This is the second of three posts on health care reform in the United States. The first post was about which type of experts to trust. The third post will be published on the so-called “public option” after the author has had a chance to review the legislation.
Tonight, Wednesday, September 9, 2009, President Obama addressed a joint session of Congress to argue for health care reform. But you might not realize why health care reform is so desperately needed in the United States, since your only experience of health care in the US might have been good visits with an excellent physician. The need for health care system reform isn’t about the quality of our doctors and other health care providers: for the most part, they’re highly qualified and good at their jobs. Instead, there are three basic symptoms of ill health in our health care system, and I will investigate the causes of those symptoms in this essay, partly from the view of an insider who worked in health care for six years, partly from the view of someone especially knowledgeable about the health care system from careful study. I argue that because the health of this system has been bad for so long, we must take action as soon as we can to reform it.
When we’re evaluating the health of the health care system, there are symptoms and there are causes, just like when we look at the health of a person. A cough could mean that you have a cold, or it might mean that you have emphysema. Therefore, let’s examine the symptoms thoroughly first, and then we can get to the causes.
According to a recent Gallup Poll, the United States ranked 18th among the 30 nation-states comprising the Organization for Economic Co-operation and Development; 83% of Americans are satisfied with their health care and 16% are dissatisfied. This result comes despite the fact that the US had the second-highest GDP per capita among the OECD nations (and thus, the world). We’re also the wealthiest nation in the world in terms of nominal GDP. What this means: despite our wealth, we aren’t all that happy, relative to our economic situation, with the health care we’re receiving. And remember what I said above – we’ve got really good doctors; we all know that. If our doctors and other medical professionals are well-trained and we’re relatively unhappy, what’s going on here?
Moreover, Americans spend more per capita on healthcare than any other nation. How is this different than our mere wealth? We’re each spending a ton of money to get mediocre results, putting our money to little use: we’re being inefficient. From spending on our insurance premiums to doctor’s office copays to coinsurance on prescriptions and surgeries, we’re paying more than any other nation in the world. And I didn’t mention the subsidies that end up going toward the uninsured or the payroll taxes that we pay for Medicare; we pay a lot for health care in the United States.
About those uninsured – according to the US Census Bureau, there are 45.7 million Americans who live without health insurance. In a nation of around 300 million residents, we’re not providing health insurance to 15 percent of our population. Some of these people have well-paying jobs and don’t have trouble paying for this expensive health care. But many more of them don’t have income to cover the expenses that go along with the high costs of health care in the United States. Insurance, after all, is intended to make health care less expensive – you (and, in our system, your employer) pay a premium so that when you use health care, most of the expense is covered by your insurer, thus softening the blow of the treatment. When someone is uninsured, he is unable to get that blow softened; doctors are either forced to accept less payment, no payment, or damage the finances of the uninsured person even further in their time of medical need.
And these are just three notable symptoms of our health care system’s illness, the cough, the sneeze, and the runny nose, as it were. The total list of symptoms could be much more exhaustive, but it’s enough to get us started on trying to get to the bottom of some of the causes of these symptoms, which I’ve seen first-hand in my six years of medical billing experience.
We should recognize that many of these problems are rooted in the way we deal with the cost of health care in the US: health insurance. Part of the problem is the particular public and private insurance partnership we’ve ended up with, and part of the problem is with the way the insurance market has evolved.
Insurance, as I noted above, is a scheme in which we attempt to reduce the amount that we pay for something, in this case health care. It might seem that we pay a little bit at a time so that we “build up” equity in a kind of health care fund. That’s not how it works. Instead, it’s more like a subscription service: the consumer pays a fee every month so that when they do need a health care service, the total amount they have to pay is reduced, and the insurance company draws from the subscription fees of everyone else to pay the doctor. They make a profit by getting more fees than they pay for services. Because health care is expensive, though, the system evolved pretty quickly so that employers offered health insurance benefits to their employees in order to give them extra incentives to join that company. That way, each month the employer and the employee shared the subscription fee of the insurance. In some cases, employers covered the whole cost of monthly premiums. When the employee needs to see a doctor or goes to the emergency room or has surgery, he or she still has to pay a copay or a percentage of the total fee of the service, which will differ depending on the service, but the insurance company pays the rest of the bill.
Once this system evolved, though, it was obvious that we had a problem; specifically, what do we do with those people who don’t have jobs, or employers who can split the insurance bill, or the indigent, or the retired? Do they have to pay the mountainous medical fees themselves, or, in the case of the indigent especially, how do doctors deal with the costs of treatment?
