Posted in Access to healthcare, advance-pricing, CPT billing, Economic Issues, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, medical inflation, Medical Practice Models, Policy Issues, Uncategorized

Wheel of Misfortune: The Fix

downloadHealthcare Transparency initiatives like the Alexander-Murray bill are getting a tremendous amount of press lately; deservedly so. But are these measures a fix or a baidaid?

Keep in mind, out-of-network “surprise” bills would not exist if not for the market surrogate (poor surrogate that it is) that we call PPO networks, which serve to suppress competition by obscuring prices & quality.

So, it is not a stretch to say that surprise bills occur by design. The way we’ve chosen to finance medical care allows prices to hide among the placeholders in the billing cycle because doctors have become defacto billing agents for the carrier networks and their anti-competitive, contractually-mandated CPT billing protocols. And the rights to those codes are owned by the AMA and the RVU dollar conversion factor is determined by CMS which guarantees upward trajectory of billed charges which make the process impervious to price competition.

This whole problem evaporates when providers remove themselves from the contract and replace these unholy inflationary-prone agreements with real prices and/or transparent service agreements.

Fix the problem: Keep the contract between the subscriber and the insurer.

Posted in Access to healthcare, Accountable Care Organizations, Affordable Care Act (ObamaCare), Economic Issues, Government Regulations, Healthcare financing, Independent Physicians, Medical Costs, Medical Practice Models, Medicare, News From Washington, DC & Related Shenanigans, Organizational structure, Patient Choice, Patient-centered Care, Policy Issues, Price Tansparency, Reforming Medicare, third-party payments, Uncategorized

How The Trump Administration Is Reforming Medicare | Health Affairs

“This 124-page document challenges a premise behind 50 years of thinking in health policy circles: that our most serious problems in health care arise because of flaws in the private sector. Most problems arise because of government failure, not market failure, the document declares, and it goes into great detail on how to correct the policy errors.

Trump policy toward health care appears to be based on the idea of promoting choice, competition, and the role of market prices. In Medicare, so far that means liberating telemedicine and accountable care organizations (ACOs), ending payment incentives that are driving doctors to become hospital employees, promoting hospital price transparency, reducing regulatory paperwork, and creating more transparency in the market for prescription drugs.”

https://www.healthaffairs.org/do/10.1377/hblog20190501.529581/full/

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, big government, Crony Capitalism, Economic Issues, Free Society, Free-Market, Government Regulations, Government Spending, Health Insurance, Healthcare financing, Liberty, Organizational structure, Patient Choice, Policy Issues, Tax Policy, Uncategorized, Welfare State

Morals Matter in Policy Making

Bastiat.3The 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.

Posted in advance-pricing, CPT billing, Direct-Pay Practice Models, Economic Issues, Health Insurance, Healthcare financing, Medical Costs, medical inflation, Medical Practice Models, out-of-pocket costs, outcomes, Policy Issues, Protocols, Quality, Tax Policy, The Triple Aim, Uncategorized

How to Control Healthcare Costs: Know Why They are High

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by Robert Nelson, MD

 

The formula for excessive Healthcare spending:

Most healthcare $$ resources tied up in premiums/billing cycle + lack of price transparency + Patients chasing benefits + Doctors chasing billing codes + No incentives to care about costs + Small Direct Pay market + Treatment Bias + Defensive Medicine + Unwise public policy and tax laws =

EXCESSIVELY HIGH SPENDING with low health value and low economic value.

Learn it.

Affect change where you can.

Pass it on.

Posted in Access to healthcare, advance-pricing, Economic Issues, Free-Market, Health Insurance, Healthcare financing, Influence peddling, Medical Costs, medical inflation, Medical Practice Models, Policy Issues, Price Tansparency, Reforming Medicaid, Reforming Medicare, Uncategorized

Same Transparent Price to Any Willing Buyer

By Robert Nelson, MD

Within many of the posts regarding the challenges facing healthcare, someone – usually out of frustration – will inevitably pose the following: “So what is the solution?”

