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Explore your curiosity - Interesting people with fascinating stories.
Life consists of three things:
-The stories we tell others
-The stories others tell us
-The stories we tell ourselves.
Chris, welcome aboard to the show. Thank you so much for joining today.
Speaker 2:Well, it's a pleasure to be here.
Speaker 1:So let's start with something, a story that you shared with me before we hit the record button that was horrific to me to hear. I'll let you tell the story, but basically you were, you could pay less for this procedure without insurance. Tell us the
Speaker 2:story. Sure. Last year, about this time of year, I needed to get surgery, a minor surgery done on my knee. Just had to get my meniscus trimmed and so I needed an MRI. The doctor told me, well, just get downstairs to our MRI facility and they'll get you taken care of.
Speaker 2:So I did. I was told that, well, you have Cigna, so we're gonna have to run that through your insurance to see if you can be pre authorized, whether the insurance company will be willing to pay for this. And that'll take a couple weeks and then they'll tell us how much it will pay because I'd ask, well, how much is this going to cost? Well, we don't know yet. We're going have to ask the insurance company.
Speaker 2:But the good news is that no matter how much they say they'll pay, we're gonna cap your exposure out at $861.23, which is random, really weird, randomly specific number. And so I was like, okay. But then the woman said, but if you just wanna pay with your credit card, not go through insurance, right? That's going to cost $450 and the guy's sitting right back there. He does, he's just twiddling his thumbs.
Speaker 2:He'll take you right now and you'll be out of here in ten minutes.
Speaker 1:Okay. That, that, that, that blows my mind. Like, why is it cheaper to not use insurance? How does that even make sense?
Speaker 2:Well, a couple of reasons. One, the insurance rate, and you have to realize the other thing I guess I didn't mention is that I have a high deductible health plan and I hadn't used any of my deductible. So I was going be paying for this a 100% out of pocket no matter what. And the reason the MRI provider is getting paid more though is that's what they negotiate. There's a specific negotiated rate for every last little thing.
Speaker 2:Little micro procedure has a specific, it's called a CPT code. Don't ask me what that stands for. And that CPT code, there's a negotiated rate for all of them. That's what the doctor's office gets paid. And in this case, because the insurance company wasn't going to cover any of that for me, I was going to have to pay the insurance company, which would then pay the doctor or something like that.
Speaker 2:The reason why the cash pay price is so much less in this case is that it's actually fantastically expensive to run a charge through an insurance company. The actual, the cost, the transaction costs can be upwards of 30% depending on the cost of the the procedure. So the doctors have to build that in that that expense into the thing that's not all that the doctor themselves wouldn't pay all the insurance company has to pay, you know, to pay some of that as well. Have to somebody has to administer a claim, administer all those little micropay details.
Speaker 1:Basically give me the money right now and don't make me go through insurance claim hell and here's a huge discount or we go through all that and you pay more because you're on a high deductible. That's ridiculous. What's the, what's the let me ask you two questions. What's the advice if there is any to the general population thinking about, well, should they just ask this question? Does it always work?
Speaker 1:Is there other advice that you would give to people who are, you know, at the cash register and, you know, need to make this decision?
Speaker 2:Yeah. Well, I think it always behooves you to ask how much is this gonna cost and what the cash pay price is. And what you'll find is that some of the times you'll get a straight answer and much of the time and some of the time you'll get a bewildered confused look from the person who's asking you and a and a and I gotta go ask somebody else and I don't know what that is or what in the world are you talking about? I think you'll find it's not limited, it's not that variability can be across the same type of service. So for instance for my MRI, I actually did have them run run through the whole insurance process as much to because I'm in the business as much to see what would happen as anything.
Speaker 2:I took that those couple weeks. I took the liberty of calling some other MRI providers to see what they would charge. I found another one locally that excuse me, also charged $450 cash pay. So they told me, oh, there's a little market for MRIs here in Boulder, Colorado. Another person I called down in Denver gave me the humming to humming, and they didn't know what they just literally had no idea what I was talking about, what I was asking.
