Weapons of Mass Corruption (WMCs) Part III: The Explanation of Benefits
“A lack of transparency results in distrust and a deep sense of insecurity.”
“Secrecy is the linchpin of abuse of power…its enabling force. Transparency is the only real antidote.”
“The most important political office is that of the private citizen.”
-U.S. Supreme Court Justice Louis D. Brandeis
What if I told you that you and/or your company, depending on where you get your health insurance, are spending more than $1,500 a year just to have your health insurance claims processed? That’s half a trillion dollars a year just to process health insurance claims. Well I’m telling you, it’s true. We spend about two-thirds of what we spend on our entire defense budget on healthcare administration, not on healthcare. And what do we get for it? The answer is selective information at best and a shroud of secrecy mostly.
The Unnecessary Costs of Insurance
The concept of health insurance in America, the belief that everything we get from the healthcare system must run through an insurance carrier and be scrutinized, is preposterous not to mention wasteful. But it serves a purpose. It creates a layer of secrecy between us and our providers, and in most cases makes it impossible for us to know what is being paid for and why.
Why is every claim reviewed to see if my physician knows what she is doing? When an insurance carrier says, “that was not medically necessary,” they are telling me that they know medicine — and my medical needs — better than my physician. That’s preposterous. It’s not about combating medical fraud. It is about creating an unnecessary layer of administration to facilitate a mass system of corruption. In most cases, I’m paying the bills, either through high deductible plans or because I’m the employer. I don’t want, or need, an insurance company to judge the decisions made between patients and doctors.
The insurance industry’s grasp on the system is a big part of the reason for our high costs. How do they do it?
The answer is that they get healthcare providers — hospitals in particular — to keep prices ridiculously high unless we are running things through an insurance carrier. In “Weapons of Mass Corruption – Part One,” I described how hospitals use their chargemaster to overcharge the most vulnerable members of society — the uninsured or underinsured. Today, I want to explain how that same chargemaster serves insurance carriers.
The Explanation of Benefits Scam
Have you ever received an Explanation of Benefits (EOB) from your insurance carrier that said you saved 50% or 60% or more because of the amazing rates your insurance carrier has negotiated with the provider?
Several years ago, I received an EOB that said I saved 92%. Amazing! What would I do without insurance?
That was the first bill that really caught my attention. It was an ER bill for $12,154.70. But with insurance, I was entitled to a 92% discount, meaning I only owed $980. Having health insurance really pays off, doesn’t it? Do they think we’re fools? Apparently so.
Under our current paradigm, we really do “save” a great deal with insurance, but only because of the collusion with providers — mostly hospitals, laboratories, radiology centers, and other ancillary services. In “Weapons of Mass Corruption – Part Two,” I explained the Medical Loss Ratio and why insurance carriers want net prices — the amount actually paid — to go up. The insurance carriers use the EOB to show us just how high those prices have gotten and just how lucky we are to be receiving such huge discounts. And of course the huge premiums we are paying to receive those discounts are being used to generate hundreds of thousands of meaningless EOBs every day. It’s a scam. The Explanation of Benefits is a Weapon of Mass Corruption, which is being used every day against the U.S. economy.
Ask yourself, “how does any healthcare CEO sleep at night knowing that an uninsured patient is being charged $1,483 for $69.21 worth of services?” Take a look at the image of one of my personal lab bills. This is for the lab work associated with an annual physical. An uninsured patient would be charged 20 times what I am charged. That’s not a guess. I tested it. Last year, when I had my blood drawn, I told the lab I didn’t have insurance. They didn’t say a word to me about the cost (truth be told the woman at the counter probably didn’t know). They just drew the blood and sent me a bill for the full amount — 20 times what I’d be charged with insurance. When I called to check the price, I was offered a financing plan whereby I could pay the full amount over the course of a couple of years. And that is the other part of the scam. People panic, so they quickly accept the finance plan that might be, for example, $50 a month. Even if they only make the first few payments, the lab is making many times what the services were worth. Providers use the offer of a financing plan to get people to sign away their rights. They also use such offers to make legislators and regulators think they are actually working to help patients. They’re not. Again, I don’t know how most hospital CEOs sleep at night knowing what’s being done not only to uninsured, under-insured and out-of-network patients but also to the U.S. economy as prices are pushed ever higher.
How Transparency Would Help
Why isn’t the lab required to post its prices? Transparency would stop these games.
Many that look at the changes our bill and ballot initiative propose say it’s short-sighted. This has been a problem with many special interest groups who do a cursory reading of the law without taking the time to analyze its actual impact and then offer their opinion on it. The most common question I hear is, “what good will the chargemaster do anyone, since so few people pay chargemaster prices?” My answer is simple: if one person is charged such immoral rates, everyone should see the price. And more important, if you look two steps ahead, it’s not hard to imagine what will change. In the case of the lab work, the lab won’t want to post the $1,483 price. So it will change the way it does business. It will figure out how to post a price that’s 20% (or some other rational number) higher than the $69.21 price. Right now all we can do is demand transparency into the system we have. Only once their prices are forced out into the open will providers worry about pricing services fairly.
Transparency is an amazing thing. It’s time for a change. Please get involved. Please call your state legislators. Please contribute at least $10 for every member of your family. And please ask your company to support this effort. Your company is getting hurt almost as badly as you are and its leaders may not even know it.