Financing Healthcare

People always look at me funny when I tell them that I haven't had my family on a medical insurance plan in years. Even my wife will joke, "I'm married to a doctor and I don't even have health insurance."  Are we crazy? How can we not have insurance? 

Obviously, there's more to the story, but it is true: we do not pay for conventional medical insurance - and we have saved a ton of money doing so. 

Now, everyone has individual needs and situations, so what I'm about to share may not be best for everyone, but my goal in this article is to challenge you to think differently about how you are financing your healthcare. Let's dig in.

Why do most people want medical insurance? 

Answer: fear of a catastrophe. 

This is definitely something to take seriously. What if there's a terrible accident, or you are diagnosed with some awful disease? Healthcare expenses are outrageous, and can easily bankrupt any of us.  We all need a safety net. 

If you're like most people, you feel compelled to purchase an insurance plan. If it can be paid for or subsidized through your employer or the government, all the better. Honestly, if they are willing to pay for it, you should take it! (Especially if it's a High Deductible Health Plan (HDHP) with a Health Savings Account (HSA) option.)

But did you know that according to a Kaiser study in 2021, the average annual premium for a family of 4 was $21,342? This is $1,778.50 per month in premium payments. Remember, your premium is what you pay to be on the plan. In many cases, it doesn't 'get' you anything. 

What about the deductible - you know, the additional amount you pay before the insurance plan kicks in? In 2021, the average deductible was $1644. It's most certainly higher now, but we'll go with it for the sake of illustration.

So, to pay for this safety net against catastrophe, a family of 4 will pay (on average) $22,986 for the year. Nearly $23,000 before their insurance kicks in. Almost $2000 per month, if we spread the premium and deductible out over the year. 

That seems like a lot of money to throw out the window in case a catastrophe hits. After all, most years there isn't a catastrophe (thankfully).  And keep in mind that this money is often NOT coming back to you to support your health. As we'll discuss below, most of us are not getting $23,000 worth of healthcare from our annual checkups, labs, and the occasional x-ray or specialist appointment. 

Before we move on to that, let's settle this catastrophic issue. 

Are there alternative 'catastrophic plans?'

YES! 

As I mentioned, I agree with having a safety net. But to spend $2000/month for that safety net seems insane. 

Our family has been members of Samaritan Ministries for years. We've paid somewhere in the $300-$400/month range and it protects us against a catastrophe. 

Fortunately, we haven't had any major problems, but when my son broke his arm, the bills kept coming in. My first guess was that it would be a $2000 problem. Nope. After more than 6 months of bills coming in from who-knows-where: the labs, radiology center, radiologists, ER docs, supply vendors, room fees, hospital fees, and every other fee - our final total was $9000! Mind you, this was not even surgical. It was x-rays, IV conscious sedation to reduce the displacement, and a cast. 

In any event, with Samaritan Ministries, our out-of-pocket was around $1000. 

Granted, this was not a $500,000 problem, but #1, it proved to us that this cost-sharing system works, and #2, had it been a $500,000 problem, well, that would have been a really scary, and financially difficult situation even if you had traditional insurance. With our Samaritan plan, we have a max sharing amount of around $250,000, which is pretty outstanding for $350 or so a month - and is likely to cover 99% of the catastrophic possibilities. 

There are other cost-sharing organizations out there besides Samaritan Ministries. Most are faith-based such as Liberty Healthshare, Christian Healthcare Ministries, Medi-Share, and Altrua Healthshare. However, some are not faith-affiliated such as Sedera and KnewHealth. KnewHealth was actually designed with functional medicine in mind! 

So that's what we do for our catastrophic plan. We spend around $4200/year, which is about 18% of the $23,000 average premium/deductible scenario above. That's a way better deal. Even if it was only 50% less, it's a no-brainer.

Now, let's move beyond the catastrophic and start to think about our daily, common healthcare needs. 

Do you spend $2000/month for your family's healthcare needs? 

