“Bits and Pieces” Healthcare Legislation #2: Overcharging the Uninsured

Wednesday, August 19, 2009

Earlier today, in a piece entitled “A Bits and Pieces Approach to Healthcare Legislation”, I suggested that the President and Congress abandon their attempt to devise all-encompassing healthcare legislation in favor of writing new law to address individual issues. The example I gave was about resolving the problem of pre-existing conditions. Here’s a second item Congress could also dispatch with speed and efficiency even while they continue to argue more esoteric, more complicated strategies for healthcare reform.

Doctors and hospitals charge their insured patients prices which reflect what has been negotiated with the underwriters – Blue Cross/Blue Shield, Aetna, Prudential and others. Uninsured patients are often charged significantly higher prices for those same services. Why?

The only reasonable explanation would be certainty of payment. The doctor or hospital knows it’s going to get paid by the insurance company, while it may have serious collections issues with some of the uninsured – particularly given than many families who do not have coverage make lower and less stable incomes. The question is, do these price differentials reasonably compensate the service provider for the additional administrative costs and real potential for lost collections?

It’s not an easy question, but rather one which requires research by finance and industry experts which may have already been done and, if not, can certainly be done quickly.

If, as I am going to assume, the uninsured are being over-charged, there are solutions short of providing everyone with coverage. That’s our goal of course, but doing so may take time and/or may be an incomplete process, still leaving millions without any or adequate insurance.

One option is to simply legislate that the price of a medical service charged to a patient must be the same whether or not that patient is insured – and let the healthcare industry and insurance underwriters work out the details. If necessary, the legislation could include a government subsidized default insurance program – the healthcare version of mortgage insurance – to guaranty payment. Premiums would be paid by the uninsured.

Sure, I tend to over-simplify everything, which I actually consider to be positive trait. My personal intellectual deficiencies aside, the bits and pieces approach to healthcare reform is clearly superior to the overly-complicated, often incomprehensible, impossible to explain legislative process our President and Congress are struggling to accomplish. Even if it turns out that individual laws we pass, one issue at a time, need to be revised in light of future revelations, the effect of the approach for its clarity, timing and impact will be well worth these relatively minor adjustments.


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