There is no health insurance mafia

In The Health Insurance Mafia, Jonathan Kellerman, an author of crime novels and psychology books in addition to his job as a clinical professor of pediatrics and psychology, has this nonsense to say about health insurance:

The health insurance model is closest to the parasitic relationship imposed by the Mafia and the like. Insurance companies provide nothing other than an ambiguous, shifty notion of “protection.” But even the Mafia doesn’t stick its nose into the process; once the monthly skim is set, Don Whoever stays out of the picture, but for occasional “cost of doing business” increases. When insurance companies insinuate themselves into the system, their first step is figuring out how to increase the skim by harming the people they are allegedly protecting through reduced service.

He continues in the same spirit for a few more paragraphs, but you get the idea.

Kellerman thinks the answer to health care costs is to shift back to paying for physician fees and hospital stays out of pocket. But the example he offers from his own experience hints at the fallacy of his position.

Several years ago, I suffered a sports injury that necessitated an MRI. The “fee” for a 20-minute procedure was over $3,000. My insurance company refused to pay, so I informed the radiologist that I’d be footing the bill myself. Immediately, the “fee” was cut by two thirds. And the doctor was tickled to get it.

All we know about his encounter comes from those few sentences, but there are some things about it that don’t smell right:

  • If the MRI was really “necessitated” his insurance company probably would have paid for it. Certainly he or his physician could have appealed if they thought the denial was unreasonable. Maybe he didn’t need the MRI at all, but the doctor wanted to boost his own income. Medical imaging is one of the most overused technologies and if anything we need more intervention from insurers and radiology benefits managers (like NIA) rather than less. Also, although Kellerman says insurance companies’ “first step” is to harm members by reduced service, in imaging and diagnostic testing in general less can be more. An MRI probably won’t hurt you but other popular modalities like CT very well may. (See Image gently, or when the diagnostic is worse than the disease.)
  • The sudden reduction of the fee from $3000 to $1000 and the doctor being “tickled to get it” doesn’t ring true either. Is Kellerman claiming (as he seems to imply elsewhere in his article) that a doctor would rather get $1000 from a retail patient than $3000 from an insurer? I doubt it. I don’t know about you but I’m not keen to go back to the days of “usual and customary” fees or enter the world of the bazaar every time I go to the physician’s office or hospital. Maybe Kellerman could have gotten the scan for free as a professional courtesy, but what about the rest of us? I wouldn’t be surprised to find that certain groups end up paying more for the same services –and it won’t necessarily be those with greater financial means.

Rather than this senseless vilification of the insurance industry, which leads to simplistic and incorrect conclusions, I’d like to see a discussion about how insurance companies can shift to meet the needs of consumers, beyond simply offering Consumer Directed Health Plans. As consumers assume more of the cost for their health insurance –either because they pay their own premiums or have to pay a greater share of what’s offered by their employer– I expect consumers will increasingly turn to managed care for help in figuring out what services really are necessary and which providers offer high quality care at a reasonable cost. In addition I expect there to be an opportunity for insurance companies or third-parties to help audit and negotiate bills for health care services. They could start with a close look at hospital bills, which consumers are essentially hopeless to decipher.

April 16, 2008

8 thoughts on “There is no health insurance mafia”

  1. Instead of taking apart the anecdote, why don’t you address the main thesis, which is that the health insurance system provides little in the way for both patients and doctors. If auto insurance was the same as health insurance, then an oil change would cost more than the typical $20 it does now. My auto insurance pays for big events like a collision, and I take care of little things. Should be the same thing with health care. If I get hit by a bus I want the medical insurance to kick in and I don’t have time to shop around. But if I have headaches, I should shop for the best service for the price I’m willing to pay. If I want a quick oil change, I go to Jiffy Lube and pay more. Or I can go to Firestone and sometimes wait a bit and pay less.

  2. Your being too hard on Kellerman. He is right that the insurers only care about their take. When patients are left to negotiate the fees when paying cash directly to their doctor, you would be surprised at the discounts that come. I know because I was given 40% off a new patient fee and doctor visit.

  3. Kellerman’s got some interesting ideas, even if his anecdote doesn’t hold up to scrutiny.

    I’m on a high-deductible plan. When doctors find this out, they typically charge me significantly less…and they genuinely don’t seem too upset about it. Part of it is that – if they can get me to pay in cash at the point-of-service – then they don’t have to deal with the hassle/risk of submitting claims to the insurance companies.

