Controlling health care costs requires shared sacrifice

To understand how hard it is going to be to control health care costs, one merely has to consider the outrage surrounding TSA’s recent roll-out of “enhanced security” measures – measures which include ‘enhanced pat downs’ and full body scans.

Videos of boys getting patted down personified the problem. But the upset and outrage and anger visible today will be nothing if another airplane gets blown out of the sky; then we’ll see – and hear – about the gross negligence that allowed the terrorists access to a plane full of people.

We want to have our cake, eat it too, and not get fat.

Folks, we need to get the deficit under control. We can’t afford the future bills for health care entitlements. Yet many of the same deficit hawks outraged by government spending are also the loudest voices protesting cuts to Medicare and angry about reducing physician reimbursement.

This is going to hurt everyone – you, me, my ninety-year old mom, doctors, the poor, the wealthy, hospitals, supply companies, pharma – you name it. We can either whine about how unfair and awful this is, or get serious.

A good place to start is the President’s deficit commission’s approach.

Here are a few things to consider

- Speed up cuts to Medicare Advantage and charity care payments to hospitals, both provisions in the ACA.

- Beef up and empower the Independent Payment Advisory Board, the newly created commission charged with slowing the growth in Medicare spending.

- Means-test seniors’ contributions towards their health care.

- Quickly implement a strict cap on the amount of employer-provided health insurance expenses that are tax deductible – a much lower cap than called for under the ACA (that kick in until 2018).

And here are a few ideas from your author:

- Raise Medicare-specific taxes. Much as I dislike paying taxes, I dislike dumping the costs on my – and your – kids even more.

- Allow the federal government to negotiate prices with pharma for Part D; either that or cancel the program altogether. That’s $15 trillion right there.

- Require Medicare to alter payment based on the effectiveness and efficacy of various treatments – a rather obvious step that – believe it or not – is illegal today.

- Require individuals with modifiable risk factors to pay more – or get less – if they refuse to work to get healthier.

What does this mean for you?

This is about shared sacrifice. While the ‘enemy’ isn’t as easily personified as a terrorist or nuclear power, it is every bit as dangerous and threatening. Real, verifiable, tough steps are necessary. We’ve handled this before, and we can do so again, but only if we get serious.

Alas, the cynic in me doesn’t think we will get serious. The deficit crisis isn’t going to manifest itself in a highly-visible televised explosion or plane falling out of the sky; no pictures of bloody victims staggering away from a dust-filled street, no shattered buildings with blown-out windows and screaming sirens.

Just a deeper and deeper hole sinkhole that will slowly – but surely – swallow our future.

Joseph Paduda is the principal of Health Strategy Associates, and blogs at Managed Care Matters.

Submit a guest post and be heard on social media’s leading physician voice.

email

Comments are moderated before they are published. Please read the comment policy.

  • http://fertilityfile.com IVF-MD

    The use of TSA as an example illustrates a universal principle regarding the morality and increased efficiency of people making voluntary mutually-consensual choices vs being coerced by force to patronize a monopoly.

    The truly free way would be to allow full freedom for airlines (and their passengers) to choose between TSA-controlled airports vs those with private security. This way, passengers could choose. Maybe some like the “big name” reputation of TSA so they will fly out of the TSA airports. Good for them. Others, however, may think they can have a more pleasant experience, save money and be even safer with skilled non-government workers doing the screening. They can choose the privately-screened airports. Good for them.

    The same principle applies to healthcare. Maybe some feel that politicians and their committees are extremely well-qualified to deliver the best care so they will gladly pay into the tax and MediCare model. Others may have the opinion that they can shop for better quality at a lower price by doing it on their own. So they get to opt out of the MediCare portion of their taxes, but they are also on their own with respect to healthcare.

    With respect to doctors, maybe some love the guaranteed income and job security of being part of the government model. Good for them. Others, may cherish the independence and flexibility of the free market, but would then have to be self-accountable to provide such an attractive service at an attractive price that patients are willing to support their practice.

    This model brings out the best in everyone because it forces the public and private agencies to put out the best product in order to compete for the funding.

    • AC

      You’re suggesting that a “non-government” choice is less expensive? Medicare is the best example of the contrary. If the government would be the one negotiating drug prices, instead of giving the task to the insurance companies, we would save a LOT of money.

      • http://fertilityfile.com IVF-MD

        Are you asking if a government model is DIRECTLY more expensive per patient or INDIRECTLY more expensive per patient? Directly, it’s not, because the payment is hidden. But indirectly, taking into account taxation, waste, fraud as well as the overall productivity loss due to taxation, the cost of the government model is much much worse. Now to prove it via accounting methods is not possible. To prove it under experimental methods would require a randomized trial of different groups of people subjected to different taxation rules and different medical regulation rules.

        My assertions is that a true free market model (which we absolutely don’t have yet) would improve the quality of life for more than half of the people in this country.

        • AC

          I will give you an example of what I’m talking about.
          Let’s say that the insurance company negotiated an 8% discount for one Part D covered drug. If the government would have used Medicaid’s statutory formula instead, the discount would have been at least 15.1% (back when the program was launched). Now the minimum discount is 23.1%. Also, every year, if the drug manufacturer takes a price increase higher than the inflation index, which happends quite a lot, they have to pay the difference to Medicaid. I’m not counting the admin fees charged by the insurance company b/c let’s say we would use them to pay the government employees to administer the program. Do you see what I mean?

          Regarding your free market statement, I agree we don’t have one right now. But why is that? Leaving insurance companies aside for a moment, why is it that doctors, hospitals, and labs, in the US are reluctant not only to publish their prices, but to give a patient a price before going in? And forget about negotiating prices, unless you are an insurance company. Out of necessity I have personally gone through a costing exercise a week ago. None of the 7 offices I called offered any discounts for self-paying patients. One office didn’t want to give me a price, period. Another gave me a quote reluctantly. All prices I received were at least 2-3 times higher than what an insurance company would pay for the same services. So can someone explain to me how is it that doctors hate insurance companies but at the same time they do everything they can to keep the system in place?

