Thursday, July 13, 2017

Affordable Health Care? Facts, Opinions, and a Solution!

Disclaimer: I am not a financial wizard, or a financial analyst. I sold health insurance for six months or so but that was 35 years ago. I do work for a company in the
business of health care but we distribute supplies so we get paid no matter how this goes. Finally, these thoughts are mine and mine alone. I’m just a concerned citizen who scratches his head at the folly of our legislature debating Health Care and various acts they want to repeal or pass.

Let’s begin with the Facts:

Prior to 1973, it was illegal for healthcare to be conducted on a “for profit” basis. The Health Maintenance Organization Act was passed by Congress and signed into law by President Nixon on December 29, 1973 to encourage and promote HMOs as a way to reduce the cost of health care on a trial basis. The intention of this act was that entities could eventually begin to use profits to offset costs, thus driving down overall costs. (Or make a buck out of healthcare, however it worked out. Turned out to be the latter.)

All Americans are guaranteed to receive some form of health care should they show up at an Emergency Room at a hospital even if they have no way to pay for it. (This is as a result of the Emergency Medical Treatment and Labor Act passed by Congress in 1986 and signed into law by President Reagan. It’s an unfunded mandate that all hospitals appear to heed; more on this later.) The fact that this legislation was passed leads me to believe that, We the People, believe that everyone is entitled and has a right to basic healthcare.

The annual cost of healthcare in the US is $8608 per capita (that’s as of 2015; current estimate is $10,068 per capita) which is the highest in the world. Despite this, the US does not have the “best health care in the world” as many believe. The following paragraph comes from Wikipedia.

The United States life expectancy of 79.8 years at birth, up from 75.2 years in 1990, ranks it 42nd among 224 nations, and 22nd out of the 35 industrialized OECD countries, down from 20th in 1990.[6][7] Of 17 high-income countries studied by the National Institutes of Health in 2013, the United States had the highest or near-highest prevalence of obesity, car accidents, infant mortality, heart and lung disease, sexually transmitted infections, adolescent pregnancies, injuries, and homicides. On average, a U.S. male can be expected to live almost four fewer years than those in the top-ranked country, though notably Americans aged 75 live longer than those who reach that age in other developed nations.[8] A 2014 survey of the healthcare systems of 11 developed countries found the US healthcare system to be the most expensive and worst-performing in terms of health access, efficiency, and equity.[9] 

(We must be very proud!)

There is no such thing as “free health care.” Even the indigent, who may get health care they can’t pay for, aren’t getting it for free. It may be free to them but the rest of us are paying for it.

How? Hospitals, bound by the law mentioned above, record the cost of that care on their books as “un-reimbursed expenses” which is above the profit line. That means, it is accounted for as an expense or “cost of doing business” and is simply deducted from their potential profits. In other words, all of those who pay the hospital money (insurance companies, your employer, you in the form of copay or deductibles) pay for it.

That means WE pay for all the health care in the country. Medicare, Medicaid, private insurance, and our employers may send a check to pay parts of our healthcare bill but they get the money to do so from We The People in the form of taxes paid, health insurance premiums, copays, and deductibles. We pay. They 

About 18.5% of all the money in our economy is taken up by the cost of health care. How much is that?

Current In round numbers, it’s $3,400,000,000,000. That’s over three trillion dollars and it continues to go up every year. This is the reason that the Affordable
Current Law
Care Act
and it’s repeal / replacement / adjustment / tweaking are so important to our Congress. And it should be very important to all of us because, in the end, they’re discussing the distribution of almost 20% of our money, each year.

Do you trust them? (And by them, I’m talking about Congress since they’re the ones deciding how this will be done.)

Now, here are my Opinions (along with some additional facts):


I find it ridiculous that healthcare isn’t treated like nearly every other business in this country. What do I mean? Well, we have all kinds of consumer protection laws in place to ensure we don’t get the shaft from just about every type of business but nothing like that exists in healthcare!

