The current way we pay for health care is unacceptable!
The way Americans pay for health care services is very wasteful. We pay premiums to health insurance companies who use it to pay company profits, administrative cost and buy health care services. There are a lot of health insurance companies, so the advantages of scale are lost and the states insist on being the regulators of the health insurance companies, which results in adding to the overall cost of health care. The health-care-provider must deal with each health insurance company, resulting in more administrative costs. In addition the health-care-provider must waste time on things like health insurance paper work and the insurance companies’ bureaucracy.
The government (Medicare, Medicaid, Etc) is the insurance to seniors and the poor adding more complexity and deep pockets. They would like to control the cost of health care, but there is no hope in sight and they are running out of money. There is a limit to the amount of money available for health care.
Employers buy health insurance for the employees or pay for the health care and have insurance companies administer the health care program.
Some individuals try to pay their own bills and are financially penalized.
Others want the insurance companies to be in control of paying the medical bills.
That is to say, we the people of the United States will hand over our money and control to either the government or health insurance companies because we do not want to pay our own medical bills. We pay for this privilege.
There is got to be a better way!
I do not pay for my health care services. Do you pay for your health care services? I do pay co-pays and deductibles, but I do not receive a bill for health care services. The bill is sent to a third-party-payer, who pays the bill. Well, they don't pay the whole bill; they determine what they are willing to pay and make a partial payment which is accepted by the health-care-provider as payment in full. The question is, do you receive a bill for your health care services and then pay the bill or are you making use of a third-party-payer to pay for medical services? Even though you are using a third-party to pay your medical bills you may still feel that you are paying the medical bill. The third-party-payer is using “your money” to pay your bills, so you feel that you are paying for your medical care even though a third-party-payer is paying and is using money collected from you and others.
When using a third-party-payer, you are not paying for health care services you received!
If you were paying for something that was not medical care, you might pull out your wallet and pay cash. That is the most efficient way to pay. A debit card is yet another way or a charged card still another. If the bill came in the mail, writing a check is a good way. All methods have advantages and disadvantages and one is cost. This may not be a complete list, but these methods or some variation should cover how most bills are paid most of the time. But what is missing is contracting with a third party to pay your bills, which is not a normal method for bill paying.
Let’s try to imagine how contracting with a Bill Paying Service might work. First, you turn over most if not all of your paycheck each month to the Bill Paying Service. As you make purchases you would ask for the bill to be sent to your Bill Paying Service which would then pay the bill. Does this sound good or you seeing problems? First, the Bill Paying Service will want to be paid for its work (10% maybe). Second, if it’s assumed that the merchant will agree to send your bills to your Paying Service, they will need to be compensated for their efforts (5% maybe). Third, there is a good chance you will over spend because you have no idea (record) of what you are spending. Forth, it is easy for the merchants to pad the bills. Fifth, The Bill Paying Service and the merchant, in order to simplify their book keeping, charge the average cost so people getting chicken salad pay the same as those getting a 16oz steak dinner. You probable could add to the list of examples that bring into question whether a Bill Paying Service makes any since for anybody.
Let’s compare the Bill Paying Services to the third-party-payers. With either there are administrative costs to pay. It is hard to control spending and cost. The door is wide open to fraud and abuse. And this may not be a complete list of problems they share. There is no question; the third-party-payer will use “your money” to pay other people’s medical bills and if you have medical bills you hope they will use other people’s money to pay your medical bills. With the third-party-payer, the money you pay them is gone, it is no longer users. Hopefully at this point neither the Bill Paying Service or third-party-payers looks like a good way to pay your bills.
Are You Now Thinking about Paying Cash? Bad Idea!
At this point you might be considering paying cash for your medical care. In some cases this may be OK, but in many cases it is not a good idea. Medical bills can be very large and you probability do not have sufficient cash to pay the bill. Even if you can find the cash there is a problem. The third-party-payers get a big discount if they are paying; you do not get a discount for paying cash. Everyone is changed the same, but not everyone is required to pay the same[1]. When you are paying cash, you are “asked/ required/ demanded” to pay the “fair and reasonable” full charge, no discounts for cash. One exception is to qualify for charity. Something is wrong when a person paying cash cannot get a discount. It appears that third-party-payers pay a lot less than what is “fair and reasonable”.