          • http://fertilityfile.com IVF-MD

            AC,
            Brilliant of you! You are reasoning this out and will have the answer soon as to why medicine is the way it is today.. You are almost there.
            Let’s start with your costing experiment, I totally believe you. I thank you for asking the brilliant question of WHY? Why don’t most doctors enthusiastically give 1. transparent pricing information 2. competitive pricing. I think if you and I can figure this out, we will have discovered some insight on how to improve medicine! Exciting!

            First, my arguments are these. If you don’t necessarily agree, can you at least acknowledge my attempt to prove my arguments?

            1) In a free market, I propose that doctors would absolutely make an effort to give out transparent pricing information. In a free market, doctors would absolutely drop their prices and compete with each other.
            2) We don’t have a free market.

            Shall we go on to deduce how not having a free market results in doctors being unmotivated to lower fees and display fee information that patients can use to effectively price-shop?

            Please allow me to ask you to participate in a thought experiment. What do you think would happen if somebody opened a new restaurant and refused to post prices on the menu? You sit down, look at the list of food offered, but no matter how much you try to get a quote from the waiter about how much it cost, he refuses to give you a clear answer. What would happen? Begrudge me and think it over before peeking at my answer.

            OK here’s the answer: Customers would refuse to eat at that restaurant and they would go elsewhere to the other places that have easy displaying of prices. Right?

            So the next question is this. What if ALL the restaurants did as the first one did and refused to post prices or at least only gave it out begrudgingly after repeated asking on your part? Right? This is analogous to your findings when you called the 7 doctors’ offices.

            This situation of so many restaurants being so nebulous on their prices would not last long? Why is that? Offer your answer in reply to me and then we can continue :)

          • pj

            It’s been said that ins. co’s get volume discounts. A cash pay pt can’t guarantee the amount of work to the Doc an insurer can, which may be why the cash pt pays more.

            My feelings on that are mixed.

            If an ofc won’t quote a price, then how open would the Dr. be about risks and benefits of treatment? Better not to work w/them anyway.

          • AC

            IVF-MD,

            If all the restaurants refuse to post their prices then I would not eat out :) .

            In fact I’m already doing so for any dental work since the prices in the states have gone through the roof in the last few years. I prefer to go to the dentist in Europe, and keep US for emergencies only. The cost is 1/4 of what I would pay here, plus if you have US dental insurance they would reimburse you.

            Anyhow, you would always find a “restaurant” that would be willing to be different because they realize the potential. If you’re persistent enough you will find it. In my case I called my former doctor and she actually offers very reasonable prices without insurance, even though she is in a major metro area and she’s a good doctor. I would have to drive 3 hours to see her but I would rather do that than to have to pay an arm and a leg at some other office. Unless I’m on a death bed I would never go to any of the 7 offices I called a week ago.

            Btw, are you in a hospitalist?

          • AC

            Pj,

            I’ve heard that argument before, but I don’t agree with it. For one, insurance companies can’t gtd the number of patients that would go to doctor X or the number of visits that doctors X would get from these patients in any given year.
            Second, health is not (or at least it should not be) a luxury, like renting a hotel room so the whole volume principle should not apply. Third, I can’t possible comprehend the argument where an insurance company making huge profits gets a huge discount, while John Doe who barely gets by has to pay at least 3 times more. How that makes sense?

            Lastly, John Doe should at least get a prompt pay discount for paying on the spot.

      • M.

        AC – that is a very true statement, but Unfortunately that will never happen. Insurance & Pharmaceutical companies are two of the highest contributors to political races. Not to mention the lobbyists! As long as there is money to be made by politicians from pharm & ins companies we will not see changes. I teach billing and coding, anatomy, and terminology as part of my curriculum. And, the first thing I teach my student is, “Do you know how insurances companies make and maintain all of their money? Simply put, by saying NO.” They will deny claims left and right for the smallest error on a claim form, or some companies initially send out a denial letter for absolutely no reason. Then it is left up to the billing A/R departments to fight for the reimbursement that is due to the provider. It’s just the way it is. It’s not just with health insurance cover either, it is all insurance companies. And do you know why they do that? Because they can! I have 14 years experience in the field and 3 years experience writing contracts for negotiators. Some help plan contracts are written to allow them to do such.

        We need a streamline processes and patient advocates to fight for patients rights to fair pricing. But, again, with the politicians, lobbyists, and pharm execs have each other on speed dial….things won’t change for a while

        • AC

          You’re right about insurance and pharma…used to work in pharma so I know…

          The other reason why insurance companies make money is the way they design their plans to impede patients to seek care – it’s all in their 2010 financial statements (see United, Aetna, etc).

  • http://www.whatstherealcost.org Susan@Regence

    And as patients, here are five questions we can all start asking our doctors that go to the heart of cost, quality and effectiveness: http://whatstherealcost.org/video.php?post=five-questions

  • http://www.drmintz.com Matthew Mintz

    @IVF-MD
    I like your TSA analogy and agree with many of your points. However, I would be interested in your response to the following issue:
    Not everyone needs to fly. People can do all their business and personal affairs locally (or even in walking distance if you want to use the health insurance/car insurance comparison).
    However, everyone needs basic health care and most people will get eventually get sick, many with chronic diseases. For those able to choose between free-market and government health care, (as you say) good for them. But what about those that can’t afford basic health care and need to rely on the government? In your airport analogy, the privately-screened airports might be cheaper. However, in medicine, private/free-market/out of pocket usually means more expensive (or at least greater up front cost).
    Thus, one down side to a free-market approach is that it leads to a tiered health care system. Those with money can afford free market health care, those that don’t have money must rely on a government based system (that everyone pays for) or go without health care altogether.

