Health Insurance Premium Versus Healthcare Cost

Author: Michael Dewar
Dwelling Place Cleansing

This short article is my observation based upon 28 years of interaction with healthcare as the provider of services in a multi-service medical center and hospital setting. I am taking the position that—to truly have affordable healthcare that is sustainable for the American people, five issues must be considered: premium cost, healthcare cost, provider profitability, the marketplace, and physician malpractice cost.

The preceding categories are like five moving parts of the same engine. Or, better yet, think of juggling five balls. The normal way of juggling is: while some balls are going up, others are coming down. But healthcare is a different animal, all five balls must go up and come down at the same time, and must be caught with only two hands. There is always an odd ball to be caught, and the odd ball could be any of the five on each throw. If all balls are not caught, it throws off the entire juggling process. Let’s look at these five balls.

Insurance Premium 

Some people are making the mistake in thinking that if insurance premium falls to the level of consumer affordability that automatically brings down the cost of healthcare, but that is not true. In fact, premium cost coming down could have the reverse effect. It could cause healthcare cost to go up, because there are four other balls putting pressure on the system. When premium falls, the insurance company takes in less money but must continue make payouts as heretofore. That puts pressure on the insurance company to move some things around to make up for lost revenue. In many cases that results in higher deductible and higher copays and reduction in services. These adjustments may not appear dramatic to create alarm up front, but they will become noticeable after a while when you are locked into the system.

For political reasons, government policy makers are greatly focused on lowering premiums because this gives the appearance of affordability in the sight of voters. Plus, it is easier to explain to them, because they are not looking at the other four moving balls. Chances are—they are looking at the odd ball.

Healthcare Cost

There are three categories of people who are quickly affected by the healthcare cost: the insurance people, the provider of services, and the consumer of services. When I speak of healthcare cost, I am speaking of all the services associated with one health crisis or event. Let’s say, Mary fell at home and fractured her right knee. She is rushed by ambulance to the hospital, x-ray reveals she needs a replacement knee. She needs a skilled orthopedic surgeon for the surgery, then three weeks of acute rehabilitation. Upon discharge to home, she needs home care: a visiting nurse, physical therapy, home health aide, and equipment (a walker and cane).

Now, the insurance that Mary has, must be and excellent, top of the line policy to pay for this quality care from ambulance to the last person and service that puts her back on her feet. Chances are her deductible and copay are going to be burdensome, depending on her financial situation. Any home care service over three weeks will have to be paid out-of-pocket, unless she has Medicaid. If she has Medicaid, she is fully covered for the service (at least in NYC), but the quality may not be as good. She will get by, but some service providers do not take Medicaid because of the pittance paid for service. So, right away one can see how quality care is skewed to those that have the best policy (cost more) or those that can private hire extra services.

Provider Profitability

Now, the cost scenarios used in this section is pure fiction, there is nothing like this going on in American healthcare. It is reasonable to say, all the professionals, para-professionals and agencies associated with the care of Mary want to provide services, not at a loss, but at a reasonable profit. Less say, the orthopedic surgeon charges $20,000 for the knee surgery. A good quality, American made prosthetic knee may cost $2,500 depending on type. Some may say that’s a lot of money. But where can you get an orthopedic surgeon at bargain price? And would you prefer a $200 prosthetic knee manufactured in a third world country? Even if you could find one at that price, no orthopedic surgeon would risk his or her reputation using it on a patient.

Or, less say the insurance company will only pay the orthopedic surgeon $5,000 for the surgery and if he or she used cost-effective prosthetic from outside the United States and perform 10 surgeries for the month, $2,000 bonus per surgery will be paid. Now, if this were true, the temptation would be high to compromise on quality to cut cost in favor of the insurance company. And who would know if quality were compromised unless something serious went wrong. The point is—profitability is not a dirty word, and it does not always signal greed. Good healthcare is costly, a fact we already know. But we must still ask the question, what is reasonable profitability? Should there be a reasonable, flat fee for replacement knees from NY to LA?

 The Marketplace

Some people say, like everything else, let market competition regulate the cost. From the preceding paragraph, you begin to see that healthcare is a different animal. Leaving it to be regulated by the marketplace is what brought us to the current crisis. When healthcare is left to the competition of the marketplace to lower costs, on the surface it appears that cost is lower, but below the surface quality is often compromised and fraud becomes wide-spread. Sooner or later, like the housing market the whole system comes crashing down at the expense of the consumer and taxpayer.

How then shall we live as far as healthcare is concerned? I don’t think there is any magic bullet. But a single payer system with incentives for doctors and strict oversight, may be the way to go. We may have to take piece of what works from all the healthcare systems around the world and make it work for the American people. At the same time, the profession of medicine must remain attractive for the brightest students from around the world, less we dumb down medicine to a second-rate profession. We cannot afford to lose our leading edge in healthcare. In the United States, it is easier to spend money on weapons of war than healthcare. The mother of all bombs is rumored to cost $314 million. Yes, one bomb!

Malpractice Coverage

One of the basic reason doctors’ services should not be had at a bargain price from some, and a greedy price from others is the unbelievable high cost of malpractice insurance. Two professions collide in malpractice: the medical and the legal. There are greedy lawyers and there are greedy doctors, but I am not too quick to fault them. The consumer falls in the middle. The right of the consumer must be protected; therefore, settlements must be fair and equitable. Outrageous law suits often driven by greed must be discouraged. Someone needs to rethink the convergence of interests and come up with affordable coverage and reasonable and equitable payouts. Perhaps, a government subsidized malpractice insurance, if not already in existence.

If doctors are poorly paid on the one hand, and greedily paid on the other, and malpractice insurance has gone through the roof, then we are forced to maintain the status quo or come up with a more balanced system that works for all the players, except the greed. We have the skills to do it, but I am not sure we have the will as yet.

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Published by The Dwelling Place

I am, Michael Dewar, author and director of Dwelling Place and the chief writer. Professionally, I am pastor, Bible teacher, mentor in the spiritual life, a specialist and consultant in church and family conflicts. I also have a background in Social Work (LMSW) and mental healtn.

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