When it comes to the topic of health care, I certainly have my opinions. For this article I’d like to do something a little different. I have a friend, for the sake of anonymity we’ll call him Frank, who has a wealth of first-hand experience working in insurance. So I thought I’d ask someone who saw the inner workings of how our health care system got so screwed up and ask him how we got here, and how do we get out of this mess.
L: Thanks for giving me the opportunity to interview you, Frank. Can you tell me a little bit about your experience working in insurance?
F: I worked in sales and service for a leading health insurance carrier in the US for more than 20 years in various positions including mid-level management. I also have a nursing degree and experience working in geriatric care.
L: What are the primary factors driving the increasing cost of insurance?
F: So there are three main factors. The first is a rise in utilization caused by additional testing and other services that have grown significantly in the past 20 years such as the use of CT scans, MRIs and other diagnostic services for minor injuries and illnesses. The cause of which is physicians being overly cautious due to the threat of lawsuits and malpractice -and often just because they can.
The second is the stratospheric cost of all these different services, particularly diagnostic services and services that support surgeries and other in-patient confinements. Even with competition, costs soar rather than decrease.
L: I find that interesting because one of the Libertarian arguments on the topic of health care is that competition will decrease overall costs, but you’re saying it’s the opposite.
F: Yes, in our community in the early 90s there was one MRI provider. Within three years we had at least three clinics who provided MRI services, let alone the hospitals. One type of MRI (cervical screen) went from $1200 to over $4000 during this three year period. Since then, MRIs are performed everywhere and they have become commonplace rather than a “last-ditch” effort preceding surgery. During that three year period the equipment didn’t change. Since then it obviously has improved a great deal, which would lead you to believe the cost would decrease accordingly, when in fact the opposite is the case.
The third item driving the costs of insurance is the regulation passed at both the state and federal level. The Affordable Care Act is a great example of this. Health insurance used to work in a similar manner to car insurance; it only covered major medical expenses, now we essentially expect our health insurance to cover our oil changes.
L: Why have the costs of services increased so much?
F: In my experience I have seen profiteering happening at all levels of the health care system, this includes manufacturers, drug companies, lobbyists, lawyers, practitioners, insurance carriers as well as patients who benefit from large malpractice settlements due to a lack of tort reform. As an example, look at the cost of insulin; Humalog, a common formula of insulin on the market went from $21 per vial in 1996 to $375 a vial today. An average one-year’s supply is 36 vials. That’s an increase from an average of $750 per year to over $13,500 per year! This does not include all other diabetic supplies like pumps, test strips, meters, etc.
From the perspective of a health insurance carrier, for a one month supply the insurance company is presumably paying $1,015 after the insurance co-pay, whereas in the past they would have paid $53. In addition, insurance carriers create formularies for pharmacy reimbursement, it’s the politics and middle-manning involved in this process that causes such astronomical drug price increases.
L: How do we solve these problems?
F: Unfortunately, it isn’t any one solution. We have to work to find ways to solve the leading indicators of the service costs. That includes tort reform, some type of price stabilization measure (i.e., a cap on a prevailing rate), reduction of redundant administrative services, some control around the excessive profiteering in both services and supplies including pharmaceuticals. If we can move away from believing that “Medicare for all” is the silver bullet and target our efforts in these multiple areas we’ll be able to truly make an impact toward cost reduction and service availability. But one without the other is just going to continue this same cycle. There are so many different things that need to be fixed. Health care is a complex issue with many interconnected moving parts. Just as much as we tend to look to the government to solve the uninsured crisis, we need to look to ourselves to be as healthy as possible and avoid unhealthy food, drink, activities, lifestyles and unnecessary prescription drugs or hospitalizations in order to conserve benefits and restrain costs. There is no one specific boogeyman to blame for all of these problems. Corruption, malpractice and abuse of our health care system has happened on all sides. All abusers, profiteers and parasites need to be held accountable for their unethical behavior because without fair consequences there can be no resolution to any of these problems. For better or for worse, an ideal solution is one that leaves no one happy, but no one feeling totally defeated either. Who wins and who loses isn’t important though, what it is important is that we fix our broken health care system.
L: Thank you so much for your time and insight, Frank.
F: My pleasure.