AEIdeas

The public policy blog of the American Enterprise Institute

Subscribe to the blog

Discussion: (86 comments)

  1. Hopefully, the government won’t go after these surgical centers, but I have my doubts. If it does, my hope is that Americans will fight it off.

    I’ve been thinking about this recently. There is a growing medical tourism industry and that represents a worldwide free market in health care where providers are free to use their creativity to improve healthcare in ways that are blocked by sclerotic socialized and semi-socialized systems.

    There is no worldwide regulatory regime to mess this up. Countries naturally compete with each other. The outcome is so far predictable – prices are dropping and outcomes are great and getting better. Competition for patients provides all the incentive needed to improve both comfort and outcomes. Competition – the best regulator of all.

    This is one very successful model for surgery in India . Costs are driven down by economies of scale. This hospital performs vastly more heart surgeries than any other hospital and at a fraction of the price. The large volume of surgeries allows surgeons to specialize in particular types of cardiac surgeries and they are thus able to gain unprecedented expertise, improving outcomes for patients and reducing the hit to their wallets.

    Dr. Shetty is planning to open more centers closer to the U.S. and anecdotally, I know of several doctors who have opened clinics outside of the United States to compete in this market.

    If local regulators burden the industry, there will always be countries (particularly in the Caribbean, if I had to guess) that will be more than happy to accommodate surgical centers and clinics. We may have a free market in health care yet – on a global rather than a local scale. And that might very well be even better.

    1. Nice link about the surgery center in India, not sure I caught that one before. I am skeptical about the claims that the Indian hospital is much more cost-effective because of “economies of scale,” as that doesn’t usually apply to service businesses like surgery. Sure, by more efficiently using the physical plant of the surgical center and driving down prices of physical inputs by buying in bulk, like the sutures mentioned in the article, you will get some cost savings for services too, but those benefits can’t drive down costs by 50-90% like they’re claiming. The biggest component of costs is likely salaries, which they’re either cutting down on the administrative side or by paying the surgeons less per surgery. That may not be a repeatable model if the doctors are only taking lower pay for more work (the article mentions that they only pay the going rate and implies they may be working longer hours) because they believe they’re providing a charitable service in a third-world country like India, which the doctors in the Caymans likely will not accept. The greater experience provided to the doctors by being able to do a lot of surgeries may be a mixed bag, as they probably just exit for better pay elsewhere once they get enough experience. In other words, I don’t think surgery is where you can really cut costs, I suspect there’s a lot more fat to be trimmed on the diagnostic side, by replacing the doctors with software.

      btw, nice to see the comments are in chronological order now, can we get a Preview button for comments too?

      1. Efficiencies are also achieved by narrow specialization. A surgeon performing the same surgery over and over again will be able to perform more of them better. I’m actually amazed at the range of efficiency among doctors.

        Also, doctors don’t typically make less money in these models than they do when they perform surgery covered by insurance. It is my understanding that they usually make as much or more and they don’t have the insurance headache either. Surgeons leave all the time now and there are more junior surgeons who studied under them waiting to take their place, so I don’t think there’s much reason to be concerned. Everyone on the surgical team has done a million of these surgeries and one surgeon leaving isn’t going to reduce quality. Also, since surgery is a bit of a team sport, a highly specialized surgeon will be hampered if he moves to a new hospital with a team less experienced in this style of surgery. I’m not a doctor, but this is my understanding from discussions with my family members who are surgeons (we seem to breed people who like to cut up other people).

        I don’t know whether there are more efficiencies to be gained in diagnostics or procedures, but I’m all for efficiencies of any kind anywhere.

    2. Encinadoc

      Our problems are too complex to think that we can solve them just by market driven health care. I support the concept, but NOT the lack of regulation. The fungal meningitis deaths from epidurals speak to the reality that regulation for safety will always be part of the American Health Care scene, and thank goodness. Meanwhile, if we find good blends of market driven competition to lower health care costs, terrific.

  2. SeattleSam

    The only reason places like this aren’t the norm today is because government subsidizes the purchase of health care through third parties like employers or Medicare. Government creates problems by interfering with markets. Then the solution for these problems is always? More government interference.

    1. You are exactly right. The idea that more government intervention makes sense now when what we are dealing with is the product of prior government intervention is ridiculous.

  3. Isn’t at least part of the reason the hospital charges so much is because they have to cover their losses on people who go there that don’t have insurance because of EMTALA?

    1. I would caution you to fall prey to the propaganda of the big hospitals. If they were cost-shifting to “break even” levels, that would be one thing. They have presented marked up charges, however, that allow them to pay their administrative staff huge salaries, enough money to buy their struggling rural competitors, engage in hostile takeovers of physician practices, metastasize all over their region with new building projects, engage in massive marketing campaigns and sponsor sports franchises. I think they’ve overdone the cost-shifting thing a bit!

  4. reading back.. it looks like the business does not take insurance.

    So why would someone who does have insurance, go there or could they even?

    Do the doctors themselves take insurance or is it all not 3rd party-based?

    but say..that they do find something and work on it but then you need other providers….to finish, work further then what?

    1. Because this surgical center charges less than the co-pay for a covered procedure at another hospital.

      I have only catastrophic insurance and pay for visits and procedures out of pocket. I changed our insurance policy from a comprehensive one because the best doctors are increasingly not taking insurance (or seeing medicaid or medicare patients) and because even though I pay for procedures out of pocket, it’s cheaper than paying the astronomical premiums for comprehensive insurance and then all the co-pays and dealing with the approval process for procedures. My health care decisions are in the hands of myself and my doctors and it’s cheaper that way by so many measures.

      Of course, Obamacare is going to take that option away from me even though we were promised if we like our current health insurance we will be able to keep it.

