The Affordable Care Act perpetuates a myth of health insurance

Whenever a discussion of health care policy is initiated, the importance of health insurance, of extending coverage, takes center stage. The need for insurance quickly becomes an undeniable truth, a universal imperative. And we never seem to question this premise enough before getting more patients fitted with shiny, new policies. This was precisely the case with the Affordable Care Act. But where is the evidence insurance plays any role in improving anyone’s health? Why is it assumed more coverage is always the answer, particularly for routine care? I would argue it is little more than a myth, one found nowhere else in our collective understanding of insurance.

Let’s consider our experience with insurance in other areas of our lives. In most states, it’s mandatory for drivers to carry automobile insurance. But it doesn’t reduce the incidence of accidents or extend the life of a vehicle, nor does it cover oil changes, car washes, flat tires, or any other form of maintenance or unfortunate mechanical reality. Similarly, homeowners insurance doesn’t cover the cost of repairs when your kids put a hole in the wall, the price of having your gutters cleaned, or the removal of mold due to leaky pipes or unsealed windows.

Why, then, do we expect health insurance to function any differently? There is no compelling evidence that insurance improves outcomes. In fact, of the few studies conducted, most have either failed to control for known determinants of health or shown, at best, a very tenuous relationship between the two. Access to health care matters, but we mistakenly assume more insurance is the best way to increase access. We believe coverage for routine medical care, for everything from checkups to preventive care procedures, improves our nation’s health. It does not; it only appears to because of numerous confounding variables.

What is known, however, is the total amount of money available for health care, generally some large percentage of our GDP. That number is static at any given time and cannot be magically increased. In fact, by definition, relegating any aspect of health care to insurance industry jurisdiction necessarily decreases the funds available at the bedside. These companies must extract a profit; that’s how capitalism works. Moreover, whenever the scope of coverage is increased, patients and physicians give up more control as to the nature, timing, and extent of the routine care provided.

All insurance, even health insurance, should be procured to protect one’s financial interests against catastrophic, unforeseen events. Engaging it for routine activities, including all but the most costly drug therapies and procedures, serves only to dilute valuable resources and relinquish essential control. Thankfully, Healthcare.gov offers some high deductible plans that encourage direct payment for routine care, but many of them are also HMO-type plans, plans where third parties determine the routine care that is or isn’t covered.

Physicians must regain the authority to decide what routine care patients need. Despite the increasingly popular, one-size-fits-all algorithms of evidence-based medicine, it remains a fact that, even for those of similar age, sex, race, and socioeconomic background, every patient is unique. We have conceded that the future of pharmacology points to personalized medicine, to therapies tailored to an individual’s unique genetic composition, and yet we continue to assume that generic algorithms should govern what is best for a particular patient.

And some argue that health care is too expensive for certain patients to handle without insurance. For many aspects of health care, that’s true. So strengthening our nation’s safety net, consistently scrutinizing the performance of Medicaid programs, for example, is critical. But the truth is insurance increases the cost of routine care. It raises physician and hospital administrative costs and artificially inflates prices in several other ways, not to mention the aforementioned profit reality.

Improving access to education, reducing unemployment and increasing household income by stimulating small business and innovation, limiting environmental hazards, reducing poor health behaviors, and increasing the number of primary care physicians available would have a greater impact on health than more coverage. These are some of the confounding variables that lead us to believe insurance is always the answer. And focusing directly on these true determinants of health status does not force patients to relinquish control or artificially drive up the price of health care services; insurance paradoxically does both.

For decades we have increasingly relied on insurance (public and private) in health care. The results have been perpetually rising costs, increased infringement on physician independence, and an ever growing psychological barrier that prevents patients from understanding the true costs of, or seeing the real value in, health care services. We have conditioned patients to believe a long visit with their physician is worth about twenty dollars. Meanwhile, most Americans accept that a similar session with any good attorney costs many times that number.

We need to embrace a system where health insurance is procured only to protect patients’ financial interests against catastrophic injury or illness and routine, less expensive health care services are paid for directly by patients. This would require a fundamental change in how individuals view their responsibility for their own health, an increased awareness that routine care must be budgeted for like any other household expense. But this shift would help control costs and empower patients to purchase competitively priced services from independent primary care physicians free of unnecessary administrative burdens.

Effective, efficient health care policy must adhere to three basic principles:

  1. No one knows how to spend an individual’s money more wisely than the individual does, not the government, not insurance companies, no one.
  2. No one is more qualified to determine the appropriate medical care for a given patient than a well-trained, independent physician.
  3. The introduction of any intermediary between a patient and his or her physician will, by definition, always decrease the amount of money available for medical care without adding anything of comparable value to the process.

I tend to believe in people, in the individual. And I believe a well-educated, fully employed, free individual, in consultation with plentiful, well-trained, independent physicians, will generally make the right choice. In our society, however, it is their right to make the wrong one, and, thankfully, no insurance policy will ever change that reality. Unless we limit our reliance on insurance, costs will continue rising, physician reimbursement and therapeutic autonomy will continue declining, and patients’ understanding of, and control over, their own health will continue to wane. Insurance is great if used judiciously, but let’s not continue to assume more of it is always better; it isn’t.

Luis Collar is a physician who blogs at Sapphire Equinox. He is the author of A Quiet Death.

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  • Duncan Cross

    First you come out swinging against a right to health care, now you tell folks they shouldn’t even have insurance? I don’t know how that plays with your peers, but you should know it sounds like you just don’t care at all about anyone whose health burdens exceed their net worth. And your solution is wholly focused on acute care, not chronic care — which accounts for something like 80% of healthcare spending in this country, a lot of it for ‘routine’ care. It’s easy to solve small problems.

    To answer your question, it takes Google 0.21 seconds to find ‘evidence that health insurance improves health’, but the reason health insurance is so popular isn’t that the stupid and lazy want it so bad; it’s because nearly every “well-educated, well-educated, fully employed, free individual” considers it the “right choice” — so much so that it’s almost definitional to the idea of “fully employed” in this country.

