Health Impact Statement (updated 05/21/2000)
he changes in health care have affected every one of us over the past few years. Before the advent of HMO, PPO, POS and the gobbledygook of terms there was a time when health care was between you, your doctor and your family. You had complete choice of any doctor or hospital and your health insurance helped pay for expensive services. Today things are quite different. You health plan is now called a Managed Care Company and your doctor and hospital are selected from a list of participants. You need permission to see specialists or get tests or even get admitted to the hospital. You even need approval for the types of medication your doctor prescribes. Why? to keep costs down! What do you get for this new brand of health care? Reduced costs for the health plan and care as THEY deem fitting. What do you lose? Control! confidence and dignity!
Is this forfeiture of your rights so important ? We think so. The patient doesn't really know what is needed in his healthcare and usually relies on the doctor to tell him what needs to be done right? In the days of free choice and physician independence from the insurance company this was true. Now however, your doctor and all other health related facilities work for the Managed Care Company, they DO NOT WORK FOR YOU! In the good old days if you were unhappy with your care or even the doctor's 'bedside manner' you simply moved to a new doctor. Since the doctors in the Managed Care Organization don't work for you anymore their incentives have changed. Before, they had only one thing in mind, the best care possible thus keeping you as a patient! Under Managed Care the doctor still tries to look out for you but his primary allegiance is to his position in the Managed Care Organization. If he costs them too much money in services he provides to you he will lose his job or get a reduction in payments! Thus, he will try to balance both of these as best a possible but in most cases this is just not possible.
The other problem facing the physician in Managed Care (and thus impacting on your care) is the reimbursement schedule for the doctor. All doctors are rich so what is the big deal, they can afford a cut in pay right ? WRONG! Yes, in general doctors earn a good living but millionaires they are not! Although the AMA states the average doctor makes about $150,000 per year this is actually inflated by a few very specialized doctors that earn very high incomes. The doctors you generally deal with make much less than this. The other detail you need to know is that the usual doctor you deal with has an overhead of about $150,000 to $200,000 per year. Thus he must earn this amount of money before he makes income for his own pay. Now in order for a doctor to earn his own salary (which the AMA says is $150,000), plus the overhead, he must bring in $350,000 per year! Does this surprise you? Ask you doctor!
Now back to Managed Care payments to the doctor. In the typical Health Maintenance Organization (HMO) the doctor is paid $8.00-$10.00 per month per patient the HMO supplies for the doctor. Thus he earns $120.00 per year for each patient. This number does not change whether he sees a patient once per year, 50 times a year or never. In general, according to most surveys 60-70% of all patients with HMO insurance see their doctor on an average of 3-4 times per year. Now lets do a little math. At the monthly payment of $10/month and a required gross income of say $300,000 (assuming the doctor makes $100,000/year) the doctor must have 2,500 patients! Now, lets assume 70% of these patients show up 3 times per year for care. This comes to more than 100 patient visits per week! How much time do you think the doctor can actually spend with you if he has such a large number of patients to attend? How much do you think he is missing when he examines you? Our feeling is that this makes for poor medical care. Your doctor should not be forced to rush through your examination and he or she should have the time to listen to you and answer all your questions and concerns. In fact, he should even tell you what questions you are supposed to be ask!
Some of you may remark that $100,000.00 is still rich and doctors can stand to earn less! I don't know though. Have you considered that the doctor must spend 4 years in college, then 4 years in medical school, then 3-9 years in post doctoral training before he goes out into practice? Have you considered that he does not start earning an income until he is between 30 and 35 years old? Have you considered that the typical doctor is $150,000 to $200,000 in debt before he even hangs up his shingle? Have you considered that the typical doctor works 70 hours per week? Call me prejudiced but I don't think an income of $100,000 is too much to ask.
Now lets go back to the problem of needing permission to get you special tests or referrals to see specialists. In most managed care organizations the doctor needs to call the insurance company to get permission to send you for special tests and get you a referral to a specialist. Sounds reasonable if we want to prevent unnecessary services that will drive costs up right? WRONG AGAIN! The way it actually works is the doctor calls a number that connects him or her with a "trained clerk" NOT ANOTHER DOCTOR! This "trained clerk" listens to the doctors explanation of the problem and why he wants the test or referral. While the clerk listens he or she is looking though a check list supplied by the managed care company. This check list tells the clerk whether the service is necessary or not. The problem with this is that the clerk really does not understand medicine (did they spend 11-15 years in training like your doctor?) they simply look at the check list and see if the doctor mentions the correct words! If the doctor does not use the same terminology as in the check list the request is denied!
