Money

We’re All Entitled

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So . . . what’s at the core of our healthcare mess?  The doctors and hospitals overcharging?  Insurance companies stealing from everyone?  Pharmaceutical companies paying-off Senators to allow the continuance of obscene pricing?  Medical device manufacturers creating margins of a million percent?  The government’s ineptitude at administering the Medicare program?  Well, yes.  And no.  These are all contributors (and there are many, many more), but as Curly said to Billy Crystal in City Slickers, it comes down to “One Thing.”

Now, it took Billy 1:45 of cinema run time to figure out what that One Thing is.  But for the rest of us 300+ million Americans, this healthcare movie is like watching “Lost” — there’s no real answer and there’s no end in sight.  So I’m here to give you the answers to the SATs.

The “One Thing” is entitlement.  Every American feels entitled to receive healthcare services for free.  It’s why we constantly complain about $20 copayments and deductibles.  We think that’s unfair.  The doctors and hospitals make enough money.  Why should we have to shell out hard-earned cash because we were unlucky enough to get sick or hurt?  I mean, how much did it really cost the doctor to look in my kid’s ear for 5 seconds and write a stupid prescription?  Is the cost of the ink that much?

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Most people deny this is the way they feel. They’ll tell you that doctors should get paid well.  But the truth is, that is EXACTLY how we all feel.  We just don’t want to pay for this stuff.  So where does this feeling of entitlement come from?

Well, it starts with the insurance companies.  There is always going to be a problem when you have a third party paying the bills.  Think of it this way . . . if your father is filthy rich and he happily pays all of your bills, how much attention are you going to pay to prices or the amount of stuff that you buy?  Well guess what . . . when it comes to healthcare, most of us have that rich father.  Let me ’splain.

A couple of generations ago, insurance companies recognized a new way to make money by wedging their way in between the doctors and the patients.  The result of this was, and is, a system where patients see their doctors, and their insurance company mails their doctor a check.  Free healthcare.  In point of fact, the original “indemnity” plans paid 80% of the doctor’s charges, but the doctors never bothered to collect the other 20% from the patient because the reimbursement was so good, and because they didn’t want to upset their “customer”.  But then came the ’80s Wall Street boom.  The doctors saw how much money their investment banker friends were making, and wanted to even the playing field.  So they started charging more for their services, unbundling their bills and performing more money-generating services and tests.  The same greed entered the hospital, pharmaceutical, medical device, and other healthcare sectors resulting in an explosive increase in costs to the insurers.  The insurers (never ones to lose money) responded by developing managed care plans (HMOs & PPOs) to control costs, cutting back on benefits, instituting lifetime caps and exemptions for pre-existing conditions, requiring referrals and preauthorizations, establishing co-pay requirements, increasing deductibles and raising premiums. Doctors got paid less and responded by billing more aggressively and performing extra tests to protect themselves from the rapacious malpractice attorneys.  Ultimately, the result is less service for a higher cost.

Now, most Americans get health insurance through their employers (or the government), who pick up most, if not all of the premium payments.  In recent years, as the cost of insurance has escalated, the employers have passed more of the costs on to the employees.  So an employee might be paying $50, for example, out of each bi-weekly paycheck for health insurance ($1,200/year) plus a $20 co-pay when they see their doctor.  But their employer is likely paying $20,000/year to their insurance company (or self-insured administrator) on their behalf.  A nice perk, but very few employees recognize or appreciate this. They see the health benefit as a “given right” instead of viewing it as additional compensation.  I have a friend who just lost his senior-level Wall Street job, and his primary complaint is that, in addition to not earning income, he now has to pay $25,000/yr for health insurance for his family.  In the words of Bruce Willis, “welcome to the party, pal.”  He has been incessantly whining because this is a new expense for him that is unfair.  Of course, the fact that he earned a million dollars a year for umpteen years and got health coverage for free didn’t seem to soften the blow for him.  Entitlement!

And then there’s the “pass the bill” attitude. Since insurance is paying the majority of our healthcare bills, we want to get the most for our money.  It’s like going out to a fine restaurant with a large group.  Everyone subscribes to the Nash Equilibrium concept and orders the most expensive dish and multiple drinks, figuring that when the bill is split equally among the throng, they’ll pay less than their fair share because those that have consumed less will make-up the difference.  The only problem is, in healthcare everyone is gaming the system.

So we all go to the doctor and allow him/her to take unnecessary x-rays, perform extra blood tests, do unnecessary vascular doppler studies, hearing tests, physical therapy — whatever — because the insurance company is paying.  What do we care??

Well, here’s what happens.  The bills get passed to the insurance company and they respond by raising the price of coverage, which you and I pay directly, or indirectly in the form of a smaller paycheck from our employer.  And we thought we were getting away with something — that someone else would pick-up the tab.  In reality, when you litter in healthcare, you will, at some point, have to clean-up your own mess.  The penalty is guaranteed . . . it’s just delayed.

Now, in the case where Medicare (the government) is the insurer, eventually the system runs out of money.  And they can’t pass the loss on to employers, so they pass it on to the tax payer — YOU and ME!  So along comes Obama who says we have to fix this.  Well . . . there are 3 components of healthcare delivery, and to fix the system, all 3 have to lose money.  And we all know, nobody likes to lose money.  Those 3 components are 1) Providers [i.e. doctors and hospitals]; 2) Insurance companies; and 3) Businesses that feed off healthcare like pharma companies, blood labs, imaging centers, medical device manufacturers, etc.  And all three lobby heavily to both sides of the aisle to block this new legislation that will blow-up the runaway, money-generating healthcare gravy train.

The Republicans argue that reform will be bad for business, generate unrecoverable debt, and result in poorer healthcare services because of government mismanagement.  The Democrats argue that everyone is entitled to healthcare access at any cost.  But there is one thing we all agree on — SOMETHING has to be done.  We just don’t want to pay for it.  A complicated issue, to be sure.  Let’s just hope we’re moving in the right direction.  That we’re entitled to.