This is Part II in a series. Read Part I here.
We all know the truth in the expression “time is money." I wish President Obama and our own Rep. Jim “damn-the-costs-anything-called-reform-is-good” Cooper had considered this truth before they passed the monstrous health care reform bill. Unfortunately, they not only ignored this basic economic principle, they made things worse.
The typical family spends perhaps $3,000 to $4,000 every month on autos, home and groceries without filing an insurance claim. It uses cash, credit cards, debit cards and checks. That is, this family buys gas, tires, makes monthly car payments, pays for general car maintenance, makes house payments, buys and fixes appliances, pays for a plumber, and buys food — without using insurance. Only if it has a car wreck, flood or fire does it actually file a claim with its auto or home insurance company. The family knows the cost of the goods it is buying. It pays in full each time. This is efficient, and it keeps the costs down.
Yet when that same family goes to the doctor’s office, insurance is part of the equation. Typically, the patient pays a co-pay of, say, $30. Then the doctor’s billing company files a claim with the insurance company. Then the insurance company checks the claim to be sure everything is in order. Then it pays the doctor part, sometimes all, of what the co-pay does not cover (and mails an explanation of benefits that is not a bill to the patient). Then, when there is a remaining balance (and there often is), the doctor bills the patient, who then pays the balance.
No wonder the cost of health care is so high. To paraphrase James Carville, “It’s the paperwork, stupid.”
Doing away with the tax deductibility for employers for health insurance, plus reforming our tortuous legal system, would dramatically lower the ridiculous amount of paperwork involved in health care. The much lower costs associated with providing health care would lead to much lower prices.
Real tort reform is the other driver to lowering costs. While malpractice insurance premiums are way too high, they are a tiny cost when compared with the amount of defensive medicine doctors practice to protect themselves from lawsuits. The difficulty is compounded by the lack of consumer awareness and transparency in pricing, problems that would quickly disappear if consumers paid in full at the time of service for all health care save hospital stays, which should be insured based on ability to pay.
Gee, what an absolutely novel idea. The customer would actually know what he is paying for and the price. Hallelujah!
There you have it. Reform health care so the consumers and providers interact directly rather than through opaque intermediaries.
Crom Carmichael is CEO of Nashai Biotech in Nashville. He is a longtime political commentator for various local media outlets.