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In early May, Secretary of Health and Human Services, Alex Azar, was delivering a speech to the Federation of American Hospitals. He had these simple words to share:
“Imagine a day when healthcare delivery in the United States functions the way other parts of our economy do. We as patients would pick providers with the level of information we have when using Amazon or Yelp. Consumers would drive quality and cost-effectiveness with information, competition and genuine choice.”

Soon after, former U.S. Senator Tom Coburn, a longtime champion of sensible, market-driven healthcare reform, shared his thoughts on what we are trying to do here in Colorado.
 
“The Secretary’s key word is ‘function.’ Right now, at 18% of GDP and expanding, our healthcare system is entirely dysfunctional. A measure making its way toward the November ballot in Colorado is the first and only active effort in the nation that truly addresses this. That’s why every American should support the people of Colorado right now.”

Secretary Azar continued during his May speech with the following:
 
“Some argue healthcare is simply different and is and should be immune from market forces. I simply disagree. Real competition — in the economic sense — has never really been fully tried in our bizarre, third-party payer system.”

And I just came across this report in the American Journal of Medicine. The study repeats a study that was done in 2016, using a common medical procedure (hip replacement, formerly referred to as Total Hip Arthroplasty, or THA) as a proxy for transparent pricing. They looked at the period 2012 through 2016. Here is its conclusion:
 
“We found no evidence of improvement in hospitals’ ability to provide estimates on reductions in the estimated price for THA between 2012 and 2016. Our results provide sobering evidence that substantial efforts from government and industry to improve price transparency have had little tangible effect on availability of prices.”

In fact, the study suggests we’ve gone backwards.

The study itself is an illustration of why our system is so broken. While the data is credible, the academic-speak that stands between it and real change is palpable. I also find words in the study’s discussion naïve when it cites, “…substantial efforts from government and industry to improve pricing transparency have had little tangible effect on availability of prices.” Really? Substantial effort? While the study’s authors rely on data to conclude no progress has been made, I have to wonder what data led them to believe there had been “substantial effort.” The truth is that numbers don’t lie, and the lack of progress clearly tells us that there’s been no serious effort, just five years (the time between studies) of excessive profit-taking on the basis of price obfuscation and collusion.

We often talk about the waste in healthcare—waste due to unnecessary tests and procedures, redundant testing, and a highly corrupt and inefficient system of claims management. Perhaps it’s time to start talking about the reciprocal of waste: excessive, uneconomically earned profit. You see, that trillion-plus dollars a year we waste has to go somewhere, and much of it goes to the bottom line of monopolistic healthcare giants. One man’s waste is another’s profit. The Affordable Care Act (aka Obamacare) is a case in point. One of the many unintended consequences of Obamacare has been the transfer of great wealth from patients and tax payers (which is really one and the same) to the healthcare industry. States were promised that coverage for more people would mean increased patient volumes, thus driving down costs (as happens in every other industry). Yet the opposite has happened. Prices have gone up—and taxpayers are paying for it. How can that be? Easy—without competition, there’s no linkage between volume and cost.

The ineffectiveness of government, and legislatures, leaves us no choice. The people have to take charge. That’s why we need your support.

Last week, Senator Coburn helped us raise over $100,000 from outside the state in a single day. That’s terrific, but it’s also a concern. As the Senator said, “Every American should be supporting the people of Colorado right now.” If you live in Colorado, please help me ensure the rest of the country knows, “we’re in.” And if you don’t live in Colorado, please consider supporting us anyway. What we are doing in Colorado is for every American.

I’ll close with one last excerpt from Secretary Azar’s speech:
“Simply put, our current system may be working for many. But it’s not working for patients and it’s not working for the taxpayer.”

If you read between the lines, “the many” does not refer to many Americans. It refers to many healthcare industry giants.

If you have not yet contributed to Broken Healthcare, no matter where you live, please consider making a small contribution right now.

And if you have donated before, please consider making another contribution. This is America, and for better or worse, nothing changes without money behind it.

Thank you for your support.
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Healthcare prices in the U. S. are growing twice as fast as you think. To understand this phenomenon, which should convince everyone that tackling healthcare prices must be the Trump Administration’s top domestic priority, consider the following:

The United spends double, on a per capita basis, what other similarly developed countries spend on healthcare, while getting lesser healthcare outcomes. We do not visit the doctor more often. We visit less—far less. In fact, in the United States on average, we visit the doctor 40% less often than the average across all OECD nations. That means we are spending twice as much money to see doctors 40% less often. Now, you might think that’s because we’re healthier, but we’re not. As it happens, the United States has seen improvements in life expectancy come to halt over the past two years. It’s the first time in 50 years that a drop in life expectancy has been recorded two years in a row. Growing healthcare prices also cannot be explained by more drugs or more surgical procedures. According to the Health Care Cost Institute, almost all of the growth in healthcare spending can be attributed to one thing—rising prices. And when prices are rising faster than the rate of inflation, the money is going somewhere—mostly to profits that are not rewards for providing more or better service. That, in turn, explains why the stock prices of health insurance carriers are up twice as much as the stock market (which is up over 100% itself since the implementation of the ACA).

