The Health Insurance Mafia

[Guest guest]

From The Wall Street Journal

The Health Insurance Mafia

By JONATHAN KELLERMAN

April 14, 2008; Page A15

Most discussions about the rising cost of health care emphasize the need to

get more people insured. The assumption seems to be that insurance - rather

than the service delivered by doctor to patient - is the important

commodity.

But perhaps the solution to much of what currently plagues us in health care

- rising costs and bureaucracy, diminishing levels of service - rests on a

radically different approach: fewer people insured.

You don't need to be an economist to understand that any middleman

interposed between seller and buyer raises the price of a given service or

product. Some intermediaries justify this by providing benefits, such as

salesmanship, advertising or transport. Others offer physical facilities,

such as warehouses. A third group, organized crime, utilizes fear and

intimidation to muscle its way into the provider-consumer chain, raking in

hefty profits and bloating cost, without providing any benefit at all.

The health insurance model is closest to the parasitic relationship imposed

by the Mafia and the like. Insurance companies provide nothing other than an

ambiguous, shifty notion of " protection. " But even the Mafia doesn't stick

its nose into the process; once the monthly skim is set, Don Whoever stays

out of the picture, but for occasional " cost of doing business " increases.

When insurance companies insinuate themselves into the system, their first

step is figuring out how to increase the skim by harming the people they are

allegedly protecting through reduced service.

Insurance is all about betting against negative consequences and the

insurance business model is unique in that profits depend upon goods and

services not being provided. Using actuarial tables, insurers place their

bets. Sometimes even the canniest MIT grads can't help: Property and

casualty insurers have collapsed in the wake of natural disasters.

Health insurers have taken steps to avoid that level of surprise: Once they

affix themselves to the host - in this case dual hosts, both doctor and

patient - they systematically suck the lifeblood out of the supply chain

with obstructive strategies. For that reason, the consequences of any

insurance-based health-care model, be it privately run, or a government

entitlement, are painfully easily to predict. There will be progressively

draconian rationing using denial of authorization and steadily rising

co-payments on the patient end; massive paperwork and other bureaucratic

hurdles, and steadily diminishing fee-recovery on the doctor end.

Some of us are old enough to remember visiting the doctor and paying him/her

directly by check or cash. You had a pretty good idea going in what the

service was going to cost. And because the doctor had to look you in the eye

- and didn't need to share a rising chunk of his profits with an insurer -

the cost was likely to be reasonable. The same went for hospitals: no $20

aspirins due to insurance-company delay tactics and other shenanigans. Few

physicians became millionaires, but they lived comfortably, took

responsibility for their own business model, and enjoyed their work more.

Several years ago, I suffered a sports injury that necessitated an MRI. The

" fee " for a 20-minute procedure was over $3,000. My insurance company

refused to pay, so I informed the radiologist that I'd be footing the bill

myself. Immediately, the " fee " was cut by two thirds. And the doctor was

tickled to get it.

A few highly technical and complex procedures that need to amortize the

purchase of extremely expensive hardware will be out of reach for any but

the wealthiest patient. For that extremely limited category, insurance might

work. A small percentage of indigent individuals won't be able to afford

even low-cost procedures. For them, government-funded county facilities are

the answer, because any decent society takes care of the weakest among us.

But a hefty proportion of health-care services - office visits, minor

surgeries - would be affordable to most Americans if the slice of the

health-care dollar that currently ends up in the coffers of insurance

companies was eliminated.

When I was in practice as a psychologist, I discussed fees up front with

prospective patients, prior to their initial visit. People appreciated

knowing what to expect and my bad debt rate was less than 1%. That allowed

me to keep my charges reasonable and, on occasion, to lower them for less

fortunate patients. And I loved my job because I was free to concentrate on

what I went to school for: helping people, rather than filling out

incomprehensible forms designed to discourage me from filing them in the

first place.

Physicians and other providers need to liberate themselves from the Faustian

bargain they've cut with the Mephistophelian suits who now run their

professional lives. Because many doctors are loath to talk about money, they

allowed themselves to perpetuate the fantasy that " insurance is paying. " It

isn't. There is no free lunch and no free physical exam.

If substantial numbers of health-care providers shook off the insurance

monkey on their back, en masse, and the supply of providers was

substantially increased by opening more medical schools, the result would be

a more honest, cost-effective system benefiting everyone. Except the

insurance companies.

Dr. Kellerman, clinical professor of pediatrics and psychology at USC's Keck

School of Medicine, is the author of numerous crime novels and three books

on psychology. His latest novel is " Compulsion " (Ballantine, 2008).