Healthcare Costs for Dummies, by a Dummy

By Doug Horner, Content Marketing Strategist

Recently, our EVP of Sales and Sales Strategy explained how his background in consumer electronics has influenced his approach to working in healthcare. I, too, have a background in consumer goods, but less in electronics, and more in beer and cannabis (yes, that kind of cannabis). So, hi. I’ll be your Dummy. Thanks for coming to my Dummy Talk.

I’ve made it a point to immerse myself in this industry, but I’ve been focused on perceiving everything through the lens of the average healthcare consumer. I’m at a point now where I realize just how little I know, which is a humbling thing. Hence, the whole “dummy” perspective.

Learning the ins and outs of the industry has been an eye-opening experience, and I’m finally starting to grasp some of the more complex stuff. For example, did you know there’s something called a CPT code? I know! They codified the entire healthcare system! Who knew!?

As it turns out, everyone. Literally everyone in this industry knew. It’s one of the most basic concepts in healthcare billing. So yeah, to say I’m a newb would be an insult to newbs everywhere.

Determined not to be a newb, I asked our dashing VP of Marketing if he had any materials that could give me a quick overview of the healthcare system. One week, a handful of articles and videos, and hundreds of Google searches later, I learned there is no such thing as a “quick overview” in this industry. Still, I had deciphered enough abbreviations and unnecessarily complex phraseologies to reach the earthshattering conclusion that the current American healthcare system is…wait for it…broken. It’s true! Look it up!

Now, people much smarter than me have explained why that is, so I won’t insult them or you by trying to wade in too deep here. But from my dummy perspective, it seems like a shipload of the blame could be assigned to two major problems:

  1. The medical loss ratio rules (sometimes referred to as the 80/20 rule) that inextricably tie insurance carrier profits to the total cost of medical care for a given risk pool or employer
  2. A total lack of price transparency, which keeps even the most motivated consumers in the dark regarding the cost of care

As I understand it, medical loss ratio rules were on the books at the state level across the country, but the Affordable Care Act went ahead and codified it at the federal level. The law mandated that 80% of every dollar health insurance carriers receive must be paid out to providers for actual medical care and treatment, with the remaining 20% retained by the carriers to cover overhead, administrative expenses, and corporate profits.

“That’s an interesting constraint to put on a business,” you might be thinking. “How do you increase profits with a business model like that?”

Turns out it’s pretty simple: you let your negotiated rates for care with providers increase, hide the price of life-saving treatments and medicine, then never tell the consumer about it—that’s how! And yes, that’s exactly what’s been going on in healthcare for the last 20+ years. Check out the chart below.

That is 100% real, and even a healthcare newb like myself sees how troubling is.

From a business standpoint, it makes good sense. If your company’s primary profit center is limited to 20% of insurance premiums received, and your main source of revenue is premiums, and premiums are directly tied to how much is paid out in medical claims (by law!), then the more expensive the care, the higher the premiums, the bigger that 20% gets. It’s Bond-villainesque in its genius. Soulless, greedy, and everything wrong with corporatized healthcare, but genius, nonetheless. I mean, you’re only tying essential healthcare treatments to your company’s bottom line. What could POSSIBLY go wrong?

I recognize that this all sounds like very harsh criticism, and I recognize that my dummy brain still has a lot of healthcare industry nuance left to absorb and appreciate. But man, I’m just scratching the surface here and this industry just seems ugly.

Ignorance in Real time

I’d always had a low-deductible health insurance plan through my previous employers, and on paper, that always seemed like a steal for a late-20s/early-30s single guy in fairly decent health. Never mind that I was paying for something I barely used, or that I was blindly overspending on prescriptions and procedures.

Since then, I’ve learned what a massive waste of money that was, and thanks to a really well-written blog on golfing, I’m realizing that a lower deductible isn’t necessarily a good thing. In fact, it’s often just the opposite.

Why? I’m still sorting that out, but from what I can tell, a lower-deductible plan means high premiums for employers, and that money is coming out of your paycheck one way or another. So, low deductible = high premium = not really saving you all that much money. Factor in the alternative of employer-sponsored health savings accounts or HSAs (terms I didn’t even know four months ago), a low-deductible health plan isn’t just wasting money, it’s leaving it on the table.

Hindsight’s always 20/20, unfortunately, but since starting my employment with MyMedicalShopper, I’ve seen just how much money is floating around in the healthcare industry, and it’s absolutely mindboggling. The only thing that boggles my mind more is the average consumer’s complete and utter lack of interest in awareness of any of it.

Not that I necessarily blame them. Most people hope they never have to use their health insurance, and aside from making sure they have it, don’t even think about it until they need it. It definitely doesn’t help that even the lightest discussion on it causes people’s eyes to glaze over almost instantly.

Well, stop it. Wake up and pay attention, because that needs to change. Who’s responsible for that is up for debate, but from my perspective we need to stop being so dumb. Clinging onto the excuse that “Insurance covered it” is a truly irresponsible way to handle your medical finances. Healthcare has become a multitrillion dollar industry, and the combined healthcare lobby outspends literally every other industry lobby to grease the wheels and keep the gravy train rolling. Worst of all? Most healthcare consumers don’t know or care about any of this.

They should, and need to. If nothing else, always remember that just because “insurance covered it” today doesn’t mean you won’t pay for it later.


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