Make Insurance Honest Again

A perverse, convoluted system exists in healthcare that enriches third party at the expense of the patient, the taxpayer, and the solvency of the U.S. economy. The scheme uses dishonest manipulation of the cost of providing medical goods and services, discriminatory taxation, selective government subsidy, entitlement programs, and complex laws of command and control that are created by politicians who are bought off by rich and powerful special interest groups.

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 hold up is that politicians won’t do what they promised the American people, because they 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 medico-industrial complex that consumes over $3.2 Trillion yearly. They want to keep their hands on this money. Individual patients and doctors have no power or money to influence politicians by comparison. We have lost the forest for the trees. The political forces are evil. They run ads against each other, make up lies about each other, and fund candidates to run against one another, if one doesn’t do what the “leadership” says- and this is what they do to members of their own party!

In a recent WSJ 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- except there was never a “Repeal Obamacare” bill. There was only Paul Ryan’s American Healthcare Act (AHCA) bill- put together in conjunction with insurance executives and hospital association lobbyists, behind closed doors with physician Senator Rand Paul outside 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 at least 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. It took away cuts to Disproportionate Share Hospitals (DSH payments) and granted billions to states, only to then force them to subsidize payments to insurers.

Contrary to Mr. Henninger’s premise, Congress Meadows and the Freedom Caucus should be applauded for refusing to support bad policy and broken promises and refusing to acquiesce to political threats. The so-called moderate “Tuesday Group” should be reprimanded for acquiescing to special interest and political pressure- including abandoning their campaign promises and principles- and deceiving Americans about the actual cost of medical care. But, playing the blame game helps nothing. The goal is to make medical care in America great- exceptional, accessible, and affordable- particularly under catastrophic circumstances. This requires we first 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 can 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, recanting anecdotal tales of medical catastrophes where hospital bills mounted to such enormous sums that the patient would be bankrupt were it not for health insurance regulated and subsidized by the federal government. I recently heard a member of the Republican Tuesday Group telling a personal story on Fox News where he tragically lost a child and would have been bankrupted by a million dollar hospital bill were it not for his health insurance; based on this he was unable to support repeal and replace of Obamacare. Let’s be honest, the million dollar “bill” is a scare tactic and a scarce occurrence. The entire system must not be aberrantly manipulated for the benefit of the outlier.

In reality, no one ever pays those huge bills. They are fake- fabricated and inflated to maximize profit for insurance companies and hospitals. A hospital can make the bill be whatever it wants it to be. There is even a term for the inflated bills- called the hospital chargemaster. Dr. Keith Smith at Surgery Center of Oklahoma has done a beautiful job of showing side by side comparisons of the cost of the same operation done in a hospital versus in his outpatient direct pay surgery center. These huge bills are rarely paid. In reality, as Dr. Smith shows over and over, the operation can be done at a fraction of the cost.

The 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.

Why does it behoove hospitals to overbill? 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 to the patient, which it calls “uncompensated care.” The hospital then adds up the cost of all the uncompensated care it has provided and reports it to the federal government. The federal government then issues the hospital a check based in the amount of uncompensated care reported. This subsidy is called Disproportionate Share Hospital (DSH) payments. This led to the intentional inflation of bills. The more phantom uncompensated care a hospital reports, the more subsidy money it will get from the government. When this began, DSH payments escalated from $1.3 Billion to $17.7 Billion between 1990 and 1992 alone. Further, because the hospital reports these manufactured phantom losses for providing uncompensated care, they are deemed nonprofit and pay no taxes. This is how nonprofit hospitals become very rich, and this is another reason why they overbill patients. It also serves to scare patients to death when they get their “bill.” The bills are also extremely difficult to understand, as if by design, and they are rarely itemized. This is a sinister “marketing plan.”

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 just over $100,000.00. The insurance company paid the hospital the allowable- $40,000.00. (The hospital is actually making a profit at this negotiated rate.)The hospital can claim $60,000 in uncompensated care and receive DSH money from the government. The hospital pays no taxes on all this money, because it is deemed nonprofit. 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, but knowing what I know, 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, nor should the patient be frightened by the bill.

If she had purchased a plan with a lower monthly premium, her deductible and cost-sharing would have been higher. It all comes out about the same. The insurance actuarials and accountants make sure of that. And, under Obamacare, if they’re off, taxpayers will subsidize them. (Recall Obama’s decision to do this using taxpayer money, even though the money is not allocated in the law. A lawsuit is ongoing.)

The billing vs. allowable scheme is also why there is no price transparency. It is nearly impossible to find out the cost of goods and services-except under the new, third party free, direct patient care models. Each insurance company has negotiated a different allowable with each hospital and provider for each patient depending on the benefits of their plan. All that people can see is the inflated chargemaster bill at best.

This is like the federal government forcing you to pay an extra $1200.00 every month for auto insurance in case you wreck your car badly. If you wreck your car, you have no choice, you can only go to one body shop, and it takes months to get in and then months for the work to be “prior authorized” before they can start. You and your family wait and suffer without your car, but they don’t care. Then the body shop bills you $100,000.00 to fix it, but accepts a $3000.00 payment from you and $37,000.00 from the insurer, for which you have paid $1200.00 per month for years. In fact, if you have paid this premium for just 2 and a half years, you have already paid the entire bill yourself. With Obamacar you are forced to buy the bad wreck insurance and pay every month. Even if you don’t wreck your car, you lose the money at the end of the year.