Speaker 2:So but I think the general population doesn't even know you can ask for prices and doesn't know that there can be cash pay prices. Now an important thing is I I like to think of that there's sort of three different prices on, you know, there can be up to three different price levels for a given procedure. There's the base level, hey, this is what my insurance pays, and you know each insurance company's gonna have its own price negotiated with a given provider, so that depending what insurance provider you have will determine the price, but from the point of view of a patient there's one insurance price. Then there's what's called the chargemaster price and that's the rack rate, the quote unquote list price that the doctors list in some data, you know, super secret database they have, that oftentimes if you're uninsured, you don't have insurance, sometimes that's the price you will get, especially if you don't ask for a cash pay price. And that rate is usually much higher than the insurance rate.
Speaker 2:It's almost like it's not meant to be a real price. It's meant to be a nego it's like an anchoring, you know, in a negotiation one on one where you anchor high because you want to get beat down. That's kind
Speaker 1:the of doctors basically.
Speaker 2:It's the what? It's the MSRP of doctors. Yeah, it's the sticker price that sits on the window of the car, but but but it can sometimes be shockingly high. Like, if you remember back, way back when, in the, the 1980s, there was this, scandal in the US military where toilet seats were you know the people were selling toilet seats to the the military for like $10,000 and things like that and because it was some sort of average cost pricing craziness. Well it's just sort of the same thing here.
Speaker 2:Sometimes those prices can be really really crazily high. If you ever get an air ambulance, my God, the price of that can be through the roof relative to the insurance, what the insurance actually will cover. That's what's called the chargemaster. Then there's the insurance price and then more recently there have been this cash pay prices are because the charge master pay people don't the hospitals don't expect to collect that on a regular basis. It's not a business strategy.
Speaker 2:It's not a price that they actually expect to be collecting. Cash pay prices is should be lower than the insurance price because you don't have to go through the administration or at least as the same as it probably lower. And that is meant for providers that want to actually do business that way. We'll have a price that is clear, understandable, it doesn't have pennies after it's not like a Walmart price like my MRI thing was and it'll be easily communicated. Because that's the thing about the chargemaster prices, it's not like the people at the front desk will know what that chargemaster price is though, it'll often be, it'll just show up on a bill someplace.
Speaker 1:So when we think about the layers of complexity that are driving these extra prices, what are all these inefficiencies that could potentially be removed?
Speaker 2:Well I think, sort of like we were talking about in the pre discussion here, there are in my mind types of procedures that ought to be run through that require and should be insured and then there's some that you know in an ideal world and we're not at it not that we can do this but in an ideal world would not be run through insurance. Let's use it.
Speaker 1:Hold on. Let's, let's take a step back and explain why do we even have insurance and what are the types of procedures that would or wouldn't be insured? Like what's the, what's the philosophy behind insurance even?
Speaker 2:Well, let's, let's, let's, let's look at what the definition of insurance is, not the philosophies, but the definition. Insurance is something that ensures you, ensures that you are not bankrupt when something bad happens. It is a way to shift risk for an outlier type of event to somebody else who's willing to take that risk for price. So let's think about your and then there's things that you know that no normal person would view as real risk and would no one would pay money to shift that risk off to somebody else. Let's look at your house.
Speaker 2:People have homeowners. I bet you have homeowners insurance. I have homeowners insurance. Everybody has homeowners insurance. You wouldn't buy a house without homeowners insurance.
Speaker 2:Probably couldn't actually. And what does that insure against? Well, insures against your home burning down, a tree falling on your roof, a hailstorm destroying your things that are sort of outside the normal course of wear and tear on your house and that where if it happens you're gonna be out a mid you're gonna have a major financial loss, right? If your house burns down that could be you know hundreds of thousands of dollars to replace it And if you don't have owners insurance, you're gonna have to pay that out of pocket, which most people don't just have money sitting around to do that. On the other hand, if your light bulb burns out, do you file a claim on your homeowners insurance?
Speaker 1:Absolutely not.
Speaker 2:No. What do you do? You go to Walmart and buy a new white light bulb. So and why is that? Well, because you expect, you know, you don't expect your home's gonna burn.