      1. Methinks – could you do me a favor and go to http://finder.healthcare.gov/ and see what private plans would be available to you and if any would be catastrophic-only and/or suit your needs or be similar to what you have now?

        thanks…

      2. I changed our insurance policy from a comprehensive one because the best doctors are increasingly not taking insurance (or seeing medicaid or medicare patients) and because even though I pay for procedures out of pocket…“….

        Hmmm, that interesting methinks and the same sort of situation is developing here in the St. Louis, Mo area…

        There has also been the onset of ‘health clubs or co-ops‘ where insurance and or medicare/medicaid isn’t accepted…

        Apparently the savings just in mandated paperwork alone is enough to make most doctors consider doing something similer…

        methinks if I maybe nosy how big of savings was it for you %-wise to drop comprehensive health insurance and goto the plan you’re on now?

        1. Juandos,

          We saved about 50%. In the state of NY there were so many mandates that the savings by moving to a different state and buying catastrophic only would be 75%. I went to the doctors I wanted to go to anyway and paid out of pocket because my doctors are worth every penny. If the insurance company wouldn’t cover a procedure (and they often didn’t), my doctor had to lie or I just paid out of pocket anyway. Basically, if you want the medical care you prefer, you’ll have to pay out of pocket and if that’s the case, comprehensive insurance just doesn’t make sense.

          1. We saved about 50%“…

            Dang! That’s a nice chunk of change methinks

            Basically, if you want the medical care you prefer, you’ll have to pay out of pocket and if that’s the case, comprehensive insurance just doesn’t make sense“…

            Almost like ala carte medicine, makes sense…

          2. Yes, we’re very healthy, though. There are minor things here and there, but we work hard to keep ourselves in good shape. Our premiums in NYC and (I think) CT didn’t reflect that because of stupid laws.

            About 6 months after we moved to Florida our accounting firm (which is still in NYC) called us to notify us there’s an error in accounting for our health insurance (we obviously buy it through our firm). The premium was so low our accountant couldn’t believe it was real. Those mandates are a disaster.

    2. Michael Stein

      As long as you can pay out of pocket and submit to your insurance for reimbursement, you’re fine. I should be able to do that with my consumer-driven health plan. It appears they may be even cheaper than a regular provider that is part of my plan’s preferred provider network.

      The only hitch is that the consumer needs to be able to front the several thousand dollars and wait for the insurance complany to get around to reimbursing. It would be quite annoying to carry that kind of balance on an 18% credit card for two months while the insurance company drags its feet. But aside from that hitch, I really like this idea. If only my company offered such an option, I’d certainly go with a low-premium high-deductible plan, pay all the bills out of pocket, and just stack them up in a drawer until they added up to the deductible. Only then would I have any interaction with the insurance company. I know my doctors would be thrilled to work on that basis. And I hate leaving the doctor not knowing what (if anything) I’m responsible for, getting a bill (or maybe not) two months later when the insurance company decides what part of the doctor’s bill they will or won’t pay.

      1. This is where a really nice high deductible plan with an HSA account would come in really handy. Too bad that won’t be an option with Obamacare.

          1. Larry failed to read and comprehend that last paragraph as usually.

          2. naw.. I saw it.. but I’ve not seen much more about it.

            have you? got a link?

            can you explain the problem?

          3. Read it yourself: http://thomas.loc.gov/cgi-bin/query/D?c111:5:./temp/~c111xNTszN::

          4. bad link Methinks but that’s just the law.

            what is the substantive impact to you that
            makes you feel like it’s no longer an option?

            serious question. If it affects you, it may affect a lot of people.

          5. Exactly. That’s the law. Read it and understand it. I have neither the time nor the desire to spoon feed you information you won’t comprehend anyway.

          6. huh? How can you complain about it and then not at least minimally disclose what specifically you’re complaining about?

            now I get the impression that you don’t know.. that you’re just parroting opposition to the law in general.

            I thought you had a specific problem worth sharing.

          7. Larry, Methinks wasn’t complaining to you, and it appears she has little interest in discussing the subject with you.

          8. she is, however, commenting in public about a problem.

            if you don’t want to converse in pubic – don’t.

            no go back to your room Ron and do whatever it was you were doing.

          9. Read the law. It’s what we’ll all be forced to follow. Can you not read?

            (I ask rhetorically)

          10. re: ‘read the law

            how will I know when I get to the part that specifically affects you Methinks?

            I’m starting to think you don’t know either.

          11. she is, however, commenting in public about a problem.

            if you don’t want to converse in pubic – don’t.

            No one is obligated to converse in public with anyone and everyone just because they are in public, and it seems Methinks is telling you she isn’t interested in having one with you.

            no go back to your room Ron and do whatever it was you were doing.

            Actually, I was reading a thread on a very interesting economics blog, but some annoying guy named Larry keeps popping in with attempts to defend his hero, Obama.
            no go back to your room Ron and do whatever it was you were doing.

          12. does Methinks need you to defend her ?

            seems like she does a pretty good job herself and she can (and has) just refuse to answer and so far…she has.

            so Ron – why are you interrupting yourself? boy.

          13. Thanks, Ron. I sometimes wonder if a different person spelling it out for Larry will actually work. Nice job, but smacking your head against a cement wall studded with steel spikes might be less painful than explaining anything to Larry.

          14. back to elementary school antics Methinks? lord woman.

            when they created you, they broke the smart-ass machine.

          15. how will I know when I get to the part that specifically affects you Methinks?

            Are you admitting that you’re too stupid to understand when you have gotten to the part of this POS that deals with HSA? If can’t comprehend the English language then I can’t help you.

          16. re: HSA and methinks.

            if you don’t explain how it pertains to your circumstances, no matter how much one reads the law, they’ll not understand.

            are you this idiotic all the time?

            you need to be in a rubber room girl.

