The True Cost of Healthcare
By Paul Gagliardi
My client was recently hospitalized and received an explanation of benefits document from Humana, his insurer. The bill was listed as $116,000. Of that amount Humana paid only $14,000 and my client paid approximately $2,000 in out-of-pocket costs. At the bottom of the document is this statement: "Because of the agreements between Humana and the healthcare providers, there is nothing further due from you."
What is the true cost of this care - the $116,000 billed or the $16,000 paid? If my client didn't have Humana, would he have to pay $116,000? This discrepancy illustrates why it is so hard to determine, what is the true cost of healthcare?
The difficulty is further demonstrated by the actions of Anthem Blue Cross of California, which recently petitioned for a rate increase of 39 percent. The outcry was huge and the proposed increase was stopped. The insurance commissioner's office asked Anthem to justify the increase.
It was discovered that Wellpoint, Inc.'s (Anthem's parent company) profits for the last quarter were up 51 percent. Anthem had also just handed out 39 bonuses to executives of over $1 million each. This is on top of 103 company trips that cost policyholders $27 million.
After seeing the money Anthem spent and still showed an obscene profit, the need for a rate increase seems almost laughable.
What would have happened if the commissioner's office hadn't ordered a review? Higher premiums for policyholders and run away health insurance costs with the insurance companies blaming everyone but themselves for the problem. Now there is a new healthcare law. During the healthcare battles on Capitol Hill, the insurance industry employed 4,525 lobbyists. That is eight lobbyists for each member of Congress. What were they after? Gridlock would have continued run away profits.
We have yet to tally the amount of money insurers spent to derail healthcare reform, but it is safe to assume it is well into the billions - a small price for them to pay relative to their profits.
Just think if that money had actually been spent on healthcare rather than fighting change.
Change will happen and most important is the transparency created regarding the cost of healthcare with new regulations and more competition among insurers and providers.
The new law makes healthcare plans simpler to understand and compare. The transparency of coverage will allow individuals to compare and shop. The competition is intended to bring premiums down.
Each state will set up insurance exchanges by 2014. This will enlist healthy individuals into the insurance pool. This will spread risk more widely, lowering premiums for everyone.
One of the basic concepts of the legislation is to cover some of the 45 million uninsured people in this country. Tax credits will be offered on a sliding scale basis going for the cost of premiums. Families would not be required to pay more then 9.5% of their adjusted gross income on health insurance cost.
There are also incentives for health care providers to make care safer and more efficient to help lower healthcare cost. According to PricewaterhouseCopper, a private CPA firm engaged to evaluate the cost of healthcare, preventable readmissions cost Americans $25 billion dollars per year. Hopefully, better care can lower healthcare costs for us all.
If we bring costs in line and insurance company profits down to a realistic level, it should make healthcare affordable for us all. Perhaps then we will truly know the true cost of healthcare.
Paul Gagliardi is the President of the Wisconsin Association for Justice, the state's largest statewide voluntary bar organization. The Wisconsin Association for Justice stands with consumers to promote a fair and effective justice system for every citizen, not just the privileged and wealthy.