By Paying Cash You Are a Victim of Cost Shifting
It appears that by not conforming (using third-party-payers) people paying cash are penalized. Most people paying cash cannot afford to be punished. They did not have enough money to pay the third-party-payers in the first place so it is very difficult to pay what might be considered a very inflated price. We have price discrimination.
The health-care-providers need to collect from all payers what they need/want to cover their costs and profits. When third-party-payers do not pay their far share, what they do not pay is shifted onto the less fortunate, those paying the “Billed Charges” from their own pocket. When an individual is paying the “Billed Charges”, they are the victim of what is called “cost shifting”.
If the “Billed Charges” are so high that all costs and profits of health-care-provider are paid by the third-party-payers even with their discounts, then the medical-care-provider is profiteering at the expense of those paying the “Billed Charges”.
Everybody is billed the same for the same health care services, but third-party-payers are not required and do not pay the “Billed Charges”. They pay much less than what is billed. What is considered as payment-in-full is a function on who is paying the bill. The Billed Charges has little meaning or none to third-party-payers; it only has meaning if the patient is paying the bill. Third-party-payers determine what they consider as their full payment for the medical care services the patient received. The results, “Billed Charges” are not the same as the reimbursement expected from all bill payers. The amount on the bill sent out to all payers of health care services is a fantasy, a fiction, a fraud. The real payment-in-full is determined by agreements between the health-care-providers and third-party-payers. The “Billed Charges” do not represent what is a fair and reasonable price for the health services delivered to the patient!
What is a fair and reasonable price is an unknown. The court is used to force individuals to pay the inflated “Billed Charges”. By the court’s action, they have converted the “Billed Charges” (Charges inflated, unfair and unreasonable) into a “fair and reasonable price” because the court would not force a person into paying unfair and unreasonable prices. (One would hope)
Same Health Care, Same Charge, Same Payment for All Payers!
- The “Billed Charges” must be the same as reimbursements expected from all payers and which is paid by all payers, even the government.
- As a consequence the battle between payers (both government and employers), deliverers, and insurers of care placed the real consumer, the patient, on the sidelines. In the traditional economic model there is a tension between the buyer and the seller, but the buyer is also the consumer. In medicine the tension between the purchaser and the seller still existed, but the purchaser---the employer--- was not the consumer. That role belonged to the patient who, seemingly, was left out of the equation. There was little reason to believe that the purchaser truly represented the patient's needs and desires. The priorities that the potential patient set might or might not be those of the employer. Furthermore, the seller was no longer the producer. The seller was the insurance company----insurance, after all, is what the employer was buying. The producer, however, was the physician, the allied health personnel, and the hospital and its infrastructure. The insurer did not represent those interests either. This departure from the traditional economic model that balances interests (not always in, the most equitable manner) between parties with, divergent interests, this confusion of roles, was among the forces making for what has been referred to as the "destabilization" of health care. (1)
If third-party-payers are not negotiating for a fair and reasonable price, how can a free market exist? Without a free market in health care services, can the claim be made that the “Billed Charges” (Price) is fair and reasonable? In the absent of a free market how is the price for health care services determined?
Determining Price
Determining a fair and reasonable price for a product or services is very difficult. The free market system is normally used to make the determination. When a buyer and seller, in a free market, acting on their self interest agree on a price, the price is assumed to be fair and reasonable. To have a free market the buyers need to have sellers of products and services; and the sellers need to have buyers willing to buy the products and services when price and quality is “right”. The buyers need information such as price and quality so a comparison can be made. The sellers need to provide appropriate information. A monopoly will exist when there are too few buyers or sellers, potentially resulting in prices that are not fair and reasonable. Our nation depends on free markets working correctly. It is the responsibility of the government to assure that the free market system is working correctly so that fair and reasonable prices can be determined for the Citizens of America. When a free market cannot exist, the government must create a way to determine the correct price (fair and reasonable?).
Determining Price When Third-Party-Party is Present
Determining a fair and reasonable price for a patient's health care services is even more difficult, especially when the situation is as follows: The patient is the consumer of prepaid health care and the seller is a third-party-payer (insurance) that does not produce the health care services but buys it form health care providers when needed. The provider delivers to the patient health care services which hopefully will result in health care for the patient.
