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Why Government and Health Insurers Should Back Off

The opinions expressed by columnists are their own and do not necessarily represent the views of
My previous piece on health care reforms presented a variety of ways by which doctors and individual consumers might affect positive change in our health care system. Now we must consider the opportunities for insurers and government to play their parts.

The most important (and biggest) change of all must come from insurers. Medical insurers need to move back to the model of other insurance agencies. You don’t pay a copay to your car insurance company when you get an oil change, and you don’t expect your homeowner’s insurance to cover your new ceiling paint, so why do you expect your medical insurance to cover your basic doctor’s visit or prescription for antibiotics? Medical insurance companies have embedded themselves in to every health care transaction – they have established a strange symbiotic relationship. This symbiosis has massively increased costs, as there is an additional layer built in to every transaction. Two simple examples might illuminate the problem:

First, when an insurance company is involved in every medical transaction, additional time and paperwork is added to every transaction. The insurance employee must be paid, the doctor’s office worker must be paid extra for the extra paperwork he or she has to fill out, additional letters must be printed and mailed, etc. Instead of simply handing over cash to pay for my treatment, I have added a layer of significant additional costs.

Second, this layer of insurance hides the real costs of my medical care. If a visit with a primary care doctor or specialist costs me only a $20 copay, I am likely to go more frequently than if it costs me $100. I am even incentivized to take advantage of this “cheap care,” because I feel like I am “getting my money’s worth” from the high premiums I pay my insurance company each month. The incentives become perverted quickly – particularly when insurance plays a role in every transaction.

Medical insurance must return to its original form. It ought to be insurance against catastrophe. Then each consumer would pay a much smaller premium to insure themselves against a crippling catastrophe that would cost thousands or tens of thousands of dollars. For typical, recurring visits, you pay out of pocket. This approach shows the wisdom of health savings accounts – an innovative approach that is, unfortunately, likely to slowly disappear under a brave new world of government-mandated “standards” for health insurance plans.

Furthermore, imagine if cash-transactions became the norm in the drug industry. The costs for new name-brand drugs are often astronomical if you pay out of pocket, but that same drug can be bought for a $40 copay if you have a group insurance plan. This dichotomy exists because insurance companies are able to bargain with the pharmacy for a “negotiated rate” for drugs. This gives them a steep discount inaccessible to the average cash-paying consumer. If everyone was paying cash for most of their medicines, the costs to the uninsured would drop significantly. Drug companies would have to overhaul their way of doing business if this cash system took hold. Drug prices may go up a bit for the insured, but the uninsured or underinsured could afford to buy drugs with cash.

If cash transactions can again become the basis for most health care purchases, we will see prices drop dramatically. The decreased paperwork and rates game-playing alone will massively reduce costs, and the pricing transparency will open the doors for much-needed competition among pharmaceutical companies.

In addition to these changes by insurers, government must also shift to doing its real job. Stop setting up exchanges and regulating what basic services must be included in a health care plan. Instead, allow the new cash-transaction era to do its work and focus on the things you should be worrying about: theft and abuse. Punish companies for price collusion or post-claims underwriting. Hit hospitals for medical errors that lead to complications and repeat visits. Focusing on actual injustices will give government plenty to do while also reducing costs and improving our collective health.

So how do we really reform health care? These reforms can, to some extent, be aided or recommended by the government, but ultimately government action is not the answer. Change will take the collaborative effort of consumers, hospitals, doctors, churches, charities, drug companies and insurers to enact lasting reforms. Consumers need to be more informed – they must demand answers, transparency, and, above all, options and clear pricing. Doctors, laboratories, and hospitals need to incentivize cash transactions – offering much better rates and openly encouraging patients to get away from their constant reliance on insurance. Churches and charities need to work to provide support and options for those who genuinely cannot pay their bills. Insurers and drug companies need to wake up to the unsustainable nature of our current system and adjust their business models.

Unfortunately, America has currently decided that it wants government to fix the problem. It won’t, because it can’t force these kinds of reforms through. And why would politicians want to? Politicians are receiving all manner of contributions and pressure from many, many different players in our complex health care and health insurance industries. These players have the money and influence to get what they want from our elected officials. Who will eat the costs if we rely on government? Uninformed consumers and unrepresented local doctors. We must act now or dread the future.

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