So, back to the original point—why healthcare spending is rising twice as fast as you think. Consider that we spend, on average, about $10,000 on healthcare for every man, woman and child in the United States each year (it’s actually a little more, but $10,000 makes the math easy). Right now healthcare spending is rising at two to three times the rate of inflation. But for arguments sake, let’s just assume it’s double and call that 4% (inflation was 1.9% in Q1 2018). That means we should expect healthcare spending to rise $400 per American each year. However, that $400 is calculated by multiplying the inflation rate by the prior year’s spending ($10,000 in this example). If we were only spending $5,000 per capita, then the annual increase would by 4% x $5,000 = $200.

That’s why even restraining the growth of healthcare spending to the rate of inflation is allowing it to grow faster than it should—twice as fast, in fact ($400 per person as opposed to $200 per person).

Over the coming decades, we have to drive prices down, not just keep them flat, because growth at the inflation rate will ensure we perpetually have a healthcare system that consumes twice the economic resources that it otherwise should.

The oversized cost basis of our healthcare system is why I’m calling for a target growth rate of zero. Even at that rate, it will take decades for prices to come down to where they should be. For now, let’s call a zero growth rate about 2% slower than the inflation rate, and 4-6% slower than the healthcare inflation rate. If we can do that, we return approximately $200 billion per year to the U.S. economy for investment in other things such as infrastructure, education, and the growth of small businesses.

$200 billion in economic stimulus—every year—is bigger than any tax cut. That’s $2 trillion over the next decade. And when you consider that government pays half the healthcare bill in this country, a concerted effort to drive down healthcare prices effectively pays for the recently enacted tax cuts. There is no greater gift that Trump and Republicans can give to Americans than attacking healthcare spending. Democrats should join them.

But…it has to be done right. Squeezing prices by simply lowering Medicare reimbursement or reducing the money states have for Medicare is not the answer. The answer is ensuring that competitive market forces drive prices down by improving service while encouraging innovation and efficiency. That way we don’t short change the healthcare people are receiving. When we cut Medicare and Medicaid prices, two things tend to happen. First, seniors and those most in need of our help have a tougher time getting the access to the healthcare they need. Second, an ever-greater share of costs is passed on to the private sector. Cutting spending doesn’t really save money in the long term. Only by allowing competitive forces to drive down prices can we ensure it’s done efficiently and effectively.

So please, help support our effort to ensure real price transparency that empowers consumers and the market to do what needs to be done. Please consider making a donation to the Broken Healthcare Action Fund today. We need $20,000 by the end of the week to keep the signature collection going. We have until the first week of August to get all of the signatures necessary to make sure Coloradans have the right to vote on price transparency in November, setting an example for the rest of the nation. We’re in the homestretch, but we need your help.
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Note: If you are new to Broken Healthcare or just want to catch up, we’ve put together this page with the best and most useful reading all summarized in one place.

First, an update. This weekend saw the launch of the second phase of signature collection for Colorado Initiative 146. Phase one started with volunteers and a small team. Over the past few weeks, we’ve been ramping up and this weekend, we had dozens of new people all over the Denver metro area at big events like the Bolder Boulder.

With dozens of paid signature collectors out there, the costs are piling up fast. If this is an effort you believe in and you expect to benefit from yourself, please consider making an investment now to ensure we get it done (hint: everyone benefits from lower healthcare costs).

“Until the great mass of the people shall be filled with the sense of responsibility for each other’s welfare, social justice can never be attained.”
-Helen Keller

“Every social justice movement that I know of has come out of people sitting in small groups, telling their life stories, and discovering that other people have shared similar experiences.”
-Gloria Steinem

“Throughout history, it has been the inaction of those who could have acted; the indifference of those who should have known better; the silence of the voice of justice when it mattered most; that has made it possible for evil to triumph.”
-Haile Selassie

“The hardest thing to explain is the glaringly evident which everybody had decided not to see.”
-Ayn Rand

 

Bundling? Fragmentation? These are words that most of us don’t use every day. Yet the healthcare industry uses them all the time—very strategically—to maximize profits at our expense.

