So I'm a little confused, because it states that you can combine DPC care with an HDHP to satisfy basic coverage and skip the penalty, but wouldn't the HDHP plan satisfy that? Or is the simple possession of an HSA combined with DPC good enough? (The second case would seem weird, since there's no "insurance" for high risk situations; it's just a savings account. And in most cases you wouldn't have an HSA unless you already were on an HDHP.)
Nothing against DPC, I'm just unclear how this works in with the individual mandate.
I can appreciate the appeal of DPC, but in my experience routine visits (at least anything that qualifies as preventative) are generally 100% covered by the high deductible plans. Maybe that's a requirement from ACA?
Maybe the DPC cost savings is in the non-preventative minor occurrences which are almost routine. Like a kid's broken bone for example, things you don't expect to happen but aren't exactly a surprise either, and not catastrophic.
Right, the HDHPs have to cover preventative care for in-network doctors. However, you still have to be careful. I have seen doctors bill for a non-preventative visit if you ask any questions at all about specific ailments during a preventative care visit.
I think the premise is that the cost savings for maintenance and low complexity care make the risk of paying for emergency care worth it? Which I'd love to see numbers on.
I imagine any chronic condition would almost certainly rule this out as presented.
Models where a provider network gets $X a year to handle a chronic condition patient are one of the few bright spots in recent health care policies.
Ten years back we may be looking at high deductable plans as a disaster -- if you have the money to fill an HSA they are great, but for most people in the U.S. an HDCP means that diabetics will not take metformin or insulin but instead they will get their feet amputated at much greater cost.
One clear example is asthma. Steroid inhalers can often enable an asthma patient to breathe freely and avoid hospital admissions for about $200 a month. That looks like a crazy high price, but a hospital admission is going to cost $8000 or more. In the fee-for-service model the hospital profits from amputations, asthma exacerbations, etc. In a flat fee model they make a profit from practing good medicine.
It depends on what your purpose is. It is at least debatable that one of the major problems with our current system rarely addressed by anyone on any side is that it conflates a health care plan with a health insurance plan. The two things may with some justification be the same thing inside of your head, but in monetary terms, they have radically different statistical distributions of monetary payouts required, one being a fairly reliable steady drip of relatively small amounts of funds, one being a highly irregular payout of large amounts of funds. Only the latter is something that "insurance" is a solution to; if you're getting a steady drip of low-payout events the only thing insurance can do for you is add a middleman and raise net prices as a result. (Some individuals may win and some may lose, but it has to come out net more expensive for the system.) Trying to bind the two together into one thing may be part of, though probably not the entire, problem.
I think this is applying a "car insurance model" (sorry in advance for the car analogy) to healthcare. Ignore third-party insurance for the moment as it's not really applicable to health. You don't generally make an insurance claim for something like an oil change, 30/60/90k mile checkup, or something like that. On the other hand, if a tree fell on your car and smashed the engine, that's when insurance kicks in: for the catastrophes.
I understand what would happen for routine check-ups and serious accidents.
How would such a model handle predictable-but-expensive medical needs, like hip replacements for the elderly and monthly prescriptions for HIV and cancer patients?
The hip replacement can be covered under another policy like a home warranty. At the same time, without coverage, the prices have to come down. If they don't, all of those expensive doctors are bringing in near $0. Such an economic position is untenable.
The other two are probably going to be fixed through direct market forces. If the people of America can only pay $X, then the makers of the drugs can only charge $X + small premium to have a market. Since they would face a similar price pinch abroad, they'd have to adjust their prices.
We've seen the inverse of the price pinch with the epi-pen scandal. The makers knew the price could go up since insurance would absorb the cost.
Hiv cost over a lifetime is only 340k and 1:300 in the US has HIV, so the subscription would only have to cover a little over a 1k in lifetime risk; actually less, since HIV is overrepresented in the homeless and poor segments.
I think it's the exact inverse of what you describe. The article describes something like a subscription model for the oil changes that also satisfies the legal requirement for health insurance under 26 U.S.C. § 5000A. The enormous liability and collision part of auto insurance in this analogy is not covered by the plan described in the article.
On one hand, it seems like a great idea for those whose employers don't provide subsidized insurance coverage. If it's truly affordable, it should allow more people to get routine care. Especially for women, who generally need more routine doctor visits than men. OTOH the things that bankrupt people are hospitalizations and real insurance plans are generally there to help mitigate that.
I checked and it appears there isn't really a loophole. Direct primary care providers are able to combine their offering with insurance and offer it on the ACA exchange, but they are subject to the same requirements of any other insurer. And none seem to be doing this yet:
"H.R. 3590 recognizes DPC and allows DPC Medical Homes to offer coverage in health insurance exchanges in combination with a wraparound insurance policy provided by a qualified health plan (QHP). Working together, the two must satisfy all other essential health benefits requirements under H.R.3590. DPC practices provide all primary care in a monthly fee arrangement. The QHP is used for hospitalization, specialty care and other more costly services. The first DPC offering paired with a QHP in the healthcare marketplace went live in the Washington state exchange in January 2015. There are no DPC practices operating in the federally facilitated exchanges yet."
Many are combining Direct Health Care with a Healthcare Share. It's a co-op model that's not really "insurance" and is meant to be drawn from for only serious issues. So kind of what you'd expect to cover with a high-deductible plan. It works more like a community who reviews and decides whether they want to contribute to your bills.
One of the biggest advantages of these healthcare shares is that they're ACA exempt. Meaning, no fine. But there are other requirements to be accepted. Especially with the religious healthcare ministry ones. But they are very affordable.
I came across those before. If I could feel confident t they would be garunteed to cover serious issues I'd do it. But it seems like there's no garuntee so you're taking a big risk?
Other issues I didn't like is that they're not eligible for an hsa? And what's the Guarantee you get the Aca exception?
In the US, it is a huge problem that physicians spend so much time dealing with insurance, they have to churn through patients and can't establish a real relationship to them. It actively undermines the quality of care. DPC allows physicians to escape a horrifying hamster wheel of running faster to just stay in place. It allows them to take the time to get to know their patients in a way that was normal when I was growing up, but is very rare these days.
It allows them to see the same patient for thirty minutes or an hour a few times a year and actually remember who they are instead of having some insanely low amount of time per patient per year, like seven or ten minutes. It has a track record in this country of stopping the insanity and improving care.
I've been to modern doctors who spent time with me, and in all honestly--I'm getting no benefit from their "wisdom".
Now the family doctor, whom retired in 2000, was time well spent. He palpated for tumors. He looked at our retinas. He listened to our hearts. He found a slight mitral valve prolapse in my mom, and myself.(Something every doctor I have seen since has completely missed, or didn't care enough to listen for?). And yes, some times the rubber glove was brought out.
Since I have good insurance now, my doctors spend time with me, but I have found talking kinda useless, unless I'm in for a specific symptom. Too many they don't seem to really listen.
They love to run up the bill with a depression screening. They mention fish oil. Blah--blah--blah.
I sometimes think a person without good insurance might be better off. They are left alone. They aren't put on dubious anti-depressants. They arn't over treated. They won't get a testosterone patch. They won't get any edgy new treatment--that might be found to be dangerious. I will admit; I'm no fan of modern doctors, unless it's for emergency medicine. Maybe that's affecting my judgement? I don't have the respect for doctors I once had. I haven't been to a doctor recently whom I didn't walk out of thinking---He's/She's just in it for the money? I have a psychiatrist that put me on a addictive drug years ago, and has literally held me hostage with the mandatory office visits, and they are solely for money. I look back at 99% of my doctor office visits, and I can't think on any ailment they caught by spending talking time. "So give me the comprehensive blood test, and order a MRI if I"m complaining of upper right quadrant pain--please doc, and refill any addictive prescriptions for a year. I really don't want to talk to you, unless that office visit includes blood work, or something other than just yacking, and running up a bill!"
