Posted in Access to healthcare, Consumer-Driven Health Care, Defined Contribution Benefit Plans, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Employer-Sponsored Health Plans, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, Medical Practice Models, Policy Issues, Tax Policy, third-party payments, Uncategorized

Who Pays for Your Healthcare Matters

By Robert Nelson

Zero co-pays. No co-insurance. No surprise medical bills! Considering the inflated prices we pay for healthcare, who could pass up that deal, right?

Are the new generation of value-based employer-sponsored Direct Contracting Health Plans, which often include Direct Primary Care, a great deal and more efficient use of our healthcare dollars? Absolutely yes!

real-health-care-expenditures-and-third-party-largerBut we can’t lose sight of the economic reality that individuals always pay the cost of benefits, either directly or indirectly.  And linking benefits to employment has been a colossal policy mistake and the genesis of job-lock and our 3rd-party payer system, which has been the source of runaway costs for 50 years. As the graph illustrates, insurance (3rd party payer) is now a near surrogate for total healthcare costs!

Don’t be fooled. Within the modern paradigm of healthcare financing, employers don’t pay for our healthcare. Our healthcare expense, no matter how it is structured, IS part of our compensation and a huge portion of of it.

images-223535545945618981307.jpgFACT: Every dollar of tax-favored benefits paid by our employer reduces our take-home pay.

The beauty of Direct Primary Care is the portability (no job lock) and affordability which can exist independent of the size or benefit package of the employer. But the foundation which aligns the incentives is based on the identity of the customer. This is why we have to be careful to match the buyer with the recipient of care whenever possible. To insert another 3rd party, even the employer, undermines the sovereignty of the patient and the independence of the physician.

The supply side of healthcare has served the wrong customers for far too long. DPC should not make that same fatal error by exchanging its essence for a pipeline of patients.

This linkage highlights the importance of policy decisions regarding use of HSA funds; the importance of allowing HSA dollars to pay premiums AND DPC fees can’t be overstated.

For DPC, and Direct Contracting at-large, to dig us out from under the boot of the 3rd party apparatus it must remain accessible to the sole proprietor, independent contractor and very small businesses that don’t have “health plans.” And moving to defined contribution plans and away from defined benefit plans will help get us there.

third-party-2Getting first dollar decisions in hands of consumers will also be deflationary and spur competition; and essential to the goal of eventual portability & ownership of benefits. To do otherwise, with too much focus on a new & improved generation of employer-sponsored healthcare plans, will lead us right back to where we started.

Posted in Access to healthcare, advance-pricing, CPT billing, Direct-Pay Practice Models, Economic Issues, Free Society, Free-Market, Healthcare financing, Liberty, Organizational structure, outcomes, Policy Issues, Price Tansparency, Quality, Rule of Law, Uncategorized

Under-Appreciated Benefits of Markets

By Robert Nelson, MD

Honest price-transparent markets allow value propositions to surface and to be discovered.

Contrary to the outcries of many academics, intellectuals and utopian collectivist, free markets don’t create wide-spread abuses or anarchy in peaceful law-abiding Societies. The anti-market narrative attempts to impune the term “free” in free-markets by equating it with lawlessness and all manner of fraudulent activity; rather than acknowledging that “free” means maximal freedom from unnecessary economic distortions. One only has to look at the litany of government scandals (VA comes to mind) to conclude that vice is not intrinsic to, or a consequence of, the exercise of free commerce, but rather a malevolent side of human behavior.

Markets not only provide a functional platform for innovation and creative destruction, but can help suppress waste, fraud and abuse by aligning incentives such that mutually beneficial outcomes are the rule, not the exception. Markets that are willing to operate in the light of transparency are in stark contrast to systems where avarice and other human foibles seek cover behind complex non-transparent systems or within unaccountable bureaucratic hierarchies.

In healthcare, the behemoth we call the 3rd party payment apparatus (and regulatory morass that supports it) often creates an environment which, unlike a more transparent market-oriented approach, allows bad behavior to go unchecked longer.

To the extent that we view market transparency, and all the downstream benefits that result from full disclosure, as the best chance of uncovering AND discouraging human vice, then many of the bad actors and bad behavior will be found out more readily. This approach benefits all stakeholders in healthcare.

Also, transparent pricing & markets naturally lends to transparency in quality measures, and thus better value propositions.

We should embrace changes which incorporate as many intrinsic disincentives to bad behavior as possible, as well as maximize the correct incentives – which helps healthy & sustainable endeavors to thrive.

Posted in Access to healthcare, advance-pricing, CPT billing, Deductibles, Direct-Pay Medicine, Economic Issues, Employee Benefits, Free-Market, Health Insurance, Healthcare financing, Medical Costs, Medical Practice Models, Medicare, Network Discounts, out-of-pocket costs, Patient Choice, Policy Issues, Price Tansparency, Uncategorized

Free The Patient – Forbes

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John C. Goodman

Who is likely to negotiate the lowest fee with a doctor, hospital or some other health care provider? The federal government? A large employer? An insurance company? Or, a patient spending her own money? Strange as it may seem, the answer is often the patient. One of the most persistent myths on […]

Canadians coming to the United States (and paying a cash price upfront) were paying almost half as much as US employers were paying and even less than the typical payment by Medicare. Think about that. These patients not only lacked a big bureaucracy to bargain on their behalf; they were foreigners.

The other factor is third party payment. After the deductibles and copayments are exhausted (which is almost immediately in the case of a knee replacement) the only payer is the third party. The incentive of the hospital is not to lower charges, but to raise them. In fact hospitals typically try to maximize against third-party payment formulas and they have sophisticated computer programs to help them do it.

