Friday, October 05, 2007

Is there a real cost of health care? A horrible example -- and some questions about a suggested alternative

President Bush recently vetoed a proposed expansion of the State Children's Health Insurance Program (SCHIP) (the link will take you to the government site explaining the program) and the usual suspects are predictably aroused.

Here, for example, is an ABC News story about the feared consequences of the veto. Although the proposed SCHIP expansion had bipartisan support, not all Republicans favored it. Here is a link to an op-ed piece in the Kansas City Star by U.S. Representative Sam Graves (R. Mo.) defending the veto.

I'm not taking sides here on a political question, but I'd like to add a couple of observations and ask questions of anyone who comes across this.

I write as a lawyer who has some experience of the ridiculous nature of our health care pricing system. Let me give you a real-life example from a case that is settled and done.

You'll understand that I can't use actual names and must fuzz the details.

But I represented a middle-aged woman and her mother who were involved in a traffic accident downstate about two years ago.

Accident is far too polite a term for what happened to them. It was still daylight, but the driver coming in the opposite direction down the Interstate was roaring drunk. He hit something or swerved to avoid something in his own lane of traffic -- even the police were vague on the details -- and, because he was traveling at such a high speed, literally became airborne. His car flew into oncoming traffic, directly into the path of the middle-aged woman and her mother.

The mother was driving. And she could see, in that awful split second, what was about to happen. A maternal instinct kicked in and she turned the wheel of her car so that the airborne car would hit her side of the vehicle and possibly spare her daughter. The middle-aged woman saw her mother do this.

And the daughter was spared. But her mother's decision to turn the wheel was the last decision she would ever make.

Surprisingly, the drunk driver had some liability insurance. Not a lot, mind you, but some. And my client had underinsured motorist coverage. And since neither of their policies were issued in Illinois the policies were stackable (that's not true for Illinois auto policies).

Now the health insurance angle: The middle-aged woman and her mother were working poor. The middle-aged woman's husband had a job with a major retailer, one which has a justly deserved reputation for preventing its employees from ever qualifying for health benefits. My client had no health insurance.

My client was taken from the scene to a nearby hospital. She was kept overnight for observation and released the next day. There were a number of diagnostic tests performed -- all coming back negative. And because my client had no insurance, her bill was over $17,000. A health insurer would have been billed a far, far smaller amount.

And the hospital found a way to bill the mother, who was killed at the scene, another $10,000.

These bills helped me get the maximum available auto insurance benefits, yes, but then I had to deal with the liens.

The hospital had gotten med-pay benefits from my client's auto policy -- $5,000 for each accident victim. The balance of the mother's claim was submitted to Medicaid -- not Medicare, don't ask me why -- which paid only a few hundred dollars of the thousands of dollars still claimed. And the hospital took it, willingly, and closed its file on the mother. But that hospital wanted full value from the surviving daughter. And the hospital had its own lawyers seeking payment on the lien.

Well, sure, you say, but shouldn't the hospital be entitled to collect its fee?

But what should its fee be, please? What is the actual cost? What it charges Blue Cross? What it charges some other health insurer? What it would accept from Medicare or Medicaid? These are all different -- far lower -- prices.

I listen to the politicians bloviate about letting the market work, or making the market fair and I see insurance distorting any semblance of any market I can understand.

In the example I'm using today, this money -- which the hospital would never have gotten from Blue Cross -- was taken from a woman who needed this money to bury her mother. And, frankly, losing the mother's social security check -- whatever it was -- was a blow to the family's finances. These people were not retiring to the South of France on this settlement.

So I ask: Is it too late for the market?

I have to tell you that I don't have high expectations for a government run health system. Seems to me the recent scandal involving the treatment of returning war veterans at Walter Reed Hospital provides a strong starting point for any argument against "socialized medicine." We have been providing health care for soldiers, sailors and marines since we became a country... and we don't have even that down pat. Will adding hundreds of millions more people to the ranks of those who are entitled to government health care make things better?

This is why I was intrigued to read recently about SimpleCare -- doctors who have opted out of the insurance system, and coding bills, and large staffs devoted solely to tracking insurance payments and claims. From the SimpleCare website:
Better care for less money – it’s just that simple!