I'm now fifty. If you get through your twenties-thirties without a mental malady; you succeeded. Life in America is hard on the psyche, and that can cause so many health problems--high blood pressure from self medicating? Weird pains? Most of it will be psychosomatic. In terms of health, I can offer what helped me: cut back on the alcohol, exercise a little, eat less. Get that pneumonia vaccine if you're constantly getting chest infections. It's one of the better vaccines.
I'm curious how it would work at the hospital level, or even at the hospital network level. Pay the network a monthly fee, and then when you get sick, all of your care is already paid for. I suppose this is the idea behind HMOs, but the execution hasn't been there.
All the little hospitals and clinics in our area have been bought up by one of the two healthcare networks in the five-county region, and I'm fairly shocked they haven't done this.
Maybe it's illegal for a hospital system to offer insurance in NY? I don't know. You'd think they'd be happy to cut out all the fuss around handling insurance approvals/rejections and pocket the 20% middleman cut.
I don't have a ton of first-hand knowledge, but I know that being licensed to provide health insurance in NY specifically is no joke. Todd Park (former US CTO, AthenaHealth founder) once told me that he didn't pay much attention to Oscar early on until he found out they had gained an NY license, at which point he dove into it.
More broadly, many hospitals and hospital are getting involved in the ACO (accountable care org), which gets at some of these goals, but it's not 100% clear that an ACO model can be successful (financially or for patients), and it doesn't cut out all the relevant middle-men.
> Maybe it's illegal for a hospital system to offer insurance in NY?
Definitely not. A lot of hospitals are part of networks which are doing exactly this.
And many of the ones that aren't are entering long-term capitated agreements with insurers, which basically means they're acting as if they were insurers but without technically being one.
It's more like capitation, which was tried very early on with PPOs. Unfortunately, people don't like being told "no", so a lot of the discipline required to make it work was removed.
> It's more like capitation, which was tried very early on with PPOs. Unfortunately, people don't like being told "no", so a lot of the discipline required to make it work was removed.
Capitation is still very much alive, and in fact more common than ever. It's just structured now so that it's hidden from the patient.
You may already be receiving care under capitated agreements yourself and simply not know it.
> It achieves lower costs in large part by cutting out the middle man of health insurance for basic services.
Is it actually lower cost? The cash fee for a PCP visit and what insurance actually pays are drastically different. If you're paying a membership fee just to get the same sort of rates insurance pays out at, there's no win here.
> A little known provision of the ACA makes Direct Primary Care a kind of legal loophole. When combined with a high deductible health plan or health savings account, Direct Primary Care can meet the requirements for basic coverage, thus getting you out of the tax penalty for not being properly covered.
That's not a loophole. That's "pay extra". You'd still need at least a Bronze plan, and any visits that bill against your DPC won't count towards your annual deductible or out-of-pocket caps.
> The cash fee for a PCP visit and what insurance actually pays are drastically different. If you're paying a membership fee just to get the same sort of rates insurance pays out at, there's no win here.
You don't want to get the same rates that insurers pay - those are actually the inflated rates.
Billing is complicated. In short, part of the problem is that doctors who take public insurance (Medicare/Medicaid) actually take a loss on those patients, because Medicare reimburses about 7% less than the direct costs of services, in the aggregate. It's one of the reasons you see very few private practices which cater solely, or even primarily, to Medicare patients.
The way providers make this work, since they can't negotiate rates with Medicare, is to charge higher rates for private insurers. This ends up as an effective subsidy from private insurers to Medicare.
A doctor who doesn't accept any insurance whatsoever doesn't have to manage this indirect subsidy, so the amount they charge a self-paying patient could be a lot less than what another doctor would bill a private insurer for.
I would like to learn more about this. Some people here (who claim to be intimately involved with the actual financial aspects of running a clinic) say it's the opposite -- that Medicare actually pays the bills so the clinic stays open because the private insurers are so effective at getting out of paying anything.
Surely there is a reliable source that can confirm one way or another how this works in practice? I get that it is probably arcane and difficult to understand, but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
> Some people here (who claim to be intimately involved with the actual financial aspects of running a clinic) say it's the opposite -- that Medicare actually pays the bills so the clinic stays open because the private insurers are so effective at getting out of paying anything.
Oh no, definitely not. Granted, the number I cited is for the aggregate, so it's not going to be exactly true for all practices. Things might look different if you're talking about a public clinic that specializes in low-end care for the poor, but by and large, it's definitely the other way around. Medicare is actually quite notorious among physicians for taking ages to remit payments even for bills that they have approved.
That said, the dynamic usually goes like this:
1. Patient sees doctor for routine procedure
2. Doctor submits bill for $8,000 to private insurer
3. Private insurer says "no, that's way too much, and also you didn't document this part sufficiently"
4. Doctor resubmits bill with more supporting evidence for that part, but a lower total amount
5. Repeat steps 3-4 an arbitrary number of times
6. Insurer says, "okay, to save work next time we'll agree to pay you 400% of what Medicare does for all of these procedures for the next year".
So in that sense, private insurers negotiate their rates, so it seems like they're "getting out" of paying, but in reality they're still paying multiples of what Medicare is.
One confusing quirk: most Medicare patients[0] actually have their insurance plans managed by private insurers, so billing and reimbursements for those would be handled by the private insurers.
> Surely there is a reliable source that can confirm one way or another how this works in practice? I get that it is probably arcane and difficult to understand, but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
The numbers are available in Medicare's annual reports. That's not very user-friendly - last I checked, they were still available in full only on paper(!), and you have to understand financial accounting a little bit in order to parse the numbers yourself. (It's not like they want to make it easy for people to find out how they're under-reimbursing).
Though in terms of secondary sources, if you look at documents written by and for other hospital and insurance adminstrators, you'll find a lot of references to this practice. They don't really talk about it more broadly for political reasons, and also because it's something that's really difficult to explain to the public, and because I'm not convinced the public actually cares.
> but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
There probably is, but getting to my last point - I'm not sure people actually care enough. To be honest, I used to talk about it a lot more on HN (if you search my username + various combinations of "Medicare" or "health insurance", you might find other posts where I've gone into more detail and linked to other materials). But even on HN - let alone with the broader public - I get the sense that most people don't want to understand the complexities of billing and reimbursements and the interchange dynamics between insurers. It makes for a much more complicated narrative than most people are looking for, and so it's easy to gloss over in favor of a simpler one, especially one that fits more neatly into a partisan narrative.
[0] Not most people with Medicare (yet), but most Medicare patients (people with Medicare advantage are a minority, but they account for a disproportionate amount of people who actually use their plans - largely because Medicare is damn-near impossible to use as a patient if you're not on a private network. Ask me how I know that one.)
> I'll bite, how do you know that one? This conversation is incredibly fascinating to me.
I have lots of Medicare horror stories, from both personal and professional experience.
I founded a health-tech company aimed at ensuring that people who were discharged from the ER received proper outpatient followup care. This is a big problem - most people who leave the ER receive their next medical care from another physician in the ER (ie, a subsequent visit).
