Isn’t “fee-for-service” the main problem with healthcare costs?

https://www.pilotonline.com/opinion/columns/vp-ed-column-sherlock-1208-20191208-xwslqqkt3fdt5j624jknanlhqe-story.html

The author makes a good case for ending healthcare monopolies by ending certificates of public need.

It makes sense to the extent that non-hospital testing and procedures are much cheaper.

Yet, the real culprit is fee-for-service. We have coding systems that are so complex that it take a 6 month course to get a certificate for competency. And the whole concept is to maximize billing by a convoluted method of charging (overcharging sometimes) for every possible pill, device, touch, consult, wink and nod.

And this has no relation to efficacy. Warranties are heard of. Over treatment and over diagnosis is handsomely rewarded. To put it more bluntly and cynically, a cured patient is a loss of income.

I believe the vast majority of doctors, NP’s, etc. would prefer a better system because they are dedicated to the profession of alleviating suffering. However, the consolidation and incorporation of large healthcare groups that are bought up by investors creates a buffer that clouds that patient-caregiver relationship.

Tales are told of ancient China where local physicians were paid fees by all the residents to keep them healthy. If one got ill, the payment stopped until cured.

Simplistic? Sure. But not without merit.

We are kind of doing this now through insurance which is essentially prepaying for care, but with costs spread among large populations. But the providers are paid for services regardless of need or outcome. Payments don’t stop when a covered person gets ill. Instead, they increase and continue as long as he is sick.

How to shift to a more results oriented system was addressed by ACA. But it never got a chance to improve.

And it is going to get worse. Healthcare organizations are consolidating to a degree that insurance companies are at a huge disadvantage for negotiation. It used to be that insurance companies would put providers in their network for a good price. Now, with the best providers joining corporations like Sentara, insurers have to pay to get the good docs in their network.

Good for business, bad for healthcare costs.

Every “reform” that has taken place or offered, including ACA (and the Libertarian one by Don) is essentially focused on insurance. Fine, except that insurance merely reflects the costs, prices really, of healthcare without addressing the problem.

And now that insurance is losing the whip hand in major regions, we can no longer expect insurance to be an effective advocate for lowering healthcare costs.

So what to do? Eliminating COPN might help, but with the powerful monopolies already in place, it might be a case of closing the barn door after the horses are gone.

A start might be to look at auto repairs. Most go by a book for set prices. Warranties are part of the deal. Allow more independent clinics and diagnostic facilities and loosen laws regarding NP’s.

And the perennial bugaboo of regulatory pressures as just about all other nations with less costly and universal or near universal coverage have.

IMHO

15 thoughts on “Isn’t “fee-for-service” the main problem with healthcare costs?

  1. RE: “We are kind of doing this now through insurance which is essentially prepaying for care, but with costs spread among large populations.”

    Nope. Insurance doesn’t prepay for anything. Insurance companies collect and hold premiums until covered events occur. Then they pay for them.

    You’ll never come up with a workable solution to reduce the cost of healthcare until you understand how insurance works. Here the important thing to grasp is that insured patients are beneficiaries, not buyers.

    If insured patients were buyers, they would have rights as defined in their contracts with sellers, as did the residents of the Chinese communities you cite who hired physicians. As it is, insured patients have contracts with insurance companies, not physicians.

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    1. Do you know how they determine your premium?

      Basically, they take what they paid out last year in covered costs, divide it by the expected number of clients, tack on overhead and that’s it. The law says that if they overcharge by more than some percentage, then they have to return the money to the clients — they literally send a check to last year’s policy holders.

      Now, to be sure, that “divide it by the expected number of clients” is conditioned, i.e, weighted by age, weight, lifestyle, occupation, and tons of other actuarial hocus pocus, but the goal is to cover last year’s costs plus the acceptable amount of additional. BTW, the law limits them to 20 cents on the dollar for “overhead”. That’s the money they play with to be competitive.

      The fact that the LAW says they MUST spend 80 cents per dollar of premium on actual costs means it is prepay.

      Liked by 1 person

      1. RE: “The fact that the LAW says they MUST spend 80 cents per dollar of premium on actual costs means it is prepay.”

        Not really. It is technically and logically impossible to “prepay” for things you don’t receive. For example, if your insurance policy covers stroke, but you never have a stroke, then you couldn’t have “prepaid” for it.

        In other words, as the insured your policy is a contract for risk management, not actual services. The 80% rule you cite only means that the insurance company operates in good faith, performing the function it is in business to perform: risk management.

