•10:38 AM
As discussed in my previous post, the market has failed to deliver options that create competition, add value and drive down prices. Reform is badly needed to restore Justice to our health care system. One reform that must be looked at is decreasing the amount of risk the uninsured have to bear.
One of the major advantages the insured have over the uninsured is that, although their premiums are astronomically high, the cost is not nearly as high as the actual cost of major health care services. Because the actual cost is so high, people purchase insurance to keep themselves financially safe in case the need arises.
Insurance companies are able to pay out billions of dollars in bonuses and profits because they are able to leverage their huge population of insured individuals against hospitals and doctors and demand, or rather force, them to accept less for the services than they would have otherwise billed.
The government with its even larger population of insured is able to do this even “better” than insurance companies. This creates some unintended consequences within the whole system. For example, a typical profit margin is 30%. If Medicare reimburses you at 60% of billed charges, you have actually lost money. The provider has to make it up somewhere. Who do they pass it on to? The insurance companies and the uninsured. This pushes up premiums and costs at an alarming rate and financially devastates those without insurance. Because of the fear of the financial loss that comes from being uninsured, people will eventually do all they can to get insurance.
Increased competition will lower costs. In addition to the other recommendations I have made, one more reform that needs to take place is a measure that places a maximum amount the uninsured can be charged for medical services. This would increase competition and provide a level of security. For example, if the original price of a service is $1,000 and the insurance company reimburses the provider $500 for the service, the uninsured should not be stuck with the full bill of $1,000. That however is exactly what is happening in most cases.
There certainly should be some advantages for having insurance. However, one of them should not an exclusive window to discounted prices.
There is no easy way to solve this problem. If you lower prices on some customers it has to be raised on others. The problem is that the uninsured are always the ones who get the worst end of the equation. It is not Just that a system which presently forbids competition and forces prices up leaves those who cannot afford insurance left in the most vulnerable situation.
So, what is the solution?
The most logical solution is that the uninsured will not pay more than 1xx% of the average reimbursement amount (or the advantage the insured enjoy) the Insurance Provider pays for a given procedure, test, or visit. It seems right to me, that the percentage should be about 120%. The exact science of this formula would have to be determined. When using this formula in the situation above, the uninsured consumer would have paid $600 instead of the full $1,000. Through health reform legislation, the differential, or $400, could become a tax deduction for the provider or even a temporary tax credit.
Even without the extra protection from the tax code change, this could still be a viable option. However, without the tax benefit, this push prices up in other areas. Nevertheless, the insured still would enjoy the advantage they expect by being insured and the market would find the appropriate balance with these safeguards in place.
With or without the tax code change, being uninsured becomes its own product. It comes with a risk but it also comes with a safeguard – or type of insurance - and possible reward based on the health of the individual. More on this topic will be discussed in my next post.
This is not the perfect solution. However, it is one solution among many that must be considered. Bringing the insured vs. the uninsured costs to a similar level creates options for the American consumer. With this kind of safeguard, the consumer has options: remain self insured or purchase health insurance. Whereas presently, the consumer doesn't truly have a choice. They are forced into one situation or another. Furthermore, this kind of provision could be one for a temporary duration of time, for example of five years, while the health care market begins to grow and take hold on free market principles. As it does, other options will be created that will provide the insurance and protection needed. For the time being however, this is a necessary change to provide justice in an unjust and perhaps even predatory system.
Choice lowers costs through increased competition and options. If we believe in health care for all and in prices that all can afford, this is something that must be debated and considered.
One of the major advantages the insured have over the uninsured is that, although their premiums are astronomically high, the cost is not nearly as high as the actual cost of major health care services. Because the actual cost is so high, people purchase insurance to keep themselves financially safe in case the need arises.
Insurance companies are able to pay out billions of dollars in bonuses and profits because they are able to leverage their huge population of insured individuals against hospitals and doctors and demand, or rather force, them to accept less for the services than they would have otherwise billed.
The government with its even larger population of insured is able to do this even “better” than insurance companies. This creates some unintended consequences within the whole system. For example, a typical profit margin is 30%. If Medicare reimburses you at 60% of billed charges, you have actually lost money. The provider has to make it up somewhere. Who do they pass it on to? The insurance companies and the uninsured. This pushes up premiums and costs at an alarming rate and financially devastates those without insurance. Because of the fear of the financial loss that comes from being uninsured, people will eventually do all they can to get insurance.
Increased competition will lower costs. In addition to the other recommendations I have made, one more reform that needs to take place is a measure that places a maximum amount the uninsured can be charged for medical services. This would increase competition and provide a level of security. For example, if the original price of a service is $1,000 and the insurance company reimburses the provider $500 for the service, the uninsured should not be stuck with the full bill of $1,000. That however is exactly what is happening in most cases.
There certainly should be some advantages for having insurance. However, one of them should not an exclusive window to discounted prices.
There is no easy way to solve this problem. If you lower prices on some customers it has to be raised on others. The problem is that the uninsured are always the ones who get the worst end of the equation. It is not Just that a system which presently forbids competition and forces prices up leaves those who cannot afford insurance left in the most vulnerable situation.
So, what is the solution?
The most logical solution is that the uninsured will not pay more than 1xx% of the average reimbursement amount (or the advantage the insured enjoy) the Insurance Provider pays for a given procedure, test, or visit. It seems right to me, that the percentage should be about 120%. The exact science of this formula would have to be determined. When using this formula in the situation above, the uninsured consumer would have paid $600 instead of the full $1,000. Through health reform legislation, the differential, or $400, could become a tax deduction for the provider or even a temporary tax credit.
Even without the extra protection from the tax code change, this could still be a viable option. However, without the tax benefit, this push prices up in other areas. Nevertheless, the insured still would enjoy the advantage they expect by being insured and the market would find the appropriate balance with these safeguards in place.
With or without the tax code change, being uninsured becomes its own product. It comes with a risk but it also comes with a safeguard – or type of insurance - and possible reward based on the health of the individual. More on this topic will be discussed in my next post.
This is not the perfect solution. However, it is one solution among many that must be considered. Bringing the insured vs. the uninsured costs to a similar level creates options for the American consumer. With this kind of safeguard, the consumer has options: remain self insured or purchase health insurance. Whereas presently, the consumer doesn't truly have a choice. They are forced into one situation or another. Furthermore, this kind of provision could be one for a temporary duration of time, for example of five years, while the health care market begins to grow and take hold on free market principles. As it does, other options will be created that will provide the insurance and protection needed. For the time being however, this is a necessary change to provide justice in an unjust and perhaps even predatory system.
Choice lowers costs through increased competition and options. If we believe in health care for all and in prices that all can afford, this is something that must be debated and considered.
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