          17. Thanks, Ron. I sometimes wonder if a different person spelling it out for Larry will actually work. Nice job, but smacking your head against a cement wall studded with steel spikes might be less painful than explaining anything to Larry.

            No one has succeeded so far, and I doubt anyone ever will.

            Actually, I was taking a break from poking myself in the eye with a sharp stick, so this didn’t seem too painful.

          18. does Methinks need you to defend her ?

            No! She certainly doesn’t need my help, she is quite capable of defending herself, but in this case there wasn’t any defending going on, unless you believe you were attacking her.

            seems like she does a pretty good job herself and she can (and has) just refuse to answer and so far…she has.

            She does an outstanding job, Larry, no doubt about it.

            “so Ron – why are you interrupting yourself? boy.”

            Heh. Maybe you hadn’t noticed, but you weren’t exactly in a conversation, so I can’t be interrupting anything.

          19. not in a conversation?

            naw… Methinks is like a balky engine… she huffs and puffs then settles down a while …then starts back up.

            I got her calibrated.

    3. Larry, no one will question your eligibility to pay cash for a medical procedure.

    4. We do take some insurance at this point. I think that this will become less and less attractive now that the Unaffordable Care Act goes forward, however.

      1. Michael P. Stein

        Dr. Smith, thank you for weighing in here – and even more for offering something I’ve spent years begging for. As a consumer, I have been frustrated for the past 20+ years at the fact that medical pricing is largely a black box. I have a hernia that is not severe enough to require surgery, and seems to be stable. But I wanted to figure out how much I should plan to put into my HSA if and when that changed. I had about as much luck getting an answer to that seemingly simple question as I would have had asking the CIA to tell me the names of their covert operatives.

        I can’t figure out why nobody did this long ago. Even with insurance, one would think that a practice that cuts overhead so dramatically below other providers could offer a win-win-win proposition. Lower cost to the insurer, lower copay for the patient, and the practice makes a profit. What am I missing here?

        So … have you thought about franchising?

        1. Here is the missing piece. “PPO repricing.” Hospitals generate gigantic bills. Insurance companies ride in to the rescue and “discount” these bills for the “benefit” of the employer paying. Insurance companies receive up to a third of the “discount.” I have been told that insurance companies make more money on repricing activities than they do in premium collection. It is this arrangement that inclines insurance companies to seek out the highest priced care, the most gigantic bills,avoiding facilities like mine like the plague. Hospitals are all too willing to comply as these “write-offs” help maintain the fiction of their not for profit status and boost their “uncompensated care” claims, claims that bring them car dealer like rebates from taxpayers at the end of the year for “charitable” care they have provided. See my article, “Anatomy of a Cartel” for further illustration.

  5. I’m surprised insurers don’t offer to reimburse individuals who seek their care. Hell, after the massive increases in premiums (only 2 choices this year) under Obamacare, I wish I could drop my employer insurance and get hospital only insurance. Even when my wife had surgery and stayed in the hospital for 6 figures, I still could afford the professional fees for all the doctors involved.

    1. speaking of Ian’s experience … sometimes I wonder if the concept of insurance itself is under question.

      Some people apparently believe they’ll just pay cash for what they need and not really need insurance anyhow.

      they “self insure”. that’s pretty dangerous strategy with health care.

      and the problem with insurance in the US for health care – is the insurance companies get tagged the cost of uncompensated care at hospitals who are required by EMTALA to treat regardless of ability to pay. So this cost gets passed on to insurance companies in the form of $10 aspirins and all the way up the ladder to very expensive diagnostic imaging.

      I would think the insurance companies, given a choice between paying the hospital 10x what the other business charges would pick the cheaper path but I’m also a little skeptical about the doctor cost because doctors – no matter where they operate still are vulnerable to lawsuits and still have to buy liability insurance to protect themselves.

      1. morganovich

        larry-

        like methinks, i carry just catastrophe insurance. it’s a high deductible plan (about $10k). as a result cash pay is very attractive to me and i have very low premiums. i find such an arrangement to work very well.

        i would be perfectly capable of totally self insuring though.

        might it be “risky?” maybe. but why is that anyone’s choice to make but mine?

        i just looked at the risk and the price of high d insurance and decided it was worth it.

        i do not need to carry homeowners insurance either, but i do. it’s a question of perceived cost benefit.

        the issue around emtala is a good one. clearly, it’s a big cost issue and it encourages poor choices for some. that is what we need to be getting rid of. such a law seems contrary to basic notions of free determination and it pushes costs onto private entities without their consent.

        malpractice costs are also clearly way out of line and some changes in the tort system would be a big help, especially around medical liability waivers. but the docs at a cash pay center currently face all the same liability issues as those at a hospital taking insurance, so i don’t see why you are drawing a distinction on doctor costs.

        doctors will be paid faster, more reliably, and a larger % of the overall costs due to less processing and administrative overhang.

        the other real killer for hospitals is medicaid and medicare, whose reimbursement rates are often below cost. as a result, they have to charge those that can pay more to cover the gap.

        the system is badly, badly broken and the incentives are all wrong.

        1. I went to healtcare.gov to see if they offer catastrophic plans and they do and several cost less than 100 a month and others as low as $59 a month.

          1. morganovich

            larry-

            better check the fine print on those plans. at $59 a month, they are going to have massive coverage exclusions for potentially big cost items (like imaging, pregnancy, etc) and extraordinarily limited formularies.

        2. might it be “risky?” maybe. but why is that anyone’s choice to make but mine?

          no reason, unless if you, God forbid, get broke and very sick and will be able to get free healthcare from the taxpayers.

          1. God forbid, get broke and very sick and will be able to get free healthcare from the taxpayers“…

            Free?!?!

            Sarcasm right efim?