The next problem with this scenario is the fact that the doctor usually has to stay on hold for long periods of time waiting for one of these "trained clerks" to come to the telephone. You’ve called your insurance company before haven’t you? Did you get through to a human being right away or did you go through the press 1 for this department and 2 for the other department and so on… The telephone number the doctor calls is no different! In addition the "trained clerks" are on the telephone with other doctors all day long so your doctor must wait his turn thus wasting a lot of time on hold!
So, first he has no time for you because he has to see so many patients per day and now he has even less time to see you because he is spending an inordinate amount of time waiting to speak to and convince the "trained clerk" that some of his or her patients require extra care.
Ok, say you are lucky and found a doctor that is willing to work the 200 hours per week to make sure everything is done properly. He spends enough time with each patient so the examination is complete, he listens to and answers all your questions and teaches you what you need to know to help in your care. Then he spends the hours on the telephone in order to get all the various approvals needed to get special tests and referrals to specialists. You got it made right? WRONG AGAIN! In many managed care plans that doctor will be fired because he is costing the insurance company too much money! The managed care company keeps tract of how often and how many referrals a typical doctor makes. If your doctor is being very diligent he will invariably be sending more than the average number of patients for expensive services. In the end the managed care plan will terminate the doctors contract. (Every contract has a clause stating just that ! In fact the clause states the contract can be terminated without a reason!). Yes, this does happen and is a great cause of fear among many doctors.
Now lets talk about the hospitals who sign up with Managed Care Organizations. First you must understand how hospitals stay alive financially. Each hospital must be open 24 hours per day and have staff to care for patients 24 hours a day 7 days a week. This means 3 shifts per day (8 hours a shift), 7 days a week. If any of you own business and has to make a payroll every week you can understand what this means. BIG BUCKS must be taken in every week to pay the bills. Next the hospital must obey a whole series of laws (partly to protect you the patient but mostly to make it easier for inspectors to inspect). Usually the there are Federal, State and Local laws that have to be obeyed and man a time they conflict with one another. Then they have to have equipment to care for the patient (e.g. a typical state of the art CT scanner costs $1,000.000.00 !) and keep the equipment working so there must be specially trained technicians to operate and maintain the equipment. Lastly the hospital must buy medicines and keep it in stock for patient use. Many of these medicines expire quickly and are very expensive. Then there must be a large bureaucracy to make sure all laws are followed, bills are paid, orders and made for supplies, payroll checks are given out on time and bills go out to insurance companies for payment. Note this last part usually gobbles 25-25% of a typical hospitals budget!
So we are talking about a lot of money to make sure that hospital is equipped and ready for you in case you need emergency care when you get that heart attack! If it weren't there you have a 50% chance of dying. Once you arrive in today's hospitals your risk drops to 2% or less! But to do this the hospital must have money to operate.
How does Managed Care fit into the mix? They contract with the hospitals to pay a fixed amount of money per diagnosis. NOT per day of hospital stay. NOT based on how much medicine you use. They pay based on your diagnosis, period. Thus, for example, if you are admitted with a heart attack the managed care plan pays the hospital say $3,000. for your care. If the hospital keeps you for 24 hours or 24 days they still get $3,000.00! Thus there is a BIG PUSH in today's hospitals to get you admitted and discharges as fast as possible. IN MANY CASES YOU ARE DISCHARGED BEFORE YOU ARE WELL ENOUGH TO GO HOME! On top of this ridiculous payment system the hospital must have yet another bureaucracy to keep track of every aspect of your care so the managed care company can come in and inspect. This requires more staff and more paper work. Please note they are not inspecting to make sure your care is optimal, they are inspecting to see if there is any way they can deny payment! If they can find any excuse that the admission was not needed they will not pay the hospital! When they do pay it is usually after months of billing and letters flying back and forth from the hospital trying to justify the admission and treatment. This takes even more staff and bureaucracy.
