Understanding your health plan

It sometimes seems as if there are as many kinds of health plans as there are trees. Nobody understands all of them.  Indeed, health plans tend to be so complex that few people fully understand any of them - including, it seems, the people that run them.

The complexity turns out to serve the purpose of covert rationing.  If the plans are complex, then who's to say who deserves what, and under what circumstances?  The complexity gives those who administer the plans maximum latitude.

Thus, nobody, not even DrRich can teach you all the ins and outs of your health plan.  After all, what's in one day is out the next.

What we can do, however, is impart some general information - some dirty little secrets, if you will - that can help you understand any health plan you might have.  Since many of the specifics regarding what's coming to you under your health plan are ultimately negotiable, all you really need to know is enough to help you decide when and how to negotiate. (You may also want to check out my discussion of the modern managed care plan, here.)

Four dirty little secrets

Dirty little secret number one:

All health plans are businesses, and they need to make money.  Everyone understands that for-profit health plans need to make money, of course - that's why they exist in the first place.  If they don't make a profit, their shareholders become quite angry, and highly-placed and highly-paid executives lose their jobs. What many seem not to have grasped yet is that even not-for-profit health plans need to make money.  The days when not-for-profits could garner sufficient funding from charitable contributions are long gone.  Now, they have no choice but to depend on the bond market for their funding.  And pleasing the bond market is very similar to pleasing the stock market; nonprofits that lose money are left for dead.  For this very good reason, then, the behavior of for-profit and not-for-profit health plans has become, for all practical purposes, indistinguishable.  They are businesses, and their bottom lines had better be in the black.

Dirty little secret number two:

You can't make money taking care of sick people.  Sick people are extremely expensive, and the more sick people health plans must take care of, the less money they make.  Indeed, while it appears that not even health plans have realized it yet, it is most likely impossible for health plan to turn a profit purely by operating their core business (i.e., by providing healthcare to their subscribers.)  As I have pointed out, the heady profits turned by many HMOs during the mid-1990s came instead from acquiring community property for pennies on the dollar.  Now that all the likely charitable organizations have been fully absorbed in most major cities, and HMOs are left with having to operate that core business for the money they make, most are in serious trouble.

Dirty little secret number three:

Patients aren't customers; they're cost centers.  Very few patients go out and buy their own health insurance. Most receive their health insurance through their employers, the government, or not at all.  Thus, patients don't really have the power to shop around and choose among health plans (except within very strict limits), nor do they have any true power to walk away from the health plans presented to them. Their lack of the ability to choose a plan, and the ability to exit a plan, essentially destroys any claim they may have to the title "customer." Indeed, their economic position in the healthcare system is more akin to that of "commodity." (They are, in fact, called by the industry "covered lives," and are traded back and forth like pork bellies.) Thus, health plans see relatively little reason to afford patients the same respect that businesses traditionally afford their customers.

It's even worse than that, however.  Not only are patients not customers, they're also the main obstacle (along with their doctors) standing between the health plan and the money it must make.  Patients are merely a cost center. Customers may always be right, but patients are merely a threat to the bottom line.

Dirty little secret number four:

Encourage the healthy; discourage the sick.  While the healthcare system ostensibly exists for the sick, the healthcare system as controlled by today's health plans is actually geared up to please the healthy.  

If you're running an HMO, you want to encourage healthy young families to sign up for your HMO instead of the HMO down the street (their only other choice).  You will collect premiums for each member of this young family, and odds are, you will get to keep most of that money.  You want to treat these young families very well, both so they will stay with you, and so they'll tell their (young) friends to join your HMO.  You will treat the sorts of illnesses experienced by young families - conditions like appendicitis, strep throat, and childbirth - with great efficiency and a minimum of red tape.  You will give them mammograms, and memberships to health clubs. And when you conduct your "patient satisfaction surveys" (an important tool used to convince employers that your HMO will make their employees happy) these enrollees - who are likely to constitute 85% of all your enrollees - will say they are "satisfied or very satisfied" with your services.

On the other hand, you want to discourage the elderly and the chronically ill.  You don't mind paying to treat an illness once, as long as it's gone after that.  What really gets your goat is having to pay for an illness that isn't ever going to go away.  Why, you'll just keep paying and paying.  There are many ways to discourage the chronically ill from joining your HMO, or from staying in it if they've already joined. (I describe these methodologies elsewhere.)  The easiest thing to do is simply let the red tape accumulate, and thus to drain the will from the patients and their doctors, so they'll just stop pursuing more expensive treatment modalities out of sheer exhaustion.  With tried and true management techniques, you can keep these malcontents to under 15% of your enrollees - and your patient satisfaction surveys won't be affected very much.

Now that you've got the general idea, let's turn to what you can do to try to survive such a health plan. The big difference between managing your doctor and managing your health plan is that appealing to any underlying sense of right and wrong, or of professional ethics, is utterly hopeless when it comes to health plans. You want your healthcare and they want to keep the money.  Just keep that in mind - and ignore all those commercials they spend your premium dollars on, with the soft lights and soothing voices, protesting how much they truly care about you - and you'll be in the right frame of mind for what you must do.