INSURANCE

Choosing your health plan: HMO? PPO? Why not DPO?

PAULA MUTO | November 2, 2021

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The fall is a time of renewals and choices.  It is also a time of so called “open enrolment” for health plans. It is the one time of year we can study and learn about the options offered through employers or government sponsored plans.  Individuals and small business owners alike are also are faced with a myriad of choices with confusing and often contradictory language promising lower premiums with higher out of pocket costs for covered services subject to deductibles. What does it even mean anymore when your monthly premiums exceed your pay check and you still have to pay for your colonoscopy or your insulin? Where is it all going?

Let’s imagine you twist your ankle playing basketball.  You might go to an urgent care, receive an X-ray, probably be examined by a non-physician, and then referred to your primary care, who can’t see you for a few weeks but eventually sends you to an orthopaedic who takes another X-ray and treats your injury. Weeks have passed, multiple visits, time out of work, and co-pays, not to mention the out-of-pocket fees associated with imaging and perhaps a $100 ace bandage.  What stops you from going straight to the ankle specialist in the first place?  First, we have become conditioned to follow the directions dictated by the insurance companies, even when restrictions are not in place, patients have been convinced that stepping out of line will make all insurance promises null and void resulting in catastrophic bills and financial ruin.  Second, the doctors and their office staffs have been conditioned to deny entry to any patient who does not have the proper referral, authorization, or identification. There are dire consequences for both if the insurance rules are not followed and fear keeps both sides aligned.

The past two decades have seen an explosion of healthcare costs. Health insurance has become the single biggest line item second only to payroll for most businesses.  It is no coincidence that as the government increased its role as payor with state subsidies, the prices have gone up.  Much like college tuitions, when loans are easy to obtain and guaranteed by federal support, there is little to deter those in charge from increasing the price.  After all, everyone is doing it, it must be OK, and even if students end up in debt, it will be repaid because they have received the value of a great education. Right?  But unlike higher education, healthcare is a necessity. We cannot avoid it, and there needs to be a reliable mechanism in place to guarantee access.
Ironically, as charges and prices have continued to escalate, payments to doctors have diminished. Why medicine is the only service industry where there is no transparency is truly astounding, especially since the there has been no increase in so called “reimbursements” for decades. As physicians, we have been complicit, being fully aware of the discrepancies between what is charged and what a patient’s insurance will pay.  Even as patients began to have higher deductibles, and therefore higher out of pocket expenses, we continued to follow the rules, asking insurance permission to collect payment from the patient.  It is not surprising that bad debt accounts for over 50% of most account receivables and why over 70% of doctors are now employed by hospital networks or private equity, who not only go after patients, but benefit from the repricing that occurs when insurers pay a negotiated amount as opposed to the charge. In other words, we pay more not just for less, but for nothing.

But what if we twisted our ankle and went directly to that specialist and paid out of pocket a transparent price? What would it take for that to happen? Not much, the cost of care is predictable, and because payments have always been decreasing, most physicians have learned to be economical. Plus, out of pocket costs are capped by federal law, so no patient is really responsible for catastrophic bills. Charges inflate to cover overhead, but if payments were guaranteed and immediate, then the cost of doing business goes down.  Add technologies like telemedicine to a practice and you have increased patient access to a doctor without adding more personnel.  Direct pay doctors are emerging all over the country and have consistently offered better access and more affordable care. The bar is also being set by independent surgery centers and imaging centers who offer better outcomes at lower costs. Perhaps motivated by prohibitive pricing, better options have emerged that have moved patients away from expensive operating rooms to safe, office-based procedures.  Even cutting-edge cancer therapies can be delivered at home, preserving more of the healthcare dollar for medical care rather than the complex system built to manage it.

Competition and choice inevitably drive prices, but in a monolithic system the price is not negotiated, but instead it is set by only a few, in this case the big insurers.   Small businesses cannot compete when bigger companies come to town.  Eventually, the local hardware store gives way to a national brand, and the consumer is left with fewer choices and eventually higher prices.  Amazon disrupted this equation by creating a marketplace for individual buyers and sellers.  The convenience of finding a trusted brand, no longer available locally, is irresistible and the reason why we became loyal consumers.  Healthcare is no different. Trust exists implicitly between a physician and patient, because it is an authentic, empathetic, and logical relationship. Trust does not exist between a patient and their insurer, on the contrary it is an unsympathetic business relationship without transparency or consistency. Few doubt the insurance company’s top priority is the premium, not the patient.  Creating a direct relationship between the doctor and patient is a common-sense approach that serves both stakeholders well, and requires merely a fair and affordable price.  But do doctors have the capability or the will to do it and if so, can the rest of the system follow?

Never in the history of modern medicine have physicians been more dissatisfied.  US healthcare used to lead the world in innovation and outcomes, now we struggle to break the top thirty. We may have the most brilliant doctors and scientists with access to the best resources, but the need to maximize profits while catering to special interests, be they commercial or political, has led us to favour certain therapies over others despite marginal proven benefits. Doctors have little autonomy and less authority; prescribed treatments are routinely denied by insurance companies without a second thought or appropriate peer review.  In fact, insurers even renamed us “providers”, a term used to by Nazis when referring to Jewish doctors to devalue them professionally.  Over 56% of physicians are burned out, nearly all report moral injury and as hospitals have systematically replaced doctors with non-physicians with limited training, we have watched the standard of care deteriorate. It is no wonder we have witnessed the single biggest loss in life expectancy since WWII. The prognosis is grim, but there are solutions.

We need to reinvent healthcare by removing the middleman.  We don’t have to set the price, but we can make it transparent so patients can decide for themselves if it is worth the inconvenience, the delay, and the co-pay to use insurance or just pay directly.  Health savings accounts are tax deferred and can cover an out-of-pocket maximum in just a couple of years. Paying for care means there are no surprise bills or out of network costs, because there are essentially no networks and therefore no need to follow restrictions.  You’d be hard pressed to find a doctor or hospital unwilling to accept an immediate cash payment, especially when it costs nothing more than the service provided.  There are no billing cycles, or claims to prepare, no up coding, or authorizations.  Doctors free to care for patients, patients treated individually and not subject to protocols designed to maximize charges. There are literally thousands of direct pay primary care and specialists now available all over the country and they are building alliances with likeminded people providing imaging, ancillary services, surgery centers, and prescriptions all at fair market prices.  More and more employers are moving toward medical cost sharing plans that not only lower the cost of care but the cost of administration.  Even the biggest payor, namely the government, sees the benefit of price transparency and is piloting models of direct contracting. 

We will always need coverage for those unexpected events, emergencies, or hospital-based services, but all the rest - doctor visits, screening tests, and outpatient procedures - are easily affordable.  After all, do we use our car insurance to pay for an oil change? If we did, the cost would be prohibitive and few of us would drive. But health insurers have lost our trust, they no longer cover necessary services and no longer honour contracts with physicians or patients.  It is time to offer another option and let the patients and doctors get back to the real business of medicine.

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Loyola University Health System

Loyola University Health System offers integrated academic medicine, advanced technology and expert clinicians who are leaders in their fields. LUHS offers rewarding healthcare careers in nursing, pharmacy, nutrition, physical therapy, administration and many other ancillary and support service fields.

Spotlight

Loyola University Health System

Loyola University Health System offers integrated academic medicine, advanced technology and expert clinicians who are leaders in their fields. LUHS offers rewarding healthcare careers in nursing, pharmacy, nutrition, physical therapy, administration and many other ancillary and support service fields.

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