A View From The Press Box

The gap between the amount the insurers negotiate with the providers and what the actual bill from the provider is can be staggering.

Two personal examples with the private sector, using one of the nation's largest carriers:

--A tumor removal that was done with an overnight stay was billed at $19,000 by the provider, but the insurer's negotiated price was $2,900.

--Emergency cardiac catheterization and stent implantation, including two ambulance trips, was billed at $69,000 and the insurance paid less that $13,000, including the emergency transports.

As the benefactor of the reduced pricing, and thus a very low co-pay, I can state emphatically I was very pleased, but would not have been overly concerned had my portion been higher. These were life-threatening surgeries, for goodness sake!

However, the following year, one of the hospital groups no longer accepted the HMO I had previously been on, and the other accepted a modified version only through 11th-hour negotiations.

Regardless of the tough, protracted negotiations that went on for months between the carrier and the one medical provider, it seems they could not agree on a negotiated rate that would allow them to break even, much less make a profit.

This was a non-profit hospital and clinic group, so making a profit wasn't the question...They just didn't want to continue losing money, according to them.

So, choices narrowed. Premiums for every plan increased significantly. Procedures were cut from the plans. Cafeteria plans to allow savings make up for the loss of options, and HSA's became the plan of the day.

In the end, the consumer lost out. In fact, everyone lost--the healthcare sector, the insurer and the consumer.

Employees with single-earner households allowed their coverage to lapse in some cases, to save the increased costs, even though part of the cost was employer-sponsored. They just couldn't afford it.

That placed the costs squarely on the taxpayers as the low-income families used the well-baby and child clinics for care they used to receive through the insured plan. A lose-lose situation for all. Another nail in the coffin of private healthcare coverage.

Yet, I still don't know, who is to blame? The hospital for investing tens of millions in the latest facilities and equipment? The physician for attending the best medical schools and honing his knowledge in specialty practices?

The insurer forwanting to make a decent return on their investment? Or us, the consumer, for wanting decent healthcare at a price we can afford?

SAM RESPONDS:
Thanks for sharing this informatino, BJ, but the fundamental question I posed remains: How do we set rational, reasonable prices for medical services? Was the prices set by your providers too high? Was what the insurer agreed to pay too low? How do we judge?

Please do not use scare quotes on "free market" when we do not have one in this area.

Here is another question: Do we base all decisions on the worst-case scenarios?

I can highlight four terrible cases on anything--should those cases be the starting point to reform?

Finally, when someone like Oprah brings in a phony like Michael Moore to frame an argument, you have already decided to pass over logic and demogogue the issue.

SAM RESPONDS:
I might characterize Michael Moore as a provocateur, but not a "phony." His documentaries are biased, but he never claims to be totally objective, and he does train a spotlight on problems in our society that desperately need to be addressed. For that, I give him credit.

A few years ago I was involved in an accident and shattered the bone below my kneecap. I required surgery and was hospitalized for one week. The bill came to over $85,000. The titanium plate was over $8,000 and the screws were over $2,000 each.

BCBS negotiated the bill down to a little over $50,000, which they paid. Unfortunately, we haven't always had BCBS, and I know that providers stick the other insurers (and subsequently patients) with the higher amounts.

I wonder if they use the higher amounts to subsidize what they receive from Medicare/Medicaid and the other usual and customary charge negotiations?

While I'm not a huge fan of governmental regulation, there has to be some sort of uniformity in charges. If you compare procedures from one hospital to another there can be a 50 percent difference or more between providers.

All businesses need to make a profit or they will cease to exist. Unless we start treating medical care like a public utility, there has to be a profit margin built in.

Perhaps there needs to be more upfront disclosure of costs to patients. Typically there is only sticker shock when the bill comes in the mail.

This upfront disclosure is what we as an insurance industry are required to do, and maybe regulators should extend that disclousre to healthcare providers as well.

With the U.S. being a capitalist country, surely there must be a market out there to insure a healthcare insurance gap between $150,000 and $250,000?

