Posted in Access to healthcare, advance-pricing, Affordable Care Act (ObamaCare), British National Health Service, Deductibles, Direct-Pay Medicine, Direct-Pay Practice Models, Employee Benefits, Employer-Sponsored Health Plans, Free-Market, Government Regulations, Health Insurance, Healthcare financing, Individual Market, Individual ObamaCare Market, Insurance subsidies, Large group insurance market, Medical Costs, medical inflation, Medical Practice Models, Medicare, Patient Choice, Policy Issues, Price Tansparency, Quality, Subsidies, Third-Party Free Practices, third-party payments, Uncategorized

Lies That Won’t Die: Health Insurance Costs and Healthcare – Post Hoc Ergo Propter Hoc

In the department of economy, an act, a habit, an institution, a law, gives birth not only to an effect, but to a series of effects. Of these effects, the first only is immediate; it manifests itself simultaneously with its cause—it is seen. The others unfold in succession—they are not seen: it is well for us, if they are foreseen. Between a good and a bad economist this constitutes the whole difference—the one takes account of the visible effect; the other takes account both of the effects which are seen, and also of those which it is necessary to foresee. Now this difference is enormous, for it almost always happens that when the immediate consequence is favorable, the ultimate consequences are fatal, and the converse.  ~Frederic Bastiat

The results of the immediate/ intended effects (the seen) and the subsequent/ unintended effects (the unseen) of U.S. healthcare policy are clearly instantiated by examining the way we use, and misuse, health insurance.  

Despite the ostensibly good intentions to improve access by expanding coverage for various medical services, the “ultimate consequences are fatal, and the converse.”

Our insurance-based third-party payer protocols have pernicious and nefarious economic consequences on our healthcare system.  This manifests as rampant healthcare inflation catalyzed by the macro-economic market distortions of the 3rd party payer effect and perpetuated by the micro-economic price-obscuring distortions of the billing cycle.

As evidence for the negative consequence of misusing insurance as a pass-through system for virtually every healthcare expense, we can examine the employer-sponsored group market premiums. From 2007 – 2017 the average premium for family coverage increased by 55% and employee contribution rate as a share of premium cost increased by 74% over the same 10-year period; while median household income went up by only 3%.

To add financial injury to insult, the percentage of employees with an out-of-pocket maximum of greater than $3,000 doubled, going from 30% to 60% of employees.

“Eighty-one percent of covered workers have a general annual deductible for single coverage that must be met before most
services are paid for by the plan. Among covered workers with a general annual deductible, the average deductible amount for single coverage is $1,505
.  ~KFF.org

In the ACA individual market insurance exchanges, single coverage premiums (unsubsidized) increased by 62% and family coverage premiums increased by 75% just since the implementation of ObamaCare!

And between 2002 and 2016, medical costs for a family of four in an employer-sponsored PPO plan increased 180%! 

Given that household income has barely budged in real dollars since 2002, these increases are clearly not sustainable. By contrast, the auto insurance market (a real indemnity product) increased by only 17% from 2007 – 2016, while deductible offering ranges remained stable, averaging $500.

The refusal of some to recognize the valid comparatives between the health insurance market & the auto insurance market (ostensibly because healthcare is SO different) is not an argument suitable to justify the dysfunction and high costs of Healthcare; nor does it explain why health insurance premiums have become an unwelcome surrogate for total healthcare costs! The irony being that a competitive cash market for all things related to driving and keeping a car in working order, which are not paid for at all by insurance, is exactly why the auto insurance market is affordable and sustainable! Based on data from 2014, auto insurance accounts for about 15% of the cost of ownership of a nicer car for an average safe driver. Stated differently, the cost of insurance adds about 18% to the cost of ownership compared to not having insurance.

Health insurance, on the other hand, adds about 50% to the cost of healthcare compared to no having insurance. Now consider that cost ratio in light of the NIHCM 2012 study on the concentration of healthcare spending.

“… mean annual spending for the bottom half of distribution was just $236 per person, totaling only $36 billion for the entire group of more than 150 million people… 15% of the population had no spending whatsoever in the year.”

So in any given year, 150 million of us spend less than $300 per person on actual medical care. Even more striking is the statistical likelihood that roughly 15% of the population (nearly 50 million) will have no personal health expenditures in a given year (we have no reason to believe the year in question was an aberration)!

The flip side to this story – and one that is often used to justify the way we use health insurance – is that about 81% of the spending comes from 20% of the population, which holds largely true in almost any given year. But this is the rule for almost any market and is not unique to healthcare. Most of the cars or new homes or new roofs or refrigerators or new tires or new windshields are purchased by a small percentage of the population each year; but it is not by the same people every year.

