Gordon C. Everest, Professor Emeritus of MIS and Database Management, Carlson School of Management, University of Minnesota
What don't we get about healthcare in this country?
Our system is fraught with perverse incentives among three parties: the provider, the (insured) "patient," and the payer insurance company. When you, the patient, have a health related problem or question, and IF you have insurance, you go to see the doctor, clinic, or hospital. The only incentive to NOT go is the copay or deductible (which is really getting out of hand) or the prospect of paying the whole cost if uninsured. The provider has no incentive to say 'no', and every incentive to say 'yes'... IF you have insurance (or, even better, if you will pay the full "sticker" price in cash). They get paid for your visit so their bottom line incentive is to maximize your visits (or refuse to see you if you are uninsured or underinsured).
Third are the insurance companies. They get the bill from the provider. Their main incentive is to NOT pay or to pay less. This sets up a battle between providers and insurers. They will try hard to see if a provider's bill can fall through the cracks of their policy. The provider might recode a diagnosis or treatment to get it approved. The patient can appeal a denied bill.
Insurance companies are not in business to lose money. They will raise premiums, raise copays and deductibles, cut coverage, drop out of a market, or worst case, shut down in bankruptcy. The shareholders (even if a nonprofit) will not tolerate sustained losses. The ACA said that insurers must spend out at least 80% of their premiums for the delivery of healthcare. They get to keep 20%? Those are good odds in any business. The industry was not even at that level yet when the ACA passed. What a sweet deal – they could increase their net revenues even more. This means that 20% of every dollar spent on healthcare contributes not one iota to the health of our society (sure, they try to make us think they do). That is a pretty hefty margin which we would not tolerate in many other industries.
The purpose of insurance is to cover rare and catastrophic events (e.g house fire, car accident), not for regularly incurred expenses. Furthermore, both of those examples are mandated -- you can't get a mortgage on a house without fire insurance; you can't get a car license without proof of insurance. It is really a misnomer to use the label "health insurance" at all.
Interesting that the only two parties not fighting are the patients and the providers. They are the buyer and seller in this marketplace! However, add the insurance companies to the mix and we no longer have a bonafide marketplace.
Healthcare is a right in any society, or should be. Just as voting is now considered a right (which we finally got for women, blacks, and yet to come prisoners). Education is a right for everyone which is why we have public schools, and why we mandate that every child must be enrolled somewhere. It is in the best interests of society as a whole. Likewise, health care must be universal, and it is in most developed countries. The default here is: you are NOT covered... unless you "opt in" by buying insurance or applying for government aid. What bothers me more than anything is some people not having access to at least a minimal level of healthcare, particularly for preventative measures and catastrophic events or conditions.
We often criticize other countries for their system of "socialized" healthcare (e.g, Canada) saying that healthcare is rationed. Well guess what, it is also rationed in the US ... on the basis of money. If you can afford it (by having insurance) then you get the service... the insurance companies can't say no (if it is coded right), but they can pay out less.
The Republicans argue that everything will be fine if we just have an open market – greater competition leads to lower prices. True. However, anyone taking an introductory (micro)economics class can tell you that markets only work well if there is complete, free, and open access to information and the ability to negotiate. This includes pricing, quality and availability of goods and services, peer and user ratings of providers. We have anything but in the healthcare industry. You want to improve the ACA? Mandate the availability of information. That includes prices for various services, set by the provider not the insurance companies. We must abolish the rule which says a provider must charge someone willing to pay cash, the same as the rate billed to the insurance company, which is never the same as what they get paid. I have seen payments cut by as much as 90% of billed charges. Both providers and patients are hurt by this practice. In effect, there is only a discount (to the insurance company) if you have insurance, otherwise you are expected to pay full "sticker" price, and those can vary wildly. What's more, to be in the insurance company's network, providers must agree to NOT give discounts to cash patients. We all know that paying full price rarely happens – people just declare bankruptcy, which is increasingly prevalent. This keeps us captive to the insurance companies. Again, the system is one in which they cannot lose.
The ACA was a band aid which only delayed the inevitable increase in costs. What happens after you expand the risk pool to include more non-sick people paying premiums? There was no viable mechanism to control costs, made worse by mandating the coverage of pre-existing conditions and older children, and removing the lifetime cap. These were good things to do. Perhaps what we got in the ACA was the best we could do at the time. But much work remains to dig ourselves out of this predicament.
There, I have said my piece. I hope someone is listening.