There are a lot of reasons that patients don't have followup care, but a big one is the amount of coordination and effort required. A lot of that we could automate or do efficiently, because we were handling the process for many patients at once. But dealing with Original Medicare[0] was particularly awful. Original Medicare's coverage is actually quite terrible (from the patient's perspective) and, to make matters worse, lots of providers don't accept Original Medicare[1], because it's a lot of hassle and may not even pay for itself. We had by far the hardest time with Original Medicare patients compared to Medicare Advantage patients. Even Medicaid was arguably better, for reasons which aren't relevant here.
From a personal standpoint, I've seen how frustrating it is to arrange for proper care for family members on Medicare, and that's with the knowledge we have about how the whole system works together. For ongoing care, such as physical therapy or dialysis[2], Medicare will often cover a small amount, but not enough to really make an impact. Say, you need three sessions a week, but Medicare only covers one. However, because providers can't bill a patient directly for services that Medicare does cover (even if Medicare won't cover that service, because the patient has hit their cap, or whatever reason), that means you... can't receive it from that same provider. So you have to find a different provider for the remainder, which means you now have two different providers and all the problems that means. That is, of course, assuming you manage to find one who will let you self-pay, and you have to cover it out of pocket.
To be fair, that last point applies both to Original Medicare and Medicare Advantage; Original Medicare just happens to be worse about it.
[0] Original Medicare is the term used for Medicare plans that aren't offered through private insurers
[2] Dialysis is actually particularly heinous for another reason - due to a legal loophole, Medicare basically forces private insurers to pay for nearly all dialysis, albeit indirectly.
And no one else pays anywhere near 100% of 'reasonable costs' (they pay more, or in the case of Medicaid, less). So I wouldn't call it the normal rate.
Note, many of these hospitals are nonprofit, and benefit from donations and grants too- so it isn't entirely clear that they need to earn a profit or even break-even on "patient care" alone.
With all that being said, the Forbes article seems to be promoting the idea of making patients pay higher co-pays in order to prevent them from actually using their Medicare benefits, and reducing the demand for health care overall.
It seems to me like a much better strategy would be to increase the supply of care (More training facilities to increase #'s of doctors, better, more streamlined regulations to reduce the operating costs, etc).... but it doesn't seem like the politicians are interested in fixing the real problems in healthcare. We shall see what the new Congress/President brings to the take, but I don't hold much hope
As a family physician, i can tell you that most physicians lose money on medicare rates b/c of the added administrative costs. And that just got worse 1/2017 with the addition of 962 pages of new laws (medicare:macra/mips).
If you take Medicare patients, the fee you charge them is the floor for everyone else. You can't charge anyone less than you charge Medicare.
The reason most facilities take Medicare is that Medicare typically covers the marginal cost (and then some) of whatever services the patient is using. You can't sell yesterday's hospital bed, so better take the pittance from Medicare than get nothing for it.
> The reason most facilities take Medicare is that Medicare typically covers the marginal cost (and then some) of whatever services the patient is using. You can't sell yesterday's hospital bed, so better take the pittance from Medicare than get nothing for it.
Actually, Medicare doesn't cover the marginal cost. In the aggregate, they reimburse 7% less than that.
Many facilities take Medicare because they are literally obligated to. Right now, many providers (hospital networks, but some practice groups) are actually trying to figure out ways to restructure their businesses so they can legally drop Medicare, but it's difficult.
> because Medicare reimburses about 7% less than the direct costs of services, in the aggregate. It's one of the reasons you see very few private practices which cater solely, or even primarily, to Medicare patients.
Could you please point us to the source of this information?
It was my understanding, from a news article I read a few years ago, that Medicare evaluates each medical procedure and comes out with a fair price that guarantees fair profit for the provider.
I think it might be that providers cannot charge insane profits to Medicare so they rather avoid dealing with them.
Medicare negotiates a MFN clause, so they are - out of the gate - at the lowest rate any clinic ever charges, with no eye towards profitability.
Because it's well known in healthcare economics (or at least finance/administration) I thought the ~7% aggregate number would be widely published and that I'd be able to quickly find a link for you. For reasons I don't understand - it is not - but here is a link that has a chart/graph from Davita that talks about the phenomenon (in micro, not macro):
We here this question a lot - how do i afford the insurance PLUS the membership. To which we try to show how can you afford your insurance WITHOUT the membership. BC the directcare model can decrease the patients out of pocket expenses dramatically on visits, copays, procedures, medicines and labs.
i've been a direct care doc since 9/2010 and happy to answer any questions. to (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
The premise of this post is straightforward once you remember how insurance works from an economic standpoint.
One thing that people often overlook when talking about health insurance is that, economically, "health insurance" is really the combination of two completely separate products, only one of which is actually insurance.
Insurance is about pooling risk. It smooths risk across states of the world (e.g. the universe in which your house burned down, and the universe in which it didn't but your neighbor's house did instead). It reduces the variance between those states, and in exchange, it charges a premium for making the outcome more predictable. It is not there to save you money. The expected value of all insurance is negative, and that's intentional.
By a true insurance model, routine care and elective surgery would be priced the same with insurance as it would without, because there is no risk involved. The reason it isn't it because we want to subsidize these, to enable people to obtain care they otherwise wouldn't be able to afford. We use "insurance" as a vehicle for this, but really, that's not insurance at all. It's a redistribution.
So it's perfectly understandable that a primary physician who is dealing with routine care and doesn't accept insurance would be able to charge patients less (and still walk away with more money) than one who uses insurance.
The reason you don't see this everywhere, though, is that policies are making it harder and harder for physicians to run private practices entirely (whether they accept insurance or not). The majority of physicians are now employed, largely by hospital networks which are required to accept insurance (in some cases legally, and in others by virtue of the fact that they need to cover their Medicare losses[0]).
So, the place you are most likely to see the direct care model are with physicians who are catered to the incredibly wealthy. That's not to say that a direct care model couldn't work for people who aren't, but the way our system is set up doesn't facilitate it.
Only if you ignore non-monetary costs and benefits. Risk reduction/mitigation is a benefit and has a value. If it had no value, people would not bother buying insurance. When that benefit is taken into account, the net expected value of insurance is positive for both parties: the insurer makes money (assuming it has done its actuarial statistics properly) and the insured buys risk reduction/mitigation at a cost that is less than its value.
Your point about "health insurance" combining two separate products, only one of which is actually insurance, is valid, though, and very important.
I'm not sure it holds for all health insurance products though - you're very specifically talking about the US model.
For the first part you're assigning a value to a thing beyond it's market cost and saying everyone is in fact a winner, and that's a little strange. Risk pooling via a private insurance company is negative sum because someone makes a profit beyond their costs. That should not then be taken to mean it's a bad deal (it isn't).
> you're assigning a value to a thing beyond it's market cost and saying everyone is in fact a winner
Of course. If that weren't true, people would not buy insurance.
> Risk pooling via a private insurance company is negative sum
If you only consider monetary costs and benefits, yes. But this ignores the (non-monetary) value to the insured of not being exposed to the risk (because that risk exposure has been transferred to the insurer).
> That should not then be taken to mean it's a bad deal (it isn't).
I agree that it's not a bad deal; I'm just saying that the reason it's not a bad deal is that people consider more than just monetary costs and benefits.
> Pretty sure when he said "the expected value" he meant monetary value.
You might well be right. But I wasn't trying to tell him what he meant; I was pointing out that viewing "expected value" solely in terms of monetary value does not explain why people buy insurance in the first place. To explain that, you have to take into account non-monetary costs and benefits.
