While Democrats and Republicans debate the merits and drawbacks of reforming America’s broken health insurance system, few policymakers are paying attention to perhaps the biggest reason health insurance is so expensive: The actual cost of healthcare, which insurers have to pay, is out of control.
There are many reasons the cost of providing healthcare has been steadily rising in most sectors of the healthcare industry. One of the most important is that the traditional health insurance model wastes piles of cash. It pays health insurers to act as middlemen between patients and their doctors. Patients continue to use their health insurance to pay for virtually every healthcare service, including those that they could easily pay for on their own, like primary care visits, flu shots, and routine exams.
Insurers’ involvement in nearly every primary care visit is causing healthcare expenses to skyrocket. Patients are being forced to pay extra so insurance companies can facilitate transactions they really don’t need to be involved in. Not only does this cause the cost of primary care services to rise, it also forces doctors to squander time filling out paperwork instead of treating patients. Some doctors choose to hire more staff to handle much of the administrative work, also contributing to the rising cost of providing primary care.
I remember the day (not so long ago) circa 1950 my mom would take me to see the 'family doctor: or GP as was common knowledge. She would pay about $7.00-$15.00 for an office visit. The doctor (Dr. Brown) would often come to our house to see me if I had a fever. ( I lived in Connecticut, where in the winter it would get pretty cold, icy and generally inhospitable.)
No matter, today an initial visit to a 'primary care doctor' runs about $125.00 and a followup is around $75.00.
No matter, today an initial visit to a 'primary care doctor' runs about $125.00 and a followup is around $75.00.
I am often told medical care is so expensive today because we can treat almost anything, and have drugs we had not back in 1950 (except for maybe, penicillin) and that is why health care is so expensive. It's a 'simple' explanation of how we arrived at this point in time.
But is it ?
Prior to 1965 there was no Medicare, some seniors had retirement benefits from their employers along with their pensions. Once Medicare became established the Federal government infused billions into the health system, creating inflation. In 1981 the Health Maintenance Organization billl was passed, allowing doctors to sign contracts with insurance companies. At that time most medical practices were private and independent. Over the next 25 years Health Insurance Plans were indemnity plans, which evolved into Health plans. Invasive regulations created oversight and bureaucracy increasing the costs to medical practices. Prior authorization for services increased the workload and delayed treatments. Billing and reimbursement issues became very cumbersome, increasing overhead substantially. The days of one doctor and one 'nurse' in the office dissolved into major business.
The increasing overhead led to acquisitions, mergers, and a transition from solo practice to group practices.But is it ?
Prior to 1965 there was no Medicare, some seniors had retirement benefits from their employers along with their pensions. Once Medicare became established the Federal government infused billions into the health system, creating inflation. In 1981 the Health Maintenance Organization billl was passed, allowing doctors to sign contracts with insurance companies. At that time most medical practices were private and independent. Over the next 25 years Health Insurance Plans were indemnity plans, which evolved into Health plans. Invasive regulations created oversight and bureaucracy increasing the costs to medical practices. Prior authorization for services increased the workload and delayed treatments. Billing and reimbursement issues became very cumbersome, increasing overhead substantially. The days of one doctor and one 'nurse' in the office dissolved into major business.
In 2006 the use of electronic health records was mandated by CMS and HHS, in order to be fully reimbursed. Further inflationary funds were given to doctors to purchase EHRs. There was no funding for ongoing maintenance or replacement of IT systems. The benefits of the federal largesse were vendors of IT system. The money given to medical practice, and hospitals flowed through to vendors and software companies.
The 'incentive' was a perverse combination of penalties for non compliance and an increase in fees for those who 'complied'.
Other issues arose, the conversion from the ICD-9 to ICD-10 coding increased work loads for medical providers.
As things progressed in the early 2000s insurance companies began to feel the competition and had diminishing profit figures, which stockholders and investors . Major insurers began to merge, pharmacy companies merged with each other, or health plan to maximize their own profits. Many of these occurences did not decrease costs to the system. The beneficiaries were the major insurrers, pharmacy benefit programs. Gone were the days of the independent pharmacies, much like medical practices. They are replaced by PBMs (Pharmacy Benefit Managers) with large scale contracts with advantage plans.
The development of specific focused drug applications added increasing expenses to drug companies coupled with the expense of the FDA drug approval process
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