Friday, March 2, 2012

Health Insurance Makes Sense! (yeah right)

        A friend called me this week after his wife had a baby, their fifth.  They’ve been through this before, they know the drill.  My friend now works in a small family business with a total of five employees.  They all have “catastrophe insurance,” but they pay for everything else out of pocket. 

        SO – their baby was born, everyone is fine and healthy.  Mom says she’s ready to go home.  Mom and Dad know they are paying for the entire delivery with cash, so they ask how much they’d save if they left today instead of tomorrow?

        They’d save nothing, the cost is the EXACT same.  The nurses are very kind and tell the mom that she should relax and stay through the next day.  The nurses are being very honest.  They don’t get paid any more if she stays an extra day.  They are really are just thinking about what’s easiest on the mom.  So stay the extra day – the cost is the same.

        My friend calls me asking: “How is that possible?  How can another night in the hospital for both mom and baby not change the cost at all?”  He asks me who he should talk to get an itemized bill so he can see how much cheaper it would be if his wife decided to leave that day instead of the next day.

        An Itemized bill?  It exists but it doesn’t matter.  Don’t get me wrong - The hospital knows how much it costs for every piece of equipment.  They know how much it costs to keep the lights on, the hourly wages of the nurse and CNA.  They know how much they pay the resident, the OB/GYN, and the Pediatrician.  They know the cost of each meal, each medicine, each cup of soda, each popsicle.  The administrators know the exact costs, because they pay for all these things every day.

         But the cost to them does not determine the customer price.  The two are hardy even linked.  Medicaid has determined how much they will reimbursed the hospital for a normal delivery.  They pay “x” amount for mom and baby to be treated the day of delivery and one day after.

        That’s how the hospital determines the price of a delivery – by how much government insurance pays.  They won’t charge you per item, they won’t charge you per day.  If it’s a normal healthy birth, they’ll charge you the flat fee…no matter what.

        WHAT?  How does that make sense?  I know plenty of businesses use flat rates, but that is determined by costs.  If a customer is willing to incur less costs, shouldn’t the business offer to charge them less?
How did all this start?  I don’t really know.  I do know that our view off health insurance is completely wrong.

        Most of us have health insurance but we never, EVER, use it.  We use pre-paid health care.  We pay our monthly fee to Blue Cross and then when go to the doctor we pay our co-pay (maybe $20.)  We pick up a prescription and pay another co-pay ($20), and we go home.  We take the pills, we get better, and the whole system worked.  Woo-Hoo!

        How much did the doctor’s visit cost?  Usually neither the doctor nor the patient have any idea.  This is the way it should be.  This way the doctor can treat the patient without thinking about costs, and just give them the best possible treatment…right???

        This system is moronic.  People pay, and they pay, and they pay – their insurance company.  As long as their visit to the doctor is cheap and their prescription is “covered” they don’t care that they’re paying 10 times more to the insurance company than the whole visit and prescription would have cost.

We don’t use health insurance, we use Pre-Paid Health care.

        Imagine if patients paid full price for all their regular visits - just like with your car. You pay for all the maintenance: oil changes, brakes, tires, belts, spark plugs, etc... The car insurance is used when you're in an unexpected accident and your car is totaled.

        Health care should be the same way. If you take care of your body you'll pay a little for maintenance (Regular check-ups, occasional labs, and a prescription here and there.)  You’ll pay $60-$120 per visit and your prescriptions will vary.   You’ll need health insurance when out of the blue you have kidney failure, a heart attack, or an emergency C-Section.

        Health Insurance is for the unexpected - kind of like your Fire Insurance on your house.  You pay out of pocket for the monthly expenses, the new paint, the patch in the wall, the hole in the carpet, the replaced door, etc…  Everyone in the neighborhood pays a little to fire insurance.  Then when one house has a terrible accident and is consumed in a fire – that house is rebuilt with all the money pooled in fire insurance.  Most people will never use their fire insurance, but they pay it just in case.

        Health Insurance should be the same way.  It should never be involved with routine things.  Health insurance should never cover kids with ear infections, or even healthy births.  It should apply to kids with Diabetes, cranial bone fusions, etc.  It should apply to EMERGENCIES.

        So – why can’t my friend’s wife decide to save some money by leaving the hospital a day early?  Because everyone else has pre-paid the set amount for their deliveries.  Everyone else has pre-paid health care and the hospital prefers to stick with one price - set by the insurance companies.

It’s moronic, it’s annoying, but good luck changing it.


Joel Perkins said...

I think pediatricians would still be fine, but let's look at psychiatrists: How would they ever make any money if insurance didn't pay say 80% of the visits for the patient? Seems like they couldn't make it in private practice. Certainly psychologists would struggle, no? Or PT's...I'm seeing one right now...I wouldn't be without insurance...they are expensive!!!!!

Joel Perkins said...

That is a crazy revelation about the hospital stays - and it doesn't surprise me at all....

Simple Citizen said...

- I don't know what it is that makes us feel better about high monthly payments if we never have any big "one time" expense. People will pay their insurance huge amounts, then go to PT, psychologists etc. because it's included.
They know they need the help, but they wouldn't if they had to pay for it.
THEY ARE PAYING FOR IT! - just through their insurance premiums.

It reminds me of Apple and the cost for an iPhone. The original iPhone was more expensive with a cheaper monthly charge. Apple found that people liked it better when they paid less for the phone but more each month - even though each customer ended up paying $200 more per year.

It's all psychology - and it's messed up.

Joel Perkins said...

Oh yeah - I forgot about the part where my employer and I pay a bunch of money each month....I guess you're right. At the end of my life, I'd like to be handed a comparitive statement - what I paid for healthcare, and what I should have paid for healthcare. Did I beat the system, or did it beat me? Hopefully I get a gnarly disease so I can come out on top!!

buzygrizz said...

I've heard Dave Ramsey talk about pre-paying for medical expenses, when you are paying from your own pocket. You have to talk to the hospital beforehand, and you may have to choose a hospital that will work with you. There's less room for negotiation after the fact.

BTW, we have a high-deductible health insurance plan because the premiums are covered completely by my husband's employer. If we were in a small business, we would probably doing the same kind of insurance and putting our premiums toward our actual medical costs, and having the additional reason to eat smart and exercise because it costs less over your lifetime (something the average American probably has little to no idea about).