When we visit a doctor, or other healthcare provider, most of us assume that after we pay our deductible and co-pay, our insurance will pay the rest.  Wrong!  Not only do we not know what the insurance company will pay our doctors, neither do the providers.   Sound crazy….it is.  Insurance companies present themselves as guardians of our health care dollars.  Wrong again! Their role can better be described as middleman between provider and patient which obscures their part in the high cost of healthcare, as well as in the disparity of access to medical care, which makes it easy to point a finger at doctors and other healthcare providers.

Healthcare reimbursement in the United States is mind-numbingly complex.  There are private for-profit insurers, private not-for-profit insurers, state and federal fee-for-service payers, and true middlemen called Managed Care Organizations (MCOs) that manage Medicaid reimbursement for some states.  MCOs make decisions about how much medical care, if any, a person may receive, how much providers should be reimbursed, and if payment for services should be delayed or denied, without ever seeing a patient.  And, since their earnings are based on reducing medical expenditures for their employer (the state) they focus on the bottom line, as do for-profit insurance companies.  It is more realistic to say they deal in risk management in order to increase profits, rather than focus on the well-being of people in need of medical care.  For MCO’s, the more they cut cost, regardless of the impact on patients, the healthier their reimbursement.

Advertisements and sales reps assure us that their product will cover our medical costs after our copay and deductible, but that’s a misleading generalization.  They do not pay what the doctor charges.  Rather they set a payout maximum with limits on everything… every office visit…all medication… every procedure…everything…regardless of what the providers costs to provide medical care.  For example, if a doctor bills $120 for a complex initial office visit and the insurance company only allows $75 for that type of service, and the patient’s copay is $15, the provider is paid $60.  If the doctor billed $60 for that office visit, he/she receives only $45, again because of the copay.

If medical professionals provided only a handful of services, instead of the enormous number of medical conditions they deal with every day, they might be able to keep track of reimbursement limits at the time of each service.  And, since no two insurance companies pay the same, and the types of coverage vary from policy to policy, and coverage limits frequently change, a provider cannot know the particulars of their patients’ coverage at the time they are caring for a patient.

We’re not done yet…there are more limitations.  Insurance imposes mandatory contractual adjustments to which a doctor/provider must agree.  Using the $120 example, the provider must write off any remaining balance; in our example, the remaining $45.  Don’t stop reading- there’s more.  There are additional billing adjustments that need to be factored into office visits and procedure, such as “bundling,” “global visits,” and procedure limits to name only a few.

Is it any wonder that doctors and other healthcare providers, including hospitals, have little chance of knowing what they will be paid until after the fact? Nor do they have much, if any, influence on the insurance companies that set the reimbursement rates, because insurance companies have created a complicated and obscure system that excludes them.  It’s like accepting a job without knowing what the wage will be or ordering and eating a meal at a restaurant and finding out how much it costs afterward. Hence, a provider’s best strategy is to bill high to obtain maximum reimbursement and avoid losing money. ^[1]http://truecostofhealthcare.org/outpatient_charges/

For anyone who is uninsured or has had their claim denied, this is presents quite a problem.  Many physicians are open to negotiating fees when an uninsured individual is concerned about their ability to pay.  In true hardship cases, some providers, not all, have been known to greatly reduce or waive their fees. Should a claim be denied, a person with insurance, is expected to pay the entire bill.  They do not have the option negotiating.

Physicians have good reason to be set their fees high to avoid short-changing themselves.  Consider the debt they must incur to become a doctor:  four or five years of college; another four years in medical school; and between three and ten years of residency.  By then they are most likely in their thirties and must begin paying back student loans and starting a practice, as well as providing for normal living expenses.  For other healthcare providers the specifics regarding years of schooling and the cost of entering practice are different, but the principle is the same.  They have school loans and other professional expenses and they don’t know how much reimbursement they will receive for providing medical care. They can’t afford to practice medicine if they lose money.

This convoluted system is expensive.  Providers must employ large staffs, or pay outside agencies, to wade through the ambiguities and restrictions involved in filing insurance claims.  Once a claim is filed it is common for insurance companies to demand documentation (also known as proof) that is incredibly time consuming before they will pay.  Should a claim be denied, which happens frequently, providers then need to file an appeal in an effort to get paid.  Appeals may or may not be successful. If unsuccessful the patient is billed, or the doctor absorbs the loss based on the patient’s insurance policy. All of this is in addition to the staff who manages the day-to-day patient care.  It is estimated that doctors and hospital spend $30 billion a year in billing costs alone.  And costs continue to rise. ^[2]Peter Ubel   Nov 30, 2018, 08:17am https://www.forbes.com/sites/peterubel/2018/11/30/the-insurance-companies-that-are-most-likely-to-refuse-to-pay-doctors/#5dfe48137f77

One of the most frustrating parts of this is, as healthcare consumers we are not getting our money’s worth.  We spend almost twice as much on medical care as any other high-income country, although our utilization rates are mostly similar.  In the March 13, 2018 Special Communication from JAMA it reported on “…the analysis of data primarily from 2013-2016 from key international organizations including the Organisation [sic] for Economic Co-operation and Development (OECD), comparing underlying differences in structural features, types of health care and social spending, and performance between the United States and 10 high-income countries.”  They compared us to the United Kingdom, Canada, Germany, Australia, Japan, Sweden, France, the Netherlands, Switzerland and Denmark.  The other countries spend between 9.6% and 12.4% of their GDP for healthcare, with a range of 99% to 100% with medical coverage.  The U.S. spends 17.8% of GDP, yet we are not healthier, nor do we reach their levels of medical coverage. The study also noted that we have the lowest life expectancy, the highest infant mortality rate and the highest obesity rate. (JAMA March 13, 2018)  https://jamanetwork.com/journals/jama/article-abstract/2674671

Regrettably there are no solutions to be found in these articles, only a glimpse at what we are dealing with. Finding a solution to our excessive medical cost will not be easy.  In July “The Maze” will delve into the realities and difficulties faced by insurance companies and federal and state payors.