The Private Healthcare Insurance System Is Broken
Stanley Feld M.D.,FACP,MACE
During our father son weekend Brad introduced me to Ian Sigalow. Ian is a 31 year old principle in the venture capital firm Greycroft LLC. He received his BS in Economics from the Massachusetts Institute of Technology and an MBA from Columbia University Graduate School of Business. He is a smart fellow.
Ian felt comfortable with the healthcare insurance policy his firm provided him before he got sick. At the Lindzonpollosa he told me his horrible story. He has permitted me to repeat it. There are several important points to illustrate the dysfunction of the healthcare system.
There is also a lesson here for President Obama. Government is supposed to be by the people for the people. Government should make the rules that are be fair to consumers of healthcare.
Ian published his story in the Huffington Post. I hope I will give his story a little more publicity.
Ian had never been sick until he was diagnosed with Seminoma at age 29. Seminoma is a type of testicular cancer that affects one percent of males. It is the most common type of cancer among men aged 20 to 35. It is often cured by surgery alone, but advanced disease requires the addition of radiation therapy or chemotherapy. His seminoma had spread to his lymph nodes. He needed to have chemotherapy for a cure.
“My insurance provider was Oxford Healthcare, a subsidiary of UnitedHealth, the largest private health insurer in the United States.”
“When it comes to testicular cancer, the Centers of Excellence are Indiana University, which treated Lance Armstrong, and Memorial Sloan Kettering Cancer Center (MSK) in New York.”
Sloan-Kettering was not in his Oxford healthcare insurance plan’s network. He couldn’t switch to an upgraded plan because he works for a small business.
“Oxford’s better plans are reserved for large employers. I was willing to pay any amount to get in-network access but there were no options. However, I learned that Oxford offers an "in-network exception", where in-network privileges are granted to out-of-network hospitals based on doctor referral. I was told that if three Oxford oncologists referred me to Memorial Sloan Kettering, an in-network exception would be granted.”
Oxford supplied him with a list of 300 doctors to call. Many were not in practice anymore and most were not oncologists. This was the situation despite Oxford’s claim to be user friendly.
Ian found ten oncologists in the Oxford network. They all recommended Sloan Kettering based on the advanced stage of his disease. Oxford then reneged on its offer to grant an in-network exception.
“Oxford was going to call another set of doctors to see if they could find someone in-network to treat me. I asked the woman from Oxford why I was told to make the calls if Oxford was planning on doing it themselves. Her response was, "We were hoping you wouldn’t bother."
Oxford called a few days later. It was on a Friday afternoon. The representative told him she found three physicians who were willing to meet with him. He was advised by his oncologist that rapid initiation of treatment was important. He had scheduled himself for treatment the following Monday morning at Sloan Kettering. Oxford’s representative knew all this before she called him.
"We cannot tell you not to go to Memorial Sloan Kettering, and we cannot tell you to delay treatment. However, we found three doctors in New York who agreed to meet with you. It will require a new consultation…" and more delay in treatment.
The first lesson is of private healthcare insurance abuse in order to save money. This happens countless times a day. Unless you are the victim you would not be aware of the restrictions of access to care.
The state and federal government must paying attention to the consumer abuse. Consumer abuse has been ignored for 20 years. A simple regulation fining Oxford or rescinding its license to sell insurance in the state where the abuse took place would be an effective deterrent to the industry’s restricting access to care. In order to get Oxford’s full coverage he would have had to delay his treatment and pay an additional deductible to see three other physicians in consultation to grant permission for an in network exception.
“I made the decision to go out-of-network.”
After being treated at Sloan Kettering Ian called the three additional doctors Oxford had recommended. They all agreed he made the right decision to go to Sloan Kettering. He also found out from a former Oxford executive that patients with out-of-network benefits are almost never granted an in-network exception. All Oxford was doing was stalling and trying to impose its will on him.
Ian tried to quantify, in advance, the costs of out-of-network as opposed to in-network. It was impossible. Hospital systems do not publish their fees no matter how hard a patient tries he cannot get them.
This defect presents another opportunity for President Obama to Repair the Healthcare System. All that would have to be done is to require hospital systems to publish their fees in order to get certified to treat patients. Instead, President Obama is creating bureaucratic agencies to fix prices.
Ian obtained Oxford’s reimbursement rates for procedures and drugs. He figured his out of pocket expenses would be between $5,000 and $7,000. He was prepared to pay that fee based on his in network benefits.
His final out of pocket expenses bill were $35,000. Hospital systems have multiple negotiated prices. The multiple fees are one of the travesties of the healthcare system. If you are out of network you are responsible for the inflated retail price.
If a hospital system will accept five hundred dollars for a service from a healthcare insurance industry an individual patient out of network should not be responsible for a fifteen hundred dollar retail price for the same treatment and services. There is a total lack of transparency of negotiated prices.
All President Obama would have to do would be to require publication of negotiated prices Transparency would immediately empower consumers.
“What surprises many people is that the largest part of the bill was not doctor’s fees — those were only $3,000.”
Physicians do not know what hospital systems charge. Hospital systems have lobbied the government to restrict physicians from delivering the chemotherapy in their clinics because the in hospital profit margin is so large.
Why is the government always using physicians as a scapegoat? Physicians are the scapegoat because they are the weakest stakeholder in America’s political system. We lack effective representation.
Ian used the example of drug costs.
“One example of how this adds up: I was prescribed three shots of Neulasta, which is a white blood cell booster. At drugstore.com, a single shot of Neulasta costs $3,500. At Memorial Sloan Kettering, it was $5,600. Oxford’s usual and customary reimbursement was $2,600. I didn’t have a choice. I was left with $9,000 out of pocket for three shots.”
How was the cost of $3,500 at www.drugstore.com calculated? How much did it cost to produce the drug? How do you price R&D for the drug? Why should Sloan Kettering charge $5,600 a shot? Why would a hos
pital accept $2,600 from Oxford?
There is nothing in President Obama’s healthcare reform bill that deals with this problem. The solution is easy. Develop rules of transparency to price various services and treatments which include all the negotiated prices.
President Obama has chosen to impose prices through price controls and not rules to negotiate prices.
The opinions expressed in the blog “Repairing The Healthcare System” are, mine and mine alone.