This is the final of a three part article that attempts to explain why our healthcare system is so difficult to change, let along “fix”. This part explains the role of the third party payor and then summarizes the three articles.
So who pays? Enter the third party payor – insurance company, the state (medicaid) or the federal government (medicare). The person (patient) may enter into a contract with an insurance company to pay for specified conditions, services, etc. in exchange for a periodic payments by the person. In the case of the state or federal programs, those eligible under the rules for state or federal government will have their care paid for less specified deductibles or copays.
Again, what are the incentives? Cost is now a concern. Whatever the third party payor, they want to minimize costs and seek out ways to pay a reduced amount or avoid paying all together. Insurance companies usually negotiate with physicians and the other players to pay a reduced percent of the costs “billed” or an agreed amount for specific services, tests, etc. In the case of the state or federal programs, they make a unilateral decision to pay a fraction of the costs billed – around 50 to 60% of the bill. Sometimes it is more, sometimes less.
So lets recap:
Person (patient) – after the decision to seek care, largely depends on the physician to make the calls. Cost is no object. Nothing’s too good.
Physician – the decision maker. Inclined to order more than might be necessary in order to make sure he/she covers any possibiliry and to avoid possible law suits. Not concerned about costs.
Clinic or Hospital – responds to orders of physician. Costs are not the primary focus. However, the incentive is to get patient out of hospital as quickly as possible as the reimbursement will be less than 100% of “billed” costs and payment is limited to a number of days depending on the diagnosis.
Ancillary Services (Laboratory, Radiology, Cardiology, etc). Responds to the physicians orders. Concerned about costs only to extent that they know they will not be reimbursed 100% for the billed costs.
Third Party Payor – Costs are the primary concern. Really isn’t concerned about the health or recovery of the patient. Not unusual to deny reimbursement and always, always pays less than 100% of billed charges.
This concludes the review of the healthcare system and addresses the role that each of the major players have in the process of providing care.
We have looked at five of the players typical of a treatment encounter.
- Patient – present themselves for care. Largely turns decision making over to the physician. Cost is not a factor
- Physician – Essentially becomes the decision maker. While the physician “recommends” a course of care, patients are more likely than not to accept the recommendation. Therefore the physician essentially becomes the decision maker. Cost is not a factor.
- Institution (clinic or hospital). Provides the services ordered by the physician. Cost is not a factor.
- Ancillary Services – provides support services such as laboratory, x-ray, cardiology, etc. Cost is not a factor.
- Third party payor – Cost IS a factor. Inclined to deny care when possible. Will take actions of minimize the cost for care, thus effectively controlling what services will be provided.
Is it any wonder, our health care system is a mess. Still, the care in the best in the world.