by Ralph Weber
Health plans are expensive because medical care is expensive. Will shopping across state lines for insurance fix that? It’s a nice sound bite, and will allow the insured to drop some of their own state mandates, but the biggest input to the cost of a health plan, is the underlying cost of the medical care financed by this plan. If you buy a plan in Shreveport, and use it in San Francisco, it will trend up in costs.
During the year-long healthcare debate, I did not hear ONE person ask why medical care is so expensive. They barely even asked why health insurance was expensive, but if 85% of the premium for health insurance must be paid out in medical costs with the new medical loss requirement, and we have not addressed the cost of medical care, then insurance premiums will CONTINUE to rise at an unsustainable rate. Enacting health insurance reform without addressing the cost of medical care, is like putting a new roof on a building which was in an earthquake.
Here’s how the Feds put the fix on health care pricing.
It all starts with a Federal agency called the Center for Medicare Services (CMS). They set the reimbursement rates for some 14,193 medical procedures. How they come up with these figures is based on a “secret formula” calculated like most government methods of accounting. Then CMS pays the AMA (American Medical Association) to produce and manage “secret codes” called Current Procedural Terminology codes (CPT codes). The AMA then sells these codes to all doctors and hospitals, and insurance billing clerks. Altogether, they receive annual income reported to be $69.9 million, to manage these codes. Insurance companies then use the reimbursement rates as a starting point in determining how much should be covered as an insurable benefit under the term, you no doubt recognize: “co-insurance”.
In any business model where prices are fixed and paid by a third party, the patient (consumer) and doctor (provider) both have an incentive to consume more services than may be needed in order to gain maximum benefit. This is why these programs have become entitlements, rather than indemnity programs. If patients travel to Kansas for a bunionectomy or to New Jersey for a knee replacement, or Oklahoma for a Coronary Artery Bypass Graft, and you allow doctors and hospitals to compete across state lines, with their own rates, THEN you will achieve fair market rates, and sustainable costs.
Each doctor and hospital has different costs for different procedures, and each medical provider includes different services with any given procedure. When a third party arbitrarily decides to pay Dr. X in Los Angeles the same as they pay Dr. Y in Miami, some doctors will be overpaid for certain procedures, and underpaid for others. Patients will receive “cost effective” procedures, which may not be what they really need. How many times have you turned on the TV and heard a vendor offer, “If you have Medicare, we’ll get it paid for, or you get your scooter free.”? Would you get one if you had to pay $25,000 of your own money? Take your car to a body shop and get an estimate to fix a dent. Then say: “oh, I forgot to mention, I have insurance”. The price will suddenly go up. This is because both the consumer and the provider are spending other people’s money.
So how can we address the costs of medical care? By allowing doctors and hospitals to compete across state lines, not just insurance companies, and by having the patient see the true cost of the care, and direct their own care. A key element completely missed in healthcare reform.
In recent years, an industry known as “Medical Tourism” has emerged, and is projected to grow at an estimated 35% per year. Medical tourism brokers send people overseas with “promised” savings which compare “billed rates” in the US to “paid rates” overseas. There often exists an added incentive for these brokers to send you overseas in the 20% to 80% or more that they get in kickbacks from the facility they send you to. These kinds of kickbacks are illegal in the US, so these brokers usually won’t refer you to a US facility. Deloitte estimates that by the year 2017 as much as $599.5 billion per year of medical care revenues could be lost from the US, in favor of overseas facilities. There is a very important place for overseas medical facilities in caring for US patients, but they are often not competitive on price. When US doctors and hospitals are permitted to set their own rates, they can usually compete very favorably with overseas facilities. A service such as MediBid.com allows patients to shop domestically as well as internationally, and define their own criteria for medical care.
The status quo, and the reformed healthcare model lack transparency, as well as financial incentives for both provider, and consumer to reduce costs. In order to reduce costs while encouraging technological improvements, we need to introduce competition among doctors and hospitals.
Ralph F. Weber, President of MediBid, was born in Vancouver, Canada, and grew up in Thailand, Nepal, and Germany. After starting an international health insurance brokerage in Canada, Ralph’s wife was injured by a 2 ½ year wait for surgery, and his son sustained a head injury which was not treated because of the lack of a CT machine at the hospital in Canada. In 2005, Ralph moved to California to obtain surgery for his wife, and expanded his brokerage there. In 2006, Ralph participated in a healthcare forum with presidential hopeful, Rudy Giuliani. Ralph later contributed healthcare reform policy to Mayor Giuliani, and state assemblyman, Mike Villines. Driven by a passion for greater access, transparency, and value in healthcare, Ralph and a group of private investors started MediBid. MediBid does what politicians have failed to do to healthcare for decades: To control costs, expand access, and offer quality choice and value to patients through a free market system. MediBid allows patients to shop for medical for medical care in a free market system.
At MediBid, we restore market forces to medical care. Doctors get to set their own rates based on their training, experience, and outcomes, and patients get to shop for medical care across state lines and international borders. Many times with MediBid, you will find procedures that are more effective than procedures allowed, or covered by health plans. Transparency and competition are the only way to achieve reasonable costs. Many of our employer clients offering group health insurance through MediBid save $5,000 per employee per year. Those are substantial savings. Patients are saving an average of 48% vs. insurance discounted rates, or 80% vs. retail. Contact us for more information.