Well, the answers won’t be found in repeating partisan talking points. Especially the ones based on economic fallacies and socio-economic myths, so often repeated they have become dogma for the healthcare surrogate we call a “health plan”, despite its sub-par effect on mortality and health when compared to other socio-economic factors. This industrialization of healthcare has been orchestrated to be over-priced by pundits and politicians, on the right and the left, who pander for influence, money and votes. They claim that we need more of it, covering more items for more people. By design, it crowds out more cost-effective alternative sources of funding. It is the ultimate healthcare inflation machine.

The solution is to utilize different financial strategies for different segments of healthcare, using tools to maximize their effectiveness. This begins with the deflationary & stabilizing effect that real prices have when they are known in advance for the vast majority of healthcare services exchanged between buyers and sellers, most of which takes place in a non-emergent scenario.

https://fmma.org/pillars-of-the-fmma/

 

 

 

Posted in Access to healthcare, advance-pricing, CPT billing, Direct-Pay Practice Models, Economic Issues, Free-Market, Healthcare financing, Medical Costs, medical inflation, Medical Practice Models, Organizational structure, Policy Issues, Price Tansparency, Protocols, third-party payments, Uncategorized

Replacing Myths with Markets

images (22)Hardly a week goes by that we don’t hear a defense from the status quo about how different healthcare is from any other services or commodities. The dogma, based on economic fallacies, is pervasive.

We’re asked to believe that advanced pricing is unrealistic, yet the majority of care is scheduled in advance and much of it is elective. We are supposed to believe that value-based reimbursement is the savior and FFS is the root of all evil; yet VBP lacks the very price transparency required to determine value. We are told healthcare is an “essential” service, the implication being that it is rarely a voluntary transaction, therefore it does not respond to market forces; despite voluminous data to the contrary.

There are many essential commodities that are necessary for life, all of which are obtained with advanced transparent pricing. It should not surprise us that these essentials are in abundance with mostly affordable prices and arguably more important to our daily survival than healthcare; largely because these “essentials” are obtainable in an competitive price transparent Market. The idea that Healthcare is “oh so different” and cannot benefit from the discipline of the market, and the price transparency that comes with it, is a myth that should be put to rest.

Posted in Access to healthcare, Canadian Health System, Economic Issues, Government Spending, Healthcare financing, Medicaid, Medical Costs, Medical Practice Models, Medicare, News From Washington, News From Washington, DC & Related Shenanigans, Policy Issues, Protocols, Reforming Medicaid, Reforming Medicare, Tax Policy, Uncategorized

Medicaid for All Would ‘Bankrupt the Nation,’ Warns Bernie Sanders—In 1987 – Hit & Run : Reason.com

“Notably absent from Sanders’ proposed single-payer system was a detailed plan to pay for it. The senator said he would lay out the tax hikes necessary to fund his new system in separate legislation.

That may be because enthusiasm for single payer tends to die down pretty quickly once people get a sense of what sort of tax increases would be necessary to fund it. An Urban Institute analysis of a previous version of Sanders’ plan estimated that it would cost $32 trillion over a decade.

It promises huge overall savings along with coverage that would be far more expansive, and far more expensive, than Medicaid for all, with no clear way to pay for it, and no specific strategy for driving costs or spending down.

In 30 years of political advocacy, Sanders has not solved any of the fundamental problems with single payer. He has merely opted to pretend they do not exist.”

[Note: On annualized basis, that would more than double the amount we currently spend annually on healthcare.  And past projections related to the costs of gov’t programs always vastly underestimate the actual costs, as evidenced below. – The Sovereign Patient]

“The House Ways and Means Committee estimated that Medicare would cost only about $12 billion by 1990 (a figure that included an allowance for inflation). This was a supposedly “conservative” estimate. But in 1990 Medicare actually cost $107 billion.” http://reason.com/archives/1993/01/01/the-medicare-monster

Source: Medicaid for All Would ‘Bankrupt the Nation,’ Warns Bernie Sanders—In 1987 – Hit & Run : Reason.com