Friday, January 16, 2009

Immediate Savings of Cash-Only Practices

In the past I've argued that America's health care problems can be boiled down to price. The price of health care is too high. Unequal access to health care, patient dissatisfaction, and the rising price of health insurance are all a result of this high price. I believe that cash-only clinics can bring down the price of health care, making it more affordable and available to all Americans.

For those who may not be familiar with them, cash-only clinics are clinics where patients pay for services at the time they are received. Generally speaking, these clinics do not accept any health insurance. Patients simply pay the doctor (cash, check, or credit card) when they go to the doctor. Both the patient and the doctor immediately save money for the following reasons:

1) Physicians do not have to hire extra staff to work with insurance companies. Many offices have more employees working with insurance companies than they have physicians. Simply dropping those salaries can translate to significant savings.

2) Physicians save money by avoiding insurance claim denials, costs associated with bill collection, and lag time in waiting for reimbursement from insurers, Medicare and Medicaid.

3) Patient compliance improves, decreasing visits to the physician and cost of their personal health care. When faced with directly paying for medical costs, patients are more likely to value and comply with the care recommendations they receive. For example, patients paying for each prescription out-of-pocket will be less likely to blow off taking meds for their full course than insured patients who can get another prescription for a recurring infection with a $5 copay.

4) Patients are more likely to proactively improve their own health. A patient directly confronted with the cost of health care is more likely to use means immediately available to improve health before visiting the doctor. These means may include dieting, exercise, better sleep, and reduced recreational drug intake to improve their health. Patients who make these self-improvements are likely to save thousands of dollars in medical bills. Having to physically pay at the doctor's office can make this difference. Which patient with diabetes is more likely to control blood sugar through weight loss and exercise- the patient whose insurance plan insulates them from the cost of their health care or the patient who must write a check for every insulin shot and doctor's appointment?

5) It costs less to directly pay for health care than it does to pay for health insurance. We might fret after reading points 3 and 4, worrying that patients might put off needed health care when they have to directly pay for it. However, let's remember that health care actually costs less than health insurance. By saving the cost of the middleman, patients can afford more and better health care.

6) Doctors save money by focusing on patients' needs, not on insurance company protocol. Doctors are able to tailor care to patient's needs and budgets. They do not have to run excessive diagnostics. They are able to prescribe the precise medications that patients need and are not confined to the list of meds covered by patients' insurance policies.

A cash-only system redefines the role of doctors and patients. It restores patients' direct responsibility for their health care and doctor's direct responsibility to patients. Patients save money by shouldering this responsibility and by physician competition in a real medical market. In this way cash-only clinics address the real medical problem, making health care immediately more affordable and available to Americans.

Rusty Scalpel


Terra said...

Dear Rusty S. or should I call you R. Scalpel,

I conditionally agree with your stance on the way to decrease health costs to the consumer. Your points are accurate for a healthy individual that only requires occasional help from a physician (like myself). I have paid out more in insurance premiums than the cost of the office visits and medication that I have used in the past.

My disagreement is in respect to the patient with a chronic illness. In the case of a patient with a diagnosis that requires a multidisciplinary approach to have a successful outcome or simply to pay for a series of medications, the insurance option is less expensive. In the case of multiple hospitalizations of the same patient, the insurance option is the only affordable option at this time.

Insurance companies have great benefits for the chronically ill patient, but they will also attempt to cap the amount of money they pay the physician/health care provider and deny claims without regard to the treatment. Example: I once had a patient that had hip instability. After resolving her pain issues we progressed her level of therapeutic exercise (TE) to include dynamic stability using neuromuscular reeducation (NMR)techniques. The insurer denied the claim due to the code used: NMR. Under the umbrella of TE NMR can include balance and proprioception techniques. The patient was penalized by the insurer because the insurer doesn't worry about the progression of the patient. The outcome was successful with treatment, but the insurer never agreed to pay for claim. The hospital covered the cost in the end, but will raise its prices to cover profit margins to future consumers.

I am happy to have insurance, but as we know the current system is flawed.


Rusty Scalpel said...


You're right about health care costs for the chronically ill. For them, many health insurance policies will cost less than the health care itself. So, what are the benefits of a cash-only system to them?

I think we both agree that the cash-only system is cheaper medical care. It costs less. Cash- only physicians can provide the necessary paperwork to their patients and the patients can then personally work with their insurance companies for reimbursement. They will help keep their premiums low by submitting less costly claims than patients patronizing insurance-billing clinics.

It is apparent however, that if cash-only practices become the norm and people begin managing their own care instead of using comprehensive insurance polices, health insurance will become more expensive for those with chronic illness. As less and less healthy individuals enter the insurance pool, the prices for premiums will go up for those who may feel financially obligated to keep their insurance policies. Insurances must underwrite their policies so that the premiums are at least the cost of health care for their average patient. If the average patient is chronically ill, the price for premiums will sky-rocket.

The situation begs questions as to our duties to the chronically sick among us. Should we be obligated to stay on our insurance plans to support the high cost of their health care? Some would say yes- many institutions of higher education argue the merits of having mandatory health insurance for their students for that very purpose.

Here at FMP, where we argue the principles of economy and freedom, we would say no. I believe that the market should not be controlled in this manner. I do believe that the market holds solutions for the chronically ill, though.

Our goal here is to drive down the price of health care through market approaches. This makes the care more affordable to everyone, especially chronically ill. I also believe we have a moral duty to assist those who cannot help themselves. This means that their care falls to the generosity and nobility of the American people. Having worked within the Shriners Hospital system, where patients receive state-of-the-art care at no cost, I know that such nobility and generosity exists and is sustainable. However, this comment is getting a bit long and will be continued in a post later...