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A Health Care Story
A couple of years ago, I had a sebacious cyst on my back. It was relatively small because it drained freely, but my wife was disgusted and ordered me to have our doctor remove it. At the time, I was on my company’s PPO (Preferred Provider Organization) health insurance, so I simply had the procedure done, paid my co-pay, and went about my business. I subsequently received an explanation of benefits in the mail some time later describing the amount paid by insurance, the cost of lab work done to examine the cyst afterward, and some other information regarding deductible expenditures.
Well, as sometimes happens, the doctor failed to get the root of the cyst and had sealed up the drain. So, a couple of years later, what was formerly a tiny hole was now a bulbous mass on my lower back which was steadily growing. Thus, I made an appointment at the general surgeon’s office for a routine cystectomy.
In the intervening years, my wife and I decided to switch our insurance coverage from a PPO to a HDHP (High Deductible Health Plan) with a HSA (Health Savings Account). Under this system, my company provides $1500/yr to our HSA and we benefit from considerably lower premiums and the opportunity to save for future health care tax-free. We did this because we viewed it as an opportunity to save for our future rather than simply washing our premium money down the drain from now until eternity.
So, during the cystectomy and in discussion with the surgeon and attending nurse, the point in the procedure came when the surgeon announced that he was going to send the excised cyst to the laboratory for biopsy.
“You don’t need to do that,” I said.
After a brief silence, the incredulous surgeon asked why. I replied that, unless there was some concern regarding the results of the procedure or if the contents were abnormal, then I saw no need that justified the cost of the lab work.
More silence followed, and then came the questions — “Are you self-insured? What do you mean?” — to which I explained that I cover my own medical expenses with the assistance of my HSA and have no need for unnecessary lab work. Now that I had their attention, I started to ask questions of the baffled nurse and surgeon. “Just how much does this procedure cost?” I asked. The subsequent and very awkward silence was eventually broken by the admission that they had no idea.
I’m an engineer. If a person called me on the phone and needed a piece of work done, I could quickly explain our hourly rates and provide a cost estimate. What did these medical people mean that they didn’t know what this procedure would cost?
Thus began the explanation of the (apparently) chaotic negotiations which go on behind the scenes between insurance companies and health care providers, where there is no consistency in terms of anticipated costs and the promised reimbursement rate for a pre-planned procedure can vary radically between phone calls placed to insurers just ten minutes apart.
The bottom line is that the nurse and surgeon had no idea what the cost of a routine cystectomy was because they didn’t have an insurance company official standing over their shoulder telling them how much to charge.
How did this madness happen?
The simple answer is that consumers have been completely disconnected from the costs of their health care. Insulated by our premiums, we learn that we can consume today and pay for it some day … indirectly … in a way that we’ll probably never examine and will have little control over. This, the so-called third-party effect, is responsible for much of the explosion in health care prices.
So, how do we fix it?
Republican presidential candidates frequently promise to repeal Obamacare down to the last word. That would be a step in the right direction because it would partially dis-entrench this sense of disconnection. Merely repealing Obamacare, however, is insufficient to the job at hand.
My proposal is simple. In addition to repealing Obamacare, whomever the Republican nominee is should promote legislation to allow every American to deduct the costs of health savings accounts and catastrophic medical insurance from their taxes. They could also restructure tax law so that part of a person’s compensation from their company can be a generic, tax-free “Health insurance reimbursement,” which would unchain insurance from one’s employer.
These simple fixes would probably cover 80% of citizens and radically drive down prices for those occasional consumers of healthcare.
Hopefully, as in the case of my cystectomy, the bill would be based upon time and materials such as:
Nurse, 0.5 hr @ $100/hr
Surgeon, 0.5 hr @ $250/hr
Surgical instruments: $50
I concede that this doesn’t address the needs of the remaining 20% of people who have expensive, chronic conditions that require immense resources. To be honest, I don’t have a great solution there. Perhaps the government could also use its status as a large consumer to get preferred or group-rate pricing for the indigent.
What say you, Ricochet? Am I batty in my belief that radically simplifying the billing and insurance market would produce positive results all around?
Published in General
Last year, I had a staph infection. So I went to one of those little doc-in-a-box offices just down the street.
Doctor looked me over, said “Yeah, that’s staph,” and wrote a prescription. When I went to pay, they told me it was $400 for the visit.
“I don’t have insurance.”
“$200, then.”
The prescription was similarly discounted at the pharmacy across the street.
Ralphie : “he was special”
That’s the problem with dogs – they all are.
You’re essentially right.
I don’t have any control over what I am paid. I may charge $250 an hour for surgical care, but the 4.5 hour case I did yesterday will actually pay me a couple hundred bucks, to include one pre-op visit and all other care for 60 days post op. There is no reason why the surgeon or nurse should have the faintest idea what a procedure costs. They do the medical care, not the billing.
In November I had to do a two-stage operation on a critically ill patient. Ten hours at the hospital, transfusions, post op infection, five office visits. I was paid nothing for this and will be paid nothing for this due to a paperwork error in my office.
Medical billing is a matter of trying to jive the system to stay alive. This adds enormously to overhead, costs me in documentation and lost time and makes giving care must more forbidding.
If I could just charge an hourly fee and be paid what I ask, as my accountant, lawyer, music teacher, lawn guy, auto mechanic and gym trainer do, a lot of the problems of the health care “system” would go away overnight.
