Posts Tagged insurance
The author of this blog is willing to be the CEO of United Healthcare for a mere $60,000,000 / year. That would save the insurance company 6 million dollars a year — a real bargain. So why does United Healthcare need a new CEO?
The Wall Street Journal reported today that United Healthcare (the nations largest healthcare insurer) can’t seem to make enough money with clients who get insurance on the government exchanges. They feel other insurance companies should have those pesky patients, who cost more for a couple of years, because they did not have insurance before.
United Healthcare (NYSE:UNH) has been having a lackluster financial situation for the past few months, like almost all other stocks — perhaps a little worse. Reports show the health insurer will lower its earnings-per-share outlook to $6 per share, down from its earlier forecast of $6.25 to $6.35 per share.
Could it be that the 25 cent drop in earnings is due to business on the exchanges? — surely it’s not the fault of the CEO? But, why take a chance, get a new CEO. The company could get a new CEO for half the price and even might be able to snag someone with a PhD in economics to help figure out what to do. Duh — lower the operating costs!
Presidential candidate, Dr. Ben Carson*, says insurance companies should be low-cost non-profit operations simply to process claims. It makes a lot of sense. Why is so much profit being extracted from the US healthcare system by insurance companies? It does not need to be that way. The companies keep about 20% to 25% of premiums for CEO salary, expenses and profits. In France, insurance companies are limited to 6%. Yes, it can be done.
* This is not a political endorsement, just an observation.
The PBS NewsHour reported on 12/23/13 an astounding survey — they found a generic medication for breast cancer (letrozole) ranged in price from $9 to $400 dollars for a 30 day supply. Even more surprising the company that charged $400 dollars agreed to match the $9 price at a competitor.
Not only do pharmacies price gouge so do insurance companies. Almost uniformly insurance drug plans add $20 to every generic prescription. So a typical $10 generic prescription without insurance involvement will cost you a copay of $30 with insurance. And, do you think the pharmacist will suggest you avoid using insurance — not usually, since the $20 copay is for them!
What should you do?
- Shop around — check prices at several pharmacies
- ASK if there is any program the pharmacy has to lower that price (sometimes if you get a shoppers card you get better prices)
- You don’t need a membership to get prescriptions from Costco. Consumer Reports rated them as having the best generic prices.
- Here is a great place to check prices: goodrx.com (and they will print coupons for free!)
- You can get mail order generics here with free shipping. Usually their prices are good: healthwarehouse.com
- Don’t involve your insurance plan if it costs you more out of pocket than just outright paying for the prescription.
- Insurance plans often limit the prescription to 30 days (with a copay every time). Getting your prescription in 90 day amounts saves trips to the pharmacy and often improves the discount.
- Pharmaceutical companies often make a long-acting medication just before the patent runs out on the short-acting form. Ask your doctor if the long-acting medication is absolutely needed. Sometimes taking a medication twice a day at a generic price is much less expensive than once a day at a brand name price.
The price gouging is astounding. Patients often think a pharmacy just adds a small amount to the wholesale price. Not so. They often set the price at some percentage less that the brand name — hugely more profitable for them and devastating for consumers.
The price gouging makes you understand better why the UK and other countries have legislated a solution — they negotiate a country-wide price for each generic medication and allow only a few dollars to be charged as a dispensing fee. The US has a long way to go to protect consumers and reduce health care costs.
Two days ago the Centers for Medicare and Medicaid Services (CMS) published the fees hospitals charge uninsured patients. These fees are called the “chargemaster” of the hospital. Hospitals point out that most people have some type of coverage. That is true. But, 50 million people do not have insurance and the fees apply to them. The following are the statistics for Colorado hospitals for which CMS presented data on the charges for heart attack. The column in pink is the amount charged and the MC Allowed column is what Medicare has calculated as a fair payment.
Hospitals are businesses and can charge what they wish for services. Except, many hospitals are “not for profit“; which means the money they would normally need to pay in taxes is instead used to benefit the community. They often prove that benefit by writing off the money they can not collect from people who lack insurance.
The unfortunate effect is that hospital charges are the number one cause of bankruptcy. Furthermore, the extreme penalty of the “chargemaster” for people without insurance drives people to purchase insurance — certainly a happy situation for insurance companies.
If you go to any health insurance web site you can see what the “chargemaster” penalty actually is. Look at the charge for the highest deductible policy. That charge, in large part, is the fee to benefit from insurance company negotiations with hospitals. Of course, the hospital makes the charge very high so any mark-off for insurance companies is just for show. This is an old retail game — raise the price 100% then have a 50% off sale.
A simple solution:
If the charges by hospitals were restricted by law not to exceed 20% above the fee allowed by Medicare the cost of insurance would be substantially less. And, people who select a high deductible plan could really enjoy low rates with protection from the cost of catastrophic illness.
It is important to note insurance reform will NOT solve the US problems with high cost and low quality health care. Insurance just distributes financial pain over a greater number of people. The solution is to fix the underlying problem not distribute the problem to more people.
Laura Landro of the Wall Street Journal published the article: “Image Sharing Seeks to Reduce Repeat Scans” on April 1, 2013. Ms. Landro reported on an academic project to store x-ray pictures on the Internet called the “Imaging Sharing Project” (image share news release). The idea is to have patients own a secure copy of their personal x-rays. By having this storehouse of x-rays in the “cloud” they can be given to any health care provider or hospital as needed.