    Lastly, the idea that removing insurance and government from the equation would lead to better care for patients is hopelessly obtuse. Physicians have tremendous power in our health care system as it stands; your fixes would only increase that power. I hope your heart is in the right place, but it is hard to believe you are arguing for anything other than your own power and profit.

    • Luis Collar, M.D.

      Thanks for the feedback. A few points…

      It is precisely because I do care about people “whose health burdens exceed their net worth” that I raise this issue. Insurance, while quite effective as “risk management,” is terribly ineffective as “health management.” If two citizens each have $50 for health care, collectively they have $100, right? Giving that $100 to an insurance company will always, always, without exception, result in making a number significantly less than that available for the actual care of those two people. Just as importantly, turning more and more care decisions over to insurance companies increasingly limits the ability of patients and physicians to determine the direction of an individual’s care. And leaving the resource allocation to third parties will assure continued disparities between groups, even between insured groups. I only raise routine care here, but that principle is one that applies to any type of care. I do not claim this is a comprehensive “solution,” rather a small step toward better “health” instead of better “insurance.”

      Some argue that if insurance was not as prevalent in our system, patients could not afford current health care prices. The other side of that argument, however, is that if insurance were not as prevalent in our system, health care prices would not be anywhere near as high as they currently are. One reason (there are several others) that health care prices continue to rise is the ever growing disconnect between those consuming health care services (patients) and those deciding how to allocate money and other resources (insurance companies / govt), not to mention the administrative burden to delivery systems that further raises prices. Until the role of third parties that add nothing of value to the process is limited (not eliminated, but rather pulled back), costs will continue to rise.

      Years ago, when flat screen televisions first hit the market, those televisions were prohibitively expensive for most people. Over time, as the technology became more widely available and market forces were allowed to act, flat screens became more and more affordable. Currently, all televisions are flat screens, and most people can afford one. This is a normal cycle that is consistently observed whenever new technologies are brought to market. If, when the technology was still new and expensive, we had introduced insurance in an attempt to assure all citizens could own a flat screen television, some people would still not have been able to get one (quite a large number, actually, approximately equal to the insurance companies’ significant profit plus expenses), And, moreover, the price of those televisions would have remained artificially high. It is the inability to “sell” a product or service for a given price at existing demand that forces prices down. And, again, some people would still not have had their televisions paid for by insurance (their claims would have been necessarily rejected based on some criteria determined by those enterprises.) Not only would the overall audiovisual “pot” have been smaller, but there would still have been disparities between groups.

      Also, while your “google search” I’m sure yielded some interesting results, you are incorrect that there is any significant evidence that insurance makes you healthier. In fact, recent studies have shown quite the opposite. Some earlier studies showed some correlation (albeit minimal) simply because those studies were flawed. They did not effectively control for confounding variables. An example… If we compare the health of a wealthy individual with insurance with that of a poor individual without insurance, we can mistakenly assume the wealthy person’s better health is due to an insurance policy. In fact, it is the plethora of confounding variables, things we know actually do affect health and outcomes (e.g. employment, household income, housing, education level, safe neighborhood, genetics, health behaviors, etc…), that actually account for the vast majority of the observed difference.

      Finally, I must say, respectfully, that your assertion that physicians exert “tremendous power” in our system is absurd. If you believe that physicians can “bully” insurance companies, or if you believe that insurance companies have your best interests in mind more than physicians do, then that truly is the most “hopelessly obtuse” idea I’ve heard. On both accounts, quite the opposite is true…

      • Duncan Cross

        Whether or not you have a problem with the evidence does not mean there is no evidence. Your question clearly implied that you were unaware of any evidence. It was irresponsible of your to ask it if you were indeed aware. The Oregon Health Insurance Experiment I’m pretty sure answers your question, over your objections. If you know of better or contrary studies, that would have been a good thing to cite.

        The comparison between flatscreens and human well-being is inapt. Not every technological process is defined by diminishing costs. “It is the inability to ‘sell’ a product or service for a given price at existing demand that forces prices down” is a gross misunderstanding of basic economics. We can cure diseases now that were fatal 50 years ago: should we hold off on treating those people until the price comes down? The difference between demand and supply in your model is a bunch of dead people.

        Physicians do exercise tremendous power… versus patients. I’m not a fan of insurance companies, but at least they provide some bargaining power to prevent physicians from billing me according to whim. One only needs to read a medical bill to appreciate this. The claim that a provider would be any more responsible with my money than an insurer is (sadly) contrary to my long and varied experience. The idea that the world you want to create — by depriving patients of any leverage — will give patients something like parity with physicians is indeed hopelessly obtuse.

        Everything you write about healthcare reads as a defense of your own privilege. It would be huge gesture towards the rest of us if you would describe what you personally are willing to sacrifice, while the rest of us are giving up our rights and bargaining power and money.

        • Luis Collar, M.D.

          1.) I did not say there was no evidence; I clearly stated there was no compelling evidence with regard to outcomes. Below is a link to the New England Journal of Medicine article that summarizes the results of the study you cited. It clearly states that “…coverage generated no significant improvements in measured physical health outcomes…” The study did find decreased rates of depression and financial strain, likely due to the decreased financial burden. But it is precisely that financial burden that I believe can be lowered in other ways that are much more conducive to improving health and controlling costs. Again, the very study you cited reinforces my assertion. There are others, and I know them all, which is why I said there is no compelling evidence with regard to actual outcomes.

          http://www.nejm.org/doi/full/10.1056/NEJMsa1212321

          2.) My assertions about the way economic forces work are, in fact, 100% accurate. I would challenge your assertion, however, with regard to how many diseases are actually “cured” by new drugs and therapies. Increasingly, many of the newest drugs that are feverishly marketed and promoted, in fact, do not cure anything. They may achieve better control in some cases, but, quite often, the data show they are only minimally better, frequently the same, as existing, much cheaper therapies (with a few exceptions, of course). The issue isn’t one of waiting to save lives versus letting people die. The issue is one of: a.) is the drug actually better? and b.) does society benefit by paying an exorbitant price for marginal or no benefit, or continue using equally effective, cheaper drugs until pharma realizes that those prices need to come down? and, most importantly, c.) who is best qualified to determine if the new drugs or interventions that actually do represent an improvement over existing therapy can be of particular use in a specific patient? The insurance industry? Don’t forget, for every patient that gets approved to use a new, supposedly better drug or intervention, another patient gets his/her claim denied. Who gets what isn’t up to the patient or physician in this system, it’s up to the insurance company.