Speaker 2:It may, but you don't expect that's gonna happen. And you certainly don't expect that to happen every year. In
Speaker 1:essence, right? What is insurance? It's, it's, you know, a group of people, let's say a 100 people, right? Just an arbitrary number coming together and saying there's a good chance one of us, this house is going to burn down. So one of us is either going to go bankrupt or we all pay a small little amount.
Speaker 1:And then basically whoever it happens to is covered. That's right. The essence of insurance, but it's a complicated process. It requires a lot of overhead. There's a investigative process that goes into it to prevent insurance fraud.
Speaker 1:And now you're using this whole complicated process to bring it back to health care to give to help somebody who has the sneezes. Like that's ridiculous.
Speaker 2:That's yes. And that's exactly the system we have. That's exactly right. Know there's some so in the what's interesting is in the broader population people think of UnitedHealthcare and Aetna as health insurance companies. In the healthcare world we call them payers and that is a almost an unconscious tick.
Speaker 2:No one thinks about that, it's just what we do, we call them payer. We don't call them, these are health insurance companies, we call them payers. It's the payer community because they pay for everything. So they're not actually insured, they have an insurance component in there but there's this whole other aspect of what they do that involves taking my money, sitting on it and then giving it back to me when I need my light bulb fixed or I want to paint my wall because I don't like the color anymore or you know I need to steam clean my carpet and they've been sitting on my money, they're earning interest on it, they're getting carry on that money, okay? So that when I need my light bulb changed I can have my money back but then they don't give it back to me cleanly and smoothly.
Speaker 2:There's a whole administrative process for me to get my money back. Yeah. Mean,
Speaker 1:you even imagine that you pay somebody in advance $100 for them to buy you a light bulb that costs $1 for $5 That's ridiculous. That just makes no sense. What does salvation look like here? I mean, is this legislation? Is there an opportunity for innovation?
Speaker 1:Are there companies kind of trying to figure this out working in the space already? What is the environment?
Speaker 2:Well, I mean, first of all, just to be clear, healthcare is a fifth of our economy. It's about a $5,000,000,000,000 industry. People make one thing people who aren't in the industry say, well, we got to get rid of, you know, commercial, you know, like, this shouldn't be a for profit industry. It's the profits that are killing us. It's actually not.
Speaker 2:The profits it's it's not a very profitable business. Okay? It's not. It's just that there are a lot of people who are doing unnecessary things that make reasonable profits. So it's more the industry is a little bit like a Rube Goldberg machine than it is, you know, like a fantastically profitable business.
Speaker 2:Okay. It's just a whole bunch of, know, the whole bunch of little people, you know, little bits and pieces. But because there are that many people making that much money, it ain't going to go away anytime soon. Unfortunately, I think the best we can do and to be clear, let's take a step back. All what I'm saying does not mean that we don't need insurance and a lot of this machinations we're talking about, yeah, we can make it more efficient and there's entire industries trying to make the current system work better and that's great because you're still going to need it for when your house burns down.
Speaker 2:You get brain cancer, you're in a car crash, you're in a coma, you need a hip replacement. There's all kinds of things out there and probably at some point in your life you're gonna have one of those bad things happen. So you will need, you know, unlike hopefully my house will never burn down. Although I did have a I did have to have my roof replaced. I maybe you've had to use your homeowners insurance.
Speaker 2:But maybe, you know, there's lots of people out there that never do, but they will need something bad will happen to them. So you need insurance and you need the the probably you need a lot. You probably there's a better way to you for the insurance component of this to work. That's step one. And then for all of the other touches that are, you know, the equivalent of buying light bulbs at Walmart, I ideally, the ideal way to do it is, okay, let's just buy light bulbs at Walmart.
Speaker 2:Let's just not run that through insurance. Let's put down our credit card. Let's have reasonable prices. You have to have a safety net because there a few people that can't even afford that and that's that's you know we can do that. But and and there is a emerging business that variety models that do just that.
Speaker 2:There's the direct primary care model. There's the direct specialty care model, which are basically you just pay your doctor. I mean, my MRI thing was a great example of that. I'm having another I'm having some follow-up work done on my on my feet based from the surgery and my doctor is he just charges packages of care and I pay for my credit card and the insurance doesn't pay for these type of service. So I have no, you know, it's not like he's he's breaking a model here, but because he's paying, you know, he's doing that.
