Monday, March 30, 2009

Health Insurance Blues

We just finished processing a bunch of health care bills, and it made us feel ill.

The amount of wasted administrative energy that goes into the health care system is mind-boggling.

We had four bills to pay. They were all associated with referrals from our primary care physician to various specialists to run a bunch of fancy tests, which confirmed that, yes, the Curmudgeon is still quite healthy.

Frankly, it all seems a bit like mattress shopping. Only a fool would "pay full" price for a mattress, since just about all mattresses are deeply discounted all the time. The problem with mattress shopping is that you really don't know what's a good price unless you compare all those discounted prices. Getting the retailer to tell you the actual mattress price (as opposed to the percentage of the discount), however, is not that easy.

Health care is even more frustrating and confusing. The face value of the four bills we just paid was $3557. Of that, our health insurer, which extracts nearly $20,000 a year out of us through Mrs. Curmudgeon's law firm, paid $993.79. We were asked to pay an additional $360.41. That leaves $2202.80 that was not paid. In the mattress world, we got a "discount" of 66%.

Hey, not bad! That's a big discount--those insurance boys (and girls) must really be doing their job!

Or are they? The problem is that we don't know what the services are really worth, or what these health care providers would really charge in an open market. It sure must suck though, if you're the doctor who has to write-off two-thirds of everything you charge.

Furthermore, unlike mattresses, where the transaction cost of that hefty discount is small, the transaction costs in the health care industry are quite large. It would be one thing if Dr. X, the Curmudgeon's cardiology referral, had a sign in his window saying "Spring Sale: 65% Off on all Echocardiograms!" and we just went in and paid him the discounted price.

Instead, Dr. X has to have an administrative person to fill out a bunch of paperwork to send to the insurance company. The insurance company has administrative people to review it. (Apparently, they use a random number generator to decide how much to reimburse the doctors, because the numbers are never round--it's always something like $223.77 or $189.61.)

The insurance company then tells the doctor how much will be reimbursed and how much the doctor can charge the patient. Then the doctor's admin person arranges for a bill to be sent to the patient--probably via a third-party administrator, since we got four bills today for four different doctors, all in the same format with the same return address.

Of course, with the doctor being stiffed by the insurance company, and having to pay for all that administrative overhead, it's no wonder the doc spends about 2 minutes with you while her waiting room is filled with other patients to run through the mill. And it's no wonder that, despite all that increased efficiency at the doctor's end, it still costs a lot, because we have to pay for all those billing and review assistants!

Meanwhile, the insurance company can play the charade that we should be so we have them on our side. Just think of it: without the insurer, we would have had to pay another $2200! Yes, but we paid the insurer some $1600 just for January, and it paid our docs about $1000, while denying reimbursement for all of our son's various neuropsych treatments to get him on track at school.

Someone is laughing all the way to the bank, but it isn't us.

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