Are the Insurance Companies Really to Blame?

[Katie]

I know this is a very sensitive topic with almost everyone here, myself included.

But I have to wonder what the reasons for the high costs of health care really are.

I recently received a form from my surgeon who performed a three level discogram, and since it was from out of province, it needed my signature before it could be submitted to my home insurance for reimbursement.

After speaking to another 'spiney' here and on a second forum, I discovered that the cost of my four level procedure was ten times less than the same or shorter procedure in the US. Now, I don't know how differently those costs vary from state to state, but even that would be quite a difference.

Is it not the hospitals that charge for those procedures? And the Insurance companies that have to pay for them? This is the way it works here, roughly. The procedure is done by the physician and billed accordingly. Most other people involved receive salaries, like the nurses, etc. They don't get paid by the procedure, but by the hour or week, etc. I'm not sure how the anesthesiologists, etc. are reimbursed.

There is a fee guide that outlines what the surgeon will get paid for each procedure, and that is posted on the Internet, so that there is clarity for public funds. I do not know how it works down in the US, but there should be a fee schedule there too, would there not?

So is it not the hospitals who are working like a business and controlling the huge costs of spine surgery? I'm certainly not defending the insurance, as here it is basically one and the same...the province. There is no one policing them, and watching who and why which patients are being declined for surgery. But the fees have already been set.

How does it work in the US, and how can it be changed for the better? If the costs were reduced, then more patients would stay at home for surgery, correct?

I'm just trying to understand both systems and be able to carry on informed discussions about both health care systems. Thanks.

[Justin]

Is it not the hospitals that charge for those procedures? And the Insurance companies that have to pay for them? This is the way it works here, roughly. The procedure is done by the physician and billed accordingly. Most other people involved receive salaries, like the nurses, etc. They don't get paid by the procedure, but by the hour or week, etc. I'm not sure how the anesthesiologists, etc. are reimbursed.

First, coverage of surgeries (and other procedures) in the United States are based on what a given insurance company will pay for, not if a surgeon determines that the operation proposed is "medically necessary."

In regard to your questions above, surgeries / procedures have multiple providers submitting requesting payment. The hospital, surgeon, anesthesiologist, etc. all submit charges (and CPT codes [each code has a value assigned to it]) to an insurance company for reimbursement.

If a surgeon replaces a heart valve and bills the insurance company for reimbursement, he will not be reimbursed the full amount submitted--the insurance will look at the bill and determine they will only cover "X" amount of dollars of the total cost (this is a contracted rate).

Every provider in a given surgical case submits charges for reimbursement.

At teaching hospitals, physicians are usually paid a salary and physicians in private practice are paid based on number of patients seen and the charges submitted for each visit. Since reimbursement has gone down considerably for physicians, physicians are forced to see more patients in a shorter amount of time. BTW, physicians salaries only make up < 1/5 of the total healthcare expenditure in the United States.

There is a fee guide that outlines what the surgeon will get paid for each procedure, and that is posted on the Internet, so that there is clarity for public funds. I do not know how it works down in the US, but there should be a fee schedule there too, would there not?

There is a fee schedule in the United States based on the "relative value" of a service.

So is it not the hospitals who are working like a business and controlling the huge costs of spine surgery? I'm certainly not defending the insurance, as here it is basically one and the same...the province. There is no one policing them, and watching who and why which patients are being declined for surgery. But the fees have already been set.

Katie, there are public, private and non-profit hospitals in the United States. Of course, the private hospitals are "for-profit" and the public hospitals are operated by federal, state or city governments. Many of the public hospitals are university-affiliated teaching hospitals.

How does it work in the US, and how can it be changed for the better? If the costs were reduced, then more patients would stay at home for surgery, correct?

The costs are so expensive in medicine because a lot of money and resources are spent on defensive medicine (or cover your butt medicine--running unnecessary tests, etc. because of the sue happy / frivolous lawsuit society we live in). In a perfect world if expenses were reduced, patients would "stay home" in the United States for surgery. However, a huge obstacle is what insurance companies are willing to cover. For example, my Dad is unable to have artificial disc replacement surgery because his insurance company will not cover the procedure.

In my opinion, physicians have their hands tied and are at the mercy of insurance companies--they are to blame.

[Katie]

The only similar thing I have heard of here is when a patient is out of country (or perhaps even out of province) and has a procedure done, usually as an emergency.

The home province will only pay what they deem necessary, similar to what you describe down there. My neighbour for example had back surgery done in California while on vacation, and out of a $60K+ bill, the province paid ~ $8K. Next to nothing, considering he thought all of his expenses would be covered. We have to buy private insurance like Blue Cross when crossing the border, and I've heard that it is only the bills from the US that are treated like that. If we had an accident in Europe, for example, the whole bill would probably be paid. But then the cost wouldn't be so much.....

Thanks for the information and explanation. No wonder you are so angry at the system. It sounds like a no win situation. I guess that's why I posted this question, to understand it better.

We've had quite a few people upset because over the years, many doctors have wanted to go to a two tier system. One in which the poorer patients are treated by the socialized medical system, but those who can afford to jump the queue and pay for faster service, will. I always thought that this would lessen the stress on the system, but after reading your post, I'm taking another look at it.

[KBear]

Katie,

I would like to elaborate more on the contractual rates that insurance companies set. An insurance company decides that x, & z procedures are worth a set amount of dollars each, the contractual rate. A doctor, either decides in advance to accept the contracted rate and thus enters into a contract with the insurance company to be an 'in network provider'. If a doctor does not agree with a the contracted prices, they simply do not enter into a contract and are considered 'out of network'.