Bundles are easy to understand. When you order a number six at McDonalds, you pay a bundled price. If you order a cheeseburger, a drink, and fries separately, you expect the teller to say to you, “Would you prefer the meal, ma’am? It’s a better price.” Or better yet, you just expect them to do it for you. And the last thing you expect them to do, when you order a number six, is to “unbundle” it and charge you separately for the burger, soda, and fries in order to charge you a little more. Yet this is what healthcare providers—hospitals in particular—do to unsuspecting patients. The result, however, is not a little more. In healthcare, it can be a lot more.

Good businesses empower their employees to help customers get the best price on their goods and services. But then again, good businesses don’t generally give people titles like, “Revenue Enhancement Specialist.” (seriously—that’s the title on a letter I received from a hospital).

In healthcare, unbundling, sometimes called “fragmentation,” is used as a revenue optimization strategy. For example, you might be charged for five different blood tests, each having their own CPT code, when there was another CPT code that could have been used for a “liver panel” at a lower cost. CPT stands for Common Procedural Terminology. CPT is the system of medical coding used by healthcare providers.

While intentionally unbundling codes can be used to maximize revenue from self-paying patients and private insurance patients, it goes by another name when billing Medicare: fraud. There are ways around that even with Medicare. But unbundling and “up-coding” (using the coding system as a weapon, carefully choosing codes to minimize the likelihood of procedures being bundled) most often affects privately insured and uninsured patients. 

This is one of the many of examples of our government’s conflict of interest in healthcare. It writes rules to protect itself, while not extending those same protections to the rest of us. And in the process, it creates systems that confuse us, which provides the industry with ever-better weapons to use against us. 

Efforts are underway to change that by making it a condition of payment or participation in federal programs to extend the same protections to us that are enjoyed by government payers. But don’t kid yourself. The special interests are hard at work, sowing confusion, to minimize anything that might impact the bottom line. And, the system is so complex that these schemes still cost government payers a lot, too, even though many providers are being taken to task for fraud every year.

What about insurers? Well, insurance carriers only protect patients or employers when it’s in their best interest. With insurance carriers, if we are not going to hit our increasingly high deductibles this year, it’s not worth much to them to invest in correcting our fragmented bills. It doesn’t save them anything and, when still within your deductible limits, it doesn’t save your employer anything, either. So why fight the higher cost calculations just for us, the patients? 

While I think they have a duty to protect us, acting in the best interest of the patients and employers they represent is not a duty that insurance carriers accept is theirs. They will tell you that they legally have no such duty. That’s something that needs to be changed, and it needs to be tested in the courts.

And when they are bumping against medical loss ratio limits (see Weapons of Mass Corruption, Part II), allowing unbundling helps drive payouts up, thereby maximizing profits.

Most patients and employers are oblivious to the practice of unbundling. At best, they might be able to go online and find an estimated price for a specific CPT code. There is nothing that will tell a patient that the CPT codes on their bill should have been bundled into a single, different code. They’d need to be a medical coding expert for that. By creating a system that requires such expertise, we have enabled unbundling abuse.

The complex nature of medical coding itself is an enabler to all kinds of corruption. Each year, hundreds—sometimes thousands—of codes are added to the system, along with “modifiers,” just to make things a little more complex. 

To protect itself against malicious unbundling, CMS (Centers for Medicare and Medicaid Services) launched a program known as the “Correct Coding Initiative.” Unfortunately, the benefits of this program, again, are strictly for CMS. The Correct Coding Initiative does not extend to the private sector. 


“In the absence of justice, what is sovereignty but organized robbery?” 
-Saint Augustine

 

The result of unbundling is, often times, that when billing patients at chargemaster prices (see Weapons of Mass Corruption, Part I), not only are the charges inflated by 10x, 20x or more than Medicare or an in-network insurance carrier would be charged, the unbundling results in even more obscene overcharging.

The bottom line: there is tremendous waste, fraud, and abuse in healthcare that is facilitated by complexity and price obfuscation. Anyone that doubts that serious price transparency will bring healthcare costs down hasn’t woken up to how they, and/or their employer, are being scammed every day.

Also telling: you’ll notice that no one is writing about why the corruption I write about is wrong or inaccurate. Instead, they’re scheming about how to defeat us through negative advertising in the fall. A marketing firm has already been hired. The ads are being conceptualized. The challenge they’re facing is what to tell you that would get you (if you live in Colorado) to vote against this measure. Here are the ideas they’re working with, from what I hear:

  1. It will stifle competition and drive costs up.
  2. Insurance carriers will pull out of the state.
  3. It’s a violation of their constitutional rights.
  4. It’s more bureaucracy and more cost for doctors, which will in turn cause your prices to go up.