There is no reason to believe that a third-party-payer can correctly represent the patient's self interest, needs and desires. Likewise the third-party-payer cannot correctly represent the self interest of health care providers. The normal relationship between buyer (patient) and seller (health care provider) that is used to determine the fair and reasonable price does not exist. In his situation a fair and reasonable price cannot be determined. The free market system is not operating as desired.
Determining Price When Third-Party-Party is Not Present
One would hope, that determining a fair and reasonable price for a patient's health care when the buyer is the patient and the seller is the health care provider would be working. It is not working. One reason is the price and quality information is not readily available so comparisons cannot be made. Another is the price agreed on by the seller (health-care-provider) and the buyer (third-party-payer) is a lot less than what is asked and required for a patient to pay to the health-care-provider. There are agreements between third-party-payers and health-care-providers that enforce the price discrimination. Different payers pay different amounts for the exact same health care services. This happens under the illusion that the third-party-payer deserves a discount by limiting their customers’ choices of health care providers. With competition for patients diminished, it is easier for the health-care-provider to control the price. The paying-patient either pays or is taken to court unless deemed to be a charity case. The fair and reasonable price has not been determined.
No Fair and Reasonable Price for Health care
There is no free market in health care because fair and reasonable prices are not being determined. The self interest of the buyer (consumer, patient) of health care is not being represented in the price negotiation. The prices are being determined by third-party-payers and health-care-providers. This results in a health care system that is open to exploitation by the greedy. The system depends on the people in authority to set “fair and reasonable prices” leaving the patient out of the price negotiation.
Profiting on the Less Fortunate
As a results of the unfair pricing, the biggest part of health-care-providers profits come from the uninsured and the under insured. The people who pay their health care bills are taken to the cleaners. The people who cannot pay the bills are taken to court with some exceptions to prove that charity is still “alive and well”. The message comes across load and clear, get “good” health insurance or pay. The system wants and needs monthly income to pay the large fixed costs of hospitals. The system does not like billing individuals, for some reason it’s better to bill third-party-payers. The government implies that everyone must have health insurance to get health care by calculating and publishing the number of uninsured. There are many statistics that could measure the performance of the health care system, why the number of uninsured? The less fortunate pay or else!
Health care System Allows Unbridle Greed
There is nothing to stop people in authority to raise the price of health care in monopolistic fashion. There should be no question that unfair prices impact the less fortunate. The fully insured are impacted by paying inflated premiums. With higher premiums the insurance companies have greater profits. There is nothing stopping the greedy from profiteering.
Action needed:
- A way to Determine what is a Fair and Reasonable Price for Health Care Services!
No Free Market in Health Care
We know that health care services are bought and sold. The question, is there market for health care? Does any health -care-provider sell health care? Health care and health care services are not the same.
Health care services are consumed to make a sick person healthier or keeping a person from getting sick.
From Wikipedia:
- Health care is the prevention, treatment, and management of illness and the preservation of health through the services offered by the medical, nursing, and allied health professions.
Health care embraces all the goods and services designed to promote health …
Health care is not the goods and services used in an attempt to provide health care. When a person is sick, they will seek out health care. Health care services are used in an attempt to provide health care so the person’s health can improve. If there is no improvement in the person’s health, has the person received health care? Health care services have been consumed with no health care results.
Normally health care is not viewed as a product or service that is bought or sold. Health care services are what is bought and sold. This distinction is very important! The patient wants to get health care, but what they receive is health care services. The third-party-payers in general are paying for health care services not health care! When we or our employer buys health insurance, we think we are purchasing future health care, but what Insurance companies pay for is health care services.
Because in general health care is not being sold to the patient or third-party-payers, there is no market in health care.
If you contracted for a house to be built, you would pay to the contractor the agreed upon price for the house. You normally would not get a bill from each subcontractor every time they completed a task or ordered material. You can pay out a lot of money and still have no house.
When you ask for medical care, a lot of fee-for-services may get paid and you are still no better than when you started. You where sold medical care services not medical care.
You are purchasing health care, when the bill is based on the results in treating your medical condition. It will not be easy to have a market in health care and paying for health care services will not be eliminated. The health-care-provider must do a good job of treating the patient or they will suffer financially. There should better quality and prices if there is a market in health care.
Action needed:
- We need health-care-providers to sell Health Care.
Do We Want Discrimination in The Health Care System?
