Why Are You Paying So Much and Getting So Little From Medical Insurance? Part 3
By Michael J. Harris, MD
Medical insurance premiums have doubled in the past 3-4 years for many comprehensive health insurance plans. Businesses that provided 'employer-based' health insurance are struggling to afford this employee benefit. Drug prices are skyrocketing. Doctors are retiring early or leaving medicine for other careers due to career dissatisfaction and frustration. Why is the richest nation on Earth suffering from such a health care crisis?
In this third and final article, I will outline the steps that can be taken to reform our present medical system to the efficient, sensitive system described in the previous article. Either the physicians or the patients can initiate system reform. Once one community demonstrates the effectiveness of a free market medical care system, the nation will rapidly follow with similar changes.
Physician changes: Physicians as providers of medical service can price services based upon the value of efficiently provided care rendered in the absence of billing and collections costs. SimpleCare of Seattle has defined the tremendous saving for physicians and patients when using a 'cash and carry' method of payment. (see 'www.SimpleCare.com') Medical offices spend an average of $26.00 to process and collect an insurance claim. If the charge is $75.00 for an office visit with insurance processing, the same medical service without insurance processing costs $49.00 for payment at the time of service. If the patient has a high deductible policy, he only needs to save the receipts. No insurance interaction is necessary. Physician offices that discontinue 'participation agreements' in favor of 'cash & carry' service for value pricing will restore the practice of medicine. Surgical charges for elective procedures, in this situation, are paid in advance to avoid the need for billing and collection staff. Overall, costs decline under competitive prices and quality increases. The physicians that provided the best value will succeed. All will be accountable to the patient for value-driven service.
Employer benefits: Employer based health insurance is not a sustainable system as outlined in the first article. Employers can add up the costs of all benefits, except wages and pension, and provide a 'defined contribution plan' for that benefit amount. This will fix the employer costs for benefits and incent the employee to be cost sensitive. If the 'defined contribution plan' is for $3000.00, employees submit receipts for any medical or dental related expenses for reimbursement with pretax dollars up to $3000.00 (or whatever level the employer sets as the benefit). The employees are then educated on the advantage of individual, high deductible insurance policies. Employees submit the receipt for their insurance for reimbursement from the 'plan'. Any extra funds at the end of the corporate fiscal year are paid to the employee, taxed, as a bonus. Thrifty employees will save this money and gradually accumulate enough savings to increase their deductible (and thus reduce insurance premiums).
Employee/potential patient behavior modification: The patient will purchase high deductible, individual insurance that is completely portable. They can set up a conservative investment or savings account to build money that will be their 'medical savings account'. This change will radically alter the patient's perception of medical service and they will shop for the best physician for the money and not run to the emergency room for every ache and pain. The value of preventative care and healthy lifestyles will be obvious to the employee. Tax sheltered medical savings accounts (MSAs) would normally be an ideal vehicle for people to fund their high deductible medical insurance and medical expense savings accounts, however, Congressionally mandated restrictions severely impair the usefulness of this option. Once Congress removes the present restrictions imposed upon MSAs, they will be the method of choice for all Americans to buy high deductible insurance and save pre-tax dollars for future medical expenses. The patient will have privacy and control over their medical care.
The above free market medical economy will thrive best without government. Eventually, the Medicare system will be replaced by individually funded MSAs and high deductible insurance plans. When this occurs, government will no longer dictate to patients and have access to our medical records. Seniors will have saved for their future and be the sharpest consumers of all. While their medical insurance would be more expensive than that of a younger person, they will have a lifetime of savings to prepare for higher premiums, just like term life insurance is more expensive as we get older. Older people utilize at a much greater rate than younger people. In the absence of Medicare taxes, people will have more money to invest for their later years of retirement and medical needs. Since the need for terminal medical care is more likely than the need for large pension savings, appropriate consideration in savings should be made. Less government intrusion into the routine business of medicine means fewer taxes and more money to save for other, more useful goods and services.
High deductible individual insurance policies are already available. Once people start purchasing these policies in greater numbers, insurance companies will become more competitive in writing more flexible and marketable high deductible plans. Insurance companies could offer high deductible plans linked to a medical savings account with a debit card for the patient to use for medical services. Such an account would automatically keep track of services utilized that may eventually add up to meet the insurance deductible. The expectation is that, on most years, the deductible will not be met, and these premium savings grow.
Hospitals are not geared up for the self-insured patient. Market pressures will force hospitals to restructure to meet the demands of the patient as a consumer of service. Eventually, regulations imposed by state and federal governments will have to be reduced to allow centers to evolve for the delivery of efficient, specialty specific services. Hospitals, as large employers, are facing the same financial pinch with employee benefits as other employers.
The pharmaceutical industry: Market pressures will cause drug prices to fall. Pharmaceutical companies will become directly accountable to the patients and will compete in a free market with price reductions to gain market share.
What about those 40 million uninsured? The above changes will make insurance and medical care more affordable. Personal insurance against catastrophic illness is each citizen's own choice. If you do not insure your home and it burns down, poor planning is the homeowners' fault. Medical insurance is each citizen's own choice as well. The concept that medical service is an American right is a communistic idea that is specifically un-American and unconstitutional.
Successful implementation. My practice does not participate with any insurance plans as such relationship interferes with my purpose, that is, providing urologic care for my patient. My fees have been reduced, in most cases, to less than 1993 rates. Part of our mission statement is to 'exceed patient expectations' in the delivery of urologic care. My family insurance plan utilizes a $20,000.00 deductible, catastrophic insurance and I pay cash for routine care, including prescription medications. My employees have complete control over their medical benefits, as they do not have the same needs. I have outcomes data to serve as my own report card for commonly performed procedures. I provide $3-10,000.00 in free care to the needy on a monthly basis. The pleasure of medicine is mine because I have restored the purity to the practice of medicine that has been my career dream.
Michael J. Harris, MD is a board certified urologist who is internationally known for developing minimally invasive prostate cancer surgical techniques. He is a member of the Association of American Physicians and Surgeons (aapsonline.org) and an active lecturer on topics of prostate cancer, health care reform and cost-efficient practice management. He has been practicing urology at 1020 Sixth Street in Traverse City since 1993.