I just researched the cost of health insurance for a single policy, purchased off the exchange in the state of Idaho. The best “deal” I could find was a bronze policy with a monthly premium of $550. As part of that screaming deal, I inherit a whopping $9,000 deductible.
What does this mean in practical terms? If I have a bad cold, I’ll have to cough up several hundred dollars to see my doctor. If I have another unplanned medical event, that will be out of pocket, too. And if any of these require imaging or blood work, guess who foots the bill?
While my health insurance does include annual preventive exams, I’ll still be on the hook for thousands of dollars just in case something really bad happens. And likely more on top of that.
Staying Well is Hard to Do
Health systems want to do more than heal sick people. They’d also like to keep people well. It helps them achieve their mission of promoting good health in communities, and ultimately, helps drive healthcare spending down.
Yet a huge obstacle standing in the way is the cost of medical care, and the increasing percentage consumers have to pay. I just completed a compelling patient segmentation study, soon to be published, for VisitPay; and consumers weighed in:
Rising healthcare costs influence a patient’s interest and ability to seek medical care, especially younger adults with lower earnings.
Here’s what’s happening.
Up and Up
Premiums and deductibles aren’t just cramping my style; they are affecting many others as well. In fact, from 2006-2016, premiums for families rose 58% from $11,480 to $18,142.
Deductibles increased, too. Average bronze plan deductibles in 2017 were over $6,000 for individuals and $12,000 for families. By the time we have paid our premiums each month, we don’t have enough leftover to pay our medical bills.
Year after year, patients are paying a higher percentage of total healthcare costs. In fact, patients collectively are a health provider’s largest payer after Medicare and Medicaid, accounting for 35% of the average health system’s revenue. This is happening, in large part, due to the increase in deductibles and out of pocket expenses.
Yet two of every three patients couldn’t pay off their medical bills last year, according to CNBC, and the situation is likely to get worse. It’s a never-ending cycle of we-can’t-pay so costs keep going up. And up.
Why so high?
It must be health insurance companies.
Our inclination may be to blame insurance companies for all our healthcare financial woes. There has been much national publicity in recent years about how insurance companies are cleaning up. In 2016, the industry’s net income rose to $13.1 billion, up 46% from a year earlier.
But what you may not know is that the ACA limits the amount of profits insurers can make. At least 80 percent of premiums must go toward covering health costs. The rest can go toward administrative costs, profits, marketing and salaries. If insurers don’t meet those requirements, they have to issue rebates to consumers.
In addition, profit margins in the health insurance industry were about 4.5% in 2016. Compare that to accounting firms (at 18.6%), legal services (17.4%), offices of dentists (14.8%) and offices of real estate and brokers (14.3%).
So what about hospitals?
So, if it’s not (completely) the fault of insurance companies, it is the provider’s fault? After all, costs continue to climb due to complexity of cases, an aging population, labor shortages and technology costs. And despite ACA incentives for value-based care, 86% – 95% of U.S. healthcare providers are still paid for each individual test, procedure and treatment they provide, an arrangement that continues to drive up healthcare costs with little to show for it.
Even as costs increase, the margin of hospitals isn’t fairing much better than insurance companies, hovering around 2-4%. What’s more concerning is that some of our nations largest hospitals are reporting declines or even losses to their operating margins. And with the payer mix shifting more and more to the consumer, they’ll have even more revenues at risk.
‘Gotta be the drugs.
There is no doubt that medications save lives and improve the quality of life for those suffering from a variety of illnesses, from cancer to ADHD to ear infections. And developing new drugs takes time and money, resulting in high prices, especially while medications are under patent.
Yet pharmaceutical companies have some of the highest profit margins in the world. Consumer spending on drugs has doubled since the 90s, according to a study by the U.S. Government Accountability Office. Last year, the average net profit margin for drug companies, including pharmaceuticals and biotech, was about 12.5 percent to 14 percent.
How do patients contribute to high costs?
Patients don’t pay
The disposable income of Americans is about $400, helping explain why two of every three patients don’t pay bills in full, even when they are $500 or less. Moreover, according to a McKinsey report, medical bills are the last ones we pay. (Creditors will take our house or car away, but not our new shoulders or knees).
We don’t take accountability
Aside from slow/no payment, another patient issue is lack of accountability. I interviewed an insurance executive this summer who told me back pain is a huge cost drain on the U.S. health system. While some individuals have no alternative but surgery, others can help the condition by good, old-fashioned core workouts at least 3 times a week. Planks and sit-ups may not be fun, but they ease the pain. (I am proof).
She explained that back pain sufferers often prefer meds to working out, and the ER is the easiest place to get a prescription. Ultimately, patients seek treatment at the most expensive healthcare setting, thus driving overall costs up. And sadly, the back condition is not resolved.