Oh, and on the last item—they’re torn. That’s doing a smear campaign on me. The risk, or so I hear, is that it could somehow raise my profile instead of squashing me. So they’re not sure yet if they want to go with that strategy. 

So, on top of the games and scams they play with us, they are prepared to lie to us, too. Ask yourself, is that a healthcare system we can #trust? Are these companies we can #trust? I don’t think so. And the only thing that’s going to cure this very sickly beast is to shine a bright light on it. All of it. And in Colorado, that means passing Initiative #146 to set an example for the rest of the country.

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Would you donate to the Broken Healthcare Action Fund to if it meant better and safer U.S. schools?
For many months, I’ve been writing to you about skyrocketing healthcare costs, disparate prices for haves and have nots, the corruption that pushes prices ever higher, and the staggering amounts of money used to persuade politicians to maintain the unfair and wasteful status quo as it relates to discriminatory pricing policies. We are fighting for a “proof of concept” Colorado ballot initiative which would require full healthcare price transparency to reduce healthcare prices and increase healthcare quality.

While most of us agree that change is necessary, recruiting both donations and volunteers has, at times, been slow as healthcare reform is just one of a number of critical, hot-button issues competing for attention and resources. But what if we look at what transforming our healthcare system would mean for some of those other issues occupying our hearts and minds? There is a very simple, but important, connection between fixing the broken healthcare system and fixing many of the other pressing problems facing our nation. Fixing most problems will cost money. Fixing the U.S. healthcare system can provide those critical funds.

Let’s look at education quality and school safety.

All across the country, teachers have been protesting low pay and poor benefits. As we head toward the November elections, politicians are staking out their positions as saviors of teachers with promises of better pay. And, of course, the mounting death tolls related to school shootings mean almost every state legislature is looking at costly school safety bills (in addition to controversial gun control measures). But while talk is cheap, good education in a safe environment costs money. So how do we pay for it?

The answer is right in front of us.

Annual healthcare spending in the United States has topped $3.5 trillion, or 18% of GDP. Of that, we waste between $1 and $1.5 trillion every year. More than one-third. Wherever the actual number lies, it is easy to understand what that kind of money would mean to students and teachers in this country.

The entire K-12 public education budget in the United States is less than $1 trillion. That’s right—we WASTE more money in our healthcare system than we spend, in total, on primary and secondary education. This may be why teacher protests in Colorado are among the best places to collect signatures for our healthcare ballot initiative. In addition to sub-standard salaries, teachers are experiencing what many government workers at the state and municipal level are experiencing—skyrocketing healthcare costs and declining benefits on sub-par salaries. It’s an ugly picture.

At the end of the day, though, it’s not about the teachers. It’s about the kids. And as healthcare consumes an ever-larger share of tax dollars and personal incomes, we’re wasting money that could otherwise be spent on education and school safety measures. The money we waste in healthcare is rotting our country from the inside out—forcing legislators to make choices they don’t need to make.

Unfortunately, those best in a position to do something about it are not feeling the pain on a day-to-day basis and are not helping to promote big picture solutions.

This is America’s biggest problem today—there is not enough empathy among the affluent to drive real change.

Reforming our healthcare system, starting with serious price transparency that drives competition and forces prices down and quality up, can provide the funds to significantly improve the quality and safety of primary and secondary schools. We could pay teachers better and improve our public schools. We could fund vouchers for private schools at the same time. We waste enough money in healthcare to improve the safety and quality of our nation’s schools and tackle some other underfunded systems while we’re at it.

The bottom line is that we’ve been talking a lot about how healthcare price transparency reform will reduce healthcare prices and increase quality. But maybe instead of trying to compete with other major issues for the hearts and minds of the American public, it’s time to start talking about how one single effort—reducing healthcare prices—can change lives in so many other critical ways. Shedding a bright light on healthcare pricing abuse, creating real competition that drives prices down, and providing a single set of prices for all patients not only reduces the great health divide in this country, but will also reduce the great wealth divide in so many other areas. Isn’t that worth a real investment?
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Is Tri-Partisan a word? Probably not, but it doesn’t matter. Because all I really want to say is that Colorado’s Healthcare Price Transparency Ballot Measure is truly NON-partisan.

Colorado’s effort to enact real price transparency in healthcare went to committee in the Colorado House with strong bipartisan sponsorship and support from Democrats and Republicans. Now the Libertarian Party of Colorado has added its endorsement, agreeing that every Coloradan should have the right to do what the legislature couldn’t—vote to ensure we have free, fair and competitive markets in healthcare.

I’d like to thank Wayne Harlos, the party chair, and the entire board of the Libertarian party for their endorsement. Sitting in on their board meeting, it was clear to me that free, fair and competitive markets are among their most important values. As Americans, we should all feel the same way. We have over two hundred years of experience telling us that the most powerful force in the world is that of the free market.

While there are many well-intentioned politicians trying to figure out how to improve our healthcare system, in the end they can’t do it alone. Government can ensure the safety of healthcare systems and can promote access to healthcare by subsidizing the cost for those who need our help, but government has never proven successful at driving down cost or promoting greater efficiency. Government cannot substitute for the forces of the market in ensuring proper supply and demand balances, simplifying the business side of healthcare, and ensuring the voice of the patient is truly reflected in the healthcare delivery market. That is all best accomplished through competitive forces.

Government payers already comprise more than 50% of healthcare (Medicare, Medicaid, the VA, the military, the Bureau of Indian Affairs, government employees, and others). While there is no clear path to getting government out of healthcare, and that is not our focus right now, we can partner with government by ensuring a highly functional and competitive marketplace that drives the benefits of free and fair markets. That can only be done by us—the people. Many other aspects of government are built on competitive foundations. The Department of Defense allows companies to bid to make everything from bullets to fighter jets. Contractors compete for government highway contracts. But in healthcare, free market competition is absent because a small group of highly monopolistic companies dominate the system. These private sector forces not only control the private insurance side of the market, they also control government with their big money influence. Believe it or not, it is not government sponsored healthcare that is the problem here. It is the big money pharmaceutical companies, health insurance carriers, and monopolistic hospital systems that fight to maintain the limits on competition, both in the government sector and the private sector. The problem is politics, not government-run healthcare. We saw that last week as President Trump signaled that he would back off of his promise to allow Medicare to negotiate drug prices.

The legalized cloud of secrecy that is the current norm in healthcare protects these dynasties and their unfair profit streams from competitive forces, whether the buyer is a government agency or the private sector. Sometimes, you have to know who your enemy really is in order to effectively combat it.

We can only get this done with your help. We need to end the BS in healthcare pricing and to have a little fun to help the fundraising, we’ve just had 1,000 BS Flags (see below) donated to Broken Healthcare. Until we run out, donate $25 and we’ll send you an official BS Flag. Donate $50 or more and we’ll send you ten of them to share with your friends.  Even if you’ve donated before, we have two months of signature collection to go and we need to raise a lot more money to get it done.

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I know what you’re thinking: How can knowing your out-of-pocket healthcare costs be used as Weapon of Mass Corruption? Read on…

A 2014 article in Modern Healthcare reads, “New CMS policy on releasing doc pay data and ACA provision requiring hospitals to disclose charges may signal full price transparency is inevitable.” The article is worth reading, as are the links in the article.

It’s 2018. In many ways, we’ve taken steps backwards since 2014. The article was optimistic. The reality is, it never happened. Hospitals are still not complying with the ACA and no penalties have been imposed on them. The suggestions this week (about 11 minutes into the video) by HHS Secretary Alex Azar that transparency is coming is refreshing, but we should all be skeptical about the implementation of any such rules. They didn’t happen in 2014 and they’re not likely to happen now. That’s what we have to keep the pressure on. The healthcare industry lobbies hard. It makes “suggestions” to regulators. But ask yourself, who is making suggestions as the representatives of patients and employers? No one.

The healthcare industry has taken control of the conversation and, in many ways, has snowed government officials. When it comes to drug prices, here’s a quote from a VOX article a couple of days ago: “Under Trump, drug companies have undertaken a concerted campaign to shift the discussion about drug prices to a conversation about out-of-pocket costs.”

Knowing our out-of-pocket costs accomplishes nothing. In fact, in many ways, it plays into the drug companies’, hospitals’, and insurance carriers’ games. When it comes to drugs, if all we know is our out-of-pocket cost and not what our insurance carrier is paying, then we are doing nothing to drive costs down by making better decisions. If in one place a drug costs $100 and in another it costs $50, but we only know that we have a $10 co-pay (i.e., “out-of-pocket”) then who is pushing for the $50 price? No one. And thus this game of charades leads to higher prices for us and our employers. Partial transparency equals no transparency. That’s why “out-of-pocket costs” is a Weapon of Mass Corruption.

As this article suggests, we are stuck with “half-measures” and the truth is that partial transparency equals no transparency. Legislative philosophy in this country promotes the idea of incremental steps. But in this case, the healthcare industry is carefully guiding those steps. And in doing so, they are perpetuating the status quo by creating the illusion of progress. The truth is that partial transparency is the same as no transparency, so incrementalism accomplishes nothing.

Imagine going into a supermarket where the price of everything is on display. When you check out, your bill reads, “$146.50.” You turn to the clerk and say, “I’d like an itemized receipt,” so she reprints it. This time it says: Vegetables: $15.98, Fruits: $13.12, Deli: $9.95, Paper Goods: $12.76 and so on. Then you say, “no, no, no…I want a truly itemized receipt.” This time it lists everything out, just the way you’re used to, but at the bottom is says, “after you leave the store, our analysts assess a service charge that will show up on your credit card bill. It is based on the following factors: a) how much time you spent in the store, b) how many things you removed from the shelves and replaced, c) whether you used a basket or shopping cart, d) whether you bagged yourself or we bagged for you, and e) whether or not you took up a parking spot in the parking lot.”

Not knowing if that service charge might be $1 or $100, you realize that knowing the prices of everything else turns out to be relatively useless because over time, the store has been shifting more and more cost into the service charge while bringing down the price of other things — creating the façade of lower prices.

These are the kinds of games played in healthcare. Secrecy enables the system to cheat us and our employers every day. Only complete transparency, without incrementalism or half-measures, will get the job done.

If you live in Colorado, please contribute to the Broken Healthcare Action Fund to help us change the law at the ballot box in November. We are collecting 140,000 signatures and it’s proving to be a very costly process. Volunteers have been great, but they can’t collect the more than 1,000 signatures we need every day.

And if you live outside of Colorado, please contribute to BrokenHealthcare.org where we help patients all over the country fight their bills and raise awareness of the issue of price secrecy. We’ve launched a GoFundMe account which is the easiest way to make a tax-deductible contribution and it’s very easy to share with your friends on Facebook or anywhere else. Even if you’ve given before, we need your help. Just $5 for each family member that ever results in a medical bill makes all the difference in the world. And please…share the GoFundMe campaign on your own social media account.

In the end, we need to build a system we can all #trust. We can only do it with your help.
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As is often the case, we somehow become our own worst enemies. While there are many unethical and immoral things happening in healthcare today, we shouldn’t tarnish the image and reputation of those who simply want to provide good healthcare. As is more often the case than not, systems comprised of good people become corrupted for structural reasons. For example, while I don’t know how any hospital CEO sleeps at night knowing they are billing lower-middle-income Americans at chargemaster rates that are many times the fair value of the services they provide, we have created a system that tells them that doing so is ok (in a later piece, I’ll explain why it is NOT legal and simply has not yet been adequately litigated). These hospital CEOs are not all greedy bastards, though there are exceptions. Instead, they rationalize their immoral actions. They convince themselves that they are being shorted elsewhere and have to make up for the lost revenue. They argue that it is “cost shifting,” albeit shifting costs to those who can least afford it. And of course, when compensation is based on profitability, we also provide them with the incentive to rationalize.

The bigger structural problem is that of our own making, or, better said, our government’s making. Start, for example, with the 1945 McCarran–Ferguson Act that exempts insurance companies from Federal antitrust laws. The law was enacted to allow states to regulate insurance companies, much like public utilities. At the time, the belief was that, “the business of insurance is neither commerce or interstate trade,” and thus the Federal Government had no business regulating it under the interstate commerce clause. Jump about to 2018 and ask yourself if that still applies.

Beyond the anti-trust exemption for insurers, there are the so-called “Safe Harbor” provisions granted to various healthcare group purchasing arrangements, exempting certain parties from laws against accepting kickbacks from suppliers. This is why there are so many games being played across the healthcare supply chain, including medical devices, pharmaceuticals, and basic supplies. Such exemptions were designed to assist benevolent non-profit organizations, but that was never written into the rules. So today, these protections are used as Weapons of Mass Corruption against employers and patients. This Wall Street Journal article, published yesterday, explains it much better than I can.

At the same time, it’s clear that the scream for transparency is increasing. Here is another piece from yesterday in USA Today. I believe many in the healthcare industry think they have avoided change for another year. They defeated a bill in Colorado and are well on their way to doing the same in other states. But the people haven’t been heard yet. In Colorado, we’ll be going to the ballot in November. And the chorus screaming for change is growing across the country. It also seems our new HHS Secretary is also joining in.

I hope you’ll join the fight for a healthcare system we can all trust and that works for all of us. We are collecting signatures at a fast clip, and we’re burning through money to do so. We still need over 100,000 more signatures between now and the first week of August. Please chip in and help ensure we get this done.
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“A lack of transparency results in distrust and a deep sense of insecurity.”
-Dalai Lama

“Secrecy is the linchpin of abuse of power…its enabling force. Transparency is the only real antidote.”
-Glenn Greenwald

“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.

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During the past 10 months that I have been drafting, driving, and upgrading an important, but disruptive, piece of healthcare, I have been greatly impressed with our state politicians. During the past year, I’ve gotten to see that attributes like thoughtfulness, altruism, and integrity are the norm—not the exception—for Colorado lawmakers. When I share that with people, it always seems to surprise them. But think about it. A state legislator earns $30K a year and isn’t given enough of a budget to keep a 22-year-old kid on the payroll year round. Why do they do it? Certainly not for the money. Power? They work incredibly long hours and have to deal with some pretty absurd things. It’s a fairly thankless job, and when you are one among one hundred, you don’t really have much power.

What has impressed me is our legislators’ desire to do the right thing. I haven’t run across anyone yet that is clearly acting on the behalf of special interests, as so many believe. And politicians clearly know when the special interests are feeding them self-serving messages. They listen—more than I would have the patience to listen—but they listen and then tune things out when appropriate.

Our non-partisan bill, HB18-1358, legislating broad-based, full healthcare price transparency, represents big change, for Colorado and for America. It will upset the status quo. At the same time, it enjoys strong bi-partisan support inside the Capitol and outside the building. And while there are many special interests voicing their opposition, there is no one representing the individual, unaffiliated voter—except for their elected officials. That’s what American is all about. That’s the nature of representative government. And that is what has impressed me the most. Legislators truly strive to represent the individual voter. The Capitol is open to anyone and your elected officials are very accessible. Yet private citizens are not roaming the capitol to talk to their legislators every day. Private citizens are out at work. They’re raising their kids. And for the most part, they don’t have time to compete with the lobbyists for whom whispering in the ears of politicians IS their work. The lobbyists are there, every day, working to shift political points of view away from the greater good and towards special interest groups with deep pockets.

So please, let your politicians hear from you (easy legislature lookup). We have let them know what you think, but it’s better that they hear it directly from you. I started this effort to ensure the real voice of real people wanting real change is heard, because there is no one standing up for the patient—no “special interest” group representing all of us who need healthcare during our lives. I also wanted to ensure real solutions were designed without the undue influence of special interests. The special interests have been heard and many have had good ideas, too. Those good ideas have been incorporated into our bill.

If you’ve never been to the Capitol, it’s a beautiful building and the staff is very helpful. Just ask for directions and you’ll easily find your state Representative and Senator’s office. Some are in buildings on either side of the Capitol. You can just walk into any of these buildings. And if they’re not there, bring a letter to slide under their door. Most have a staff member who will be there as well. Your representatives are thoughtful and they are listening, so let them hear from you.

The time to get loud is now. Please write. Please visit. And please show up for the hearing on Thursday the 26th, late afternoon. I’ll send more specifics as they become available. The legislature still has 200 bills to try to hear in the next two weeks, so their schedule is going to be in flux. And know this: your elected officials really are on your side. That’s what has been so refreshing. Tell them you know that, too! Tell them that you will support them in November (if they are up for reelection). Tell them you won’t let PACs sully what you think by outspending them 100 to 1. Encourage them to do what they believe is right. I believe that if they hear you, they will do just that.

Finally, to help ensure the pressure of the ballot remains real, and that we get this done through the ballot if the legislature fails, please contribute today. We are collecting signatures at a fast pace. They are costing about $1.50 per signature so please simply do the math and decide how many signatures you would like to fund. One for every member of your family? One for each of your employees? We’re having a feature added to the website so you can monitor the signature count in real time as well. I’ll let you know as soon as that is available.

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If this doesn’t motivate business owners and employers to invest in this cause, I don’t know what will.

In WMCs — Part One, I described an ongoing type of system collusion between insurers and hospitals that characterizes our healthcare system. The result is a deception that most employers and patients don’t even recognize. But hospitals raising their base prices to give insurers bigger “discounts” is only a tiny piece of a much bigger system of financial gamesmanship, which weakens our healthcare system every day. The Weapon of Mass Corruption I would like to detail today is the way insurers can work around caps to the “medical loss ratio” (MLR) to increase both payouts and profits. As usual, the bottom line is increased prices.

An extreme example of this was revealed about six months ago by Chris Vanderveen, an investigative reporter for 9News. He reported a story that has become known as “The $169,600 Check.” A patient named Debra Altman had back surgery, which was mostly covered by her husband’s United Healthcare insurance policy. A year after surgery, long after the related claims had been processed, the Altmans received a $169,600 check from UHC. Almost immediately thereafter, they received a bill from a company, BHLH LLC., for the very same amount. That’s when the Altmans reached out to Chris Vanderveen, who does an ongoing series on outrageous medical bills. The Altmans were obviously not worried about their out-of-pocket costs. But $169,600 is a great deal of money and they were worried about turning it over to a company they had never heard of.

Chris did some investigating and learned that the “neuromonitoring service” for which the Altmans were being billed, and for which UHC was happy to pay, should cost at most $5000 – that Medicare would pay only $2000. I decided to do some investigating for myself.

I thought the deeper story should have been about why United Healthcare paid $169,600 for what, by most estimates, should have been $2,000 to $5,000 at most. I thought the reason United paid the bill — even though they could have told the neurology firm that they were crazy, they were getting $5,000, and they should take it or leave it — had to do with the MLR.

In the most simple terms, the MLR is simply the quotient of claims divided by premiums for an insurance company (the actual formula is slightly more complicated). Under the Affordable Care Act (aka ObamaCare), the MLR is capped at 85% for large insurance carriers. The idea is that at least 85% must go to claims, not profit. It was an awful concept that completely corrupted the typical incentives for businesses in a competitive system.

Under the 15% MLR cap, the problem is that driving down claims could cause the MLR to dip below 85%. In that case, they’d have to reduce premiums or even refund premiums to their customers. This perverted cap makes it so that insurance carriers actually want to see claims go up, not down, since their profits are really a function of the magnitude of claims.

Debra’s husband, Dave Altman, works for a $50 billion company, and the company runs a self-funded insurance plan. That means it wasn’t really United paying the $169,600 — all they were doing was making a decision on behalf of the employer. Keeping the MLR up allows them to essentially pocket 15% (100% – 85%), netting United about $25,000. Pretty unethical, don’t you think? And the employer doesn’t even know it. But if agreeing to pay out $167K more than was necessary to pocket $25K wasn’t bad enough, just wait until you learn what was really going on.

In its contracts with employers, insurance carriers essentially say, “look, sometimes your employees go out of network. We try to help them avoid that, and you should too, but it will happen from time to time.” They go on to say, “but don’t worry, you see we have this other network outside of what your employees know as ‘in-network.’ So while the charge will be an out-of-network charge, we’ll save you money by tapping into our extended network (referred to as a wrapper network) where we get lower rates than the billed charges. When we do that, we keep 1/3rd of the savings. That way we all win.”

To the employer, that’s great news. Their large, national insurance carrier is going to protect them from high out-of-network charges. But they don’t…

It seems that what was really going on, which I’ve confirmed with multiple industry insiders, is that the bill from the neuromonitoring firm was likely closer to $500,000. It’s a fictitious number. Then the insurance company says, “Through our wrapper network, we only pay $169,600.” That’s about a $330,000 savings. United keeps a third, netting $110,000. The employer — well, they paid $169,600 plus $110,000 for a total of $279K — for $2,000 worth of services. But they never know it because it’s buried in the numbers for a large company.

I confirmed with Dave Altman that they were never able to get a copy of an original bill. They were told that was between the neurology firm and the insurance carrier, despite Colorado law clearly stating that they are entitled to an itemized bill. And to make matters even worse, I’m told the contracts between the insurance carriers and employers prevent them from auditing these transactions because they’re outside the “normal process.”

Now, I cannot tell you the numbers above are precise. They’re just close. But the scheme is precise — this is what goes on. We can’t know the exact number because it’s all kept confidential. This is one of the many deep, dark secrets of legalized collusion that goes on. If that doesn’t tell you why employers should be screaming for transparency in all respects, I don’t know what does.
Our comprehensive price transparency will shine a light on these dark weapons of mass corruption.

Please help me put an end to this insanity. Between now and August 5th, we’ll need approximately $1,500 a day to collect 1,000 signatures a day (with what we already have, that will get us to about 150,00 signatures). It’s proving relatively easy to get signatures — we’re only spending $1.50 for each because it’s such an easy message — but it adds up quickly. Please make a small contribution today. And please share this with your company’s CFO, benefits managers, and anyone else and ask them if they’ll make a company contribution. I’m also happy to come talk to them about how they can address these problems and many others.

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