Solving the health care (cost) problem – or maybe not

Health care, the cost of health care, is a hot topic. Many theories exist on what causes high health care costs. There is a great deal of misinformation  out there and people tend not to connect the dots as to cause and effect. 

The cost of health care is driven by use and the price of each service provided. Utilization is both justified and excessive. Some people demand more care, some doctors provide extra care as defensive or on occasion to generate revenue.

For example, If you invest in an MRI machine for a $1,000,000 plus, you must use it to pay the bills. If another MRI facility pops up a few blocks away, they both must generate use, there is no price competition in health care. Once you enter the system, demand is driven by the people who provide services. 

The United States has the second highest per capita number of MRIs in the world with 38.96 units/million. France has 12.59, Canada just 9.48. Japan is number one. 

In any given year most families will not meet their insurance deductible – even before we had high deductible plans, but they worry they might have a large expense and are driven by fear over what could happen thus often over-insuring and trading the risk of health care spending for the certainty of higher premiums. 

CEO salaries do not drive insurance premiums, profits of insurance companies do not drive premiums. Large employers don’t even use insurance. Between 50 and 70 million Americans are covered by self-insured plans. The profit margin for health insurers is on par with regulated utilities. The use of health care drives costs.

Many people complain – often with vigor – at the insurance company’s “interference” in their care, requiring per-certification, applying medical necessity criteria, limiting access to certain providers, even denying certain payments. 

The original Medicare Act did not allow any of this. Now Medicare uses limited pre-approval for durable medical equipment. Proposals have been made to expand the pre-approval requirement. 

On the other hand, the infamous Project 2025 says this about health care:

“the federal government should not restrict providers’ ability to discharge their responsibilities or limit their ability to innovate through government pricing controls or irrational Medicare and Medicaid reimbursement schemes. The federal government should focus reform on reducing burdens of regulatory compliance … ceasing interference in the daily lives of patients and providers, allowing alternative insurance coverage options, and returning control of health care dollars to patients making decisions with their providers about their health care treatments and services.”

I don’t know what all that means, and I expect neither do the authors. To me it doesn’t sound good for Americans or for managing health care costs. I do know that rarely is it patient dollars involved.

The Project 2025 philosophy approaches health care costs assuming health care can be obtained on a price competitive basis, patients acting as consumers without oversight of care provided other than patient concern for costs. 

I will say unequivocally that health care is not like buying any other product or service. If you or a loved one has been seriously ill, you understand that.

Frankly, when Connie was diagnosed with cancer a few months ago, the last thing on my mind was shopping for the least expensive surgeon/oncologist. Would that be different if patients were paying more of the cost at the time care is provided? Some people think so, I don’t. In any case, it is not practical for average income Americans. The underlying reality is that nobody wants to spend their hard earned dollars on health care, me included. 

This begs the question- to me at least – what level of oversight is appropriate for the entity paying the bills? A friend likes the phrase, “I want the best health care your money can buy”

Our current system shifts costs around. Medicaid pays less that Medicare, Medicare pays less in fees that the private coverage sector so someone is paying more than if there was a single experience cost pool. 

Providers must play the system by inflating charges. Connie just received an EOB from Medicare for a physical therapy session. The charge was $400, Medicare allowed $55.62.  Her back injection for pain management was billed at $4500 (in office few minute procedure), Medicare allowed $421.55. 

I have my own ideas on how to provide health care in America, but after my last post I’m not ready for more red arrows. Let me just say that we have tried scores of different approaches from HMOs, to high deductible plan and HSAs, PPOs and more. Nothing has worked and we still have tens of millions of Americans without coverage.  

Note: 

I have been involved in health care coverage since 1962, first as a claim examiner for my self-Insured employer’s major medical plan and over the decades designing and managing various plans, including negotiating claim administrative contracts. In the 1980s I was on the boards of four HMOs where I participated in negotiated physician group contracts. 

Connie was a claim approver for a large insurance company and for a few years was a billing clerk in a physician’s office. 

We have viewed the system from several perspectives, including, unfortunately, as patients – combined we have incurred hundreds of thousands of dollars in charges since being on Medicare and paying very little in out of pocket costs because of our coverage, but paying taxes and hefty premiums for it. Millions of of Americans are not as well insured.