And if we are accountable, we still pay
Another executive at a large health system told me how their community outreach is targeted to higher income individuals who are more likely to use profitable service lines like orthopedics. Her explanation was simple: if we can increase revenues in service lines that are more profitable, we can use that margin to fund our mission of serving the community. Those who can pay compensate for those who are uninsured or underinsured.
And while the mission is noble, it’s another way of saying that the ones who pay their bills are paying for everyone else’s, too.
How Can Patients Make it all Better?
Take advantage of the ‘free’ stuff.
How many of you enjoy the benefits of frequent travel rewards from hotels and airlines? I bet you don’t think twice about using miles and points to upgrade or stay for free. Why not treat health insurance the same way? Take advantage of the laundry list of services that don’t require a copayment or coinsurance charge, including services for adults, women and children.
By all means, if you’re paying that hefty deductible each month, take the time to seek the preventative care you are due. It may save you – and others – lots of money down the road.
Work at it.
Eating right and exercising can help control weight, boost your mood, fight off disease and improve longevity. Bad habits can be hard to break, but a healthier lifestyle is well worth the effort.
Likewise, if you have a backache, shoulder pain, muscle tear (or in my case, all of the above), stick to a physical therapy regime. While it takes time and effort (like those core exercises), it’s certainly better than the alternative – costly surgeries, medications and/or no activity at all.
Don’t let problems fester.
The cost of care influences interest in seeking care. And it’s easy to tell yourself that the headache is nothing, the cold will go away or the stomach pain is tolerable. Like that leak in your roof that you ignore until a monsoon hits, repair that hole before you do permanent damage to your house.
If you let problems fester without seeing a physician, you may end up getting sicker and having to visit the ER. In other words, you will seek more expensive care with a condition that’s more costly to treat.
Get cost estimates.
While cost is important to patients, only about one third of patients get estimates prior to receiving care, according to the same VisitPay study. One reason for this reluctance is unforeseen events (e.g., a broken bone or heart attack) where timing is of the essence. Who cares how much it costs if you need attention right now?
There are planned events, or elective procedures, such as knee and hip surgery, or MRIs, in which you have time to assess costs. These procedures also tend to be ones with more transparent prices. So why not take the time and choose the more cost-effective options(s), assuming quality isn’t sacrificed?
Demand price transparency.
I’m sure you have seen an episode of Property Brothers or Fixer Upper when unforeseen expenses arise after home renovation work has begun. Builders don’t know what’s behind the walls of a 100-year-old home until they knock ‘em down.
It’s not that different for a physician who is treating someone with co-morbid chronic conditions. After a diagnosis of rheumatoid arthritis, for example, she may find the patient to have diabetes as well. (That’s another reason prices aren’t always straightforward in healthcare).
You have to start somewhere. And if you don’t inquire, you’ll certainly never get answers about care costs. Knowledge is power, so start asking.
How many times have you asked for a better deal on something you’re buying – and gotten your wishes? Whether you are staying at a hotel or hiring someone to do yard work, it never hurts to ask, “Is this your best price?” The same is true in healthcare.
You may qualify for discounts. Even if health systems don’t hit you over the head with the “blue light” special (for those of you who remember K-Mart). For example, are there any breaks if you pay in full? Do you qualify for charity care? Is there a more less expensive way to get x-rays or blood work? Don’t be embarrassed to ask! The sooner in the care process you investigate, the better off you’ll be.
If you need help because the business of healthcare is so confusing, there are patient advocates to do the work for you. You may compensate for the fee you pay by the savings you’ll gain.
Find a personal concierge.
From valet parking to white glove delivery service, concierge services permeate the product and service industries. Guess what? You can enjoy the same at some health systems, too.
If you are getting are having neck or back surgery or getting treated for a migraine at Nobilis Health, you have the luxury of a personal concierge to roll out the red carpet for you. They’ll do everything from explain your insurance benefits to find the lowest cost option of care. (Hopefully other systems will catch on.)
Seek low cost financing.
While most consumers seek ease and convenience, the current healthcare billing process lacks these attributes completely. It was designed for insurance companies, not patients. In fact, according to a new study by InstaMed, even as patients have become increasingly responsible for their care costs, health systems have done little to educate consumers and improve payment processes.
Two thirds of health systems aren’t proactively telling patients about payment options for their care, according to the VisitPay study. Yet many offer payment installment plans with no interest if balances are paid off within one year. In fact, you may have more power than you think over when and how to handle your debt. With health systems losing money on uncollected revenues, they’ll be happy to have a customer who is engaged and willing to pay.
Drink a glass half full of water with that pill
The reality of rising medical costs is a hard pill to swallow. But there are ways you can help make a difference.
Take care of yourself, ask more questions and demand more information. And ‘ye might find promising solutions to ease the financial – and physical – pain.