How does it work? We call it PIFATOS – Pay In Full At Time Of Service – and it is truly a "Cash-Based Revolution." A patient sees a doctor for a non-catastrophic reason – yearly check-up, a nagging flu, a twisted wrist, an aching stomach, etc. The doctor bills the patient after the visit. The patient pays in full before leaving. Because doctor charges are anywhere from 25 – 50% inflated due to administrative costs caused by the health insurance industry, you’ll be paying drastically reduced rates for your medical expenses. In conjunction with a regular catastrophic health insurance policy to cover extremely costly procedures, PIFATOS can save the average healthy adult and/or family up to $5000/year!*
The asterisk takes you to an example: It claims a catastrophic health policy can be had for $3,000 a year while a regular health policy must cost at least $9,000 a year. (In the last year I paid health insurance premiums -- a few years ago now before my wife got benefits from teaching full-time -- I was paying $18,000 for the family, and that was with several large deductibles that had to be satisfied before the customary 85/15 split would kick in.) If you spend $1,000 going to the doctor in that year, you've saved $5,000.

I am intrigued that there would be -- could be -- a market-based price. A real price -- and not one that depends on who's asking.

So, gentle readers, tell me: Is such a Nirvana attainable? Have you heard of this? Does it really work? Could it?


Empress Bee (of the high sea) said...

drat. i just typed a whole long comment about all the insurance claims i have had in the past fifteen months and it disappeared. basically i said that for example the five day radiation i just had (mammosite) was billed at $40,000. what will be paid? who knows? maybe $2000? but if i had NO insurance i would owe the whole amount. this sucks. we are retired military and have an out of pocket max of $3000 per year for the family. i know how lucky we are to have this. i am anxious to see your other responders.

smiles, bee

Shelby said...

Great issue to post about - seems simple but not.

One thing's certain - the drug companies are doing great in the profit area.

landgirl said...

Here in the UK for all the limitations of the National Health Service, nonetheless the idea of medical care available to any and all is a goal that they work toward and often achieve fairly well. In the US that does not seem even to be a concept. Folks here are horrified by the stories about the outrageous cost of health care. I would like to split my time between here and the US but the prospect of getting health coverage is really chilling. And the prospect of living there without is even more frightening.

sari said...

When I had Five, the hospital billed $1000 for five pain pills they gave me...the same pain pills I went and got a prescription for I think 30 pills for about $7.00 at the pharmacy after I left the hospital.

You do the math.

Ralph said...

Curmy, you have hit the nail straight here. There is no transparency in what the actual costs are...reasonable and customary fees are too low for many providers, but the uninsured (like me, currently) are charged the full (not R&C) amount for the service. I hope to be working soon and have access to insurance. The odd thing about how the uninsured are billed is is that the uninsured are subsidising the insured, which is truly bizarre. I think that employer based insurance must be deleted from the tax code to make a real market for insurance. I had a Dr. appointment in Sept, and when I told him of my employment situation, he gave me a bill for $75, which is close to the R&C that the insurer will pay. The normal bill is $120. So maybe it would be better to eliminate insurance for basic care. And be advised that because of my disability (MD), I can not even purchase a high-deductible policy. Yeah, insurance is a racket which is allowable due to tax and other reasons created by the US govt. I'd better not get into an accident until I have access to a group policy...

katherine. said... this is new to me.

It makes sense at first glance. I'd have to know more...and think about other scenarios.

What I get all concerned about is that health care will end up like "kaiser permanente" which is an HMO we have out our way.

They offer lower rates, presciptions, services...but my experience is that they have substandard medical treatments. This is not the place the best and brightest go to be doctors.

I agree we have to do something.

Heather said...

Being a health care professional, you'd think I'd have some suggestions. Instead, I just shake my head, sadly.

I hate the state of our health care system today.

Anonymous said...

Hate to sound like a homer, but our health care system, in Canada, works well, and costs about $60 per month for basic coverage (docs, hospital etc, but no drugs). We all bitch about it, but that's because we have come to believe that we are entitled to "the best health care available" versus adequate basic health care for our premium dollars.
True, there is no free market involved, but should basic adequate health care really be a profit centre?

Lahdeedah said...

You know,

I really hate our health care system. I frankly would like to see adequate health care available, and real, reasonable costs provided to those who are for whatever reason uninsured.

I really think health care and drug company profits are so astronomically high that there is no way there will ever be a fair market. It's very saddening.

The worst thing is that even if you ARE insured, if you have any sort of long-term illness, eventually, you're financially hit.


Our health care system makes me sad.

And frankly, that 'i veto'd the bill for poor kids' crap doesn't fly with me, because there are a lot of working and middle class folks who can't afford insurance or who have employers who don't offer good insurance.

Unknown said...

