Why Healthcare Costs Will Continue to Climb and My Healthcare Plan

by iam1percent on January 8, 2013 · 21 comments

Healthcare costsDuring the 2012 holiday season, I spent Christmas in the hospital.  I wasn’t sick, but someone very close to me was sick and was in the hospital for 3 days.  I stayed with them day and night and through it all, I made a lot of observations about the healthcare system.  There are some real fundamental problems in the system.  Some of it can be fixed through legislation, but others need a dialogue and real discussion about how we value life in America.  Here are the problems I observed:

  • No one questions the costs
    • Need another MRI?  Sure, whatever you say!  Need to have your blood re-tested?  Sure, what do I know!  Need another bag of IV Saline solution?  Um, yeah, of course!  Doctors can and will order tests because they don’t care about the cost.  They really don’t.  Ideally, they would like to provide patients with the least amount of intervention to get them better, but many doctors order tests and do unnecessary screening because they are afraid of our litigious culture…they’re afraid of being sued.
  • No one is willing to put a price tag on life
    • So this will cost $1 million to keep me alive for 3 more days?  I’m worth it damn it!  Someone pay for it!  Sounds insensitive, but its true.  No one is willing to say “it’s not worth the cost” when it comes to their life or the life of a loved one.  In order to really bring down healthcare costs, we must question the value of the service relative to the benefit it brings.
  • There is no transparency
    • I have no idea what costs were being incurred during the stay at the hospital.  Though many want to and should stay focused on getting better, I felt extremely uneasy not knowing what costs were being incurred, minute by minute, hour by hour, and day by day.  I will only know when I see the bill.
  • There is no accountability
    • This person who was in the hospital first went to the ER on 12/21, but was discharged.  This person went back to the hospital on 12/23 and was admitted.  You can bet that there is no one reviewing why this person was not admitted on 12/21 unless we ask.  Since my insurance picks up a bulk of the cost, it is really on them to investigate.  But with the barrier to competition in the insurance market being so high, there is always a pool of revenue in the form of premiums, particularly now with the every American mandated to buy health insurance.
  • There is no competitionn
    • The barrier to entry in healthcare is extremely high.  You can’t just go to a bank and ask for a loan to build a hospital.  There is so much involved to build the infrastructure to a hospital system, that there is usually only 1 hospital that dominates a city or county.  Additionally, if you call an ambulance, you’re not in a position to shop around.  It’s also equally just as hard to start a health insurance company or a pharmaceutical company.

Many of the above simply cannot be changed and is why the cost of healthcare will continue to climb.  However, there are other ways to “bend the cost curve”, and I’ve outlined my plan below.

I Am 1 Percent’s Health Care Proposal:

  1. Repeal Obamacare.  This does nothing to “bend the cost-curve” of healthcare.  It only increases taxes on most everyone including the people whom it intended to help.
  2. Repeal state minimum coverage.  Everyone should be able to shop for the coverage that best suits them and their families.  If I don’t want to pay for chiropractic services or acupuncture, I should not have to.  The other advantage to removing state minimum coverage is the ability to shop for plans in other states.
  3. Remove the tax break for companies to provide health insurance and give tax breaks for individuals to purchase insurance.  This way, a young person can purchase a long-term health insurance policy and not have to worry about being dropped because he wanted to change jobs.
  4. Provide safety net coverage in the form of Medicaid for 3-4x poverty limit..no exceptions.
  5. If you make greater than 3-4x poverty limit and choose not to purchase insurance, you waive your right to free healthcare services annually on your taxes
  6. Medicare should be optional for people less than 55 years of age
  7. If you’re born with a pre-existing condition, you’re covered.  Insurance cannot deny you coverage.  If you develop a condition later, you should’ve had insurance in the first place.

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{ 19 comments… read them below or add one }

Hamilton Lempert January 8, 2013 at 9:08 am

One point of clarification, as the Director of Quality Assurance at a hospital ER, all patients who are admitted to the hospital within 72 hours of an ER visit are looked at from a QA point of view. This is a standard practice at most if not all hospitals. I agree with most of your other points. Our health care system is broken

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iam1percent January 8, 2013 at 11:38 am

I didn’t know that! Thanks for the insight! Do you think they’ll cross-reference the admission on 12/23 with the separate ER visit on 12/21?
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Hamilton Lempert January 8, 2013 at 11:40 am

If it was at the same facility, yes.