I'm all for consistent healthcare costs, but I'd like to know the statistics of U.S. citizens who do not work full time and are not insured along with their family. I, personally, know of no one who fits these standards and I haven't been able to find the statistics.

I don't know that citizen-paid (governmentt) healthcare is the anwer. I find it hard to believe we can all absorb the cost of many years of research & development to further medical science.

As far as Michael Moore is considered, I don't know that he's a phony; he definitely has his shtick. But I don't know that his noted bias can further the discussion constructively.

Sam, I believe both of the scenarios are likely correct. The pricing by the providers is likely way overboard for some procedures, and the reimbursement by the insurer is too low.

Yet, we have to remember there was a meeting of the minds at contract time for this to occur--a sort of mutual greed, if you will.

The healthcare system wanted the patient base and the resultant capitation, and the insurer wanted the premium, so both are to blame in the end. The ones that suffer are the patient with higher pricing and limited facility choice.

Will this change with federalized healthcare? Perhaps not as the government finds that they can cut here and there to "streamline" the system and reduce choices, in the name of cost containment and better service provision.

This will be an unpopular comment perhaps, and maybe not the proper forum, but why do the uninsured illegals at the local hospitals receive all the free healthcare they need for them and their families upon demand, while the working class go without because they can't afford it?

Will governmental-run healthcare change that at all? I don't think so.

The consumer should set the price, as in most other industries.

I have a hard luck story that is true. The family had dentist exams scheduled when my husband was employed and insured, but when the appointment time came up, he was neither.

I called, explained the situation, and the receptionist said, come on in, you are established clients.

When leaving, I went to pay for the visits, the billing secretary printed out the bills and asked for our copay and I said, I have to pay the whole amount as my hubby's insurance had expired and he was between jobs.

The bill for the network charge with my copays was taken away and a new bill printed that was three times the previous bill. I wrote my check for the first amount, wrote paid-in-full on the memo, and gave it back.

I pointed out that I was paying them today in as close to cash as they were going to get, and I was not costing them additional billing hours or waiting for a payment to arrive in the mail.

I have never gone back to that dentist and I loved his work. The check was never cashed, and I did receive a call from a collection company about nine months later.

I explained in full what happened and sent a copy of the check carbon. His office refused payment of an amount that they would have accepted from another source, so I don't feel I wronged him.

Had it been a repair on my auto, should he be allowed to have so many sets of prices?

A side note, but on topic: At the time I did some paid survey work ($25 for opinions seemed like a dreamy job) but I cannot believe the way prices are set for many services in this country.

Cellphone service, lasik eye surgery, and several other medical procedures and medication surveys all approached pricing of the service as: "How much would you be willing to pay for such a service?"

All of the services I surveyed for were made available, and I saw the pricing was higher than what I had chosen, and wonder, did the companies set their profit margin or did they just charge what people were willing to pay regardless of whether they were profiting 1000 percent or just 10 cents, because that's what people were willing to pay?

I know they are making as much money as they can possibly get before some government regulation caps their profits. Isn't that capitalism? Or is it profiteering?

Who shops around when they are ill or need immediate care?

One could make a case that basic services should be priced about the same, and electives can be as artistic in pricing as they want.

I research who I go to and wouldn't mind paying a bit extra for someone who has a spotless record, as opposed to a doctor who has active malpractice suits against them.

I have to stay with the consumer should set the prices--but with the third-party payers it is hard to know what you are paying.

It sure is an odd pricing system. The buyer has no idea (and with insurance, couldn't care less) what the price will be, before asking for the service, so the provider sets some arbitrary price and demands payment. The (uninsured or underinsured) buyer is surprised and outraged.

The insurer tries to obtain at least some predictability of costs, and so negotiates fees in advance with some set of providers, but they can't do so with all the providers that their policyholders might choose (in ignorance of their fees) to use.

I'd like to see a law that obligates all medical service providers to have a Web site and to post their fees for every service, and be obligated to stick by them until they post a revision.

Then, before the buyer gets sick or injured, they can do some comparison shopping, surprises will be reduced, and there will be some assurance that all buyers from any one provider will be charged similar fees for similar services.