The same is true for any economic transaction that involves anything other than pure financial instruments. For example, I go to the grocery store and buy various items for money. If I only consider monetary value, the "expected value" of this transaction is negative. Does this seem like a useful way to explain the economics of grocery stores?
Contrast this, for example, with trading stocks. Here there is no non-monetary value involved; people don't eat stocks, or get any other non-monetary benefits from them. So when analyzing the stock market, it is appropriate to use "expected value" to mean monetary value.
How do you calculate the expected value of your grocery store trip? Expected value is calculated by summing the product of value*probability across the complete range of possible outcomes. I'm having difficulty understanding what you mean.
When I go to the grocery store, the expected value is exactly zero. In every possible outcome, I expect to exchange some amount of money for a basket of goods with an equal value.
> How do you calculate the expected value of your grocery store trip? Expected value is calculated by summing the product of value & probability across the complete range of possible outcomes.
That's the general meaning I'm using, but in this case the range of possible outcomes is pretty narrow--basically I buy food and eat it. The small probability of some of it being bad, and me either having to throw it away or getting sick from it, isn't significant for what we're discussing here.
> When I go to the grocery store, the expected value is exactly zero. In every possible outcome, I expect to exchange some amount of money for a basket of goods with an equal value.
Then either your grocery store is overpriced or you are being really pessimistic about the value you get from your food. Also you have a pessimistic view of economics.
My expected value from grocery shopping is positive: I expect to get more value out of the groceries than the money I spend on them: I can't eat money. The expected value to the grocery store owner is also positive: they weren't going to eat all those groceries anyway, so the money is more useful to them than the groceries were. In other words, the transaction as a whole is positive sum. This is how wealth is created: people make positive sum exchanges that redistribute things to increase overall value.
Of course, this whole viewpoint I'm expounding requires a concept of value that is uncoupled from monetary value. You don't appear to have that concept: you appear to believe that the "value" of anything is equal to the money you can exchange for it. That is not a fruitful way to view value if you want to understand how wealth is created. Notice that the "value" of both the groceries and the money had to be different for me and the grocery store owner for the exchange to take place; that is how all positive sum exchanges work and how wealth creation happens. If everything had the same value to everybody, which is what is implied by equating "value" with monetary value, the economy would be completely stagnant and no wealth would ever get created.
I'm aware that there's a difference between utility (value to me) and monetary value. But when people talk about 'expected value', they're generally talking about monetary value. (I'm not saying that you couldn't usefully apply it to utility, but that would require some gymnastics.)
"If everything had the same value to everybody, which is what is implied by equating "value" with monetary value, the economy would be completely stagnant and no wealth would ever get created."
That's untrue. Even if everyone had the same utility function with respect to every single possible good and service, (i) wealth would still be created (e.g. by a woodworker transforming a piece of wood into a piece of furniture) and (ii) trade would still take place (because, even in the absence of differing utility functions, there are still productivity gains to be had from specialisation).
Anyway, we've veered way off topic. The comment to which you replied "The expected value of all insurance is negative, and that's intentional" was entirely correct, as long as you don't want to use a definition of 'expected value' that nobody uses.
> Even if everyone had the same utility function with respect to every single possible good and service
The same good or service having different value to the two parties to a transaction doesn't require them to have different utility functions. It just requires the utility functions to depend on variables that differ between the parties. For example, the utility of a given item of food depends on how much of it you already have (the grocery store has a lot more of it than me, so it's worth less to them).
> we've veered way off topic
I'm not so sure. Health care seems like an area where it should be obvious to everybody that non-monetary costs and benefits are a huge factor that must be taken into account.
> Only if you ignore non-monetary costs and benefits. Risk reduction/mitigation is a benefit and has a value. If it had no value, people would not bother buying insurance.
As mentioned below, expected value here refers to the flow of funds. Yes, it is different from the utility of the (guaranteed) value, which is also different from (and greater than) the expected utility of the risky action.
The monetary difference between what I'm referring to and what you're referring to, incidentally, is what economists call the premium. (The naming of "insurance premiums" is not a coincidence.)
Arrow wrote the seminal paper on understanding insurance, for anyone who's interested in how this is calculated.
I have seen a lot of startups coming out to "re-invent the clinic" essentially by re-inventing DPC. They generally focus on on a wealthy clientelle with the (tesla-like) promise of moving down market. They aren't small concierge physicians, though. It ends up looking a lot more like one medical on steroids.
Not sure if it is a reasonable model yet, since these firms are incentivized to minimize patient contact. In the positive view, it means they want to focus on preventative care. In the negative view, they will get suffocated with hypocondriacs and have to institute limits to care that invalidates the allure of an unlimited insurance-free provider. Plus, these places effectively have to underwrite like insurers to remain profitable which is not easy when competing woth sophisticated giants. Not to mention the risk pf dealing with a very unstable ACA that will likely change the landscape.
I think direct care models, in all but name, are probably coming. I might be wrong, but the way federal governance in the US is headed it seems increasingly rather than decreasingly likely.
In our region there are already hospital systems that are owned as subsidiaries by corporations that also own insurance companies. These corporations are gobbling up smaller hospitals as those merge and then subsequently get purchased by regional systems.
The monopoly in the provision is problematic enough, but it reaches new levels of problems when they are also merging with insurance companies.
So for some people, even if they aren't getting direct care technically, they are, because their choices are limited geographically for all intents and purposes to one provider, and their insurance is coming from the same provider.
The challenge these direct care models faced, as alluded to by other posters, is in competing with conglomerates that offer a complete spectrum of care. You either cater to people who can afford it, or have to lower costs enough to make it reasonable for people who might not otherwise. The first option limits your customer base; the second is not really currently feasible given government regulation and how it inhibits competition in delivery models.
I worry about the future of health care in the US, only because I don't see the GOP implementing anything other than the not-too distant status quo, which was broken. I sympathize with their stated ideal of reducing costs and increasing competition, but it seems like doublepeak for reducing costs and decreasing competition for established financial interests and increasing competition for everyone else. The net effect will just be squeezing more and more money out of the common individual.
For anecdotes: I've had a HDHP before ACA, started at about $45/mo now up to about $60/mo with an outrageously high $12.5k or so deductible.
I've had two different DPC, one about $45/mo, now with one about $30/mo.
Both combined are still less than I would pay in any marketplace.
It's nice to be able to just see your doctor without worrying what it might cost. A large list of simple procedures are covered, and tests cost next to nothing. It's a health subscription to an actual doctor who can be just as cost-conscious as you are while still incredibly knowledgable and invested in your health.
Is this health insurance purchased via your employer? If so, is your employer subsidizing it?
Double digit premiums sound ridiculous, even for a male in their 20s. As a data point, I'm a <30 male, never been to a doctor with no health issues that I can tell, and my HDHP premium is $310ish, last year it was $275ish, but that's using healthcare.gov so completely unsubsidized, and I have a deductible of $1,500/$2,500 and out of pocket max of $3,600/$6,550 for their tier 1/tier 2 providers, respectively (whatever that means).
> Both combined are still less than I would pay in any marketplace.
That might be as cheap as you can get for your out-of-pocket costs in any US healthcare marketplace, but that's one of, if not the most expensive in the world.
Factoring in the externalities is impossible, so it's an unfair comparison, but going to a doctor in Sweden costs ~$10, specialists are $30, and ER visits are $50, and after you've paid ~$120 in a year, all other visits (eg major surgery) are covered. On top of that, overnight hospital stays are capped at $10/night.
