This post is Part Four of the series, Healthcare: Yes We Can.....But We Probably Won't.
THE PROBLEM WITH PRIVATE INSURANCE
There are many problems with private healthcare insurance, the most troubling being that private insurers exist to make money rather than to ensure that subscribers receive the best medical care for their (thousands of) dollars. This issue is the root of all other problems with the private health insurance industry.
AFFORDABILITY
According to the National Coalition on Healthcare (nchc.org), the average annual family health insurance premium was $12, 700 in 2008, and the average single premium was $4700. At the current minimum wage of $6.55/hour, the cost of family coverage is nearly 94% of a worker’s annual salary; the cost of single coverage is almost 35%. Even with the minimum wage increase slated to take place on July 24, 2009, the percentages are still out of reach: nearly 85% and almost 32% of total annual income. In fact, the annual premium for family coverage exceeds the 2009 federal poverty level for one person ($10,380); single coverage totals nearly half of the federal poverty guideline for a single person.
An estimated 8 million people, over half of whom are over the age of 24, make minimum wage. Millions more are employed at the minimum wage in their state, and these numbers may have risen due to the job losses and state of our economy. These people are generally not eligible for Medicaid unless they have children, are pregnant or have a disability, so what coverage is available to them? Some states have programs that offer insurance to the poor that don‘t qualify for Medicaid, but these premiums do not offer much in the way of savings as compared to traditional private health insurance.
At these rates, even those who are employed for reasonable wages cannot afford the premiums. The average US annual household income is $46K; the average annual family insurance premium is $12,700--nearly 28% of their income. Noises are made about “responsibility”, making “the responsible choice” to purchase health insurance. But for many, the choice is between eating and having a place to live or purchasing health insurance. That isn’t a decision anyone should be forced to make, nor should anyone who must be criticized for making it.
What does it matter if health insurance is available if people can’t afford it?
ACCESSIBILITY
Healthcare providers may choose to participate in one or many private and public health insurance plans. A thick listing of participating healthcare providers is provided to recipients of private healthcare insurance, who must then choose a Primary Care Provider (PCP), to act as a “gatekeeper”, preventing unnecessary tests and procedures.
Potential problems begin at this point. A patient’s regular provider may not be a participating provider, forcing patients to either abandon a provider who knows them and their conditions well, or incur substantial extra costs and the hassle of self-pay and saving receipts for reimbursement.
There may not be a provider nearby who accepts a particular insurance. In order to benefit from insurance coverage, a patient may be forced to undergo significant travel time to reach a provider who participates with their insurance.
People who choose the least expensive health insurance plan may have to change providers annually as healthcare premiums rise, and patients continually face the risk that their provider may stop participating with their insurance company.
COVERAGE
Many insured Americans believe that they have good health insurance coverage--until they really need it. Privately insured Americans have been bankrupted by just one major accident or illness. In fact, a study by Harvard University found that 68% of Americans who filed for bankruptcy had health insurance coverage and average out-of-pocket health expenditures of at least $12K, and that 50% of all bankruptcies were due at least in part to medical expenses. (nchc.org)The full policy for each insurance plan is usually an inch thick or more--quite different from the sheet or two of paper with important parts in big bold letters--and contains cost and frequency limitations on specific types of coverage, tests and procedures. Insurance policies also contain both annual and lifetime benefit limits, which can be as low as 10K and 250K. Few people have the time or inclination to read through their entire policy, until a claim is rejected. A rejected claim is often the first time patients discover that there are limits as to how much care they can receive in certain areas (particularly mental health), how many tests can be ordered, how much in benefits they can receive annually and over the lifetime of the policy. Unfortunately, this notice only comes when a patient has or is about to hit the cap. In general, most privately insured patients don’t know the details of their policies, and normal use of health insurance won’t exceed these limitations. But newly diagnosed cancer or AIDS patients, or those diagnosed with other chronic illnesses quickly discover the downside of private health insurance.
QUALITY OF CARE
Unfortunately, the staggering amount of paperwork that a healthcare provider must complete in order to be compliant with private insurers takes up a significant portion of their time.
Providers are usually given at least one day per week or one week per month to catch up on paperwork for private insurers (this is why you’re better off making an appointment specifically for completion of paperwork rather than sending it to the office). This leaves 12 fewer weeks for the provider to see patients. The office still needs the same amount of money to stay open, and so the amount of time allotted for your appointment shrinks, and the daily number of patients a provider must see grows.
Providers are strongly encouraged by their employers to see a minimum of 25 patients per day; those who can't keep up or refuse to may be fired. This is why we now have appointments scheduled every 10 minutes, must wait 2 weeks to see your provider when you are sick (fewer overall appointments due to insurance paperwork), are asked to arrive 15-20 minutes prior to your appointment (in case someone else cancels), and must wait an hour to be seen (providers have difficulty seeing a patient in 10 minutes and run over). If your provider looks hungry, he or she may have missed lunch due to double-booked appointments. Some facilities even prohibit providers from treating more than one problem per visit in order to keep to the schedule and see the maximum number of patients. In other words, if you have a blood pressure checkup scheduled, and figure that your provider can also give you a prescription for your sinus infection during the visit, think again. You get to pick the problem you’ll be seen for, then must schedule another appointment for the other. The facility can then bill your insurer for two visits. This isn’t done maliciously, and is not profit-motivated; it’s simply something more that facilities must do to keep afloat.