    • http://fertilityfile.com IVF-MD

      Matthew, we have the same goals. I care very much about the needy. (So coincidental that an hour ago, I just did a pro-bono I&D of a sebaceous cyst in my office for a friend of a friend of a friend in need. Totally not my specialty, but a skill I retain from doing hundreds of them in training days). If we think of the big picture which is access to good medical care for the needy, there are much better ways to do it than the current inefficient “tax the life out of everyone to support the political class and then throw some scraps to the poor” mentality. I’m probably not all that much older than most of you on this board, but when I was a med student, we got part of our training in community free clinics that were staffed by volunteers and kept in supply by pharmaceutical donations and local charity. Patients got good care and were very grateful. We hauled bags of expired meds across the border into Mexico and did a lot of good work in monthly clinics where people would line up for hours to see us. Doctors are altruistic by nature (or they used to be) but when the government took over charity, we now have a system where the good will doctors used to extend for free ends up getting replaced by payment to the doctors. This results in a little more money for doctors but a huge loss of the satisfaction of giving. It also replaces a grateful patient who will volunteer what they can do (clean up, handyman work) to help the clinic to a horrible system where patients don’t feel cared for but rather feel the entitlement of one dependent on the state. Also, think about how much better the current needy could afford care themselves if we didn’t have the predatory taxation that is ruining our economy. Think of how much charity care there would be if we eased up on the overregulation and the ever-present threat of lawsuit abuse. I could go on for pages, but you get my point.

    • pj

      “one down side to a free-market approach is that it leads to a tiered health care system.”

      Well, we have that now!

  • Solomd

    “This is about shared sacrifice.”

    I’m all for shared sacrifice, but what would the author say to the physician who will literally go out of business and then leave medicine because the “shared sacrifice” results in government payment less that what it costs to keep the doors open and the lights on? Many like to poo-poo the filthy rich doctors complaining about the pending pay cut, but the reality is that a lot doctors are just breaking even on Medicare and have been losing money on Medicaid for years.

    I think the options will be to push through the cuts and watch doctors leave Medicare, let doctors balance bill, or just replace doctors with midlevels (who will get just as aggrevated about being taken advantage of and will bail out themselves).

  • Killroy71

    Solomd – I totally get what you’re saying, which is why I don’t understand Physicians for a National Health Plan — do they want every patient reimbursed at CMS levels?

    • M.

      with the fee schedules, DRGs, and the RBRVS system in place, being constantly reimbursed at the CMS or Medicaid level, the loss of great physicians would be huge. if they went to a national health plan, they would need to raise the fee schedules from those programs.

      or if they changed it to an HMO model and physicians and facilities being reimbursed on a capitation payments alone, the quality of care would just suck, because it is only based on risk management and preventative care only

  • John Ryan

    The author has chosen the usual targets to target for extra taxes and reduced benefits/payments, small employers providing healthcare choice for workers, patients, especially the elderly, and of course the private physician.

    Shared sacrifice? What are the huge healthcare insurers, with billion dollar profits, and CEOs pulling in $250 million dollar annual bonuses, sacrificing? What is big Pharma, with obscene profits to match obscene drug prices, sacrificing? What are the plaintiff’s attorneys, diabetes supply houses, health IT companies, mail order mega pharmacies, and all the other parasites on medicine sacrificing? They all have healthy bottom lines. But they were able to cozy up to the Washington policymakers and secure their piece of the pie, while doctors & patients waited for our elected leaders to do the right thing.

    • Killroy71

      John Ryan – You are correct that the real profit in health care is all upstream – with PhRMA, suppliers, manufacturers, etc — one look at Yahoo Finance will tell you where the profit is.
      http://biz.yahoo.com/p/sum_qpmd.html

      This will also show how far down the food chain health insurance is on the profit scale, despite what you read about CEO pay. Here’s what one guy has to say about the whole compensation issue:

      “By my back of the envelope calculation, if the top 50 executives at Massachusetts Blue Cross Blue Shield worked for free and received only a handshake on retiring, there would be no visible impact on the cost of insurance for members and employers.”
      http://healthcareorganizationalethics.blogspot.com/

      Hard to believe, but our sheer medical spending dwarfs even a $25M payout (which only 1 CEO gets, btw, the rest of for-profits are MUCH less and nonprofit CEOs make less than a highly paid plastic surgeon or radiologist.)

      If everybody wants every iota of conceivable medical care AND screenings, how will we spend less? We AND our doctors must learn when to say no.

      • AC

        You can read the insurance companies financial statements and see the huge profits they make every year. For example, United made over $7 Billion in 2010, an increase of about $1.5 Billion over the previous year. Their CEO, Stephen Hemsley, made $102 Million in 2009 (couldn’t find the figure from 2010). He’s not the only one either. In the meantime, patients can’t afford care. It’s shameless.

      • AC

        The $7 Billion if just the profit…

  • Muddy Waters

    In the end, the doctors will win. When you get down to it, without administrators, CEOs, middle-men, etc, healthcare will find a way to survive, but without physicians, you have NO healthcare. Politicians have been banking on the complacency and compassion of physicians for too long, but a day of reckoning will eventually be upon us. The sooner that physicians realize they have power in numbers, the better.

    • http://fertilityfile.com IVF-MD

      I’m in agreement that physicians are a crucial irreplaceable component. I wonder if I could be allowed to differ with you on one aspect. I infer from your wording that you believe physicians are in their current predicament BY CHOICE, by being too complacent to take action and exercise the right or our power in numbers, as you put it. What if the reality is that we have no choice? What if attempts to exert our right of power in numbers (ie collectively bargain, refuse to participate according to the unfair rules of the politicians) would end up at best, by having our right to work forcefully taken away and at worst, by us being forcefully throw into cages?

      To use a hyperbolic metaphor, how would your above concept apply to agricultural workers of the past?

      {In the end, the actual crop-pickers will win. When you get down to it, without plantation owners and overseers, farming would survive but without the actual crop-pickers, you have NO harvest. Slaveowners have been banking on the complacency and compassion of slaves for too long, but a day of reckoning will eventually be upon us. The sooner that slaves realize they have power in numbers, the better.}

      Is this not valid and just a totally outrageous metaphor? Haha. Maybe. Never mind then. :)

      • pj

        Very good points, both of you. I see sort of a circular dilemma.