          3.) The idea that insurance companies protect patients from physicians is baffling to me. Take a look at the links below. In 2012, five executives at one insurance company (not even the entire leadership of that one company, but rather just five individuals) made almost $100 million in compensation…again, five people…at one company…five people making as much as about 1,000 primary care physicians and nurses… Or consider this… 25 individuals at not-for-profit health systems, I repeat, not-for-profit health systems, made over $50 million in compensation in one year. The list goes on and on. I believe in the free market, so I don’t think we need to regulate how much CEO’s or other executives can make. However,when we willingly choose to turn more of our health care over to them, to let them effectively choose our fate, to continue to steer policy away from individual physicians and toward corporate solutions, we only compound the problem. These hundreds of millions of dollars I just referenced is the yearly compensation for only a handful of people. The total number of dollars lost to “administrators” is orders of magnitude greater when you take all insurance companies and health systems into account, or when you go one level below the executive suite and the total compensation still reaches into the millions for each of those individuals as well. Where do you think the money comes from for these salaries? This money is being extracted from the same pool that was originally available for actual health care at the bedside at the beginning of this mental exercise. Where can we find evidence of any five physicians making $100 million dollars? What would do more to control costs, adding 1,000 physicians and nurses competing to provide services with less administrative burden and more price pressure, or letting that money flow to insurance executives that not only draw huge profits but also further increase costs by establishing administrative burdens across the system. Those burdens are inevitably passed on to the patient by the delivery systems serving them or are absorbed by declining more health care services to the insured. Again, I respect your opinion, but I just can’t see how some of the conclusions are drawn. Better care for all, not better insurance and fancier, well-dressed administrators, should be the goal here.

          http://www.beckershospitalreview.com/compensation-issues/ceo-compensation-of-the-25-top-grossing-non-profit-hospitals.html

          http://www.kaiserhealthnews.org/stories/2013/june/06/hospital-ceo-compensation-chart.aspx

          • Duncan Cross

            1.) The thing about that study is that the people with insurance reported better health. I’m sure the blood work they did was super important, but you’ve already come out against “algorithms of evidence-based medicine”. I think we have to give at least some credence to what the actual participants reported about their health. Also, depression is a health issue: how could it not be?

            2.) Your understanding implies that producers can shift supply curves arbitrarily: this is not the case, or else there would be no need for an Orphan Drug Act — which also speaks to the rest of your argument. Granted that ‘cure’ might be too strong a word, but consider the progress we’ve made in treating diseases like CF, CVID, and even my own IBD — often at high cost. Where are those patients in your world?

            3.) The excesses in compensation are an argument for better government regulation, especially single-payer, which you didn’t quite respond to when Margalit brought it up. Yes, insurance bureaucrats are overpaid — but it’s disingenuous to suggest that your proposal would reduce compensation in ‘health systems’ — i.e. hospitals. It could well increase such compensation, as providers gain a direct line on patients’ bank accounts. I expect hospital bureaucrats and pharma execs would easily mop up every cent loosed from the grip of insurers.

            The only real conclusion at stake here is whether our health care system – given its deep flaws and economic inefficiencies – is better off with more or fewer people covered by some sort of insurance program. You still haven’t found a way to say ‘fewer’ that reads like anything more than a defense of your privilege.

          • Luis Collar, M.D.

            1.) I do give some credence to self-reported health (though, interestingly, those data are not regularly considered at all by insurance companies in determining what care they will pay for), and I also agree that depression is a health issue (I referenced that in my response). I simply feel there are better ways to address the financial strain referenced in the article that undoubtedly bears at least some of the responsibility for the discrepancies in the observed depression data. However, you still do not acknowledge that the very study you cited found no difference in any of the measured, physical health outcomes. None. And that was exactly the point I made in the article.

            2.) I never argue that manufacturers “arbitrarily” shift supply curves. There is nothing arbitrary about it. They do so in response to demand and the prices the market is willing to bear. That is precisely why the orphan drug act exists (because the financial incentive is not present for those small markets so they wouldn’t investigate those illnesses otherwise). What I am saying, however, is that when third parties are allowed to decide how to allocate resources, third parties that are neither physicians nor patients, those resources are often not allocated according to “evidence” or “patients’ best interests” or any other altruistic motives, no matter what the advertising says. This leads to derangements of price and supply because we remove patients and physicians from the equation, relinquishing the decision of which drugs will be paid for to insurance companies, and pharma companies that are all too happy to continue producing them if insurance companies are paying for them, irrespective of the lackluster studies they often come with. And, again, the most important point is that the decisions are best made by patients and physicians, not third parties. Furthermore, your assertion that direct pay would increase executive compensation is wrong. Prices (and profit) would need to be brought in line with what individuals can pay (or there would be no hospitals). Of course, we would need to be increasingly realistic and well-versed in many areas (e.g. the absurdity of providing hundreds of thousands of dollars of ineffective care in the last weeks and months of life, etc…) Moving to that type of system overnight could not happen because of the misguided direction we’ve moved in for years, but starting the shift away from third party payment is critical, or it will, in fact, be too late to do so.

            3.) I do believe that regulation and oversight are needed. Doctors, hospitals, health systems, pharma companies, CROs, PBMs, insurance companies, etc. all should operate with some oversight to ensure there is no abuse (abuse can occur anywhere within the system). One of the problems is that the government can’t effectively oversee processes that it is itself administering. (e.g. how effectively can they oversee the insurance industry when they are, in fact, in business with them?)

