Why should I worry about medical and healthcare charges? My employer provides my insurance so what’s the big deal?

You should care even if you are young and healthy because the person ultimately paying for coverage is you, your fellow employees and other people like you. More than 160 million Americans are covered by employer-sponsored insurance plans. Another 17 million Americans purchase insurance for themselves in the private insurance market, and about 100 million are covered by government-sponsored insurance plans. The excessive cost is passed on to the employees in the form of lower wages; to the individual insurance purchaser in the form of higher premiums; and to the taxpayer in the form of higher taxes. As a result of the indifference of the public, healthcare providers and insurance companies have been able to overcharge and keep information about their business practices secret.

I thought Obamacare fixed all of this. What happened?

The ruse that was Obamacare forced people to buy insurance from private industry or be fined. Because the government subsidized insurance premiums for those who qualified, insurance companies were able to continue to raise premiums. The costs of healthcare to continue increase unabated. Obamacare did nothing to improve the public health as measured by infant mortality, life expectancy, suicide rates or homelessness.

Why is healthcare such a contentious issue year in and year out?

Because the cost keeps going up and it is not affordable for most people. The question is then  posed- Who should pay for medical care? The government? The Insurance Company? The Employer?

HHI believes we are asking the wrong question. The question should be how do we improve the public health? The answer to the question who should pay the cost of healthcare is obvious. We are the only ones that can pay for healthcare. Having intermediaries like employers, insurance and the government only adds administrative costs, opportunity for fraud and abuse, and loss of personal freedom to obtain the healthcare services we desire. Although there is a place for medical insurance and government, their use should be minimized as much as possible.

As an advocate for reform, what exactly are you advocating?

HHI wants to advocate for specific changes with the primary objective of improving public health including mental health and a secondary objective of lowering healthcare costs dramatically. We need to understand that healthcare is a commodity that is a necessity for life just as food, clothing and shelter are. The supply and demand system works well for food, clothing and shelter. It will work just as well for healthcare. HHI wants to help drive reform by unmasking the ways hospitals, insurance companies and drug makers work to keep prices higher than are needed.

What specific reforms do you advocate to correct the problem?

There are several but the major ones include: Price transparency. Make contracts between insurance companies and health providers illegal. Eliminate group health insurance. Mandatory Health Savings accounts. Patent reform for drug and medical devices. Strictly enforce antitrust laws to prevent drug companies from fixing prices. Use tax laws to encourage physical fitness and a healthy lifestyle. Annual physical examination to diagnose disease at an early stage. Increase the earned income credit so that working families are guaranteed an income above the poverty level. Legalize drugs.

Why are the prices charged to patients through their insurance companies different than what are charged those who choose to pay cash?

Because the insurance companies negotiate prices with the hospitals, pharmacies and other providers. They are generally 100 to 200 percent of what Medicare pays. Cash prices are literally just made up and are usually much higher.

How are the prices at hospitals determined?

Hospital prices are initially determined by Medicare with the advice of an AMA committee presumably based on hospital cost. Hospital contracts with insurance companies are negotiated at a higher price than Medicare  usually at 130 to 160 percent more. The sticker price that the hospital charges the uninsured are literally just made up and are kept secret as are the contract prices.  While hospital contracts with insurance companies appear to be giving discounts, this is an illusion. Those initial prices are inflated and the so-called discount merely trickery. No one is really getting a good price under this scenario. This is a cost-plus system with little incentive to lower cost or decrease hospital use.

How are the prices for tests and procedures determined?

The same way hospital prices are determined. It is a cost plus system.

How does managed care keeps prices down?

They do not! The biggest thing managed here is the profit that insurance companies,  hospitals and other providers realize. But give the business managers who did this credit for not just learning how to take advantage of the government regulated business environment but for also finding ways to make the public believe that this was for their benefit. So, if it feels like you’ve been duped by the medical business, you probably were. If you haven’t noticed, new treatments are routinely very expensive. Hospitals hate to change anything that is working.  Working means making money. Any new or better and more effective treatment that does not improve revenue goes onto the back burner. Prices are actually kept higher through the use of networks of hospitals and physicians. Networks limit competition and the freedom of the patient to choose physician or hospital. Quality measures are also kept secret from the patient.

Will the healthcare business and the way it is managed get better anytime soon?

There are few reasons to think so.  A system has evolved that benefits insurance companies, doctors and hospitals. It is to the detriment to the patient. It has caused a decrease in the overall public health with an explosion of obesity, diabetes, depression, drug abuse, suicide etc. plus out of control costs.

What is there to conclude about managed care and hospitals and the state of the healthcare business?

Managed care has fostered the growth of the large hospital system. In 1977, there were over 50 independent hospitals in the Houston area. Now there are 4 hospital systems. Large providers and hedge funds have bought up physician practices and independent imaging and surgery centers. This decreases competition and results in higher prices. This is NOT the best way to deliver healthcare. Hospital executives will tell you that these changes, driven mostly by mergers and acquisitions, are all for the good of the public and allow bigger organizations to leverage their buying power for the good of the public. Great. But where is the evidence? If the free market was allowed to flourish, we would quickly find out.