        One reason Docs and our problems should not be compared to slave crop-pickers (though I did laugh as i read it- thanx) is we can’t be easily replaced by another group/boatload of random prisoners. We are not (yet) a commodity.

        But one reason we cannot advocate well for ourselves is our lack of cohesiveness. We are our own worst enemy because we complicate things and won’t agree on things as a group.

        But if we reformed our ranks and got organized and unified in our thinking, then we may become easier to replace. A dilemma, or more a conundrum?

        Any thoughts?

  • Sideways Shrink

    @solomd

    I think that the retiring generation who failed to plan for what they could have seen coming on actuarial tables 15-20 years ago can share all the sacrifice they need to. According to the wonk MD at Incidental Economist blog the government could have raised the Medicare withholding
    amount on paychecks at that time and have averted this.
    In my position of student loan debt with some of the lowest RVU’s around—and, moreover, will not play clean up for what, studies have shown has heretofore been the most financially fortunate generation in American history. They have, in the main, had easy access to college with no debt
    afterward, those who didn’t want college could do apprenticeship programs through unions, easy to buy a first home right out of college and a series of homes which all earned equity, easy to live on
    a single income for the childrearing years, and now many of them have money to actually retire.
    If I were to take Medicare and give them health care, my children couldn’t go to college and I would never get to retire. So I think I will sit out this round of sacrifice sharing out.

    • pj

      The US is an empire in decline. Most americans simply don’t realize or admit it.

  • Sideways Shrink

    IVF-MD

    You may have had you tongue inserted firmly in your cheek, but I do think that medical providers of all types–MD, NP and PA–may end up having to collectively bargain together as the only way to gain traction for public health issues, medical education costs, provider reimbursement, patient health insurance coverage issues. We should be running this conversation. (If providers split by licensure, the insurance companies win.) Collective bargaining is the only way, at present, we could bypass the Sherman anti-trust laws that health insurance companies are, for some historical reason unknown to me, exempt from.
    Forgive me, my first BA was in philosophy so I can not resist this one. The principles that guide the practice of medicine and those of the “free market” if it has ever existed anywhere, are almost anathema to each other. No market is ever free because someone always comes into it with capital to buy product to sell or to buy bits to make products and so has the upper hand in the competition (for example, George W. Bush “C” student who somehow graduated from Yale…).
    But you were refering to “predatory taxation” at a time when taxes on high earners/the wealthy are at a historical low for so I think you are probably doing pretty well in the free market world of fertility medicine? I mean no offense by this. It is all about perspective. And, before HMOs decimated primary care, I think providers were valued at the same social rank as their patients: psychiatrists treat mentally ill people=low value; cardiologists treat 45-55 year old white men at the height of their earning power=high value; geriatricians treat old people on Medicare=low value; OB/gyns treat women=low value; pediatricians treat chilren=low value; oncologists treat terrifying cancer=high value; IVF doc helps people have babies but the insurance companies won’t pay=high value/free market=damn taxes. (I’m teasing to make a point….)

    • http://fertilityfile.com IVF-MD

      As for the predatory taxation, I’ll resist the temptation to go on and on about it, but the short version states that morally, all human transactions should be voluntary, so we, as taxpayers, would have a say, as in “I like the manner in which you provide fire services so let me know how much it is and you can deduct it monthly. I don’t like the way you are bombing civilians in the Middle East, so I will politely pass on contributing to that. I don’t like the way you are distributing charity to the poor, so I will donate to these two well-run private charities instead. I love how you are bailing out the investment bankers so I will gladly contribute to that etc etc” When there is accountability and voluntary nature in human interaction (ie voluntary societal collaboration), we get better outcomes than when coercion and physical power is used (ie predatory taxation). We’re not there yet, but someday maybe not in my lifetime we’ll get there. Remember they laughed at abolitionists who spoke hypothetically that someday there could be a world without chattel slavery.

      • pj

        Wish I had your optimism.

        • http://fertilityfile.com IVF-MD

          The optimism is heavily dependent on the continued power of the internet to nurture uncensored intelligent discussion (such as on sites like this) so that each person can come closer to deciding the truth for himself/herself, bypassing the biased commercials propagated in the state schools or spoonfed by controlled media. As long as we have this newfound freedom, we’ll continue to move forward. :)

  • http://fertilityfile.com IVF-MD

    Thanks :) . I welcome disagreement because it can help change my views. You are questioning how medicine can operate in a free market from a philosophical perspective? Well, in a free market, all transactions are voluntary. This assures that both parties judge that they would be better off making the transaction than not making it. Person A has suffered an accident or developed a health problem, which usually translates to either pain or loss of function or maybe in extreme circumstances, a threat to ones life! Person B at one time in his life, decided that he wishes to invest his youthful time and energy towards acquiring skills that will later enable him to assist people like Person A. Person A chose not to acquire those skills, but instead chose to be a really good fisherman or plumber or rock singer. Person A earns money from people who benefit from his skills. That money is used as a medium of exchange by which he can then contract with Person B for B’s time and energy.

    Is this or is this not considered a free market transaction? Your turn.

  • Sideways Shrink

    Yes, that’s the ideal world: I, Person A, provider of medical services receive a fee from Person B to give them medical care and put Person B’s health as the “good” in the interaction. If more time is required I ask Person B for more money. If they do not have it, ethical questions ensue. However, in the world in which we live in, which is not a free market Corporation Y wants to make profit from organizing a lot of providers of medical services and lots of persons who may need medical care and who pay monthly as a hedge against getting sick and they can only see the aforementioned group of medical providers. Corporation Y wants to make money. They “manage” AKA “withhold” health care they do not give it. This makes the medical providers and the erstwhile patients/premium payers not free at all. Corporation Y’s profit motive in antithetical to putting “health” as the good in the provider-patient interaction. There is no reason that medical providers can not have systems to provide care that are health focused but not geared toward making a third party money. Besides the “waste” of the profit Corporation Y takes, all of the administrative costs to run Corporation Y (and that medical providers must have to interact with Corp. Y) is a huge waste and takes away from health promoting things like having diabetes counseling RN’s on staff, etc. etc.

