The High Cost of Health Insurance – Explained

The High Cost of Health Insurance – Explained

One of the frequent debates I run across with people when discussing healthcare reform is the common misconception that Free Markets (profit) caused health insurance, and thus healthcare, to become expensive beyond reach for most Americans.

On the contrary, it wasn’t free markets at all, but rather government meddling, that caused America’s Healthcare cost woes.  But to understand this, one must delve into the history of health insurance in America. 

My friend, Dr. Paul Hsieh, does a phonemenol job of documenting this history, in his white paper, Moral Healthcare vs. “Universal HealthCare”.

This document provides an incredibly detailed picture of the historical events dating all the way back to the Great Depression, that led us to rampant healthcare cost inflation. Very few Americans and non-Americans have a clear understanding or picture of these historical events and thus, naturally conclude that free markets are evil, uncaring entities that leave fellow citizens to “die in the streets”.

A brief excerpt from Dr. Paul Hsieh’s writing creates an analogy to describe the common sense outcome of what would happen to homeowner’s insurance, if we used it in the same way that we use health insurance :

“To understand this, consider that homeowners generally pay for their own house maintenance such as lawn work, painting, and remodeling. Routine maintenance is not covered by homeowners insurance; only damages resulting from a tornado, fire, vandals, or some other catastrophic event are covered. But suppose the government suddenly decreed that it would exempt from income taxes any money spent on homeowners insurance. This would reduce taxes for insurance-paid repairs. Accordingly, people would seek insurance policies that cover routine home maintenance, such as painting, carpet replacement, and fence and deck maintenance—and insurers would provide them. Although these new policies would cost more, they would seem on the surface to be a bargain because homeowners would be spending untaxed dollars. Demand for home repairs would skyrocket. More money would be spent on home maintenance, and the cost of home insurance would quickly outpace that of other goods and services. To remain in business, home insurers would limit coverage for more expensive repairs. Simultaneously, to curry favor with their constituents, politicians would seek mandates to expand coverage, and, of course, they would demand further regulations to make sure that poor homeowners had “access” to homeowners insurance. This is precisely what has happened with health insurance.”

Believe it or not, routine healthcare and chronic healthcare is incredibly affordable when it’s not insured, and when it is provided in the free market (meaning that the actual consumer of the care pays for the care – not an insurance plan or the government).  And when insurance plans can mitigate the risk of pre-existing conditions and not have to pay super-inflated prices for routine healthcare, like lab, chemistry, or a physical, they suddenly become very affordable too, providing peace of mind for the statistically unlikely catastrophic medical event.

Compare the charges pictured below from a hospital to an insured patient vs. the cost of the same services, provided from a direct primary care (DPC) doctor, Epiphany Health, that takes direct payment from the consumer.  Imagine what the total annual spend per person in America would be if everyone used direct primary care instead of insurance to pay for routine healthcare. I don’t think even Canadians would be able to boast such low costs. Is it really morally superior to impose a $10,000 tax on your neighbors (Canadians consistently remind me their care costs about half what we pay for our hospital charges) than pay out of your own pocket in the free market for something that would really only cost about $280?

Hospital Cost billed to 3rd party payer vs. Free Market Cost for same procedures

I’ve often been told by Americans and non-Americans alike that free market healthcare is immoral, and that we should do what every other “developed country” does and adopt a single-payer healthcare system, where the government pays for, and thus controls the healthcare system, providing “equal and excellent” quality care to all fellow citizens.  But is the quality really “excellent ”? Read some of these stories on Twitter, #Canadawaits.  (If you’re Canadian, you will presumably tell me that these cases are ‘anecdotal’ and not representative of your system. You’ll tell me I need to so some research, which you’ll assume I have not done).  I suppose universal healthcare is perceived to be “excellent care”, when you’ve never been exposed to free market healthcare before.

Canadian Healthcare 

“The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries.” — Winston Churchill

Direct Primary Care (Free Market Healthcare)

But once you’ve had a taste of what free market healthcare is like (especially if you’ve been on a wait list), then, like me, you’ll just want to share it with everyone, and you’ll want to find ways to expand it.  After all, a rising tide raises all boats, like a booming economy raises people from poverty, like affordable, high-quality healthcare becomes accessible to nearly everyone, while freeing taxpayers to use their money for other worthy causes, such as providing charity to family or those in need (ideally a very, very small segment of society in a free country).  Oops, did just I say “nearly” everyone?  (oh, the hypocrisy)! Yep, that’s right, I said, “nearly” everyone.  In a free economy, there is  some inequity, but, free market healthcare would be accessible to the masses, without the negative consequences of taxation or the need for health insurance for routine medical expenses.  Catastrophes would be covered by affordable “True” health insurance, without the requirement of extorting hard-earned income from your neighbor.  For the very small number of poverty stricken households, charity and safety net programs will provide equally good care, without the worry of waiting or government restrictions.

