Tuesday, September 24, 2013

Blame the Third-Party-Payer System, Not the Free Market, for Cancer Patient's Woes

Bamboozled, PART 1

This is the first in a five part series relating to an 8/12/13 New Jersey Star-Ledger column, 
Life-saving transplant denied, health insurance canceled over 26-cent shortfall.

Bamboozled intervenes in disputes between consumers and and businesses, government agencies, and the like to resolve the issues involved. This series covers my participation in the comments section, a favorite avenue of activism for me.

In her weekly column Bamboozled on 8/12/13, the New Jersey Star Ledger's Karin Price Mueller tells the story of a man who lost his insurance coverage just before he was to undergo expensive life-saving surgery.  

Sergio Branco lost his job at Russell Reid, a waste-management company, after being diagnosed with cancer. Under COBRA law, the Branco's paid the required premium to continue coverage for Sergio under his former employer's health insurance plan. 

The COBRA premium payment was $518.26, but Mrs. Branco mistakenly paid $518.00, inadvertently omitting the $0.26. Subsequently, just weeks before Branco's scheduled surgery, The Brancos were notified that, due to failure to pay the required premium, their coverage was canceled. Mrs. Branco offered to pay the additional $0.26, but even though the deadline for payment hadn't been reached, Branco's employer refused to allow the insurance company to reinstate the coverage.

Frantic, Mrs. Branco contacted Bamboozled, who intervened on her behalf.  Numerous telephone calls to the employer and its representatives by both Bamboozled and the NJ Department of Labor, along with pleadings from  Branco's surgeon that Branco "will most certainly die in the very near future if he does not proceed to [bone marrow] transplant," came to no avail. Only after the Branco's lawyer filed a court motion was Branco's coverage was reluctantly reinstated. 

Judging by Mueller's account, the employer seemed to act in bad faith, if not illegally. In my comments, I chose to focus on the more fundamental issue. In this series, I must stress that, as I told a correspondent who misrepresented my position, I did not say the government is at fault in the specific issue Mueller describes. I said the government created the insurance system that led to the problems the Branco's faced. I am not defending Russell Reid's behavior, or minimizing the Brancos' angst:

This case highlights a fundamental flaw in our health care "system": Most of us as consumers are not the insurer's customer. Through a series of government policies, particularly tax policy, health insurance was coercively shifted from the individuals' to the employers' responsibility to provide.

In regard to all other types of insurance, the consumer of the insurance service is also the customer, because he pays the bill directly. The loss of a job doesn't result in automatic loss of life, auto, homeowners, or other types of insurance. Since the individual contracts directly with the insurer, the customer knows what he is paying for, and the insurer is beholden to (and competes directly for) the individual receiving the service. No need for COBRA laws or the like. No middlemen to gum up the works, and cause angst for consumers. The policy says what it says. Both parties voluntarily agreed to its terms. Both are legally obligated to abide by those terms. It is a legally binding contract between consumer and provider, and the government steps in only when one party breeches that contract.

With employer-based health insurance, the consumer doesn't pay the bill directly. The employer pays. But here's the perversity of it: The employer pays for and thus controls the insurance with the employee's own money. It's the employee's money because health insurance is part of the employee's compensation. This perverse setup and it's consequential problems; all to avoid draconian taxes on the compensation. The logical solution: give the money the employer spends per employee for health insurance to the employee—tax free, as is is now—so the employee can contract voluntarily and mutually beneficially with the insurer whose policies best suit the consumer's needs and affordability. If that were the case today, the Branco's absurd predicament wouldn't have arisen, and Price-Mueller's column wouldn't even have been written.

The insurer is, rightfully, beholden to whoever pays the bill. The person responsible for paying the bill should be the consumer, not some third party. This doesn't happen, because the political leadership is not interested in protecting the individual's moral right and responsibility to take care of himself. The dominant political leadership is concerned with political power and unearned greatness.

To be continued.

Related Reading:

"Pre-Existing Conditions," and the Solution

No comments: