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March 4, 2013 by Aaron Leave a Comment

The Bitter Pill: The Times Article on Health Care Costs That You Need to Read

The Bitter PillIf you haven’t taken the time to read the new Times article on health care costs you should really do so. It is an expose on our nation’s health care system written by Steven Brill. I warn you, it is very long about 24,000 words (the longest article ever published by The Times, in fact). With tons of anecdotes and mountains of data it shows how for-profit hospitals and health care companies are practically robbing us blind. So you might want to set aside a bit of time to work through it. It will open your eyes…

Here are a few snippets from the article.

When we debate health care policy, we seem to jump right to the issue of who should pay the bills, blowing past what should be the first question: Why exactly are the bills so high?

What are the reasons, good or bad, that cancer means a half-million- or million-dollar tab? Why should a trip to the emergency room for chest pains that turn out to be indigestion bring a bill that can exceed the cost of a semester of college? What makes a single dose of even the most wonderful wonder drug cost thousands of dollars? Why does simple lab work done during a few days in a hospital cost more than a car? And what is so different about the medical ecosystem that causes technology advances to drive bills up instead of down?

If you are confused by the notion that those least able to pay are the ones singled out to pay the highest rates, welcome to the American medical marketplace.

The difference between the regulatory environment in the U.S. and the environment abroad is so dramatic that McKinsey & Co. researchers reported that overall prescription-drug prices in the U.S. are “50% higher for comparable products” than in other developed countries. Yet those regulated profit margins outside the U.S. remain high enough that Grifols, Baxter and other drug companies still aggressively sell their products there. For example, 37% of Grifols’ sales come from outside North America.

More than $280 billion will be spent this year on prescription drugs in the U.S. If we paid what other countries did for the same products, we would save about $94 billion a year. The pharmaceutical industry’s common explanation for the price difference is that U.S. profits subsidize the research and development of trailblazing drugs that are developed in the U.S. and then marketed around the world. Apart from the question of whether a country with a health-care-spending crisis should subsidize the rest of the developed world — not to mention the question of who signed Americans up for that mission — there’s the fact that the companies’ math doesn’t add up.

The article has many examples of the madness that is our health care system. Routine double billing and overcharges on basic items is the norm. Huge profit margins in non-profit hospitals and CEO and administrators making hundreds of thousands or even millions to run them. What you will read will undoubtedly have you wanting to beat your head in the wall about the sheer scope of what is considered good business in healthcare.

Here is Brill conclusion, that sums things up pretty well.

Obamacare does some good work around the edges of the core problem. It restricts abusive hospital-bill collecting. It forces insurers to provide explanations of their policies in plain English. It requires a more rigorous appeal process conducted by independent entities when insurance coverage is denied. These are all positive changes, as is putting the insurance umbrella over tens of millions more Americans — a historic breakthrough. But none of it is a path to bending the health care cost curve. Indeed, while Obamacare’s promotion of statewide insurance exchanges may help distribute health-insurance policies to individuals now frozen out of the market, those exchanges could raise costs, not lower them. With hospitals consolidating by buying doctors’ practices and competing hospitals, their leverage over insurance companies is increasing. That’s a trend that will only be accelerated if there are more insurance companies with less market share competing in a new exchange market trying to negotiate with a dominant hospital and its doctors. Similarly, higher insurance premiums — much of them paid by taxpayers through Obamacare’s subsidies for those who can’t afford insurance but now must buy it — will certainly be the result of three of Obamacare’s best provisions: the prohibitions on exclusions for pre-existing conditions, the restrictions on co-pays for preventive care and the end of annual or lifetime payout caps.

Put simply, with Obamacare we’ve changed the rules related to who pays for what, but we haven’t done much to change the prices we pay.

When you follow the money, you see the choices we’ve made, knowingly or unknowingly.

Over the past few decades, we’ve enriched the labs, drug companies, medical device makers, hospital administrators and purveyors of CT scans, MRIs, canes and wheelchairs. Meanwhile, we’ve squeezed the doctors who don’t own their own clinics, don’t work as drug or device consultants or don’t otherwise game a system that is so gameable. And of course, we’ve squeezed everyone outside the system who gets stuck with the bills.

We’ve created a secure, prosperous island in an economy that is suffering under the weight of the riches those on the island extract.

And we’ve allowed those on the island and their lobbyists and allies to control the debate, diverting us from what Gerard Anderson, a health care economist at the Johns Hopkins Bloomberg School of Public Health, says is the obvious and only issue: “All the prices are too damn high.”

For a little more levity on the situation you can watch Steven Brill on a recent daily show. Daily Show (link for the full episode)

Filed Under: insurance Tagged With: health care cost, insurance

January 31, 2013 by Aaron Leave a Comment

How a cheaper health insurance plan can save you money

choosing an insurance policy
Choosing the best health insurance can be a tricky endeavor!

