Comparative Healthcare Costs explained:
The simplest health care cost equation involves you paying your doctor bills directly out of your source of income, just as you pay any other bill. When you pay up front at your medical appointment, the doctor (or his nurse) can take your money and process it with a minimum of paperwork. When the doctor does not need to pay extra staff to handle payments from patients, this lowers his overhead, allowing him to charge less for his services.
Each dot on this chart represents someone who must be paid, or an expense created by the complexity of the payment arrangement.
*You still pay, but now there is a “middleman”: the insurance company.
There is still only one source of income paying your doctor bill, and it’s yours. You work for your income, whether you are self-employed or working for someone else.
If you are working for someone else, your employer (Emp) receives the money you make for the company first, pays you some of that income, and keeps some of that income to pay other business expenses. Out of the portion of your income that your employer keeps, he pays the insurance company (Ins) for a percentage of your insurance coverage. You might also pay the Insurance company a monthly amount that comes out of your paycheck.
However the insurance company is paid, they will only, ever, be paid with money that has been generated by your work, whether for your own business or for someone else’s. The insurance company then takes that money, and puts it into their business, where they pay their employees, fund their investments, and cover the cost of the company infrastructure that permits them to do business with you, your employer, and your doctor.
When you see the doctor, you must pay a copay to the receptionist (Admin), and also must pay for those procedures and medical items which are not covered by your insurance, up to, but not exceeding the total amount of your deductible. If all goes well as intended, the insurance company pays for almost all of your medical care after your deductible has been met.
However, the insurance company is in business to try to keep as many of your insurance dollars as possible in their company, and to pay your doctor as little as possible while still honoring their obligation to pay your medical bills on your behalf. The insurance company’s Account Manager (Acct Mgr) accepts the bill from your doctor, but decides that some of what is included in the bill is not covered by your insurance, or that the doctor must accept a lesser amount of payment on your behalf that what he has charged for treating you.
The Account Manager only pays part of the bill your doctor has charged you.
This means that now your doctor now must employ at least one staff member to handle billing your insurance company, and making sure that they pay on time for as much of your bills as they can be required to cover. He also must retain a lawyer (Legal) to handle any possible legal disputes over your bills and care.
Every new person the doctor hires must be paid from the money he receives for treating you, so his bill to you goes up.
Using an insurance company to pay your medical bills for you means that there is now an entire business that survives on the money it receives from you for insurance. Everyone in that business who handles your insurance must also be paid for their time and effort on your behalf. This adds a hidden cost to your healthcare, because the insurance company pays its expenses before it pays your medical bills.
*You still pay, but government is in the middle of your medical care, telling you, your employer, your insurance company, and your doctor how you will receive care.
Government does not create or generate any money of its own. All a government can do to raise money is to tax or fine its citizens.
When you have government deciding how much healthcare you may receive, then government also demands taxes from you, from your employer, from your insurance company, and from your doctor because the bureaucrats keeping an eye on your healthcare have to be paid, too, and the infrastructure that allows government to regulate your healthcare must be funded.
For instance, with the Affordable Care Act or ACA (aka ‘Obamacare’): not only do you have an insurance company that takes your money to pay its employees and covers its other costs before paying for your medical care, but you also have the government making up thousands of new rules about how much coverage you can have, who the insurance companies must cover (everyone), and how much the doctor can charge you for medical care. The Affordable Care Act also creates seventeen new taxes that are levied against you, your employer, your insurance company, and your doctor.
These taxes mean that you must find a way to also pay the IRS more money out of your income, which hasn’t grown any larger from when you were paying the doctor out of your own pocket.
You must also pay the insurance company more, because they will have more expenses to cover and must hire more people to deal with the regulations that the ACA is requiring them to comply with.
You must also pay the doctor more, because he has had to hire an accountant full-time to ensure that he is compliant with the requirements the IRS has ordered him to comply with, and that his portion of the new taxes are properly paid on time so he doesn’t rack up penalties.
Not only that, but because your employer must also pay more taxes as well as you, he is whittling down his bottom line until there is nothing left to whittle. If he decides that you are not an asset to the company that brings in more than it costs to cover your insurance through the new, government-run program, he will fire you or cut your hours down from full-time to less than thirty, leaving you to find a way to buy insurance on your own.
To have the cheapest possible healthcare, it is necessary to reduce complexity of payment until there is only one person requiring payment (the doctor) and one person paying (you). Any other arrangement drives healthcare costs up and forces you to pay more for your healthcare.
For more of Krystine Kercher’s articles and books, please visit: http://www.krystinekercher.com.