by Robert Berry, MD
In his column, David Brooks of The New York Times effectively compares our rapidly rising health care costs to “a stampede of big ugly rhinos.” What he ignores, however, is the huge elephant in the room that is largely responsible for this rhino stampede – the tax preference for employer-based health insurance.
This tax preference – enjoyed primarily by employees of large businesses and government at the expense of small businesses and the uninsured – promotes the purchase of low co-pay, low deductible health insurance so that most Americans do not feel the true cost of the decisions they make about their routine, outpatient care. This elicits a trickle of expensive individual responses that collectively swell into a cascade of costly decisions for the nation as a whole.
If this tax-favored majority had to pay full price for non-catastrophic and non-emergency care, they would become more economical in their decisions without any loss in quality. They would question health care professionals about the value and cost of tests and treatments and forego the ones they judge to be of marginal value. For example, if patients with back pain had to pay for their $1,000 MRI’s, more would make the effort to learn that this test rarely affects treatment and is usually unnecessary. Loud snorers who are sleepy during the day would use an inexpensive, in-home screening test or a trial of CPAP before undergoing expensive studies in a sleep lab. For heartburn, patients would try generic Zantac at $4 per month before buying Nexium or Prevacid for $120.
Patients would require their medical providers – doctors, hospitals, pharmacists, durable medical equipment companies, etc. – to make their prices readily available up front (as they are, for example, at my practice). One insured patient of mine assumed his insurance company would pay for the lab tests I had informed him would cost $95 at my practice. So he decided to have them done at a local hospital instead from which he received a bill for $600 several months later, because his insurance company refused to pay. Abolishing the health insurance tax preference would eliminate this confusion. Patients would know from the start that they are responsible for paying for everyday lab tests, and they would insist that medical providers be transparent in their pricing.
Having provided nearly 30,000 office visits for the uninsured and patients with high deductibles in my insurance-free practice over the last nine years, I could relate many more ways my patients and I have discovered to cut cost. But given these, I believe it would be reasonable to estimate that at least $100 could be saved per outpatient visit if a similar mindset were applied during each encounter. With over a half billion such visits per year, the U.S. could save more than $50 billion annually simply by giving both doctors and patients the incentive to make cost effective decisions at the point of care.
It could also significantly cut medical office overhead as well. Dr. Brian Forrest, a family physician in Apex, North Carolina, does not file insurance, and as a result his annual operating expenses are only $80,000 – as compared to an average of $330,000 for family docs who do. Other cash practices (including mine) have demonstrated similar cost reductions. With approximately 300,000 primary care physicians in this country, $75 billion could be saved each year if Americans paid for their non-catastrophic care directly. Billions more could be saved annually by employers, hospitals, pharmacists, private insurers, and government for not having to settle hundreds of billions of small medical claims.
Dr. Forrest’s practice enables us to determine just how much it costs a doctor to file insurance for an outpatient visit. With $250,000 in additional overhead and approximately 5,000 patient visits per year, family physicians pay about $50 to settle each claim. Without this overhead, Dr. Forrest can afford to allot an average of 30 minutes per patient visit and charge about what it costs other family docs to bill insurance for their 10 minute visits. Little wonder that Mr. Brooks’ rhinos are stampeding. Situations this ridiculous can occur only when elephants are ignored.
Some might object that visits to primary care physicians are too expensive and must be insured. That’s because most Americans have no clue how much such visits cost and how that compares to other purchases they make. According to the Medical Group Management Association, family practitioners on average receive about $300 in revenue per patient per year, most of that through insurance payment. According to the Bureau of Labor Statistics, each year Americans spend on average $9,000 for transportation and $3,000 for entertainment. It appears, therefore, that paying physicians directly is less about price than about changing our priorities.
If patients had to pay for non-emergency treatment out of their own pockets, fewer would choose ER’s for such care. If there were 25% fewer ER visits, we could potentially save another $10 to $20 billion annually while providing relief to our overburdened ER’s.
Without the health insurance tax preference, it would no longer made economic sense for large businesses and government to buy expensive low co-pay, low deductible policies – the type that pays most of these ER costs for routine medical care. These organizations could then pass on thousands of dollars a year in premium savings to each employee rather than giving that money to insurance companies to ration their care.
Adding up all of the money we could be save by being more economical at the point of service would probably yield over $200 billion per year – not an insignificant sum, even by Washington standards.
We are at a critical juncture in our republic’s history. Mr. Brooks is right – the rapidly increasing costs of our health care system are not sustainable and will likely bankrupt us. It is obvious from this month’s townhall meetings that most Americans do not want a government takeover. However, simply rejecting Obamacare will not solve our health care financing problem. We can check these soaring costs by changing the tax code so as to promote direct payment for non-catastrophic care. Or we can choose to pay federal bureaucrats to cut costs for us by rationing this care in a single payer system.
In other words, to avoid getting trampled by the rhinos we must first get rid of the elephant – the tax preference for employer-based health insurance.
Robert S. Berry is an internal medicine and emergency physician.
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{ 12 comments }
Finally, a Dr who completely gets it. Somebody should give him a huge megaphone as his message is what we should be hearing.