Nice blogs and good points. My name is Vern Cherewatenko, MD and I created SimpleCare. I had a thriving practice, employed 135 staff including about 50 health care providers - all went bankrupt thanks to Managed Care in WA state. I was so beyond frustrated with the insurance companies putting up so many barriers to patients care and then getting a fraction of my 'billed' fee - I had to create something that worked for BOTH patients and doctors. Hence - the simplest transaction between me (the doctor) and you (the patient) is that #1 you get to go to WHO you want! #2 You pay a fair price today for what you get - just like the grocery store or gas station. The high cost for me is dealing with YOUR insurance company, billing and rebilling etc. I cut my fees nearly in half and when I get paid in full we both win. People STOP PAYING HIGH RATES FOR MANAGED CARE TYPE PLANS!!! You all are paying $500-$600 or much more just to have a $25 co-pay!!! Buy Catastrophic, 'house burns down' type health insurance! You are buying health insurance as if you were buying homeowners insurance expecting it to pay for light bulbs, a throw rug and window cleaning! It will cost you a fraction and 98% of us will never see that cherished deductible! only about 2% with catastrophic insurance will ever go over their deductible!!! You can save about $5000 a year, go to WHO you want for WHAT you want WHEN you want when YOU are in control over YOUR health care dollars. I charge a fair price for my time - over 13 years of higher education, a couple books and a national speaker. I am a compassionate doctor who SPENDS TIME WITH MY PATIENTS. ANd they pay me for my time and then THEY fight with their insurance company to get reimbursed. People - its YOUR body. GO to YOUR physician that YOU trust. Pay him or her and purchase a $2000-$3000 catastrophic illness insurance to cover cancer, heart attacks, brain tumors and major problems like that. Pay for your snotty sinuses, your yearly physical, your lab tests, and a few medications or natural supplements. I LOVE BEING A DOCTOR AGAIN. I PRACTICE THE WAY I WANT AND HAVE A WAITING ROOM OF PATIENTS THAT CHOOSE TO SEE ME BECAUSE I DELIVER GREAT CARE. I am NOT a pawn of the insurance companies, the government or any one... I work for you! Plain and SIMPLE! checkout and thank yiou for reading this blog if you took time to do so. Our program is working, we have 40,000+ members who have joined our non-profit association for $29/year (single) or $39/year (family). SimpleCare is NOT insurance - it is a bunch of docs and patients looking out for each other and finding a much more SIMPLE way of 'doing health care'" Best of Health to all of you! - Dr Vern

Patti said...

where do I sign up? I shall check out the site.

Great post, Mr. Curmy. Our children and I are currently covered by catastrophic health insurance.
We have a lot of prescriptions and have just switched to Wal-Mart's $4 for generics plan. Yay! And normally I hate Wal-Mart.

Jean-Luc Picard said...

Our government-run health system is a mess.

Dave said...

I'm going to check out

Being self-employed, insurance is pricy. Back when I was with a firm, we went from health insurance to, POP, PPO and something else, maybe not in that order, driven by the cost. At the start we paid for a hundred percent of the premium. By the time I left five years ago we paid fifty percent of the employees' cost and, I think twenty-five percent of their dependants' cost, for less coverage.

What has always galled me about insured health care is the physicians' scamming of the system to get by. A check up always included, until I said no, various tests that the insurer would pay for but the physician couldn't explain to me why they were needed.

I finally found an internist that does what is necessary and explains to me why he wants to do what he recommends.

Dave said...

Well, that's disappointing. I went to Site's there but the links don't work because the server company says the site is not "active."

Anonymous said...

This is such a heatbreaking story, at least in the UK, nobody ends up with abill, on top of losing a loved one.

Smalltown RN said...

this is all still so confusing to me....even in the so called pay up front are still dealing with private insurance experience with the American style insurance companies to date is that they are crooks.....they don't pay your premiums...and they still don't pay....the hospital are just as guilty as well....for example...I have seen charges on hospital bills for things that never even took who's to blame for that....why are people not covered for medical? that is a philisophical question that I think we all must ask ourselves, as a society we must decide what are our priorities, is it in health care, education, social programs? You make the argument that you wouldn't trust governments with healthcare....well at least with governments if you don't like what they are doing you can vote them out.....not the same can be said for private health care insurance companies. Health care in a country as wealthy as the United States should be a right not a make reference to the "working poor" that in itself is a poor commentary for the state of the economy...why should there be any working poor....why do so many families have to work 2 and 3 jobs to make ends meet? Those mininum wage paying jobs should be left to the young kids in school or just starting out...not for someone trying to raise a family....shame shame shame......great post Curmudge....

SQT said...

I could go on for days about health care. My big fear is that an aging, and largely unhealthy, boomer population will push for universal healthcare. My parents are in that category and they'd vote for it today. Never mind the fact that they've run their health into the ground, let the government pay for it.

I've met too many people who live overseas who've told me universal care is a big mistake. I seriously hope SimpleCare is a real, possible solution. We need one. We alse need one that can be explained and sold to the masses quite easily. I hope the "simple" in SimpleCare is the real deal.

The Curmudgeon said...

I need to follow up on these comments... and I intend to... soon.

Thank you all.