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The Problem With Health Insurance

Something touched a nerve yesterday.  I kind of lost my composure when someone tried to defend the insurance industry and responded out of emotion – perhaps putting aside some reason in the process.

I used to get mad at myself or embarrassed when this happened, but now I stand back and try to analyze my reaction.  What is it that touched a nerve in me?  Why did I feel so strongly?  We don’t feel things without reason, and my reaction doesn’t necessarily betray weakness on my part, it shows the depths of my emotion.  That passion usually comes from something – most of the time it is personal experience; and my personal experience says that insurance companies are causing my patients harm.  That makes me angry.

I don’t think the people in the insurance industry are bad people.  I think vilifying people is the easy way out.  The people there feel like they are doing the right thing, and are no less moral than me.  But I do not think the way to fix our system is through letting them do their business as usual in the name of “free market.”  Defending the current system of insurance ignores some obvious problems in our system:

1.  They are financially motivated to withhold services

If you hire a contractor to work on your house, how wise is it to pay them 100% in advance?  You have just given them financial incentive to do as little work as possible, as it will maximize their profits to do so.  The insurance industry is in such a situation; despite any good intention, they are put in a position to decide between profits and level of service.  It is much better to pay more for better service, not worse; but that is what we have done with health insurance companies.

2.  They have been given the ability to withhold services

If all United Health Care (for example) did was to provide insurance, they would not be vilified as they are.  But since the only data available for medical care was the claims data they hold, they were put in a position to control cost.  This was sensible initially, as they had both the data and the means (denying unnecessary care) of cutting cost.  It’s OK that women aren’t kept in the hospital for a week after having a baby.  It’s OK that I can’t prescribe expensive brand-name drugs when there is a reasonable generic alternative.  There was a whole lot of fat to cut, and they did a good job cutting that fat.

The problem came when all the fat was gone and they were used to big profit-margins.  Once there was not any more unnecessary care to cut, they had two ways to keep their profit-margins: increasing premiums or cutting services.  They did both.  Both of these have hurt my patients.

  • Patients have had premiums increased or have been dropped because they were diagnosed with medical problems.  I have had patients beg me “don’t put that in my record,” as they know a diagnosis of diabetes or heart disease will be disastrous.  I am then caught between the pleas of my patients and the demands of honestly practicing and documenting my care.
  • I do what I can to follow evidence-based standards, but there are times when people fall out of the norms.  Medicine is not science, it is applied science.  This means that I am trying to take an individual and somehow match them with the scientific data.  Sometimes it works, but everyone is different.  If something is true 90% of the time, 10% of the people will be exceptions to the rule.  I have repeatedly been told by “gnomes” (people with minimal medical education who sit in front of a computer screen with a protocol for care) what “good medicine” looks like.  They see things as black and white when it is just not that way.  This has caused people to be unnecessarily hospitalized, it has required them to get unnecessary tests to follow their rules.  There is no arguing with people in front of computers.

3.  They covertly ration

Dr. Rich Fogoros (whom I recently met) has coined this phrase to explain what happens in our system.  Because it doesn’t look good to deny necessary care, insurance companies (including government-run ones) resort to making things exceedingly complex.  This makes it look like care is being offered, but not taken advantage of.    What does this mean?

  • The burden of proof is put on the provider to show the tests ordered are necessary.  The assumption is that a test will be denied unless the doc can prove otherwise.
  • Tests are sometimes inappropriately denied.  They then can be appealed, but the appeal process is even more difficult than the initial approval process, and so some people give up.  Every time someone gives up, less is paid out by the insurance company and their profits go up.
  • The rules for coding and billing are so complex, that it is very easy to make mistakes.  This means that an appropriate test ordered by a doctor that is not perfectly coded doesn’t get paid for.  The patient gets the bill and must get the doctor to appeal the denial.  This appeal process, again, is difficult.

Because of this, I have to hire staff whose sole task is to learn all of the rules of the different insurance carriers (including public ones) and then play the game properly with them so that we get as few denials as possible.  I probably spend $70-80 thousand per year to deal with the frustratingly complex system we have.


I have health insurance.  I do understand why it needs to exist, but I also see how harmful the current state can be to my patients.  I get frustrated with Medicare and Medicaid as well, but that is not my point.  Just because government run insurance has problems doesn’t do anything to change the problems with private insurance.  The fact that you can be killed by firing squad doesn’t make the gallows any better.

