Level One - The Foundation
Most cost reform approaches leave the impression that the problem is like a balloon with a hole it. Better yet, a very large blimp with a hole in it. We are left to believe that if we can fix the hole, then the problem is solved. Politicians will not admit that this is what they are spinning, but in reality that is exactly what they are offering. This is not a simple problem and if you have every tried to come up with your own solution, you soon discovered that there are so many levels that it is impossible to change just one thing. Over the decades this problem has grown like an untended flower garden. If you pull one weed you uproot several others, including the flowers you want to protect. To politicians credit, it is easy to see why a comprehensive solution can be over 1,200 pages. That is the core of the problem - with the problem. This cannot be fixed with one huge rubber patch over the hole on the side of the blimp. This must be addressed one issue at a time, adjusting for how that decision effects several others surrounding it.
So, why is there a problem?
Glad you asked. The other grand fix offered by most everyone is a bigger program that allows the little guy to buy like the big guy. That is hilarious to those who understand the problem. Bigger is not cheaper in the health care world. Okay, now I will answer the question. The best example may be the automobile. When you purchase an auto you go to the dealership and pick out the perfect car for your needs. You buy the one that has all of the accessories that you need to satisfy your driving habits. You settle on a price, kind of, the salesperson takes the offer to the sales manager, they talk about everything except your offer, the sales manager writes down another number and circles it in red and sends it back to you. You agree, go through the finance and insurance department and seal the deal. Then you drive the car off the lot and it depreciates 30% when the front tires hit the public road. There is another way to buy a car. Most sane people would never consider it, but you could do it.
Many years ago Johnny Cash recorded a song called, One Piece at a Time, outlining how he would sneak all of the parts to a Cadillac out of the factory in his lunch box, one piece at a time, and then assemble them. As bazaar as it may sound, it is possible to purchase every part to any car one piece at a time. The comparative cost of the car to the same one you drive off the car lot, once you have someone assemble it, would be astronomical. No one would consider buying a car that way. However, we do that every day when we purchase healthcare.
Politicians would have us believe that the problem starts when the incurred cost reaches the greedy insurance company. Actually the problem starts the instant we go to a provider or pharmacy and create an expense. Lets take a fairly normal experience. You get up feeling poorly and call your doctor for an appointment. Two weeks later you go to see your doctor. We will assume that you went to a primary care doctor and not a self-referral to a specialist. The nurse brings you back, weighs you, takes your blood pressure, and asks a few questions. You sit there and finally the doctor comes in and asks you why you are there. You tell him the same thing you told the nurse earlier, which was never recorded, or if it was the doctor ignores it because he wants to hear it from your lips. You tell the doctor that you don't feel well and that your side hurts. He pushes a few places until you squirm. He listens through his stethoscope while you take some deep breaths. You put your garments back on and again face the doctor. He is not exactly sure what is wrong without some further tests. The doctor has the nurse call to another floor and schedule a time for you to see a specialist and have some imaging performed. That will take place the next day. To ease the pain you are given a simple pain killer, something a little stronger than an aspirin. The next day you visit the specialist. They draw blood, take a few x-rays and then you see the specialist. The test are inconclusive and they need to run a pet scan. The scan reveals a kidney stone that is too large to pass. You are scheduled for a lipotripsy procedure the next week in the hospital. The total cost of this ordeal - $175.
You just bought a Lamborghini one piece at a time, and to you it was a bargain. You paid a $20 copay to see the primary care doctor, a $150 copay to be admitted to the hospital for out patient surgery, and a $5 copay for the generic pain killer. The rest of the pieces to the Lamborghini were paid by the insurance company, or if you are in a self funded plan, your employer. The total cost was probably several thousand dollars. Actually the insurance company or your employer probably only paid 50% of the cost because they have a great discount through their preferred provider network. So why did you buy the car in pieces? You cannot buy it any other way. Who did I buy the pieces from? Good question. Now we are getting somewhere.
From the time you called the appointment desk until you checked out of the hospital and returned for a follow-up visit you likely dealt with 7 different companies and 18 different professionals and staff. None of these companies work for each other. They all have separate contracts and billing procedures. They all have different agreements with insurance carriers and there is no science involved in how they come up with what they charge. This all happens before the bill ever reaches the greedy insurance company approximately 30 days later. The bills that were created at each of these institutions use something called a CPT code (see Defining Stuff) to classify what they did and assign a cost factor. All of those CPT codes are copyrighted and owned by the American Medical Association and each of these providers have to pay a royalty to the AMA each time they use them. That cost is also included in your charges. You just received the best care in the world - the Lamborghini treatment - and you received it one bite at a time.
The problem that must first be dealt with starts long before an insurance company gets involved. So the solution cannot begin with an insurance company cure. That comes later in another level of the problem. First, lets fix this layer. If the foundation is bad, nothing you build on top of it will last. That is what will happen with the current political fixes. They may appear perfect when first built, but before long, there is going to be a really scary noise as they begin to collapse. Let's fix this right...from the ground up.