The Great American Healthcare Heist

A Saga of Overpayment and Underperformance

Imagine, if you will, a scenario where every American overpays for healthcare by a staggering 30% to 50%, funneling trillions of dollars into an abyss of inefficiency and greed.  It's not just an imaginary scenario; it's our reality, a reality where the healthcare industry, much like a skilled magician, has pulled off perhaps the greatest heist in American history, right under our noses.

The narrative isn't new.  Dave Chase wrote expertly about it eight years ago here, but the intricacies and the audacity of it all never cease to amaze.  Picture this: the United States, a global powerhouse, spending more on healthcare than any other country, yet struggling with a middle-class economic depression largely fueled by healthcare costs.  It's a head-scratcher, isn't it?  But as you peel back the layers, the culprits and their methods become glaringly apparent.

PPOs and MLRs

Enter the world of PPO Networks, a labyrinth designed not to save but to spend.  These networks, with their faux discounts, have employers and their workforce paying two to four times more than Medicare rates for healthcare services.  It's like walking into a store, picking a product off a 50% off shelf, and then realizing you've actually paid double the original price.

Now, let's sprinkle in some PPACA (Patient Protection and Affordable Care Act) magic with its Medical Loss Ratio (MLR) standards.  On paper, it's a noble effort to ensure that a significant portion of healthcare premiums are spent on medical costs.  However, in a twist of irony, it's led to insurance carriers favoring higher claims.  

Why?  Because their overhead is a percentage of the total costs.  Fully insured, large-group carriers (mostly PPOs) must spend 85% of their premium revenue on medical claims.  That only leaves them with 15% of their total revenue to detect fraud, improve systems, improve quality control, and pay overhead costs.  If one of these fully insured carriers actually succeeded in reducing claims, i.e., making your employees healthier, they would shrink their profits.  How do you suppose the shareholders and private equity giants behind them would react to that? 

More spending equals more profit.  It's Economics 101, but with a perverse twist that disincentivizes cost-saving measures like wellness programs, fraud detection, and preventive care.  The very initiatives that could stem the tide of rising healthcare costs are devoured in the bureaucratic administrivia of the Government Healthcare Complex. 

Hospitals and insurance carriers, in a dance of complicity and undue complexity, have set a stage where costs are obscured, care is commodified, and the middle class pays the price.  And what a steep price it is, with future generations shackled to an unsustainable financial burden, making the American Dream seem more like a mirage.

Enter RBP

But every story has its hero, or in this case, a beacon of hope: Reference-Based Pricing (RBP). This innovative model operates on a simple yet revolutionary premise: rather than relying on the arbitrary and inflated rates set by providers and PPO networks, RBP benchmarks payment rates for healthcare services against an established standard, most commonly Medicare rates.  This approach not only introduces a much-needed dose of transparency into healthcare billing but also ensures that payments reflect the actual value of services rendered rather than the whims of a profit-driven market.

Here's how RBP typically works: An employer, fed up with the spiraling costs of providing health benefits, decides to adopt an RBP model for their employee health plan.  Instead of contracting with a traditional PPO network that negotiates discounts off billed charges (which are almost always grossly inflated), the employer sets reimbursement levels for healthcare services based on a percentage over Medicare rates.  For example, if Medicare pays $100 for a particular service, the employer's RBP plan might pay $140, reflecting a 40% markup over Medicare.  This rate is transparent, predictable, and based on a publicly available benchmark, offering a stark contrast to the cloudiness of traditional healthcare pricing.

RBP's effectiveness is not limited solely to savings.  By decoupling healthcare payments from the inflated charges of the traditional fee-for-service model, RBP encourages patients and providers to engage in more meaningful conversations about the cost and value of healthcare services.  Patients become more informed consumers, questioning the necessity of expensive procedures and exploring more cost-effective alternatives.  Providers, in turn, are incentivized to focus on the quality of care, rather than the quantity of services billed, fostering an environment where value takes precedence over volume.  Each Reference-Based Pricing (RBP) implementation marks a crucial win in healthcare reform.  By educating providers and patients, and removing insurer middlemen, we empower direct, informed negotiations.  Every success simplifies healthcare, advancing us toward a clearer, more transparent system.  Step by step, we're freeing healthcare, one employer, one family, one doctor at a time.

It's Never Easy.  But When is Corrective Disruption Ever Easy?

Despite its potential, RBP is not without challenges.  Providers accustomed to the higher reimbursement rates negotiated by PPO networks may initially resist accepting RBP rates, leading to negotiations and adjustments as both parties navigate the new landscape.  Moreover, the success of an RBP model hinges on effective communication and education, ensuring that both employers and employees understand how the system works and the benefits it offers.

There is no doubt that the path to redemption is fraught with resistance.  The healthcare cartel, much like OPEC once did with oil, maintains a stranglehold on prices, driven by a singular motive: profit.  But just as the oil embargo eventually gave way to alternative energy sources and innovations like fracking, the healthcare industry, too, faces the inevitability of change.  RBP and similar models represent the fracking of the healthcare industry, a disruptive force working to break the cartel's grip.

In this narrative, employers and patients alike are called to arms, urged to demand transparency, to question the status quo, and to embrace models that prioritize value over volume.  It's a tall order, but the stakes couldn't be higher.  The saga of American healthcare is at a crossroads, with the potential to either perpetuate a cycle of overpayment and underperformance or to chart a new course toward affordability and equity.

For most, the choice is clear, but the journey is complex.  It requires a collective awakening, a recognition of the heist that's been perpetrated on the American people, and a commitment to reclaiming not just our healthcare but our economic vitality.  The great American healthcare heist is not just a tale of deception and loss; it's a rallying cry for reform, a call to action that we can no longer afford to ignore.