I can understand the value of paying for your own “small” health care issues. Would a patient go to the doctor for a simple cold if it meant paying a couple hundred dollars?
I often question my doctors’ recommendations. Do I really need that mammogram? Isn’t the sleep study kind of exessive for my first insomnia complaint? How much information is a second EGD really going to give us? For the most part, the doctors I have seen respect my reluctance to undergo excessive testing but there are those that are offended by my questioning. I am able to question my treatment because I spend hours on the internet, making sure I know everything about what is going on. (For you doctors that are cringing, I have never brought a printout to a doctor’s office.)
But what about catastrophe? It’s clear when you are diagnosed with cancer-or some other expensive condition-you have a catastrophe. But what about the ongoing problems? Advair is expensive…I suppose I could cut back on my dose…only take it once a day. I probably wouldn’t end up in the ER but I wouldn’t feel well. Then there is insulin for my T1. I am over $5000 a year-every year-and all I have is medication-no doctor visits-no screening tests. Since I live close to the border, I could get my insulin from a Canadian pharmacy without a prescription. There are direct to consumer laboratories and home kits to check A1C. I don’t really need to see a doctor to monitor my diabetes. Not too excited to do the Advair from a foreign pharmacy. We don’t have any retail clinics in my area yet but nurse practitioners are able to practice independently in the state I live. So another option is for a NP to provide care the for the asthma, diabetes and other “small” medical issues for $4-500 a year. I don’t feel mammograms are that useful and I am at low risk for cervical cancer so I could skip a PAP. The lung function tests are a waste of time and I only do them to make my doctor happy…skipping those wouldn’t be an issue. As long as I don’t have a more complicated health issue come up, I pay $5,500 a year plus premiums for my castastrophic insurance. I could always go “naked” and hope that catastrophe doesn’t happen…and rely on charity care.
Take that $5,500 out of my income, I would qualify for food stamps. Take out the premiums for castastropic health insurance, I won’t be able to pay my rent.
I agree. I don’t understand why we pay for insurance for office visits. Most people need insurance against catastrophic care, specialist procedures and expensive necessary testing. But preventative care is needed as well, and as the article above points out people need a reorganizing of their priorities.
While I agree with most of the points made in the article, I see that there is no guarantee that decoupling the tax benefit for employer healthcare, and putting patients in charge of their health dollars will suddenly make them pay for the needed preventative care.
Therefore, these patients who choose less substantial health care plans which require less $ per mo, but more cash for services rendered, must be “forced” into getting the needed preventative care that they don’t want to spend out of pocket. People will only spend on something that they see as having value, and unfortunately, the benefits of preventative care are so delayed that most people won’t pay for them unless required.
I have blogged about why employer tax subsidies are an unfair subsidy to the wealthy: http://drbrenner.blogspot.com/2009/07/truth-about-controversy-surrounding_12.html
I personally think we should phase out the employer tax subsidies, require employers to give the same gross $ amounts in salary or in health care accounts so the employee only loses the tax break, not the gross dollar amount. Then everyone in the country is required to have a basic minimum of coverage: catastrophic plus standard preventative care for their age bracket (e.g. child ‘well-baby’ visits, and colonoscopies for those in their 40s). Everything else is out-of-pocket or requires a supplemental policy. Basic policies for most people will be inexpensive. Thus they can afford any cash outlays that are required. Chronic disease patients will have a low cost catastrophic plan, and a higher cost supplemental plan. Thus patients who are currently healthy have an impetus to stay that way so they never require these expensive high-cost supplemental plans.
And to help keep costs down on supplemental plans, pts will be encouraged through premium rebates, to be “healthy” chronic disease pts (e.g. Diabetics that keep the HBA1C in a normal range get a discount, participating in age/medical problem appropriate exercise programs get you a discount).
Hospital costs and expensive testing are the big ticket items in insurance anyway. So the risk pool won’t be destroyed by young people moving to catastrophic plans since the whole population will all be have these plans. If you simply have a choice of catastrophic vs comprehensive, young healthy people choose the cheaper catastrophic plan and less healthy, or chronic disease pts choose comprehensive therefore destroying the risk pool.
My suggestion above allows both to coexist without a destruction of the risk pool, while allowing people to actually know what they spend.
Real healthcare reform. Great perspective.
“Chronic disease patients will have a low cost catastrophic plan, and a higher cost supplemental plan.”
So an insurance company, knowing that I will probably spend more than $5000 in a year for medical expenses, is going to give me an affordable premium? How many “less” chronically ill are they going to recruit to offset what I use? Won’t they increase the premiums? Why would anyone buy an expensive supplemental policy for a chronic disease when paying the premiums is more than what they would pay out of pocket for those services? What about those who need more care than I? Are my premiums going to be even higher?
I’m not sure why the patient — that would be the person in the transaction WITHOUT medical training — should be the one to question whether any given test or treatment is necessary. I recognize that all too often we are put into that situation (I, too, have been taken for an unnecessary MRI that I could’ve prevented with some appropriate research), but it seems more appropriate to me for the physician to guide that decision.
