Health Insurance is not the problem in American Health Care

By Dana S Kellis MD PhD MBA

"For every complex problem there is an answer that is clear, simple, and wrong.”

H. L. Mencken

fixingushealthcare.com

Tuesday, January 14, 2025

Dear Mr. President, Honorable Members of Congress, Distinguished Staff and Fine Citizens,   

The Health Insurance Myth:  Insurance companies are corrupt.  Insurance companies profit from denying care to patients.  Their coverage decisions can be cold or even ruthless, leaving patients to suffer as a result of these decisions. That doesn’t mean, however, that these companies are corrupt or that they are doing a bad job.  In fact, in our health care (non) system, that happens to be exactly their role; that is, to control costs by limiting care, and to make a profit doing so.  Insurance companies operate in a highly regulated, competitive environment.  They have accountability for their decisions to the people they insure, the companies they provide insurance for, the hospitals, doctors and others who they reimburse for services, and to state and even federal regulatory agencies.  As a practicing physician, and also as a hospital executive, I had many frustrating encounters with insurance companies when I tried to appeal their coverage decisions.  In fairness, though, I have to admit that once I talked with the insurance company’s physician representative and explained the rationale for the proposed treatment or care decision, they were nearly always reasonable in either granting an exception or making a clinical case in upholding their decision to refuse coverage.  I’ve been invited by insurance companies to serve on committees of physicians and nurses to review their policies and to give feedback on difficult coverage decisions.  I’m not an insurance company apologist, but to be honest, my experience has been that insurance companies often are one of the best organizations in healthcare at making evidence-based, defensible decisions. 

The real issue with insurance companies, though, is a structural one, and comes from two main flaws in our health care (non) system.  The first is that doctors and hospitals are not paid for the care they provide patients.  They are paid for the documentation of the care they provide.  This approach to payment has led to a related issue:  the sicker or more complex a patient is (by documentation) the greater the reimbursement.  Thus, there exists an entire industry within healthcare of helping doctors, hospitals, and even insurance companies to “optimize” their documentation to get the highest reimbursement possible.  Patients, who rarely even see the documentation of their care, and who know little if anything about the complex rules involved in translating documentation into reimbursements, are often understandably bewildered when they experience the consequences ꟷ financial and even care-related ꟷ of this constant struggle between insurance companies, hospitals, doctors, Medicare and Medicaid, and corporations. 

As significant as the first issue is, the second is far more important and consequential to patients.  Health Insurance’s role in our health care (non) system is ultimately to act as a financial brake to control costs.  One only has to compare the bill, for the same service, that a non-insured patient receives versus an insured patient, whether it be for medications, hospitalizations, procedures, or any other service.  Uninsured patients often pay several multiples of what the insured patient is charged. 

In our health care (non) system, doctors and hospitals almost always receive payment for piecework.  The more they do, and the more complex they can make it look, the more they are paid. Also, as a nation of patients, we have a culture of “more care (and more complicated care) is better.”  A good example of this is that a high proportion of health care expenses are for patients in their last year of life.  Some of this is warranted, of course, but how often are titanium hip replacements placed in non-ambulatory nursing home patients (I’ve seen this on multiple occasions)? Or how often do end-stage cancer patients die from the effects of their treatment and not from their cancer?  Other examples abound, but the point is that were it not for someone saying “no”, that isn’t appropriate, our astronomical health care costs might be exponentially higher. 

Then, of course, is the fact that, because we have a “pseudo” free market health care (non) system (pseudo because it meets none of the requirements for being free market, but we nevertheless allow doctors, hospitals, pharmaceutical companies and insurance companies to operate as if they were in a free market system), insurance companies are almost all privately or publicly held for-profit companies who are in business to make a profit. 

In summary, then, insurance companies are in business to make a profit by saying “no.”  And in a nation in which doctors, hospitals, pharmaceutical companies and patients really don’t like to be told “no”, especially by someone who profits by doing so, being an insurance company is a very unpopular place to be.

The most important point of all of this, however, is that calling for violence against executives in the insurance business – or hospitals or physicians – solves none of the problems of our (non) system, and in fact, probably makes the problem worse by making our (non) system even more dysfunctional.  The real, and probably only, answer to our anger at the excess pain and suffering we experience because of profit-taking by health care companies is to change the system to one that doesn’t allow, let alone incentivize such behavior. 

Respectfully submitted,

Dana S Kellis MD PhD MBA

Farmington, Utah

fixingushealthcare.com

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