When I talk with friends, family and business acquaintances universally they answer yes to one or more of these questions, with emotional responses about what it is like to interact with the healthcare system in the United States. Often, they feel the doctors, nurses, and hospitals (the providers) have done a good job. The business side, which includes the insurance companies, are intentionally opaque, needlessly confusing and teeming with densely impenetrable contracts that allow them to arbitrarily deny benefits after services are rendered.

I have been a comparatively heavy user of the system the past 35 years. I have had two brain surgeries, close to two dozen out-patient surgeries and procedures, two knee surgeries and cancer.  I have had eight different employers and processed claims with nearly every health insurance company in the market that included PPOs, HMOs, both group and individual plans.

Because of this history, I have a story to tell and insights into the workings of this complex, highly non-transparent industry. I currently do market research for a healthcare technology company that has introduced me to people that have worked inside the beast and have shared their stories with me.
Before one of my brain surgeries, I had two dozen MRI scans. Each scan was $2000. My insurance carrier had determined $1200 was the “usual and customary rate”. I was on the hook for the remaining $800 for each scan. I spent 10 years paying what is termed “balance billing”.

Unfortunately, this is not an isolated example. It is one of many ways the system is structured to insulate insurer profitability by shifting the liability to the provider and the patient. Providers have no idea what their costs are to deliver services. What they charge is an approximate estimate that is negotiated depending upon the bargaining power of parties.

This raises another aspect of the healthcare industry that makes it unlike any other. In most markets, there is a seller and a buyer. The seller has the product/service and the customer pays for it. Healthcare is triangulated. The provider delivers services, the patient receives the services, but the insurance company negotiates prices and pays for the services. In many instances, there is a fourth side added when an employer purchases the insurance. In both structures the patient is liable to the provider for the bill including anything the insurer decides is outside the scope of their coverage. Patients that believe an insurance company has not honored their policy (contract) must hire and pay an attorney to litigate a very large and incredibly wealthy adversary.

The leading cause of personal bankruptcies is medical bills. In the 1980s and early 1990s, I worked as a commercial credit manager. Some of that was in the home healthcare industry. During those years I attended the NACM Graduate School of Credit and Finance at Dartmouth and worked with credit managers that did lobby work in Washington D.C. The banking industry was heavily lobbying members of Congress at the same time about the discharge of student loan debt. Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 that said student loans could no longer be discharged in bankruptcy. This allowed interest to continue accruing along with counseling charges and made student loan debt perpetual.

I am concerned the provider networks that are now being merged with insurance companies will lobby and enact similar exemptions for healthcare debt.

Subsequent articles will examine different aspects of this market that will hopefully help you make some sense of how profits for the players are so structurally “baked” into the system. Any reform needs to go far beyond what the ACA has started. Democracy is based on an educated and involved population. Healthcare is a Master’s level class. We want to do our part to teach from our own experiences.