US Healthcare — A Laundering System
When information is scarce, information is power.
In 2022, I spent over twenty hours “shopping” for health insurance. I say “shopping” because normally the term denotes reviewing items and comparing their relative traits for desirability or undesirability before buying. But with US health insurance, this is not a straightforward task.
When attempting to make my decision, I spoke to brokers, marketplace personnel, insurance reps, medical provider assistants, medical provider pharmacy managers, insurance pharmacy assistants, insurance DME representatives (well, not really. I left them a message, but they won’t talk to you until after you already purchased the insurance), and on and on. Hold times were abundant. Information was not.
No one knew what to tell me about my questions. I repeatedly got sent to someone else, each person having a single piece of the puzzle (and a script they were following). No one had the big picture.
There is something else akin to this. It’s called money laundering.
When a criminal operation wants to obfuscate the origin of its dirty cash, it launders it. There are multiple steps it can take, including layering (breaking down large payments into smaller transactions), trade-based laundering (inflating invoices through companies so that payments through that company are higher than normal but legitimate on paper), creating shell companies (fake middlemen), and structuring (staying below reporting thresholds).
The standard US healthcare industry — a behemoth of a system that no longer can be blamed on, nor be beholden to, just one part of the whole — does almost exactly the same thing.
Layering: Have you ever gotten out a calculator and added up all the costs you pay for your healthcare? Insurance premiums you pay + insurance premiums your employer pays + your co-pays + your co-insurance + your deductibles + your pharmacy deductibles + your Rx out-of-pocket costs + an unknown (but large) percentage of your taxes (which goes to fund things like Medicaid, Medicare, research that someone else vets, and many other aspects of the industry) + separate premiums for vision + separate premiums for dental + separate co-pays and co-insurance for vision and dental + opportunity costs (time) + (I could go on).
If you were robbed a dollar at a time. You probably wouldn’t notice. This is layering.
The buyer used to be the way price was vetted. Supply and demand. But the buyer no longer knows what the ultimate price is, only what their price is. In fact, they really only know what their price at a given time, is.
We are most emotionally tied to the dollar in our hand, so it’s that dollar that we are careful with. But we are so careful with that one that we don’t even bother to think about the other dollars that have gone missing.
Inflated Costs: So, what happens when the buyer is no longer policing the price? The price gets inflated.
Have you ever seen an itemized invoice from a hospital, for instance? Do you know what a Charge Master is? For kicks and giggles, ask for one the next time you have the misfortune of being in such a place. You’ll find that a single aspirin, for instance, costs around $30.00.
If you’re using insurance.
Yep, that’s right, different charges for different sarges.
When insurance — the large, faceless, building-full-of-men-in-suits-somewhere — is the main one paying your hospital or clinic, it’s so much easier to gauge them than it is to overcharge the young, pathetic little girl with pneumonia. Especially when the insurance company has repeatedly tried to deny your valid claims in the past (the jerks!).
So the individual would pay, say $15.00 for a hospital aspirin (still ridiculous), while the insurance company would be charged $30.00.
No wonder your premiums keep going up.
The Middlemen: And how much of that money goes to which parts of the system, do you know? When you go to the doctor for a checkup, do you know how much your doctor’s office actually gets paid? Unless you work in medical billing, you probably don’t. (Actually, even if you work in medical billing, you probably don’t).
This isn’t a simple Farm-to-Table process.
There are intake secretaries who schedule, nurses who take vitals, doctors who give you 20 minutes of their time in order to ascertain which drug will best suit your ailment (regardless of your lifestyle choices), aides who review the doctors’ notes, coders who (inconsistently) determine which medical billing codes to attach to those notes, claims adjusters who review the codes and make decisions about their validity, claims processors who tell you (months later) what they think you’ll end up paying for those services (sending you an “Estimate of Benefits”), claims closers who finally make such decisions (after battling with your doctor’s office), billing departments that pay the other middlemen, and rinse and repeat if you got sent in for any labs. None of these people are in the same room.
If you got an Rx (which, if you saw any standard American doctor, you did), then you’re also the newfound beneficiary of these additional middlemen: the drug manufacturer, the wholesaler, the distributor, the plan sponsor, the pharmacy benefits manager (PBM), and the pharmacy, with the PBM reigning supreme when it comes to controlling, and obfuscating, information in this particular line of costs.
Each of these middlemen have different incentives, often at odds with one another, and none of the individual people really know how their incentives and their decisions will ultimately affect you and your family.
You are the collateral damage of Charge Masters v. Insurers v. Manufacturers v. PBMs.
Structuring: The ultimate result of all of this middleman-ing is that each separate cost and piece can “fly under the radar” as it were. You didn’t pay $30.00 for an aspirin, so it didn’t catch your attention, even though, ultimately, it raises your premium down the road.
You don’t know why your hiddencostin prescription costs $1,367 per month (as dictated by the PBM), and you don’t really care, because you only pay your $50.00/month pharmacy co-pay for it.
And you’re not sure why the generic alternative is only $10.00 out-of-pocket, and, actually, you didn’t even know that because no one told you, because it’s not on your pharmacy plan (your formulary), because PBM said it was a no-no, so none of the middlemen in your system would get paid at all if you knew about the generic alternative and bought that one instead (shhh), and you literally do not have time to research the truth and alternatives of every damn piece of obfuscation in this complex system…
When information is scarce, information is power. And you don’t have it.
Insurance used to be much simpler. It was a pooled fund that would pay for really bad luck. You paid the insurance company. They put the money in a pot. They waited until someone got really sick. They used the money from the pot to pay the bill. A little extra went to the company. Done.
The bill from the hospital was a bill for time — actual time — and services — actual services. The same bill for the services whether you were a child with pneumonia or a man in a suit. So the payout from the insurance company was simple as well.
Kind of like life insurance. You buy insurance in case you die. If you die, they pay your beneficiary the insurance amount. Done.
But health insurance is no longer a prepaid catastrophe hedge. It is a very, very, very complex discount card instead.
If we want to take back the power, we have to take back the information. I would challenge each US citizen to start with this seemingly-simple task: ask questions.
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