The cost of care has gone up dramatically over the past 10 years while my reimbursement has dropped.  Where is that extra money?

But the system is very broken right now.  It needs to be fixed.  Things need to be changed in both the private and public sector.  When I was in DC I made the point that our ship is sinking and we are arguing about who will be the captain.  The problems in our system are not simply who is writing the checks.

Honestly, I don’t really care who writes the checks.  All I want is for the system to reward good care and to stop hurting my patients.  Those who deny the reality of either of these problems will invariably draw my ire.

*This blog post was originally published at Musings of a Distractible Mind*

Who Can Be Trusted In Healthcare Reform?


It seemed like a reasonable plan.

I was having trouble keeping track of my chickens – they kept somehow escaping from their coop.  So I figured that I would set guards to make sure none of them got out any more.  I got some rabid wolves and put them outside of the coop, figuring that they would scare the chickens enough to stay in their place.

But here’s the problem: these rabid wolves are eating my chickens! Can you believe it??  You would think they’d have the moral decency to respect the fact that I hired them to guard my chickens, but now they try to bite me whenever I go out there!  It’s amazing to me that these wolves would act in such a way.  What’s the world coming to when you can’t trust rabid wolves to guard your chickens??


What?  You think I’m crazy?  Take a look at our healthcare system!  This is exactly what we are doing with our healthcare dollars.

In a recent article, Ezra Klein (coincidentally mentioned in two consecutive posts) discussed Wendell Potter, a disillusioned insurance executive who shared why he left the industry.  Potter explained that the for-profit insurance industry (Cigna in this case) uses the following tactics to maximize profits:

The industry, Potter says, is driven by “two key figures: earnings per share and the medical-loss ratio, or medical-benefit ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits.”

So it seems that a for-profit company is in it for the profit.  Disgusting.  Klein goes on:

The best way to drive down “medical-loss,” explains Potter, is to stop insuring unhealthy people. You won’t, after all, have to spend very much of a healthy person’s dollar on medical care because he or she won’t need much medical care. And the insurance industry accomplishes this through two main policies. “One is policy rescission,” says Potter. “They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment.”

So the insurance industry is “cherry-picking” healthy people to insure – people they won’t have to pay much on – and dumping unhealthy people.  How can this happen?  How can the insurance industry be taking money from the system and using it for their own profits?

But who is actually the problem here?  Are the Wolves evil for eating my chickens?  No, they are just acting like wolves.  I am the fool for trusting them to watch my chickens without getting taking advantage of their position.  Putting for-profit insurance companies in charge of huge sums of money is just as foolish.  As Klein states:

The issue isn’t that insurance companies are evil. It’s that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. And as Potter explains, he’s watched an insurer’s stock price fall by more than 20 percent in a single day because the first-quarter medical-loss ratio had increased from 77.9 percent to 79.4 percent.

Actually, I think Mr. Klein understates it a touch.  It isn’t that the insurance companies need to be profitable; they are under huge pressures from shareholders to maximize their profits.  They are being pressured to milk as much money from the system as possible.  Maggie Mahar underlines this fact:

Potter is right.  Disappointed shareholders can be brutal. And it doesn’t take much to disappoint them. In this case investors sent the share price plummeting because the insurer had the poor judgment to increase the amount that it paid out to doctors, hospitals and patients by 1.5 percent.

Even if an intelligent CEO wanted to do the right thing, take the long-term view, and provide labor intensive chronic disease management so that, over the long term, customers would be healthier—the CEO of a large publicly-traded insurance company probably wouldn’t keep his job long enough to find out whether or not his ideas worked. This helps explain why for-profit insurers have not followed the example of non-profit insurers and created “accountable care organizations” like Geisinger or InterMountain.

Those who have followed this blog have heard me say it before: the system won’t change until we stop trusting for-profit insurance companies to guard the money.  Those who are morally indignant over the fact that these companies would milk the system as they do are blustering in the wrong direction.  You don’t blame wolves for acting like wolves, and you don’t blame for-profit publicly-held companies for trying to maximize profit.  They are just being themselves.  We are the idiots – assuming they could be trusted in this position.

Obviously, the best solution is to put the politicians and lobbyists in charge.  Surely they are trustworthy.

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*This blog post was originally published at Musings of a Distractible Mind*

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