For many years now, insurance companies have included lab tests as part of their healthcare coverage plans. Unfortunately, for most people this significantly increases their healthcare costs. Tomorrow’s Health has adopted a cash pay model for lab testing. This removes the hassle, saves you money, and most importantly enables higher-quality healthcare!
The Beginnings of Healthcare Insurance
During the Great Depression (1930s), Baylor University Hospital started up what was called a “hospital services plan”. Members of the plan paid $0.50 per month, and they were guaranteed up to 21 days of service per month at the hospital. These plans quickly expanded to other hospitals and hospital systems across the United States. The American Hospital Associated (AHA) created a committee to regulate the formation of these plans, and was called the AHA Blue Cross Commission.
Using hospital services plans as a model, the California Physicians’ Service was created in 1939. In this “medical services plan”, members would pay a monthly premium, and in return, the plan would reimburse a set amount of money per medical “event”. This money would be sent directly to the patient, allowing them to spend the money as they wished. In other words, they could choose which doctors and other medical professionals they used. Soon after, the American Medical Association (AMA) began regulating the formation of medical services plans, eventually becoming Blue Shield.
Around this same time (early to mid-1900s), prepaid group medical practice plans also emerged. Beginning with the lumber and mining industries, groups (such as large employers) would contract or “prepay” for medical services for their members (employees). Examples include the Ross-Loos Clinic in Los Angeles, CA (provided medical services to the Los Angeles Department of Water and Power), Dr. Michael Shadid in Elk Grove, OK (provided medical services to the local Farmers Union), and the Kaiser Foundation Health Plan (originally provided medical services to workers on construction of the Grand Coulee Dam and in the Kaiser Shipyards (in CA, OR and WA)).
Modern day healthcare insurance is unrecognizable from those early beginnings. The industry has become a hodgepodge of public and private companies where we are getting the worst of both worlds – high cost, low quality healthcare. Why is this?
Where Has Healthcare Insurance Gone Wrong?
When healthcare is a public (government) entity, both costs and quality are lower. Having a single payer (the government) reduces variabilities, complexity, and ultimately costs. However, the lack of competition also hampers innovation, ultimately leading to low quality (or at least healthcare that is not on the leading or cutting-edge).
When healthcare is a private (free market) entity, both costs and quality are higher. Competition breeds innovation, leading to cutting-edge, high-quality healthcare. Of course, along with cutting-edge technology comes higher costs.
What we have is a mixture of the two. The introduction of Medicare in 1965 ensured there would be significant involvement by the government (public) in our “free market” healthcare. Along with this has come a mind-numbing number of laws and regulations surrounding healthcare (including insurance) practices. But exactly why has this led to high-cost, low-quality healthcare?
Because much of our healthcare is still private, healthcare providers have had to take on significant administrative burdens to meet these extremely complex regulations. And because most healthcare providers did not also get degrees in law, finance, or interpreting government regulations, this work almost always gets contracted out to third part entities that have very little to do with a patient’s actual healthcare. This continually increasing administrative burden is increasing prices astronomically.
This explains the high cost, but how has our healthcare become low quality? The existence of at least a partially free market ensures that some innovation and high-quality care is taking place. But why is that not the case overall? Why do we (the United States) consistently rank toward the bottom in quality of healthcare when compared to other developed countries?
The answer lies in the incredibly complex set of government regulations and resulting healthcare insurance providers that currently plague our healthcare market. Healthcare insurance providers spend most of their time and money (actually your money) finding ways to meet the complex set of government regulations while still being profitable. Which means they don’t spend much time finding ways to improve the healthcare of their paying customers. But how does this lead to lower quality in healthcare?
Many of the innovations that healthcare insurance providers have developed over the past few decades have focused on meeting government regulations while still making money. These include (but are not limited to): prior authorizations; preferred providers or provider networks; high deductible healthcare plans; and, prior authorizations. Let’s take a look at each of these innovations and reason why they decrease the quality of our healthcare.
If you were asked the question, “Who knows the most about how to improve your health?”, or “Who should most influence decisions about your health?” Your answers will probably be, you and your doctor. Unfortunately, the actual answer is, your healthcare insurance provider. What?! How can that be?! Your healthcare insurance provider doesn’t have a clue about who you are, let alone the state of your health. So how is your healthcare insurance provider affecting decisions about your health more than any other entity or person (including yourself)?
