Health Care Insurance - An Oxymoron?

by Del Meyer, MD

Dr. Golenski, SJ, EdD, in his address to the Sutter Medical Staff in December 1990, stated that healthcare costs in this country at the current rate of increase will progress from 12% of gross national product to100% of the GNP in the year 2040. Armageddon will obviously arrive before then.

The following case report with variations is all too common.

Ms. P., a 47-year-old female with lifelong asthma came to the emergency room on a Saturday. The ER physician could not clear her over several hours of vigorous therapy and she was admitted. A four-day hospitalization occurred. Asked when her symptoms became worse, she stated that the increased cough, expectoration and wheezing started on Tuesday. When reminded that I was in the office both Wednesday and Friday, she stated it was not convenient for her family to bring her in. She traded a $40 office call for a $4,000 hospital bill. When asked what it would have taken to make her come in on Wednesday or Friday, we finally connected on "Would a $10 a day charge by the hospital have made you come into the office?" She said certainly. She could not afford to pay $10 a day.

While Congress and medical organizations are talking about containing health care costs, this lady did not increase her unnecessary costs by 10%, or 100%, or 1,000%, but by 10,000%!

This situation replays itself in hospitals across the country. It occurs whether the payor is private insurance, federal or state socialized programs, or mandated HMOs. After all, it was an emergency admission, and no one will interfere with urgently needed care. Yet no one seems to be addressing this issue.

Perhaps the issues to be addressed are the economic laws that control the market. Although marketing is an offensive term to most of us, aren't the hospitals employing marketing strategies and aren't we getting offers to market our own practice? When a product has no cost to the consumer (essentially free at time of service even though prior taxes or insurance premiums paid by oneself or employers give it a significant or even exorbitant cost) it is over-utilized without any recognition of overall cost and impact on our health care system or the economy.

Perhaps we need to go back to basic definitions. What is insurance designed to cover? What is insurable?

We obtain car insurance to provide for unexpected damage to our vehicle, injury to us in the process, and for theft. We cannot buy insurance to cover maintenance such as oil changes, tuneups, engine overhauls, or even tires. Can you imagine if tires were covered, the service manager would come up to you and say, "I know the tread is not quite at the 3/32" limit, but you must think of your safety, the welfare of your children and their safety. Why don't we just put on four new tires and charge it to your insurance carrier?" If it's free at the time of service, there will be over utilization - economic laws cannot be disregarded.

We obtain house insurance to cover damage from fire, vandalism, flood, and earthquake. We are unable to buy insurance to replace the roof when it leaks or wears out, or the electrical wiring as it shortens out, or the plumbing as it gets old and leaks, or the paint as the exterior weathers.

The process of aging cannot be insured. In this country we have medicare, paid by taxes, to cover us during our old age or after longterm disability.

We (and the 35 million working Americans without insurance) need health insurance to cover us for the catastrophes such as heart attacks, strokes, pulmonary emboli, cancer, appendicitis, and other unexpected problems. Office visits are not insurable any more than house maintenance work or car service calls are insurable. If people neglect routine office visits because of their costs, then we as physicians have not done as good a job as the car salesman in pointing out the need for preventive maintenance or our suppliers in doing preventive maintenance on the copy machines in our office. For people to see the value of a product, including health care, the cost benefit analysis has to be known. And there is no better way than to be financially at risk for the service to some degree.

If we had a national policy that all employers would have to provide a policy to cover 90% of hospital costs, 80% of outpatient surgery, and, since some office tests are quite expensive, 50% of outpatient costs, the policies would be affordable. We would need to do some cost research, but I would wager the mortgage payment that the premiums would be less than half of current premiums and would not escalate.

This would result because at every point of service there would be an immediate recognition of total costs since a percentage is payable by the consumer to remind him of that. What better utilization review than by the patient himself?

Let's assume hospital costs are $1000 per day. If the patient had to pay 10% or $100 per day, then each day he would ask his doctor, "Do I really need another day?" And we as physicians would have to justify each day as it occurs. The cost of hospitalization might actually drop by 20-30% rather than go up each year.

This would happen because the patient would scrutinize each hospital bill to the point that the charges would have to be justified. For example, with the hospital charges for arterial blood gases ranging from $149.50 to $208 in the Carmichael/Folsom area, while the total costs including technician, analyzer, rent, billing, administrative and other hidden costs add up to $39.17, what better way for cost containment than for thousands, perhaps millions, of patients agitating for reasonable costs! Perhaps the patient would be more successful in reducing the cost of an ABG to $78.34, the same 100% markup that retail merchandising utilizes. Only the merchant has to use the 100% markup for his entire overhead and profits, while those costs, as I understand, are already in the $39.17 figure!

Similarly, if the patient had to pay 20% of the cost of outpatient surgery or procedures, there would probably be no unnecessary bronchoscopies, gastroscopies, colonoscopies, arthroscopies, etc., thus reducing the costs of outpatient procedures.

Likewise, if the patient had to pay half of the costs of outpatient visits including laboratory and x-ray, we would have to justify the need of every test we order. There would probably be no unnecessary CT scans, MRIs, PFTs, ABGs, with constant patient awareness of costs vs. benefits. If we can't convince a patient of the benefit of a test, would that not be a better containment mechanism than not convincing a policing agency of it's benefit?

The time is ripe for our medical society to take the leadership and appoint a task force to evaluate such a 90/80/50 plan, how much it would cost, how much it really would save and what a realistic premium structure would be.

I believe our Blue Shield Plan could market it immediately with great success. The state with, it's PERS CARE, would probably adopt it as the plan the state would pay for and anything more would be at the employee's cost. We could probably also market it to the federal government for its employees.

A large number of the employers of those 35 million uninsured Americans might adopt it even without legislation since it would be affordable. And we would have changed the pattern of medical practice in this country to the benefit of our patients. And they would keep us apprised of all the economic issues in the process.