January 6, 2014 – 11:10
TL;DR: Premium costs reduced by more than a third. Annual deductible reduced by more than 90%.
We have much, much better health insurance for much less cost.
Full disclosure: I worked in and around U.S. healthcare for over 30 years. My clients have included essentially all aspects of the health care system, from big pharma to diagnostic imaging to large-scale vertically integrated health care systems to clinical delivery at the individual doctor level. I’ve worked in regulatory, public policy and payers (health insurance). In all cases I’ve been on the inside, in the meetings, often with more visibility into the actual, real data than the people who worked there.
As part of that experience, I was once part of a team tasked with modeling the U.S. health care system so I learned the numbers on a societal scale.
What did I learn in my career in and around health care?
Health care systems are huge, complex systems consisting of innumerable moving parts, and that is just at your local level. At a regional or national level, they are, usually, essentially intractable. Attempting to change them, or any aspect of them, is a galactic-scale daunting task.
The biggest single challenge is discussing the issue of health care is The Bubble.
If you work for a medium to large company, an educational or government institution or are in the military or retired from the military, it’s easy to wonder why anything needed to change with health care.
After all, even though your co-pays probably have increased, nothing is broken, so why fix it?
If you get sick, you go to the doctor, they fix you up, somebody else pays for it and all is well, so what’s the problem?
Outside of that bubble, however, things are not so much unicorns and rainbows.
Two big things happened outside the bubble that yielded the U.S. spending twice as much on healthcare than any other industrialized country.
The first was that whole “they fix you up, somebody else pays for it and all is well” thing. How many other purchase transactions do you make in your life where the person paying for it is not in the room?
What happens when nobody is in the room who might, even remotely, be worried about how much this thing costs? That’s like a trust fund baby shopping with daddy’s zirconium, no-limit credit card. What happens when daddy runs out of money? Short answer: Big Problem.
The second is that, by law, hospitals must provide care to anyone who walks in the door. That is a nice reflection on our values as a society, that no one will die in the gutter due to lack of basic health care, but it’s a very big challenge for my friends who are hospital CEOs.
If a good sized portion of your emergency room’s patients are paying nothing, then you must charge every other patient in the ER and every other patient in every other department of the hospital whatever it takes to cover the costs of that free care. Considering that U.S. emergency rooms are the most expensive place on the planet to receive care, it takes a lot of other customers paying very high prices to make up for that.
If you are in the bubble, you’ve never experienced what it’s like to personally pay for that subsidy. All you need to do is whip out your insurance card and, voila, you receive care and somebody else, somewhere else, pays for it.
And, before you start on some partisan ideologue rant about shipping all of those ER freeloaders back to where they came from, most of the uninsured people resorting to emergency room care have jobs or are part of a working household and more than 80% are U.S. citizens.
The knock-on effects of the emergency room care scenario are that those people do not seek health care until they are seriously ill. That means their resulting care, once they are very sick, is extremely expensive. That means the hospitals must charge even more to everybody else to make up for this care.
If you are in the bubble, you don’t have the experience of waiting until you are desperately ill before seeking care. If you need it, you go to the doctor. You don’t wait until your spouse is spitting up blood, your kid can’t get out of bed or your tumor pops through your skin.
The payers for all of that health care, the Medicare and Medicaid programs and the health insurance companies, have their own set of challenges and relief valves for this cost pressure.
The government programs have the luxury of mandating reimbursement rates for care, meaning they dictate how much they will pay for a medical product or service. This leads to any health care provider who has a choice to not accept any patients on Medicare or Medicaid since, from the profit margin perspective, they are bad for business and fatal for profits.
The health insurance companies have comparatively little leverage with the large buyers of health care insurance. Winning a big company account represents the ultimate “big fish” win for a health insurance company. Consequently, they compete aggressively for that prize. That means the health insurance companies’ resulting margins on those contracts can be smaller than they’d like.
The one group of customers who everybody can squeeze, the health insurance companies, the providers and the elected representatives, is the individual buyer of health insurance and small businesses.
Neither of those groups, individuals or small business, owns any senators, so they have no voice in how the laws are written. Individuals and small business have zero bargaining power with the health insurance companies. As a result, the policies that have been sold to individuals and small business have been, by far, the most expensive form of health care in the world.
In this way, the majority of the burden for the wacky, out of balance health care system in the U.S. has fallen on the backs of the self-employed, small businesses and other individuals who do not have access to corporate benefit health insurance.
If you are in the bubble, you have no knowledge of this. Your co-pays may go up, some benefits might be pulled back, but, by and large, you have great health insurance. You get sick, you go to the doctor. What’s the problem?
But out there, outside of the bubble of “nothing’s broken, so why fix it?” things have been exceptionally brutal. And while there have been countless people trapped in jobs they hated, working for tyrants they loathed because they, their spouse or their child had a pre-existing health condition that would never be covered by a new health plan at a new employer, those numbers are small compared to the millions yoked to outrageous costs and unrelenting cost increases in the outside-the-bubble world.
As an example, how does $10,000 annual per-person deductible at a cost of $900 per month for two individuals in good health with no chronic conditions, no prescriptions and no tobacco use sound? And don’t forget the semi-annual 10% to 20% premium cost increases.
See the difference between inside and outside the bubble?
So, what to do?