            4.) I firmly believe the best solutions are those in which the market is allowed to operate freely, where patients and truly independent physicians come together to make good health decisions (with tight oversight by a truly impartial government that is not involved in administering or intervening in the policies of the very system it seeks to regulate / oversee). To answer your question, though, if that option were not available (which it is, if we would only seek to make it so over time), then I would, in fact, support a single-payer solution above a nonsensical, blended system that still allows costs to increase, limits the ability of patients and physicians to make independent, educated choices, continually introduces new administrative burdens and bizarre, unscientific policies as far as the eye can see, and then allows different “players” in the system to profit disproportionately, even though they should all be working toward the same stated goal — improving health.

          • Duncan Cross

            Dr. Collar,

            4.) I have a new post here on Kevin, MD about what the free market would mean for health care. I will be interested to see which points in that plan you endorse: http://www.kevinmd.com/blog/2014/01/real-market-reforms-health-care.html

            1) Yes, I acknowledge that the very study I cited found no difference in any of the measured, physical health outcomes — which were only for cholesterol, blood pressure, and diabetes, so hardly a comprehensive workup. Absent more complete data, I’m going to side with the patients who self-reported better health. In the clinical trials I have done (~5), self-reporting is a crucial factor in determining the efficacy of a new drug, so it’s not irrelevant to your argument. (None of them looked at my cholesterol or glycated hemoglobin, to my knowledge.)

            2) This is the problem: “It is the inability to “sell” a product or service for a given price at existing demand that forces prices down.” That is not quite accurate unless the supply curve is flat (which rarely happens). It is because your argument implies that quantity supplied and price supplied are unrelated that it implies an arbitrary shift in the supply curve. Because supply curves usually slope upwards (quantity and price increase together), a decrease in price also means a decrease in supply. You are offering a free market that will provide cheaper health care for sick people, but not acknowledging the fact that market logic suggests there will be less care to go around.

            3) Are you saying there should be regulation on how much hospital CEOs and pharma companies should earn? Why them, and not physicians? Again, I think every cent freed up by your plan will be captured by market actors far more powerful than physicians. In a free market you will earn the same, if you’re lucky, but probably significantly less.

  • http://onhealthtech.blogspot.com Margalit Gur-Arie

    Let me start by saying that I actually agree with the basic premise, but there are some tweaks that need to be made.
    First, the car/house analogy would be correct if everybody got to buy a brand new car and a brand new house which I assume they would, since the model is predicated on changing the fundamentals to create a society where everybody can afford a new car and a new house. There are legal protections in place for car and home buyers to ensure that the manufacturer did not sell them a faulty product, even inadvertently. Since the Almighty does not issue warranties, we will have to figure a way to deal with the fact that some of us were issued less than perfect bodies.
    Second, the catastrophic model of car/house insurance is also episodic in nature, because it assumes that accidental damage can be either completely fixed, or the item is replaced. To make this notion work for health care, we would have to consider a diagnosis for something like HIV a catastrophic event, and the insurance will then kick in. Replacement value is obviously (I hope) not an option for human life.
    This leaves us with preventive care for healthy people (i.e. physicals and vaccines), and small things like a broken arm or some stitches, as the only uninsured portion of health care. The aggregate expenditures on these items for the entire nation is probably a rounding error in that 17% of GDP that we are all fretting about, so the question remains of what to do with the bulk of health care costs.
    I agree that insurance is the wrong model for all the reasons mentioned, so perhaps a better choice for our catastrophic needs, most of which are ongoing, would be to pool all our money in a prepaid pot, and give it (so to speak) to physicians. I am all for that, and that is called single payer, where the payer is us, or our representative government, assuming it’s of the people, by the people and for the people.
    Of course the assumption above is incorrect, as is the assumption that we can fix the fundamentals so that all our citizens are well educated, fully employed, and free (which assumes well compensated). And yes, if we want to “fix health care”, we must first fix our fundamentals. Unfortunately, we are busy tinkering with the symptoms, of which health care is just one, instead of attacking the underlying disease.

    • Luis Collar, M.D.

      As an aside, just want to say that my analogy was not intended to equate the value of human life to that of a car, rather it was an attempt to point out some of the economic and transactional problems with assuming that health insurance leads to better health.

      Having said that, a couple of points related to your comments…

      With regard to your first point, there is no way to fully compensate for the fact that “some of us were issued less than perfect bodies.” Current science can’t even fully compensate for that unfortunate reality, so insurance certainly will not “level the playing field” so to speak. If we want to come as close as possible, however, and we find that a worthy goal (which I do), then insurance is certainly not the right answer. It significantly decreases the amount of money available to achieve that goal, and it doesn’t eliminate health disparities (for each claim that is approved, others must be denied based on criteria that were developed by those entities, not to level the genetic playing field but rather to protect the bottom line…all insurance policies are not created equal, and guess who the “not-so-good policies” go to?) In short, insurance has not, and never can, eliminate observed disparities in health.

      I begin by singling out preventive care coverage simply because the evidence shows that, financially, the long-term savings from routine care coverage do not come close to compensating for the massive expense. This is simply because of the associated costs and questionable impact on actual outcomes, and the fact that these procedures have to be made available to hundreds or thousands of patients in order to modify just one outcome. (Some things like vaccines, for example, have been shown to justify the cost. But many others, including things like PSA screenings, repeated blood tests or imaging, colonoscopies, and, more recently, even repeated reflex HPV testing (on top of pap smears, that is) etc. do not.)