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Dan January 8, 2013 at 2:16 pm

IAM1PERCENT,

You made some excellent points but I have one to add to your list:

Tiered health insurance rates – Now that all food products in the grocery stores are labeled and almost all restaurants are required to list the calorie count and fat content of their food, there should be some personal accountability/responsibility added to the equation.

Obesity is an epidemic that we as a nation can not afford. There can not be true health care reform unless this issue is addressed and I believe that holding people accountable for their actions is a step in the right direction.

I work with a few guys (foodies) in their late thirties/early forties that are 300 – 370 lbs and are starting to experience serious issues including high blood pressure, high cholesterol, diabetes, early arthritis of the spine, etc. They truly enjoy the freedom of eating anything they would like at anytime. I am very jealous of that!

In the meantime, every year my premiums and co-pays go up and I don’t see an end to it.

Keep in mind I am not some crazy health fanatic, I just watch what I eat and walk a couple of miles every day. To be fair, one of the other guys that I work with is an avid cyclist in excellent shape and I believe that he should pay less for his health care than me. Maybe that would motivate me to do more 5 Ks a year. :)

Dan

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iam1percent January 9, 2013 at 9:25 am

I agree do a degree with your proposal, though maybe there is a way to incentivize good behaviour? But to your point, like life insurance and car insurance, health insurance companies should evaluate each member’s health and collect a premium that is relative to their risk of getting sick….that’s the whole point of insurance.

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The White Coat Investor January 8, 2013 at 2:53 pm

Interesting plan. You see the problems well, but I’m not sure I buy into your plan, at least all aspects of it.

Consider your family member’s ER visit on the 21st. Just because the patient was admitted 2 days later doesn’t mean there was ANYTHING done wrong on the 23rd. Sometimes people just get sicker and need to come back. Same thing with hospital discharge. Yet now hospitals are being penalized for readmissions within 30 days. Seems smart, right? They must have screwed something up because now the patient is back. But what kind of incentives does this create? It causes doctors to test more, treat more, keep the patient in the hospital longer, make them sign out AMA more often, send them to rehab more often etc. Instead of cutting costs, it increases them. A lot of times readmissions aren’t just because the patient got sicker or the doctor screwed up. A lot of times they’re because the patient screwed up. He shot up cocaine again, ate too much salt, didn’t take his meds etc. Why should the hospital be penalized?

A couple other points. “Repeal Obamacare” is like saying “repeal the fiscal cliff bill.” There are lots of good things in this huge piece of legislation and you don’t want to throw the baby out with the bathwater.

Minimum coverage is also important. For example, my aunt was diagnosed with cancer last year. She had an employer provided health insurance package that she thought was “really good” that had a maximum out of pocket (for the insurance company, not her) of $2K. Some insurance huh? I can tell you how much good that did her.

What do you mean “waive you right to free healthcare?” Where did you get this right? And are you going to come on down to the ER and enforce it? Or do you expect me to stand there and watch someone die for you? Think about the practicalities of denying emergent care to people (I assume that’s what you mean when you say “free care.”) There is no such thing as free care by the way. Just because I provide care without regard to your ability to pay doesn’t mean I don’t send you a bill for it, which is then sent to bill collectors if you don’t pay it.
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iam1percent January 8, 2013 at 4:33 pm

Hey bud, thanks for the feedback! Couple of comments:

1. I’m not saying that there was anything wrong with discharging this person on 12/21, but I just want some accountability or independent review of the case to see if they in fact, should’ve been admitted. It seems that there may be in some hospitals, but we, as patients are not exposed to that.

2. regarding readmissions, i’m not sure if you’re citing any data about it actually increasing costs, but i would presume a few more tests or treatment may in fact cost less than a readmission. I think the incentive is good, but the big assumption made is that the increased cost of care far outweighs the cost of readmission.

3. I’m not sure what is wrong with repealing the fiscal cliff bill and replacing it with another bill. Similarly, I’m not sure what is wrong with repealing obamacare if i’m replacing it with something else. I believe my plan covered pre-exisiting conditions. The other good thing in obamacare tends to be coverage on parent’s plan til age 26, but i don’t think that its necessarily good.

4. I’m not sure why your aunt would choose that plan with a maximum out of pocket cost for the insurer of $2k. I would never sign up for that. I’m sorry, but this comes down to personal responsibility and choosing the coverage that’s best for you and your family.