          2. morganovich

            efim-

            but that would never happen. i have plenty of assets to cover pretty much any conceivable health issue. do keep in mind that if you actually have any assets, the hospital will come for them. it’s only “free” if you were broke to begin with.

        3. Morgan,

          I really should self-insure. When I look a the premiums and think about what may or may not be covered by the insurance company, I think I’m probably overpaying.

          I’ll probably end up paying out of pocket for the treatment I want anyway.

          1. We switched to a health savings account last year and the pricing difference is just crazy.

            I think the thing that is most enlightening about paying in cash is how little we know about the health care process until we play an active part and, for something everybody wants to complain about, we know very little about the pricing.

          2. “I think … enllightening”

            Mike,

            I sprained my ankle on the job, so it was covered by Worker’s Comp. When I got the statement and saw the $175 charge for the temporary splint, I called the insurer to see if they wanted to contest the charge. They said it was accurate. There is no way that the cost to the hospital for that splint exceeds $25. The labor costs were also itemized, this was the charge for just the splint.

            It’s frustrating that I was more concerned about the cost of my treatment than than those paying for it were.

        4. Michael P. Stein

          @Morganovich – Actually, malpractice may be a significant annoyance to doctors, but it is not a significant part of total health care costs.

          http://www.factcheck.org/2009/10/malpractice-savings-reconsidered/

          But the are certainly distortions and broken incentives, including a very big one you didn’t mention.

          I can buy car insurance with a $100 deductible, or $250, or $500, or $1000. The more loss I’m willing to cover out of my own pocket, the less risk the insurance company bears, so the less they charge me.

          Medical insurance shouldn’t be any different. I wouldn’t exactly be thrilled if I had to cough up a $10,000 deductible in a single year. But it will not bankrupt me if it happens – especially if I do the smart thing and stick the premium savings (compared to the low-deductible plan) in the bank.

          In the meantime, as you note, I am not paying the insurance company overhead to deposit my money into their bank account, then turn around and write a check from their bank account to my doctor. The doctor is not paying clerical staff to navigate the insurance company hoops.

          Yet my employer doesn’t offer that kind of insurance, even though both my doctor and I would be much happier to minimize our interaction with insurance companies. The tax code and the extra cost of individual vs. group policies impose a significant penalty if my employer were to pay me their health care subsidy and let me use it to buy a private plan that’s exactly what I want, rather than buying it for me.

          For this, you can in part blame Reagan. It used to be that all heath care was deductible if you itemized (although there was still the 15.3% combined employer/employee Social Security/Medicare tax on any money paid by the patient). However, now you may only deduct the amount that exceeds 7.5% of your adjusted gross income. But your employer can still buy you health insurance entirely with pre-tax dollars. If you’re in the 28% bracket, and under the Social Security limit, your employer would have to pay in payroll taxes and salary over 50% more than the premium on your health insurance to leave you after taxes with the extra money needed to buy it yourself – and that’s ignoring the higher cost of personal vs. group plans.

          McCain has it right in 2008: the tax treatment of health care should be equalized to eliminate this distortion.

          1. re: people making rational decisions about risk and affordability.

            re: Singapore

            re: universal coverage, mandatory 33% payroll tax, subsidies for the poor, govt requirements on price and quality disclosure, and last but not least – less than 5% share of the GDP.

            Singapore is not the only example but is about the best.

            You cannot truly assess risk unless you are informed about not only statistics but costs of things like appendectomies, heart valves, and other costs.

            Most people can figure the cost of the car for deductibles , etc but they cannot for health care.

            In the US – the name of the game for doctors and health care providers is to operate for-profit enterprises whose prime motivation is to find out which procedures insurance companies will pay for – and order those procedures.

            Primary Care physicians no longer operate as the sole-provider of care. Referrals to specialists are routine and referral medicine is lucrative and expensive.

            The key to many medical practices is a little phrase called diagnostic code.

            that code once put on your chart – opens the door to a crapload of downstream tests and procedures many of them unnecessary and duplicative if you are seeing more than one specialist – who may not coordinate at all.

            People who have catastrophic-only. what do they do when they go to a primary care who says: “I’d like you to see this specialist whose likely going to order more tests”.

            My guess is at this point – the catastrophic policy folks are in trouble.

            Catastrophic-only insurance is a gamble. I presumes that you, as a human being will never get seriously sick at some point in your life – and that’s a statistically questionable assumption.

            My guess is that most people who have catastrophic – wait until the doc says – “you may have something that needs looking into”, then they go running looking for a short-wait time comprehensive policy and lie about their “pre-existing” condition that they suspect but is not documented yet.

            People would go bare on car insurance if they could – on the liability part – and that’s what that big bad coercive govt steps in and says “You WILL obtain liability insurance” – as a protection of other property owners rights to not have you damage them then evade just compensation by declaring bankruptcy.

            would people actually be that irresponsible? You bet your butt they would.

            if the only person you hurt with your risky behaviors was yourself and you never would end up needing govt assistance because you underestimated your risks – then that would be fine but actual experience tells us that people will willingly engage in risky behaviors that will cause harm to others also.

      2. they “self insure”. that’s pretty dangerous strategy with health care.

        Why is that any more dangerous than paying someone else to insure you? The risk is the same.

        1. re: ” Why is that any more dangerous than paying someone else to insure you? The risk is the same”

          are you serious?

          most people insure with a company other than self-insure because they do not have enough in personal assets to cover a worst-case scenario.

          it’s the same reason people insure everywhere for a wide number of reasons Ron.

          Are you opposed to insurance ?

          1. Well then those people will buy insurance. Problem solved.

          2. ” Well then those people will buy insurance. Problem solved.”

            which is most people… even fairly wealthy ones.

            now if you are STINKING RICH then you can self-insure.

            but a lot of folks seriously under-estimate their exposure to a worst case scenario – and they pay the price later.

            in the case of health care – we pay the price.