When I worked in retail consumer electronics, we were required to have on display
and available for sale in every store, any item that was advertised in our newspaper circular. Failure to do so, could result in a $10,000 fine per location. On any given Sunday, that meant we were on the hook for up to $7 million in fines due to being out of stock and this was enforced by the Federal Trade Commission. (The law came about as the result of bait and switch tactics practiced by some retailers.)
In the world of healthcare, pricing is a kind of smoky unreality that no one really wants to talk about with the patients. (The only place where pricing is upfront is typically in the case of Urgent Care Clinics. These places spell out their prices for visits when you check in. In other words, they act like a retailer. How refreshing!)

Example – an acquaintance of mine was diagnosed with a form of sleep apnea and was prescribed a CPAP device; these blow air in your nose and keep your airway open so you can actually sleep. When they went to the equipment provider, they were unable to tell how much the unit cost and how much the private insurer would cover. This person called the insurance provider and they were unable to explain how much coverage would be provided so that the insured could budget for the purchase. In other words, no one was willing to own up to actual cost for the patient! (In the end, it amounted to over $1200 and this person was able to cover that but most people in this country could not afford that expense; in fact, most Americans couldn’t afford it if it was as little at $400.)

High Costs – because, waste

On a different plane, why is the cost of healthcare itself so high? Particularly when the US clearly isn’t getting much in return? (See rankings above.)

For one thing, there is a great deal of waste involved in our current system. The person with the CPAP machine that I just mentioned received a total of 11 different bills (delivered thru US mail) for the device, despite having gone to only one provider for the unit!

This is an example of waste that occurs on a daily basis in every aspect of health care. In this case there is at least 10 bills too many, all with postage that adds up to around $5 of wasted postage cost. But it’s far more than that. Each of those bills and invoices had to go through various departments/people for processing before being printed and mailed to the insured. A quick Google search tells me that it costs anywhere from $7 to $37 dollars for each invoice produced. If we take the halfway point, that’s $22 per invoice or $220 worth of waste for this one transaction. Bear in mind, that the waste noted here is only on the patient side. If the same number of invoices have to be produced for the private insurers, it doubles. That’s $400 of waste on one transaction (that cost the patient $1200) and we’ve only looked at the billing!

More waste occurs in another way, over-testing. Currently, physicians are reimbursed for procedures / tests that they perform, a methodology known as pay for procedure. The downside to this is that it incents them to perform more tests than may be needed for a given presentation by a patient. Is there justification for this? Maybe. Doctors claim that it helps to keep the cost of malpractice insurance down but I haven’t done any research on that. (I do know that my personal physician sold his practice about 8 years ago and moved into another role in health care because his malpractice insurance had risen to $12,000 per month and he’d never had a claim! That cost was more than he could overcome.)

It’s estimated that a third of health care costs are caused by waste in the system. That seems like a reasonable number to me, especially when you consider that 64% of all healthcare is paid or administered through some form of government program: Medicaid, Medicare, Veteran’s Administration, for example. If that estimate is correct, that is $1 trillion that is being paid for, needlessly, by all of us every year! (That’s 1/12 of the economy.)

Higher Costs – because, profit!

Another cause for the high cost of health care stems from the costs of pharmaceuticals. Manufacturers invest a great deal of money in coming up with new drugs to fix all of the things that ail humankind and I recognize that. But do you know how much they spend on advertising? In 2016, it was $5.2 billion!
WTF with 2 tubs????

Direct to consumer drug advertising began in 1982 but didn’t really get going until 1997 when the law was loosened up and TV advertising began in earnest. It’s gotten really bad the last few years as more and more manufacturers expand their advertising and, coincidentally, their prices. According to a report by CBS News, 20 brand-name, high use, prescription drugs have quadrupled their prices since 2014. In 3 years, that equates to a compound annual increase of 48%! I’m not aware of any current business that is driving it’s pricing in such a way while still remaining in business.

So, “Ask your doctor if continuing to get screwed by high drug prices is right for you!”

Solutions – are there any?

