As I listened to the debate about health insurance over the past eight months, I became a (more) interested party.
After 35 years as the insurance companies’ dream (virtually no money ever paid out on my behalf), I find myself facing huge expense for limited coverage, and a hard end to that coverage in 2011 unless I join another large group like my last employer.
As a late-50’s high-end earner and taxpayer (no shelters for that W-2 income), I’ve paid the maximum income tax rate for decades. My payroll tax for Medicare has already prepaid a very expensive organ transplant and a year or two of physical therapy to boot, procedures I expect never to want and hope never to need.
I’ve also worked so many hours per week at my jobs that I went literally for years without seeing a doctor of any kind. Those few times I did (a separated shoulder from a spectacular fall, a hospital-based diet and weekly monitoring, and the occasional ear infection or bronchitis or flu), I ended up paying for it myself and not taking the time to submit expense forms to the insurance company.
To top it all off, the only time I ever got around to having expensive voluntary procedures (eg colonoscopies) was when I wasn’t doing the 9 to 5 thing. Except for the last couple of months where I paid COBRA and the insurance company paid the hospital and doctors, I’ve paid out of pocket for my health care and let the insurance company keep their money and their hassle.
[In fairness, my wife is different. She uses more doctors, and expects the insurance to pay what they say they will cover. I recall once in the 1990’s when they pulled the “pre-existing condition” weasel move to deny some expensive treatment she had. Problem was, we had paid out of pocket for the required full year after we were covered under that policy before she ever submitted receipts. By the time she elevated the case to the state Insurance Commissioner, she had documented every communication, every lie, and every evasion. A week after the Insurance Commissioner took her file and turned it into a case, we had a check for nearly $20K.]
Anyway, separating the partisan insanity from the financial reality, I was shocked and pleased when there was a brief moment that allowed my age group to “buy in” to Medicare without going through the nightmare of private insurance bought on the individual market. To me, I couldn’t fathom how this was an alternative to a public insurance product for all, but I thought it made sense from an expense standpoint.
It was soon defeated by the Senator from the state of Insurance, even though he was caught on tape several months earlier proposing exactly the same policy.
The argument made against it was two-fold.
Lieberman’s incoherent argument was that it would add to the general deficit as a new mandate. To that, I say the only way it could happen is if they ignore the well-established science of actuarial pricing. When I got my COBRA renewal for 2010, I was shocked to see a nearly 20% year-over-year increase in insurance premiums to keep exactly the same plan I had in 2009.
In just one year, my premium costs were increased by as much as the 10-year expected cost increase that opponents to the legislation are whining about. I don’t know about you, but I think 20% over ten years doesn’t feel nearly as bad as 20% the very first year, and uncapped future increases. Maybe the 100,000 employees in the group my old employer covered had a huge jump in costs last year, so the actuarial results justified the increase.
More likely the insurance company figured out how to create more administrative costs, so that after they make their “modest” 3% or 4% profit, it just ended up costing 20% more for next year. Or maybe my doctor and every other doctor and hospital just announced huge increases for everything they do.
Call me skeptical. I think they were doing just what the credit card companies did after the new consumer protection law was passed, but before it became effective. They were “getting while the getting is good” by raising their rates enormously to establish a new higher base to work from. Or maybe I was the only one with a spotless credit record that got letters from all the banks saying they were raising my interest rates on my cards in spite of 0% rates set the Fed.
The other argument was more interesting: that the existing system reimburses for Medicare services at such a low rate that doctors and hospitals have to charge higher rates to privately insured or cash-paying customers. Certainly nearly every story I’ve heard about denied coverage comes from privately insured patients, not Medicare patients.
That makes sense. Lower-level bureaucrats respond to pressure the same wherever they work, taking the path of least resistance or greatest reward.
At a private insurance company, withholding payment gets rewarded, so those bureaucrats look for reasons to deny service. One company that provided coverage for one of my employers seemed to automatically deny or “lose” the claim the first time it was submitted, according to my wife.
They also had a neat trick when dealing with repetitive bills like the chiropractor that helped me recover from the shoulder separation — they would pay every other claim, and say they had already paid the missing ones when questioned. My wife, of course, kept meticulous records, and made them pay what they owed by providing full sets of copies, with dates, every time she wrote to them. There’s no doubt in my mind that it cost quite a bit more to operate that way for that series of treatments, but if it had been up to me to file the claims, they would have avoided paying for a lot of the cost.
