Sunday, October 19, 2014


    It is that time of the year, when we get to 'choose; the health insurance .I can change my health insurance in November (private insurance ) and the new medicare enrollment will also start now.I was talking to some patients and some doctors and some nurses.I was surprised to realize how little many of us 'know' about the Medicare.So I thought that I will write as to how many insurance companies work.
    So let me start by saying that the medicare expense as part of Federal budget was 14% in 2013
The money comes from general revenue ,(41%),pay role taxes(38%),and the beneficiary contribution(13%).The government collects the money and then pays out as the 'claims' are submitted by the 'providers',such as hospitals,doctors labs and outpatient clinic and radiology centers.There is off course management cost , and that comes out of the expense.Now since the medicare is supported by the federal government, there is no limit to the expense.So each year the medicare expense continues to go up.This is where the HMO come in picture. The companies like Humana, Welcare, or Freedom and many more like to have the piece of the pie.So they go to the federal government and tell them that they will 'manage ' the health cost of the recipients. So Let us take number, though not accurate, it is for understanding purpose only. The federal government is spending $1100 per month per medicare patient. So these companies will accept payment of $1000 per month,per patient.Now the federal government is off the hook for the expense. If the expense is less than $1000  then Humanas or wellcare etc will make profit. If the expense is more than $1000, then they loose the money.But wait a minute, .The HMO have expenses too. They need to pay agents who sign up patients and the expense for advertisement, and the claim managements and the office and the other expenses. They also need to have some profit so they can stay in business.So they have to 'manage' all this in the amount less than the medicare was spending when it was done by the government.So how do they do it?
       They go to different providers and offer them contracts that are less than what they would have gotten if it came directly from the government. So they go to primary care physician and 'offer' him 'fix' amount of money per patient per month. Say $25 per month and then they assign say 100 patients . So the primary care physician gets $2500 1st of every month, irrespective of how many patients and how often he sees.So if a patient sees him 3 times a year , he gets same money as if he sees the patient 10 times a year. But then there a catch . The year end 'bonus; will depends upon how much is actual expense on 'his assigned  patients if the total expense is more than what insurance company wants , then the bonus less or gone .So this is" the carrot and stick approach."So now you can see that the primary care physician has motive to spend less money,which means less tests, less consultants ,less costly medicines and less hospitalizations.In a way this is good as it eliminates unnecessary tests and referrals. But it is not good as the referrals or expensive tests  are not ordered.Every provider gets pay cuts, may it be Labs or Radiology clinics or consultants.This very easy to understand . If the insurance company is going to get less money than what the federal government would have spent, and they have spend money too get patients to sign with them and they have to 'manage' providers and on top of this they have to show profit to their stock holders. So The actual money spent on 'health care; is anywhere from 70% to 85%.(under new law this has changed.)At one time one HMO was spending only 67 cents out of a dollar that they collected.THEY CALL IT MEDICAL LOSS RATIO!!.Most of the primary care physicians do this kind of contracts.But there  an another way of doing these contracts and that can be more daring and more lucrative.
       Some doctors feel that they can manage better than the HMO insurance company.So they now approach the HMO and get money from them and now HMO are off the hook if the expense is more than what they collect. Now the doctors manage it and so you can imagine. The money that was spent by government is more than the HMO spending and this 'risk contracts' doctors spend even less . So now everybody gets deeper cuts and less  tests and referrals are done.This is a reality. The patients don't understand as to why the consultants won't see patients without getting referral or would do a tests as if they do , they won't get paid.
     So if any one signs with the HMO ,does not matter which one ,the money spent on health is less.This does not mean that one will get inferior care . It definitely means that there would be more restrictions on your care. Which consultant you go, which radiology clinic you go , which lab does your blood tests, who gives oxygen or other equipments  etc are all predetermined .I am sure there are more questions than answers after reading, but get the answers before you sign. 

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