Poof.
Doc Bob, you are so right about making it simple. If left up to the free market health care should be no harder than ordering a cheeseburger at a fast food store. If my air conditioner quit I could six quotes in a day.
This story is a great demonstration of what is wrong with our insurance system where costs are unknowable at all levels but benefits are specific.
Providers are continually getting squeezed by a system they have little effect on and so they have no option but to provide more and more services to get ahead. Consumers on the other hand have no incentive to refuse expensive treatments with marginal benefits other than their own pain and suffering which is also unknowable ahead of time.
This is a crude analogy. However, the way that I envision Health Insurance operating would be akin to buying a Sam’s Club Membership.
You buy a Sam’s Club Membership because you want access to a nationwide network of stores where you can purchase from a uniform selection of things in bulk that you were going to buy anyways. The difference is when you go into Sam’s Club all of the prices are clearly marked so that when you get to the checkout the cost isn’t a surprise – or worse, they bill you later. Sam’s Club also only accepts cash, check or Sam’s Club Credit Cards, so they basically get paid immediately.
Doc Rob: Do you think that the next wave will be concierge medical service of this type?
One of the problems with liberal and progressive circles is their expectation that someone else’s money, someone else’s energy, someone else’s work and someone else’s time will solve all their problems, so it’s no surprise to me that these ‘lilies of the field’ would find themselves flat on their backs and under the knife without having made any prior provision for their own welfare.
Why should they?
They’ll probably get single payer, one way or the other. To quote the inestimable Trump again, “We’re not going to let people die in the streets.” “Everybody’s going to get taken care of much better than they’re being taken care of now.” “The government’s gonna pay for it.”
My head is already spinning.
The system is messed up. Single Payer is not the answer, though.
as usual, the government steps in, messes the system up, then declares more government as the only solution.
If you want to envision single payer look no farther than the VA.
Majestyk, you are absolutely correct.
Here’s another personal example: Last August, I had a week of terrible sore throat, mild fever, and palpable anterior cervical lymph nodes. Even though I had weathered the worst and was beginning to improve, I worried about the possibility of strep. On one hand, I could have prescribed myself 10 days of penicillin for about $4 and eliminated the chance of rheumatic fever weeks down the line, but I elected to do things the right way: I made an appointment at my next-day clinic and had a throat swab taken. Total time: about five minutes door-to-door.
The bill: $578, of which my insurer paid $222.
The health system and I continue to fight over the balance. The billing office refuses to tell me exactly what the charge is for–the invoice reads only “LABORATORY – GENERAL CLASSIFICATION”–for reasons of “patient confidentiality.” The fact that I am the patient carries no weight.
But “fight” is actually too strong a word. The clinic has never responded in writing to my multiple letters, with the above explanation gleaned from my one successful phone conversation–I was not permitted to talk to a supervisor or learn more than the first name of my bureaucrat. Now the matter is with a collections agency.
Consolidation encouraged by Obamacare is a big part of the problem. The local university health system gobbled up my small, formerly patient-friendly clinic a year or so back. Now I am a data point, not a customer.
The strep antigen tests run about $50 elsewhere. In fact, a local pharmacy-affiliated clinic even markets a rule-out strep service– test plus physician consultation–for $90.
This past November, I had hip replacement surgery. I had the other hip done in 2009 under another employer’s insurance plan in another state. I tried to find out what the costs were going to be under my new employer’s plan in my new state. The estimates ranged from $500,000 to $1,500 from sources that should have known.
I finally took a big swallow and got it done. My out of pocket costs reached the max at $4,000. I have no clue what the hospital got. The MD got $7,500 for the surgery and then there were the others like the anesthetist, the dozens of labs etc. all the way down to the company that provided a walker for $250. (I used it for a week. It’s in the garage now.)
There is no way to even guess what something like a hip surgery will cost given the number of palms that are out.
I see a potential business here though. Figure out what the costs are going to be for an entire package and sell it for a one price – one bill and done option.
George, there’s no other word for that situation than “disgraceful.”
You’re a doctor, so tell me: how is it that this sort of regulatory capture (for lack of a better term) has happened and what are nominally small business owners have found themselves captives of these absurd bureaucracies?
I’m both relieved and horrified that George finds this process as impossible and infuriating as the rest of us.
Pilli, I have a Canadian friend who was in bad shape with a hip. The wait list was 18 months in Canada. He flew to India had it donee stayed in a first class hotel for two weeks with round the clock care the first week plus meals for less than $10,000. He said half the doctors in Canada are Indian anyhow.
Well, it should. They must provide you with the information, although you may have to pay for them to make copies of it. Patient confidentiality is not in question, if you are the patient. Nor is the issue of whether or not you have paid the bill. Even if the billing office is being Bolshie, the hospital or doctor’s office must have requested a specific test, and that should be specified on the medical record. If it’s not documented there, then they have a serious problem. Keep beating them up.
I have had things go to collection a couple of times over the last 30 years. I have then sent them an extremely stiff letter saying that I do not know what the charge is for, that I am not paying for something if I don’t know what it is (therefore, please send me the detail), and that, absent the detail, I challenge the bill. When I’ve done that, I’ve never heard any more about it.
Majestyk, thanks for this post. Good discussion.
What I want to know is where to go for the simple, straightforward and complete explanation of the GOP-proposed replacement for Obamacare?