At the present time, we have a tax system that discriminates. The government gives a tax break to employers that provide health care benefits to employees. If you are paying for your own health care, you are paying more for health care than you should. The government allows employers to use the whole earned dollar to be spent on health care. On the others hand, those not being favored by this discrimination, must pay taxes on the earned dollar and then what is left can be uses use for health care. This discrimination should stop. One method of correction is not to tax the money spent on medical care. This would be a way to make medical care more affordable to a lot of people that need the help. This should happen in all reforms of the health care system.
Who is the most important person in the medical care process?
One would hope it was the patient? The money that is paying health-care-providers and third-party-payers comes from people that at some point will, in all probability, be a patient. As a patient, you are a liability and other people’s money will be spent for your medical care, so the third-party-payers “must” control the health-care-providers so they do not spend other people’s money unreasonably on your health care services. The health-care-providers and their employers are being paid by the third-party-payers not by the patient. Does this not imply that health-care-providers are working for third-party-payers not the patient? The patient’s interests are secondary in spite of what should be a physician-patient relationship. The third-party-payers are very important to the health-care-providers, because the health-care-providers are assured of being paid when third-party-payers are paying for the health care services provided to the patient. The options and information the patient receives from the health-care-providers may be limited by the third-party-payers in their attempt to control how much they will pay for health care services. Thus the most important person does seem to be the patient.
Is the patient ready, willing and able to make decisions about their health care? Is the patient ready to be in the center? Then the third-party-payers would be working with and for the patient, not exerting control over the health-care-providers in anyway. The health-care-providers would work with and for the patient not allowing third-parties to interfere in the patient’s medical care. Third-party-payers could help to find options for the patient so that the best option(s) could be selected from the best medical care available.
Is the patient ready to make their health care decisions? When a person is sick, they can be quite willing to turn the decisions to some else (“mother”). They do not want to worry about how I am going pay for my medical care. At this point third-party-payers look very attractive, assuming they will pay for the correct medical care.
Can the patient be allowed to have the authority to make their health care decisions?
A Desirable Model for Health Insurance
The money that people pay to have health care sometime in the future should not be considered as income for the insurance company. The IRS should not tax this money as income. This money should be considered as a deposit in an account that will be use by the company to pay for someone’s health care. It would be like depositing money into a savings account in a bank where the bank pays interest on the deposited money. In this case there would be only one account to which everyone makes deposits. When there are medical needs, money is withdrawn to pay for medical needs. When the patient agrees to the amount of medical care delivered, the company takes from the account payment for the health care services delivered. This payment is taxable income that the company has earned by seeing that the patient receives the best health care possible. There is no income for the company until health care has been delivered to patients. The amount of income would be proportional to the health care delivered. If the patient made a full recovery, something like a maximum of 10% of the costs could be taken as income. If the patient was expected to make a full recovery and did not, then the income might be just 1% of the cost. If the patient died, maybe even no income.
Keeping the customer healthy is another way of delivering health care which could generate income for the insurance company.
The company makes an income (profits) by getting their customers healthy and keeping them healthy.
A Search for Health Care for All the People of the United States
In most cases health care is something you will need in the future. So why not have every one save on a regular basis so when they get sick, they will have the money to pay for their medical care? Sounds good, but it only works some of the time. One problem is that not everyone earns sufficient income so they can save for their medical care when they have a need. Another is that people do not like saving, especially for something they do not believe they will need. Even when people save a substantial amount of money, their unexpectedly high medical cost can exceed their savings and their ability to pay the medical bills. So savings may be a necessary first step, but it is not sufficient to get the required health care in all cases for all people. Something more is needed.
Not everyone gets sick at the same time, and some people almost never need medical care. So is there a way to share the savings since all the money is not needed at the same time. People could put their savings in a pool so that it could be shared with other people also putting their savings in the pool. If someone in the pool does not have sufficient funds to pay for their medical bills, the fund could give or loan them the needed money. A Medical Care Pool is needed, with an administration, to receive and distribute funds.
Not everyone has money to put in the pool. But some people have sufficient wealth that they can pay for their own health care and have funds left over so they could share some of their wealth with people less fortunate than themselves. Everybody needs to make a contribution based on their wealth. For all the people to have health care there must be charity and or welfare. If the total shared wealth is large enough, then with a method of distribution based on health care needs, all the people in America can have health care.
