Collusion? At the very least, it’s a broken system.
By Michael Gorback, M.D.:
I had a patient who I thought would benefit from viscosupplementation, the injection of hyaluronic acid (a naturally-occurring component of joint fluid) into the knee for arthritis pain. I sought pre-authorization from his insurer for a single injection of Synvisc One. And that’s when things became … interesting.
His employer had a self-insured plan run by a third-party administrator (TPA). As I reported in a previous article, the TPA is usually a health insurance company, and the “self-insured” plan often buys reinsurance from the health insurer acting as TPA. That’s how they get around state regulation. If they just bought insurance outright, it would be state regulated. If it’s “self-insured,” it falls under ERISA, and they can ignore state insurance laws.
A TPA makes money in two ways: administrative fees and a “PPO Repricing Fee.” The PPO repricing fee is similar to paying me to find you a car with a commission based on the price reduction I can get you. If you hire me to find you a specific car and I get a percentage of the difference between asking price and final price, I have an incentive to connect you with the guy who is asking $65,000 but will accept $55,000 rather than the guy who is asking $55,000 but will accept $50,000.
If I as a physician call a TPA and offer to do a procedure in my office for 1/3 of what it costs in a hospital setting, they aren’t interested. If they haggle me down to $300 from my usual $600 fee, all they can show their customer is a $300 savings. If the patient goes to a hospital, the TPA can reprice the cost from the ridiculous hospital chargemaster fee of $5,000 for the same procedure down to $1,000, “save” their customer a fictional $4,000, and bank a nice repricing fee – perhaps 20% of the $4,000 in “savings.”
Therefore, the financial interests of TPAs and their customers aren’t necessarily aligned, and collusion between certain parties can actually raise prices paid. And what if the TPA gets a cut of the seller’s price? What’s the TPA’s incentive?
To find you the highest price.
When I sought pre-authorization from my patient’s insurer for a single injection of Synvisc One, his insurance company, as represented by the TPA, would only approve it if we used their approved pharmacy to get the Synvisc. I don’t think this common denominator is coincidental, nor am I convinced that the self-insured company knows that this is going on.
The pharmacy wanted $1,200 for the Synvisc. The patient had a few thousand dollars left on his deductible so he would pay the entire cost. We told him we would provide the Synvisc for $590. This is the ASP, or average sales price, for Synvisc One according to Medicare. Yeah, I was only charging Medicare rates.
The patient would save $610. That’s good, right?
But if he had done that without insurance approval, he would have forfeited having the cost applied to his deductible. His choices were to pay $590 and not have it count toward his deductible, or pay $1,200 and have it count toward the deductible. How many patients know how to goal-seek this in a spreadsheet?
The designated pharmacy did not offer to meet our price even though as a large corporate supplier they probably get Synvisc at a much lower price than I can negotiate. We finally got through to someone at the TPA who approved the lower price we were asking.
If the TPA, which is supposed to act on behalf of the employer and employee, insists on a specific vendor that costs over twice as much, one must question the relationship between the TPA and the vendor.
Is it collusion?
In my experience with insurance companies and their pharmacy fellow travelers, that’s the smart way to bet. At the very least, this is a broken system that doesn’t serve the customer well at all. By Michael Gorback, M.D., board-certified in Anesthesiology and Pain Medicine. He practices pain management at the Center for Pain Relief in Houston, TX.
Outraged by the prices, often unknown upfront, that you and your insurer pay for medical services? Enter the bizarre world of “Place of Service” pricing. Read Dr. Gorback’s … The Sheer Insanity of What You Pay For Medical Services
Enjoy reading WOLF STREET and want to support it? You can donate. I appreciate it immensely. Click on the beer and iced-tea mug to find out how:
Would you like to be notified via email when WOLF STREET publishes a new article? Sign up here.
The entire medical complex is under tremendous cost pressures. For the most part, the “system” has an unsustainable cost structure. Period. It will be “down and dirty” for many years for this monster to be slayed. Unfortunately, unwary users will be the primary target to maintain the status quo. I’ve encountered already, two very unethical referral practices within my longstanding medical group. Their overall business is down and they are doing these questionable things to try and keep things going.
It is troubling, frustrating and sad to see what has happened.
Mish recently commented that “(o)ne of the most under-reported medical success stories in recent years has been the increase in medical tourism: traveling abroad to get high-quality care at a fraction of what it would cost in the United States”.
The examples he gives are “(t)he same Lasik eye surgery that might cost $4,400 here (for both eyes) is available in India, for example, for $500, according to the Medical Tourism Association. A heart-valve replacement that might cost $170,000 in the United States could cost less than $30,000 in Israel.”
He suggests that this kind of saving should be embraced by the government for Medicare recipients by incentivizing them to seek the best care for the best price . . . and allowing them to share in the savings by adding a portion of the savings to their monthly Social Security deposits.”
The $140,000 difference between a single patient’s bills for a heart valve operation done in Israel for $30,000 and $170,000 for the same operation in the US provides a lot of incentive opportunity for both Medicare and the patient.
Cheaper operations like Lasik surgery would require some creative thought to encourage patients to join groups of travelers.
The medical industrial complex has overpriced its services to such an extreme extent that it is very vulnerable to foreign competition and is only saved from that competition by the existing protectionist rules and laws. Its expenses for lobbying will only rise and will progressively provide less protection as all poliicians risk retribution from an increasingly enraged public and are forced to reduce the protections.
