Health Insurance accounting

This is a comment from the linked blog entry.
The same kind of accounting decisions are made at other kinds of businesses, too.

http://economistsview.typepad.com/economistsview/2010/06/us-ranks-last-among-seven-countries-on-health-system-performance.html

Devin said in reply to Morgan...

"The insurers just rubber stamp CMS's decisions"

What are you talking about??? My mom spent 20+ years in claims review for a major insurer, and my wife has a chronic condition, so I can tell you from plenty of first hand experience there is no rubber stamp in use. Every claim is reviewed first by a medically trained person (like my mom, a nurse), and once it passes muster as medically appropriate, it then gets reviewed by an accountant who looks at whether it's financially appropriate. The accountant gets final say.

Not many people who've been bankrupted by a medical condition are in any position to sue. And when you're talking about procedures that would cost the company, at a minimum, tens of thousands of dollars, the math goes something like this...let's say the insurance company knows that 2% of denials will lead to a lawsuit (that's an example, I guarantee the accountant knows the actual number). So if you turn down 50 procedures at an average cost of $100k, conservatively, that's $5 million you've saved. If you've just freed up $5 million to defend the lawsuit, you've got almost a sure thing that you'll defeat the plaintiff who just lost all their money to a medical disaster. They don't care about being vilified or being dragged before Congress. Both things happen regularly with no impact on the bottom line. And anything that doesn't impact the bottom line doesn't matter.

The reason this doesn't keep costs down as it does in the UK and other countries is probably (and I'm speculating) because the US accountant is looking at the cheapest way to ultimately drop the patient as a member, and then they're not the insurance company's problem anymore. The UK economist is looking at what's the best value over the life of the patient, because there's not a way to simply shove the patient's problem onto somebody else. Once the US insurer gets rid of the patient, the costs continue to pile up (probably more than they would have been if medically appropriate care hadn't been delayed during the fight with the insurance company), but those costs are paid out-of-pocket, absorbed by the hospital when the patient goes bankrupt, or paid by the government if the patient qualifies for assistance.

Of course, the other big cost driver is the amount the US system spends trying to avoid paying for medically necessary care so somebody else will have to foot the bill. The oft-cited statistic is 30% of insurance company costs are overhead...and a substantial chunk of that is going to finding ways to screen members and deny claims for those members that get through the screens and still have the audacity to get sick or injured. If insurers simply accepted all applicants (as they're now being required to do), overall costs will definitely go down, even though they'll go up for the individual insurer.


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