To solve this problem, we developed Medicare and Medicaid. Medicare is a program for the retired: those who meet the basic conditions of the program get low-cost health insurance, and the program is funded by a special payroll tax that’s outside the regular federal budget. Medicaid, on the other hand, is a program for the indigent: those who are either unemployed or have such low incomes that they can’t afford to get insurance either through their employers or for themselves. This program is funded through a combination of the regular federal government budget and each state’s budget; it’s a kind of partnership between the national government and the state governments.
I called this way of doing business a problem for a reason. Part of that problem is with the nature of insurance: the insurance company is taking a risk that you won’t be so sick that they’ll spend more money on you than you’ll give to them over the life of your agreement with them. If you apply for insurance on the open market and you have some sort of chronic health condition like diabetes or migraine headaches or something even worse, they might reject you. In fact, it’s in the insurance company’s interest not just to reject potential risks: every time you make a claim, they want to find excuses to reject it. From the doctor’s office accidentally mis-coding the diagnosis to you not calling them in advance to get pre-certification for a service, they want to find reasons not to pay so that they can save every penny they can without losing out on premiums. If the doctor’s office doesn’t recognize they’ve made some minor typographical error within a certain “timely filing” window, the insurance company doesn’t have to ever pay the claim to the doctor. If they think there’s a reason you went to the doctor when you didn’t have to, they’ll deny it as not being medically necessary, and leave the balance to you the patient. Even worse, if you develop a serious medical condition, insurance companies can – and sometimes do – just drop you from their rolls altogether, so that you have to pay the full bill for your medical services yourself. And because they have so much more power than you do, there’s often little to nothing you can do about it.
Because the states have recognized the power differential between the insurance companies and the insured, they’ve all, to a greater or lesser extent (depending on the political culture of that state), put together regulations and medical advisory boards in order to protect consumers.
But there’s a problem here that the states can’t deal with. According to the US Constitution, Article 1, Section 8, the federal government is the only entity with the power to regulate commerce between or among states. When an insurance company does business that crosses state lines, then, there’s very little any one state can do to regulate its size or promote competition.
This problem has become huge in the United States. Because of factors too complicated to get into here, there are really two major health care insurers in the United States, with several also-rans who fight over the scraps. The big winners are the United Health Group and the Blue Cross Blue Shield Association, which is usually represented by Wellpoint in the statistics. UHC and BCBS, as we call them in the billing and health care field, tend to take up a large percentage of non-Medicare patients and receipts, across specialties and across states. Aetna, Humana, and Cigna, respectively, each have a decent piece of the pie, but those pieces of the pie aren’t especially large relative to the mammoths of the industry.
What does this mean for consumers? Nothing good. UHC and Wellpoint each have the power to set the terms for the insurance conversation in almost every state they do business, and they have tremendous power in the United States at large. They can provide bad service in each state; bad service to doctors, bad service to patients, and meet state and federal regulations at a bare-minimum level. They are, put simply, monopolistic enterprises. While we in the United States value capitalism almost as much as we value liberty, monopoly is capitalism gone bad: monopolies leverage their power to keep other companies from providing services, which gives consumers fewer choices and, usually, worse services.
The only payer that rivals these insurance companies in size is Medicare; because the aging members of society tend to run into illnesses and injuries more than the rest of us, they use health care services more than we do. Medicare has a lot of the same monopoly-style power that UHC and Wellpoint have, and for good reason; they have the broadest demographic of subscribers built in to their programs. Medicare’s payment and enrollment policies are mandated by law, though – they have no incentives for trying to provide fewer services, and Medicare does an excellent job of negotiating low prices with doctors. So while Medicare is part of the monopoly problem, it isn’t as bad as UHC or Wellpoint in some respects.
But among Medicare, Medicaid, and the private insurance companies, we still have that gap of 45 million Americans without health insurance, and that’s something that has needed fixing for a long time, something that needs fixing even more given the recession conditions we’re faced with now. Think about how all this works: we’ve covered retired people with Medicare, people who are employed with medium-to-large sized companies through private insurers like United Healthcare or Aetna, and the indigent through Medicaid. But what about people who make more money than the Medicaid threshold but whose company can’t afford to split the difference on health insurance? What about self-employed consultants and freelance writers? Low-wage and part-time workers who don’t qualify for benefits in the first place? Suddenly, our institutions have left a big gap, one that widens every day.
