Medical Patients Don't Pay Enough Out Of Pocket – Yet

By Anish Koka

You may have heard that repealing and replacing Obamacare recently failed.  The analysis of what went wrong comes from many corners. Apparently, the theory goes, moderate Republicans, especially in states that expanded heavily and rely on Obamacare Medicaid expansion, were skittish of a repeal and replace plan that endangered the healthcare of millions of constituents. And if the Republicans were wavering, town halls filled with angry constituents were sure to provide an extra dollop of pressure.

The effort to get the messaging right is clearly important to many, but I find most of it functions as a smoke screen seeking to obscure the real battles being fought over your healthcare.

It is certainly true that Obamacare insures millions of Americans.  But it is also true that having health insurance and having healthcare are two very different things.  To be clear, the folks attempting to preserve the status quo want to preserve the ability to force all Americans to buy health insurance that costs hundreds of dollars per month.  Put another way, the folks attempting to preserve the status quo want to force Americans to give a monthly fee to health insurance companies.  Remember, these plans have deductibles so high that most of the cost of care delivered during the year in the form of labs, copays, and imaging studies falls on the hapless patient.  The insurer, for the average healthy person, doesn’t pay a dime.

It is also, of course true, that the vast majority of folks signing up for Obamacare were not of the young, healthy kind (one of the problems with the marketplace) – they were poorer and sicker than predicted.  The kind designers of Obamacare had a built in solution – tax dollars would kick in to make up the difference so that insurance companies could keep the cost to the patient low.

Consider also that insurance companies are terrible negotiators that routinely pay hospital claims that are multiples of what Medicare pays.  The reason hospital chargemaster schedules are as outlandish as they are is because somewhere there is an insurance company that will pay a significant portion of that price.  On average, hospitals around the country charge 550% of medicare and the commercial insurance companies provide discounts of 50% of those prices.

It is also a market where the actual payers (consumers) are usually blind to the actual cost at the time of service.  All the consumer knows is that premiums and deductibles rise on a yearly basis to pay for ever spiraling healthcare costs. Insurers predictably blame hospitals while hospitals cry of penury, all the while making acquisitions, paying EMR companies hundreds of millions of dollars for garbage products, and paying proceduralists handsomely for being the rain makers that bring patients to hospitals for procedures.


The handwringing that accompanied repeal of the ACA in large part related to eliminating the individual mandate and reducing federal subsidies to insurance companies.  If you assume health care costs are fixed and will only go up, reducing these subsidies and shrinking the pool of people buying insurance by eliminating the mandate would seem to be a sure way to make insurance unaffordable.

But what if the cost of healthcare is being driven up by the slovenly stewardship of third-party commercial payers blindly paying 80% of the $1,200 being charged for an electrocardiogram that costs $12?  What if the best mechanism to reduce the cost of healthcare is to reduce the footprint of third-party payers?  Would a hospital continue to charge $4,000 for an echocardiogram if patients knew this before the procedure was performed?

America’s healthcare problem is one of cost.  Focus on making healthcare more affordable and healthcare will become more accessible.  Counterintuitively, the best way to make healthcare more affordable may be to have third parties cover less – a line of reasoning bound to elicit outrage from the left.  Mandate, or allow consumers to buy catastrophic insurance plans, but allow patients to use health savings accounts (HSAs) and shop for everything else.  Even better, explicitly allow HSAs to be used to pay a low monthly subscription fee to a direct primary care (DPC) physician to cover all outpatient office care (office procedures, vaccinations, basic labs, same day visits) and allow them to serve as your guide to low cost specialists and imaging centers.  An even simpler option would be to have the government set all prices by taking insurance companies out of the mix by extending Medicare to all.

There are many that are gleeful about the failure to significantly reform or ‘replace’ the ACA. I don’t share in their joy.  A failure to replace or significantly reform the ACA is a win for insurance companies and hospitals – an outcome that may keep more people ‘insured’ but does nothing to expand access to actual healthcare.  Americans are right to be scared of losing access to healthcare – but the danger comes not from a replacement plan that threatens the status quo, it comes from keeping the status quo.

Anish Koka, M.D., is a cardiologist. A version of this article originally appeared at The Health Care Blog.