Also called pre-authorizations, these are requirements for a patient to get authorization from an insurance provider for a particular medication or medical procedure before ordering it. Many times, these are denied, meaning the insurance company will not cover it. Wait. Isn’t it you, in consultation with your doctor (the two people that know the most about your health), that should be making these decisions? Unfortunately, once it’s found out that a medication or medical procedure is not covered, medical decisions are often changed to medications or medical procedures that were determined NOT to be best for you as a patient (or you would have chosen those in the first place)! One thing is certain, NOT covering medications or medical procedures saves insurance providers money.
Preferred providers or provider networks
Let’s say that you work for Company ABC. They’ve decided to utilize Insurance Provider XYZ. And Insurance Provider XYZ has decided that only Providers L, M, N and O are “in network” with them. Your insurance provider is now making choices on which medical providers you should use! What do you do if you decide that instead, Provider P is going to give you higher quality care than Providers L through O? You can go to Provider P and pay a LOT more money out-of-pocket, just because they are not “in network” with your insurance provider. Or, you can go to one of the “in network” providers and receive care that you judge to be lower quality than what you could get. One thing is certain, if you go to providers not “in network”, insurance providers make more money.
High deductible healthcare plans.
No matter what insurance providers tell you, this was invented so they could make more money. Insurance providers claim that the high deductible plans were created to save the customer money in up-front premiums, particularly designed for those in better health. However, what’s proven to be the case is that premiums, even for high deductible healthcare plans have skyrocketed over the past several years – as have the deductibles. And due to the incredible administrative costs, healthcare providers are billing insurance providers exorbitant prices for even the most basic medical care items (including lab tests). Since you will almost never meet the astronomically high deductibles, these inflated prices come right back to you, the consumer (until you “meet your deductible”, that is). One thing is certain, buying into high deductible healthcare plans helps insurance providers make more money.
What is The Solution – or at least A Solution?
Many people are already going in this direction – only getting “catastrophic” healthcare insurance and paying out of pocket for low-cost healthcare items. This actually would function more like automobile insurance: the consumer is responsible to pay for oil changes, new brakes, windshield wipers; the insurance is responsible to pay for major repairs due to accidents or other problems.
This is saving people a LOT of money and hassle! Consider the below comparison:
Typical private insurance
The average person pays $400/month in healthcare insurance premiums – that adds up to $5,000/year. In a typical year, let’s assume that a person sees the doctor 3 times (1 well checkup and 2 urgent care visits). Including the visits with the doctor ($250/visit), a few lab tests ($250) and a radiology exam (e.g., x-ray, MRI) ($500), the amount billed to insurance would be around $1,500. Since you haven’t met your deductible, you will pay around 80% of that cost: $1,200. So, for the year you’ve spent $6,200.
Catastrophic insurance plus cash pay
The average person pays $150/month in catastrophic healthcare insurance premiums – that adds up to $1,800. Assuming the same typical year as above and cheaper up-front cash prices for healthcare: $100/visit, $100/lab tests, $200/radiology exam, total costs for healthcare would be around $600. So, for the year, you’ve spent $2,400 – a savings of $3,800! This is a good down payment on a car, something you’ve saved in just one year!
When you choose direct-to-consumer blood testing at Tomorrow’s Health, these insane costs are dramatically reduced for your benefit.
Why Tomorrow’s Health?
When we first started offering blood work laboratory testing, we were accepting all forms of insurance. However, this meant we needed to charge the patient (through their insurance) much more money per test (2 to 3 times the up-front cost) so that we could recoup what we needed to operate our business. After some months of this, we didn’t feel like this was an honest way to do business, so we decided on April 1, 2022 to switch completely to up-front cash payments for our blood work laboratory tests (note: we still bill through insurance for COVID-19 PCR testing, per the CARES Act).
We know this model doesn’t work for everyone. But since then, we’ve had several patients tell us how much they appreciate this. Some of them had been surprised in the past by bills that come months after and with costs much higher than they expected. Paying up front was transparent AND saved them money. And some have appreciated their ability to order their own laboratory test (without a doctor’s order), letting them be more involved with their own health and giving them peace of mind.
The bottom line: Tomorrow’s Health wants to provide superior customer service (including cost savings) that leads to the greater health of members of our great community!
Visit our Lab in Kennewick at Tomorrow’s Health!
Brent L. House, PhD