          3. I’m reasonably certain you’re among those who don’t pay any income taxes and keep voting for more free goodies so that the rest of us are forced to pay for your failures. YOU pay for nothing. Stop complaining.

          4. Please ignore the above and read this comment instead, as it may make more sense.

            Are you opposed to insurance ?

            Not at all. Pooling of risk is a great concept.

            now if you are STINKING RICH then you can self-insure.

            I don’t know about “stinking rich”, Methinks may just be “smelly rich”.

            but a lot of folks seriously under-estimate their exposure to a worst case scenario – and they pay the price later.

            Luckily for those folks the insurance companies have figured it out for them. The cost of mitigating that is exposure is something less than the monthly premium charged. If you prefer to self insure, you can pay yourself that amount.

          5. ” The cost of mitigating that is exposure is something less than the monthly premium charged”

            really?

            so you’re putting away a thousand dollars a month for 3 years and you get hit with a 100K problem?

            how does that work?

            see when they passed auto insurance laws and banks set up mortgages, they were on to folks like you.

            so in both case they MAKE you buy insurance because you’re too dumb to do it unless forced.

          6. Well, shoot. I don’t mean “the above”, I mean a comment somewhere below this on this thread.

          7. “are you opposed to insurance?”

            Where on this blog have you read anything by the libertarians who comment that we object to you freely entering into a contract? In fact, Methinks specifically wrote, “Well then those people will buy insurance. Problem solved.”

            That statement nicely sums up our position on most things. It is none of my business how you ensure your well-being. I do not want it to be otherwise.

            It is none of your business how I ensure my well-being. I would appreciate it if you would take care of you and yours and leave me alone.

          8. no.

            we were talking about the difference between buying insurance and self insuring.

            Exactly, Larry, that’s what my entire comment was about.

            I understand the reduction in coverage strategy when a car gets older and is paid for but you still are vulnerable to an accident that destroys another persons car or you or they or both suffer serious injuries.

            Larry, I intentionally chose to discuss collision insurance so as to keep it simple and avoid a discussion of liability and mandates. I’m not going to respond to liability issues.

            I was afraid the diminishing value of a car as it aged would cloud the issue. Instead, if you prefer, use a new car you have paid cash for. You are not required to carry collision insurance, and can decide for yourself if your assessment of the risks involved warrants the premium required to insure it. Your maximum amount at risk is the amount you paid for the car.

            show me how self-insuring is better and how much of a fund you’d have to set aside in order to not have exposure beyond your means to cover.

            I did. Self insurance is better if you are comfortable with the amount of financial risk you are assuming, otherwise insurance may be a better choice. Each person must decide this for themselves based on their assessment of the risk.

            Morg and Methinks are really no different than a lot of people who are probably young (not old), still working, and in relatively good health – and believe they don’t need heavy duty insurance.

            Are they wrong? Who could better determine how much risk they should assume than they can?

            That can change overnight in a heartbeat if you suffer a terrible accident or you end up with cancer or serious heart disease or whatever.

            That’s why it’s called *risk*, Larry. If the future was known, there would be no risk.

            At THAT point “self-insure” is exposed as pure foolishness and a high deductible policy is not much better as you’re going to lose a significant part of your saved assets.

            At THAT point, was the insurance company foolish for offering to cover your huge expenses for such trivial premiums?

            this is why I ask you guys if you are opposed to the CONCEPT of insurance because the entire purpose of it is to safeguard you if something UNEXPECTED happens.

            Why would anyone be opposed to the concept of insurance? Insurance is a wonderful idea, Larry, I don’t believe anyone who responds to your comments believes otherwise.

            Something unexpected? Look up the definition of the word “risk”. If everything was *expected* there would be no risk and no reason for insurance to exist.

            the answers I get from you and others indicate to me that you do not ever believe that a bad thing could happen to you.

            What you get from me and others is that we can assess the *likelihood* of something bad happening, and decide accordingly whether to insure against it.

            Believe it or not I don’t carry asteroid insurance. I know there’s a possibility I could be struck by one, and that would be worse than even a auto accident, but the *likelihood* is so small that I am willing to assume that risk myself, so I “self insure” even though I imagine insurance would be very inexpensive.

            and that’s not a very rational approach to life in a world where insurance is available.

            Balderdash.

          9. I hate like hell paying for insurance. I resent the hell out of it. Every six months I have to pay an outrageous sum to my auto insurance and every year another outrageous sum to by home insurance as well as pay health insurance and life insurance ..

            But you prefer it to the alternatives, or you wouldn’t do it. Please don’t mention mandates. Being required to carry coverage is a different subject, not directly related to a discussion of risk.

            But the alternative is a not insignificant chance that I’ll end up with no car, no house, and living on the street.

            That chance is the same whether you insure against it or not. You don’t prevent any of those occurrences by buying insurance, you only reduce your risk of financial loss.

            young folks tend to think they’ll live forever, never have an accident, never get cancer, etc… and over and over they would, without someone forcing them to for auto or mortgage/home – to either go completely bare of minimal insurance.

            Young people would get cancer over and over if someone didn’t force then to get insurance? What a bizarre notion.

            You must believe that someone, perhaps you, can better assess risk than the people who are actually at risk.

            I acknowledge there are different views about how much insurance is “adequate” and some people just pay too much for too little but at the other end on the margins, it’s a dangerous game – IMHO.

            Each person is best able to assess that risk for themselves, and best able to decide how to manage that risk, unless you believe they are all little children.

            If, in your view, you are at substantial risks of very expensive medical bills, then you may want to decide for yourself to carry lots of insurance. For others, their mileage may vary.

            By the way why DO you carry life insurance? It doesn’t protect you against dying.

