A paradigm shift in health care has begun and traditional health insurance will become obsolete. Major health companies have recognized this but the Administration hasn’t. This is the fundamental reason why President Obama’s health care plan missed the mark.
The true risk in health care that is insurable is major medical. There is not so much “risk” in primary care as there is more the administration of expenses. If you talk with most any primary care physician, the complaint you will hear is about insurance billing. Often a medical practice will have one or two staff members handling the billing to clients and the billing to insurance carriers. Billing administrators at the insurance companies complement these individuals. This adds overhead expenses across the industry. Estimates are that 30 to 40 percent of overhead expenses goes toward billing in a primary care practice.
Due to this higher overhead and the pay-per-visit compensation model, a traditional primary care physician will attempt to serve patient base of 3000. Typically, he or she must see roughly 20 patients per day just to break even as a business. To make a reasonable living, a typical primary care physician might see up to 50 to 60 patients per day. This translates to a doctor’s average time with the patient under this model being about seven minutes but sometimes less.
One entrepreneurial physician saw this and devised a different approach to health care. Dr. Samir Qamar asked how the business model of primary care would change if compensation were a monthly subscription paid in advance and no insurance was accepted. Immediately, the costs associated with billing at both the provider and the insurance companies would drop out of the system. Dr. Qamar found that this efficiency led to other efficiencies being built into the business model. In the end, a primary care physician need only service a maximum patient base of 2000. Without the fee-for-visit compensation model driving care, there was no clock-watching and no emphasis on volume. Rather, the focus became quality of care. The average time spent with a patient more than doubled. The company is Monterey, California based MedLion, Inc.
The shocking aspect of MedLion’s new approach to primary care is its cost: $59 per month for an adult, $39 per month for seniors, and $19 per month for a child. How is this possible? It seems that it is more than just primary care physicians who grasp the costs associated with insurance billing. MedLion approached other medical providers – such as labs, specialists, etc. – with a simple deal: our patients will pay you cash up front for your service instead of you billing insurance. These other providers overwhelmingly preferred this deal to billing insurance.
Major medical is not included in the MedLion model. This is where the insurance companies fit. Major medical is the true risk in health care and providing this coverage is the proper role for insurance companies. Such policies – with a high deductible – might run $150 or so per month. Thus, combining MedLion’s direct primary care model with a major medical policy might run $200 to $225 per month. For employers who provide health care benefits to employees, this is a game changer.
This model to primary care has not gone unnoticed by the big names in health care. They are establishing “consumer health services” divisions. Recently, Procter & Gamble purchased a primary care model similar to that of MedLion’s and rumors are that Johnson & Johnson is in the hunt to acquire such a firm.
While the goal of providing every American with health insurance is noble, the Administration’s health care plan follows the road of the obsolete insurance company model.