      With regard to what is considered a “catastrophic event,” there, too, there are harsh realities to be dealt with. There would need to be consensus on those things, but I would argue that, as controversial as it may sound, looking to the limitations of the existing science can help us decide. For example, as a society, do we really benefit from spending billions of dollars on the final weeks or months of life? Does coverage for this truly change the nature of the dying process or improve the quality of any minimal gains in life expectancy? (Please understand I am not being callous. In fact, I am feeling the cruel reality of these truths now more than ever, not only because of the patients I have cared for but also because my own parents are now approaching their eighties and both suffer from expensive, chronic illnesses.) It is not that I believe that human life does not merit the expense but rather that I have experienced how these expenditures often do nothing to genuinely extend life or improve the quality of life. In many ways, we are unwilling to accept the realities that other cultures regularly accept — that there is still no “cure” or “solution” for many deaths, no matter how much money is thrown at the problem. In fact, in many ways, much of what is regularly done at the end of life is cruel and goes against some of the very tenets that physicians swear to uphold. How could those billions be better invested? Could that money be used in the treatment of chronic illness that falls outside the scope of end-of-life care? I don’t know the answers, but more insurance coverage definitely doesn’t do the job either.

      With regard to HIV, as a communicable disease, many states already subsidize treatment simply because it is in society’s best interest to limit its spread. But, for example, with much more expensive line items in this country like heart disease or diabetes, which are not communicable diseases, how are limited resources best spent? Is coverage for repeated HbA1C tests going to fix the problem of obesity, poor diet, lack of exercise? Will mass availability of carotid ultrasonograpy / doppler reduce death due to cardiovascular disease in a cost-effective way? Does extending coverage to brand name drugs that have minimal to no additional benefit when compared to much cheaper generic drugs do anything to further the cause? And who should make those decisions? Insurance companies? Physicians and patients?

      My issue isn’t that people don’t deserve care, or that we should just give up on eliminating health disparities, or that there is no benefit in any preventive care. My problem is that health insurance doesn’t really help our society make real progress in any of the areas discussed. It quite often provides a false sense of security at an unreasonable cost given the small to no impact on real health. And why would we want to turn over the decisions on how to best allocate these resources to the insurance industry? Again, insurance is great tool for risk management but not for health management.

    • Luis Collar, M.D.

      By the way, Margalit… Someone commenting on one of my other articles shared this with me. It is an article originally published in 1932 in a periodical called The Forum. It is not directly related to this particular post, but I’ve read many of your posts and comments (always well-reasoned and thoughtful) and you seem to be a health care history buff like me. I really enjoyed it so I figured I’d pass it on in case you’re interested. Just interesting to see that many of the things we face now were already being grappled with over 80 years ago. Anyway, here it is:

      http://www.unz.org/Pub/Forum-1932jun-00353

      • http://onhealthtech.blogspot.com Margalit Gur-Arie

        Dr. Collar, I don’t know how to begin thanking you for this article…. There is something awe inspiring, almost terrifying for me, when I read stuff written long ago, that with some minor edits could have been written today. It’s like we have been spinning in place for centuries and probably longer, and it makes sense that we are, considering that our history is just a blip in this universe. It’s the same feeling I have when I look up at the stars for a few minutes….
        And by the way, the scariest thing in that link is the article that follows the good doctor’s essay, because today is in essence not much different than 1932, and that thought crossed my mind lately on multiple occasions.
        Thanks again for a wonderful gift. I owe you one… :-)

        • Luis Collar, M.D.

          You’re very welcome… I thought the same things which is why I passed it on. I forwarded it to Kevin as well and told him if his website had been around then, it would have made a great post.

  • Luis Collar, M.D.

    Thanks for the comments. I couldn’t agree with you more. Transparency across all of health care is critical (price transparency included). I don’t mention some of these in the article simply because 1,000 words is not enough to “fix” everything wrong with health care. I do believe a thorough review of all players (hospitals, health systems / corporate med, PBMs, biopharm companies, insurance companies, CROs, etc…) is needed. Each needs to be evaluated in terms of the costs they add to the system versus the benefit they actually deliver to patients.

  • Luis Collar, M.D.

    I agree. I’m not sure there can be one “silver bullet,” but the continuous introduction of third parties (e.g. insurance companies, more “administrators,” etc…) can only worsen matters. Any health policy that ignores the three principles in the article will lead us further from achieving improved “health” for the vast majority of patients.

  • whoknows

    I enjoyed your article. The dysfunction in HC is so rampant that it drives up costs. I saw on here that there are now 30 admins for every MD.
    I myself recently needed an MRI. I try to avoid the large academic centers that drive up these costs. But between the doctor’s office and the MRI center they got the wrong test.

    They were so dysfunctional they let me leave without an MRI I absolutely needed. I had to give up on them. Go to a different doctor in a high cost academic facility with no doubt facility fees. Repeat the MD visit and then finally got the needed MRI probably at a cost 10 times that of the initial MRI center.
    It felt like the old joke -how many people does it take to change a light bulb?

    • Luis Collar, M.D.

      Thanks for your thoughts. Your experience is, unfortunately, much too common. I’m happy you were able to get the needed test, though.

  • Luis Collar, M.D.

    I’m admittedly not an expert on rural medicine, so I can’t specifically comment on those aspects of the ACA that would most directly affect care in rural areas. For my own edification, are there any that are unique to rural areas? Or are they just some of the same ACA issues we all deal with that will have a greater impact there due to the nature of rural care delivery? In either case, thank you for your comments.

  • John Hunt

    The author of this post got it just right. Truth (real truth) can be discovered and presented, as it has been here. The question then is, why do so many people accept the lies, the irrational, the self-contradictory crap that the politicians spew forth?

    The answer is likely that those who cannot see the truth when it is presented to them possess either no ideology (because they do not care enough to bother), or possess a failed ideology, usually of a narcissistic collectivist nature, in which they know what is right for everybody else. Absent an internally cohesive ideology that is consistent with natural law, a man is but a pawn in the games of the morally insane.

    How can Obama and his ilk imagine that they know how I should best pursue my happiness? What a distorted sense of divine authority and wisdom the people such as Obama and his followers, or the neocons for that matter, (and all those who like to control others) must have?

    • Luis Collar, M.D.

