The Problems of Our Third-Party Payer System:

Problem One: Nobody Cares About Cost

Medicare, Medicaid, and employer-based, low deductible, high cost coverage blind both patient and physician to the cost of care. Nobody knows how much is spent. This is perhaps the single largest factor driving up the cost of American healthcare.

If you have a headache, ask your physician how much an MRI of your head will cost. Why the blank stare? The question is almost impossible to answer. If you are a physician, ask your patient if they need to know how much the MRI will cost. Most won’t care—they don’t have to pay.

This system is designed to fail. Neither the individual patient nor the treating physician is forced to consider the cost of care. Under the current system the only way to control healthcare spending is for either the government or the insurance company to limit access to care. Simply placing today’s uninsured patients on federal coverage does nothing to solve the problem of the third party payer.
 

Problem Two: Loss of Accountability

Medicare, Medicaid, and employer-based coverage remove the patient feedback that drives innovation. If a patient on Medicare or Medicaid is unhappy about the coverage offered, he or she has no other choice. A patient with employer-based coverage? He or she must change jobs to find another carrier. Under the current system neither the government nor the insurance company is directly accountable to the patient.

Example #1:
Medicare changed the guidelines for in-patient rehabilitation a few years ago. Previously, orthopedic patients such as those having knee replacement qualified for in-patient rehabilitation. Now, many of these patients no longer “meet government criteria” for in-patient rehabilitation unless enough patients with diagnosis such as strokes were recently admitted. These means how you are treated depends on who your rehab physician admitted before he or she saw you.

A rehab unit in Atlanta was fined approximately $2.5 million because Medicare felt the rehab unit did not following these rules closely enough. This is government-rationed healthcare simply to save money. Again, whoever pays holds power.

Example #2:
A gentleman treated in our hospital needed rehabilitation after suffering a stroke. When asked for approval, his insurance company denied the service without reviewing the chart. Only after my partner and hospital social worker spent 45 minutes on hold waiting for the insurance company’s medical director was the appropriate care approved.

Why did this happen? Insurance companies are paid by employers, not patients. To gain the contract they must provide competitive rates. To cut costs they limit access to care. Shifting the payer source from insurance companies to the federal government does nothing to solve this problem.

Problem Three: It Restricts Access to Care

For insurance companies to survive, they must sign contracts with employers. The insurance company that best controls cost will offer the best price. Cost is contained, in part, by limiting access to care.

Simply shifting the payer source to the federal government does nothing to solve this problem. It only changes the name of the third party payer. Every “universal healthcare” system in the world controls cost by limiting access to care, including Britain and Canada.

The solution: When possible, let patients control their own healthcare dollars.