C test is like a baseball player's season batting average. Both A1C and the batting average tell you about a person's overall success. Normal HbAIc values for non-diabetics is approximately 4.0 - 6.2 percent. The American Diabetes Association recommends that it should be below 7 for diabetics to prevent the complications from diabetes. So I want to pay insurance rates based on my performance. Just like getting a speeding ticket or not paying my bills, when my health numbers change out of "normal" range, I agree to pay more. I simply want a fair system.

We need pay for performance guidelines mandated by insurance companies that include provisions for annual diagnostic tests that reward excellence financially with lower rates. Can Bill Gates and Health Vault help with that?