SAM RESPONDS:
You make some excellent points--in essence noting that free market forces don't work in healthcare because of a lack of transparency.

However, the big problem is that people are in no mood to "shop" for service when they are extremely ill, and in fact may be in no position to do so.

In addition, do you really just want to go to anyone who posts the lowest price, the "Crazy Eddie," if you will, of healthcare, who says, "Our prices are INSANE!!!" Quality is also an issue, especially if your life is at stake.

In other words, a heart transplant is "worth" something different from a relative novice than from a world-renowned surgeon, right?

More complications!

MH GETS THE LAST WORD:

Why should people shop for medical services only when they are already ill or injured? That's too late; it's actually irresponsible. Reminds me of the old joke: "Too late to fix the roof when it's raining. No need to fix it when it ain't."

When medical service providers are identified with their fee schedules on line, people can pre-arrange for all conceivable kinds of medical services with willing providers, at fee schedules known to both parties in advance.

World-class heart surgeons can post world-class fee schedules, if they can find people willing to sign up for them. Novices might have a harder time attracting customers unless they set lower fees. Rich people will be able to buy the best services, poor people not the best --like everything else in life.

Health insurance can work in such a system. If you want to buy health insurance, the insurer would get your list of service providers that you would use--indeed, they would probably be happy to create your personal network of service providers for you.

Taking their fee schedules, your personal characteristics and insurance choices into account (deductibles, covered services, age, health status, smoking history, weight, family medical history, genetic data, etc.), the insurer can price your coverage--including coverage for emergencies while away from home and your personal network of medical services providers.

What about those irresponsible people that don't bother to make these arrangements in advance? Our problem is that we treat grownups like children, so that is how a lot of them act. We need to treat grownups like grownups, letting people live and die with the consequences of their choices.

What about those people who already have serious health problems, or for other reasons can't afford the fees or the insurance premiums that actually price for their expected costs?

That's not an insurance issue--that's an issue of charity, an issue for political debate about whether to create an "Uninsurable and Indigent Patients Fund" that would be funded by political means. Don't call it "insurance."

Sam Friedman raises an interesting and fair question--one that could and should be answered--$250,000.00 for a bone marrow transplant?

Hospitals expend huge resources on such procedures. It might be sensible for the pricing critics to do some evidence-based research into the actual costs of providing services to patients.

The Department of Health and Human Services' Centers for Medicare and Medicaid Services has essentially done this when they devised, and annually revise, the national DRG payment system for Medicare, which is based on average resource utilization over large populations.

Remember that hospitals already provide tremendous amounts of unreimbursed care to uninsured and under-insured patients as it is, but cannot continue to lose money on insured patients and the "falsely-insured" also, and then expect to make up the losses in uninsured, under-insured, and falsely-insured volume.

While the overwhelming majority of hospitals are genuinely non-profit in name, in actions and in deeds, the health insurance industry is on the contrary invariably and strictly profit-motivated. They are forever seeking increasing financial performance for their shareholders-- including their executives, who just happen to be the decision-makers for these controversial coverage decisions.

Michael A. Sedrish, MD
Director of Utilization Management
MediSys Health Network

It's difficult to find any public figure willing to address the three major reasons for runaway healthcare costs:

1). A high percentage of all healthcare dollars are spent prolonging life, when the individual is beyond recuperation and is ready to die. Medical staff and family just don't know when to "let go."

2). Technology advances are constantly creating new procedures and new medications, often at tremendously high prices. Is it appropriate to use every possible resource, regardless of cost?

3). Many individuals take little responsibility for retaining good health. Is it the responsibility of everyone else to pay for the costs of individuals who take no responsibility?

This question applies whether the U.S. healthcare system is private or taxpayer-financed. Even today, this subsidizing applies to group-health plans and to Medicare and Medicaid.

Subsidizing poor health habits does not encourage healthy behavior.

Michael Moore does not address any of these points in "Sicko," nor do Democrats or Republicans in any of their healthcare proposals.

All three of these issues will mushroom in future years, until society makes some tough decisions.