The Right Kind of Healthcare Reform


The Right Kind of Healthcare Reform

Over the past year, The Obama administration’s push for health insurance reform has used insurance companies as the scapegoat. Insurance companies have been part of the problem for sure. They have stymied competition by “cutting deals with providers” to pay exorbitant charges for services. Collusion between insurance companies and hospitals was highlighted in a Boston Globe investigative article a short time ago. It works like this: The CEO of Blue Cross Blue Shield got together with the CEO of Partners Healthcare and agreed to pay the hospital a lot more money for services if the hospital would agree to provide Blue Cross Blue Shield with its “best discounts” off these inflated charges. This verbal agreement resulted in Blue Cross Blue Shield essentially eliminating, or at least putting at a great disadvantage, its competitors.

It is my belief that this type of arrangement has gone on all around the U.S., resulting in minimal competition and higher prices for medical care. As a result, see the example below of a recent medical claim from a hospital in Lubbock, Texas. Due to HIPPA regulations, I will not disclose the patient’s name or medical condition.

This inpatient stay was for a total of 52 days. The average length of stay nationwide for this condition is 29 days. Total billed charges were $1,016,000. Texas’ largest Third Party Administrator’s PPO discount of 40% brought the claim down to $610,000. Sounds like a great deal, right? Not so.

This claim was sent out to a company called NCN for further review. NCN can determine the hospital’s true cost of providing services through the hospital’s own numbers, in reports they provide to Medicare. NCN determined that this stay cost the hospital $134,600. The amount that Medicare would have reimbursed would have been $132,562. The U.S. average cost based on 14,688 studied cases would have been $64,864.

In summary, this Lubbock Texas hospital marked up the cost of care from seven to fifteen times what it should have been. Our Congress should focus on this type of abuse by having hospitals and other providers post their prices for all services in advance to afford consumers and insurers to shop for the best value. The price for services should not be different for consumers or insurers. One competitive price for all patients would greatly reduce the cost of healthcare for all without the government spending one tax dollar. Couple this with malpractice reform and combine with a health savings account and we have a model that works and breaks up the insurance company/medical provider monopoly. This is a solution we cannot afford to go without.

We can solve the health care crisis immediately, with a few changes and no increase in taxes:

  1. Medical providers should post their best price and third party “outcomes data” for all major procedures, for all customers to see, so consumers can shop for the best Price/quality deal.
  2. Medical mal-practice reform is needed to stop frivolous law suits which increase the cost of care.
  3. Employer plans should include provisions that limit payments for medical procedures to no more than the “best deal” the plan can negotiate with a quality provider located within a 250 mile radius of the employer. The cost of transportation should be covered by the plan to make travel easy for plan participants. Plan participants can then take the “best deal” price and go wherever they want for services, recognizing they may be required to pay more if the local hospital or provider will not meet the “best price” at a highly rated hospital..
  4. HRA’s and HAS’s should be a requirement of all employer sponsored plans so employees will watch for good deals on smaller claims.

I encourage you to offer true competition based medical reform without spending any more tax dollars. Providers need to be required to post their best price for all to see with no special deals on pricing for inefficient insurance companies. With your support, we can make healthcare more affordable for all which should be the ultimate goal of reform.

William McKelvey

After college, I worked for what is now CIGNA and later State Mutual Life as a group sales representative marketing Group Medical and other products in the New England area.  In 1975 I established Medical Claims Service, Inc, a third party administration company, in Boston.  I started AMF Risk Management Solutions in 1979. AMF is a risk bearing Managing General Underwriter for American Fidelity Assurance Company of Oklahoma City, Oklahoma. Medical Claims Service was sold to Excellus BCBS of New York in 2006, so I could devote more time to my Reinsurance Business.  My background in both reinsurance and claims administration has allowed me to put together some turnkey innovative solutions for self funded employer group medical plans.  Our Aggregate Wrap and U.S Health Options plans are good examples.  Please see our website for more details.  Thanks for your interest.  Bill