It's great that there's a bit of a loophole in the system for people that can afford to have a $12.5k deductable, but it's not for everybody.
This is not particularly novel. There are already integrated HMOs, like Kaiser Permanente and Group Health Cooperative, that function in a similar way. Kaiser is a little more complicated (there is a "Kaiser Foundation Health Plan" that acts as insurer, while physicians work for the "Permanente Medical Group") but they have integrated systems so physicians are not spending time dealing with claims--and besides, the physicians do all their work for this one health plan, so there's no web of insurance companies.
> This is not particularly novel. There are already integrated HMOs, like Kaiser Permanente and Group Health Cooperative, that function in a similar way
Integrated practice is distinct from HMOs, though they might appear to be similar. Kaiser us an integrated practice and also provides and manages an HMO, but not all Kaiser patients belong to the HMO
> they have integrated systems so physicians are not spending time dealing with claims--and besides, the physicians do all their work for this one health plan, so there's no web of insurance companies.
Not exactly. Kaiser physicians still have to do all the work of coding and billing, except for them, the billing is all reconciled by a single entity and managed internally.
That's different from direct care, in which the billing step literally does not happen, because the patient self-pays, usual in-person.
Kaiser does have a PPO plan, but it must not be very common because the one Kaiser doctor I mentioned this to was very surprised and had never heard of Kaiser offering a non-HMO plan before.
Except that if you have a HDHP, your costs towards routine care also go towards your deductible, so if you have emergency care that year, you only get hit with your max out-of-pocket for the year. Instead of paying your max for the year AND whatever your paid directly to your direct pay provider.
So these types of services are a gamble - you come out ahead if you have no emergencies. And come out behind if you do. For a family with kids, I'll pass. If you are young and healthy and do not have kids, and do not do a lot of outdoor activities that risk injuries, this might make more sense.
Yes, but direct pay to another doctor doesn't apply towards your out of pocket max - so if you are doing a direct play place, you end up paying your max for your emergency care PLUS anything you paid directly to another provider.
That is a fair point - any major hospitalization and you're over your deductible anyways. But the insurance statistic is that about 87% of people with a 3k deductible will reach that in a given year and <95% of people with a 5k deductible will reach that in a given year.
Which means, families are paying more than $1000/mo or 12k/year for a risk thats rarely over 5k. Which means they can decrease their insurance coverage, save $500/mo on their premiums, and save more money each year than their increased deductibles would be.
Plus, our direct care models saves them on the majority of care most people need in a year.
i've been a direct care doc since 9/2010 and happy to answer any questions. to (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
i've been a direct care doc since 9/2010 and happy to answer any questions.
To answer your questions: yes, we have ins companies that will accept our fees toward your deductible automatically.
As an example, 80% of visits to the ER are for non emergency conditions, yet charge often >$1000. Most of those same things, i can do in the office for little or no additional fee. Stitches are free. labs are $2-3/test.
To (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
My understanding is that one of the biggest issues that we can actually improve is inflated billing. It seems that something like direct primary care could help with that issue.
But maybe we could just create a law that resets things so that they cannot simply inflate the bill and then certain groups pay only a small percentage of the amount? Because it makes it so we can't tell what the real costs are at all, and then people who don't have insurance or the right insurance are screwed by these giant basically fraudulent bills.
That is the really stupid part about it.
Then another idea is, I think that some health care costs just really are quite high. This is because of scarcity of high-tech medical machines or doctors or specialists. Maybe the solution to that is to push for greater volume of high tech medical machinery or medicines and a greater volume of medical professionals.
Maybe by supplementing with advanced AI we can relax requirements for certain types of more general physicians or nurses rather than researchers, etc. Maybe just finding ways to reduce medical education could help.
Then one other idea is the realization that more and more mainstream researchers are having that A) the majority of medical problems have some significant component that is related to aging, or where aging increases risk, etc. and B) we are now in fact able to start investigating and have hope for treating the actual causes of the various system degradations referred to as aging.
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[ 4.5 ms ] story [ 134 ms ] threadNothing against DPC, I'm just unclear how this works in with the individual mandate.
Maybe the DPC cost savings is in the non-preventative minor occurrences which are almost routine. Like a kid's broken bone for example, things you don't expect to happen but aren't exactly a surprise either, and not catastrophic.
HDHP satisfies the penalty. DPC helps save costs on routine care.
I imagine any chronic condition would almost certainly rule this out as presented.
Ten years back we may be looking at high deductable plans as a disaster -- if you have the money to fill an HSA they are great, but for most people in the U.S. an HDCP means that diabetics will not take metformin or insulin but instead they will get their feet amputated at much greater cost.
One clear example is asthma. Steroid inhalers can often enable an asthma patient to breathe freely and avoid hospital admissions for about $200 a month. That looks like a crazy high price, but a hospital admission is going to cost $8000 or more. In the fee-for-service model the hospital profits from amputations, asthma exacerbations, etc. In a flat fee model they make a profit from practing good medicine.
If you could buy catastrophic insurance with a plan like this then That would be awesome.
How would such a model handle predictable-but-expensive medical needs, like hip replacements for the elderly and monthly prescriptions for HIV and cancer patients?
The other two are probably going to be fixed through direct market forces. If the people of America can only pay $X, then the makers of the drugs can only charge $X + small premium to have a market. Since they would face a similar price pinch abroad, they'd have to adjust their prices.
We've seen the inverse of the price pinch with the epi-pen scandal. The makers knew the price could go up since insurance would absorb the cost.
On one hand, it seems like a great idea for those whose employers don't provide subsidized insurance coverage. If it's truly affordable, it should allow more people to get routine care. Especially for women, who generally need more routine doctor visits than men. OTOH the things that bankrupt people are hospitalizations and real insurance plans are generally there to help mitigate that.
Source: I just spent months trying to figure out how to buy truly catastrophic insurance and avoid the aca penalty with no luck.
From http://www.dpcare.org/specialties:
"H.R. 3590 recognizes DPC and allows DPC Medical Homes to offer coverage in health insurance exchanges in combination with a wraparound insurance policy provided by a qualified health plan (QHP). Working together, the two must satisfy all other essential health benefits requirements under H.R.3590. DPC practices provide all primary care in a monthly fee arrangement. The QHP is used for hospitalization, specialty care and other more costly services. The first DPC offering paired with a QHP in the healthcare marketplace went live in the Washington state exchange in January 2015. There are no DPC practices operating in the federally facilitated exchanges yet."
One of the biggest advantages of these healthcare shares is that they're ACA exempt. Meaning, no fine. But there are other requirements to be accepted. Especially with the religious healthcare ministry ones. But they are very affordable.
For example, I know people who use http://www.chministries.org with a local (AZ in this case) DHC such as https://www.arkfamilyhealth.com
Other issues I didn't like is that they're not eligible for an hsa? And what's the Guarantee you get the Aca exception?
This is strongly linked to several forms of harm. Over-testing, over-diagnosing, and over-treatment are dangerous. (And, in some places, expensive.)
http://www.cancerresearchuk.org/about-us/cancer-news/press-r...
It allows them to see the same patient for thirty minutes or an hour a few times a year and actually remember who they are instead of having some insanely low amount of time per patient per year, like seven or ten minutes. It has a track record in this country of stopping the insanity and improving care.
http://medicaleconomics.modernmedicine.com/medical-economics...
http://aapp.org/2016/01/08/why-you-should-transition-to-dire...
http://www.dpceugene.com/single-post/2016/07/06/Why-choose-t...