I’m a huge fan of Mish but he is very ignorant about the healthcare system, as I’ve told him in private emails.
Medical tourism works to a large extent for the same reason iPhones are made in China: everything is cheaper. For example, nurses and pharmacists in India make less than $10,000/yr.
You can do medical tourism for one-time things like a heart valve or a hip replacement but you are not going to fly to Thailand M-W-F for dialysis. In that sense medical tourism isn’t a solution so much as cherry-picking high margin business.
So if you want medical care to cost as little in the US as it does in India you need a colossal deflation in 1/6 of the US economy.
I just used Yelp to warn customers of a dental practice refusing patients standard fillings to force them into crowns not covered by insurance. The practice, like many, has a 3D printer-type machine to create a crown in a few hours. What is so shocking is that I informed the practice that there will be no crown purchases prior to the visit. In the end, I sent my wife to a off-network holistic dentist (removed my mercury fillings a decade ago) with a total charge much, much less then in-network dentists’ forced practices. (btw, this holistic dentist does not like fluoride, root canals, or crowns.)
My employer changed prescription plans that disallowed one of my meds. They said they’d only pay for the injections not the topical. When they told me the cash price for a 30 day supply I had a cow. The price-$550 a month-is more than my car payment! Fortunately I had a final 3 month scrip on the old insurance and was able to ration it to last the first year. Fortunately for me they came out with a generic that $358 for 30 day supply and I can get by for about $1100 a year instead of $1650. Since I’m on the road most of the year the injections just aren’t practical, plus the added cost of taking on a specialist, as my G.P. wouldn’t prescribe the injections. And this disaster has only just begun to screw up the system.
We need a single payer system and we have needed it for a long time. Those of you who say it will ration care, I have news for you, care is already rationed because I have insurance and still can’t afford to go to the doctor.
Obamacare does have a alternative is called ” Self-Pay Healthcare”! It simply unites like-minded Americans to share medical costs together. In this way families all over America share their medical expenses each month. There’s power in group sharing!
By putting you, the self-pay patient, in charge of your care, unnecessary costs and procedures are eliminated. After all, it’s your money! You review the treatment you receive, and you approve the costs. Plus, we have a team of professionals that will advocate for you throughout your medical incident to manage your care efficiently. Insurance companies engage in actuarial projections. They try and predict mathematically the expected medical costs of their policy holders. Then they add in administration, marketing, sales, taxes and profit. They collect a premium to cover all that, and hope for the best.
“Self-Pay Healthcare” does comply with “Obamacare” or Affordable Care Act regulations. Just Google it to find out about Self-Pay Healthcare.
http://www.libertyhealthshare.org/
I believe Wolf has a link to my self-pay web site here. I also tried advertising in local publications. I had zero response to the ads other than a couple of doctors who contacted me about sending patients so I stopped the ads.
The website is free with my Comcast service or I would take that down too. At least where I am there doesn’t seem to be much interest.
Self pay works well for services that have low fees like family doctor visits but not for higher ticket items.
BTW, self-pay for Synvisc One purchased at a local pharmacy is less than the $1200 the designated pharmacy was asking. I believe they sell it for $900.
I’m still the best deal. ☺
Back in the ’80’s I delivered a load of pallets to a mom & pop supplier in Chadron, NE. It was a bitterly cold night and the owners, who were probably in their late 60’s came out to unload. They had no dock and the man was going to use a non-motorized pallet jack to get the pallets to the tail. I took over that job and he ran the forklift and his wife was able to go back inside and stay warm.
They were grateful and bought me dinner in town. I asked how he got into the pallet biz. “Oh my wife and I were radiological technicians.” I must have looked puzzled so he explained that the government couldn’t tell him what to charge for his pallets, or make him jump through hoops or fill out forms in triplicate.
If Petunia has her way with single payer any medical professional from doctors on down that have any skill will be forced into civil service and will quit and do something like selling pallets. Mediocrity will be enshrined in medicine and the best will be punished with “from each according to his ability, to each according to his need.”
I do not understand your point. It is well established that the US medical system does not produce better outcomes than the much less expensive single payer systems.
I really would prefer to stay on topic here and discuss how your insurer may be rippings you off but it’s hard to let these truisms pass.
The “less expensive systems” like the UK and France are going broke. I suspect that the bureaucrats either lie about their numbers or the population lives a healthier lifestyle. Some of it is just the way they categorize things. A baby born in the US is considered a live birth but in many countries it’s not until it has survived 24 hrs. A “bad baby” might just be left in the corner to die. That makes your infant mortality rates a lot better.
Is “going broke” a fair description of the condition of those systems? Is it not similar to the way those who oppose our Social Security system describe it as unsustainable or “going broke” because they choose to deprive it of the previous traditional fixes of increased Social security contributions?
The US medical care system is not “going broke” only because it our politicians are providing political support to a system that compels us to pay more every year for already overpriced insurance, drugs and medical services.
And apparently even that is not sufficient for our money hungry medical system. In order to feed the system’s insatiable appetite for new money, Obamacare now compels some 40 million formerly uninsured persons to purchase insurance, many against their will upon penalty of increasing annual fines.
When I discuss the medical care system I view it as a whole. The public is being ripped off by the entire system. It is not productive to isolate the health insurance component from the rest. The entire system has become corrupted. Not too long ago we did not fear that we might be sued for our life savings for an extended stay in the hospital or be turned away for insufficient insurance.
Today, there is a lot of harm that is produced by our medical care system because of its insatiable money hunger.