First of two parts
By Andrew Gerns
We all paid for Polly.
The other day, I did the funeral for a woman. Let's call her Polly. She lived alone, worked as a cashier in a gas-station/variety store 50 to 60 hours per week saving $5 here and $20 there to "pay off" the bills she carried after a being hospitalized for a seizure. As far as we can tell, her care was very good. Care was not the problem. The problem was that she was never going to pay her bills in anything like a normal lifetime.
She died of a massive stroke. She was able to have some of her organs donated to another. We prayed over her body at her bedside and did a pauper’s ceremony after she was cremated in a cardboard box.
I saw some of Polly's healthcare bills before she died. She was charged the highest possible rates that her hospital and most of her providers could charge. I know because I carefully track my own, everyday costs—and I am reasonably healthy—and I saw the difference that the same hospital charged Polly and what they charged me and my insurance company, and what my insurance company and I actually paid.
Between the two of us, I was the lucky one. Not only do I have insurance, but generally I do not have to pay the difference between what the hospital charges and what the insurance pays, except for a comparatively tiny co-pay. Part of my premium goes to pay for the negotiating power of the plan that my church-employer can pay for. Polly had no one to negotiate for her.
The only provider who cut her a break was her physician who often wrote off his care for her. He would make sure he bought his gas where she worked so he could check on her without her going to the office. On her death, she had mounds of charity care forms that were incomplete and unprocessed because either she did not understand them, was too busy working, or was too darned depressed.
Polly's story is everyone’s story. She is not alone. She was a little luckier because she had a small circle of folks who cared for her. But her story is a story about how astoundingly backwards our so-called health care system is: how fees are structured and how contracts with providers are negotiated.
I'm a priest not an economist, but I have spent nearly half my ministry in healthcare and this is what I have learned about how we pay (or don't pay) for our healthcare and what it meant to Polly and how we all pay in the end.
Most health insurance plans negotiate the rate they will pay with the provider or network of providers they will use. This provider could be a hospital and it might also be a pharmaceutical company.
This is why someone’s insurance will tend to emphasize one or two pharmaceutical companies over another regardless of what medication is needed and why most plans require extensive paperwork and appeals if a patient is prescribed a drug that is "off-list" and why patients are often "encouraged" to use generic or "clinically equivalent" brands through the creative use of co-pays. And why doctors are forced to use a ladder approach moving from the most general drug up to the most specific, in an attempt to keep that drug either generic or on-list, but which many times ends up costing patients lots of money in co-pays both in drugs and repeat visits and in mind-boggling waste because of both the paperwork and the volume of unused prescriptions.
But the thing I want to focus on is how hospitals and other providers have to negotiate rates with insurers and how that affects both the Pollys of this nation as well as the insured. The idea is this: the insurer wants to pay as little as possible for health care services but the provider needs to earn as much as possible through the money it collects.
In the "old days," a hospital had one rate system, usually covering three distinct operational areas: "room" which paid for the care the person received while in hospital, "board" which paid for support services that made the stay possible, and physicians who were paid separately. Often other providers and specialist areas were paid separately, too. In these "old days" there was an old-style Blue Cross, which covered hospitals, and a Blue Shield, which covered physician costs.
The system was simple, but was based on several assumptions that no longer apply about how health care was delivered: longer stays, a building boom in hospitals (that was both government-encouraged and market-driven) and the fact that providers were pretty much in charge of setting the costs.
The big disadvantage was that there was no way to contain costs and no incentive either. When the revolution of medical technology really took hold and every hospital, no matter how big or small, got into a space race of having to provide all the services and technologies that a competitor might provide. Every new technology both drove up costs and increased what hospitals charged. The old system had lots of flaws and it left many people out. It was also based on assumptions about who worked where, for how long and for what kind of company that no longer apply. The whole house o' cards collapsed in the 1980's.
The first attempt to contain this was the invention of DRGs. You know: the idea that the average appendectomy or child birth costs "$X" so that's what insurers would pay. If hospitals could keep costs below "$X" then they kept the difference, and if it cost more, then they'd eat it. The hope was that over the broad average of a typical year there would be more money kept than lost. It looked good on paper but had problems in reality. Still, some version of this tool is still with us today.
The next thing that happened was that it was decided that "cost-shifting" was bad. Very, very bad.
Cost-shifting means that a provider would pay for its poorer or money losing patients (who might not have been poor or uninsured but whose DRG-related insurance did not cover the cost of care) by spreading their costs over the whole pool of all their insured and wealthy patients. In other words, thems that had coverage helped pay for thems that did not.
When looked at micro, it seems unfair that my insurance rates should be higher because somebody else could not pay their bill. Cost-shifting became anathema in the era of the infamous Reagan "welfare queen." It was a rhetorical flourish describing a reality that never really existed but surely won votes! Cost-shifting was deemed to be bad because it seemed to encourage waste, fraud and personal irresponsibility.
But on the macro level, the end of cost-shifting meant the end of an important social contract that all of us together would share our resources to care for those who have fewer resources available to them.
The inability to address that basic social contract is the elephant in the room when it comes to talking about paying for health care today. The question comes down to this, who pays for Polly?
Tomorrow: Confronting the moral questions.