This is precisely why insurance is necessary and valuable; but also precisely why insuring too many things that are more affordable in a cash market is a horrible financial strategy! Yet we continue to commit to paying for all the small stuff, plus the unpredictable catastrophes, with this expensive proposition we call health “insurance”!

So maybe should re-frame how we look at healthcare and ask…”What have we done TO healthcare to make it behave the way it does?”

Instead of blaming “market failure” – or any of the usual suspect villains – for the high costs & low quality of healthcare, maybe we need to re-frame how we view the provision of healthcare. And when it comes to blaming the “free-market”, how do you blame something that is wholly absent? Because almost NONE of the factors which define a normally functioning free market system (discoverable, actionable prices and outcomes data with competition based on price & quality) are operational in healthcare today.

Rather than market failure, a more productive and accurate way to view healthcare would be as a massive, systemic, well orchestrated pricing failure…brought to us almost exclusively by the central planners in Washington DC, And the perverse incentives that are baked into the system.

Dr. John Goodman, economist and healthcare policy expert, has
this to say
about the consequences of this [“pricing failure”].

“In every  profession outside medicine – law, accounting,
engineering, architecture, etc. – providers are able to repackage and reprice what they offer to the market…Doctors by contrast are slaves to a third-party payer system that has been shaped and molded by government.

Many of the problems begin with Medicare, which pays doctors today the
same way it paid in the last century – long before there were emails or
iPhones. Most private insurers and most employers pay the same way. State governments pile on. Sometimes they make consultations with patients by phone or by email or by Skype illegal. In most places, doctors can’t freely practice across state lines.” –
Dr. John C. Goodman

Collectively, these interventions add excessive costs of our healthcare system. It is important to remember that many of these cost over-runs are manifestations of the applied distortions, not intrinsic to healthcare itself.

One of most pernicious of these pricing failures can be traced to the bizarre way in which we utilize health insurance; which brings me to our featured “lie that won’t die”, and it goes like this…

“Health insurance is expensive because Healthcare is expensive.”

NOT!

But like all effective fallacies, it contains just enough truth on the surface and enough logical coherency to be believable. Let’s explore why this commonly held doctrine in healthcare circles is not only wrong, but counterproductive to useful healthcare reform.

Insurance should be the financial fireman that protects us from the consequences of catastrophic events.  But for insurance to work, these catastrophic events must be infrequent & unpredictable, thus spreading the risk of these infrequent events across a large population; so at any given time, only a few are affected.

When insurance becomes a funding source for the routine – the predictable – the affordable events, then we actually concentrate risk rather than spreading it! This model changes “insurance” into a perpetual payout fund, violating every tenet of insurance! And to compound the effect, the contractual obligations on both the demand side and supply side promote the incentive for everyone to utilize their health plan as often as possible.

It doesn’t take a Ph.D. in economics to predict that the costs of sustaining such a model are never satisfied, always being squeezed by patients who are chasing the benefits and providers who chase the billing codes for reimbursement.

So health insurance is definitely the Fireman or “lifeguard” when we have a costly health crisis; but when it becomes an expensive medical maintenance plan, insurance also becomes the arsonist.

We have taken a tool designed to pay out rare higher-priced claims on unpredictable events, and turned it into an inflation-prone product whose design promotes an incentive for everyone to use it as often as possible. That makes about as much sense as trying to buy insurance for a car that is regularly used in a demolition derby.

Our third-party payer system has created a dependency paradox; the same funding method (health insurance) that contributes to runaway costs also causes us to be more dependent on it for access.

The result is a healthcare system that costs way more than the sum of its parts. This is why playing the blame game does not solve the problem. American doctors could take a 50% pay cut and we could eliminate the spend equal to all care during last 12 months of life and we would still spend more per capita than any other country. You can go down the list of culprits and repeat the calculations, which I’ve done, but the math doesn’t add up; it doesn’t reconcile.  

The introduction of DPC has deflated these cost escalations considerably.  In the individual market, data from several sources bears this out.  CovenantMD, a Direct Primary Care practice in Lancaster, PA illustrates the potential savings based on a typical family’s utilization.

They compared the total costs incurred using a Bronze ACA plan with $6K individual/$12K family deductibles without and with a DPC membership at CovenantMD.  Pairing a Bronze Plan with a DPC membership resulted in an out-of-pocket savings of $7,267, even after the cost of the membership was counted.  That is a 65% reduction in out-of-pocket costs!