5. My plan is in progress. Maybe waiving the right to healthcare is one way, but the other way is that if you do become sick, you will be held liable for all costs and that you have to put up all your assets as collatoral if you do end up seeking care without insurance and can’t pay for it.

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krantcents January 8, 2013 at 6:33 pm

I may disagree with one aspect of your argument. I think there is some competition, but it is up to each individual to ask questions. Second opinions helps create competition. When I had surgery years ago, I asked which hospitals my doctor could perform the surgery. I found out I had a choice of 4 hospitals. I then did a little research about costs and reimbursements. I created a better solution for me.
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iam1percent January 9, 2013 at 9:45 am

Thanks for your comment. I think you’re the exception and not the rule. Most people won’t call around and ask about costs. They typically go with name recognition and/or reputation rather than costs and results.

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Shaped January 10, 2013 at 3:34 pm

If you are about to have someone cut you open, I personally would think reputation in much more important than cost.

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Mrs. Pop @ Planting Our Pennies January 8, 2013 at 9:23 pm

I’d also add let’s question some of the motivations behind coverage. Twice recently I’ve run into older people that had the same issue. They had an accident where they broke a bone or two. Medicare covered setting the bone in the emergency room, but at that point they were notified that if they wanted Medicare to cover them for the rehab they would need, they needed to stay in the hospital for at least 3 days – medical necessity aside.

I get that this limitation might have been put in there in a well-intentioned way, but all it is seeming to do is increase bills by the cost of a 3-day stay in the ER in terms of its practical applications.
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iam1percent January 9, 2013 at 9:46 am

I agree and it sounds like a flaw in Medicare! But being that Medicare is a government entitiy, it doesn’t surprise me.

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ANOTHERKINDOF1%ER January 9, 2013 at 1:51 am

Interesting post; I respect and appreciate that you have some raw recent emotional reactions given your experience. However I disagree with your plan on many levels.

1. As noted above, ‘Repeal Obamacare’ doesn’t mean much in and of itself. It’s an extremely complicated act with some positions as you have pointed out like pre-existing conditions and student coverage which have merit. While it does raise taxes on individuals who I’d argue can afford it, without getting too bogged down in arguments, it generally does grant rights and coverage to a large number of previously uncovered individuals. Again, I don’t want to get into a political argument, but a reasonable non-partisan view can at least acknowledge that it is an effort to provide some level of health care for those who otherwise would not have it. Repeal isn’t happening anytime soon.

2. Repeal of minimum coverage misses the fundamental point of universal care; the system only works if there are no free riders. If everyone is required to pay for some level of coverage (hence the tax/penalty if you don’t have it), then insurers have a large enough pool and fee base to subsidize those with actual expenses. Your point on chiropractors is valid as an example of what shouldn’t be in the minimum, not an argument against it.

3. I have a different view on item 3 – I actually don’t feel employers should have any part in health insurance. Individuals should buy health insurance directly from providers. Why does GM need a HR department trying to decide what policies to offer – it is simply a historical anachronism whose time has come and gone. As to tax deductions, I’m not in favor of more deductions, preferring that we lessen all deductions across the board to simplify the tax code.

4. Expanding Medicaid to that level is expensive; I’d support you on it but given your reaction to taxes in Obamacare, I’m not sure where the funding should come from. Given Medicare/Medicaid have dramatically better cost structures than private insurers, I was a supporter of a single provider alternative when health care reform was originally proposed, but I assume many would criticize this as a ‘government takeover of healthcare’ and demand that ‘the government keep their hands off my Medicaid’ again.

5 and 6. These points were covered well by other posters. Its nice to say that if you don’t get health care or sign up for Medicare, you are on your own. However, are you really suggesting that when someone shows up to the ER, they should be turned away? You refined that a little in a later response, but I believe you remain liable for bills already.

7. I disagree with your point on ‘you should have had insurance in the first place’; we need a system of universal care where everyone is forced to opt in that will allow costs to be spread across a large enough pool. Requiring people to have some type of care is the only reasonable option; otherwise society would need to deny them coverage or pay for it.

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iam1percent January 9, 2013 at 10:53 am

Thanks for your comment ANOTHERKINDOF1%ER! Looking forward to your next post:)

1. As noted, I would agree if my only proposal was to repeal Obamacare and offer up no other solutions. I think a proposal to repeal obamacare while offering up other solutions has significant merit. I did notice a word you used here, that I will fundamentally disagree with. I don’t believe healthcare is a right, just look food isn’t a right and shelter is not a right. we need all of those to survive.