What's the end result? Hospitals are falling apart all over the country. Many small community hospitals must lose their autonomy and join up with larger hospitals in order to survive. many are just shutting down! To cut costs most hospitals get rid of the creature comforts of hospital care. Fewer aids are working on each floor so patients must wait longer when they ring the call bell. Fewer nurses are around making care somewhat sub-optimal in many areas of the hospitals. Suppliers are paid in 90 or even 120 days instead of monthly. The suppliers eventually stop selling or require C.O.D. for supplies. This cycle will continue until there are only a few very large very impersonal hospitals left!
This life under managed care! It will only get worse as the "market forces" push costs down and down. Quality, personalized care and compassion will be totally gone if things are allowed to continue as is!!
What was the problem with the old system?
The old system was simple but ended up costing too much money. You remember, you saw your doctor, a bill was sent to the insurance company, they paid 80% after a deductible and you passed this payment to your doctor. So why did the costs go so high and whose fault was it?
Well, lets start with the doctor. In general, he knew that if he charged a lot of money for his services he'd get 80% of that fee so he could simply charge more and make more. In addition, there were a certain percentage of doctors out there that performed unnecessary tests and procedures. They charged for them and made even more money. Then there is the added problem of malpractice. Most doctors are sued at least once in their careers. Many are sued multiple times. This has nothing to do with their abilities! It has to do with the way our legal system works. So to prevent the suit or limit their exposure most doctors ordered extra tests to "cover themselves" in case of a malpractice law suit.
Now lets move to the hospital. Remember above when I said how expensive it is to run a hospital? Well they made money in the old system by charging daily for the room you occupied, your emergency room visit and for every pill you took. Not unreasonable except that many hospitals took advantage of the billing system and charged the insurance $5.00 for each aspirin you took. In addition, (and this is still true today) the hospital had to cost shift for patients with poor or no insurance. This means simply that if your insurance pays poorly for you hospital stay or if you have no insurance the hospital simply increases its fees to patients with insurance that pays well! Since the hospital takes in the overwhelming majority of money in the healthcare system, their charges made the cost of healthcare go through the roof. When did this all start? It started when the government started putting clamps on what hospitals could earn from Medicare patients. Since Medicare patients (elderly) use the hospital the most and when the government began paying hospitals based on the patient's diagnosis rather than their length of stay the hospital began to lose money. How do they re-coup that loss? You got it. They cost shifted (raised their fees) to private insurance companies. The private insurance companies just kept raised their rates to you and your employer until we ended up with spiraling healthcare costs and eventually the insurance companies started managed care to take control of the spiral in costs.
And the last person who caused the demise of the old system was YOU. Huh? How is it my fault? Well, you wanted it fast, you wanted it perfect, you wanted it in comfort and MOST OF ALL YOU WANTED IT FOR FREE! Thus, doctors who just accepted you insurance as payment simply raised their fees to absorb your deductible and 20% co-pays. Hospitals raised their fees to pay for more equipment and staff so you would not have to wait in line for tests and procedures and the insurance company paid for admissions to the hospital for patients that could be treated at home.
So how do we get rid of Managed Care, get back a system where you the patient is in control but keep costs in line?
Review our plan to revamp health care reimbusements
The solution is not as complicated as you might think. First let me ask a few questions.
Why does your employer pay for your health insurance but not your auto, life or home owners insurance?
Why does health insurance cost so much compared to other insurance?
Why is it that we consider health care a right that should cost us nothing?
Let's start with the last question first. In general we all consider health care a right and it should not cost us anything out of pocket. Although this is a noble thought, real life does not work this way. Firstly there is nothing in the Constitution about health care being a right, free or anything else for that matter. Why has this come about? Insurance Companies wanted it this way so they could get control. If you remember back 15 or 20 years ago the insurance companies started to advertise how their plan was better since you paid less out of pocket. As time went by they started advertising how health care was a right and you should not pay for it. In fact, they developed systems (the HMO) where it was really free for you. BUT THEY TOOK COMPLETE CONTROL. Since you are not paying the bills anymore you cannot choose any doctor your want. You and your doctor do not determine what is necessary and you must use drugs and therapies they approve. THE BOTTOM LINE, YOU AND YOUR DOCTOR CANNOT DECIDE ON YOUR OWN HEALTH ANYMORE!
Is this what you really want?
