Health Insurance – What You Thought Was True Part 2 of 3

After I read my last blog entry to my wife (Yes, she can read. I just like to read it to her in my voice) she had a very strong reaction to my main talking points.  Essentially I was saying that insurance is not the benefit that everybody thinks it is. At least, not the insurance that you have right now as opposed to the insurance that you wish you had.  You’ve been trained to believe that you need the insurance so you want the insurance with a desire bordering on mania. But, you don’t investigate the insurance beyond the surface reading because it’s too murky and you probably don’t do the math that really counts about insurance (though I assume you do some math, you’re looking in the wrong place) .  And my second point about the insurance was that the primary policy of your insurance policy carrier is to take money out of your pocket, not, as the carrier would have you believe, to “financially insure you” against something, like, say, a cost.  

My wife’s reaction was basically to say, “But we need it, don’t we?”

So, if I wasn’t getting through to the person who knows me best and understands even my most poorly organized rants, then maybe I need to try this another way.  This time I’m going to use good old money and math.

In my last job, I was paying about 12% of my pay into an insurance program. (close readers will recognize that originally, I had posted this as 25%, but my math we wrong and I’ve fixed it in the previous post to correctly reflect the 12%).  I should also not that 12% is what I paid because of what I made.  The cost of that plan was fixed, but not everybody in the company made the same amount of pay.  Their percentage would be different.  It should be sufficient to say that everybody paid monthly.  Our monthly nut was about $500 for health insurance or $6,000 for a year.  That number was fairly consistent throughout the 9 years that I worked for the company but the plan itself changed. Appearantly the price point for family insurance is about $500 a month.  To adjust for inflation, rather than raise the price, they lowered the benefits.

So we paid $6 grand a year for 9 years.  That’s $54,000 dollars.  But that’s not all we paid.  We also paid deductibles and co-pays. We are a family of five; Mom, Dad, three kids.  My wife and I average about 4 visits per year and the kids are about the same over time. (the oldest hasn’t been in a while but when they were smaller, they all went a lot more) So 5 people times 4 visits times 9 years. Our co-pay was $30 and that cost remained the same thought out. That’s another $5,400 just for office visits. And that’s just the GP.  It doesn’t include specialists like allergy doctors or urologists or the guy who stuck a very long camera up my ass or the guy who stuck an equally long camera down my throat,

Then there were prescriptions.  My wife and I are both on several maintenance drugs (that means drugs we take forever) and we also had various prescriptions for antibiotics and cough medications, years of allergy stuff for the middle daughter, the occasional pain med, in office shots that were partially covered or not covered at all.  Based on recollections and one attempt during that time to track the costs for tax purposes, we spent an additional $1,500 (average) per year or $13,500.

Then there were procedures and emergency visits.  My middle child broke a bone a year for several years and my youngest once fell from a chair in the dining room and hit her head on the tile floor resulting in an CT scan ($1,200) that was not fully covered.  My middle daughter also had her tonsils and adenoids removed ($2,500 out-of-pocket).  I had hernia surgery ( a 30 minute outpatient procedure) that cost me $2,500 out-of-pocket (and though the insurance covered part of the bill, I would say that really, $2,500 for 30 minutes work kinda covered it.) There were also several other notable moments and costs and I don’t think I ned to go into explaining each and every one of them here except to say they existed and I paid money for them.  In some cases, lots of money. So, counting all of the “Non-covered” things, the yearly out-of-pockets, and the additional co-pays over nine years, let’s call it conservatively, another $12,000.

We’re at $84,900 that we paid to the insurance company and medical and pharmaceutical industry (roughly) over nine years even though w were insured and paying $500 a month.  Let’s just call it $85K for the sake of round numbers.

In order for the insurance to have been a benefit to me and my family, we would have had to have received more than $85K in benefits.  That is, if the insurance was supposed to be doing something for me, like insuring me against medical costs.  But that’s not what it was doing.  Not really.  What it was really doing was to make me think I was being insured against these things that happen to everybody while it was only really covering me against the things that happen to a very few, like cancer or traumatic amputation.