I’d be willing to bet the insurance company had actuarial proof that enough people like me give up entirely, send in our only copy of the bill, or otherwise end up not being paid to make it worth it to deal with multiple letters and calls from the few like my wife, who simply refused to be cheated no matter how much time and how many Certified Mail expenses it cost her.
At a government bureaucracy, processing the required number of claims without causing problems that get elevated to more senior bureaucrats is what gets rewarded.
As a result, Medicare pays the claims, at its reduced dollars per service, but on nearly every claim. That would make Medicare more susceptible to fraud more than private companies, in my opinion, because the claims processors at Medicare don’t want hassle, and don’t want to spend too much time on any one claim.
What we have, then is an incredibly efficient government claims processing vehicle that rewards providers for maximizing the number of claims they submit, and alongside it, a private enterprise system that minimizes the amount paid to providers while maximizing the amount that can be justified as legitimate overhead.
No wonder we spend twice as much as other countries for less favorable results!
We obviously can’t just hit the “reset” button on a system that has become as large as the Federal Government, much as we’d like to. (Check the percentage of GDP — total Federal tax revenues are lower than the fraction of GDP now given to health care, once you include its administration, marketing and financing.)
Worse yet, now that Social Security and Medicare taxes are the largest single source of revenue to the Feds, beating personal income tax, a significant portion of our government is already a pass-through to the health industry.
OK, I get it. We can’t just blow a whistle and stop the music. Whatever we do has to let the existing system continue delivering essential services.
But let’s start fixing the financing, since that seems to be the main problem.
First, how about having each doctor, clinic, lab and hospital charge the same amount for the same service to all customers? Is that really so anti-capitalistic? Maybe even the baby step of having each patient know what the final, total estimated cost is for a procedure or treatment? Even the most hard-core capitalist has to agree that those deciding to spend the money should know how much they’re deciding to spend.
Second, let’s admit that extreme loss to uninsured patients is a cost that already taxes society, and does it by the most unimaginably inefficient method possible. After the patient agrees to have the treatment (without knowing how much it costs), the provider is forced to look under every available rock to find someone or multiple parties to pay for it. Just the multiple attempts to bill and collect from multiple parties has to be adding several points to the real cost.
My idea is a nationwide “disaster” policy that pays single event or single illness costs that exceed some very high “deductible” — say $100K. I have just the place to find the revenue, too. Let every general public advertising for drugs, medical devices, medical services, etc. carry a small surcharge. I’ve read a number of times that spending on pharmaceutical advertising on American TV alone exceeds the cost of all pharmaceutical R&D in the world. If they can afford $50K to ask me to ask my doctor about “satataxafyn,” or some other new word with an X and Z, they can afford $2K extra to pay into the pool for the emergency surgery of a twenty-something who chose not to be insured or has a lousy job that doesn’t have coverage. I can certainly live with fewer ads for motorized wheel chairs, too.
Basically, we could all then carry insurance for the first $100,000, or be self-insured for some or all of that cost. I’d love to see the actuarial cost per person for that kind of coverage. My guess is that it is very small, especially because the insurance industry already dumped the really expensive patients onto Medicare and Social Security Disability.
Beyond that, I’d like the option of joining all the other people my age in being part of a pool that chooses Medicare as our payment agent. But let’s make my voluntary Medicare carry a little more of the load. Specifically, since the defenders of the poor abused insurance companies like to buy into the Hollywood-style accounting that shows they only make 3% or 4% in profit, we’ll set the premium for my buy-in at actuarial cost plus 5%. Now it can’t be unfair public competition, since the vastly more efficient private system should be able to beat the public system by 1% to 2% on price without breaking a sweat.
What if only really sick people take this option? Simple, really. Each year the premium would be based on real costs from the actual cohort group (including the 5% transfer), so only a really bad epidemic or something would make a large loss, and only for a year at a time.
Just like my current private coverage, each year the premium is announced a couple of months in advance so you can change plans if you want to.
I think without the overhang of enormous marketing and administrative costs embedded in private insurance, voluntary early Medicare buy-in might be very viable option, and it would allow those of us in our working years to choose to help the Medicare system extend its date with destiny by paying slightly more for our insurance than it costs.
Some of us think that a “system” with costs rising four or five times as fast as the cost of government is already too big to continue, especially because it is already the size of our Federal government. Those exponential curves are a killer.