  • http://fertilityfile.com IVF-MD

    You talk as if doctors and patients “allow” Corporations to butt in and take a chunk and add inefficiency. If we had a free market (and we don’t) then things wouldn’t happen that way.

    In a free market, doctors and patients will only invite Corporation Y to be a middleman if it benefits both parties. Why do I let the supermarket be a middleman between me and the tomato farmer? Can’t I just buy directly from the farmer or can’t the farmer open up a Tomato Depot Club store? Sure, they can do that, but it is worth it to them to make a little less profit and let the supermarket middleman get a cut because it is beneficial to the grower (convenience, increased market exposure, smoothing out peaks/valleys of demand) and beneficial to me, the shopper, in terms of convenience so that I don’t mind paying a little more for my produce than if I bought straight from the farmer.

    So think it over carefully. Do you assert that healthcare middlemen ( ie government and insurance companies) don’t add value, but just force their way in between doctors and patients? My question is what means are they using to force themselves into our lives? With government, the answer is easy – forced taxation. With insurance companies, the answer is not as easy to figure out, but try anyway. Why would a patient want to deal with an insurance company instead of directly with the doctor? Why would a doctor want to deal with an insurance company rather than directly with patients? Once you figure that out, you’ll be one step closer to enlightenment. (HINT: Put yourself in the shoes of the patient. Put yourself in the shoes of the doctor.)

    • AC

      “…it is beneficial to the grower (convenience, increased market exposure, smoothing out peaks/valleys of demand)” – should we then understand that it’s convenient for the doctors to deal with insurance companies? About the market exposure and peaks/valley these could definitely be achieved through other methods without any “help” from insurance companies.

      You’re asking how insurance companies have forced their way into our lives and continue to do so. A couple of things come to mind – lobbying and campaign contributions…

      “Why would a doctor want to deal with an insurance company rather than directly with patients?” It’s easy. If you would to eliminate the insurance companies completly, and you go to a free market (supply and demand, price elasticity), doctors know that they would not get paid as much as they currently are.

      What I don’t understand is why doctors are not offering any discounts to the self paying patients and why their prices are no advertised? This could be done without making any changes to the current system.

      • John Ryan

        The only contract offered a small practice doctor by the big insurance companies dictate that their patients pay no more than any other office patient, including those paying cash. So if I advertise a discount for self pay patients, I have just discounted for the managed care patients also. Insurance claims require extra people to file and follow up on the insurance payments, so I can’t afford to reduce charges for everybody.

        • AC

          Are you saying that you offer the same price to every insurance company? I’ve personally noticed that my former doctor received different payments from the 2 insurance companies I used to have.

          “So if I advertise a discount for self pay patients, I have just discounted for the managed care patients also.” How is that? You already give a discount to the insurance companies. Why would you charge the uninsured the rack rate? You could just give them the same discount and nobody precludes you from doing so.

          “Insurance claims require extra people to file and follow up on the insurance payments, so I can’t afford to reduce charges for everybody.” So you’re saying that you’re okay offering discounts to companies that make billions in profit every quarter, but you don’t want to offer any discounts to the regular folks that barely make ends meet?

          • M.

            cash patients (in my opinion) are more entitled to a discounted rate…NOT an insurance company. health insurance is a multi-BILLION dollar a year industry! your contracts with whom you chose to contract with, have set ‘allowed’ amounts that they are willing to pay…then you have to figure in the patients deductable amounts, the co-insurance percentages 80/20, 90/10, 70/30 etc, then the patients actual copay amount at the time of the visits. then if you accept to bill a NONPAR (non contracted) healthplan, the patient is responsible for not their 20% coinsurance, their deductable, and their copayment, but also the difference between the healthplans ‘allowed’ amount (fee schedule)! so patients with health insurance sometimes pay MORE than what the insurance companies do. you should be charging for NONPar healthplans ONLY their allowed amount, therefore saving the patient $. be sure your medical billing manager has a binder with all of the contracts in it. be knowledgable of the plans fee schedule and bill accordingly. if you find when you are contracting that their allowed amounts suck…then negotiate! you can get more out of them!

            also, you really do need a kick ass billing & A/R team who not only know how to accurately code, bill, post, & follow up correctly, but also who stay on top of the A/R and not let it get out of hand! they should be pulling day sheets, procedure reports, daily reports, but also have the ability to identify trends quickly so they can report to you what plans are paying timely, accurately, but also who isn’t paying at all and who are a pain in the ass to get reimbursement from. for those, renegotiate the contracts.

            i could look over your books and let you know what’s up with your practice. it’s important for private practice doctors to know EXACTLY where they stand financially and have reliable people handling their books

  • Killroy71

    The value that insurers bring is that they pool the money that makes it possible to pay for high-priced care. If every doctor had to have a cost conversation with every patient, we would quickly see a damper on medical spending. People would be LOT more concerned that they were getting value for money. But when we are spending OPM (other people’s money), we are just not as concerned, whether it’s tax dollars or insurer payment. These arrangements let us fool ourselves that it’s OPM, but it all comes out of our pockets.

    Didja see Medicare approved this week spending $93K on a prostate cancer drug that doesn’t even CURE, just adds a few months? That’s the value insurers bring–who among us can afford that? But if we can use OPM, heck yeah we’ll take everything we can get. And complain about our premiums and taxes.

    Also, in the absence of medical homes, insurers attempt to coordinate care and do case management for complex or chronic conditions, but while everybody wants health insurers to lower premiums, they protest when the insurer tries to install speed bumps like prior auth.

    • http://fertilityfile.com IVF-MD

      Killroy, you stated “If every doctor had to have a cost conversation with every patient, we would quickly see a damper on medical spending.”

      I absolutely agree. Therein lies some good insight as to why we DON’T have the normal competitive free-market mechanisms that act to lower prices and that act to eliminate worthless treatments out of existence.

