Friday, December 30, 2016

Heathcare in The United States - the Real Cost

Important Disclaimer: I do not purport to be an expert on the complexities of the Healthcare Policies or processes in any given country. I can however, speak with some authority on personal experiences with the Healthcare systems and cost differentials in Australia, Singapore and the United States.

One simply needs to tune into any mainstream media channel to hear the latest on a variety of different opinions by 'experts', politicians, journalists and 'John Q Public' on the state of Healthcare affordability in the US, what is right or wrong about the Affordable Care Act (Obamacare) or the heartbreaking stories of people not getting the treatment they require, or 'losing the farm' by having life threatening episodes attended to within the system.

Even the new President-Elect Donald, Trump seems now to be shying away from his pre-election promises of 'Repeal and Replace'.

This year, my family were met face-on with the interesting nuances of the cost of Healthcare in the US, when our 9-yo son was rushed to hospital and had to undergo an emergency Laparoscopic Appendectomy (or simply put, he had his appendix removed through a kind of keyhole surgery).

At the time, with my thoughts being only on the pain that my little boy was suffering, the last thing on my mind was how much it was going to cost. Many parents know the trauma one goes through when they see their own flesh and blood writhing in pain.

It didn't occur to me to question why there was an administrative assistant wheeling around a mobile payment unit throughout the ER and taking me away from holding my son's hand to swipe my credit card for a 'deposit' - after all, I have one of the top private medical insurance coverages available.

Let me be clear - The hospital and staff could not have been nicer or more professional - they got us through the drama and we came out the other end with nothing but utter gratitude that our boy was well and we didn't even need to spend one night in the hospital. He was sent from the pediatrician to the hospital emergency rooms around 11am. By 7pm, the procedure was done and he was discharged... a week later, back to playing flag football and basketball.

Then came the bills...

The emergency incident occurred in June this year - I just received and paid the final (of many) bills this month (December).

The billing process itself left me quite astonished - in any of the other countries that I have lived, the hospital is responsible for coordination and itemization of the billing. Any monies owed get paid to the hospital and they take care of all of the other components.

Here in Florida, I received separate bills from the hospital, the surgeon, the anesthetist, the labs - different bills for surgical procedures, ultrasounds, CAT scans... just to name a few. To actually reconcile all of this was fruitless - I reached out to the insurance company (who were extremely helpful) and the hospital (not so much), but in the end, I just had to keep paying bill after bill hoping and trusting that all was well with the charges. It would take a CPA at the least, to reconcile the pages upon pages of documentation.

Now here comes the part that totally floored me - although any amount of money could not buy the happiness I have to know that my child is safe and healthy...

Having been exposed to other systems and further talking through this with friends and family in Australia, under the Medicare system, the maximum I would have paid down-under for the procedure would have been $0.00 (notwithstanding some small co-pay for any general practitioners or specialists)... now before you jump all over me and say, "but Pete, you're an idiot... Medicare is not free, you would have paid for it in your taxes", I totally get it. HOWEVER - coverage under Medicare for citizens is on average ~2% of your annual salary. This cannot come close to the cost of private insurance in the US, which does not cover everything (by any means), with deductibles and co-share payments throughout the entire process (I'll get more into that shortly).

For any other doubters that say Medicare is not the best coverage for your family in Australia (which I do not disagree with) due to potential queues for elective surgery, shortage of beds in public hospital wards, etc, I also spoke with another friend down-under who pays for top private insurance coverage. Her daughter underwent exactly the same procedure this year, and their total out of pocket was $1,700 in a private hospital - private room and all. They thought this amount was preposterous... until they heard my story.  :)

For Aussies that cannot afford private insurance, Medicare gets the job done - nobody is denied treatment and no family will lose their life savings and even their home (I have seen many horror stories of this happening in the US). I have even watched videos of people sewing up large gashes in their own body instead of seeking medical help, just so they do not have to break the bank and go into debt for many years. Often, these same people cannot afford basic healthcare coverage.

Just as an aside - in Singapore, my actual insurance premiums were significantly less than the cost of Medicare in Australia and although there is co-payment involved in this, it still only kicks in after a very large threshold of expense (and no deductible)... and Singapore has some of the world's top rated surgeons and medical facilities.

Back to the US and the appendectomy - I will not go into exact numbers (it will do my head in), so I will just ball park it for the sake of my major point.

I estimated this year I have paid well in excess of US$10K in medical insurance premiums.

When we went through the episode in June, the hospital bill (charge) itself was ~US$29K. Of this, I had to pay the deductible and co-payment (along with the other providers aforementioned). Interestingly, the insurance company has a 'negotiated' rate with the hospital for members (~$13K), yet the co-payment is not based on this figure - it's based on the initial hospital billing - go figure! (if I didn't have insurance, I would have had to pay the entire original amount)... this concerns me, because it means that anyone who cannot afford insurance are billed more than double what the insurance companies have negotiated - that extra $16K in my mind must therefore (?TBC?) be pure profit from the people who can least afford it.

Anyway - I digress - in short, the total billings from the hospital and other parties totaled around US$35K plus (nowhere near what was paid by insurance of course - that's all negotiated)... of this, my out of pocket was (approximately) $3K deductible + >$6K in co-payments. Remember - we did not even stay in the hospital overnight!!

In the US, I paid >US$10K in insurance premiums + >$9K in actual fees (at least US$20K for the year with less than one day spent at the hospital receiving any actual treatment)... and remember, I have one of the best possible insurance packages available for the family. Comparatively, for a similar year, I could have got away with 2% of my salary in Australia and maybe around ~SGD$2K in Singapore.

So - why is this the case? I am left wondering that to this day (now that I've just paid the last $3K for services that were actually rendered some 6-months ago... I am certainly no insurance expert either - but what I do know is that when anything is insured (car, home, life. health) there are very complex algorithms that these companies use to determine risk, premium charges, deductibles, co-payments... all to enable them to not go out of business. In short, they need to bring more money in than they have to pay out - that's how any business operates - on profit.

The more the insurance needs to cover, the higher the premiums - the cost to the consumer to insure a Mercedes is much less than insuring a Kia. The companies would know the risk associated with having to pay out on either of those policies.

So in case you haven't read between the lines - the observation for me is one of governance and regulation. The healthcare system in Australia is highly regulated, as is the amount that hospitals and practitioners are allowed to charge (public or private). When there is less to 'cover' (pay) for the insurance companies, premiums are lower and the less impact on the consumer pocket-book.

What I do not know, is what kind of regulations govern the US healthcare system? I've heard (and read) that the price for certain procedures in certain locations, states, institutions vary thousands of percentage points for the same services rendered. Do the Government have input or oversight into what the hospitals or medical practitioners charge, their processes for billing or calculation methodologies? What about the relationships and deals setup between these institutions and the insurance companies... are these governed or regulated?

I'm open to any feedback any answers to the questions I've raised.. I want to be able to understand it better.

As of now, it makes me think that the US leadership should spend some time thinking about the regulation and governance of the entire Healthcare industry and processes and maybe - just maybe - the problem of rising Healthcare Insurance costs might start taking care of itself.

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