The Obamacare Revolt: Physician Fight Back Against the Bureaucratization of Health Care

e85cwillpracticeforfood428x321 The Obamacare Revolt: Physician Fight Back Against the Bureaucratization of Health Care

Dr. Ryan Neuhofel, 31, offers a rare glimpse at what it would be
like to go to the doctor without massive government interference in
health care. Dr. Neuhofel, based in the college town of Lawrence,
Kansas, charges for his services according to an online price
list that’s as straightforward as a restaurant menu. A drained
abscess runs $30, a pap smear, $40, a 30-minute house call, $100.
Strep cultures, glucose tolerance tests, and pregnancy tests are on
the house. Neuhofel doesn’t accept insurance. He even barters on
occasion with cash-strapped locals. One patient pays with fresh
eggs and another with homemade cheese and goat’s
milk. ;
“Direct primary care,” which is the industry term for Neuhofel’s
business model, does away with the bureaucratic hassle of
insurance, which translates into much lower prices. “What people
don’t realize is that most doctors employ an army of people for
coding, billing, and gathering payment,” says Neuhofel. “That means
you have to charge $200 to remove an ingrown toenail.” Neuhofel
charges $50.
He consults with his patients over email and Skype in exchange
for a monthly membership fee of $20-30. “I realized people would
come in for visits with the simplest questions and I’d wonder, why
can’t they just email me?” says Neuhofel. Traditional doctors have
no way to get paid when they consult with patients over the phone
or by email because insurance companies only pay for office
visits.
Why did he choose this course? Neuhofel’s answer: “I didn’t want
to waste my career being frustrated.”
This model is growing in popularity. Leading practitioners of
direct primary care include Seattle, Washington-based Qliance, which has
raised venture capital funding from Jeff Bezos, Michael Dell, and
comedian (and Reason Foundation Trustee) Drew Carey; MedLion, which is about to expand its
business to five states; and AMG Medical Group, which
operates several offices in New York City. Popular health care
blogger Dr. Rob Lamberts has written
at length about his decision to dump his traditional practice
in favor of this model.
“Since I started my practice, I seem to hear about another
doctor or clinic doing direct primary care every other week.” says
Neuhofel.
Direct primary care is part of a larger trend of
physician-entrepreneurs all across the country fighting to bring
transparent prices and market forces back to health care. This is
happening just as the federal government is poised to interfere
with the health care market in many new and profoundly destructive
ways.
Obamacare, which takes full effect in 2014, will drive up costs
and erode quality—and Americans will increasingly seek out
alternatives. That could bring hordes of new business to
practitioners like Neuhofel, potentially offering a countervailing
force to Obamacare. (One example, the Surgery Center of Oklahoma’s
Dr. Keith Smith,
profiled for Reason TV in September, is doing big business
offering cash pricing for outpatient surgery at prices about 80
percent less than at traditional hospitals.)

