More Bad News for the Middle Class and Their Health Care

Keith R. Jackson:

The biggest “unforeseen” issue arising with the poorly named Affordable Care Act is its effect on affordability of care. The typical middle-class family, in order to afford the broader coverage necessitated by ObamaCare, is having to choose a higher and higher deductible insurance plan. This is having a huge impact on a patient’s decision even to go to the doctor, much less survive the increased cost if he does find himself needing care.

In the not so distant past, the doctor or hospital would provide a service for the patient and submit a bill to the insurance company, and the insurer would pay the bill. The patient was usually responsible for a small, affordable deductible. If the patient was uninsured, the doctor or hospital would try to arrange some sort of payment plan, although state and federal programs did cover some needy patients. Many patients’ bills were simply written off as charity, as the cost of pursuing the payment was high, and the health care providers were getting well-paid from the insured.

Beginning in the early ’90s, HMOs got a foothold in the health care market. Baby Boomers and their health care needs were impacting the profits of insurers. They needed a means to hold down costs. Besides, the threat of a government takeover of health care delivery – namely, the embryonic Hillarycare – was something of a bargaining chip with which to threaten doctors and hospitals. As HMOs proliferated, the transparency of billing for services became more and more opaque.

As HMOs got a larger share of the insured population, they could negotiate lower rates of payment. Often, these rates would be tied to what the government was willing to pay for a certain service with Medicare. For instance, if your bill for a tonsillectomy was $825, and Medicare would pay only a percentage of that bill, they would leverage something close to the lower percentage. Nowadays, the typical HMO in some of the larger cities pays around 18% of a typical surgical charge.

As you might imagine, the plummeting percentage of reimbursement was followed closely by a steady increase in the charges. This has led to the current situation, in which the bills sent by health care providers and the payments sent from the insurers look like misprints. What is a patient to think when the doctor’s charge for sinus surgery is $25,000, but he is paid $1,300? Does either the bill or the payment seem sane from a market standpoint? Then again, this is not a market, is it?

Well, look at what is happening now, with ObamaCare having entered the picture. A typical plan for a middle-class family will have a $3,500 to $10,000 deductible. But the crazy bills haven’t changed. The jacked up rates, which were reactions to the whole “look at what we did – you have to pay only 20% of the bill” bloviating of the insurance companies, are still there. But now the patient has to come up with the whole deductible. The insanity of the chasm between what is billed and what is actually collected is now complicated by the patient getting thrown under the bus as an “unforeseen” side-effect of the ACA. A hospital or physician charge that may have been reasonable prior to all of these HMO negotiations is now frighteningly imposing, and the patient must come up with his deductible.

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