Health care stocks fell last Tuesday, reflecting investor concerns that the just announced Amazon, JP Morgan, and Berkshire Hathaway health care initiative could shake up the status quo.
Isn’t that just about the best headline you have seen in months? Anything that might provide better care, a superior medical response to your needs, and lower costs is certainly welcome.
This new initiative aims to improve healthcare outcomes for employees in a cost-effective way. If it does, it will change it for all of us who are self-employed, free-lancers, and members of the gig-economy. According to the companies, it will be “free from profit-making incentives and constraints,” and will focus in the beginning on technology solutions. U.S. health care costs continue to rise year over year despite efforts to curb them. Most experts believe the fault lies with too-high prices.
Why This New Initiative is So Threatening
The fact that big investors see the competition as threatening is encouraging. These investors keep the price of the medical system in the stratosphere by supporting higher and higher quarterly earnings and giving $28 million dollar average salaries to their CEO’s. Yes, $28 million is the average salary for the CEO of our major health insurance providers! The new initiative may shake up the status quo, given that the three companies have over 1,200,000 employees among them. IMHO, the biggest plus is that small business employers and individuals who are fed up with poor and expensive healthcare will join this effort. If they do, change can actually happen.
The three companies admit that they “do not come to this problem with answers. But we also do not accept it [the problem] as inevitable,” Buffett said. “Rather, we share the belief that putting our collective resources behind the country’s best talent can, in time, check the rise in health costs while concurrently enhancing patient satisfaction and outcomes.”
That is a start. It is a daunting proposition, one that will test the skill and determination of each of the executives in charge of the initiative for their company. The negatives will start with “it can’t be done, the system is too big, the doctors won’t go along, or the pharmaceutical companies will stop it.” You can add your own reasons to mine but the system must change.
There may be few areas of the economy that rival health care in terms of complexity, low quality, opacity, and unreasonable cost. The task of forming “an independent company free from profit-making incentives and constraints” to “provide consumers with simplified, high quality, and transparent services at reasonable cost”, as Warren Buffet said, will be difficult. But it can be done. And it must be done. Most of the innovations in the health care industry have come from corporations, not the government and not from health insurers.
Working Americans are using less care and paying significantly more, a capitalistic anomaly, where common sense says that lower demand would cause prices to drop. Not so in a fragmented and profit-driven healthcare system, where prices for every type of inpatient admission has increased by double-digits over the last five years! Expecting change to come from the insurance companies is foolish. Corporations are not human but they too are hard-wired against change. The insurance companies have no incentive to change but they do have a major incentive to cut services. Here’s an interesting and frightening health care story, originally published in the New York Times & Wall Street Journal.
A Way-Too-Common Healthcare Horror Story
Anthem, one of the largest insurers with more than 40 million subscribers, recently denied coverage for a July 2017 ER visit by a Kentucky subscriber that it deemed “inappropriate”. The subscriber was covered under her husband’s large corporate plan with Anthem. The insurance company’s reviewing staff determined that the visit was not a true emergency.
The facts on the patient’s side are clear. She went to the ER after a night of worsening fever and increasing pain on the right side of her stomach. Her mother, a former nurse, thought it might be appendicitis and urged her daughter to go to the ER.
Multiple tests, including a CT scan and ultrasound, were done before discovering that she had ovarian cysts. The cost of her treatment and an overnight stay was $12,000. If you can’t get your head around $12,000 for these tests and an overnight stay, you’re not alone. But, that’s also the point of this new initiative, isn’t it? Three weeks later, the subscriber was told by Anthem that she would be responsible for all of the $12,000 cost. This woman is a schoolteacher; where does she have $12,000 for an expense that by all logic should have been covered?
Here’s the catch. The ER doctors don’t know what the patient has until they do tests, treat the patient with fluids in some cases and medication in others, and perhaps, keep the patient over night for a CT-scan, an MRI, or a series of blood tests to find the cause or extent of the pain that brought the patient to the ER. Only the end result, with the now-determined diagnosis and applicable codes, is sent to the insurance company for review and payment. The initial diagnosis of the patient and his or her complaint is put in the attending ER physician’s notes, and generally ignored after that.
This new policy now expects subscribers to diagnose themselves. In order to be paid by the subscriber’s policy, that diagnosis should fit the insurance company’s opinion of “appropriate and necessary”. For ER payments, the health problem must be timely and demand immediate care, such as a car accident, a broken leg, a stroke, a heart attack, appendicitis, or severe bleeding.
As I write, this policy is being rolled out in four states and will force us to try to be medical professionals, able to diagnose our doubled-over stomach pain and nausea as fibroids, ovarian cysts, or pelvic pain, and deal with it “appropriately”. Anthem and perhaps other insurers may not cover these types of sudden and painful conditions in the future because the subscriber should have known about their “pre-existing conditions” with regular visits to her primary care provider! How? Even with insurance, many cannot afford to go to their regular provider, to take time off work or caring for children or aged parents. The appointment is put off and then the ER becomes a must-go appointment, a visit the patient never wished for.
This will save the insurance company money by forcing the diagnosis of a perceived ER condition onto the subscriber, compelling him to practice medicine without a license or the skill to do so. If an Anthem subscriber has chest pains at midnight, and goes to an ER, the subscriber will likely pay for the experience. Anthem is essentially saying that he should wait until the morning, call his primary care physician and make an appointment. Or, failing that, he should go to a primary care or walk-in clinic and see if he can be treated there. In Anthem’s view, most ER visits can be avoided, as they are not “true” emergencies.
Now, For The Good News…
The schoolteacher appealed the decision by Anthem and after much back and forth, Anthem agreed to pick up the ER expense. There was no logic to their denying the claim and it is difficult for me to find their logic in later paying for it. The fact is that if the subscriber had not appealed, Anthem’s policy would have been reinforced and they would have pocketed the $12,000 and possibly bankrupted the subscriber.
I hope the heads of the new Amazon, JP Morgan, and Berkshire Hathaway consortium will debate the intelligence of that position in the months and years ahead. But, for the moment, I am going to enjoy the dream that this group will be able to make meaningful change for their employees and that that benefits can also be applied to the millions of us who are members of various other health care plans.
Your comments and thoughts are welcome as always. By the way, most health insurers treat BodyFix Method™ as an out-of-network provider, so we have a great deal of experience with the trials and tribulations I wrote about here. We are second-guessed daily by experts hundreds of miles away.
William M. Boland