Ilovebenefits’s Blog

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How is Health Care Paid For

Editor’s note: In the private insurance market insurance is paid for through three streams. There is the employer contribution, the employee premium (or payroll deduction) payment and the patient’s payments at the time of service. (Note: nowhere did I say that the insurer pays the bill. They are simply a conduit for the employer contribution and employee premium/ payroll deduction with some % taken off the top for their services and profit.)

In government run insurance, it is much the same. The government payment otherwise known as your tax dollars. The premium that the individual pays to have the coverage and the amount of money that the individual pays at the time they receive medical services.

So there are no magically appearing dollars. You can change the relative contributions of the three streams, but in the end it has to add up to the cost of the medical services delivered.

In order to change the sum total of the three streams you have to address the cost of the services. Anything else is simply shifting cost from on revenue stream to another.

And this is why there is so much consternation over the federal government’s health care reform. A lot of cost shifting (mostly to the taxpayer – at least $1.2 trillion) and little to no effort to reduce the actual cost of the care being delivered.

If your business could simply increase revenue and not demonstrate that it has improved its products, services and delivery you’d be satsified as the business owner. Hmmm… Have you ever wondered why providers of all types (hospitals, physicians, etc.) oppose any sort of measurement of the quality of their services? Until the consumer gets engaged that will be slow to change.

Ever wonder why we don’t have system that gets the consumer directly involved in the selection and payment of the the lion’s share of their health care? You thought it was because it cost to much. Well it does, but the reason it costs too much is that someone else is paying for it, so why not consume all you can?

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House Provision Boosts Cost Of Younger Policyholders’ Premiums. The Wall Street Journal (11/10, Mathews, subscription required) reports that a provision of the House bill that limits how much extra insurers can charge older policyholders is proving controversial because it is likely to result in higher premiums for younger policyholders. The House bill limits the cost ratio for the oldest people versus the youngest at 2 to 1, but the Senate has approved a top ratio of 3 to 1. The Journal notes that the personal insurance mandate also affects younger Americans disproportionately. Rep. Joe Barton said, “‘We are going to tell every young American who has decided that they don’t want to pay those premiums, they want to save up to get married or to buy a home, that, by golly, they are going to have to take insurance. And they are going to pay three to four times what they would under the current system because there is only a 2-to-1 ratio.”

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November 10, 2009 - Posted by | Affordability, Cost, Federal Government, healthcare, Overuse | , , , , , , ,

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