Furthermore, while people complain about how Medicare and Social Security are running out of money, these are relatively easy problems to fix. The solution is fairly simple: raise the payroll taxes on these programs, adjust the benefits, raise the retirement age (since Americans are living longer and more productive lives), and move on. The only holdup is that these changes are in the hands of politicians, who don’t have the will to do what’s necessary. The big problem is that we keep adding people to the list of the uninsured from Medicaid, because this program is a partnership between the state and national governments. The federal government funds it from the regular budget, and the state governments fund it from their regular budgets. State governments, unlike the national government, almost all have a viciously restrictive check on their ability to fund Medicaid on top of the fact that politicians have to fund it: their constitutions usually require that they balance their budgets from year to year. This requirement is bad because in an economic downturn like this one, as more people become unemployed, more people need services like Medicaid. But fewer people are employed and contributing to the tax base, thus requiring the state government to cut services. Either they force people out of Medicaid, or they lower payments to doctors. In many cases, when the latter happens, doctors refuse to take Medicaid patients, making Medicaid an even worse program. It’s a vicious cycle that no one seems to want to fix.
So now we find ourselves in a mess: insurance companies have incentives to minimize services offered and avoid paying for services at all. Then the people who need those services the most get rejected because they have “pre-existing conditions“. Then the system leaves 15% of us without health insurance, from those who can’t pay to those who would be severely set back financially if they paid. But if they didn’t pay their doctors, the doctors would just stop taking uninsured patients. What the heck?
Part of the blame, despite their professional competence, lies in the administration of medical care and the way doctors think about their profession. We hear a lot about administrative costs in the health care debate: I was one of those administrative costs, a reimbursement specialist who tried to get doctors paid when insurance companies denied claims. I was exceptionally good at it. But I was necessary because of the way doctors and insurance companies interact. Doctors want to fix the patient, get paid, and move on. Insurance companies want to get paid, and if they’re going to give money to a doctor, they want to know why. When you see a doctor, she checks off on a sheet or a tablet what services she provided to you. Then that record goes to a billing department which double-checks the record for accuracy and transmits it electronically to the insurance company. If everything is acceptable to the insurance company, they pay within one to four weeks. If not, they deny the claim and give a brief explanation why.
Doctors hate this system. They don’t like justifying what they do. Part of the problem is that they don’t take classes in health care policy or in medical coding; they simply don’t have the training to turn their medical exam, procedure, and/or findings into the codes the insurance company uses to simplify their end of the business. But this is also bizarre; doctors are scientists, after all. Why wouldn’t they want to thoroughly document what they do so that the work they do can be followed up on if necessary and the insurance company can see what they need to see to give the doctors the reimbursement they deserve?
But it’s not just because doctors hate the process that people like me get hired; medical billing has become an extremely complicated enterprise. Medical procedures are broken down into thousands of codes that describe each different procedure, which can be different depending on anatomical site or the method by which the procedure was performed, plus doctors must provide a diagnosis for each procedure: these are also broken down into the thousands, which are similarly precise. There are governing bodies which give medical coders their CPC or Certified Professional Coder certification, so that these individuals can determine from a doctor’s notes what codes the insurance company will recognize from the services the doctor provided. And then, if anything about the billing is incorrect, someone has to look back through all the information from the claim, the codes, the service addresses, the insurance information, and determine what, exactly, went wrong. And a billing department might consist of several different people performing different functions, depending on the size and revenue of the office – a person to code the charges, another to input them, another to transmit or mail them, another to call patients about their unpaid copays, another to follow up on unpaid claims, and so on.
And those aren’t counting the costs on the insurance side: the actuaries who determine risk, the adjusters who pay claims, the appeals adjusters who look at claims a second time, the managers and executives and asssistants and mail clerks and so on. Or the administrative costs in the doctor’s office that aren’t part of the insurance billing process, like front office staff and accountants and attorneys and IT staff. Medical administration is labyrinthine and massive, and hopefully you can see how we’re spending so much on our medical care.
But up at the top, I talked about something that should have brought up a contradiction in your mind. We have some of the best-trained, most professional doctors in the world, and yet we’re still dissatisfied with our health care. How can these two things go together? Can we blame that on the insurance industry?
It’s not so much the fault of the insurance industry as the fault of the insurance industry and the doctors put together. The problem is that doctors get paid on a fee-for-service basis rather than on a set salary. Of course doctors are highly trained and deserve to be well-paid for what they do. But they get paid more for each individual service they provide, rather than for the quality of service they provide or for simply providing the correct, purely adequate service. Every doctor in the United States who works in private practice (not in a hospital, where things work a little differently because of the slightly more urgent setting) has a financial incentive to see as many patients in a day as he or she can. Most doctors schedule four to six patients per hour (10-15 minutes per patient) though their financial incentive gives them reason to schedule even more than that, and to provide services even when they aren’t medically necessary. If a patient needs to take longer than the doctor wants to take with the patient, that doctor might feel rushed to get out of the room.