My doctor (family GP) has a special price system for his uninsured patients.  An office visit is $35.  Our co-pay when we were insured was $30 so we’re not really receiving much of a benefit considering that we paid $500 a month for the privilege.  My doctor says other doctors (lots of other doctors) do this and it actually saves them money not to have to deal with the insurance company.  Each carrier has different paperwork and a doctor’s office has to hire specialists in that paperwork to deal with it.  Also, at the end of every month the insurance carrier negotiates down the billing from the doctor to about 40%.  That means that when the doctor files a cumulative claim at the end of a month to a particular carrier for $100,000, when the carrier finally does pay it, they actually only pay about $40,000.  The doctor deals with multiple carriers and they all pretty much do the same thing.  Frankly, the money is ok at 40%. I’m not losing sleep for the doctor.  Try to remember that this is a game. The doctors and the insurance carriers know that it’s a game and they’ve agreed to play it over the years in various forms until it reached this point. Everybody in the game knows it’s a game except you.  In order for the doctor to get his $40k he has to file for $100K.  The insurance company publishes a list of procedures (just like MediCare does) and what they will pay for them and it reflects the same game.  A $40 procedure is billed as a $100 procedure and settled for $40. Dance, dance, get your boogie on, dance.

When I had my hernia surgery, the surgeon knew he had to get $6,000 from the insurance carrier plus the $2,500 out-of-pocket from me to make it worth his time and cover the operating theater, the anesthesiologist and the support staff to run his organization.  The procedure was only a 30 minute out-patient thing and he had a full queue of people waiting for the same exact thing like sheep being shorn.  But to get his $6,000 for me he had to bill $15,000 and settle back at $6,000.  For the record, I think the $2,500 out of my pocket for the 30 minutes on the table was compensation enough.  At that rate, he was generating $5,000 an hour.  That’s $200 grand a week for a 40 hour week and a lot of doctors do 60 hour weeks (though admittedly it isn’t all billed at surgical rates).  So the doctor got his money even before he had to fart around with the insurance company. Don’t cry for him.  He’s rich, filled with godlike self importance and, not to put too fine a point on it, a humourless dick.

Before you start feeling sorry for the insurance company for paying out the $6,000 you should know that they actually made money on the deal and here’s how… 

Tax laws are different for corporations than they are for people and the different-est of all is for the insurance industry especially in the way they file, claim and recoup losses.  On the hernia operation, my insurance company was billed $15,000.  They only paid $6,000, but they were billed $15,000 and they got to write that amount off as a loss (paid out claims are considered losses in the insurance game).  What’s more, they got the write it off for 5 years in a row.  Yeah, fucked up, right.  They got to claim the billed loss rather than the actual loss and they got that loss for 5 years having lost it only the once and not really even a full one time but really only 40% of one time.  They wrote off $75,000 from their corporate taxes because they paid out $6,000.  When I say they wrote it off of their taxes I mean they deleted that amount of tax from their tax bill at a 1 to 1 ratio and that created a net gain of $69,000.  That was just me and a 30 minute procedure.  Multiply that out.  Every claim they pay is a loss.  They are one of the few industries in this country that doesn’t need insurance against loss because the government removed loss from their ledgers a long time ago and replaced it with a 5X tax break.

So what would have been the cost over 9 years if we weren’t insured? It is impossible to know with any certainty because the game is so nebulous.  As an example, my younger brother has had occasion to visit emergency rooms from time to time in the last few years and he doesn’t have any money or usually any insurance.  He typically lists me as a contact and so when they can’t find him, they look for me, ostensibly to find him, but they have tried to collect his debt from me. Regardless of the bills bottom line, by the time they were just about to go to collection with it, they were willing to negotiate the final number.  And again, the magic number seemed to be about 40%.

When we discussed this, my wife’s take on it was that she thought I was saying that the next time I had a full-time job that I didn’t want to take the insurance.  The answer to that is a very unsatisfying maybe.  In theory, yes and in practice no.  You see, the $85,000 number that was bandied about earlier was a cumulative number over 9 years. Each individual year was $9,444. That’s not enough to weather a big medical hit.  In point of fact, neither is $85,000 if the hit is cancer or heart attack or something like that.  Also, it would presuppose that we would actually have the discipline to bank the $500 every month regardless of what ever else we needed the money for.

I’m not saying we don’t need insurance.  I’m saying that the insurance we have is messed up.  The system that has been created over the last 30 – 40 years has become so incredibly screwed up that even a marginal improvement seems like a godsend.  I’m saying that if everybody, democrats, republicans and all the “others” stands together and says, this is fucked up and we’re not going to pay for it anymore that maybe something can get done.  The stuff that has happened recently in Washington is a wishy-washy first step at best.  At worst, it’s just a more convoluted way to keep us wondering, afraid and paying a sizable monthly percentage into a system that makes a lot more money if it doesn’t deliver services.

I understand that it isn’t very realistic to say we are all going to boycott insurance.  Not only would you never get more than a fragmented section of the population to sign on to anything  (even if it were the giving away a free bag of money movement), the insurance industry can last a lot longer than we can and going without medical care isn’t any kind of real answer.

What’s the real answer?  What’s a truly workable solution?  I have an idea and I’ll make that my next post.

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