Now the family doctor, whom retired in 2000, was time well spent. He palpated for tumors. He looked at our retinas. He listened to our hearts. He found a slight mitral valve prolapse in my mom, and myself.(Something every doctor I have seen since has completely missed, or didn't care enough to listen for?). And yes, some times the rubber glove was brought out.
Since I have good insurance now, my doctors spend time with me, but I have found talking kinda useless, unless I'm in for a specific symptom. Too many they don't seem to really listen.
They love to run up the bill with a depression screening. They mention fish oil. Blah--blah--blah.
I sometimes think a person without good insurance might be better off. They are left alone. They aren't put on dubious anti-depressants. They arn't over treated. They won't get a testosterone patch. They won't get any edgy new treatment--that might be found to be dangerious. I will admit; I'm no fan of modern doctors, unless it's for emergency medicine. Maybe that's affecting my judgement? I don't have the respect for doctors I once had. I haven't been to a doctor recently whom I didn't walk out of thinking---He's/She's just in it for the money? I have a psychiatrist that put me on a addictive drug years ago, and has literally held me hostage with the mandatory office visits, and they are solely for money. I look back at 99% of my doctor office visits, and I can't think on any ailment they caught by spending talking time. "So give me the comprehensive blood test, and order a MRI if I"m complaining of upper right quadrant pain--please doc, and refill any addictive prescriptions for a year. I really don't want to talk to you, unless that office visit includes blood work, or something other than just yacking, and running up a bill!"
I'm now fifty. If you get through your twenties-thirties without a mental malady; you succeeded. Life in America is hard on the psyche, and that can cause so many health problems--high blood pressure from self medicating? Weird pains? Most of it will be psychosomatic. In terms of health, I can offer what helped me: cut back on the alcohol, exercise a little, eat less. Get that pneumonia vaccine if you're constantly getting chest infections. It's one of the better vaccines.
Maybe it's illegal for a hospital system to offer insurance in NY? I don't know. You'd think they'd be happy to cut out all the fuss around handling insurance approvals/rejections and pocket the 20% middleman cut.
More broadly, many hospitals and hospital are getting involved in the ACO (accountable care org), which gets at some of these goals, but it's not 100% clear that an ACO model can be successful (financially or for patients), and it doesn't cut out all the relevant middle-men.
Definitely not. A lot of hospitals are part of networks which are doing exactly this.
And many of the ones that aren't are entering long-term capitated agreements with insurers, which basically means they're acting as if they were insurers but without technically being one.
Capitation is still very much alive, and in fact more common than ever. It's just structured now so that it's hidden from the patient.
You may already be receiving care under capitated agreements yourself and simply not know it.
Is it actually lower cost? The cash fee for a PCP visit and what insurance actually pays are drastically different. If you're paying a membership fee just to get the same sort of rates insurance pays out at, there's no win here.
> A little known provision of the ACA makes Direct Primary Care a kind of legal loophole. When combined with a high deductible health plan or health savings account, Direct Primary Care can meet the requirements for basic coverage, thus getting you out of the tax penalty for not being properly covered.
That's not a loophole. That's "pay extra". You'd still need at least a Bronze plan, and any visits that bill against your DPC won't count towards your annual deductible or out-of-pocket caps.
You don't want to get the same rates that insurers pay - those are actually the inflated rates.
Billing is complicated. In short, part of the problem is that doctors who take public insurance (Medicare/Medicaid) actually take a loss on those patients, because Medicare reimburses about 7% less than the direct costs of services, in the aggregate. It's one of the reasons you see very few private practices which cater solely, or even primarily, to Medicare patients.
The way providers make this work, since they can't negotiate rates with Medicare, is to charge higher rates for private insurers. This ends up as an effective subsidy from private insurers to Medicare.
A doctor who doesn't accept any insurance whatsoever doesn't have to manage this indirect subsidy, so the amount they charge a self-paying patient could be a lot less than what another doctor would bill a private insurer for.
Surely there is a reliable source that can confirm one way or another how this works in practice? I get that it is probably arcane and difficult to understand, but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
Oh no, definitely not. Granted, the number I cited is for the aggregate, so it's not going to be exactly true for all practices. Things might look different if you're talking about a public clinic that specializes in low-end care for the poor, but by and large, it's definitely the other way around. Medicare is actually quite notorious among physicians for taking ages to remit payments even for bills that they have approved.
That said, the dynamic usually goes like this:
1. Patient sees doctor for routine procedure 2. Doctor submits bill for $8,000 to private insurer 3. Private insurer says "no, that's way too much, and also you didn't document this part sufficiently" 4. Doctor resubmits bill with more supporting evidence for that part, but a lower total amount 5. Repeat steps 3-4 an arbitrary number of times 6. Insurer says, "okay, to save work next time we'll agree to pay you 400% of what Medicare does for all of these procedures for the next year".
So in that sense, private insurers negotiate their rates, so it seems like they're "getting out" of paying, but in reality they're still paying multiples of what Medicare is.
One confusing quirk: most Medicare patients[0] actually have their insurance plans managed by private insurers, so billing and reimbursements for those would be handled by the private insurers.
> Surely there is a reliable source that can confirm one way or another how this works in practice? I get that it is probably arcane and difficult to understand, but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
The numbers are available in Medicare's annual reports. That's not very user-friendly - last I checked, they were still available in full only on paper(!), and you have to understand financial accounting a little bit in order to parse the numbers yourself. (It's not like they want to make it easy for people to find out how they're under-reimbursing).
Though in terms of secondary sources, if you look at documents written by and for other hospital and insurance adminstrators, you'll find a lot of references to this practice. They don't really talk about it more broadly for political reasons, and also because it's something that's really difficult to explain to the public, and because I'm not convinced the public actually cares.
> but in a country as vast as the US there is probably someone who understands it well enough to summarize for a layman.
There probably is, but getting to my last point - I'm not sure people actually care enough. To be honest, I used to talk about it a lot more on HN (if you search my username + various combinations of "Medicare" or "health insurance", you might find other posts where I've gone into more detail and linked to other materials). But even on HN - let alone with the broader public - I get the sense that most people don't want to understand the complexities of billing and reimbursements and the interchange dynamics between insurers. It makes for a much more complicated narrative than most people are looking for, and so it's easy to gloss over in favor of a simpler one, especially one that fits more neatly into a partisan narrative.
[0] Not most people with Medicare (yet), but most Medicare patients (people with Medicare advantage are a minority, but they account for a disproportionate amount of people who actually use their plans - largely because Medicare is damn-near impossible to use as a patient if you're not on a private network. Ask me how I know that one.)
I have lots of Medicare horror stories, from both personal and professional experience.
I founded a health-tech company aimed at ensuring that people who were discharged from the ER received proper outpatient followup care. This is a big problem - most people who leave the ER receive their next medical care from another physician in the ER (ie, a subsequent visit).
There are a lot of reasons that patients don't have followup care, but a big one is the amount of coordination and effort required. A lot of that we could automate or do efficiently, because we were handling the process for many patients at once. But dealing with Original Medicare[0] was particularly awful. Original Medicare's coverage is actually quite terrible (from the patient's perspective) and, to make matters worse, lots of providers don't accept Original Medicare[1], because it's a lot of hassle and may not even pay for itself. We had by far the hardest time with Original Medicare patients compared to Medicare Advantage patients. Even Medicaid was arguably better, for reasons which aren't relevant here.