It gets worse. The body shop was able to fix your car for $10,000.00, so they make a profit, but their scheme allows them to collect $40,000.00 from you and the insurance company (the allowable) to increase their profit while also reporting a loss of $60,0000.00 (because the “bill” was $100,000.00) to the government. Because of the reported loss, the body shop gets a subsidy and maintains a nonprofit status avoiding taxes. The insurance company still makes a profit and gets government subsidies as well. The government via weak politicians is redistributing taxpayers’ money to benefit the very interests that then hold them hostage. Patients pay and lose inside and out. There is a better way!

We must force our politicians to stop selling out to 3rd party parasitic special interest groups like the insurance and hospital lobbies. We must demand partisan players stop threatening one another for standing by their word. We must demand transparent pricing and allow free market competition. We must cut DSH payments for “uncompensated care” to hospitals. We must stop the fraudulent hospital chargemaster overbilling scheme. We must stop subsidizing insurance companies. We must not create a new subsidy that gives money to the States and then requires States to pay the insurance companies. We must stop preferential tax law that taxes working class patients and exempts rich hospitals. We must end the corruption-which can only be construed as theft from America’s patients and taxpayers.

We must allow people to put pre-tax dollars into health savings accounts to save for a catastrophic medical issue, instead of being forced to pay huge premiums to insurance companies, which are lost at the end of every year. Patients will be responsible custodians of their own money. States can establish high risk pools for the seriously and chronically ill. We must get rid of minimal essential benefits and other regulations on insurers, allowing them to innovate and create a robust offering of plans, and we must allow patients to buy individualized plans that best suit their individual needs. If patients can buy plans they like, pre tax, at a low cost, from an early age, they will build up a safety pot of money in their HSA should a crisis come, and they will have no reason to go without insurance. This will virtually eliminate problems with preexisting conditions and guaranteed issue. We must reform government medicine, Medicare, Medicaid, and the VA , freeing these hundreds of millions of patients to choose doctors, hospitals, and insurance plans they want.

Let’s be honest, only by calling out and stopping the inflated billable charge vs. allowable charge/ tax exemption and subsidy scam can we address the core problem- the high cost of care. Only by fixing the corrupt system that incentivizes 3rd party special interest groups to overbill patients can we reclaim money and power from politicians, insurance corporations, and hospitals and return it to the patients. We must demand our politicians stop perpetuating the false system and go forward with an honest transparent system of actual insurance-not prepaid healthcare sold like used cars by members of the mob. We must stand up for the good guys and call baloney on the others. The only person with the position, power, principles and pluck to do this is President Donald J. Trump. We must support him. We must implore him to stand firm on his pledge to repeal Obamacare and drain the swamp. We must oppose others. The time to repeal Obamacare and make insurance honest again is now.

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4 thoughts on “Make Insurance Honest Again

  1. Kris,
    Careful what you wish for. In Maryland, all hospitals are on a global budget, set by the state’s Health Systems Cost Review Commission (HSCRC), which scrutinizes budgets and allows only certain percents of uncompensated care. The advantage is hospital costs are kept in line. The disadvantage is that insurance companies know what they are paying hospitals, and thus pay “what’s left over” after they pay themselves to the docs. Our new waiver offers a Gainsharing program so they can offload some payments to the docs, but the AHCA (whichever version you pick) puts that at risk. Physician payments (I don’t use that “R” word) in Baltimore and in the DC area are among the lowest in the nation….

    • Great point and reinforces why we must get 3rd party out of the driver’s seat. Physicians must drive the system for the betterment of patients. The corporate practice of medicine that we currently have is inherently flawed, perversely incentivized, and destructive to the patient-physician relationship as you well know. The fox is running the henhouse. This will only get worse until we hens refuse. The hospital should exist to serve patients and the physicians who care for them not the other way around. This is why I have gone completely 3rd party free.i will never do the Marxist baloney set set forth in MACRA. I pray a growing number of our colleagues will wake up and do the same too. Thank you for taking time to engage and make these critical points!

  2. Thank you Kris! Can you send me the link to this so I may repost on a closed FB group on the Business of Dentistry?
    So very sorry to hear about your daughter. I hope she has had a successful speedy recovery!
    Hope all is well with you to after such a tragedy!!!
    Thanks, Deb

    Dr. Debra Seznik
    My DFW Dentist
    2820 N.O’Connor
    Irving, Texas 75062
    214 773-9641 m
    mydfwdentist.com

    Confidentiality – This email transmission and any documents, files or previous email messages attached to it may contain information that is confidential or legally privileged. If you are not the intended recipient or a person responsible for delivering this transmission to the intended recipient, you are hereby notified that you must not read this transmission and that any disclosure, copying, printing, distribution or use of this transmission is strictly prohibited. If you have received this transmission in error, please immediately notify the sender by telephone or return email and delete the original transmission and its attachments without reading or saving in any manner.
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