Healthcare Costs: Pay Me Three Times

In the webcomic “Schlock Mercenary”, the spacefaring soldier-of-fortune Kaff Tagon is often seen in a state of sheer bliss by the opportunity to get paid twice for the same job, and getting paid three times sends him into paroxysms of joy. And well it should, because he’s getting paid multiple times for the same work by different people — and it all adds up. So why wouldn’t other mercenaries wish to do the same?  But we don’t have mercenaries, you say, but you would be mistaken — we do. We call them healthcare providers.

The whole issue of providing health care services, from the simple doctor’s office visit to catastrophic hospitalization, has been a study in getting paid more than once for the same job, and any effort to reduce this to a simple, single payment from patient to doctor has been actively opposed. Not by patients, and not even by doctors, but by institutions that surround both and game the medical finance business to line their pockets. It isn’t hospitals that get paid to save your life — that is a difference in degree, not in kind, as the doctors deserve to get paid for their work, and someone needs to pay for the use of the facilities. But a simple patient to provider financial trail is rarely seen.

The excuse is that the costs are so astronomical, no individual could ever pay it without going broke. And nowadays, yes, that’s true.  I spent most of a week in the hospital this summer, just getting a kidney stone under control, and the total bottom-line cost claimed by all of the providers was something on the order of $50,000. But that number is the end-result of a long inflationary spiral, created by the mercenary application of two key concepts: It’s not their money, and charge everything the market will bear.

Let’s be clear, there’s a tendency to see the patient as the market, and once that was actually the case, but in the past 60 years or so, that has changed.  The patient is only the instigator, not the market, because the patient doesn’t PAY the entire amount charged.  In some cases, the patient pays nothing or only a small portion at point of service, and a “premium” over time. Even this premium doesn’t begin to scratch the surface of the on-paper cost of most healthcare nowadays. Enter the healthcare facility, the insurance company and at least one government agency as new players, beyond the patient and his or her doctor.

...watch the Queen, watch the pretty lady...
…watch the Queen, watch the pretty lady…

“Reimbursement” is the name of the game, and it has nothing to do with charging the patient for services rendered. It’s about keeping the Queen moving, distracting the mark, palming the money card, bending a corner, or otherwise convincing a mark to play, thinking he can win. In reality, the only ones who win are the dealer and his shills — in a proper game of three-card monte, the mark never wins.

The original system was simple. You get sick, you go to the doctor. The doctor treats you, you pay him cash (or chickens) and you go home. The doctor pays his expenses, and any profit left over is his own pay. The cost was relatively low because it was only one stage, and only one person had to make any profit. (Yes, there are nurses and office staff, they come under the heading of “expenses”, as they aren’t providing the patient with services, they’re providing the doctor with services.)

Around the turn of the 20th century, there was a relatively common health care support system called “Lodge Practice”. This was a cost-sharing system similar to insurance, created by “Fraternal” or “Friendly” organizations such as the Knights of Columbus or the Masons. The lodge member would pay a small fee each month into a common pool. The lodge would contract with a doctor to provide services to its members for a set amount.  Doctors would compete with one another to get the lodge contracts, keeping the price low. Good doctors were in demand, poor doctors didn’t get their contracts renewed — the patients drove the system. In the heyday of lodge practice, when a doctor would generally cost a person one or two dollars a visit, the lodge member would only pay, on average, one or two dollars A YEAR. Lodge practice was actually cheaper than the same care without it, but doctors still got paid a reasonable amount.

Of course, some didn’t like this practice because they felt it made the cost of health care TOO LOW, and they objected to patient riff-raff judging the quality of physicians — so they demanded that Government Do Something. Between the government and the fraternal organizations themselves getting greedy, lodge practice was first made uneconomic, then legislated as illegal. The result was much higher costs due to a lack of competition.

The real Find-the-Queen game begins during World War II, when salaries were frozen. Because giving your employees health insurance was not considered wages, but instead was a separate thing, a “benefit”, it was not subject to the freeze. This was used to reward an employee rather than giving a raise, or used to entice a good candidate to come work for you, or continue to work for you, when it was not legal to simply offer them more money. This is the financial equivalent of sucking the mark into the game — he is convinced that he can win by the dealer and his shills.

