Let’s look at our American healthcare system and how our doctors, hospitals, and medical staff get paid for their work. If you’ve been following my healthcare discussion, you’ll know it’s complicated.
1. Veterans Administration. Most of the services provided by the VA for veterans is delivered through government-owned facilities, so the cost of the services is the same as the fees for the services - the federal government assumes all the costs. However, the VA has outsourced some of its services to the private sector, and in those cases the federal government reimburses those facilities and doctors at a negotiated rate. This kind of payment is known as fee-for-service, which we’ll be talking a lot about in this post.
2. Medicaid. Medicaid programs are designed to support low-income Americans, and all the costs are assumed by the federal government and the state government (for certain elements of the program). In contrast to the VA, Medicaid operates completely on a fee-for-service basis. The federal government establishes reimbursement rates for every kind of healthcare procedure you can imagine, and doctors cannot charge more. They get reimbursed just for that rate. That’s one reason why a lot of doctors choose not to treat Medicaid patients - they feel the reimbursement rate is too low.
3. Medicare. Medicare is an insurance program funded partially by payroll taxes and partially by program participants, and it also operates completely on a fee-for-service basis. The reimbursement rate for those services are set by the federal government, and doctors can choose whether they want to accept Medicare patients. But in addition to that reimbursement, most Medicare services also come with a co-payment, for example 20 percent for doctor visits, that’s paid directly to the doctor by plan participants.
4. Private Insurance. Employers and the ACA Healthcare Exchanges provide health insurance by private companies, who each negotiate with hospitals and doctors to set fee-for-service rates. Like Medicare, most of these plans also include a co-payment that’s paid directly to the provider by the patient. It can be extremely difficult to find out what the actual costs are for medical services, because there are so many different negotiated rates. And beware going outside the network of approved doctors within your insurance network! That can lead to a lot of extra costs for patients.
5. No Insurance. People who are paying for healthcare out of pocket don’t have the negotiating power of the federal government or large insurance companies to help get the best cost, so they are often stuck with the “list price” for healthcare that may not have a lot to do with the actual cost of the service they are getting. The list price may be artificially inflated just to make it look like big insurance companies are getting a big discount. And these prices can vary hugely from place to place.
One thing all of these programs have in common is that patients often have to get permission from the payer for a procedure or operation, especially when it’s an expensive service. This often leads to a complicated process of making judgments about the efficacy and necessity of various procedures or drugs, which can be frightening and frustrating for patients.
Vox.com’s healthcare team that includes Sarah Kliff has been spending years looking into healthcare costs, and they’ve found that not only is healthcare more expensive in the United States compared to other countries, but there is also huge variation in prices charged.
Moving to a universal healthcare program in the U.S. will eliminate a lot of the administrative costs that are involved in making our complicated payment system work, and it will allow all people access to similar services and quality. The key is to ensure that we make that move without compromising the programs that protect our most vulnerable people, like disabled children, elders in nursing homes, and veterans that have unique and often expensive healthcare needs.
This post is sponsored by Marty Walters for Congress, FEC ID C00639732
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