The first, obvious thing is to get everybody into some type of health insurance coverage so that they can stop using the emergency room, the most expensive form of health care in the history of humanity, which everybody else must then subsidize.
This puts those formerly uninsured, ER-using people into the regular health care system, where they can see a primary care physician on a regular basis. That gives everyone the opportunity to nip sickness and diseases in the bud, before the conditions become raging, chronic, very expensive situations that cost everybody else tons of money to mitigate and manage.
This ends the overcharging of Peter to pay for Paul’s emergency room care.
That’s really important when there are 47 million uninsured Pauls out there that the Peters are paying for.
That’s also really important if you are outside the bubble and your name badge says, “Hello, my name is Peter.”
Getting everybody into a health insurance plan, into the insurance pool as it’s known in the trade, is the single, biggest thing you see at the retail, consumer level of the Affordable Care Act (ACA), also known as ObamaCare.
What happens as a result of the law’s changes?
The existing health care insurance companies in the U.S. gain tens of millions of new customers.
This is the critical, essential point that those in the scream-fest have missed entirely: ObamaCare just gave the existing health care insurance companies tens of millions of new customers. That is, of course, the direct, polar opposite of a “government takeover of healthcare.” But, I digress.
Many, if not most, of those new customers will be relatively young and healthy. That group, those who don’t use much health care, enjoy low health insurance rates. They also “balance the pool,” which means their presence in the overall group, or pool, of people insured enables the insurance companies to: a) pay for the people who use a lot of coverage, b) charge everybody somewhat reasonable rates and c) still make very sizable profits.
Behind the scenes, at the “wholesale” provider and payer levels of the system post-ObamaCare, there are also changes to incentivize better health care outcomes and reduce the rate of the increase of costs. Those things do not lend themselves to banner headlines so are mostly hidden from public view. Ironically, they may yield the biggest difference over time in the overall cost of care in the society.
How did everybody involved handle all of these changes?
Bottom line: If there is one thing for certain, it is that humans hate non-discretionary change.
Humans especially hate non-discretionary culture and process change.
There is little that impacts culture and process more, in a highly emotionally charged way, than arbitrarily changing how people get and pay for their health care.
Putting all the shallow, self-interested partisan politics aside, this thing was going to be a hard sell at just the basic humans-hate-change level, much less loaded down with the very powerful vested interests whose business models and profits depend on the status quo.
Most of the stakeholders in the current system are heavily vested in the current system and rely on that existing system, just exactly as it is, to bring home the bacon.
Some of those people could care less about what that existing system does to anybody else, especially you.
If you are inside the bubble, then nothing much about ObamaCare changes your world except that your benefit plan health insurance provider’s pool just got a lot larger.
If you are outside the bubble, then there is an excellent chance that 1 January 2014 was the first day in many, many years that you were an equal member of society again.
So, if you are inside the bubble, why did any of this need to happen?
At a societal level, left to its own devices, the cost of healthcare was on a trajectory to be more than 25% of the U.S. GDP in less than 10 years. The inevitable result of that trend line is a society that cannot afford anything except health care, meaning, no military, no law enforcement, no border patrol, no science, no nothing — nobody’s pet cause or program could survive the insatiable and inexorable rise in the costs of healthcare in the U.S.
The end game of that reality is nobody, except status-quo stakeholders rolling in dough, wins.
Everybody else loses.
We’ve had the good fortune to see, live and experience many different societies in the world. We’ve also had the opportunity to check out their health care systems on both an elective and emergency basis. Our experiences have been uniformly positive, some spectacularly so.
Given our observations and experiences and those of our families and friends who live in other societies, we were left wondering, how is it that the U.S. spends double its GDP on healthcare than any other OECD country? How is it that the U.S. spends 2.5 times as much per-capita on healthcare than any other OECD country?
And, with all of that spending, by multiple empirical measures, how is it that the U.S. has lower standards of health care and worse outcomes?
How would you rate your favorite sports team if they spent double what everybody else spent, with dramatic annual increases, spiraling ever-growing expenditures, yet had worse results than their competition? Would that be tenable? Would you continue to support that strategy?
If you’re inside the bubble, where “you go to the doctor, they fix you up, somebody else pays for it and all is well,” this can seem very abstract since it has no direct bearing on your life, the lives of your peers or the lives of your family. It’s easy for it to seem like a bunch of whiners and freeloaders joining together with a socialist plot to destroy life as you know it.
But, the reality is, outside that bubble, outside that slowly boiling pot of water, your entire society is having its blood sucked out by the very health care system stakeholders sworn to preserve and protect that blood.
Why should you care if you are in the bubble?
For starters, how do you expect your company to compete when its health care costs are, at a minimum, double those of its industrialized-country competitors?
On a personal level, how would you like to be out here, outside the bubble, fending for yourself for healthcare like the rest of us?
If your company can’t compete, that’s where you’ll be.
And, I assure you, life out here, outside the bubble, where you don’t own any senators and you’re not on the gravy train of the health care system status quo, is not any fun when it comes to paying for health care.
So, how did it play out for us?
It was, essentially, a life-changer.
We went from paying $900 a month, up from $800 a month less than a year ago, to around $600 a month.
Our annual deductibles went from $10,000 each to $900 each.
Every single aspect of the policy reflected similar positive changes, e.g. preventive care, lifetime benefits, pharmaceuticals, etc.
What’s that add up to?
We have much, much better health insurance for much less cost.