Now for the third question. Why is health insurance so expensive compared to other insurance. Simply put, since you do not pay for it the market has no control of the costs. Insurance charge pretty much what they want (at least to individuals). For groups its another story since they do compete with one another for large corporations and unions. But the little company and the individual must pay huge premiums because the insurance companies do not want them and make the cost very high to discourage them from purchasing insurance.
This of course answers the second question. The law states that employers and unions can pay for your health insurance but does not allow them to pay for home owners, auto or other insurance. The health insurance companies want it this way and lobbied to get this law passed. Simply put, they wanted a system where they could get large volumes of business and not have to deal with thousands or millions of individuals. They get huge amounts of money from the company or union to insure large numbers of people. The individual has no real say as to the type of insurance or whether they are satisfied with the service. The only person who must be made happy under this system is your employer or your union bosses.
So how do we fix this system and bring costs down to reality so everyone can afford it?
LET THE MARKET TAKE CARE OF IT! Get the government out of the way, get the corporations and unions out of the picture and let the market decide the cost and what is necessary!
First Congress must remove the law that allows companies and unions to pay your health insurance. Allow them to give you the money in tax free and allow you to purchase the insurance on your own! Now the insurance companies will market directly to you and you will decide what insurance to purchase and if you are unhappy with a particular plan you simply take your money and go elsewhere. Don't you do this for everything else you purchase? Why should health insurance be any different? Costs for health insurance will begin to drop for everyone just because market forces will begin to put real pressure on insurance to drop prices
Next, insurance plans must be streamlined as follows:
HMO's, PPO's and the rest of the acronyms must be outlawed except for special situations
All insurance plans should fit the indemnity model with you paying a deductible (should be relatively high) and a percentage of the bill. They must also pay for all health care services (including medications, hospital, doctor and ancillary services) so all aspects of your health are covered. To prevent the providers from cheating the system they are to be paid in full directly from the insurance. The insurance should then bill you directly for your share of the cost. All insurance must also place a cap on your out of pocket expenses to that at some point you are actually getting your health care for free for catastrophic events.
Insurance companies will not be able to discriminate against anyone except if the individual was not insured by any insurance in the past year (this prevents individuals from going bare until they need health care). Once someone is enrolled their premium cannot change for 5 years (unless the individual moves to another plan). The insurance companies in turn can develop plans that are priced based only on geography, age (in 5 year increments up to age 60, then in 10 year increments), and level of deductible, percent they pay and out of pocket cap. Other than that, they will not be able to change their prices if you are healthy or not.
What will happen in this scenario? Simple, you will find out what your health care will cost before you purchase them, you will shop for the best price and best service just like you do for everything else you buy and prices will come down and service will go up! The market will decide what everything should cost and what is the best service.
Providers that charge huge fees will soon have no patients left and those that charge reasonable fees and provide real service will prosper.
You will be in complete control, have unlimited choice as to doctors, hospitals, drugs, therapy, etc...
If you end up with a catastrophic illness you cannot go bankrupt since there is a cap to out of pocket expenses. If you do not like your doctor, his fees or his service, just find a new one! No books of what doctors you are allowed to use, no long waits for an appointment and no refusals for any medical service.
How do we handle Medicare? No different from anyone else. However, Medicare should actually be phased out! Since the government is deciding on prices it causes certain services to be artificially high and others to be lower than they should. There is no way the market can decide on costs or level of service when a bureaucrat is making the decision!
How do seniors pay for health care if there is no Medicare? The same way they pay for other goods and services after they retire. With a combination of savings, pension and social security.
Since insurance companies cannot discriminate based on age, the seniors cannot be denied insurance and prices will be based on what the market permits, not on a bureaucrat!
How do we handle Medicaid? This is another story. Market forces cannot work for people with no ability to pay for services. If we put them into the same system as everyone else, they will be locked out. This is not acceptable from a moral point of view and even makes poor economic sense. The best way to handle the poor is to set up free clinics (requiring service providers to donate some time each week), give tax breaks to providers who care for the poor at no cost and promote education aggressively. Health care utilization goes down dramatically when the individual is knowledgeable about prevention, disease and therapy. All hospitals should be required to set up free clinics and outreach programs to care for and treat the poor. All health care providers as a condition of their license should be required to put in 4 hours per week in free clinics. This is not only good for the poor but is good for the health care provider. He/she will be better kept up to date with current techniques, therapies and diagnosis.
Review our plan to revamp health care reimbusements
more to come soon...