      Thanks for the feedback. I think we benefit from having a unique, inside perspective on much of what the general public isn’t allowed to see (other than as carefully crafted marketing materials). Additionally, many of the ideological problems found in health care are by no means unique. Instead, they are part of a broader, flawed philosophy that is becoming increasingly pervasive in many aspects of our lives. The problems, however, tend to surface more quickly in health care because we deal in life and death, urgency, reality, etc… It’s harder to consistently hide flawed ideology within marketing rhetoric in a field where reality must be confronted on a daily basis.

      • John Hunt

        AND we live in a society where being an “Ideologue” is denigrated; having an ideology is something you get insulted for. Absent a carefully considered ideology, I don’t understand how anybody can differentiate good from bad. Moral relativism has combined with irrationalism, denial and defensiveness to corrupt America.

        BUT, there are still Americans out there in teh world, some even in the United States. Check out Liberty.ME. It is time for a virtual America for all who want it.

  • Duncan Cross

    The irony of this comment should be fatal.

  • Luis Collar, M.D.

    Importantly, I feel we need consistency in oversight as well. That is, once we have a clear vision of how we want the health care system to function, government oversight should be consistent across the board for all “players.” (e.g. pharma, PBMs, insurers and others should expect the same level of oversight as practitioners involved in the actual delivery of care.) I tend to use the term “oversight” only to point out the subtle differences between that word and “regulation.” Probably just a nuance, but oversight implies, “you know the science and what patients need better than we do as politicians, but we are going to make sure you are treating patients / billing Medicare, etc… ethically, legally, and responsibly. I think regulation implies, “we know the science and what patients need better than you do, so we’re going to tell you how to do your job.” The former implies protecting the public from the occasional “bad” doctor (beneficial to society), and the latter implies creating burdensome rules that prevent all physicians from doing their jobs well and add unnecessary costs to the system (detrimental to society). Physicians should be held accountable just like any other player, but we need more professional autonomy in order to do what we were trained to do — provide patients with good medical care.

  • Luis Collar, M.D.

    Thanks for the feedback. Incidentally, someone commenting on another one of my articles brought this to my attention. I shared it with Kevin and a couple of the docs that post on this site. It is an article written by a physician that was originally published in 1932 in a periodical named The Forum. I thought it was interesting to see how physicians were grappling with many of the things we face today over 80 years ago. Here it is in case you’re interested.

    http://www.unz.org/Pub/Forum-1932jun-00353

  • Luis Collar, M.D.

    You’re very welcome. Interesting to see many of our problems aren’t “new”.

  • Luis Collar, M.D.

    You’re quite welcome.

  • southerndoc1

    Sorry, but I haven’t seen anything so far related to the ACA that requires hiring more staff. Please tell us specifically why these doctors are having to do so.
    There are plenty of reasons to criticize the ACA, but blaming it for everything we don’t like about the state of medical care in this country just doesn’t fly.

  • buzzkillerjsmith

    Your solution has pluses and minuses. Sure, cutting out the middleman is a good idea, but I suspect that making pts get high-deductible insurance will decrease visits for routine buy necessary visits.

    Is that a good thing? Maybe yes, if decreasing total HC costs is the goal. But maybe no.

    Canada and the Europeans have gone to universal insurance and things seem to be working out OK for them. I have little problem with small deductibles, but high deductible stuff is no perfect solution. There is no perfect solution. And the less bad solutions are to be found only by trial and error.

    I am very skeptical of categorical statements and you make quite a few. I believe are very, very dangerous words in this world. Obviously my comments are addressed to readers here, not the poster really.

    • Luis Collar, M.D.

      Thanks for the comments and Happy New Year. Some points:

      1.) The question isn’t only whether or not routine visits / preventive care is necessary, but also who decides which visits and what care is necessary. Should insurance companies make that call? (e.g. which visits they’ll pay for and which they won’t? which care is medically necessary?).

      2.) I believe in the free market with strong oversight to prevent corporate abuse, but I am not opposed to the concept of universal care. My problem is with a hybrid system that allows some players (e.g. insurance industry) to exert significant influence in the care that patients are allowed to receive while profiting disproportionately. In Switzerland, for example, though the government uses insurance companies to administer the universal component of care, they place restrictions on industry profits that are lacking here. To me, philosophical consistency in policy approach is critical to both effectiveness and fairness.

      And I don’t believe limiting insurance is a “solution.” I simply point out that increasingly relying on it in healthcare does a great deal to compound our problems (e.g. rising costs, decreasing patient autonomy, poor allocation of limited resources, etc…)

      • Dorothygreen

        “Switzerland, for example, though the government uses insurance companies to administer the universal component of care, they place restrictions on industry profits that are lacking here”

        I’m glad you picked up on this. It was the primary reason for the Swiss gov reforming their system in 1996. The insurance co. were cherry picking and denying patient’s with pre-existing diseases (what insurance did until 2014). What they allow now is for insurance companies to sell supplemental insurance. One of the supplements to purchase is physician choice. 70% of the population choices this part of the supplemental plan. The basic premium covers HMO. There is no Medicaid, insurance is subsidized (and there is no Medicare although keeping Medicare part A is probably a good idea along with the VA).
        Pharmaceuticals are negotiated by the gov (can’t do that even in Medicare here), equipment and lab companies are negotiated and physician and hospital prices are negotiated through each Canton and their insurance companies. For about 8 Million people there are 87 insurance companies competing for business. The insurance companies “adm” costs averages around 6%. Again even though ACA insurance companies adm was decreased it is still 15% allowed and rates can be raised some without much evidence of need.

        Medical school is subsidized. And everyone in the “health industry makes a reasonable salary. No one from physician, to hospital, to insurance company makes the outrageous millions you spoke of.

        Without the insurance companies (called social insurance) to do the administration – it would be the government doing the administration . As far as I can tell – those who want more free market certainly don’t want the government doing the administration. The insurance companies have good reason to be efficient as there are enough of them to be competitive. There is no employee mandate either.

        No individual can go broke because of health care costs. Everyone has to pay something upfront and a 10% co pay after deductible (social services are more intact here so even the subsidized poor would have some money.) The most costly silver plan in the US would be a “cadillac plan” in Switzerland including dental, alternative medicine, single hospital rooms and choice of top doctors. All paid up front through insurance.