Speaker 2:He gives great great service. Mean, it's an amazing experience. So these things are are that. And then but to get there and to do that at scale and to convince people and here's one of the big problem. One of the big blockers in all this is that and you kind of alluded to this during the pre show, was that I have insurance.
Speaker 2:Why would I go pay for something else? Because that's the problem is that they have my money for my light bulbs, and if I don't use that, then they're just gonna keep that money. Right. So there is a real chicken and the egg issue here.
Speaker 1:Yeah. And it's even worse because, know, the, the, the, you know, all those who are not self employed, but work for an employer, that employer is dictating who the healthcare provider is. So you're getting insurance from X and you don't really have a choice as an individual, so there's a certain amount of lock in. So even if I was like, oh, like I want to get my insurance from a different insurance company, you can't necessarily do that.
Speaker 2:Well, so first of all, insurance, the employer isn't dictating generally how, what doctors I'm going to be able to use. They go out and buy a network from an insurance company. So it's the insurance company that does that still. The same thing happens if I buy buy on the Obamacare exchange, right? Frankly, if it's traditional now, the one thing about employers is they do have the flexibility when they're doing what call it, what's called self funded insurance to do whatever they want.
Speaker 2:You will find a lot of employers will pay for these direct primary cares on behalf of their employees. So there's a lot more experimentation going on in the employer funded model than say in Medicare, which you know there's two big blocks of well there's three, four ways healthcare gets paid for. There's Medicare where people that are of that age. There's Medicaid for people that are in the safety net. And you can have, you can have people that are on Medicaid and Medicare's dual eligible.
Speaker 2:There is employer based health care, and that comes in either two flavors. One is the insurance company. They hire an insurance company to take the risk or they take the risk, the employer takes the risk on their own balance sheet. And then the third is 20 million people have care by care directly through the Obamacare Exchange.
Speaker 1:This has been so interesting, so educational, and I think anybody who's listened to us today is definitely going to be asking about the option for cash, cash pay for their services. Let me ask you one last difficult question. If you had divine power for the day and you could change one thing, be it lore, it consumer behavior, anything in the world, right, where magical power for the day, what would you change obviously, the context of this industry and this problem?
Speaker 2:Can I can I can I go for two things?
Speaker 1:Sure. We'll give you we'll give you one more magical genie favor.
Speaker 2:Two. I got I got two powers because there's two big I because I couldn't I was like, I'm not sure which one I should go for. So I think the the first thing is I would magically educate every American that they can think differently. They can take control of this. They have the ability and the freedom to think differently about this and to begin to give them the confidence to be consumers of their own health and their own health care rather than passive tortured sheep.
Speaker 2:Okay. Amen. Okay. That's the first thing. And then I think the second thing would be, I would magically create a massive number of health plans that had this bifurcation between allowing people to get dollars for day to day stuff off to the side, hopefully tax free, pre tax, because that is the one advantage that, you know, health insurance, it's all, you you can buy your health insurance pre tax, so let's you say, let's give people a big pile of pre tax dollars, call it like an HSA for instance for all, and then couple that seamlessly with an actual insurance product, so that they wouldn't have this devil's bargain that, Yeah, I could go get a better deal, I could go get my MRI done today, but it's not going to count them towards my insurance, and I've just paid a bunch of money for MRIs and now the insurance company is going to keep that money.
Speaker 2:Because that I think is a blocker because if I've educated these people over here to be consumers, then they have no way to do it. They're just gonna get pissed off and and angry, and they'll go back to the old ways. Again, this is a chicken and the egg, but there are chicken I could list 15 other chicken and the egg problems in this whole thing, but let's start with that because I think that those two are the two biggest constraints out there.
Speaker 1:Chris, thank you so much for joining the show. If somebody wants to talk to you more and you know, they're in the business and they want to lean on your expertise, where do they find you?
Speaker 2:Well, I'm on LinkedIn under Chris Saxman, M C Saxman is my handle there. And then you can email me at M C Saxman, MCSAXMAN@gmail.com.
Speaker 1:Chris, thank you so much for your time today. I really appreciate you. Thank
Speaker 2:you. It's been a real pleasure. Wonderful.