          10. re: life insurance – I owe it to others I feel responsible for especially if I end up in long term care – the life insurance will pay for that cost.

            re: risk and asteroids.

            indeed …but there are much, much higher probabilities that you’ll have an auto accident or something happens to your domicile or you get sick.

            these are not “infinitesimal” risks like asteroids are.

            How do I know – statistics and the level of insurance offered…and the amount of claims paid.

            who got the better deal in NY/NJ – those who “risked” or those who insured?

          11. re: risk and asteroids.

            indeed …but there are much, much higher probabilities that you’ll have an auto accident or something happens to your domicile or you get sick.

            these are not “infinitesimal” risks like asteroids are.

            How do I know – statistics and the level of insurance offered…and the amount of claims paid.

            who got the better deal in NY/NJ – those who “risked” or those who insured?

            I give up, Larry, we are exactly where we started.

          12. Michael P. Stein

            @LarryG – What you are missing is this: the purpose of insurance is to protect you against a loss you cannot afford. When the cost of the premium is itself so financially damaging that it is a loss you cannot afford in and of itself, then it is perfectly rational to go without insurance, hope for the best, and use bankruptcy as your fallback option. It does you no good to buy health insurance if it means you cannot afford to put food on the table. Your policy won’t buy the food you need to treat the resulting malnutrition.

            That being said:

            @Ron H. – “Each person is best able to assess that risk for themselves, and best able to decide how to manage that risk, unless you believe they are all little children.”

            Unfortunately, that’s not really true. While everyone should have the _freedom_ to make that decision as long as it doesn’t impose involuntary burdens on others, that does not magically make everyone an expert actuary. Many people are demonstrably poor at judging the true statistical likelihood of an event, and computing the expected loss. People both overestimate and underestimate the risk of particular events.

            Note however that “involuntary burdens on others” part. As long as the law requires emergency rooms to treat anyone who walks in without regard to ability to pay, then shirking insurance that one can afford to pay for does impose involuntary burdens on others. What you want would seem to require repealing EMTALA. But do you want a system where the hospital can refuse to treat you if you can’t convince them you are capable of paying – even if you are capable of paying, but just forgot your wallet with your insurance card, or a bank statement showing sufficient assets?

          13. Michael P. Stein

            @Ron H. – “Each person is best able to assess that risk for themselves, and best able to decide how to manage that risk, unless you believe they are all little children.”

            Unfortunately, that’s not really true. While everyone should have the _freedom_ to make that decision as long as it doesn’t impose involuntary burdens on others, that does not magically make everyone an expert actuary.

            Perhaps I worded my comment poorly. My point was that each individual does have the right, and should be *allowed* to make their own decisions about medical care, and insurance, and in fact about everything else that affects their own bodies. Who can better make those decisions for them? The notion that people’s decisions place involuntary burdens on others is an entirely separate discussion.

            Many people are demonstrably poor at judging the true statistical likelihood of an event, and computing the expected loss. People both overestimate and underestimate the risk of particular events.

            Absolutely: And for those people – most people in fact – there is insurance. Insurance companies DO hire expert actuaries, and estimate quite well the risk of a particular event, and offer to assume that risk for a price, but the decisions belong to the person at risk.

            Note however that “involuntary burdens on others” part. As long as the law requires emergency rooms to treat anyone who walks in without regard to ability to pay, then shirking insurance that one can afford to pay for does impose involuntary burdens on others.

            Incentives matter. If you offer to spend someone else’s money on my medical care, I will most likely accept the offer. Your concern should be with the involuntary burdens, not the conditions that trigger them.

            What you want would seem to require repealing EMTALA.

            Absolutly! I’m not in favor of forcing any business to accept customers with whom they don’t wish to do business.

            But do you want a system where the hospital can refuse to treat you if you can’t convince them you are capable of paying – even if you are capable of paying, but just forgot your wallet with your insurance card, or a bank statement showing sufficient assets?

            Perhaps you have better insight than I into how big a problem this really is, and maybe we should agree on what the term “treat you” means. If a person arrives at the ER unconscious and bleeding profusely, I can’t imagine anyone refusing to help before financial arrangements are made, although I’m sure there have been examples of just that.

            If, on the other hand, if a person arrives at the ER with a bad cold or requiring 4 stitches in their arm, I see no reason they should be treated without charge.

        2. Are you opposed to insurance ?
          Reply ↓

          Methinks | November 16, 2012 at 5:09 pm

          Well then those people will buy insurance. Problem solved.
          LarryG | November 16, 2012 at 5:12 pm

          now if you are STINKING RICH then you can self-insure.

          I don’t know about “stinking rich”, Methinks may just be “smelly rich”.

          but a lot of folks seriously under-estimate their exposure to a worst case scenario – and they pay the price later.

          Luckily for those folks the insurance companies have figured it out for them. The cost of mitigating that is exposure is something less than the monthly premium charged. If you prefer to self insure, you can pay yourself that amount.

          in the case of health care – we pay the price.

          1. ” The cost of mitigating that is exposure is something less than the monthly premium charged”

            only if you spent your entire life saving …

            who can pay for a several hundred thousand dollar claim in their 30′s?

          2. Larry, you are missing the point. The premium charged covers your risk of serious financial loss due to medical expenses. If that weren’t enough, they would have to charge more. Think pooled risk.

            You personally are only exposed in an amount equal to the market value of your assets and future income. That is the loss you are insuring against.

          3. re: ” You personally are only exposed in an amount equal to the market value of your assets and future income. That is the loss you are insuring against.”

            and if you self-insure? Are you presuming that from day one you’ll have enough set aside to cover your assets and future earnings or are you assuming it will take a period of time putting money aside to build a a sufficient fund to self-insure “enough” to cover your losses.

            Why doesn’t Methinks self-insure instead of buying a high-deductible policy?

