The Healthcare debate

The Healthcare debate March 29, 2017

I typically don’t wade into this one because, to be honest, I have no idea what the solution is.  The United States is unlike any other nation.  The third largest population on earth.  A wildly diverse citizenry from scores of backgrounds.  A Democratic Republic established on the cooperation of individual states for common cause. A strong emphasis on liberty and freedom.

However we fix the healthcare problem, I’m sure it won’t look like any other country’s solution.  Likewise, when the day comes that we do cease to be the nation we were, when we collapse you might say, I’m sure it won’t look like any other civilization’s collapse either. But that’s for a different post.

Healthcare.  I’m no expert.  But the problem isn’t our healthcare system itself.  We have relatively good healthcare.  So far at least, we’re where people from around the world come to be treated.  Even our good neighbors up north have been known to vacation in the US for the odd medical procedure.  So it’s not the actual healthcare that is the problem.

It’s not necessarily accessibility.  Though reports that you are guaranteed a right to treatment no matter what are greatly exaggerated.  It’s true that no hospital can turn you away in an emergency.  That doesn’t mean hospitals, or private practitioners, are obliged to take you in as a patient and set up routine treatments.  In fact, the problem there is that they are only obliged to take care of you after the emergency has happened.  And by then, it’s either too late or going to be crazy expensive.

Which leads to the problem.  The problem is the cost.  The out of pocket cost to the individual.  Obamacare really didn’t solve that as much as it transferred the problem to the government.  The out of pocket costs were still based on what quality of package you chose which, of course, was based on how much you were willing to pay.  And that’s the problem, whether it’s the private sector or the government.

By out of pocket, I mean of course the money you yourself pay out for a procedure.  Whether going to the doctor, getting a test done at an outpatient facility, going to the ER, whatever.  It also means, if you want, the premiums, or the price, that you pay to have the plan in the first place.  Plans come usually in two basic forms: plans through a company you work for, and plans you can buy on your own.

In most cases, companies that offer a plan will pay for part of the premium, while you pay for the other.  Often the premiums are a little better through a company, as is the coverage you get, since it follows the ‘bulk purchase’ philosophy of less for each unit the more you buy.  Buying individual plans outside of your employer will typically cost more for coverage that is not nearly as good.  Sometimes the cost can be close to double, or even more, the cost compared to cost through a company.   This doesn’t get into issues like pre-existing conditions, which were taken care of by the ACA.

Then you have the real kickers that have become the big issue.  The coinsurance and deductibles.  While there are still some plans out there that follow the old PPO or HMO model of copays with 100% coverage afterward, more and more are going back to the coinsurance model.  The difference is how much you will pay from your own bank account.  Copays were nice, you paid X amount up front, say $10.00 at a doctor’s office, or $50.00 at an ER.  Insurance paid everything else.

Coinsurance, on the other hand, usually has you pay a certain percentage of every procedure.  So instead of $10.00 at the doctor’s office, you pay 20% of the bill.  If the total cost of the visit is $100.00, under the copay you will pay $10.00.  If the doctor’s visit, owing to this or that test or blood work, ends up being $200.00, you still pay $10.00.  Under coinsurance, however, you would pay $20.00 in the first example, a whopping $40.00 in the second.

And when you get into hospital stays or ER visits, or certain tests like colonoscopies or X-Rays or MRIs, that can make a huge difference.  Some basic visits to the hospital can run $4000.00 to $6,000.00 just for getting a ten minute test.  Actually being admitted?  It can run into the tens of thousands.  And 20% (which is most coinsurance rates, though a minority will have 10% for the patient responsibility) will run you high amounts quickly if the total hospital stay is, say, $16,000.00.  That’s you owing $3,200.00 for the mathematically challenged.