For myself I am in favor of having the option to negotiate directly with my providers directly for routine preventative care; as a person with small-company insurance it would definitely be preferable to the balance bill surprise. On the other hand, I would be concerned that this would drive people to neglect the sort of care that will prevent larger bills later on.
I also question how much these expenses really drive the overall problem. Intuitively, healthy people with inappropriate allergy meds sure seems like small potatoes compared to inappropriate ER utilization, insurance company overhead, and so on, but I certainly haven’t seen numbers. Has the author of this piece?
This is an excellent post. The point you make seems to be lost among the health care reform discussions. I have found there seems to be a preference among some physicians to prescribe whatever the newest drug is for X condition. As someone who is well insured, but treating a number of chronic conditions, I have to be careful about accepting a prescription for a name brand drug without making sure there isn’t a generic that works just as well. And I don’t pay anything close to the full cost of my medications.
Kim said “’m not sure why the patient — that would be the person in the transaction WITHOUT medical training — should be the one to question whether any given test or treatment is necessary.”
Actually that is EXACTLY who should be doing so. Ultimately we are all responsible for ourselves – the doctor is just an adviser. So, if you’re electrician says you should probably upgrade the wiring in your home – you can choose to ignore him, to get another opinion, or to research the matter. The same with your car, career, or child. The same with the lawyer who gives you advice. You are in control.
I have been to the Senate Finance committee and the HELP Senate Committee web pages and listened to and read most of the testimony. The biggest driver of increasing health care cost is the poor way we manage chronic disease and end of life care. Look at any state Mediaid budget and most of the cost is for skilled nursing home care and end of life hospital care. Most of these people could be living and dying at home at a cost of $9000 per year verse a minimum $60,000 to $2,000,000 for care in a nursing home and a hospital. CMS has some anti-technology people in control who refuse to pay for telemedicine in urban areas for either at telehealth physician house calls or for home health telemonitoring by nurses. They are hung up on requiring face to face physical visits pay a person, when 99% of the time the patient is never touched by the provider. All information is obtained through observation, questions and electronic monitors Yes, care for children can be improved, but that is not where the problems are. JB
I went to a cash-only IM practice and was very happy with it. Unfortunately, I had to move and haven’t found a comparable practice where I live now.
If the cash-only model were more widely adopted by American physicians, I hope the outcomes would include the end of ludicrous bills and ridiculous “negotiated rates”. It makes too much sense to cut to the chase by taking the insurance company out of the process and making the cost of health care more transparent.
WRT “chronic disease” – the assumption that pains me is that most, if not all, can be avoided if the pt eats healthily, exercises, etc.
There are many chronic conditions that do not fit into the “eat healthy, exercise, quit smoking” category, such as allergies, asthma, mental illness, etc. People with this kind of chronic condition still get thrown under the bus without some mechanism for making prescriptions affordable. Even if those in this group were pretty vigilant about generic vs brand medications, there are not always acceptable substitutes.
John Bierma has some good comments regarding “futile care”. Unfortunately, it seems that cogent public discussion of this topic fuels the anti-reformers’ fire.
Here is my prespective as a person who recently changed jobs from a hospital employer that offered a very low deductible plan that would pay 100% of tests/procedures/physician services/medications as long as the services were at the hospital to a small employer with a large deductible for everything.
I have dropped the back specialist I saw for my herniated discs, will only do a pap every three years siine I have no risk factors and will skip the every six months visit to the dermatologist. I will instead go to a free skin screening that the local hospital offers. I have dropped every medicine I used to take but synthroid and am doing fine. I guess I didn’t really need them after all.
My husband signed up for health care through the veteran’s administration, soemthing he was guaranteed back in 1982, only to find out he may not because of our income. Fortunately he did qualify, at least for this year. All of his meds were changed to generic and one was discontinued. Only time will tell how this will work out. He has tried generic Zocor before only to have to go back on Lipitor. He was also informed he would need a dilated exam every two years, but I think the ADA recommends this procedure every year. This is how the goverment makes decisions for you when they run health care. If necessary, we will pay for what he needs to be healthy.
So, I have decided to cut medical care I didn’t really need anyway because I don’t want to pay for it and the government decided to cut things my husband may need.
I think this illustrates how one will overuse services when they do not have to pay for them and on the other hand may not get everything they need when the government is making the decisions.
I have incredibly mixed emotions about the patient second-guessing the doctor.
On the one hand, we should all take charge of our own health and be an active participant in our health care and medical decisions. We should educate ourselves, to a much greater extent than most now do, on our those aspects of our health that would motivate us to see our doctor.
On the other hand, I did not go to medical school. I did not put in those long four years plus additional years of internship and residency. I do not claim to have the breadth and depth of either knowledge or practical experience in observing or diagnosing illness or injury nor do I have the knowledge or experience in prescribing testing or treatment necessary to feel entirely comfortable telling my doctor “No, I don’t think you’re right. I don’t think that’s necessary.”. As proficient as I am at web search and research, I would not stack that up against my family practitioner’s knowledge and experience.
And I can’t even imagine the litigation and defensive positioning that would (will) blossom (well beyond a herd of rhinos, I suspect), as more and more patients begin self-diagnosing and self-prescribing treatment.
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