Make Insurance Honest Again
by Kristin Held, M.D.
Republicans campaigned on a pledge to repeal and replace Obamacare. The electorate responded to this promise, and Republicans now control the House, Senate, and White House. So, what’s the hold up?
The holdup is that politicians succumb to pressure from special interest groups (insurance corporations and hospital associations) that benefit billions upon billions of dollars in a convoluted system of billing, subsidizing, and taxing to the point of insanity. These third-party entities feed off a medical-industrial complex that consumes more than $3.2 trillion yearly. They want to keep their hands on this money. Individual patients and doctors, by comparison, have no power or money to influence politicians.
In a recent Wall Street Journal piece, Daniel Henninger opined that the Freedom Caucus led by Congressman Mark Meadows was responsible for fracturing the Republican Party and delaying the leadership’s repeal of Obamacare. But this session has not considered a “Repeal Obamacare” bill. There was only Paul Ryan’s American Healthcare Act (AHCA)—put together in conjunction with insurance executives and hospital association lobbyists, behind closed doors with physician Senator Rand Paul knocking to no avail, and thrust on the American people with no messaging, in a take-it-or-leave-it condescending fashion.
Ryancare, AKA Obamacare 2.0, would have led to another 15 to 20 percent increase in premiums, according to the Congressional Budget Office, while leaving intact the expansive Obamacare insurance regulations that make insurance so expensive and creating yet another new government subsidy.
The Freedom Caucus, the Tuesday Group of “moderates,” and others, can trade accusations, but playing the blame game helps nothing. The goal is to make medical care in America great, accessible, and affordable, particularly in catastrophic circumstances. This requires that we make insurance affordable again, and to do this we must make insurance honest again.
One of the biggest deceptions of of all times is that the actual cost of medical care is so unfathomably expensive that no one could afford it without insurance. This myth is perpetuated by the insurance and hospital industries, because it is part of a perverse, convoluted, deceptive business plan. Understanding this scam is essential to calling it out and fixing it.
Politicians decry huge hospital bills, and accordingly they claim they must support federal subsidies, Medicaid expansion, and even single payer, government-run medicine, recounting anecdotes of medical catastrophes. For example, a member of the Tuesday Group told how he tragically lost a child and would have been bankrupted by a million-dollar hospital bill were it not for his health insurance, and based on this he was unable to support repeal and replace of ObamaCare.
In reality, no one ever pays those huge bills. They are fabricated and inflated to maximize profit for insurance companies and hospitals. The mechanism for doing this is called the Chargemaster. Care can be and is rendered a fraction of the cost, as the Surgery Center of Oklahoma demonstrates.
Insurance companies negotiate with the hospitals to pay a percentage of the bill or a flat fee for a specific operation. This is called an “allowable.” While the bill is huge, the allowable is drastically less. Further, the insurance company pays only a fraction of the allowable because, on top of the monthly premium, the patient pays a deductible and a percentage of the allowable, called cost-sharing. The insurance company also receives government subsidies.
By overbilling and then accepting a lower payment (the allowable) from the insurer, the hospital is able to report that it has sustained a loss from providing medical care, which it calls “uncompensated care.” Then the federal government writes a check called the Disproportionate Share Hospital (DSH) payment. The more phantom uncompensated care a hospital reports, the more subsidy money it will get from the government. DSH payments escalated from $1.3 billion in 1990 to $17.7 billion in 1992. Further, because hospitals report these manufactured phantom losses, they are deemed nonprofit and pay no taxes.
This is the hospitals’ sinister “marketing plan.” It terrifies patients when they get their bill, which is extremely difficult to understand, as if by design, and rarely itemized
My perfectly healthy 22-year-old daughter was in a near fatal accident last year. My amazing physician and surgical colleagues saved her life. Her hospital bill for just under one week was more than $100,000.00. The insurance company paid the hospital the allowable- $40,000.00, at which the hospital actually makes a profit while claiming $60,000 in uncompensated care and receiving DSH money from the government. The hospital, being “nonprofit,” pays no taxes on all this money. My daughter paid her $3,000.00 deductible on top of $1200.00 each month in premiums, for a total of $17,400.00 last year, which means the insurance company actually paid the hospital only $22,600.00 of the $100,000.00 bill. In her prior 22 years of life she never had a claim, so the insurance company is still way ahead. Had we been uninsured, the hospital would have billed us the full $100,000.00, I would have tried to negotiate the bill down to the Medicare rate and may have saved more money than the allowable negotiated by my insurance company. An uninsured patient should never just pay the falsely inflated hospital Chargemaster bill.
This explains why there is no transparency. Insurers don’t want patients to know about the “allowable” they have negotiated with each hospital. They want people to see only the inflated Chargemaster bill.
Politicians cannot keep their promises to bring us affordable care until they expose this dishonest and corrupt collusion.
Kristin Held, M.D.