Now, most insurance companies will have an ‘Out of Pocket Max’.  That is, you won’t have to pay more than X in a year.  Usually that is linked to the deductible amount.  The deductible?  You know what that is.  That’s how much you have to pay straight up before the coinsurance (and in some cases and plans, the coverage from copay plans as well) kicks in.  As recently as the late 90s, most deductibles were around $500.00.  Some were $200.00.  Sometimes $100.00.  On rare occasion, the really bad plans could be upwards of $1000.00.

Today, the typical deducible is around $2500.00.  $5000.00 deductibles are not unheard of.  I’ve heard some cases of $10,000.00 deductibles for catastrophic level coverage.  That is, you would have to pay $5000.00 or even $10,000.00 out of your own bank account, your own wallet so to speak, before the first brass farthing from the insurance kicked in.  And then, if you have coinsurance, the company will still only pay 80% of the remaining cost. You’ll pay the other 20%.

So, to an example.  You have a family of 4 let’s say.  You have a plan that has $3,500 per person deductible at 80/20 coinsurance.  Being a $3,500.00 deductible, you’ll likely have an out of pocket maximum of around $6,000.00 to $7,000.00 per person.  That’s how much – in each year – you’ll have to spend yourself.  Per person.  It costs you $200.00 month to have, because you get it through your employer.  It could be double or triple that for private care, but let’s keep it through your employer.  It may have an option for a free well check every year, or in some cases, will have a $10.00 copay for doctor’s visits, but everything else is coinsurance.

So right away, you’re going to pay $2,400.00/year just to have the insurance.  It’s also important to remember that this is per person.  So it’s $3,500.00 per person.  In most cases, there will be a ‘Family Maximum Out of Pocket’, usually around 2.5 to 3 times any one out of pocket maximum for individuals.  So in this case, it might be around $12,000.00 to $14,000.00 Out of Pocket maximum for a whole year for the family.

So you’re paying $2,400.00 every year just to have this.  Then, you’re going to pay for, well, everything 100% up to the first 3500.00 per person.   After that, you’ll pay 20% of everything else.  Only unless you or one of your family members ends up with open heart surgery or a brain transplant will you likely cross the Out of Pocket maximum.  You may not even breach the deductible.  It is plausible that within a given year, you don’t go past the deductibles.

So at the end of the year, if any two of your family members need any type of testing or hospital based procedure, you’re looking at up to $7,000.00 out of your own pocket.  In addition to the $2,400.00 you paid to have the coverage in the first place.   That’s almost $10,000.00 out of your own pocket.  If you end up getting coverage to kick in, you’ll be spending more.  For your average schmuck Americans, lower middle class to middle class, that could end up being 20% or more of their entire annual income (the avg. income today is $52,000/year, which would make our example approx. 19% of the average annual income).

And it all starts over the following year.  Which could mean this scenario plays out multiple times over the course of raising a family. And not because they have no insurance, but because of the insurance they have.  And with kids, you know as well as I do it’s not stretching the imagination that there will be more than one year where you easily cap off the deductibles.  And yet in all of this, that insurance company you’ve been paying hasn’t had to cough up a red cent.

That is the problem.  What other industry is there where you have to pay for a service it routinely avoids providing?  I know that insurance is based on Risk.  That is, I pay for it in the hopes of never using it.  And the company insures me in the hopes that it never has to pay.  But something went terribly wrong with this system.   Somewhere, some how, the machine broke down.  And it isn’t lack of healthcare, or lack of insurance availability.  It’s the cost that you end up paying even when you have the insurance and the fact that, in millions of cases a year, the insurance has to pay little to nothing.  That is the problem.  A problem no particular policy proposal, as far as I can tell, has solved.

Well that ended up being longer than I planned.  And I didn’t even get to my ideas of why it happened or what to do.  That will be some other time.  I just figured some numbers needed kicked around, if for nobody else than me.  That way I get the problem.  The problem is we need insurance that won’t cause a vast number of Americans to go bankrupt if they end up using it.  And simply moving it from the private sector to the government or back won’t solve the problem.  A middle class family stuck with multiple years of $10,000.00 in out of pocket expenses is equally bad off whether private plan or ACA.

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