      Please skip this paragraph if you are not fond of my restaurant analogies, but imagine that a new beer maker comes up with their new patented “New Beer 2011 version”. It’s like the regular $3 beers you get everywhere else, but it is brewed with a patented exact combination of brew technology that the manufacturer claims is so much more refreshing than the old generic beer. Oh and it costs $15 per can.

      Obviously, it would not compete well. Customers would balk at paying so much more even if they were somehow convinced of its superiority over present-day beers.

      Now suppose the brewer spends money on lobbyists and all of a sudden a law gets passed so that taxpayer money will subsidize the new beer. Now customers can get this fancy-packaged heavily advertised new beer for $0.25 out of pocket. The government will pay the other $14.75, perhaps after negotiating it down to $10.75 with the manufacturer.

      Then the manufacturer sends their army of reps to all the restaurants armed with many tactics to convince them to carry this beer. In a free market, this could never happen because nobody would buy $15 NewBeer over the $3 old beer. But enter the specter of government subsidies and you now turn the whole mechanism upside down. Agreed?

  • Sideways Shrink

    While I understand the benefits of the functions of insurance companies, I have a philosophical objection to anyone profiting from my labor. Also because there is a health care fiscal crisis looming, the last thing we can do is afford to waste money pouring money down the profit holes of private insurance companies. The solution is to go back to the beginning: non profit health insurance companies like the Blues from whence it all sprang. Without profit as a motive, insurance companies can help fill out the dance cards between Persons A and Persons B. We need every penny for patient care because the
    Baby Boomers are threatening to live forever! And I hope they do.

    • M.

      “The solution is to go back to the beginning: non profit health insurance companies like the Blues from whence it all sprang.” Even back then, the ‘blues’ were still a profit company. Granted, as a non-profit, they used their profits appropriately and invested the money back into the company itself. NOW, completely for profit although they say primarily non-profit. Blue Cross covers inpatient as Blue Shield covers inpatient.

      The benefits offered to patients is based strictly on the ‘group’. Do they work for a large corporation, such as Boeing, who gets a better bulk deal for premiums, or a smaller company in which they offer high premiums, high deductable, low coverage plans. It is up to the provider or facility as to which health plans they choose to contract with, or accept period for that matter.

      And remember, all commercial health insurance means, is any health plan that is paid for someone other than the government. Not all health plans are the same. Your HMOS are not going to pay as well as your fee for service plans.

    • http://fertilityfile.com IVF-MD

      Can you clarify to me the concept of “profit as a motive”? Or more specifically, can you explain to me what a better alternative motive would be? Bear in mind that in a truly free market, a company only earns a profit if it gives so much value that those who benefit from its services are more than happy to pay.

      If I haven’t already thoroughly convinced you all that I have a food obsession, let me go with another restaurant analogy.

      Restaurant X strives to make a profit. So the owners, managers, cooks, servers work their tails hard to put out a fantastic dining experience that people are more than happy to pay good money for. The place is always packed with happy customers and the cash register rings up a huge profit to reward the whole team.

      Restaurant Y is government-run, or otherwise set up not-for-profit. Their philosophy is that providing food should be for the public good. So they are funded by taxpayer money. The managers are salaried with guaranteed raises, job security and pensions. The cooks and servers are union and virtually can’t be fired. Every year, the restaurant runs in the red and never ever makes a profit (heaven-forbid).

      Let’s have dinner tonight. Where would you like to go?

  • Sideways Shrink

    John Ryan

    “The only contract offered a small practice doctor by the big insurance companies dictate that their patients pay no more than any other office patient, including those paying cash.”

    The Insurance Commissioner in my state would have a herd of cows if this kind of wording was brought to his attention. This puts consumers in a very bad position. I don’t know how big your state is, who “owns” the “Insurance Commissioners” office, but it would be worth bringing this up to any professional groups you belong to in your state. If the organization wrote a letter, perhaps you could get these kind of clauses stricken. I do not think “restraint of trade” is the proper term that would apply this practice, but if the mafia used their size, power and money to induce small businesses to never undercut the mafia price it would violate RICO. I don’t think the Sherman Act covers this, does it?

  • Sideways Shrink

    I looked it up and that is exactly what the insurance industry’s exemption from the Sherman Act grants them BUT only across state lines. Price fixing, monopolies, etc. that occur within a state are under the purview of that state’s laws when it comes to health care law.
    Take it up with your Association and take it to the insurance commission. They want to get re-elected don’t they?

  • pj

    Sadly, at least in the deep south, our officials are less enlightened and more owned bu industry, than in D.C.
    Nice theory, though.

  • pj

    Sorry, I meant, “owned by industry.”

  • PAULMD

    COLLUSION…..building a stronger America since 1776.

  • http://fertilityfile.com IVF-MD

    Three doctors are in a jail cell. The first one said “I priced my fees a few dollars higher than all the other doctors and I’m now serving time for PRICE GOUGING”. The second doctor said, “I priced my fees a few dollars lower than all the other doctors and I’m now serving time for PREDATORY PRICING. The third doctor said, “I priced my fees the same as all the other doctors and now I’m serving time for COLLUSION”. :)

  • Sideways Shrink

    Really Dr. IVF! As for the motivation to start nonprofit health insurance companies. Do you give to non profits at year end at least to bring down your tax bracket? If so, why do you think people work at non profits? Could it be for the same reason we practice medicine? To do good work that helps people? That seems to be what the free market doesn’t take into account: why on earth would you risk putting the wrong fertilized
    “egg” into someone due to an error you didn’t cause? Why would I risk someone suiciding after their initial psychiatric interview? We could do other work that makes comparable income without these outlier but dealbreaking risks, but, no, we take on these risks that a rational actor in the free market would not. And, though it may not be risky to work at a non profit health insurance company, perhaps they are driven by the real motivation that drives physicians: to help people in a way that benefits them in a way that has moments of purity in it. There are hundreds of thousands of people who work at non profits. They defy the notion of the free market–as do physicians.
    FYI–having no staff, I talk to patients all the time about money. Psychoanalytic training demonstrates that payment or non payment of the bill has meaning. So this socialist talks all the time about money with patients and I think that if docs are going to really espouse free market, they should talk about money with their patients instead of leaving it to hard nosed front office staff. You can’t have it both ways.