From a personal standpoint, I've seen how frustrating it is to arrange for proper care for family members on Medicare, and that's with the knowledge we have about how the whole system works together. For ongoing care, such as physical therapy or dialysis[2], Medicare will often cover a small amount, but not enough to really make an impact. Say, you need three sessions a week, but Medicare only covers one. However, because providers can't bill a patient directly for services that Medicare does cover (even if Medicare won't cover that service, because the patient has hit their cap, or whatever reason), that means you... can't receive it from that same provider. So you have to find a different provider for the remainder, which means you now have two different providers and all the problems that means. That is, of course, assuming you manage to find one who will let you self-pay, and you have to cover it out of pocket.
To be fair, that last point applies both to Original Medicare and Medicare Advantage; Original Medicare just happens to be worse about it.
[0] Original Medicare is the term used for Medicare plans that aren't offered through private insurers
[1] e.g. http://www.oregonlive.com/finance/index.ssf/2015/10/medicare...
[2] Dialysis is actually particularly heinous for another reason - due to a legal loophole, Medicare basically forces private insurers to pay for nearly all dialysis, albeit indirectly.
"critical access hospital" is a good search term. Basically every small town hospital that has an ER.
Another term is "rural health clinic"
https://www.ruralhealthinfo.org/topics/critical-access-hospi...
And no one else pays anywhere near 100% of 'reasonable costs' (they pay more, or in the case of Medicaid, less). So I wouldn't call it the normal rate.
Note, many of these hospitals are nonprofit, and benefit from donations and grants too- so it isn't entirely clear that they need to earn a profit or even break-even on "patient care" alone.
With all that being said, the Forbes article seems to be promoting the idea of making patients pay higher co-pays in order to prevent them from actually using their Medicare benefits, and reducing the demand for health care overall.
It seems to me like a much better strategy would be to increase the supply of care (More training facilities to increase #'s of doctors, better, more streamlined regulations to reduce the operating costs, etc).... but it doesn't seem like the politicians are interested in fixing the real problems in healthcare. We shall see what the new Congress/President brings to the take, but I don't hold much hope
The reason most facilities take Medicare is that Medicare typically covers the marginal cost (and then some) of whatever services the patient is using. You can't sell yesterday's hospital bed, so better take the pittance from Medicare than get nothing for it.
Actually, Medicare doesn't cover the marginal cost. In the aggregate, they reimburse 7% less than that.
Many facilities take Medicare because they are literally obligated to. Right now, many providers (hospital networks, but some practice groups) are actually trying to figure out ways to restructure their businesses so they can legally drop Medicare, but it's difficult.
Could you please point us to the source of this information?
It was my understanding, from a news article I read a few years ago, that Medicare evaluates each medical procedure and comes out with a fair price that guarantees fair profit for the provider.
I think it might be that providers cannot charge insane profits to Medicare so they rather avoid dealing with them.
Because it's well known in healthcare economics (or at least finance/administration) I thought the ~7% aggregate number would be widely published and that I'd be able to quickly find a link for you. For reasons I don't understand - it is not - but here is a link that has a chart/graph from Davita that talks about the phenomenon (in micro, not macro):
i've been a direct care doc since 9/2010 and happy to answer any questions. to (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
One thing that people often overlook when talking about health insurance is that, economically, "health insurance" is really the combination of two completely separate products, only one of which is actually insurance.
Insurance is about pooling risk. It smooths risk across states of the world (e.g. the universe in which your house burned down, and the universe in which it didn't but your neighbor's house did instead). It reduces the variance between those states, and in exchange, it charges a premium for making the outcome more predictable. It is not there to save you money. The expected value of all insurance is negative, and that's intentional.
By a true insurance model, routine care and elective surgery would be priced the same with insurance as it would without, because there is no risk involved. The reason it isn't it because we want to subsidize these, to enable people to obtain care they otherwise wouldn't be able to afford. We use "insurance" as a vehicle for this, but really, that's not insurance at all. It's a redistribution.
So it's perfectly understandable that a primary physician who is dealing with routine care and doesn't accept insurance would be able to charge patients less (and still walk away with more money) than one who uses insurance.
The reason you don't see this everywhere, though, is that policies are making it harder and harder for physicians to run private practices entirely (whether they accept insurance or not). The majority of physicians are now employed, largely by hospital networks which are required to accept insurance (in some cases legally, and in others by virtue of the fact that they need to cover their Medicare losses[0]).
So, the place you are most likely to see the direct care model are with physicians who are catered to the incredibly wealthy. That's not to say that a direct care model couldn't work for people who aren't, but the way our system is set up doesn't facilitate it.
[0] https://news.ycombinator.com/item?id=13356442
Only if you ignore non-monetary costs and benefits. Risk reduction/mitigation is a benefit and has a value. If it had no value, people would not bother buying insurance. When that benefit is taken into account, the net expected value of insurance is positive for both parties: the insurer makes money (assuming it has done its actuarial statistics properly) and the insured buys risk reduction/mitigation at a cost that is less than its value.
Your point about "health insurance" combining two separate products, only one of which is actually insurance, is valid, though, and very important.
For the first part you're assigning a value to a thing beyond it's market cost and saying everyone is in fact a winner, and that's a little strange. Risk pooling via a private insurance company is negative sum because someone makes a profit beyond their costs. That should not then be taken to mean it's a bad deal (it isn't).
Of course. If that weren't true, people would not buy insurance.
> Risk pooling via a private insurance company is negative sum
If you only consider monetary costs and benefits, yes. But this ignores the (non-monetary) value to the insured of not being exposed to the risk (because that risk exposure has been transferred to the insurer).
> That should not then be taken to mean it's a bad deal (it isn't).
I agree that it's not a bad deal; I'm just saying that the reason it's not a bad deal is that people consider more than just monetary costs and benefits.
> It is not there to save you money. The expected value of all insurance is negative, and that's intentional.
You might well be right. But I wasn't trying to tell him what he meant; I was pointing out that viewing "expected value" solely in terms of monetary value does not explain why people buy insurance in the first place. To explain that, you have to take into account non-monetary costs and benefits.
The same is true for any economic transaction that involves anything other than pure financial instruments. For example, I go to the grocery store and buy various items for money. If I only consider monetary value, the "expected value" of this transaction is negative. Does this seem like a useful way to explain the economics of grocery stores?
Contrast this, for example, with trading stocks. Here there is no non-monetary value involved; people don't eat stocks, or get any other non-monetary benefits from them. So when analyzing the stock market, it is appropriate to use "expected value" to mean monetary value.
When I go to the grocery store, the expected value is exactly zero. In every possible outcome, I expect to exchange some amount of money for a basket of goods with an equal value.
That's the general meaning I'm using, but in this case the range of possible outcomes is pretty narrow--basically I buy food and eat it. The small probability of some of it being bad, and me either having to throw it away or getting sick from it, isn't significant for what we're discussing here.
> When I go to the grocery store, the expected value is exactly zero. In every possible outcome, I expect to exchange some amount of money for a basket of goods with an equal value.
Then either your grocery store is overpriced or you are being really pessimistic about the value you get from your food. Also you have a pessimistic view of economics.
My expected value from grocery shopping is positive: I expect to get more value out of the groceries than the money I spend on them: I can't eat money. The expected value to the grocery store owner is also positive: they weren't going to eat all those groceries anyway, so the money is more useful to them than the groceries were. In other words, the transaction as a whole is positive sum. This is how wealth is created: people make positive sum exchanges that redistribute things to increase overall value.
