A dance called health insurance reimbursement
Health insurance is surely important. It protects people from the financial burden of falling sick. It extends timely access to care.
Insurance companies have today become the bridge that doctors and patients traverse everyday in delivering and receiving care.
Managed care in America changed the patient-doctor relationship forever. From seeing doctors whom their families knew, patients began seeing doctors who accepted their insurance plans.
(Most of the world is now following this model)
The insurance model also changed how doctors got paid. Earlier, patients paid directly at the end of service. Now, doctors bill insurance companies on behalf of patients. Often getting paid more than 30-45 days after providing care.
Getting paid by insurances is a complex dance
If you had asked me 10 years ago, I would’ve wrongly guessed that the insurance reimbursement process would become simpler and highly automated in the future.
My company has been in the business of getting doctors reimbursed from insurances for a longtime. This allows me to closely observe both the forest and the trees.
Even as we tinker with cognitive computing, health insurance reimbursement is stuck in the past.
Getting doctors paid correctly is anything but easy.
Instead of speeding things up, technology (in the form of traditional EHRs) has added to frustrations that doctors face. Delays and denials of payment abound.
New laws haven’t simplified the business of medicine. They’ve complicated it.
Read: A new healthcare law to worry about (MACRA, a new law, is a 2,398 page rule that has left the industry flummoxed)
Not just regulators but insurances also contribute to the administrative burden.
At an earlier time a doctor could decide, in consultation with the patient, whether a certain procedure was needed. But now, the patient’s insurance has to authorize for a procedure before it can be performed.
A doctor’s staff, sometimes even the doctor calls insurance representatives to defend the need for procedures and obtain “prior authorizations”.
Doctors spend 868 million hours getting prior authorizations. On an average, the process costs each doctor $83,000 per year.
Insurances on their part wish to avoid paying for expensive care. Stopping doctors from doing more care. Patients are limited by “benefits” that their plans offer.
But not all procedures or medications are avoidable. Patients end up getting sicker and costs pile up in hospital emergency rooms.
A heavy cost burden
Increased regulation naturally increases the cost of staying compliant. But there are more severe financial dynamics at play.
Higher deductible plans – When the economy is strained, people tend to opt for higher deductible plans (paying higher for the initial episode in exchange for lower ongoing premiums).
This leads to patients with insufficient insurance coverage. Increasing the risk of doctors getting paid for their service.
Loss-making insurance plans – Increased insurance coverage in the recent years has also meant increased volume of loss-making insurance plans. Reimbursements sometimes don’t cover the cost of care.
More denials – While some in the industry would argue the other way, I’ve observed that delaying payments on claims is a way for insurances to meet profitability goals. Increasing value to their shareholders.
More complex rules the better – Additional rules perversely mean newer reimbursement hurdles for doctors. It means more denials or delays. Beneficial from the point of view of insurances. It’s perhaps why commercial insurances often follow rules of Medicare (a federal insurance) and make them their own.
Healthcare providers end up owning the burden of these costs.
A bottleneck for true healthcare delivery
Getting paid fairly is an emotionally turbulent topic. Not just for doctors but for everybody.
When your pay is unpredictable, you can’t expect your mind to be calm and function in innovative ways.
Yet, we expect doctors to perform miracles.
At its core, the present-day insurance reimbursement model is a bottleneck for the delivery of healthcare. Ultimately affecting patient care.
It’s time to rethink healthcare.
If you’ve ever wanted healthcare to be different, I’d love to stay in touch at redo/healthcare.
If we could magically start over, how would you structure insurance payment models for doctors and patients?