  • http://fertilityfile.com IVF-MD

    SS,

    I’ve read your comment twice and I’m trying to grasp your points. I hope I understand them correctly. Here are my rebuttal points.

    - Personally I would (and do) donate my time and money to charity even if there were no tax advantage (and there actually isn’t tax advantage for many people due to the tax laws)

    - Why is the risk of a medical procedure any different if you do it pro bono or if you do it for compensation?

    - There is a big difference between working at a non-profit and doing charity. Many people at a non-profit get paid significantly more than regular for-pay laborers. In fact, some executives at non-profits make six figures.

    - Not sure who you are responding to with regards to discussing pricing with patient, but there is a difference between the drudgery of discussing insurance and payment logistics vs a global discussion as it relates to medical decision-making. In my practice, I discuss overall costs with the patient as part of the counseling. Does the patient want to spend ~$13K for a 50-65% chance of delivering a baby? Does she want to spend ~$1K for a 8-12% chance of delivering a baby? Does she want to try on her own for free for a 1-2% chance? But as far as the exact details of pricing, that is often delegated to a staff member.

    So are you saying that it would be charitable and help people to start a non-profit insurance company? Fine. Then by all means, I support whoever wants to do that. If I judge that they are doing a worthy job, I might even donate to their cause. However, don’t force me or anyone to get our medical care through them. Leave the free choice up to every individual.

    If I’m not understanding your point, please feel free to clarify.

  • Sideways Shrink

    There are 2 Blue plans in my state. They charge similar premiums. One went “for profit” the other is still non profit. Without the non profit having to funnel most of their premiums back into patient care, with my student loans it would be harder to pay the mortgage on my 1340′ rambler. Whereas the for profit Blue is gaining a monopoly share in the state and was threatening in the fall not to insure children unless their parents were also insured like Anthem did in California.
    Out local giant employer Microsoft pays in full for a platinum, no co-pay, no deductible plan for its employees and their family’s through the non profit company, It even covers full fertility treatments of all kinds! Non profit health insurance companies do not need and have never needed donations. That was not my point in bringing up donations to non profits. Many non profits have revenue streams that support their work besides donations.
    I really appreciate your vigorous and intelligence contributions on KevinMD and would like to ask you a question about your practice compared to mine. My understanding is that most of the effective procedures that treat infertility are not covered by insurance. Due to the ridiculously low reimbursement rates in psychiatry, many psychiatrists do not accept any insurance at all. I do not accept Medicare because it rankles me that the RVUs are so low and the “psychiatric adjustment” makes patients pay half the cost of their care rather than 20%. My question is founded on the assumption that most of your fees come directly from patients and NOT from insurance companies. Given this assumption (or if P then Q), isn’t the “free market” an easy philosophy for you uphold, because it only applies to you as an individual as a patient/subscriber in relationship to your insurance company/physician?
    As a socialist, it was against my beliefs to drop Medicare and if I were in any other medical practice or specialty, I would not have done so. However, Congress decided in 1997 they did not want to pay for psychiatric care. This was, I have read, the same year the cost of medical school education went through the roof. What was I thinking? Oh, yes, healing patients in the way that I could best do so….
    (What do you think? I am I wrong about your payer mix? Or does this not effect your belief about the free market?)

  • http://fertilityfile.com IVF-MD

    Thanks for sharing your opinions, SS.

    First of all, let me clarify an important premise. You shared about two plans in your state that charge similar premiums. I’m inferring that Plan X supposedly is non-profit and channels the premiums back towards patient care while Plan Y tries to maximize profit and therefore denies a lot of coverage. Here’s a logical question for you. Why would the free market not solve this problem easily? What kind of irrational person would want to support Plan Y over Plan X? The free market would all but eliminate Plan Y or at least force that company to adopt strategies that are similar to or better than Plan X. Doesn’t that make all the sense in the world? So back to your original argument, I don’t begrudge there being nonprofit alternatives to any for-profit entity, but why not leave them all alone and let them fight it out for themselves, ie letting the market decide. Why make some artificial law banning one or the other (assuming that you were advocating banning for-profit entities)?

    As for the mix in my practice, I’d estimate that 30% of my patients have insurance coverage and 70% are self-pay. Does this affect my view? Yes, because everything we encounter in life from every book we read to every real-life situation we witness to every minute we spend thinking logically affects our world views. So, yes, what I witness at work everyday affects my understanding of the world and knowing what I know, I would fully support free market over central planning wholeheartedly no matter which career path I choose to follow.

  • insurance employee

    IVF – MD: Your theory about for-profit and nonprofit health insurers is a bit off-kilter. They don’t act all that differently from each other in terms of paying/denying claims.

    Even for-profits seem to have a pretty high rate of claims payment and low rate of denial, according to the AMA’s annual health insurer report card:
    http://www.ama-assn.org/resources/doc/psa/2010-nhirc-results.pdf

    However, nonprofits seem to have had have a different ethic than for-profits in the sense that for decades they offered “richer” coverage than the forprofits, so their premiums might actually be higher, even though they don’t have shareholders to pay. I learned the hard way that when I had a choice between one of the big national forprofits and a Blue plan, I’d pay more for Blue because the coverage was better.

    But that’s changing too as the sheer cost of medical goods and services has pushed all insurers and most employers to create leaner benefit plans to keep premiums from going even higher, and to make people pay more of their care. And boy are they unhappy about it.

    And before doctors start kibbitzing about insurer reimbursement, I know the PCPs and FPs aren’t getting the dough, it’s the consolidation of hospitals and practitioners increasing bargaining power (plus cost of drugs, devices, etc) that’s pushing up unit cost. Massachusetts documented this, and it’s happening everywhere: http://www.mass.gov/Cago/docs/healthcare/Investigation_HCCT&CD.pdf

  • http://fertilityfile.com IVF-MD

    Insurance Employee,
    If you follow the thread carefully, you and I agree more and you’re making my point. I was pointing out the discrepancy behind what Sideways Shrink was arguing in his theoretical world where the non-profit insurance was not subsidized and yet paid out much more generously than the for-profit. The bottom line is there if his non-profit model is indeed that great (and I indirectly argue that it’s not) then there would be no need to legislate against the for-profit entities, because the market would naturally extinguish them. If it is true, as you are saying, that the one with the better benefits also costs a little more, then that makes more sense and it kind of defuses the argument that not-for-profit gives more value. Right?