        It is about the third most expensive system yet 1/2 of the US costs.

        As I see it, what you suggest is catastrophic insurance plans (which are the cheapest of the ACA with hugh deductibles and OOP costs). One can still go bankrupt. There are just too many other issues that are not spelled out in your “free market” plan to show me how it can be still be a universal affordable and fair. .

  • querywoman

    Tonight I had the insane opportunity of researching the Affordable Care Act again. I chanced upon a friend, a man with a master’s degree, who plays for a small symphony. It’s all contract labor. He’s done it for years, and has no health insurance or other benefits.
    He wants to use the county hospital’s program for lower-income residents and asked me to research it. I have sent an email and am waiting for the answer.
    I looked on the county hospital’s site and saw that they are not coming out and saying outright that a person has to get ACA insurance. The county linked me to the ACA site.
    I put in what I thought his annual income is. I think he could have about a $550 month advance tax credit as a discount on a $600 a month policy with perhaps a $5000 deductible and some other $5000 level of this-or-that.
    How is a self-employed person supposed to provide himself a $550 per month advance earned income credit? He’d have to pay the whole $600 per month himself, and then claim it as a deduction at next year’s tax filing.
    Now, if an employer is paying W2 income, they could easily “show” the credit and then the employee might have to pay $50 per month, which he or she is not used to paying, for an almost worthless policy.
    Advanced tax credits also assume the employer will do certain paper/computer and file their quarterly reports and pay taxes properly. They don’t all do that.
    I worked for a small factory once. I started out as a temporary but got hired permanently. I knew the second day I worked there that the boss was heading for bankruptcy. Am other things, has not filing his 911 and state unemployment taxes on time nor was he paying them, that along with his retail and supply debtors.
    I managed to get him to file the state taxes timely by telling him he would save one penalty if he filed on time even if he couldn’t pay it. I asked our state contact if I would get unemployment comp if he folded and had not paid his taxes. The state contact told me I could get my UIB if he filed his reports, but that he would have a very high unemployment tax rate if he went back in business.
    He was also holding out child support and not paying it to the state.
    However, “withholding,” is an inaccurate term. He could not “withhold” money he didn’t have from the paychecks. He was simply computing phantom money.
    When he finally folded, he owed 911 taxes, state taxes, child support, and all kinds of stuff. He was a nice guy, but a dolt with money.
    He was afraid he was going to jail over the 911 taxes. Later, I worked for the IRS and learned they seldom put any in jail over unpaid taxes. Not filing is serious, and so is hiding money. Please, nobody needs to try anything against the IRS based on the stuff I’m saying.
    In the scheme of things, what he owed the IRS was trivial compared to bigger things.
    I do not like adding extra layers of complexity to the federal process!
    The way I read the ACA, people only have to buy into it if their incomes are over 300% of the Federal Poverty Level, and the monthly premium is no more than 10% of their incomes.
    I don’t see that the advanced tax credit is that much help. I think lower income people will still be exempt without it.

  • Dorothygreen

    It really doesn’t matter whether a health care system is administrated by ” the government single payer or through an insurance program. Both can work for a country. Canadians are doing all right with the single payer and Switzerland is doing alright using insurance companies. What they have in common is that the players are regulated. There is recognition that “as a country we are all in this together – one day you may need help, another day the kid down the street needs help. We may have different insurance but it is all going to work the same, No surprises. Please read it. Americans can’t seem to come to gether on anything and remain the sickest country with the highest costs and poor scores on indicators of health, . http://content.healthaffairs.org/content/29/8/1442.full.

    I say we use this model. It is more politically digestable than a single payer. Jobs for the administration of health care in the private sector, Government negotiates with players. We cut health care costs in half . Switzerland has showed that basic services can be efficiently administered as non-profit for ^%. Yet we only cut 15% to leave 15% to do the same thing in the ACA, Why because basic services can be sold for profit. This is just one of many points.

    • Luis Collar, M.D.

      Thanks for the article; it was a good read. As you point out, the Swiss approach is different. While I believe, first and foremost, in market solutions (free market with strong oversight to prevent abuse), single payer would be preferable to a hybrid system that allows some entities to profit disproportionately without adding anything of value to the process (e.g. insurance industry).

  • matt19799

    Great article, Luis. Between my article “Dear Lawmaker’s: Why aren’t doctors involved in health care reform” and John Hunt’s article on the cost of care and moral hazard, I believe we illustrated that by giving patients their autonomy and restoring that critical physician-patient relationship, we can come a long way. The insurance companies and politicians simply add “overhead” and do nothing to restore quality health care for our patients. This is all basic economics (i.e. Thomas Sowell) and increased competition for services will lower prices and make health care affordable. Tell me what you think of some similar ideas I had in my article and maybe we can discuss more.

    • Luis Collar, M.D.

      Matt… Sorry I took so long to reply, but I was trying to take some time off for the holidays and just got back yesterday. Your article was great, and I definitely think there is much common ground in our philosophies. I suppose making drastic changes all at once could “shock” the system and lead to some instability, but if we can slowly achieve small, incremental change, it might begin to make a difference in costs, access, patient care, physician job satisfaction, etc…

  • querywoman

    Suppose an insurance company collects $7000 in premiums from a patient and/or the government in 12 months for one of these new plans,.
    The plan has a $5000 deductible, and the patient seldom gets sick.
    If I were that kind of person, I wouldn’t buy one, but what if he or she did?
    All that money will sit in the insurance company’s bank accounts and draw money!
    Meanwhile, I’m still looking for an answer for some of my friends. One guy, single, pushing 60, doesn’t need maternity care.
    He’s already paying plenty for maternity care. I certified lots of pregnant women for Medicaid over a 9 year period.

    • Luis Collar, M.D.

      Thanks for the comments. You raise very good points. That money does, in fact, sit in the insurance companies’ bank accounts, but not for long. Lending is one of the insurance industry’s primary functions. That is, because they have so much liquidity at any given point in time, they aggressively lend to other financial institutions (commercial paper, etc) to invest surpluses and boost profit / cash flow.