Of course, this whole viewpoint I'm expounding requires a concept of value that is uncoupled from monetary value. You don't appear to have that concept: you appear to believe that the "value" of anything is equal to the money you can exchange for it. That is not a fruitful way to view value if you want to understand how wealth is created. Notice that the "value" of both the groceries and the money had to be different for me and the grocery store owner for the exchange to take place; that is how all positive sum exchanges work and how wealth creation happens. If everything had the same value to everybody, which is what is implied by equating "value" with monetary value, the economy would be completely stagnant and no wealth would ever get created.
"If everything had the same value to everybody, which is what is implied by equating "value" with monetary value, the economy would be completely stagnant and no wealth would ever get created."
That's untrue. Even if everyone had the same utility function with respect to every single possible good and service, (i) wealth would still be created (e.g. by a woodworker transforming a piece of wood into a piece of furniture) and (ii) trade would still take place (because, even in the absence of differing utility functions, there are still productivity gains to be had from specialisation).
Anyway, we've veered way off topic. The comment to which you replied "The expected value of all insurance is negative, and that's intentional" was entirely correct, as long as you don't want to use a definition of 'expected value' that nobody uses.
The same good or service having different value to the two parties to a transaction doesn't require them to have different utility functions. It just requires the utility functions to depend on variables that differ between the parties. For example, the utility of a given item of food depends on how much of it you already have (the grocery store has a lot more of it than me, so it's worth less to them).
> we've veered way off topic
I'm not so sure. Health care seems like an area where it should be obvious to everybody that non-monetary costs and benefits are a huge factor that must be taken into account.
As mentioned below, expected value here refers to the flow of funds. Yes, it is different from the utility of the (guaranteed) value, which is also different from (and greater than) the expected utility of the risky action.
The monetary difference between what I'm referring to and what you're referring to, incidentally, is what economists call the premium. (The naming of "insurance premiums" is not a coincidence.)
Arrow wrote the seminal paper on understanding insurance, for anyone who's interested in how this is calculated.
Not sure if it is a reasonable model yet, since these firms are incentivized to minimize patient contact. In the positive view, it means they want to focus on preventative care. In the negative view, they will get suffocated with hypocondriacs and have to institute limits to care that invalidates the allure of an unlimited insurance-free provider. Plus, these places effectively have to underwrite like insurers to remain profitable which is not easy when competing woth sophisticated giants. Not to mention the risk pf dealing with a very unstable ACA that will likely change the landscape.
In our region there are already hospital systems that are owned as subsidiaries by corporations that also own insurance companies. These corporations are gobbling up smaller hospitals as those merge and then subsequently get purchased by regional systems.
The monopoly in the provision is problematic enough, but it reaches new levels of problems when they are also merging with insurance companies.
So for some people, even if they aren't getting direct care technically, they are, because their choices are limited geographically for all intents and purposes to one provider, and their insurance is coming from the same provider.
The challenge these direct care models faced, as alluded to by other posters, is in competing with conglomerates that offer a complete spectrum of care. You either cater to people who can afford it, or have to lower costs enough to make it reasonable for people who might not otherwise. The first option limits your customer base; the second is not really currently feasible given government regulation and how it inhibits competition in delivery models.
I worry about the future of health care in the US, only because I don't see the GOP implementing anything other than the not-too distant status quo, which was broken. I sympathize with their stated ideal of reducing costs and increasing competition, but it seems like doublepeak for reducing costs and decreasing competition for established financial interests and increasing competition for everyone else. The net effect will just be squeezing more and more money out of the common individual.
I've had two different DPC, one about $45/mo, now with one about $30/mo.
Both combined are still less than I would pay in any marketplace.
It's nice to be able to just see your doctor without worrying what it might cost. A large list of simple procedures are covered, and tests cost next to nothing. It's a health subscription to an actual doctor who can be just as cost-conscious as you are while still incredibly knowledgable and invested in your health.
Double digit premiums sound ridiculous, even for a male in their 20s. As a data point, I'm a <30 male, never been to a doctor with no health issues that I can tell, and my HDHP premium is $310ish, last year it was $275ish, but that's using healthcare.gov so completely unsubsidized, and I have a deductible of $1,500/$2,500 and out of pocket max of $3,600/$6,550 for their tier 1/tier 2 providers, respectively (whatever that means).
Since it was grandfathered in it doesn't have to offer all the benefits of the ACA.
I'm not sure if a grandfathered plan can have a maximum payout, but if it does that would explain the low cost.
Years ago I had a plan like this, it was cheap because they'd only pay a maximum 100k per year.
That might be as cheap as you can get for your out-of-pocket costs in any US healthcare marketplace, but that's one of, if not the most expensive in the world.
Factoring in the externalities is impossible, so it's an unfair comparison, but going to a doctor in Sweden costs ~$10, specialists are $30, and ER visits are $50, and after you've paid ~$120 in a year, all other visits (eg major surgery) are covered. On top of that, overnight hospital stays are capped at $10/night.
It's great that there's a bit of a loophole in the system for people that can afford to have a $12.5k deductable, but it's not for everybody.
Integrated practice is distinct from HMOs, though they might appear to be similar. Kaiser us an integrated practice and also provides and manages an HMO, but not all Kaiser patients belong to the HMO
> they have integrated systems so physicians are not spending time dealing with claims--and besides, the physicians do all their work for this one health plan, so there's no web of insurance companies.
Not exactly. Kaiser physicians still have to do all the work of coding and billing, except for them, the billing is all reconciled by a single entity and managed internally.
That's different from direct care, in which the billing step literally does not happen, because the patient self-pays, usual in-person.
So these types of services are a gamble - you come out ahead if you have no emergencies. And come out behind if you do. For a family with kids, I'll pass. If you are young and healthy and do not have kids, and do not do a lot of outdoor activities that risk injuries, this might make more sense.
Which means, families are paying more than $1000/mo or 12k/year for a risk thats rarely over 5k. Which means they can decrease their insurance coverage, save $500/mo on their premiums, and save more money each year than their increased deductibles would be.
Plus, our direct care models saves them on the majority of care most people need in a year.
i've been a direct care doc since 9/2010 and happy to answer any questions. to (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
To answer your questions: yes, we have ins companies that will accept our fees toward your deductible automatically.
As an example, 80% of visits to the ER are for non emergency conditions, yet charge often >$1000. Most of those same things, i can do in the office for little or no additional fee. Stitches are free. labs are $2-3/test.
To (quickly) define the model: $10-100/patient/month for unlimited home/work/office/technology visits, no copays, any procedure we can do in the office is included free, and wholesale savings on medicines, labs, imaging, pathology of up to 95% (yes!)
We can then take all of this value and go back to an employer and help decrease insurance costs by 30-60%.
But maybe we could just create a law that resets things so that they cannot simply inflate the bill and then certain groups pay only a small percentage of the amount? Because it makes it so we can't tell what the real costs are at all, and then people who don't have insurance or the right insurance are screwed by these giant basically fraudulent bills.
That is the really stupid part about it.
Then another idea is, I think that some health care costs just really are quite high. This is because of scarcity of high-tech medical machines or doctors or specialists. Maybe the solution to that is to push for greater volume of high tech medical machinery or medicines and a greater volume of medical professionals.
Maybe by supplementing with advanced AI we can relax requirements for certain types of more general physicians or nurses rather than researchers, etc. Maybe just finding ways to reduce medical education could help.
Then one other idea is the realization that more and more mainstream researchers are having that A) the majority of medical problems have some significant component that is related to aging, or where aging increases risk, etc. and B) we are now in fact able to start investigating and have hope for treating the actual causes of the various system degradations referred to as aging.