  • insurance employee

    As to the market function of my choosing to pay more for a plan with better coverage, so far so good. My point was your theorizing that Plan X, a for-profit, denies more claims than Plan Y, a nonprofit, so the market would punish Plan X accordingly.

    Maybe it would, if the market knew that, which (1) I think the AMA report card does not bear out that particular supposition, and (2) the average consumer has no idea about claim processing/denial rate, in general or specifically, which is a real shame.

    What I think the AMA report card shows is that around 96% of claims are paid routinely. Consumers have the idea that insurers hire roomsful of people to deny claims. Actually, they hire roomsful of people to run the computers that process the claims. Of course, things don’t always go right, and then a real person has to deal with that. This would be true no matter what kind of health care system we end up with.

    People do find out some things from experience, like which plans are a pain to deal with if you have a problem, and which ones have great customer service. For some, that will make a difference, but others are just going for the lowest possible premium. The market at work again, which is a good thing.

  • Sideways Shrink

    IVF-MD
    As to your question about the difference between the 2 Blue plans in my state, the for profit was ahead in offering employers plans that shifts costs onto employees with higher deductibles–so many plans that it drives me crazy and these patients have to call customer service and fill out a questionnaire I have prepared for them to use to quiz their insurance companies before the first visit so I know what their benefits are and how many thousand of dollars their deductible is (which they pay at each visit as they go along). The other non profit Blue has focused on, oh gee, customer service, maintaining good provider panels, patient centered research. Oh, the things you can do when you aren’t chasing money! as Dr. Seuss might say.
    I am halfway through the incorporation process of non profit to provide sliding scale medication management to patients who are uninsured but do not qualify for Medicaid or Medicare. A lot of psychiatrists do not accept any insurance at all. They pack 4 patients in per hour at a minimum if $200 per patient. Why am I going this way at 43 with killer student loans, 2 young children, a stay a home jazz musician husband– I am a she from birth, not a he– who knows? Its not liberal guilt, that’s for sure! I saw that when I was a scholarship kid at the best colleges. I don’t have to give anything back and I am not going to great rich as the executive director of a non profit. That is Right wing mythos.
    As for insurance employee, if you asked many people with low premium plans/lower deductible plans (the big name plans who donated big buks to the last presidential campaign) if they can find a psychiatrist for even a 15 minute medication check they will tell you that they can’t. This is because these plans pay lower than or on par with Medicare rates. And if they need sub-specialty care, they might not have access to the one or two people in their city who provide it. Despite my many arguments against the theoretical free market I have been having with IVF-MD, clearly the monopoly behavior of the big for profits because they are exempted from the Sherman Act leads to far worse care access for patients and reimbursement for providers. Currently only state insurance commissioners can control the behavior of insurance company’s monopolistic/price fixing attempts. Otherwise, within any given state
    The first step in health care reform is to remove health insurance company’s exemption from the Sherman Act which is what prevents every other industry from price fixing, colluding, etc. When the mafia does it they are found to be in violation of RICO statutes. When Aetna does it, it is called managed care, if the doctor just doesn’t make a fuss and signs on the contract’s dotted line because it seems like the best “protection” against going broke.

  • http://fertilityfile.com IVF-MD

    SS, can you help me understand why we don’t address the price fixing collusion that you allude to in a free market way? OK, I’m actually not sure the specifics of what you mean, despite reading your post carefully. But I can make an educated guess as to what you mean and I would venture that it would only take a little logical thinking to realize that a true free market would solve the problem price-fixing problems. How? If you’re talking about price fixing in the case of premiums being too high, then realize that in a free market if insurance company A B C D and E all secretly agree to charge $200, then this is a prime opportunity for one of them to very quietly lower their fee to $190 and rake in tons of business. If they all hold fast to their cabal agreement, then what’s to prevent newcomer companies F and G from coming in, undercutting them all and stealing their business? If this is not happening, one might question if there are some non-free-market forces at play setting up an artificial barrier to entry for the F’s and G’s to join the friendly competition. If instead, your talk of price collusion is not referring to premiums but referring to reimbursements instead, then the same applies. Companies A B C D E all collude to pay psychiatrists $250 per visit. Well, this would only work if there is a glut of psychiatrists. If there is a shortage, then the companies would have to scramble to get enough enrolled providers and thus one of them might want to get first dibs by offering a more enticing rate. Or you and your colleagues can just say no to the insurance companies and only see patients self-pay. Your volume might go down, but you would be paid better for what hours you do work, you can spend more quality time with each visit and you can then choose to see some patient pro-bono in your excess time. I happen to be related to a psychiatrist who takes no insurance and does quite fine. She is not overly busy, but as busy as she wants to be. If she ever wants to be busier, she’ll sign up with some plans. It’s free choice.

  • insurance employee

    Wow, you guys have no idea how rates are set. You’ve experienced the negotiating side with insurers, so you have some idea that each provider might get paid differently by each insurer. BIg practices and hospital groups clearly have more bargaining power than the solo practitioner. That’s pretty clear from the Mass. AG investigation.

    On the premium side, there’s constant internal tension between Sales – which wants lower premiums to peddle – and Actuarial, the guys who calculate risk, who always want to be on the safe side. I’m pretty sure that if my employer could underprice the competition without going out of business, it would. Sometimes when an insurer is trying to gain market share, they will underprice for a short time, but nobody can keep that up for long. Here’s a primer to bring some understanding to this issue. http://www.americanhealthsolution.org/assets/Health-Care-Costs/II.-How-Premiums-Are-Determined.pdf

Most Popular