Will Third Party Payer Health Systems Become Obsolete?
In a recent case and story by Dr. Singer, a general surgeon in Phoenix, Arizona and an adjunct scholar at the Cato Institute, he describes a situation involving a patient who was left uninsured for a minor surgury due to his indemnity insurance plan. The patient tried to negotiate with the hospital system and was ultimately quoted $20,000 for the surgery. After describing the cost to Dr. Singer, the patient and providers determined that they were all far better off "self-insuring" the healthcare services.
In the article Dr. Singer went on to describe that "hospitals and other providers make their "list" prices as high as possible when negotiating contracts with health plans and Medicare regulators. No one is ever expected to pay the list price. Anybody who has seen an "Explanation of Benefits" statement from a health plan will note a very high charge from the provider, and an "adjusted charge" based upon the contracted fee schedule, which usually leaves the patient with little or nothing in out-of-pocket expenses. The only people routinely faced with list prices are those few people who have insurance like my patient's—that doesn't include a pre-negotiated fee schedule with contracted providers—or those who have no insurance."
By negotiating between the parties on a "self-pay" or "self-insured" basis, the total bill was reduced to $3,000 from potentially $20,000 through the system, a savings of $17,000 from the normal charges. This cost transparency and direct negotiations with providers may be a harbinger of things to come for healthcare delivery. Organizations are now reviewing programs which would bring the cost saving described in this example to fruition by combining self-insurance and medical stop loss insurance. While it is uncertain how similar situations will be treated under Obamacare, the case is an example of how the system needs to reflect cost transparency to allow providers to serve patients for their needs.