Now we have an entirely new game — you pay the insurance company your “premium”, basically a fee to be allowed to play, and you place your wager, usually called a “co-payment”.  Insurance is, when you get down to it, gambling on your health. That’s what actuaries do, they calculate the odds of you getting sick and costing them money. They charge you a playing fee based on how likely or not you are to make a claim — the house percentage, which the house ALWAYS wins. They bank on you sitting around, ogling the cigarette girls, buying overpriced, watered drinks, and eating the hors d’oeuvres. They don’t have to pay anything out for that, in fact, those drinks pay for the munchies and the time and energy to serve you. (An $8.00 mixed drink goes a long way.)

Here’s where the gaming of the system starts. You go to the doctor, you pay your co-payment, see the doctor, go home. The doctor, who used to simply pocket that money and go home himself, files a claim against your insurance for between $150 and $225.  He doesn’t expect to get that much, of course, he knows he’ll only get a percentage, but he figured out what he needs to charge in order to get what he really wants, so he’s happy. Then the insurance company files with a government agency for their OWN reimbursement, again gaming the amount to get what they want. By the time everyone has gotten done filing claims and requesting reimbursement, the cost of that simple doctor’s visit is up around $200. The patient, however, doesn’t pay $200 — he pays what he would have paid originally, without the whole Three-Card Monte mob…and a premium on top.  This entire process takes a $25.00 office visit and inflates it into $200.00 worth of cash shuffling from one account to another. This is not the patient’s money, it’s Someone Else’s Money. The price is inflated as high as the providers can manage, based on What The Market Will Bear. Since the market is not the patient, but insurance companies and government agencies, it will bear quite a lot.  The insurance companies increase their premiums, diddle the copays, and the government agencies levy higher taxes, taking in MORE of Someone Else’s Money, and the process continues.  But still…the patient only got the same service he would have gotten had he paid cash.

Catastrophic cases are not a exception to this process — I paid, out of pocket, about $2,000 for that bout of kidney stones.  This is pretty much what I would have paid, cash, back when insurance companies and government agencies were not involved. I didn’t save a single cent, and paid them for the opportunity to get fleeced. I don’t even escape if I have Medicare, since I paid a “premium” for nearly 40 years for the opportunity to play the game now that I’m disabled. I also pay about $80 a month for a prescription drug plan, to pay between $5 and $75 for each prescription — what the drugs would have cost without the inflation afforded by Someone Else’s Money.

Oh, but the game gets better!  A Three-Card Monte dealer makes the most if he has his own box to set up for his marks, one easily whisked off should the police be seen. He makes less money if he has to split it with someone who will let him use their property, so he’s better served if he has his own place. Now we see a trend building, where healthcare providers (hospitals) are buying insurance companies and issuing their own insurance, or vice-versa, insurance companies buying hospitals and medical practices. Why would they do this?  Easy! To cut down on how many people they have to split the take with!

When the insurance company owns the hospital, it’s like that old Steve Martin routine about “Fred’s Bank”.  Fred has a bank. Actually, it’s just a white suit…you give him a deposit of $50, he puts it in the right-hand pocket.  “You gotta remember that,” Fred says.  The case of insurance owning the hospital takes the white suit one step further. The hospital makes a claim on the insurance…”Fred” takes the $50 and moves it to the left-hand pocket.  All they are doing is paying themselves…with Someone Else’s Money.  They even convince the mark that he’s getting a much better deal, saying they’ve “reduced costs”. They have — they no longer have to split the take as much.  But the patient STILL is only getting the care he would have gotten, had he paid cash.

But where’s the proof? How do I know that it’s just a big, convoluted, paper-chase game of Three-Card Monte?  Because a form of lodge practice is becoming popular again. MedLion is the fastest-growing medical services provider in the country.  They charge a small monthly fee, then your doctor visits are just $10.00.  It seems like insurance, but it isn’t. It’s a simple service fee, to pay them for their efforts to find and enlist physicians.  It’s just like lodge practice — doctors compete to be in MedLion, and the cost goes down.  The fee is fixed, the doctor’s visit is paid in cash, everyone is happy with what they got, and all of the overhead — paying all the shills in the con artist’s mob — has gone away.

Respectfully Submitted.

Sources (Links repaired!):

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