          4. and if you self-insure? Are you presuming that from day one you’ll have enough set aside to cover your assets and future earnings or are you assuming it will take a period of time putting money aside to build a a sufficient fund to self-insure “enough” to cover your losses.

            No. You must assess your risk of spending large amounts of money on medical treatment. The insurance company has done that for you and calculated a premium that covers their assessment of the risk.

            Why doesn’t Methinks self-insure instead of buying a high-deductible policy?

            I can’t answer for Methinks, only Methinks can do that. You will have to ask her – assuming she will talk to you.

            If I were to guess, however, I would guess that she has assessed her own personal level of risk, and up until now has determined that the amount she must pay for insurance is worth the cost. That may change, and she may decide to self insure.

            If a person wants complete control of their own health care, they may prefer to pay cash in any case for most care, thus making insurance less valuable.

            Methinks made the point that the Oklahoma Surgical center may charge less for a particular procedure than the copay you must come up with at another hospital for the same procedure even if you are insured.

          5. re: ” No. You must assess your risk of spending large amounts of money on medical treatment. The insurance company has done that for you and calculated a premium that covers their assessment of the risk.”

            and if you self-insure, do you also have to figure how much money to have available if you encounter an expensive illness?

            how do you self-insure for say 300K – when you first get started ? where are you going to get a 300K fund initially or are you recommending that you gamble that you won’t get that sick?

            I’m trying to understand how you decide to not buy insurance but are prepared to pay – what the insurance company would pay for a “catastrophe”

            I do not see a reasonable alternative to buying insurance unless you are so rich that even if you gamble on not getting sick – and lose – and it costs you 300K.. you are rich enough to cover it.

            otherwise, I’m not sure I understand your rationale for self-insuring.

            Most people would consider that to be exceptionally risky if you are not independently wealthy.

            what am I missing here?

          6. I do not see a reasonable alternative to buying insurance unless you are so rich that even if you gamble on not getting sick – and lose – and it costs you 300K.. you are rich enough to cover it.

            And both Methinks and morganovich have indicated that they could cover a serious medical expense. They may assess whether during the following year their risk is great enough to warrant paying the insurance premium required for the coverage provided, or whether they would be better off self insuring.

            Many young, healthy people decide to self insure because in their estimation their risk of serious medical expenses doesn’t warrant the high insurance premium they are required to pay.

            otherwise I’m not sure I understand your rationale for self-insuring.

            Most people would consider that to be exceptionally risky if you are not independently wealthy.

            Let me explain this using something simpler to understand, like auto insurance.

            If you don’t owe money on an auto loan, you aren’t required to carry collision insurance. You decide whether the annual cost of insuring against expensive repairs is worth the premium.

            You can decide to assume different amounts of risk yourself by selecting different deductibles. Some people feel comfortable with self insuring the first $1000 of risk by choosing a $1000 deductible, others might prefer to self insure the first $250 or $500. The premium is higher for low deductible, lower for high deductible.

            As your car ages and the replacement cost becomes less, the maximum amount of your insurance coverage decreases, as does your premium. At some point, you may decide that the total replacement cost is so low that you are willing to self insure the entire risk, so you cancel your collision coverage.

            Assessing risk of substantial medical expenses is exactly the same process, except as a person gets older, their risk increases rather than decreases.

            That’s all there is to it, except that medical insurance is a quagmire of federal and state regulations and may involve several different payers, resulting in a blizzard of billing activity that requires extra people working in medical facilities, increasing costs while not directly contributing to medical care.

          7. re: ” That’s all there is to it, except that medical insurance”

            no.

            we were talking about the difference between buying insurance and self insuring.

            I understand the reduction in coverage strategy when a car gets older and is paid for but you still are vulnerable to an accident that destroys another persons car or you or they or both suffer serious injuries.

            show me how self-insuring is better and how much of a fund you’d have to set aside in order to not have exposure beyond your means to cover.

            Morg and Methinks are really no different than a lot of people who are probably young (not old), still working, and in relatively good health – and believe they don’t need heavy duty insurance.

            That can change overnight in a heartbeat if you suffer a terrible accident or you end up with cancer or serious heart disease or whatever.

            At THAT point “self-insure” is exposed as pure foolishness and a high deductible policy is not much better as you’re going to lose a significant part of your saved assets.

            this is why I ask you guys if you are opposed to the CONCEPT of insurance because the entire purpose of it is to safeguard you if something UNEXPECTED happens.

            the answers I get from you and others indicate to me that you do not ever believe that a bad thing could happen to you.

            and that’s not a very rational approach to life in a world where insurance is available.

          8. I dare to step in
            if I’m wrong, so be it, but maybe I’ll save some words for all

            Larry, I think your opponents think that the abyss has a bottom – like a price of a new car you need to buy. They are ready to lose all they have or maybe die before refusing help. So they can estimate the risk properly and see the average advantage in the course on non-insuring because existing insurance is very ineffective.
            There is nothing wrong in the case of dying when one lost all assets to pay the doctors. Only in real life something else happens, and even some of the assets are salvaged by various means of cheating before falling on government support.

          9. @Efim

            reasoned remarks…

            I hate like hell paying for insurance. I resent the hell out of it. Every six months I have to pay an outrageous sum to my auto insurance and every year another outrageous sum to by home insurance as well as pay health insurance and life insurance ..

            but the alternative is a not insignificant chance that I’ll end up with no car, no house, and living on the street.

            young folks tend to think they’ll live forever, never have an accident, never get cancer, etc… and over and over they would, without someone forcing them to for auto or mortgage/home – to either go completely bare of minimal insurance.

            I acknowledge there are different views about how much insurance is “adequate” and some people just pay too much for too little but at the other end on the margins, it’s a dangerous game – IMHO.