How Healthcare Should Be

We do not have free markets for healthcare right now, in America.  Wait!  What?? There are small pockets of free market healthcare popping up here and there, but what an amazing thing it would be if free markets in healthcare were the norm.

A lot of changes would need to be made in America to achieve the goal of free market healthcare.  The necessary changes are discussed in this Kindle book, written by Dr. James Brook.  It’s no simple matter, but it can be done, if enough people are willing to take the time and learn about the things that got us into our healthcare cost predicament in the first place.

If you want to learn about single payer healthcare, whether or not you should vote for it, or if you want to learn about American Healthcare history, I implore you to take the time to read the recommended books and white papers provided to you for free on this blog.  You’re a voter.  Learn before you vote!

PeakMed Life Centers now offers unlimited access to mental healthcare

PeakMed Life Centers, Colorado’s fastest growing DPC, now offers unlimited access to mental healthcare to its members.  Read about the particulars of this program on PeakMed Life Centers Blog.

Direct Primary Care from the Patient’s Perspective

We’ve known our doctor has been unhappy for at least a year. She spent more time doing paperwork than seeing patients (not an exaggeration, unfortunately), the Centers for Medicare & Medicaid Services were planning to pay her less every year because she refused to send them the patient files of all her patients—payments would be 20% less by 2020, if I recall correctly—and her workload was crazy trying to see enough patients to keep her doors open. She was one of a very small handful of independent providers who hadn’t sold out to the local hospital (which promptly raised rates in their newly bought practices because hospitals are on a more generous fee schedule. Yay, higher prices! Sigh).

So as of January, she switched over to Direct Primary Care (DPC), which means she has opted out of Medicare/Medicaid and doesn’t take insurance anymore. Patients can still submit to their insurance company separately (though not to Medicare or Medicaid).

Sounds like a few decades ago, right? When you saw your doctor and you paid your doctor, with no one in the middle. Well, almost.

Since DPC physicians are competing against “subsidized” insurance-paid physicians, many of them see a transition to a simple fee-for-service setup as dangerous. Even if they charge, say, half of what the other doctor charges, the DPC doctors aren’t competing against the total charge but against the patient’s copay. They appear to be more expensive. If not enough people are willing to pay the unsubsidized amount, they’ll go out of business.

What irony. The reason that I put the word “subsidized” in quotes above is because most people still pay their doctor’s fees, only through their insurance premiums instead of directly to their doctor. Insurance payments to your doctor are not insurance per se; they’re prepaid healthcare services, a far more expensive proposition, especially once you include the insurance company’s mark-up. (This is not an example of insurance company greed, by the way. This is how prepaid healthcare works, and should work. But that’s a post for another day.)

Very few providers will take that risk. I personally know one doctor, James Brook in Idaho Falls, who has created a successful fee-for-service practice. He has also written great book on our healthcare system and why it is so expensive: The High Price of Socialized Medicine. It’s worth far more than its $4.99 cover price.

To protect against this risk, many physicians have chosen to follow a concierge version of DPC, where patients pay a monthly fee. Some fees are outrageous, some are nominal, and some are on top of a fee for service. Our doctor chose a lower-end monthly fee that includes our office visits. This means my husband and I get to shell out even more money on top of our insurance in order to keep our current doctor.

That’s the bad news, but there’s also good news. She offers more in-depth services than before.

  • We have unlimited visits included in that fee, including a wellness exam that includes certain lab work.
  • We get same-day appointments if we call in the morning, or next day if we call in the afternoon.
  • We get access to labs at her cost. Sometimes that cost is less than the after-insurance fee.
  • We get access to cheaper prescriptions–in some cases much cheaper. Did you know that the copay on prescriptions is sometimes more than the cash price? It pays to shop around.
  • We get 24/7 access and can chat via email/phone/IM and resolve medical issues that way instead of going to her office.
  • Family members visiting us can go see her during a two-week period on a fee-for-service basis.
  • We can make appointments and get prescription refills online.
  • If we need her to, she’ll make house calls.

House calls. I feel a nostalgic sigh in the works, and I’m not old enough to remember when doctors made house calls.

Once we start using our doctor’s services, I’ll post on them. The doctor has also agreed to an interview once she has more time. Her office is busy arranging access to the pharmacy.

Yes, I’d prefer Dr. Brook’s setup, but I’m not going to complain. If this is what it takes to convince doctors to jump through the innumerable regulatory hoops to become DPC physicians, I’m willing to pay extra as an early adopter.

Cross posted at the The EclectiSite.