Not every doctor will rush out of the room, of course, but many will. Or if a patient is shy or doesn’t communicate well, the doctor might not take the time to ask the questions necessary to find out what’s wrong, or might simply order a test rather than taking an in-depth interview; an X-ray or an MRI might figure out what the problem is and the doctor can go get money for another patient; the doctor even gets more money for figuring out what was learned from the test! While a doctor gets a fee increase for conducting a more in-depth interview, the fee for seeing more patients more often is usually higher than the fee for dealing with a more complex problem.
And still, this doesn’t mean that the doctor is bad, it just means that the doctor is facing pressure that she shouldn’t be. She has staff and rent and equipment to pay for, on top of a house and a car and a family and her own lifestyle, whatever that might be, and all that combines to force her to treat medicine not as an analytical process by which she uses her faculties to determine a problem and find a creative solution; instead, she’s trying to find a quick template for something she’s seen before and apply it quickly so she can get paid and move on.
While I can’t stress enough that not every doctor does this, that I’ve seen doctors who are fantastic and took the time to treat me or another patient like both a person and a complicated medical problem that needed treating, the financial incentive is against the patient on several levels. The financial incentive is to move on as quickly as possible and get paid as quickly as possible and find as many patients as you can who require extra services like surgeries and injections to boost the fee.
We need reform, and we need it now. These skewed incentives and gaps and monopolies have been here for at least a decade, which is the time span in which I worked in medical billing, and they’ve most likely been there at least three times that long if I understand the history of this issue correctly. So why reform now?
A combination of factors: first, we might be able to overcome the collective action problem, or the collective act of will, for the first time in decades, because the party in power thinks health care reform is important, and because the President has a gift for speaking and gathering support; second, because the unemployment rate is higher than it has been in almost twenty years, which means the gaps are widening, and we have to figure out how to help those people; third, because we are in an historic recession, and we can’t afford for health care costs to keep rising, and fourth, because we are in an historic recession and those are the best times economically to build long-term institutional reform.
But perhaps most importantly, people are suffering on a daily basis because we don’t take action on this subject. Someone you know, maybe someone you love, might be putting off going to a psychiatrist because she doesn’t have health insurance. What if she commits suicide? You might know someone else whose chronic condition is so badly treated by a doctor in a hurry that he suddenly dies of a cancer that wasn’t found until it was far too late to be treated. Or how do we manage the case of the doctor who does everything right? He keeps up-to-date on all the best journals, takes all the time necessary for each patient, but doesn’t make enough money to make ends meet, loses patience witht he profession, and switches to another profession? Then the whole system suffers. We have to help these people, and, because there are so many, all of whose lives could go wrong so quickly, we have to do it fast.
There’s an important counter-argument here; we don’t want to get this wrong by going too quickly, because we could cause more suffering in the long term. But we can still deliberate on these matters with all due urgency. We have to try to help those with whom we have the ties of mutual nationality, don’t we? We may not be able to fix every problem that they have, but when we see that other nation-states are doing a better job of this, surely we can at least recognize that we can do better and try harder. Don’t we owe that both to those suffering, and to ourselves?
As I mentioned in my previous post, and will bring up in my third, I prefer a public, or government-sponsored option as part of this institutional reform, and I strongly believe that this is the best, most likely way to effect both short-term and long-term change that will eliminate, or at least alleviate, both the symptoms of ill health in the US health care system and the underlying causes. However, whether a public option is included or not, reform must come, as increased cost per capita with lower satisfaction and higher rolls of uninsured simply cannot be allowed to continue. In my next post, I will examine the public option alongside other options and explain why I favor it.
Note: while in my previous post I argued that the only appropriate expert witness in the health care debate was that of the economist and then noted that I was not one, this was a different kind of testimony: eyewitness testimony. As I mentioned, I spent six years in the medical billing industry stretching back nearly a decade. I’ve seen the insurance industry and the health care industry up close, and I no longer have a personal stake in them, so I don’t have the same conflict of interest that doctors have. Furthermore, while I’m not an economist, I took several courses in economics as an undergraduate and am well-informed in institutions and the American political system. So while I don’t qualify as an expert, I do qualify as a someone who has more to contribute than just what he’s seen. I hope it’s helped you understand all that’s going on.