Just to review:
- In our current health care model we have providers & payers.
- Providers are largely an effective industry.
- Payers are largely a bloated system on which the industry has been built.
- Cost is the ultimate problem.
So today I want to delve into cost.
How much does it cost to see a doctor?
In our current health care system there are three separate responses to this question:
- What the doctor says
- What the private insurance company says
- What the government (medicare) says
The doctor can bill $100 for an office visit. (Remember: the goal of the doctor then is to collect as much of that money as possible from every insurance company they bill, so they have to set their price high enough so that they can maximize the amount they can collect from the high payers to recover it from the lower payers).
The doctor must bill each insurance company the same amount for the office visit, even though Insurance Company A pays $80, Insurance Company B pays $75. Medicare only pays $60.
You also cannot bill the other $40 directly to the patient, especially if they’re on Medicare, so the insurance companies tell the doctor how much they must write off of their books as a loss.
So the key point to understand is: the government already indirectly sets the cost of health care in this country through Medicare.
Doctors and hospitals are free to choose to charge whatever they think the highest tier insurer and most wealthy individual can pay, but they have remained ‘anchored’ in what Medicare will pay for any particular procedure.
Which goes to my next point:
Medical Insurance is not really insurance anymore…
Think about your car insurance or your home insurance. When was the last time those insurances paid when you had to have a few hundred dollars of repairs? When did they ever pay when you were doing home improvement?
Insurance is the concept of paying into a collective fund which would help you out in the case of sudden, unexpected, and catastrophic loss. Every time a light bulb burns out in our house, we don’t file a claim with the insurance, go pay a co-pay to Lowes, and have someone install the bulb for us. We just go buy a replacement bulb, and we’re done.
Medical insurance has gone from a protection against catastrophic loss to a payment system for the entire health care infrastructure of our country. Even medications, the last great item that you could just go pay for, are now all run through your insurance.
The goal of the for-profit insurers is to get the highest income by charging as much as the market can bear from businesses and individuals (this is the premium you pay for a health care policy), and then turning around and paying the lowest the market can bear in terms of doctors and patients care.
The ones who hate this payer system the worst are the providers! They have to play by a million different sets of rules, set by every insurance company whose patients they accept. They employ scores of people just to deal with the insurance companies and bills. (I know, because this is what my Mom does for a living.)
Because of this, being a doctor in private practice is more about being a good businessman and less about being a good health care provider.
If it’s so bad for private doctors, it gets worse for hospitals. These facilities have even more government mandates than private practices, but it all goes back to the same issue: they have to get as much money from those who can pay to make up for those who can’t. This is why a few day’s of a hospital stay generates a bill that is a 27 pages long. The hospital is taking every chance to bill your insurance for every single item they will pay for.
Hospitals also have a huge problem with the uninsured and under-insured. Emergency rooms, must see every patient, regardless of insurance. Emergency room care is the most expensive type of care, requiring the highest paid doctors and nurses, and we offer it for free to everyone.
This is the first thing that has to change.
We cannot continue to provide high-cost, emergency care to those who simply had no way to get care until the situation became so bad it was an emergency. This is a poor use of precious tax dollars.
So how do we lower the cost of health care?
Now you know more about how health care is paid for, what are your ideas? I will try to answer this question tomorrow, and hopefully your ideas will help me do so.