Health Insurance Should Be For Catastrophes
This has been said before -- that we do health care payments all wrong. We should pay for preventive care and minor expensive and be insured against the major ones.
This below is a terrific example of how health insurance, as its come to be used, like massive student loans that raise the price of education, cause the price of medical care to go through the roof.
Surgeon Dr. Jeffrey A. Singer writes in the WSJ of a patient who saved $17,000 by NOT going through his "insurance" company:
The insurance policy, the clerk said, would pay up to $2,500 for the surgeon--more than enough--and up to $2,500 for the hospital's charges for the operating room, nursing, recovery room, etc. The estimated hospital charge was $23,000. She asked him to pay roughly $20,000 upfront to cover the estimated balance.My patient was stunned. I received a call from the admitting clerk informing me that he wanted to cancel the surgery, and explaining why. After speaking to the man alone and learning the nature of his insurance policy, I realized I was not bound by any "preferred provider" contractual arrangements and knew we had a solution.
I explained that just because he had health insurance didn't mean he had to use it in every situation. After all, when people have a minor fender-bender, they often settle it privately rather than file an insurance claim. Because of the nature of this man's policy, he could do the same thing for his medical procedure. However, had I been bound by a preferred-provider contract or by Medicare, I wouldn't have been able to enlighten him.
Hospitals and other providers make their "list" prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price. Anybody who has seen an "Explanation of Benefits" statement from a health plan will note a very high charge from the provider, and an "adjusted charge" based upon the contracted fee schedule, which usually leaves the patient with little or nothing in out-of-pocket expenses. The only people routinely faced with list prices are those few people who have insurance like my patient's--that doesn't include a pre-negotiated fee schedule with contracted providers--or those who have no insurance.
Most people are unaware that if they don't use insurance, they can negotiate upfront cash prices with hospitals and providers substantially below the "list" price. Doctors are happy to do this. We get paid promptly, without paying office staff to wade through the insurance-payment morass.
So we canceled the surgery and started the scheduling process all over again, this time classifying my patient as a "self-pay" (or uninsured) patient. I quoted him a reasonable upfront cash price, as did the anesthesiologist. We contacted a different hospital and they quoted him a reasonable upfront cash price for the outpatient surgical/nursing services. He underwent his operation the very next day, with a total bill of just a little over $3,000, including doctor and hospital fees.
I appreciate the math involved. But let's not congratulate ourselves too much for having saved so much money. He still had to pay 3000 dollars.
In fact, I find it a little depressing that a person can spend over 3K, and be in a self-congratulatory mood because of it.
Patrick at August 23, 2013 12:08 AM
He was paying for a surgeon and anesthesiologist, two highly trained professionals. He was also paying for the surgical suite and staff which also costs money to create and maintain. And it was for a hernia surgery.
So how much do you expect to pay if you blow out your car's transmission? It would probably be between $1000 and $1500. So $3K to work on a body isn't really that bad.
Jim P. at August 23, 2013 5:02 AM
Amy Alkon
https://www.advicegoddess.com/archives/2013/08/health-insuranc-8.html#comment-3871046">comment from PatrickBut let's not congratulate ourselves too much for having saved so much money. He still had to pay 3000 dollars.
If you clicked on the link, you'll note that he was having abdominal surgery to repair a hernia; they weren't just putting a bandage on a booboo and sending him home.
Doctors go through years of training and years of residency (and lost sleep). As Jim P. points out, when my car had some issues, it cost me $900.
Amy Alkon
at August 23, 2013 5:52 AM
What I mean to say is that the procedure should have cost 3K in total, with insurance picking up the tab and perhaps a 50 dollar copay from him.
What happens if you get a hernia and just don't happen to have 3000 dollars laying around?
Also, I wouldn't liken a hernia procedure to a car's transmission. Depending on the severity, a person can actually continue to function with a hernia. Your car will not run without a transmission.
Patrick at August 23, 2013 6:09 AM
Amy Alkon
https://www.advicegoddess.com/archives/2013/08/health-insuranc-8.html#comment-3871070">comment from PatrickWhat happens if you get a hernia and just don't happen to have 3000 dollars laying around?
This is why I got into an HMO. I thought about this when I was presented with a number of options when I worked for a company, and when I left, figured I'd need to get health care that would remain affordable even if I didn't earn a hefty salary or earned far from that.
Of course, my health care would have remained affordable but for Obamacare. Now that I, who had health care all my adult life that I paid for -- personally, out of pocket, every month -- will have to pay for all the people who went without, gambling that nothing bad would happen to them or if it did that other people would pay. Guess they gambled right!
Amy Alkon
at August 23, 2013 6:20 AM
He still had to pay 3000 dollars.
To quote Amy: patient who saved $17,000 by NOT going through his "insurance" company. Sounds like a deal to me.
I R A Darth Aggie at August 23, 2013 6:49 AM
"What happens if you get a hernia and just don't happen to have 3000 dollars laying around?"