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    2. Health insurance differs from other types of insurance, say automobile, in three key ways:

      Health insurance covers routine expenses. Health insurance covers the cost of predictable things, like an annual check-up, mammograms or cholesterol tests. That’s like asking auto insurers to cover the cost of a engine tune-up.
      Health insurance covers small, random expenses. People expect health insurance to pay to visit a doctor for minor things, like confirming that we have the flu or wart removal. Auto insurance doesn't pay for the costs of replacing a burned out headlight.
      Many Americans get their health insurance through their employers, not on their own, as they do with their automobile coverage. As a result, a lot of people don’t really know how much they’re paying for it, and thus, don’t know how much their health care really costs.
      

      A part of health insurance really is insurance — the part of the policy, for instance, that pays to cover injuries that truly are unforeseen, like covering the cost of stitches after you cut yourself while slicing a bagel or the costs associated with catastrophic illnesses.

      But most expenses that Americans expect their health insurance to cover — annual check-ups, prescription drugs, wart removal — are not unforeseen expenses. In that case, health insurance is often more like a cash-flow management policy.

      Liked by 1 person

    3. “ Insurance companies collect and hold premiums until covered events occur.”

      So I am paying in advance to the insurance company for care costs should I need them.

      That is pre-paying as far as I understand it.

      And there is no doubt that I have a contract with the insurance company. Nothing new there.

      So does the doctor. He has agreed to accept its payment schedule for services. I have agreed to pay it for coverage. In effect, the insurance company has negotiated for me.

      Liked by 1 person

      1. RE: “So I am paying in advance to the insurance company for care costs should I need them.”

        No. You contract with the insurance company to have care costs covered, should they materialize. It may seem like prepayment to you, but if the care costs don’t materialize, then you haven’t paid for anything.

        In other words, your insurance contract is for managing health care risks, not receiving health care.

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        1. “ It may seem like prepayment to you, but if the care costs don’t materialize, then you haven’t paid for anything.”

          If I don’t crash my car, burn my house down or don’t become disabled then I won’t see a return on my “investment” But, it is not an investment. It is protecting my assets. And that is insurance.
          Much like putting a lock on my door or bringing an umbrella on a sunny day.

          What makes it affordable are the actuarial realities which say that not everyone will get damaged.

          As far as managing my health risks, that is up to me and doc.

          But were something to happen that I can’t afford then I won’t receive healthcare. Unless, of course I have insurance.

          I know you don’t think much of insurance. But for many of us, paying for a half million dollar disease or accident would be economically problematic. I prefer to pay for and carry the umbrella.

          (No, Travelers didn’t pay me a nickel.)

          Liked by 1 person

          1. RE: “But, it is not an investment. It is protecting my assets. And that is insurance.”

            If you like the risk management bargain you make with an insurance company, more power to you. Just, please, don’t contribute to public ignorance by misrepresenting the nature of the contract. Insurance is not prepayment for services.

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        2. Actually, insurance is for both managing the risk of serious illness AND for controlling routine healthcare costs.

          If you need an appendectomy, you would not be in a good bargaining position. You don’t have the time to shop around. But your insurer buys appendectomies in bulk, and has already negotiated a better price than you could hope to.

          The problems we have with insurance result from the purchaser and the beneficiary being different. Your employer, or the government, buys your insurance and their interests do not precisely match yours, and your demands do not match their budget. It’s a broken market.

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          1. That true except for the 15% or that but private insurance. I did that for my family when in business. It was cheaper to get individual for my wife and before we qualified for Medicare.

            But still very high even with 5000 deductibles.

            But underwritten, individual insurance was rife with issues such as delayed, denied, dropped or rescinded coverages. And if you tried to find a better company pre#existing conditions were a huge problem. And this was true for small businesses as well.

            In a sense, the individual market was closer to free market.

            Liked by 1 person

          2. RE: “The problems we have with insurance result from the purchaser and the beneficiary being different.”

            Exactly. It might help if more people understood that the difference between the purchaser and the beneficiary occurs because of the insurance arrangement.

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  2. Nothing provides a better value than a competitive marketplace.

    Always remember that delivering health care is not nearly so complicated as stocking a supermarket.

    There is no good reason that health care should be any less affordable than groceries. Of course, highly educated doctors services cost more that potatoes, but you don’t need doctors every day like groceries.

    Everything wrong with healthcare is the result of government meddling in the marketplace.

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    1. RE: “Nothing provides a better value than a competitive marketplace.”

      I agree. To have a market, however, buyers must contract on their own behalf for purchases. When patients use insurance to pay for health care they aren’t contracting for purchases, but for promises that purchases will be made for them by a third party. They give away their buyer’s rights.

      Cost distortions that a healthy market would otherwise prevent become inevitable as a result.

      Like

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