An individual patient, paying with his own money and willing to travel to another city for care, is a different kind of buyer. If the hospital wants his patronage, it has strong incentives to compete on price.

This very large insurance company, representing tens of thousands of people and their very large employer (the state of California), achieved a remarkable reduction in costs by doing nothing more than sending patients into the hospital marketplace with the knowledge that the money they had to spend totaled no more than $30,000.

http://edge.quantserve.com/quant.js

Source: Free The Patient – Forbes

Posted in Access to healthcare, Affordable Care Act (ObamaCare), CPT billing, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Employer-Sponsored Health Plans, Essential Benefits under the ACA, Free-Market, Government Regulations, Health Insurance, Healthcare financing, Medical Costs, medical inflation, Medical Practice Models, Network Discounts, Policy Issues, Third-Party Free Practices, third-party payments, Uncategorized

Irrational Healthcare Payment System Drives Costs And Why Payers Go Along With It | Robert Nelson, MD | LinkedIn


Our third-party payer system, by the nature of how coding & billing is contractually mandated, promotes increased health spending on aggregate – and the economic design of the system includes a perverse incentive to keep the spending going. 

real-health-care-expenditures-and-third-party-largerThis occurs in large part due to price insensitivity on the consumer-patient side due to the low marginal cost of entry compared to the inflated CPT billed charges which serve as a pivot point for network discounts. i.e. ~ once a co-pay is paid, patients don’t have any incentive to know or care what is done or how much it costs. 

 

These perverse motivations are what keeps premiums going up and up… Without utilization (claims), there is no other way to grow the pie because payers are not free to make a higher profit margin beyond the mandated cap, even if they do things to lower aggregate utilization which might lower premiums for everyone.  In other words, payers are not rewarded for efficiency, they reap financial reward to the extent that utilization, thus costs, continue to rise. 

Source: Irrational Healthcare Payment System Drives Costs And Why Payers Go Along With It | Robert Nelson, MD | LinkedIn

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Consumer-Driven Health Care, CPT billing, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Free-Market, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, Medical Practice Models, Patient Choice, Patient-centered Care, Policy Issues, Price Tansparency, Tax Policy, Third-Party Free Practices, Uncategorized

The One Thing… | Robert Nelson, MD | LinkedIn

Curly Knew…

I contend health plan networks and the multi-industry infrastructure that supports them, are simply a cartel propped up by unwise healthcare policy. They are definitely not part of a healthy functioning free-market.

Look carefully at the characteristics of how health plan networks operate and follow the money flow from start to finish. What holds it all together?  Despite its byzantine complexity and 40+ years of being entrenched into our national psyche, there is one linchpin that holds the whole perverse system together. Any guesses? What’s “The One Thing”?

 

Source: The One Thing… | Robert Nelson, MD | LinkedIn

Posted in Consumer-Driven Health Care, CPT billing, Direct-Pay Practice Models, Medical Costs, medical inflation, third-party payments

The Trouble with the Healthcare Bubble | Robert Nelson, MD | LinkedIn

Bubble-TroubleIn this self-perpetuating cycle, all of the dollars get sent through tightly controlled and mandated billing channels making it nearly impossible to render care or receive medical care unless you subjugate yourself to the process.  All of this, of course, is being fueled by exorbitant health plans premiums.

Source: The Trouble with the Healthcare Bubble | Robert Nelson, MD | LinkedIn

Posted in Access to healthcare, advance-pricing, Consumer-Driven Health Care, Direct-Pay Practice Models, Economic Issues, Price Tansparency

We All Pay the Price, Because No One Knows the Price | Robert Nelson, MD | LinkedIn

downloadThe billing and payment system in healthcare is an economic joke and is indefensible. Given all that occurs in medical billing, it is impossible to make sense of pricing, thus the value proposition is incomprehensible.

Determining patient responsibility is not the same as knowing the price. Why should any payer (if they are paying the majority or all of the bill) pay more for strep throat in the ER than if treatment was rendered in a doctor’s office? It is precisely the low cost of entry to high cost venues for non-serious problems that allows this to happen, which is a direct result of the way we bill and pay for care.

In the ideal world, the advent of innovative payment models would arise out of the quest to find the “sweet spot”. That spot would seek to align incentives while balancing risk, maximizing efficiency, increase quality of service & outcomes and control costs. Our current system looks NOTHING like what I just described and it can never achieve those goals. So why do we put up with it?

Source: We All Pay the Price, Because No One Knows the Price | Robert Nelson, MD | LinkedIn

Posted in Economic Issues, Health Insurance, Medical Costs, Policy Issues, Price Tansparency

Out-of-Pockets: What They Really Mean | Robert Nelson, MD | LinkedIn

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Some things are so familiar or so close to “us” that we don’t see them for what they really are.  Take the case of the famous vision impaired artist depicted above, Claude Rhinoir.  His tendency to misinterpret his surroundings is a result of his inability to correctly identify something that he lives with everyday.

Such it is with our healthcare landscape, being littered for decades with misplaced oddities such that we don’t even notice them anymore, let alone question their purpose.

And here is the lesson that Claude’s repeated misinterpretation should teach us: Please understand that the concept of “out-of-pocket” expenditures in healthcare is an anomaly caused by our bizarre third-party payment system in healthcare; we call this the billing cycle and it is unique to healthcare financing. Yes they are real, just like Claude’s horn, but completely unnecessary in the picture.  And these out-of-pocket costs are grossly inflated, being based on inflated billed charges to begin with; nor would they even exits in most cases if not for the intrusion of third-party payers into the arena of routine healthcare.

Read the entire article at Out-of-Pockets: What They Really Mean | Robert Nelson, MD | LinkedIn.

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