2. No one is free-riding on the insurance companies. They free ride on the hospital and on the taxpayer. That said, insurance companies will offer the appropriate insurance that is right for the individual and apply an appropriate premium based on risk.

3. I agree…employers don’t have to offer health insurance. They do because its a tax deduction. I say remove the deduction on the corporate tax side and give it to the individual. It should be a tax neutral plan for the most part.

4. Similar to your support of universal healthcare, someone has to pay for it. And you’re mixing up medicaid with medicare. Medicaid is income based. Medicare is aged based. I would like to see Medicare as optional for anyone less than 55.

5&6. Yes, that is what I’m suggesting if they waived any right to healthcare. I backtracked a little on it in my prior comment, but we should make it a rule that the government can seize your assets (bank accounts, real estate, investments) to pay for healthcare.

7. Universal healthcare is quite expensive and I don’t know how it will be paid for. No one has the right to healthcare, but they have the right to seek treatment. No one has the right to force someone else to pay for their treatement. Its like me having the right to hold the rally for a political cause, but having the government force you to pay for it. Everyone has the right to rally, but we don’t have the right to collect money from everyone in the US to pay for it.

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ANOTHERKINDOF1%ER January 9, 2013 at 6:32 pm

Lets agree to disagree here.

Fundamentally, I think we come from 2 very different perspectives on what government can/should do. You summed it up succinctly when you said healthcare is not a ‘right’ but a necessity. Government exists in part to provide certain basic needs of its citizens, rule of law, protection from external threats, roads, schools…..we can debate what should be included here. I’d put ensuring some basic level of medical treatment on this list.

We can have a separate debate on what government can and cannot afford. I think we can agree that a poor child should be entitled to some measure of healthcare. You may knock Obamacare, but it does try to address this problem. So we are really debating a manner of degree. In a perfect world, where government had the resources to do so, I think you would also agree that some basic measure of healthcare should be part of the social compact – I pay my taxes, government defends my home, builds my roads, sets aside a portion for my retirement, and ensures that if I get sick, I can visit a doctor.

As to how we accomplish this, again we can agree to disagree, but any individual without health insurance is a free rider on the system, banking on the fact that if he did get catastrophically sick, then the emergency room will work out. Given that you are OK with government confiscation of assets for failing to pay your ER bill, I would think that the much smaller penalty/tax for not getting health insurance used as an incentive to get everyone on board should be OK. The perfect world would have everyone using their healthcare to stay healthy and limit long term major illness by correcting/catching it early – but I acknowledge this is unlikely. So we need a nice broad base of payees to defray costs.

As an example, take the pre existing condition provision in Obamacare which most people agree with. It cannot exist without the universal mandate of coverage. The only way insurance companies can survive is with a large pool of healthy and unhealthy individuals, unfortunately with the healthy (good for them) overpaying more in coverage than in medical service utilized, and the unhealthy taking more from the pot than they put in. Otherwise, you force an insurance company to, in the extreme, only cover the very sick – which becomes an untenable model.

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iam1percent January 10, 2013 at 9:40 am

Yes, we’ll never convince each other since we differ on the fundamental role of government. For the record, I don’t think they have a role in schools or retirement plans and their track record on both is dismal. I don’t see how the management of healthcare would be any different.

Regarding poor children, I don’t think there was every really an issue with children. We have CHIP and it covers children regardless of income. See the graphic at this link to the PA CHIP program (http://www.chipcoverspakids.com/assets/media/pdf/complete_income_chart_2012.pdf). Obamacare does nothing further to ensure that a poor child gets coverage because they’re already covered.

By the way, my plan does nothing to reform or repeal CHIP so children in my plan are still covered regardless of income.

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Brick By Brick Investing | Marvin January 9, 2013 at 4:30 pm

I am not well versed in the medical arena but the points you make here are very valid and have given me some thinking to do. Thank you.
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James Dreesen March 22, 2013 at 9:34 pm

Healthcare system is a mess right now. If your get a cut on something you don’t go immediately got to ER. You have to think first if the cut is bearable because the second thing on your mind is “how much it would cost you”. I hope that this would be resolved because these are killing ordinary employees. This for sharing the checklist it will mean more savings on our end.
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