This article is mainly for those of us lucky enough to be self insured, but I think anyone who has any ability to pick their healthcare plan could possibly benefit from it. I am going to tell you how the cheaper insurance policy could be a much smarter way to go. This topic makes me think of the old adage “You don’t truly appreciate the value of something until you pay for it yourself,” or something along those lines.

Selecting an insurance policy for yourself or your family can be a daunting decision. While everybody wants to get the best coverage possible – the reality is that health insurance is really expensive. Expensive enough to make one think that: welI, I am hardly ever sick. What is the harm in not having insurance for a few months/years? I won’t lie, when I was between full time jobs, and doing some freelance work on my own I let my insurance policy lapse for a few months before my common sense dictated that I set up my own policy in the interim. In this day in age where a minor surgery will cost you 10-20k out of pocket without insurance, and something major could run you into the 100’s of thousands of dollars – it just doesn’t make sense not to have some kind of financial protection from what would be a veritable mountain of debt. A debt that could possibly haunt them for the rest of their life.

So there are a few things to consider when shopping around for an insurance policy. The main ones to look at are

Monthly premiums – how much money you will be spending each month to maintain your policy.

Deductible – how much money you will have to spend on medical bills before your insurance policy kicks in (note: having insurance will get you lower rates at any doctors that are in network for your policy).

Max out of pocket – the maximum amount you will spend in any plan year of your policy on eligible medical expenses. This is an important one! Why, you ask? I will get to that in just a second.

What it actually covers – AKA the fine print. What exactly is considered an eligible medical expense? Does the policy cover things like eye care? Or infertility treatment? The important thing is to be aware of any possible things that you will likely use the insurance for and if they are covered or not.

The main thing to think about when selecting an insurance plan is to figure out it will cost you. This is not quite as simple as multiplying the monthly premium by 12 and calling it a day, although, that is an important piece of information. You also want to consider what the cost to you would be if you got really sick, and needed to be hospitalized. I.E. what is the deductible of each policy you are looking at and what is the max out of pocket. If you are hardly ever sick and almost never go to the doctor, it doesn’t make much sense for you to pay extra each month for a low deductible policy. A policy that would save you a few buck if you went to doctors just a few times a year, but would end up costing a lot more in premiums. You want to think of what will be your total health care costs on each insurance policy.

The deductible can be an important piece of data to consider when figuring how a policy will impact your total health care costs. Lower deductibles mean that the insurance benefit will kick in sooner. If I had a $100 deductible on my policy and I went into the doctor for $300 dollars of care I would pay 100% of the first $100 and that would satisfy my deductible. The next $200 would be processed at my coinsurance amount. For example, if I had a 80/20 coinsurance benefit on my policy, it would mean that out of that original $200, I would be responsible for just $40. Sounds pretty nice right? The lower the deductible the more you will pay each month. So again you have to consider how often you actually use medical treatment. If you are not someone who goes to doctors very often it is not very important to have a low deductible when it is costing you more money in premiums each month. As long as the money you save by not having a low deductible is more than the money you will save by having a low deductible than you are better off not having a low deductible, and vice versa.

One of the most important things to look at is the max out of pocket costs section on your policy. This little piece of info tells you how much you will have to pay if things really hit the fan. If my policy has an out of pocket max of 5k, and I get into accident and need some serious care, I know I will not have to pay more than $5k. For me, someone who doesn’t need much medical care, but wants to have insurance to protect myself from the potential life-changing amount of debt that an accident could give me, this is a very important. I save a lot of money each year by going with a higher out of pocket max. You should look at your total costs though, and a lower max out of pocket could make sense for you if you have kids, or need more medical care.

Also factor in any regular care that you need, and if it is covered or not. For example, I wear contacts and every year I need an eye exam and new contacts – about a $250 annual expense without insurance. I would then factor that in when looking at the total cost of the policy. If the policy covers that expense 100%, cool, I know that will save me $250 bucks a year. However, if this policy costs an extra $500 from a similar policy I am looking at and there are no other differences that matter to me (think long and hard about this) then I am basically losing $250 bucks a year by going with the additional coverage. You then take these numbers and see how they affect your total health care costs for the year.

You should take all these factors into consideration when selecting your insurance policy and go for what you think will end up costing you less money in health care expenses. As with many financial decisions, it is much more important to look at the long term costs and go with whatever makes the most sense. I went with a high deductible, moderate out of pocket max because I am not often sick or needing medical care. I figured that the amount of money I save each month on premiums to be well worth the cost of a few minor doctors’ visits, if I for some reason I needed the additional care. I can bank the addition costs and spend/save them for something else. If I was someone who went to the doctors on a regular basis, then it would be more important to have a lower deductible.

I hope I shed some light on the things to think about when shopping around for a health insurance policy and why a cheaper plan can save you money, and be the smart choice. If you have any questions about any of this don’t hesitate to ask! Happy healthcare shopping!

Cheers!

Filed Under: insurance Tagged With: insurance, money saving tips

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