Zenith Direct Care did a similar analysis for a typical family of five with an 80/20 plan with $3,000 deductible.  They compared annual costs for this scenario with a Zenith Direct Care membership plus a Health Cost-share Plan (health-sharing member).  Estimated out-of-pocket costs with the traditional insurance alone was $18,343 compared to $6,160 with the Zenith/HCS combination.  A savings of 66%!

Core Family Practice, a DPC practice in Kennett Square, PA, compared a 90-day supply of four common primary care medications purchased through Aetna’s Mail-order supplier with the prices their members pay for same quantity.  The annual cost for the Aetna mail-order came to $2,248.68 compared to only $850.80 for the same medications from Core’s generic supplier, which were dispensed in the office. That $1,397.88 savings equates to a 61% reduction in out-of-pocket costs for the married couple!  They also looked at the costs of obtaining three sets of commonly ordered lab tests for the same couple.  Out-of-pocket costs using their high-deductible plan (QHDHP) was $480 in lab test responsibility. The same tests drawn and paid at time of services to Core FP totaled $63.17 yielding an incredible 87% reduction.

All components of healthcare spending add to cost of care. But the overwhelming cost drivers for the U.S. healthcare system are embedded so deeply within the way we access and pay for medical services that we often overlook them, choosing instead to blame the symptoms for the disease rather than the disease for the symptoms.

So the next time you hear someone say or pen the words, “health insurance is expensive because healthcare is expensive”, please gently remind them of the facts. It is the unwise use of a pre-paid, highly regulated & gated access model, masquerading as insurance, that causes medical care to be more expensive than it needs to be; and the same payment model suppresses the market for more cost-effective alternative pathways to access healthcare.

Posted in Access to healthcare, Economic Issues, Education, Employee Benefits, Health Insurance, Healthcare financing, Medical Costs, Medical Practice Models, Organizational structure, outcomes measurement, Patient Choice, Patient Safety, Policy Issues, Price Tansparency, The Quadruple Aim, Uncategorized

University of Lynchburg launches Master of Health Benefits Design – University of Lynchburg

downloadfile-1
Tom Scott, Ph.D.

“There’s a need for cohesive education that shows corporations and benefits advisors how to tie together value-based approaches to health care that provide higher quality health care at significantly lower costs,” program director Dr. Tom Scott said. “Health care is expensive and unnecessarily complex. This program not only makes health care understandable, but it shows the way to lower costs and better outcomes.”

https://www.lynchburg.edu/news/2019/02/university-of-lynchburg-launches-master-of-health-benefits-design/

Posted in Access to healthcare, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Free-Market, Health Insurance, Medical Costs, Medical Practice Models, Price Tansparency, primary care, Self-Insured Companies, Self-Insured Plans, Uncategorized

DPC and Self-insured Employers: A Benefits Trifecta


By contracting with a Direct Primary Care practice and re-routing subsequent encounters away from the more expensive insurance-based protocols, Self-insured employers can utilize creative plan designs to cut costs and improve employee satisfaction. The savings can be substantial even after accounting for membership costs.

http://ushealthmedia.com/part-2-a-marriage-made-in-healthcare-heaven/

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Community Underwriting, Economic Issues, Free-Market, government incompetence, Government Regulations, Health Insurance, Healthcare financing, Individual Mandate, Individual Market, Insurance subsidies, Medicaid, Medicaid Expansion, Medical Costs, medical inflation, Medicare, Organizational structure, outcomes, Policy Issues, Uncategorized

Hard Truths about Health Care ‌ by Michael Tanner

Micheal Tanner
Michael Tanner

“Every health-care system in the world rations care in some way, either through bureaucratic fiat (Scandinavia, the U.K.), waiting lists (Canada), or price (that’s us). One can argue about which of these rationing mechanisms is fairest or most efficient, but let’s not pretend that it won’t occur.”

http://www.nationalreview.com/article/446439/health-care-basic-facts-and-hard-truths

Posted in Access to healthcare, advance-pricing, Affordable Care Act (ObamaCare), CPT billing, Economic Issues, Health Insurance, Healthcare financing, Individual Underwriting Standards, Insurance subsidies, Medical Costs, medical inflation, Policy Issues, Price Tansparency, Quotes from American Presidents, Self-Insured Companies, Self-Insured Plans, Subsidies, Uncategorized, Uninsured

PassionForSubro » Health Insurance is NOT Health Care

“Just as health insurance is not health care, so too health insurance reform is not health care reform.  Yet, because the ACA got so much press, and many previously uninsured individuals did secure insurance (giving us all the warm and fuzzies), the result was a nationwide misconception that affordable insurance equates with affordable health care. For many, ObamaCare is therefore viewed as a success because millions of uninsured Americans are now insured.

