SEPTEMBER 19, 2014 – It is obvious to everyone that the healthcare system in our country is broken and getting worse. What is not so obvious is what it would take to fix it. To know this, we have to understand where we are and how we got here.
So where are we? We are in an corrupt, bureaucratic, enormously expensive healthcare system. Because of this, many people cannot access care. Of those who do, they find the costs quickly become unaffordable. In fact, well over half of the bankruptcies in this country are due to healthcare costs? Is that a fair choice – go bankrupt or die?
So how did we get here? We allowed the government (Medicare, Medicaid and now the insurance exchanges under the Affordable Care Act), insurance companies, and hospitals to take the free market out of healthcare. We separated the consumer of healthcare from the payer of healthcare. This allowed the incentives of everyone involved in healthcare, from patient to hospital to insurer, to align to financially break the system.
We forgot what the true purpose of insurance should be – to cover against unforeseen, expensive events that happen to a relatively small percentage of people at any one time. Think about how car insurance works; we use it for car accidents, not routine maintenance. In life, we cannot know which of us will suffer a tragedy, but we know it will happen to some of us. Thus, we are willing to pay a small premium to insure that if we are one of the unfortunate few, we/our families will financially survive.
However, starting several decades ago, we were sold on the idea that health insurance should cover everything including routine primary and preventive care; and once we paid our premiums, or they were paid on our behalf by taxpayers, we could expect extensive work-ups to be done with little thought of the costs. If the additional cost to us was very little, why not? We believed that more care was better care. Whether or not it was necessary rarely factored into our thoughts. Doctors, needing to protect themselves from malpractice liability, and not having time to educate patients or argue, would oblige us as it also made them more money. The insurance companies, paying for all of this care, then started charging higher premiums, implementing higher deductibles, co-pays and co-insurances…and the cycle continued.
In large part because of this, doctors have faced increasing bureaucratic regulations from government and insurance companies in an attempt to control costs. This has lead to doctors getting reimbursed very little for their time despite them spending 12-plus years in training and a few hundred-thousand dollars for that education. Thus, they need to order more ancillaries to financially survive. But ancillary equipment is very expensive and an individual physician cannot afford it if he only uses it when necessary.
For these reasons, doctors are increasingly employed by hospitals. Hospitals have the resources to purchase medical equipment because they employ so many doctors who will be using, relatively, very few pieces of equipment. The administrators, i.e., businessmen, want to capture large profits from the labs, x-rays and procedures that result from all of these doctor visits.
The businessmen took control of medicine, and guess what? Medicine became more of a business. The more doctors a hospital employs, the more testing and procedures that are performed, the larger the profits of the hospitals and the larger the bonuses of the administrators. The doctors get very little of this. In fact, doctors have had to work increasingly longer hours over the past several years just to maintain their salaries while hospital administrators total compensation continues to rise.
This explains why doctors rush through appointments and spend very little time with patients. In an attempt to not miss a diagnosis, not disappoint patients, and protect themselves from liability, they order multiple tests. This makes hospital administrators all too happy. They really don’t expect to make a profit on their employed doctor’s time, they expect to make it off of the ancillary services he orders. Some of these profit margins can exceed 10,000 percent!
So what is the solution? Re-unite the consumer of healthcare with the payer of healthcare. If we reintroduce market forces into healthcare, consumers will become more involved in their healthcare decisions and ask more questions. They will want to know if a test or procedure is really necessary, ie, going to add benefit and make them healthier, since they are paying for it more directly. This will decrease demand for many healthcare services which will in turn decrease costs. Pay doctors adequately for their time and expertise. This will encourage them to remain in private practice and utilize private companies for labs and imaging studies who charge a fraction of the cost.
More doctors in private practice means more competition which further drives quality up and prices down. It will force hospitals and insurance companies to offer market based services and products that are truly needed to improve quality of care and health outcomes. This can be accomplished with high deductible insurance plans combined with health savings accounts (HSAs). This allows the free market to work for the first few thousand dollars people spend on healthcare and allows those expenses to be tax-deductible.
However, it also places a limit on the maximum cost that an unforeseen, catastrophic event can impose on a family so they will financially survive the hardship. (The premium savings alone from obtaining a high deductible plan will fund the HSA and is approximately 5x more than most people would ever spend on their healthcare in my practice. In fact, the cost to see me for a year would usually be a fraction of the tax savings from the HSA!)
I started Atlas Healthcare so that I could practice medicine the way it should be practiced. As a direct pay practice, I do not contract with insurance of any kind. I also do not do x-rays in the office as it is not cost effective based on how rarely they are truly needed. (However, I can easily and inexpensively obtain them when needed.) The fact is, I have no incentive to order anything my patients do not need. By keeping my overhead low, I can charge a fraction of the cost of a traditional doctor visit. This also allows me to see 10 people per day, and thus, spend more time with each person.
Direct primary care is the perfect setup for people without insurance, people with high-deductible plans often attached to HSAs, or anyone with private insurance whose in-network and out-of-network benefits are similar, like a Blue Cross Blue Shield state health plan. However, the majority of my patients have traditional, private insurance, but see me anyway because they value the time and quality of the service they are receiving in this type of practice.