      Also agree with the problems on the “one size fits all” approach to policies you reference. And Happy New Year! Wish you the best…

      • querywoman

        Thanks. You taught me one here. I was not aware that insurance companies like to loan money.
        Happy New Year yourself.

  • http://www.capko.com Laurie Morgan

    I really appreciate this post — I share this same perspective with anyone who’ll listen. I have to say, though, that the idea of “bad insurance” being coverage that assumes you’ll pay your own (lower) costs for routine, minor and predictable care is very hard to shake — even among educated people who know a little something about money!

    You might appreciate this post by Megan McArdle on this subject:

    http://www.thedailybeast.com/articles/2013/03/27/health-and-human-services-secretary-doesn-t-understand-what-insurance-is.html

    • Luis Collar, M.D.

      Thank you for your comments. Indeed, the psychological component will be difficult to overcome. The disconnect between patients and physicians is quite engrained in our culture now, as is the concept of insurance as “health management.” I believe we have a chance to change that if we gradually start to limit our reliance on / misuse of insurance as a health management / healthcare financing tool. By the way, thanks for the article. Was a great read. Thanks again.

  • Slātlantican

    Wonderfully enunciated points, which regrettably, should have been argued more fiercely over the past 50 years. But now, I fear, it is simply too late; educational mediocrity combined with political pandering have rendered the truth written here literally incomprehensible to sufficient numbers to change the course on which we are set.

    • Luis Collar, M.D.

      Thanks for the feedback. I agree these problems have developed gradually over several decades. Hopefully, it’s not too late to bring some change, even if it’s done in small steps. Thanks again.

  • Luis Collar, M.D.

    Thanks for the great points. It is true that improving the system is a complex process that involves addressing various issues. I only raise the insurance angle because it is one that contributes heavily to many of the other problems we are dealing with (e.g. less patient autonomy, less physician autonomy, increased healthcare costs, inefficient / ineffective allocation of resources, etc…)

  • Luis Collar, M.D.

    We agree on the need for greater cost transparency and the need to aggressively address fraud / abuse. I do believe, however, there is definitely room for more patient autonomy and a more limited role for health insurance. It is indeed difficult for patients to make decisions about their own care when they are sick or lack the education to do so. However, increasing the role of insurance only disguises that fact and provides the illusion of control. In the current system, many of those decisions are made by insurance companies that often do not have a patient’s best interests in mind (necessarily so since they have a fiduciary responsibility to shareholders, not patients). The industry also often severely limits what physicians can do for their patients (realistically, patients often don’t get care their insurance companies won’t pay for, so the new boots vs. preventive care issue remains – this is precisely because of the psychological barriers that have developed due to the system’s increased reliance on insurance over the last several decades). The only difference is who is deciding what constitutes good care, good physicians, what patients need, etc… Insurance administrators are often no more knowledgeable about patients medical needs than patients would be, and, more importantly, their policies are developed to drive profit, not to adhere to “evidence” or “best practices”. Only patients, in conjunction with physicians that have a responsibility to them, can properly make those decisions. If insurance companies were benevolent, medically competent entities, it might make sense to shift the burden of these decisions to them. However, that is certainly not the case. So while there are challenges with empowering patients and physicians, assuming that insurance companies are better suited to allocate the dollars is definitely not wise or realistic. That fact, in addition to the billions siphoned out of the system by the insurance industry along with its significant contribution to perpetually increasing healthcare costs, all conspire to build a formidable case in favor of reducing our reliance on insurance.

  • Luis Collar, M.D.

    Thanks for contributing. I agree that it will not be easy. I simply point out that this “brainwashing” will only become worse if we continue to increase the role of insurance in healthcare. But I do a believe we need to pull back gradually so as to limit the “shock” and instability to the system.

  • Luis Collar, M.D.

    Fraud and greed will be present in any system. No system can be more than the people that create or run it, and, sadly, we haven’t evolved enough yet as a society to eliminate those unfortunate realities altogether. However, most physicians do not engage in fraud or abuse. Some do, but that is true of any profession, business or occupation in our society.

    The simplest way to ensure that the system’s goals and motives are in line with a patient’s is to limit the presence of unnecessary third parties. A physician has a responsibility to act in his or her patients’ best interests. A system in which patients pay physicians directly (wherever feasible) reinforces this relationship and aligns the objectives of both parties.

    Third parties corrupt this relationship unnecessarily by controlling too much of the process, providing conflicting incentives to physicians, and limiting a patient’s ability to make informed choices on his or her own (they control what is covered and isn’t, often not based on science or evidence but rather profit motive). Without third parties, physicians’ innate desire to improve patients’ health is reinforced (help patient, keep patient, retain a “customer”). Insurance companies can never fully align their goals with the goals of their patients, no matter what their marketing says. They extract billions from the system and the only way to sustain the business model is to give back less than they take in.

  • Duncan Cross

    1) With that out of the way, here’s some more empirical evidence regarding health insurance and health: http://tinyurl.com/JMMcWill and tinyurl.com/StanDorn )

    2) Another misunderstanding of economics: “Therefore, at different points in the curve that relationship changes.” It just doesn’t make any sense in the context of supply-demand models. Granted, it might possibly be true, but for it to be true requires abandoning the very economic logic that informs the benefits of the free market. And, again, there will be insurers in a free market — probably at least as many as there are now. I get that you are choosing the free market on principle, but the practical consequences of that choice still seem very vague.

    3) I understand your logic, but I don’t think it squares up with the real world. If I have $100 for health care, and I spend it on insurance, and my insurer pays $80 for an in-network provider to treat me, that provider will send me a statement that says : Cost — $120; Insurance allowable — $80; Patient responsibility — $0. That’s $20 in excess value I got, because I had insurance. In your model, I should take my $100 to the provider and… beg them to cut me a deal? That’s why people will keep choosing insurance, even in the free market.