It’s difficult for providers to treat you in 10 minutes, so most of the time you need to schedule multiple follow-up appointments. It’s also easy to make misdiagnoses, confuse similarly named medications and miss signs of larger medical problems. Of course, many, many providers hate this way of practicing medicine (and will sometimes write the prescription for you if you avoid mentioning it to the staff), and we’ve lost some of our best. It’s outrageous, and far from the best medical practice, but don’t blame your provider or the facility (unless it’s for-profit); blame the government for cutting reimbursement rates and the private insurers for "allowed amounts" and all the paperwork.RESCISSION (CANCELLATION)
Those who are insured may find that they no longer have coverage following an expensive diagnosis. In June of 2009, the LA Times (latimes.com/business/la-fi-rescind17-2009jun17,0,3508020,full.story) published a story about the investigation of UnitedHealth Group, WellPoint Inc. and Assurant, Inc.--three of the largest health insurers--by the House Subcommittee on Oversight and Investigations.
The investigation revealed that the companies had saved over $300 million in medical claims over a 5 year period by canceling the policies of 20,000 subscribers diagnosed with expensive illnesses; that employees received high performance reviews for terminating policies held by subscribers with expensive illnesses; and that subscribers diagnosed with illnesses requiring expensive treatment were targeted for cancellation. The insurers claim that the policyholders in question lied about pre-existing conditions in order to obtain health insurance, and that the policies were cancelled in order to keep costs down for other policyholders, and refused to commit to ending the practice.
WellPoint targeted subscribers with more than 1,400 conditions, including pregnancy, high blood pressure, lymphoma and breast cancer; an employee responsible for dropping thousands of customers, thereby saving the company over $10 million in medical expenditures, received a perfect score for “exceptional performance” on his employee evaluation.
The cancelled policyholders say that the discrepancies were honest mistakes or omissions, and that the goal of cancellations is to increase profits. The facts tend to agree with the subscribers’ version of the story. The omissions seem unlikely to be applicable to the major diagnoses. For instance, following one woman’s breast cancer diagnosis, her coverage was cancelled for failing to disclose an acne-related dermatologist visit. A man who later died of lymphoma had his policy cancelled for not disclosing gallstones, which his doctor had noted in his chart but had not discussed with him. One insurer went so far as to cite a Pap smear--a routine test administered annually to screen for cervical cancer--as a "pre-existing condition" despite the Pap smear being a screening test rather than a condition and the diagnosis of the subscriber being completely unrelated to any type of cancer or gynecological condition.
Other insurers pay bonuses to employees for rescinding the coverage of subscribers with costly medical conditions. Blue Cross and WellPoint claimed they don’t reward employees for cancellations and have no policy taking savings from cancellations into consideration, but the obtained employee evaluations discussing cancellation and savings tend to disprove that statement.
FINANCES VS BEST PRACTICE
If the PCP determines that a test or procedure is necessary despite the patient having exceeded the frequency allowed by their plan, the PCP must justify the need to the insurance company before the insurance company will agree to pay for it; this is done through time-consuming paperwork, and in some cases, via computer. An employee of the insurance company--who, in most cases must use a company manual with specific guidelines to determine need due to lack of medical training--reviews the request and decides whether or not to approve the request. If the request is denied, the PCP must decide if the test should still be ordered; if so, the patient is responsible for the cost.This causes an ethical dilemma for the PCP, particularly when the test is expensive. Best practice would be to order the test, but his office or facility must also consider if the patient is likely to pay. If the test is ordered and the patient fails to pay the bill, the office or facility must either foot the bill and eat the cost, or initiate the collections process, which can be time-consuming and/or expensive, and can significantly affect patient/provider relationships. Yet unpaid bills are directly responsible for a portion of rising healthcare costs. Healthcare providers should never be put in the position of deciding between their patients’ health and the fiscal health of their office or facility.
Insurance companies monitor the performance of each participating provider, keeping track of how many tests and procedures were ordered, how many prescriptions were written, how many prescriptions were non-formulary (not on a list of medications approved by the company)or Dispense As Written (DAW, meaning that a generic medication may not be substituted for a brand name medication), etc.; they do not take into account the general health condition of the patients for each provider.
For example, an oncologist will order many more tests than an orthopedist; a surgeon will order many more procedures than a family practice provider; a geriatric specialist will order many more tests and procedures and write more prescriptions than a pediatrician, a family practitioner will write more referrals than a specialist.