The government is already using taxes to pay medical bills for the qualified poor. These tax dollars could be deposited into the pool to pay for the poor. The special government medical assistance programs would not be needed. The government can quit forcing ER’s to treat the poor since all people will get medical care. The poor would get medical care just like everyone else. There would be one universal method to pay for health care for all the people. Is this not an objective of Universal health care?
Most people are already paying for health care, theirs and others, one way or another. Thus they are not in a position to make a contribution to the Medical Care Pool. There are drastic changes that are needed if these people are to going to have their medical care dollars deposited in the Medical Care Pool. Today the government collects taxes with a large percentage being used to pay for health care. This money needs to go into the pool. This is money that people are already contributing to health care even if they are not aware of it. The amount of money that employers are paying for health insurance needs to go into the pool. The money that people are paying for health insurance should go into the pool as well as the money they are paying for their health care needs. There is a large part of people’s income that is already going to pay for someone’s health care. Many employers are using the employee’s earnings to pay taxes and health care insurance. There must be a major restructuring of the system so the health care dollars get to the Medical Care Pool which then gets to the people that need health care. By doing this, the employers can be relieved of providing health care for their employees which means they do not have to retain a portion of the employees earnings. Since everybody may not be making a contribution based on their wealth, some adjustments may be needed in the tax code. It would be nice if everyone made a contribution freely, but unfortunately the word contribution may be just another word for government taxes. But as already stated the money is already coming out of American’s pocket. What is being changed or eliminated are the hands it passes through before it gets to pay for some one’s health care. Hopefully with most it making to its final destination, the health care provider, with the hope of reducing administration costs, waste, fraud unwarranted profits and costs.
Today we have a very chaotic way of funding health care and not everybody gets health care. There are different ways to collect the wealth and there are different ways to distributed it. You can only get the wealth from the people that have it. In some way, we must get the health care to the people in need. There is a limit to the amount of health care that can be delivered because there is a limited to the amount of wealth available for contribution into the Medical Care Pool. So everyone must be continually vigilant on health care cost so that there is money to pay for everyone’s health care. Even though the objective is to have health care for all, providing all the health care possible no matter what the cost is not practical.
How do we distribute the funds so that everyone can have health care? The funds would be redistributed based on people’s health care needs. If everybody is going to have health care, is there any other way. People need medical funds to ‘stay well’, so money will be added to their account on a regular basis to satisfy this need. Most people when they have a catastrophic medical event become the less fortunate and need help with paying for medical care. When this happens, the person receives a ‘get well’ deposit. The amount normally needed to get well from their medical condition. When there are extenuating circumstances additional deposits may be needed and made. Some medical conditions are chronic and the people will need regular deposits into their account so their health can ‘remain okay’. In this way all patients at all the time can pay for their medical care.
Now that the patient gets the health care funds to be used to pay the medical care providers instead of being paid by third-party-payers, a problem has been introduced since the patient may use the funds to pay for something other than the medical bills. To solve this problem the funds are deposited into a special account, “The Individual Medical Investment Account”, on which restrictions are placed. The funds may only be used to pay for the patient’s medical care which is delivered by a qualified health professional. In this way, there is some assurance the medical care provider will be paid for the medical care they delivered. The patient receives care and then gets a bill (which will be a major shock and adjustment) for the medical care delivered. The patient reviews the bill, and if they agree that it is for the medical care they received and the amount they agree to pay, then they authorize the bill to be paid from their special account. The provider would get the funds transferred to their account as quickly as if it was charged on a credit card. Everyone would use the same method (Universal) for paying for their medical care. This should eliminate a lot of administrative costs as well as get the insurance company out of the “doctor’s office”.
The medical care providers will need to make changes in their billing practices. They need to bill for what has been accomplished for the patient, what medical condition has been resolved, what medical diagnoses was made, what medical help the patient received, etc. So the patient will be able to understand what medical care has been delivered. For example: The patient should not be billed for tests. They should be billed based on what the tests accomplished. When the patient is billed on results, they will be in a better position to select medical care providers that deliver the best medical care value.
