Insurance copays are higher than the cost of the drug about 25 percent of the time, according to a study published in March by the University of Southern California’s Schaeffer Center for Health Policy and Economics.
In 2011, James Robinson of the University of California reviewedhospital prices charged to commercial insurers for six common procedures: angioplasty, pacemaker insertion, knee replacement, hip replacement, lumbar fusion, and cervical fusion. He found that, on average, procedures cost 44 percent more in hospital markets with an above-average degree of consolidation.
It is problematic enough that regional hospital monopolies have the power to demand high prices. But on top of this, many hospitals engage in additional anticompetitive practices. Anna Wilde Mathews of the Wall Street Journal obtained secret contracts between insurers and hospitals revealing that these contracts often barred insurers from sending patients to “less-expensive or higher-quality health care providers.” Other hospitals precluded insurers from excluding some of the system’s hospitals from the insurer’s networks. Some contract provisions, including those from New York-Presbyterian Hospital and BJC HealthCare of St. Louis, prevented insurers from disclosing a hospital’s prices to patients.
The notion that there are only two options for healthcare… 1) Central single payer systems vs 2) The current U.S. system or worse…is a false dilemma with false choices.
Efficient economies (socially sustainable marketplaces) utilize multiple financial tools depending on hierarchy of need or desired outcome. And successful self-regulating systems keep as many incentives aligned at the level of the individual end-user as possible; and ensure individual liberty as a first principle.
The desirable balance minimizes tragedy of the commons, maximizes individual responsibility, minimizes bureaucracy & waste, shames/ discourages rent-seeking behavior & cronyism, aligns reward with effort & risk, and always strives to preserve the sovereignty, liberty & choice of the individual as a preeminent principle.
Centralized tax-funded systems often crowd out these other needed tools within the marketplace and are biased heavily towards collective budgetary priorities, as opposed to individual needs/variations.
“…it is important for employers to be fully aware of what the regulations may impact them to safeguard against inadvertently putting themselves, or their employees, in an untenable situation.
It is important for an employer looking to offer an unconventional or untraditional benefit package to speak with an independent health plan attorney or CPA (not employed by the agency selling the program) regarding potential liability and compliance with federal and state laws regarding employer sponsored health plans.
Can your employee afford to reimburse the IRS for taxes not collected on an inappropriately structured HSA? Can your business afford a fine of $100 per day per employee for every day that the unqualified arrangement was offered? These are just some of the potential liabilities.”
These names are, in many ways, synonymous with the current free market movement, and for good reason. These men are the mavericks of healthcare. When Dr. Smith and Mr. Kempton were introduced in 2011 by a mutual friend and client, they had no way of knowing that their partnership would become what it is today and create an entire movement in the healthcare space.
Jay Kempton: When you understand how this business really works, you can see the effect of the dysfunction which I just described; but when you learn more about the cause, you can see that the patients’ actual financial concern is not even on the radar of so many entities that are part of big healthcare. Hospitals really do not understand that the gouging of pricing that they do trickles down into basically wage stagnation to employees. They say, “We’re raising our prices, but it only hurts the big insurance companies.” No, that’s never the way it works. It eventually makes it way as an increased cost to the employer. They can’t afford to just absorb the increase, so how do they offset that? By lowering or decreasing the increase of wages or they reduce the benefits, or both.
What is the greatest obstacle that this movement and the FMMA faces?
Dr. Keith Smith: The answer may be counterintuitive. I think the greatest obstacle the FMMA and this movement faces is ourselves. We are so programmed and conditioned to look to outside leaders or to the government for solutions and answers. They are ultimately responsible for all the problems that have led to our current system. The answer is looking to ourselves and having the courage to face the possibility that, in innumerable ways, we have been duped. Admitting that is a very personal and difficult experience for many people—to look in the mirror and acknowledge that they’ve been lied to. Even worse, we have believed these lies and have acted accordingly. People must acknowledge that it is a ground up movement, not one where solutions rain down on us from our rulers or our leaders. They must do their own thinking and not allow those who would like to be protected from innovation to stop us.
Jay Kempton: The obstacle that’s not so benign is how people in the healthcare business get paid. Brokers, consultants, and agents have tremendous influence over employers and patients, and the way that they see healthcare. Many people in the employee benefits business get paid when they make money off the problem. In other words, they’re making a percentage of the healthcare spend. The problem gets bigger, their income goes up.
If you could tell someone just one thing about the free market in healthcare what would it be?
Dr. Keith Smith: The one thing I would tell them is that the free market is not about sellers having their way with consumers. The free market is not about brutalizing the poor, or people who are trying to pay for their own care.
The free market is about an exchange between buyers and sellers that is mutually beneficial, where both parties emerge feeling like it was a good exchange. Any time that the media quotes some corporate healthcare exec or politician bemoaning the tough future that one of the sellers might face given some policy that might be enacted should be discounted or ignored. The focus has to be on the consumer, and on whether a consumer’s decision to buy A or B is a value to that person. The one message that I would give is to know that this movement is about servicing consumers. Period. Any concerns or desires that sellers have to be protected from the preferences of consumers must be seen as the source of the problem that we all face in health care today.
Jay Kempton: The free market and healthcare is the only true healthcare reform that has a chance of being sustainable. Anything else is just rearranging the deck chairs on the Titanic.
by Robert Nelson, MD
When we have a situation, as we do in healthcare, where the networks have cornered the market and control the pipeline of patients, along with the magnitude & directional flow of money in the system, that which follows is a de facto CARTEL of very unequal participants; one where the disconnect between the ability of the supply side and demand side to send meaningful price signals to each other is necessarily suppressed by the financial design of the network payment/reimbursement mechanism.
What characterizes the network as a consumer/buyer benefactor by way of “negotiated discounts” for services rendered, in reality ends up suppressing the only forces (price signals) which are capable of determing value and controlling prices. All this being to the detriment of end users and/or first order buyers of healthcare resources.
by Robert Nelson, MD
1. Price distortion
2. Price Insulation
3. Price Confusion
Shared via PowerPoint on Android.
by Robert Nelson, MD
The assumptions on which our modern era healthcare third-party payer systems are based, including Medicaid/Medicare, ignore the economic disincentives that plague its continued use. It creates a wide-spread Public Choice Theory dilemma on the demand side and way too much rent seeking behavior on the supply side. The result being an ever-increasing cost curve.
Public spending for healthcare flooded the market after 1965 and was FOLLOWED by precipitous increase in consumption, utilization and the unit costs (as supply did not keep up) and then rapid fall off of the percentage of out-of-pocket payments as % of expenditures. Public spending came first, and was a major cause (not a reaction) in accelerating healthcare inflation.
Third-party financing drives up utilization and drives up unit costs. Ironically, this creates even more dependency on a system that by its nature pushes costs further out of reach of many Americans.
Third-party financing mechanisms have become both arsonist and fireman, and we are having trouble distinguishing who is who.