If the insurance company feels that the provider has spent too much of their money, they will notify the provider to alter her practices. If the provider fails to comply with the notice, the insurance company will drop them from the list of participating providers, preventing the provider from accepting that type of insurance. As patients who choose to continue seeing the provider (now "out-of-network") face paying higher bills and submitting receipts to their insurance company for partial reimbursement (if any), the provider usually takes a substantial financial hit. It is easier for the provider to comply with the insurance company’s wishes than to lose a large number of patients and potentially, their job.
“ALLOWED” AMOUNTS CONTRIBUTE TO INCREASED COSTS
Private insurers don’t have to pay the full medical bill. Instead, they "negotiate" fee agreements with facilities and providers, who agree that the insurer can pay a reduced amount in exchange for allowing them to “participate” with the insurance plan. The insurance company’s subscribers are funneled to the participating providers and facilities in each area. Providers and facilities really have very little choice regarding whether or not to participate (with the possible exception of those who cater to the wealthy who choose to self-pay). If they choose not to contract with insurers, the subscribers from those insurance companies will go elsewhere to avoid paying more out-of-pocket medical expenses, and the facility may be forced to close.
For example, say a not-for-profit provider charges $100 for an office visit, Medicare/Medicaid reimbursement is 50%, private insurers pay 75%, and the uninsured (self-pay) pay 100%. So the office visit costs Medicare $50, the private insurer $75 and the uninsured $100. The following year, the provider’s costs have risen 10%. The government cuts Medicare/Medicaid reimbursement levels to 25%, and the private insurers cut their payment to 50%. Despite the fact that costs have risen only 10%, the provider would now be forced to charge $220 for the same visit in order to receive the same $50 + 10% from Medicare. The private insurers wouldn’t stand for the increase from $75 to $110, so they would cut their agreed upon payment rate even further; they also raise premiums and co-pays.
In short, healthcare providers don’t really know what the rates of reimbursement/payment are going to be, making it difficult to budget. The uninsured pay the most in direct, taxable, out-of-pocket funds for the same services. Medical providers and facilities must require payment up front for the non-insured or potentially deal with debt from unpaid or slow-paid bills. Hospitals also eat the cost of pricy emergency care to the uninsured--for whom it may take years or even decades to pay off a single bill--and pay for collection attempts.Another trick the private insurance industry plays is "allowed amounts". These appear on statements sent by your insurer, and mean that you can't afford Junior's college tuition after all.
An "allowed amount" is the amount that the insurer has agreed to pay for a specific charge. Your health insurance policy may say that the insurer will pay for 80% of inpatient charges incurred within the network(participating providers and facility), meaning; you, the patient, will be responsible for paying the rest. What the insurer doesn't tell you is that "the rest" is usually more than the 20% you thought you would be paying. For example:
You are admitted to an in-network facility for a covered procedure and must stay in the hospital for three days. Later, you receive a statement (THIS IS NOT A BILL) from your insurer.
Semi-private room: $15000 Allowed amount: $9000
Insurer payment: $7200 YOU PAY: $7800
Surgeon: $5000 Allowed amount: $3000Insurer payment: $2400 YOU PAY: $2600
Anesthesiologist (non-participating): $7000 Allowed amount: $4000
Insurer payment: $800 YOU PAY: $6200
You think: Wait a minute.....what? What?! WHAT?! 80% of 15 grand is $12,000...isn't it? How did 3 grand turn into $7800?! Wait..."allowed amount"? What the hell is "allowed amount"? Oh...Hold on...I guess "allowed amount" has something to do with the proctology, cuz I am getting &)^#*%!!!
"Allowed amounts" are good for private health insurers and bad for everyone else. The insurer sets an "allowed amount", then uses the "allowed amount" to calculate their 80%. Subscribers do pay the 20% as advetised, but are also responsible for the difference between the charged and "allowed" amounts. Private insurers profit by sneaking some of their costs on to the subscriber, and profit from paying for fewer medical costs when subscribers avoid seeking care for fear that they will be stuck with bills they can't afford to pay. "Allowed amounts" slap medical facilities and providers with unpaid bills, collection costs and bad debt; the insured with large debt and interest from loans obtained to pay their portion of the bill, and everyone else with increased medical costs. Collection costs may also have to be incurred by facilities for the portion of charges to be paid by the insured, who often need years to pay the bills (slow paid)from inpatient stays or expensive procedures.
Ultimately, the taxpayers bear the burden of paying for the costs left over from "allowed amounts". Hospitals must estimate the total amount necessary to stay open, then increase their fees until the amounts actually paid by insurers and Medicare/Medicaid are close to what they need, and end up in debt; the government pays out funds via grants and budget entitlements to keep facilities open.
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Farleftside
MeatMonkey
Dr William Lee
Dennis Loo
Mike Lucier
Dan O'Mahony
Salon.com
Comments
i am pretty sure that will never happen, so learn to love the smell of lobbying- as- government.
I agree. I wonder what has happened to America. We have the right to change things, and the ability, but we don't seem to have the drive.