          10. In any case, my previous point about risk was that the risk is the same whether you or an insurer assumes that risk.

          11. “no.

            we were talking about the difference between buying insurance and self insuring.”

            Exactly, Larry, that’s what my entire comment was about.

            “I understand the reduction in coverage strategy when a car gets older and is paid for but you still are vulnerable to an accident that destroys another persons car or you or they or both suffer serious injuries.”

            Larry, I intentionally chose to discuss collision insurance so as to keep it simple and avoid a discussion of liability and mandates. I’m not going to respond to liability issues.

            I was afraid the diminishing value of a car as it aged would cloud the issue. Instead, if you prefer, use a new car you have paid cash for. You are not required to carry collision insurance, and can decide for yourself if your assessment of the risks involved warrants the premium required to insure it. Your maximum amount at risk is the amount you paid for the car.

            “show me how self-insuring is better and how much of a fund you’d have to set aside in order to not have exposure beyond your means to cover.”

            I did. Self insurance is better if you are comfortable with the amount of financial risk you are assuming, otherwise insurance may be a better choice. Each person must decide this for themselves based on their assessment of the risk.

            “Morg and Methinks are really no different than a lot of people who are probably young (not old), still working, and in relatively good health – and believe they don’t need heavy duty insurance.”

            Are they wrong? Who could better determine how much risk they should assume than they can?

            “That can change overnight in a heartbeat if you suffer a terrible accident or you end up with cancer or serious heart disease or whatever.”

            That’s why it’s called *risk*, Larry. If the future was known, there would be no risk.

            “At THAT point “self-insure” is exposed as pure foolishness and a high deductible policy is not much better as you’re going to lose a significant part of your saved assets.”

            At THAT point, was the insurance company foolish for offering to cover your huge expenses for such trivial premiums?

            “this is why I ask you guys if you are opposed to the CONCEPT of insurance because the entire purpose of it is to safeguard you if something UNEXPECTED happens.”

            Why would anyone be opposed to the concept of insurance? Insurance is a wonderful idea, Larry, I don’t believe anyone who responds to your comments believes otherwise.

            Something unexpected? Look up the definition of the word “risk”. If everything was *expected* there would be no risk and no reason for insurance to exist.

            “the answers I get from you and others indicate to me that you do not ever believe that a bad thing could happen to you.”

            What you get from me and others is that we can assess the *likelihood* of something bad happening, and decide accordingly whether to insure against it.

            Believe it or not I don’t carry asteroid insurance. I know there’s a possibility I could be struck by one, and that would be worse than even a auto accident, but the *likelihood* is so small that I am willing to assume that risk myself, so I “self insure” even though I imagine insurance would be very inexpensive.

            “and that’s not a very rational approach to life in a world where insurance is available.”

            Balderdash.

            “I hate like hell paying for insurance. I resent the hell out of it. Every six months I have to pay an outrageous sum to my auto insurance and every year another outrageous sum to by home insurance as well as pay health insurance and life insurance ..”

            But you prefer it to the alternatives, or you wouldn’t do it. Please don’t mention mandates. Being required to carry coverage is a different subject, not directly related to a discussion of risk.

            “But the alternative is a not insignificant chance that I’ll end up with no car, no house, and living on the street.”

            That chance is the same whether you insure against it or not. You don’t prevent any of those occurrences by buying insurance, you only reduce your risk of financial loss.

            “young folks tend to think they’ll live forever, never have an accident, never get cancer, etc… and over and over they would, without someone forcing them to for auto or mortgage/home – to either go completely bare of minimal insurance.”

            Young people would get cancer over and over if someone didn’t force then to get insurance? What a bizarre notion.

            You must believe that someone, perhaps you, can better assess risk than the people who are actually at risk.

            “I acknowledge there are different views about how much insurance is “adequate” and some people just pay too much for too little but at the other end on the margins, it’s a dangerous game – IMHO.”

            Each person is best able to assess that risk for themselves, and best able to decide how to manage that risk, unless you believe they are all little children.

            If, in your view, you are at substantial risks of very expensive medical bills, then you may want to decide for yourself to carry lots of insurance. For others, their mileage may vary.

            By the way why DO you carry life insurance? It doesn’t protect you against dying.

    2. Exactly. You are right. The cost of open heart surgery in OKC is $26000, less than the price of a year’s premiums in Mass. The price of a total hip replacement is $18000. If you had just saved one year’s premiums you would be better off with the approach you have described above.

  6. SeattleSam

    It’s highly likely that Integris doesn’t really collect $33,000 from that procedure either. That’s sort of the “sticker” price. The contract price with Blue Cross might be half of that. Conveniently, though, your co-pay will be calculated on the sticker price. So in this example, the Hospital might get $17,000 from BC and $6000 from you.
    Bottom line, though, is the bottom line. Whatever complexity in pricing they introduce, hospitals are not run very efficiently. I have a good friend whose business is turning around hospitals that are in financial trouble. The stories I hear are frightening. In many cases, the doctors are effectively running the hospitals, and doctors do not generally operate using best business practices.

  7. Interestingly enough, a few years ago I had an emergency appendectomy. The initial bill was $33,000, but the final bill paid by the insurance company was reduced to $6,000, which are similar to the numbers given in this post.

    1. Keep in mind that the hospitals use these “write-offs” to justify the fiction of their not-for-profit status, as they pay no tax. They then receive a car dealer-like rebate at the end of the year from you and me for uncompensated care they have provided, meaning that they collected much more than the $6000 the insurance company paid.

  8. Danial Garcia

    Way to go for Oklahoma doctors! By the way, I think that it should at least be examined if doing such simple cost cutting will lead to a better system of providing healthcare.

Comments are closed.

Sort By:

Refine Content:

Scholar

Additional Keywords:

Refine Results

or to save searches.

Open
Refine Content