  4. I am one of those that call insurance the “Health Mafia”. You’re virtually forced by the industry (extortion) to pay this protection money (because it’d be a shame financially if something happened to you), then they run out on you when the time comes to collect on the protection (though at least the Mafia seemed to hold up their end of the deal). Not to mention NEVER being satisfied and always upping the “protection” money. As with the mafia, you’re protected all right, from everyone but them.

    Then there’s infiltrating labor unions (doctors). Mobsters paid off or threatened union leaders to get a piece of the action whenever a union group got a construction job, and they sometimes made their way into the ranks of leadership themselves. And once the Mafia had its grip firmly on a union, it could control an entire industry. Just replace “mafia” with “insurance” and “union group” to “doctors” and there you have it. Insurance controls the medical industry. Insurance is why so many doctors rush patients in and out and has a lot to do with the substandard care many receive. If a doctor doesn’t fall in line with the insurance mafia’s demands (checklists, decreasing certain treatment usages, etc) then that doctor will not receive payment. Effectively holding the entire medical industry hostage. Amusingly enough, it’s hard to find a doctor that will only accept cash because they all are on the industry payroll! Physicians seem to want a guarantee of getting paid if something happens to you, but complain because the insurance mafia keeps making demands. Let’s go back to the old method. Catastrophic insurance and I’ll pay you myself when I get the flu.

  5. This may be of interest to you.

    One of the concerns today in society is health care. Many people feel that they have to pay the huge cost of health care or go without anything at all. That is not the case.

    These programs serve two purposes; one for the already insured and one for the completely uninsured.

    There are programs that help get deep discounts on things insurance does not cover if you already have insurance (25% off of braces/lasik/physical therapy, lab work, high end prescriptions etc) for the under-insured. These programs are a great supplement to insurance and can even offer vision and dental for people with medicaid or medicare.

    If you are one of those that are not able to get health/dental/vision/chiro/prescription/hospital insurance at all and are un-insured, this offers great assistance and is a lot better than nothing at all.

    One such site (company) is lowcostgreatbenefits(dot)com from a national / 500,000 provider / 1,500,000 customer company. You can actually sign up right there on the site and see the story about this company from the American Medical Review.

    Pre-Existing conditions do not matter

    with this program and there are no (yes I said NO) disqualifications. You get one simple card in the mail in about 10 days after signing up and present it at the time of service. For some services, you need to check for local providers. Some services work no matter where you are in the country (like the hospital package).

    One fee ranging from $19.95/mo up to $59.95 (most get a health/dental/vision/chiro/prescription/hospital advocacy combo pkg for $39.95/mo) covers everyone in the household whether there are 1 or 40 people and whether they are related to the initial purchaser or not.

    One example is a 20 year old young lady that goes to school full time and works part time. She was unable to get health insurance. When she went into the hospital, this company went in and negotiated her $7,540 hospital bill down to $113.

    You do have choices and help for dental and medical costs.

    John Bartlett PH: 816-389-7281
    for questions or comments

  6. The reason the doctor was tickled to get 1/3 payment in cash is because he’d be lucky to get 25% payment from insurance.
    We paid out of pocket for a service that was billed at $260/hr. Insurance did not cover the service because the diagnosis was excluded from coverage (autism). Since we were self pay, they offered to accept $125/hr if we paid on the date of service.
    This year, our insurance covers it (autism mandate). Insurance bills $260/hr. We pay $35 copay. The insurance ‘allowable amount’ is $90.70. Minus our $35 copay, the insurance sends the provider $55.70.
    Those that private pay are subsidising the ridiculously low re-imbursement rates from insurance.

  7. In every civilized country, doctors are the most respected members of society, because they receive the most education and take an oath to help people.
    Society, in general trusts these professionals. Sure, there are some bad apples, as in any profession, but word of mouth takes care of weeding them out.

    Whatever benefit you claim the insurance industry provides, is certainly eclipsed by the enormous harm it causes to society. We would be FAR better off without medical insurance companies. Doctors would charge a fair price for their services, which would be self regulated by fair competition with other doctors.

    The relatively RARE chronic illness, which requires extensive treatment, would be paid through a loan from a bank, donations or even subsidy.
    Any system that penalizes 99% of the people in favor of 1% is certainly flawed.

    Let me give you an example:
    In Colombia or Peru, a colonoscopy costs about $200 US Dollars. In the states, the same procedure can cost $15,000.
    Both performed in hospitals with similar infrastructures.

    You may argue that there is little legal recourse in the RARE occurrence of medical negligence, but again, doctors are for the most part competent, and whatever system is in place to keep them in check should ceratinly not raise the price of treatment 50 times or 5,000%

    The medical system in this country has fallen prey to
    an inefficient, parasitic layer of bureaucracy that serves the interest of very few at the expense of the many.

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