The solution you won’t hear from Washington

Broken Arrow Family Drug blog

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  • 25 February 2010
    Health & Wellness
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    The solution you won’t hear from Washington

    As I write this, the kabuki theatre that is our federal legislature in is discussing how to ‘fix’ the healthcare system in the U.S. There will be much discussion on the uninsured, ‘bending the cost curve’, the ‘doc fix’, excessive insurance profits, and the like.

    As you watch the resultant news reports and promises of ‘solutions’, I ask that you consider this – most of the people you see ‘solving’ these problems have never held a non-government job in their lives. They have never owned a business, written a paycheck to an employee, or paid a business tax. They have never actually received a paycheck in an envelope, and taken it to the bank to deposit. They have no idea how their healthcare is paid for, as they never see the bill for the premium. They have their own doctor on staff at the Capitol, so they don’t worry about sitting in a waiting room.

    If you asked these people to explain the difference between gross profit and net profit, they would stare at you with a dumbfounded look. If you asked the difference between price and cost, they would give an explanation that would soon fill the air with the aroma of a west-Kansas stockyard.

    Unfortunately, that failure to understand the difference between price and cost extends to the layman. As I explained in my previous blog post, the average American doesn’t understand that price does NOT equal cost. The SOLE concern of the American public is “what PRICE must I pay?” – or more specifically, “what DIRECT price must I pay?”.

    The American public understands a PRICE when they write a check, pay a bill, or fork over cash. They see a direct price to benefit relationship. And the higher the price, the more painful the transaction.

    They do NOT see the behind-the-scenes cost involved. When the public pays a $25 copay for a prescription, they don’t see that there is a COST for the pharmacy to file a claim, there is a COST to pay the help, there is a COST for the insurer to manage benefits for the employer, and there is a COST built in as profit (gasp! A four-letter word!).

    To illustrate, let me use an example from Financial Peace University. In one of his lessons, Dave Ramsey explains that studies have been done to determine the physical effects of paying for an item – how your body reacts to paying for something. They used 3 forms of payment – cash, debit card, and credit card. When people paid for an item with a credit card, the ‘pain’ receptors in their brains didn’t activate. Over the past 50 years, the American public has developed an internal physical mechanism that tells them that when they use a credit card, they’re not really ‘paying for’ an item.

    Contrast that with using cash. When people use cash to pay for an item, the ‘pain’ receptors in the brain light up like a Christmas tree. It can physically HURT to part ways with cash for an item. This mechanism, which Dave uses in his lessons to encourage you to spend only cash, keeps you from spending cash on unnecessary items, and encourages you to shop around for good deals.

    Health insurance is the ‘credit card’ of the healthcare field. “I don’t care how much it COSTS, I need the service.” Then when the ‘bill’ comes in the form of the premium, and that ‘bill’ continues to go up, the public blames some nameless, faceless entity (usually the insurer) for ripping them off, instead of trying to understand the COSTS of healthcare.

    The solution to the problem of healthcare costs can be explained in one paragraph. The solution doesn’t involve changing your insurance coverage in any way, and I can guarantee you that within a year, there would be a positive change in the COSTS of healthcare.

    The solution? If it’s a medical event that is not an inpatient hospital event, the patient must pay for the treatment/prescription/service out of their own pocket, and submit the claim to their insurer themselves. In order to be covered as an inpatient hospital event, the medical standard of practice must be that the treatment/service can ONLY be provided on an inpatient basis.

    WHAAAAAAT? Are you KIDDING ME? You think the solution is for me to PAY IN FULL for my expenses? I CAN’T AFFORD THAT!

    Exactly. That’s EXACTLY the point.

    I want you to take a breath and think about this for a moment. How would your life change if you had to pay up front and submit the insurance claim yourself for every outpatient medical item, prescriptions included?

    You would manage your expenses better. You would price-shop for services and items. If the doctor told you that you needed an MRI, you would call around and find out prices.

    Competitive forces which are NOT in the marketplace now would return. And COSTS would go down.

    Think about the fringe benefits to the system as a whole –

    The practice of defensive medicine would stop. If a doctor said that you needed an MRI, you can guarantee that you absolutely needed that MRI. And if you didn’t get it, whose fault would that be? This would lessen the COST of malpractice insurance.

    Doctors would be able to cut COSTS simply by eliminating some staff. Have you ever looked behind the counter at the doctor’s office and seen 5 or 6 people there? At least two of them are working on insurance claims – either filing, getting paid for claims, or reconciling. That expense is gone.

    You know that Lipitor I mentioned in the last blog post? You would change to a ‘therapeutic substitute’ that is less expensive. Eventually, Lipitor would get the hint and lower its COST to become more competitive.

    Whether good or bad, there would be fewer claims filed with the insurer, in part because some people just wouldn’t file them. And because of that, the COST of the insurance would eventually come down.

    There would no longer be the need for pharmacy benefit managers – those middlemen who charge a fee to your employer and pharmacy simply to handle your claim transaction. This would lower the COSTS to your employer and pharmacy.

    Unrealistic? I don’t think so. You’re actually much closer than you know. An insurance industry buzzphrase is ‘cost-sharing’. Insurance companies are more and more increasing your copays and deductibles as a means of ‘sharing’ the COST with the insured. You may be paying a larger portion of your COSTS, but you’re definitely not in control of them.

    So, there’s my fantasy. The American public would have to actually take responsibility of their healthcare decisions, and do some work in an effort to control costs. The insurance companies would have to directly answer to the public when a claim was filed. Physicians, pharmacists and the like would be able to return to the practice of medicine and pharmacy, and we would COMPETE for your business.

    Does it solve everything? No. We still have the issue of the uninsured, but they would directly benefit from EVERYONE competing and lowering the COSTS of healthcare.

    And I guarantee you that this plan, however fantasy-based, will be more functional than anything that comes out of Washington today.

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