The Two Schools of Healthcare

Medicare, Obamacare, Paul Ryan and President Obama are going head to head on the budget, and they are refusing to budge on entitlements. 

Is it November?  No. I just checked my calendar and it's March 13, 2013.  President Obama was inaugurated in January and the elections happened over four months ago.  So, why all this déjà vu?

I think it's becoming obvious.  America has a major problem.  That problem is our health.  Moreover, it's our healthcare system.  We've all heard the statistics, America ranks 37th on the World Health Organizations performance ranking worldwide, but we rank #1 on expenditures on healthcare.  That's quite the gap.  Just to put this in perspective, I want to show some companies that rank higher than us: Singapore ranks 6th on performance and 34th in expenditures, UK ranks 18th and 26th on expenditures and Columbia ranks 22nd and 49th on expenditures. COLUMBIA.

How could this happen?  How could the greatest country in the world allow this to happen?  We are being beat by Columbia and Singapore.  A country that still does public beatings for littering is beating us in taking care of their sick, keeping their people healthy and keeping down costs at the same time!  This is ludicrous!

Right now public opinion is split between two competing schools of thought.  First is the Obama administrations point of view, and the other moves more in line with the points of view of Congressman Paul Ryan.  I'd first like to explain both of their points of view, so we can get a handle of how the current debate is facing the issue.  I would then like to explain my point of view, which is that we are looking at the wrong issues!  We are tiptoeing around what is really hurting us, and until we tackle these issues, we are going to break ourselves more than we already have!

The Obama plan addresses what and who pays.  One of his goals is to reduce payments to hospitals and drug companies.  Medicare currently doesn't have negotiating power with drug companies, which is why Medicare Part D programs (which is the stand alone prescription drug plan of Medicare) arguably provides weaker drug coverage than commercial plans and Medicare Advantage plans.  Additionally, he wants to decrease payments to hospitals and doctors for certain procedures, claiming they need to be more in line with other comparable costs.  He also wants to reduce readmission rates by incentivizing hospitals to nip issues in the bud, thereby reducing the risk that patients will keep coming back and costing us more money!

The president’s plan then goes on to address who is going to pay for this!  Guess who, the wealthy and new enrollees!  According to an article by Tami Luhbi, in CNN Money, they plan on increasing premiums on drug plans and doctors visits to high income seniors by 15% in 2017 and they want to make sure that 25% of beneficiaries are subject to these premiums. Additionally, Tami mentions that there will be a 30% surcharge on Part B premiums of anyone who enrolls in a comprehensive Medigap policy.  By the way, most people aren't aware of this, but Part B premiums go up already with income.  Here in Southern California someone making 90k a year is FAR from wealthy, but they are still charged a higher premium on their Part B.    

Now Paul Ryan's plan addresses the issues of cost to the system.  His plan, according to Rick Newman of US News and World Report, is “to solve the problem by giving seniors a federal subsidy they can use to purchase health insurance of their own choice.  The catch is that the subsidy would only cover part of the premiums, forcing seniors to pay the difference, which would be a sizable expense.”  For all intents and purposes, it's a voucher system that would allow the seniors to go to a public market place for the insurance coverage, similar to what we do prior to Medicare.  The difference would be Guaranteed Issue policies that could not be denied on issue of previous conditions.  Ryan is basically saying, let the market take care of itself, let the seniors handle their own care and everything will work itself out in the free market economy.

Here are the primary issues that neither party is confronting head on, LACK OF TRANSPARENCY and FRAUD.

Let's first talk about transparency.  Today if I go to my primary care physician and get a physical and blood work, I have no idea what the cost of the procedure is going to be.  I know that I have a $25 co-pay and that's it.  I also know that I may get a bill in the mail for differences that may or may not be covered by my insurance company.  Actually, many people aren't aware of these potential expenses until the bill comes in the mail! Now let's go a step further.  My PCP's office is going to send a bill to the insurance company.  The insurance company will then reimburse the PCP based on their scale (rate), which may differ from the PCP's scale and ironically, may differ from all the other insurance companies scale.  Imagine if you went to the grocery store to buy an apple.  That apple doesn't have a price tag on it and you are forced to negotiate the price of this apple at the cash register.  That effectively is what's happening behind the scenes with our healthcare expenses. 

Here's the final kicker, a doctor, who goes to school for more years and puts themselves into more debt than most people would care to ever go into, is the only professional that doesn't get paid up front for their service!  Could you imagine going to your attorney and walking out the door paying $25 after they perform a service for you?  And that attorney isn't taking care of our most basic need, our health!

In a transparent system, within an open market, we should know what procedures really cost.  One shouldn't need an associate’s degree in medical billing to understand how we are charged for a procedure!  Have you ever seen an Explanation of Benefits from your insurance company?  I use them when I have insomnia because they are enough to shut down your brain!  This lack of transparency creates an uneducated consumer and puts the consumer on the losing end of the battle, or even worse, America at the 37th position.

The other major problem we aren't addressing is FRAUD.  Medicare FRAUD, Medicaid FRAUD, insurance FRAUD!  I hope what I'm about to say is going to make you sick.  I have clients, in Beverly Hills, whose zip code is 90210 who are on Medicaid.  That's right, the insurance program for the poor and disenfranchised.  They can rack up millions of dollars of bills, on our tax dollars and there is ZERO consequence to them.  They live with their kids in multi-million dollar mansions; they drive a Mercedes, yes, because you are allowed one car with Medicaid, even if that car is a Bentley!  They have diamond rings and are far from struggling, but because they technically have no cash in the bank, they qualify for Medicaid.  IT IS DISGUSTING! 

I propose doing something now that is slowly starting to happen.  If you are on Medicare and Medicaid together, you should be moved from being able to go to whatever doctor you want to, whenever you want to, which is how the system currently works.  We need to move these people onto HMO's stat!  They need to be forced into a limited network of providers that can manage their care, monitor their drugs, limit their effect financially on the system and limit the ease in which they can allow some of the fraudsters out their to further fraud the system.

Why haven't we done this yet?  I'll tell you why, because it's a system that makes money for a lot of people and they are in the state capitals and in DC lobbying against it with every dollar they can put into it.

I feel by addressing fraud and the lack of transparency in our medical system, we can effectively start moving in the right direction with bringing down the cost of healthcare and putting it more in line with our friends around the world. 

In the next installment, I'll explain our take on Obamacare, the Republican plan and the reality of where they both lead us!

Jesse Hendon is the president of Simpler Horizons Insurance Solutions.  They focus on helping people on Medicare and with their health insurance needs.  They also consult with doctors and medical groups throughout southern California. Shmuel Schwartz is one of their senior agents.