Health “insurance” is more than just insurance; it’s also “a
payment plan for routine expenses,” as University of Chicago
business school economist John Cochrane
puts it in a superb
recent paper. The late free-market economist Milton Friedman
pointed
out that we insure our houses against fire and our cars against
major damage, but we don’t also insure ourselves against cutting
the lawn and buying gas. That’s the main reason innovation almost
never makes health care cheaper. Most patients never see the bill
for an ingrown toenail removal or a glucose tolerance test, so
doctors have little incentive to seek ways to offer their services
for less. For simple consultations, why bother with Skype when
insurance will pay full price for an office visit.
Insurance plans that cover everything, a situation that came
about largely because of a quirk in our tax code, have also led to
the “bureaucratization of medical care,” Friedman wrote in
a 2001 essay, in which “the caregiver has become, in effect, an
employee of the insurance company or…the government.”
Dr. Lisa Davidson
had 8 years of frustration while running a successful traditional
practice in Denver, Colorado. She had 6,000 patients when she
decided to stop taking insurance and adopt the same business model
as Neuhofel. Her patient list has dropped to about 2,000. She used
to spend about 15 minutes with each patient and now it’s more like
45 minutes. “We’re on track to make more money and take better care
of our patients,” says Davidson. “It’s a win-win all
around.”
Before adopting direct primary care, Davidson was unhappy
working at the practice she had built because the insurance system
imposed a way of doing business that resembled an assembly line.
“It’s true that in 2014, many more people will have insurance, so
there will be a profound need for primary care doctors,” says
Davidson. “You might say I’ve done a disservice by dramatically
cutting the size of my practice. However, if we make it desirable
again to be a primary care physician more people will want to do
it.”
Under Obamacare, more and more doctors are becoming employees of
large hospitals, where there will be more control over how they
practice medicine. Hoover Institution Senior
Fellow Dr. Scott Atlas fears this will cause a brain drain in
medicine. “Really smart people want autonomy, and when you take
that away it’s naive to think you’re going to get really bright
people becoming doctors,” says Atlas. “The best doctors could excel
at any profession, so why go into medicine if they won’t have the
opportunity to be their best?”
When she was operating a traditional practice, Davidson
witnessed firsthand how our “payment plans for routine expenses”
drive up prices and block innovation. She recalls that one
insurance company paid $118 for a routine PSA test. Now that her
patients pay the bill directly the cost is $18. Insurance used to
pay $128 for a bag of IV fluid. Now Davidson doesn’t bother passing
on the cost of IV bags because they run $1.50 each.
Dr. Eric Bricker is the medical director at Compass, a Dallas-based company
that helps individuals with high-deductible insurance plans. In a
previous job, Bricker was a finance consultant for hospitals,
giving him firsthand knowledge of how health insurance drives up
prices. “When insurance companies and hospitals negotiate,” says
Bricker, “it’s an exercise in horse trading.” For example, an
insurance company might let a hospital get away with charging
$2,000 for an MRI, says Bricker. In exchange, the hospital agrees
to charge the bargain price of $2,000 to deliver a baby. “You do
that mixing and matching,” says Bricker, “and at the end of the day
it works out about even.”
According to Bricker, this horse-trading method provides an
opportunity for hospitals to earn windfall profits: If the hospital
gets $2,000 for MRIs, it will start encouraging patients to get
more MRIs.
Given how prices are set, it’s no mystery why in health care
high costs often correlate with low quality. Bricker cites
one facility in Dallas, where a 3-tesla MRI (the more teslas, the
higher the resolution) can be had for $860, while a nearby facility
offers a 1.5-tesla MRI for $2,500. The former facility stays in
business only because many of its customers don’t know the
difference. They pay the same $20 co-pay wherever they go for an
MRI.
So Bricker co-founded Compass, which works with about
1,200 firms to guide their employees to those doctors and testing
facilities that offer both high quality and low prices. These
employees have an incentive to seek out value because they’re
responsible for paying a large portion of their own routine medical
costs before their insurance coverage kicks in.
High-threshold plans are exploding in popularity, which is a
promising trend. According to a 2012 report by the
Kaiser Family Foundation, about
31 percent of firms now offer health plans in which patients pay
most routine costs out of pocket, like a Health
Savings Account (HSA) or Health
Reimbursement Arrangement (HRA), and 19 percent of covered
workers have one of these plans. High-deductible plans go a long
way towards unbundling our “payment plans for routine expenses”
from the catastrophic coverage that should be the sole function of
health insurance.
“These plans offer hope,” says Scott Atlas, “because they drive
patients to care about what things cost. High deductible policies
also eliminate much of the administrative cost of insurance because
there’s no need to file claims for routine charges.”
Obamacare imposes new mandates on high-deductible plans, but it
doesn’t outlaw them. “The most devastating thing Obamacare could
have done is to say it’s illegal to have a deductible of more than
$200,” says Bricker. “So within the existing confines we can still
have a successful business and help people.”
Americans with high-deductible policies still have the
misfortune of shopping for services in a health care market
dominated by traditional health insurance. Since insurance
companies and the government still pay the vast majority of medical
bills, it’s nearly impossible to find doctors who offer competitive
and transparent prices.
A Houston-based start up called Snap Health is trying to remedy
that by signing up doctors to list their prices on its website.
Currently, there are 290 tests and about 100 doctors to choose
from. You can buy an EKG (about $35), have a kidney stone analyzed
($250), or get a heart check up (about $400). Patients choose the
procedure they want, pay online with a credit card, and then show
up for their appointments. Snap Health’s CEO and Co-founder Dr.
David Wong says the biggest obstacle to building up a menu of
offerings is that doctors accustomed to getting paid by insurance
companies have no idea how to price their services for
direct-paying clients.
Wong says he launched his
business partly on the belief that Obamacare will drive up health
care costs, causing more and more companies and individuals to drop
out and start paying their own health care bills. Neuhofel agrees
that Obamacare could be good for business. “I expect some real
unintended consequences after Obamacare is implemented. There could
be more uninsured people.”
Lisa Davidson plans to enter the state-based exchanges that
Obamacare will put in place. She cites a provision in the
Affordable Care Act that explicitly allows direct primary care
practitioners to marry their services with a catastrophic plan and
enter the exchanges, although the details of what will be permitted
under the law haven’t been hammered out yet.
Eric Bricker also sees opportunity to work within the Affordable
Care Act. “Compass is trying to make lemonade out of lemons,” he
says. “I think you can incrementally make improvements within
Obamacare, and the situation will change over time.”
The efforts of these doctors and others will undoubtedly help
constrain exploding health care costs and improve care. But it’s
hard to fathom how within the legal constraints of Obamacare we’ll
see the sort of innovations that could solve the very problems
that, ironically, were used to justify Obamacare’s passage. As
economist John Cochrane
puts it, without government meddling, health insurance would be
“individual, portable, life‐long, guaranteed‐renewable,
transferrable, [and] competitive.” And going to the doctor would be
as simple and straightforward as eating out. What needs to be done
to get there is painfully obvious.

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The Obamacare Revolt: Physician Fight Back Against the Bureaucratization of Health Care


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