The Individual Medical Investment Account
A purpose of the Individual Medical Investment Account (IMIA) is to give control to the individual, the patient. There is a relationship that must be restored between a patient and the medical care provider. Because there is third party paying for the medical care, this third party lays clams to the right to affect decisions made by the medical provider and the patient for the purpose of reducing the third party’s financial obligation. When every individual uses their IMIA to pay for medical care, the medial care provider has no need to know the source of the patients’ funds. From the provider’s point of view, the patent is paying the provider; there is no third-party-payer. Now the health care provider is free to talk about all options available and their cost to patient.
Another purpose of IMIA is to eliminate the need for the interaction between the health-care-provider and the third-party-payers. The provider can concentrate on health care for the patient with no need to be evolved with third-party-payers. The health care providers administrative cost should also be substantially reduced, sense all patients use one method to pay for their medical care, no third-party-payers.
Individuals would have the account from birth to death, used to pay all of their medical bills. Money would be deposited in the account based on the individuals medical care needs. The account would be like a bank account that is used for savings, checking, credit card, debit card, investments, etc. The money in the account would be the individual’s to spend on their medical care expenses. They could also deposit funds to their account. The account would have a credit limit, so they could change to the limit without asking for financial assistance. If they had special needs, they could ask for financial assistance.
The money would be held in a trust insured by the government. The trust would have the responsibility to care for this money as outlined below. It would pay the bills and invest the money. It would maintain a database and see that the money was only used on appropriate medical costs. It would oversee monies owed to the trust from borrowing against ones account. The trust would be a nonprofit organization. It would invest the money that is held trust so that it could pay dividends to the Individual Medical Investment Accounts and to pay for the expenses to run the trust.
The trust needs money, financial reserves, to invest so that it can pay dividends to the Individual Medical Investment Accounts and pay its expenses. The trust should have money because of the money that is being deposited into the accounts. There is a risk that the monies used to pay the medical bills would be greater than the deposits. If this is so, the contribution must be adjusted so that the fund would have money to invest. When there are sufficient financial reserves, the contribution would be reduced. The trust should not make highly speculative investments or where investments would present a conflict of interest. It should prefer to make investments in the health care industry with the objective that everyone should have access to quality health care.
An organization would need to be created to oversee the trust so that it is accomplishing its mission, which is quality health care for all. It needs to keep the trust on track, but not tied in knots.
When an individual has sufficient funds to pay anticipated medical expenses, they can direct how their money is invested as one would do with an investment account. There are limits on how they can invest. For example, they cannot invest in great paintings and hang them in their home or their brother-in-law's plumbing business where they have a financial interest like being on the payroll. The trust must guard against people making investments that are conflicts of interest. The purpose of the individual investing is to allow those who put their own money in the account to make their own investments. A person can borrow money from their account when there are sufficient funds to pay anticipated medical expenses and the person has sufficient needs and is in a position to pay the money back. They will pay interest on money they borrow, which will be equal to the money that the trust is earning on their investments. If the trust is making 10% a year on their money, then the borrower will have to pay 10%. The loan rate will track, up and down, with the trust's earning rate. The trust must guard against people abusing the loan privilege. The purpose for loans is to allow those that have been aggressively putting money into the account to be able to get to it for important personal financial needs. Most people should not need the borrowing provisions of their account.
There is a gifting provision where a transfer of monies is made from your IMIA to another IMIA.
Some people will not be able to pay their debt. The gifting provision is intended to help reduce this number. The trust will need methods so that they can forgive some of the debt. There's a fine line between forgiveness and entitlement. The trust will need to work hard to educate people that the medical payments are not entitlements, and they are to be repaid. There will be people who will pretend not to be able to make the payments and then others that truly cannot. It will be hard to tell which is which. But the trust must to do the very best it can.
The owner of the account will need to have one or more beneficiaries and directions on how the money in their account is to be divided among the beneficiaries. When loans are made, there needs to be provisions on how the loans will be paid upon death of the owner.
When third-party-payers make payments for medical bills, they will make the payment to the persons individual investment account. There will be absolutely no money going to or from third-party-payers and medical care providers. There is no need for the third-party-payers to have any dealings with the medical service providers. The trust can send the billing information to the third-party-payers, which should be sufficient for them to make payment to the individuals account. The third-party-payers should pay the same amount as it would have paid if this system did not exist. The provider should not expect any more money than it would have received if the system were not in place.
(___To Be Continued___)
[1] See appendix B (to be added)
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