But our current healthcare system is best at innovation, providing new treatment for previously incurable diseases as well as medical devices that improve lives. Don’t we need high prices to provide incentive for development.

Yes, we do. But like everything else, the incentives have to be kept within reason. We have to come up with better ways to compensate for new drugs and procedures. The current FDA approval system, the patent system and insurance payment system do not serve the public well. One way might be to limit patent profits to a multiple of drug development costs e.g. 5 times development costs. After this amount of profit is reached, the patent would expire. However, there is another form of innovation that is lacking in our current managed system. Little effort is focused on cost-effective ways to deliver better quality care. To the contrary, the emphasis is on delivering more care whether or not it actually is of benefit to patients.

Prescription medicine is more expensive now ever. But why?

There are many reasons that drug pricing is the way it is. One reason is a relatively new law that allows for an old drug in use well before the FDA existed to be granted a patent if a drug company can do a study showing it is safe and effective. Colchicine, a drug well known to be effective for gout, was granted such a patent resulting in a price spike. Another reason appears to be price collusion between drug companies producing similar drugs. Disease modifying drugs for multiple sclerosis might be an example of this. Yet another reason is the failure of government to negotiate drug prices for medicare, medicaid and the VA so as to pay somewhere near the world price. Thus, we see that drug prices are managed and take advantage of rules that favor the drug company at the expense of patients. There is no semblance of a supply and demand system to determine the price of most drugs. The patent system for new drugs allows the manufacturer to charge what it likes as long as insurance will pay. Insurance companies have little incentive to control costs; they just raise premiums. Patients that have insurance just have a small copay. Patients without insurance? Well, consider the example of the $600 Epipen and how the price went from $100 to $600.

Why don’t the insurance companies step in and demand a change?

A better question is why the voters don’t demand a change. Like I said before, private insurers and government programs pick up the biggest share of the bill, high drug costs are ultimately passed on to the public. The government is the biggest ‘customer’ for the pharmaceutical companies but as I said earlier, the federal government negotiated away its ability to use the volume of its purchases to get better pricing. So, in short, the representatives of the people who needed prescription drugs have granted the makers of these medicines the ability to charge what they want.

How does HHI envision a free market in Healthcare?

Patients need to be in charge of their own care; they need to manage it. This can only happen if they pay for it. By mandating a compulsory Health Savings Account (HSA), funded by payroll deduction, employer contributions and tax savings, patients can begin to accumulate money to pay for healthcare. With transparent pricing, patients can shop for care just like shopping for any commodity. Hospitals and doctors will have to please the patient who will now be the customer, rather than the insurance company who is the current customer.

How does HHI view pre-existing conditions?

HHI believes that patients while patients have the freedom to live the lifestyle they would like and have an inherent right to pursue happiness, they have the responsibility to pay for that lifestyle. If a pre-existing condition is the result of unhealthy lifestyle choices, the patient should be responsible. Tax law can be used to encourage healthy lifestyle. On the other hand, if the pre-existing condition is not a result of unhealthy lifestyle choices, society should step up and cover the additional cost. This can be accomplished by direct government subsidy to the HSA and a base premium attached to every insurance policy. For example, if you have high blood pressure and neglect treatment, you should have to pay an additional insurance premium. If you have a disease like multiple sclerosis or sickle cell disease, the additional insurance premium would be waived as it is already figured as a base premium. Government would place additional sums in the HSA based on actuarial determined figures.

How does HHI envision the role of insurance in the free market system?

Insurance would be a contract solely between an individual patient and the insurance company. Insurance contracts with hospitals and other providers would be illegal. Claims would be paid directly to patient’s HSA and patient would be responsible for all bills. As prices would be transparent, cost for hospitalization would be known in advance. When patients have very little money in the HSA, they would probably opt for the insurance company paying a greater percentage of the healthcare bills. As money accumulates in in HSA over time, patients may opt for the insurance company paying a lower percent of the bill.

How does HHI envision drug pricing?

If we allow a free market in drugs with the government vigilant in preventing price collusion, prices will necessarily have to be affordable. For brand named drugs to be priced affordably, patent times may need to be prolonged so that companies can recover their costs plus substantial profit. There is a current free market for generic drugs that works well for the most part except for some price collusion. Orphan drugs such as those for cystic fibrosis need government subsidies

How does HHI envision improving the public health?

An annual physical exam can supply accurate data on the state of the public health. It can also identify disease in an early stage and advise treatment. It can also supply data to insurance companies who can use this information along with their experience to determine an individual premium.

Tax law can be used to promote healthy lifestyle. For example, the medicare tax that is used to pay for medicare disability can be increased if there is an unhealthy lifestyle.  If street drugs are made legal, taxes can be levied to help care for the homeless and treatment for addiction.

Eliminate poverty by increasing the earned income tax credit. This can go a long way to eliminate stress, anxiety, depression and lowering the suicide rate.