When a doctor is in network, the patient generally has lower co-pays (a set amount we pay for a dr. visit, usually $20 or $30), lower deductible (the amount we have to pay out of pocket for major medical, like a hospital stay, before the insurance pays at a higher percentage, or in full. These range from $0, which is really unusual and very costly to $5,000 or more.... mine is $2,000), and lower coinsurance costs (money we pay after our deductible is met, mine is 75/25, which means that insurance pays 75% of the contracted rate and I pay 25% of the contracted rate, after I have met my deductible).

If a doctor is out of network, you usually have to meet a seperate deductible and/or higher deductible, higher co-pay and higher co-insurance (like 50/50).

With our state/national insurance (Medicaid and Medicare), the goverment sets what they will pay, which is really low, lower than insurance payments. Each doctor decides whether or not they will take Medicaid and Medicare. If they do, then they accept the payments offered. If they don't, they usually will not see people with those coverages at all. Or, they will see the people, but will make them pay in full for the visit and the patient has to file the necessary paperwork with Medicaid and/or Medicare and they get whatever reimbursement is offered (which will be less than the visit costs). With Medicare/Medicaid, that is a big problem they have, not many doctors accept them as insurance. Out of all the doctors I see, only 1 accepts Medicare or Medicaid, my obgyn. My family doctor, natural remedy/hormone management doctor, pain management doctor, surgeon, dentist, eye doctor, pediatrician, or pediatric ENT accept medicare or medicaid. The goverment touts how 'cost effective' these programs are, how low the costs are and how great they work; but are they really that great if you can't find a doctor who is willing to take extremely low reimbursement and much more paperwork to get reimbursed?

Insurance on the other hand, is expensive, especially if you are not getting it through work; but does give you more choice in doctors. There are two different kinds of insurance ppo and hmo. With ppo you can see any doctor or specialist without a referral, you just call and make an appointment. With hmo you need a referral to see specialists and must go through proper protocol to get a referral and for different procedures.

[Katie]

This sounds incredibly complicated and expensive. No wonder so many people are having problems. Just getting through the red tape would be beyond many people.

I can't imagine working through all that, and then being told that you don't qualify for treatment or something similar at the end.

I appreciate the time you all took to explain this to me. Kathy, we have spoken about this before, but I guess it didn't sink in just how bad it really was, how the insurance did control everything like that. It's just incredible what you have to to through. I think I'll take our wait times over that.

Thanks again, and you have my full support and empathy on this.

[Graysonlaw]

In my opinion, physicians have their hands tied and are at the mercy of insurance companies--they are to blame.

Very good analysis, but at risk of delving into the current political debate, my conclusion is that it is government regulation that has much more blame than insurance companies. When governments attempt to regulate markets, there are a whole host of unintended consequences that often make the problem worse than the problem they were attempting to correct. All share the blame: federal and state governments, insurance companies, hospitals and doctors, trial lawyers, and, yes, consumers.

[Katie]

What is the reason behind the huge difference in price between here and there though?

Ten times the cost for a discogram?

[Terry Newton]

Very good analysis, but at risk of delving into the current political debate, my conclusion is that it is government regulation that has much more blame than insurance companies. When governments attempt to regulate markets, there are a whole host of unintended consequences that often make the problem worse than the problem they were attempting to correct. All share the blame: federal and state governments, insurance companies, hospitals and doctors, trial lawyers, and, yes, consumers.

I agree; we all share blame. And unless we all take responsibility for our portion of the blame this situation will not be resolved.

The only part that I moderately agree with is the oversight from government. If a personality disorder can be attached to a business it would be a sociopath or; "without conscience." Many companies lack ethics any more and are left to run amok. This led to a huge part of the collapse of our current economy. The banking industry, Wall Street, corporations led to the current downfall of one of the worst recessions this country has ever seen.

We need balance between effective government and corporate intent.

Here is an interesting point about the current budget crisis:

file:///C:/Documents%20and%20Setting...20-%202011.PPT

Save in your bookmarks and open as a PowerPoint Document.

[Justin]

What is the reason behind the huge difference in price between here and there though?

Ten times the cost for a discogram?

Here's a great article:

THE COST CONUNDRUM
What a Texas town can teach us about health care.

by Atul Gawande
The New Yorker
June 1, 2009


Costlier care is often worse care. Photograph by Phillip Toledano.

It is spring in McAllen, Texas. The morning sun is warm. The streets are lined with palm trees and pickup trucks. McAllen is in Hidalgo County, which has the lowest household income in the country, but it’s a border town, and a thriving foreign-trade zone has kept the unemployment rate below ten per cent. McAllen calls itself the Square Dance Capital of the World. “Lonesome Dove” was set around here.

McAllen has another distinction, too: it is one of the most expensive health-care markets in the country. Only Miami—which has much higher labor and living costs—spends more per person on health care. In 2006, Medicare spent fifteen thousand dollars per enrollee here, almost twice the national average. The income per capita is twelve thousand dollars. In other words, Medicare spends three thousand dollars more per person here than the average person earns.

Read more: McAllen, Texas and the high cost of health care : The New Yorker

[Terry Newton]

Justin:

That article was sure an eye-opener. I have seen this in health care for a long time. I went to the Mayo Clinic for my first spinal surgery and was massively impressed. Our behavioral health care in Michigan has been forced to adopt this model for many years. We work as a team and work for the betterment of the patients we serve.

I also agree that we need to provide incentives for people to be healthy. If you do not smoke, if you curtail your alcohol use, if you exercise you get lower premium charges.

We have doctors that own laboratories and order all of this expensive lab work. We also have private imaging services that would have been done in house before. All of this stuff is making an inefficient service.

I truly believe that we all need to be a part of the conversation and have shared responsibility in order to drive the cost of medicine down to more manageable levels.

Thanks for posting this Justin.