Dr. James Eelkema, a Burnsville, MN family practice physician was fed up with the costly paperwork insurance companies required and the second guessing of his medical decisions by company bureaucrats. So when he learned that up to a third of his pay was to become contingent on “measures such as whether his patients got pap smears or whether he got them to stop smoking,” Dr. Eelkema decided enough was enough and converted to a cash-only practice.
Dr. Eelkema’s decision represents a growing trend of medicine returning to its fundamental role as a market-oriented, patient-driven profession. Cash-only practices have a number of advantages over traditional practices. First, they allow the doctor to save time and personnel on insurance paperwork and redirect resources to patient care, simultaneously passing savings on to the consumer. Second, they encourage a closer doctor-patient relationship, free of interference from third parties such as insurance companies or government programs. Most importantly, cash-only practices curtail expenditures by linking health care decisions and cost directly to consumers; after all, when the insurance company is paying for your checkup, who bothers to ask how much it costs?
The experience of Dr. Vern Cherewatenko demonstrates the merits of cash-only practices for physicians, patients, and the health care system at large:
Six years ago, Cherewatenko was drowning in paperwork and red ink, accepting more than 300 different insurance plans with 7,500 different medical codes. “We were losing $80,000 a month. We were inundated with paperwork. What we found is the more patients we saw, the more money we lost, and it was devastating,” he says. Unable to survive, Cherewatenko discovered what he says is a better way — a cash-only practice that’s grown into a national network of 1,600 doctors. “We have lowered our fees anywhere from 30 percent to 50 percent on some of our services which is incredible,” he says. ‘And it’s really charging less and making more.’
Cash-only doctors serve as an excellent counterpart to consumer-driven health care plans, which include high deductible health insurance plans and health savings accounts (HSAs). High deductible insurance plans offer lower premiums and supplement the cash-based market, ensuring consumers have coverage for catastrophic and unforeseen events. For all other medical costs, patients would pay out of pocket, using HSAs for predictable health expenses like checkups and lab tests. This system empowers the patient while enhancing affordability of care. Cash-only practices complement and enhance the beneficial aspects of this system by providing more consumer control of care and a better doctor-patient relationship, all at equal or less cost to the consumer.
So what’s keeping these practices from becoming more widespread? As usual, big government has its fingerprints all over the crime scene. Unfortunately, such ideas are discriminated against by the federal tax code in its virtually exclusive treatment of comprehensive, employer-provided health insurance. Every dollar paid directly to a doctor, without going through the bureaucratic apparatus of a third party payment system , must of necessity be an after tax dollar. The most effective, though limited, relief from this tax discrimination against direct payment is the health care savings account. But Congress caps the maximum contribution employees and employers can make to an HSA. Congressional policy, in other words, divorces the economic principles of supply and demand.
In reforming health care, lawmakers should create a level playing field for different types of care. This means that Congress should not be picking winners and losers, or favoring one type of health care delivery system over another. It means that cash-only practices and other consumer-driven options should not be on the receiving end of official discrimination in either law or regulation. Patients should make the choice of how they get care. As Heritage’s Ed Haislmaier writes, “[Maximizing value] can be achieved in health care only if the system is restructured to make the consumer the key decision maker. When individual consumers decide how the money is spent, either directly for medical care or indirectly through their health insurance choices, the incentives will be aligned throughout the system to generate better value—in other words, to produce more for less.”
Co-authored by Vivek Rajasekhar.
Sen. Joe Lieberman (I-CT) may have announced that he expects to vote for Majority Leader Harry Reid’s (D-NV) health bill this afternoon, but that leaves Reid with just 59 votes. He needs to get all three of the following holdouts to sign on the dotted line by Christmas:
Sen. Ben Nelson (D-NE)
As we have thoroughly documented before, there are nearly two dozen abortion funding prohibitions in current federal law that reflect two basic principles: 1) that, except in situations involving the life of the mother, rape and incest, the federal government will not pay for or reimburse for abortions under federal programs like Medicaid; and 2) that, with the same exceptions listed above, the federal government will not subsidize insurance plans that offer coverage for abortion. This is why the Federal Employee Health Benefits (FEHB), military insurance through TRICARE, and the Indian Health Service do not cover abortion unless the mother’s life is at risk.
Reid’s health bill would change all that, forcing Americans to subsidize elective abortions for the first time in more than 30 years. Nelson told Face the Nation this Sunday: “I still have the unique issue of abortion. I’ve said I can’t support the bill with the abortion language that’s there.”
Pro-abortion Democrats in the Senate are going to have to vote for a Stupak-Pitts-like amendment, reaffirming our nation’s policy not to use taxpayer money for elective abortions, before Nelson will become the 60th vote.
Sen. James Webb (D-VA)
In the Winchester Star today, Webb announced that he is “still undecided” on how he will vote. Webb voted with conservatives five times for amendments that would have prevented Reid from stealing almost $500 billion from Medicare to pay for his massive new health insurance company bailout. Webb also described himself as a “long-time supporter of Medicare Advantage programs which have, in my view, greatly improved services in rural areas of Virginia.”
Webb may want to pay particularly close attention to the latest report from the non-partisan and independent Centers for Medicare and Medicaid Services (CMMS), the agency in charge of running Medicare and Medicaid, which reads:
Lower benchmarks would reduce [Medicare Advantage] rebates to plans and thereby result in less generous benefit packages. We estimate that in 2015, when the competitive benchmarks would be fully phased in, enrollment in MA plan would by 33% (from a projected level of 13.7 million under current law to 9.2 million under the proposal).
Sen. Claire McCaskill (D-MO)
McCaskill told the Associated Press this weekend: “The whole reason we’re doing this bill is to bring down cost, first for the American people in health care, and secondly for the deficit.” AP adds: “Asked if she would vote against the bill if it raised health care costs overall, she said, ‘Absolutely.’”
According to the same CMMS study mentioned above, Reid’s health care bill will not bring down the cost of health care. Instead, the bill does the opposite, raising national health expenditures by $234 billion, bending the cost curve in the wrong direction. And according to the Congressional Budget Office (CBO), the Reid bill raises health insurance premiums for millions of Americans, which is exactly what happened when similar legislation was passed in numerous states.
Finally, McCaskill is an honest Senator who recognized Reid’s attempt to separate the Medicare “doc fix” as the dishonest shell game that it was. When the cost of the doc fix is included in the Reid bill, Obamacare ends up adding $196 billion to the deficit in the first 10 years and $765 billion in the second decade.