I guess the answer is "you should have 3000 dollars laying around". I don't say this to be facetious. I'm just pointing out that the concept of self-insurance seems to be a mystery to a lot of people today. Don't forget what the purpose of insurance is: basically it's a cost-spreading exercise. In most areas of insurance other than health, most people pay in more than they get out. They do that because a payment that's predictable and the same every month is something you can plan for, whereas a catastrophic, low probability event is very hard to plan for. But what the insurnace company does for you, you can do for yourself, at least to an extent. Put back some money every month and keep it for unpredictable expenses.
Of course, there are practical limits to self-insurance, and that's why we have insurance policies. Among other things, the insurace policy gives you access to a pool of resources much larger than your own, so when something truly catastrophic occurs, you aren't wiped out. But getting something done through insurance is always going to be less efficient than doing it yourself, so there's a tradeoff.
Cousin Dave at August 23, 2013 7:06 AM
Years ago I had a catastrophic insurance plan. I paid for all the mundane things, which worked because I rarely get sick. Then I had a car accident and needed an MRI. I called the imaging center I was referred to and said I didn't have insurance and needed to know what the cash price would be for everything. $1,200 - for cervical and lumbar MRI with and without contrast and $200 for the radiologist's report. Went in, paid my money, got the MRI and then got a bill a week later for almost $8,000 inquiring if I had insurance. I almost had a heart attack! I called the billing office and found out that I was paid in full, they just wanted to know if I had insurance so they could bill them $8,000. I still marvel at the inflated cost for the services if I had had a traditional health insurance plan.
sara at August 23, 2013 7:07 AM
I have catastrophic, as I'm in rude good health, and I pay cash for the MDs I do see and get a sizable discount for each. Obamacare will force me to pay for some plan I don't really need or else I'll pay some penalty tax, which is much less than the monthly rate for whatever plan I get stuck with.
KateC at August 23, 2013 7:54 AM
"What happens if you get a hernia and just don't happen to have 3000 dollars laying around?"
The same thing that happens if you drop a transmission and don't have $1200 laying around - you examine your options and act accordingly. Park the car and save the money, sell the car, or borrow the money. Live with the hernia, save up the money, or borrow it.
(This time, people only drive to work in cars with working tramsmissions, Patrick.)
Grey Ghost at August 23, 2013 8:06 AM
I find 3000 dollars a rather paltry amount of money to have on hand for emergencies.
I try and keep 10,000 available for emergencies, and would not feel comfortable spending money on vacations, or any other luxury items unless I had it.
Isab at August 23, 2013 9:58 AM
Patrick: "Depending on the severity, a person can actually continue to function with a hernia. Your car will not run without a transmission."
Imagine how expensive auto insurance would be if it was expected to cover the cost of things like transmission repairs and preventive maintenance. There'd probably be millions of people who couldn't afford it. Politicians would love it. Maybe Congress and the president could pass a law requiring employers to provide auto insurance too, with no exclusions for pre-existing conditions.
$3,000 for a hernia repair is a pretty good deal. People from the UK and Canada who come to the USA for hernia repairs are paying $6,000 to $10,000. But in many cases the price may include the cost of a hotel, a limo to and from the surgery center, and a visit by a nurse the day after surgery.
Ken R at August 23, 2013 12:30 PM
Yes, Ken R.
It continues to amaze me that there are people out there who find the idea of paying three thousand dollars out of pocket for a non emergency surgery like hernia repair an unacceptable expense, also think that somehow things are better and more fair under socialized medicine, where you would pay an extra ten thousand a year in taxes to be put on a waiting list of a year or more for that same proceedure.
The fact that foreigners find paying cash in the US a better deal than waiting for treatment in their home country should tell you something about how Obamacare, is going to (not) work.
Isab at August 23, 2013 12:58 PM
I self insure my pets. 20 bucks a month goes into the "kitty kitty" for their vet bills. It has built up to quite a nice little sum of cash, despite 2 illness/euthanasias in the last couple of years. I might add, though, that I don't believe in extreme measures for my pets any more than I do for myself.
When my time comes, I'd be overjoyed to have Dr G just put me to sleep and send my ashes to the pet cemetery, all for under 200 bucks.
bmused at August 23, 2013 2:01 PM
Piece of advice -- when talking to novices about Obamacare call it by it's full name: "Affordable Care Act" every time. It plant's a different picture in the person's mind.
Jim P. at August 23, 2013 5:56 PM
"We should pay for preventive care and minor expensive and be insured against the major ones."
"But let's not congratulate ourselves too much for having saved so much money. He still had to pay 3000 dollars."
Well, who do you think SHOULD pay for YOUR injuries?
Everyone but you?
No. THIS is fair.
Life is not. Be ready, and be responsible!
Radwaste at August 23, 2013 7:56 PM
I was able to get a 20% cash discount from my dentist when I was between jobs. I didn't visit a doctor otherwise in the time.
And based on what I have seen and an ex-GF told me worked for an HMO...what would likely happen is you would have to have to MDs agree that the thing to do was to have the surgery and then it would be scheduled 3-6 months out. Now if you have been a real good customer and not had any significant claims in years they might do better. She said there was no way she would have the HMO except for she worked there.
The Former Banker at August 23, 2013 10:39 PM
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