The Affordable Care Act, known colloquially as Obamacare, was enacted in 2010 and signed into law by President Obama. It was designed to reduce the overall cost of healthcare by providing insurance coverage for those who can least afford it and, generally speaking, cost the most.

Remember the law guaranteeing health care for poor people in the ER? That’s where many would go for anything health related. As a result, they’d be going to the most expensive provider for the least expensive need (flu, cold, general maladies) and getting no well care to help keep chronic disease (diabetes, hypertension, high cholesterol) held at bay. Result – increase in health care cost.

The ACA provided millions more people with health insurance, and coincidentally slightly better health care, thus bending the cost curve down. (That’s not really a reduction in expense, it’s a reduction in the amount of increase. It’s better but not dramatically so.)

American Health Care Act
Turn your head and cough!

Now that the GOP is in charge of the House, Senate, and White House, they are bound and determined to fix healthcare once and for all. They intend to do this by repealing and replacing the ACA and replacing it with something better. (Thus, saving us from “the complete failure of Obamacare.” I wish everyone would speak less dramatically about all of this. Obamacare has actually bent the curve down slightly as to the overall cost. I hope whatever the GOP comes up with fails at least that good!)

The House plan calls for reducing the amount of money spent on Medicaid (that’s the one that covers the poorest people in the country) a defunding of Planned Parenthood, along with a loosening of insurance laws that would allow them to sell across state lines (that’s not yet clear on details) and it would leave in place some of the features from the ACA around pre-existing conditions and allowing dependent children coverage until age 26.

This plan would also remove a tax on the wealthiest members of society which was in place to pay for the ACA. (Thank goodness! I was worried about them.)

According to the Congressional Budget Office, this would cause 23 million people currently insured to lose their coverage.

According to the House majority, this would turn loose the power of the open market to reduce prices for insurance thanks to competition and free market forces. It would also allow people to purchase the insurance they want, instead of having it forced up on them. (Except of course poor people who, according to one legislator could just “get a job to pay for it.” Or pay for their living expenses, like food or something.)

The Senate, as of this writing, is still working on their own version of the repeal and replace bill. Things that have been floated out from the caucus that is working on it, don’t sound much different from the House version

My Solution – Hey guys, you’re fixing the wrong things!

I believe that every citizen of the US is entitled to basic healthcare, just like every other developed nation on the planet. I further believe that rich people should be free to purchase even better health care if they wish because, hey, they can!

I don’t believe that the government should be in the administration of health care but I do believe they need to be involved in setting parameters for the business. (Why? It’s 1/6 of our economy. If it’s not regulated we end up with the Great Medical Recession of 2030 or something like it. Don’t think it needs to be? See banking and Great Recession on Google.)

I believe that the only way to do this is by using a system that I call Modified Single Payer. (I fully recognize this is way oversimplified but we have to start somewhere and I'm not against something completely different!)

I propose that insurance companies are designated for every locale in the country. It could be state, region, county, GMA, or something else. Every area has at least 2 companies to insure competition. These are for-profit entities and are required to cover all the citizens in their markets. (Note that non-citizens are not covered by this.)

Providers (that’s the medical people) can sign up with whichever insurer they want or both or none if they prefer. (My back doctor refuses to take insurance and he is doing just fine without it. I don’t want to force any provider on this.)

All of the money (less 30%) that is currently being paid out for healthcare is dumped into a pool to be divided among the payers and it’s their job to pay for the health care being handled by the providers.

The pool of money made up of that 30% is held back for bonuses. As waste is identified and quantified, the bonus money is provided in some form to compensate the group that discovers it, at a maximum of 1/3 of the bonus pool. This could be providers, insurers, even patients! If no waste is discovered, no bonus is paid. 

All of the money left over at the end of a period (2/3 or 20% of the total spent) is refunded back to the citizens who paid it into the fund. (If someone didn’t pay any in, they don’t get any back.)

I submit that this would improve out healthcare AND our health while improving our economy ($680 billion back in the hands of Americans that isn’t going to health care? New TVs for everybody!!!!). And we might even have a health system that rivals other countries.

What a concept!

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