Yet, insurance isn’t a magical money-tree. Like a college student wielding his first credit card, a newly insured America forgets that “someone” has to pay, eventually.  What you buy – with your own money, or with insurance – and how much it costs, still matters.  Insurance just passes the buck – to other insureds, and to you, when the time comes to renew. It blows my mind.  People are involved in car accidents, get out of their vehicle, examine the minor damage, and agree NOT TO REPORT IT TO THEIR INSURANCE, because they DON’T WANT THEIR PREMIUM TO INCREASE! People actually choose to pay for car repairs out of pocket, because they fear insurance premium increases and want to save their insurance for “when they really need it.”  Yet, if we treated auto insurance the way we treat health insurance, we’d be outraged that insurance doesn’t pay for the air in my tires, or the dancing hula girl on my dashboard.”

Source: PassionForSubro » Health Insurance is NOT Health Care

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Deductibles, Employee Benefits, Employer Mandate, Employer-Sponsored Health Plans, Essential Benefits under the ACA, Health Insurance, Health Savings Accounts (HSA's), Healthcare financing, Individual Mandate, Individual Market, Individual ObamaCare Market, Individual Underwriting Standards, Large group insurance market, Medicaid, Medical Costs, Medical Practice Models, Medicare, Organizational structure, Policy Issues, Portable Insurance, Pre-existing Conditions, primary care, Reforming Medicaid, Self-Insured Plans, Small group market, Tax Policy, Uncategorized

Obamacare Replacement Act – Senate Bill 222 by Senator Rand Paul – KY

Sen. Rand Paul, R-Ky., speaks during an event at the University of Chicago's Ida Noyes Hall in Chicago on Tuesday, April 22, 2014. (AP Photo/Andrew A. Nelles) ORG XMIT: ILAN114Lots to like and consider here.  We need more details about how tax equalization in the group market vs the individual market will be handled.  The expansion of uses and benefits of HSAs is robust and will go along way to establishing more ways to self-insure and less reliance on networks and government programs; both are a good thing.  The flexible, market-friendly Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage will be a welcome change.  Again, devil is always in the details.  Stay tuned for more details and insightful analysis here on the Sovereign Patient; we will post them as available. 

Some highlights:

Effective as of the date of enactment of this bill, the following provisions of Obamacare are repealed:

  • Individual and employer mandates, community rating restrictions, rate review, essential health benefits requirement, medical loss ratio, and other insurance mandates.

Protecting Individuals with Pre-Existing Conditions:

  • Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.
  • Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

Equalize the Tax Treatment of Health Insurance:

  • Individuals who receive health insurance through an employer are able to exclude the premium amount from their taxable income. However, this subsidy is unavailable for those that do not receive their insurance through an employer but instead shop for insurance on the individual market.
  • Equalizes the tax treatment of the purchase of health insurance for individuals and employers. By providing a universal deduction on both income and payroll taxes regardless of how an individual obtains their health insurance, Americans will be empowered to purchase insurance independent of employment. Furthermore, this provision does not interfere with employer-provided coverage for Americans who prefer those plans.

Expansion of Health Savings Accounts:

  • Tax Credit for HSA Contributions
    • Provides individuals the option of a tax credit of up to $5,000 per taxpayer for contributions to an HSA. If an individual chooses not to accept the tax credit or contributes in excess of $5,000, those contributions are still tax-preferred.
  • Maximum Contribution Limit to HSA. Removes the maximum allowable annual contribution, so that individuals may make unlimited contributions to an HSA.
  • Eliminates the requirement that a participant in an HSA be enrolled in a high deductible health care plan. This section removes the HSA plan type requirement to allow individuals with all types of insurance to establish and use an HSA.
  • This would also enable individuals who are eligible for Medicare, VA benefits, TRICARE, IHS, and members of health care sharing ministries to be eligible to establish an HSA.
  • Allowance of Distributions for Prescription and OTC Drugs o Allows prescription and OTC drug costs to be treated as allowable expenses of HSAs.
  • Purchase of Health Insurance from HSA Account o Currently, HSA funds may not be used to purchase insurance or cover the cost of premiums. Allowing the use of HSA funds for insurance premiums will help make health coverage more affordable for American families.
  • Medical Expenses Incurred Prior to Account Establishment o Allows qualified expenses incurred prior to HSA establishment to be reimbursed from an HSA as long as the account is established prior to tax filing.
  • Administrative Error Correction Before Due Date of Return o Amends current law by allowing for administrative or clerical error corrections on filings.
  • Allowing HSA Rollover to Child or Parent of Account Holder o Allows an account holder’s HSA to rollover to a child, parent, or grandparent, in addition to a spouse.
  • Equivalent Bankruptcy Protections for HSAs as Retirement Funds o Most tax-exempt retirement accounts are also fully exempt from bankruptcy by federal law. While some states have passed laws that exempt HSA funds from being seized in bankruptcy, there is no federal protection for HSA funds in bankruptcy.
  • Certain Exercise Equipment and Physical Fitness Programs to be Treated as Medical Care. Expands allowable HSA expenses to include equipment for physical exercise or health coaching, including weight loss programs.
  • Nutritional and Dietary Supplements to be Treated as Medical Care o Amends the definition of “medical care” to include dietary and nutritional supplements for the purposes of HSA expenditures.
  • Certain Providers Fees to be Treated as Medical Care o Allows HSA funds to be used for periodic fees paid to medical practitioners for access to medical care.
  • Capitated Primary Care Payments o HSAs can be used for pre-paid physician fees, which includes payments associated with “concierge” or “direct practice” medicine.
  • Provisions Relating to Medicare o Allows Medicare enrollees to contribute their own money to the Medicare Medical Savings Accounts (MSAs).

Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage:

  • Increases access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state.
  • Exempts issuers from secondary state laws that would prohibit or regulate their operation in the secondary state. However, states may impose requirements such as consumer protections and applicable taxes, among others.
  • Prohibits an issuer from offering, selling, or issuing individual health insurance coverage in a secondary state: If the state insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all issuers. Unless both the secondary and primary states have legislation or regulations in place establishing an independent review process for individuals who have individual health insurance coverage; or The issuer provides an acceptable mechanism under which the review is conducted by an independent medical reviewer or panel.
  • Gives sole jurisdiction to the primary state to enforce the primary state’s covered laws in the primary state and any secondary state.
  • Allows the secondary state to notify the primary state if the coverage offered in the secondary state fails to comply with the covered laws in the primary state.

Source: Microsoft Word – Obamacare Replacement Act SBS.docx

Posted in Access to healthcare, Deductibles, Direct-Pay Medicine, Direct-Pay Practice Models, Doctor shortage, Economic Issues, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, medical inflation, Medical Practice Models, Patient Choice, Policy Issues, primary care, Quality, Third-Party Free Practices, third-party payments, Uncategorized, Uninsured, Wait times to see a doctor

Debunking Media-Supported Myths about DPC: A Conversation with Dr. Brian Forrest — Hint Health

Dr. Brian Forrest. PHOTOGRAPHS BY DEREK ANDERSON After growing frustrated with the patient volume and time requirements of managed care, Dr. Brian Forrest started his own practice with a unique model of care. Its flat-rate fee and longer office visits have proven popular with patients.
Dr. Brian Forrest

As a seasoned advocate and DPC practitioner, Dr. Brian Forrest knows all to well the problems that misinformation can create for a movement built almost entirely on word of mouth. In the second installment of our ongoing series, Dr. Forrest provides a healthy dose of reality and debunks the nine most dangerous myths about DPC.

Source: Debunking Media-Supported Myths about DPC: A Conversation with Dr. Brian Forrest — Hint Health

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Consumer-Driven Health Care, Direct-Pay Medicine, Direct-Pay Practice Models, Doctor-Patient Relations, Doctor-Patient Relationship, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Free-Market, Health Insurance, Independent Physicians, Medical Costs, medical inflation, Medical Practice Models, out-of-pocket costs, outcomes, Patient Choice, Patient-centered Care, Policy Issues, Price Tansparency, primary care, Self-Insured Companies, Self-Insured Plans, Telemedicine Trends, The Quadruple Aim, The Triple Aim, third-party payments, Uncategorized

Three Reasons Why Employers Should Care about Direct Primary Care | Samir Qamar | LinkedIn

Featured Image -- 24171.“Insurance is not necessary for all healthcare.”

2.“Not all healthcare is expensive.”

3.”Employers can use Direct Primary Care to lower healthcare costs.”

Healthcare is the only field where insurance is not only used for rare events, but also common and frequent events. However, “insurance is not necessary for all healthcare”.

To reduce frequency of claims, a large segment of medical care has to be affordable to render insurance unnecessary. Thankfully, “not all healthcare is expensive.”This is where Direct Primary Care makes its grand entrance.

Direct Primary Care takes this majority of healthcare, and caps the cost into an affordable, manageable, flat monthly fee, typically less than $90 per month. As a result, insurance use (and cost) is minimized to rare occurrences.“Employers can use Direct Primary Care to lower healthcare costs.”

Source: Three Reasons Why Employers Should Care about Direct Primary Care | Samir Qamar | LinkedIn