Any patient who has had to take x-ray images from one provider to another understands the problem. The provider handed the disk of images may or may not be able to look at them because of incompatible ways of recording the material. Of course, this means another visit to the provider (or worse, a repeat x-ray and unnecessary x-ray exposure).
Storage of images is nothing new. But, the concept of the patient owning the images is indeed something new. It allows a patient to seek a second opinion without all the hassle of getting the disk. This is a real asset to a patient who keeps copies of their own medical information. The typed radiologist report is usually very brief and does not allow for alternate interpretations.
The difficulty transmitting images is partly intentional. Radiologists fear someone else far away could be a business competitor. It would be very bad for local radiologists if patients always wanted their brain CT evaluated by some expert in Boston or London.
Cancer patients will find this service very helpful. If a woman has an abnormal mammogram she can pick the oncologist or surgeon and then share the images with them. If she has a mammogram at a different facility she can share the older image for the purpose of comparison.
People who move from city to city would still retain easy access to x-ray images. The US population is much more mobile than in the past so this is very important.
The Image Share project is not available everywhere. There is a commercial product called LifeIMAGE. It is a great idea so hopefully the idea will spread. It would be a step forward if all insurance programs and x-ray offices were required to provide this as a benefit. If you know of other similar products please leave a reply.
COST SHIFTING DIAGRAM
Hosptials are licensed by the state and certified to provide Medicare and Medicaid services. They agree to provide care sufficient to stabilize a patient. If the hospital is a non-profit institution they must provide community service (indigent care) in an amount equivalent to what they might otherwise have to pay in taxes. For- profit hospitals will try to transfer indigent patients to community or state hospitals but room is limited so they often provide uncompensated care. County, State and Federal (VA and Indian service) hospitals are financed from taxes. Much indigent care is paid for by the government.
Uncompensated care in hospitals is funded in a circuitous (underground) manner. Uncompensated care just means the patient can not pay — the patient may end up going bankrupt. However, the hospitals have another way. There is a constant stream of money that comes from insured persons flowing to insurance companies and then to hospitals. To balance the books for uncompensated care hospitals raise the price of care to insurance companies that in turn raise the price to insured people. Hospitals often have to negotiate the pay increases with many insurance companies. The “system” comes into a balance as long as the numbers of uninsured patients are not too great.
The net effect of the underground system is uninsured patients do get care and hospitals stay solvent. However, look at the system from a distance and try to follow the money. Complex negotiations, patient transfers, government payments, and patients shifting into Medicaid (Title 19). The cost of doing the paperwork is astounding and combined with the cost of a social-work army it almost matches the cost of delivered care. In the end, insured people pay twice, once in the cost of insurance premiums and second in taxes.
This is our system. We designed it this way. Is this graft and corruption? No. However, it is wasteful, inefficient, unmanageable and unsustainable. The most simple solution is to provide insurance for those who can not afford it. The cost is the same and possibly less than the sum total of private and governmental costs now. Such a system would be understandable and subject to being managed.
Four in ten Americans report that within a year illness caused a severe family financial problem. Americans obviously have not solved the problem of rising health care cost. During the past 50 years insurance seemed like the answer. If insurance premiums were the same as 20 years ago who would complain? The situation has changed. Now some can not afford insurance and almost no one can afford the cost of catastrophic illness. Businesses that provide insurance to employees are strained, so insurance deductible levels are higher. Pooled risk (insurance) has concealed the lack of health care cost control for a long time — hindsight is great. Now we wish we had paid more attention.
According to the Kaiser Family Foundation 31% of the healthcare dollar is spent on hospital care and 20% on physician and clinical services. Furthermore, major drivers of health care cost are:
- Technology and prescription drugs
- Rise in chronic diseases
- Administrative costs (currently 6% for medicare and 30% for private insurance)
The “where” we spend more money and “why” we spend more money are interesting facts but do sick people feel a lot better as a result?. America spent $2.6 trillion in 2010 but the “Sick in America Poll” very clearly shows dissatisfaction. The World Health Organization ranks U.S. health care at number 37 just after Costa Rica. In simple language, Americans are not getting a good bang for the buck. The phrase “drivers of health care cost” might be associated with the image of someone driving a car, following a map and getting good mileage. Erase that image. Replace the word drivers with “culprits” to get the right picture. We spend too much for technology and prescription drugs, we spend too much on chronic disease and we spend too much on administrative cost. The philosophy of each category needs to change to help solve the financial problems:
- Technology and prescription drugs: the current philosophy is “safe and effective”, the new philosophy needs to be “safe and cost effective”
- Chronic disease: the current philosophy is treat the same as acute disease, the new philosophy is prevent, treat early, follow-up to prevent progression. Also, exercise more, eat less sugar and remove nicotine from all products.
- Administrative costs: the current philosophy is to “manage complexity”, the new philosophy needs to be “keep it simple”. Reasonable efficiency demands 94% of premiums for all public and private insurance should be used to pay for care. By some estimates 30% of all health care cost is related to “paperwork”.
The current US health system is perfectly designed to deliver high cost low quality care with an ocean of paperwork. What a mess. Fortunately, there are islands in the paperwork ocean where low cost high quality care is delivered. There is hope.