Some of us do. Expensive medicines, tests, IVs, dialysis, specialist consultations, etc. can add up for people. There are some very difficult situations out there, for which traditional medical insurance is a miracle. I do not begrudge that. 

But most of us do not even come close. Our family definitely doesn't. 

What if we took that money - even 1/2 of it - and set it aside to pay out of pocket for our routine healthcare needs: well-child visits, eye exams, dental cleaning, annual checkups? Most likely, you wouldn't even spend $10,000 a year for your family of 4. We don't. 

So we've opted to pay cash for all the routine checkups, urgent care visits, labs, contacts, dental work, etc. 

Yes, sometimes my stomach drops a bit when I see a $1000 bill come through for this or that. But I quickly relax when I remember that if I had a traditional insurance plan, I'd be paying twice that just for the plan! There's still no guarantee that the insurance will pay anything. 

Insurance creates healthcare inflation

Another important thing to think about is that insurance creates healthcare inflation. 

Costs go up simply because of the endless bureaucracy, administration, in-network deals, executive pensions, multi-million-dollar buildings in Manhattan, and so on. Someone's gotta pay for all of that. It's you and me. 

Plus, healthcare companies (the doctors, hospitals, and clinics) inevitably discover that insurance will only pay for a fraction of what was billed. What do they do then? Increase their prices! 

For example, if the insurance only paid $8 of the $10 that was submitted, pretty soon they will raise their prices to $13, so they can hopefully break even with $10.  But the insurance company will quickly catch on, and reduce reimbursements further.

And so the cycle continues - reduced reimbursement leads to higher prices; higher prices to higher premiums; and so forth.

This is terrible! What can be done?

Well, fortunately... 

Healthcare companies are breaking out of the insurance system

More and more healthcare companies and providers have simply said, "Enough." 

They've realized that it's a complicated, twisted, and messed-up game to play. It takes too much staff, creates too much stress, and who is the healthier for it? Almost no one. 

Many companies are now cash-only, or provide massive discounts to people who pay cash. Since it's such a hassle for them to get paid by insurance companies, they'll drop prices sometimes more than 50% if you pay upfront. 

I've seen this with imaging companies who do X-rays, MRIs, and CT scans for a fraction of what you'd end up paying in a hospital with insurance. Same thing with blood work: run a panel through insurance and it could cost thousands (unless, of course, you've met your deductible), but find a cash-pay option and it'll cut it by up to 90%. 

I'm not joking. 

If healthcare costs can be so much less if we pay directly, why aren't we all moving away from dependence on insurance? 

This brings me to my final issue with insurance-driven healthcare: it's not healthcare at all; it's sick care. 

Insurance does not incentivize health care, it incentivizes sick care.

It's no secret that the big money is in keeping people alive and in a state of dependence on their meds, surgeries, and specialist visits. Period. 

Healthy people do not generate billions of dollars in revenue with their orthopedic surgeries, heart caths, and name-brand autoimmune drugs. 

I'm aware of a couple of health systems in my own region that heard proposals to create a "wellness" department. Although they started to gain traction initially with 1 or 2 health-minded execs, both of these systems ultimately cut the programs within months.  

I suspect it was because true 'health' care requires time, thought, and digging deeper into each patient's situation to find their unique pathway to health.  Insurance companies are not interested in paying for this. 

So, when the insurance plans refused to reimburse for that level of care (even though it has the potential to save an enormous amount in the long run), the hospital had to shut it down. 

I often hear people say, "Insurance needs to pay for functional medicine." Unfortunately, I have to remind them that they won't because their incentives simply aren't the same as yours and your functional medicine clinician. 

And there is an irony in this because healthy people cost the system less! When I build relationships with my patients, order the necessary tests that help to uncover the true source of their symptoms and concerns, and use lifestyle, supplements, and the occasional medication to get them better, they inevitably avoid the surgeries, caths, and expensive autoimmune meds. 

What's the conclusion here, anyway? 

#1. Traditional insurance, while an incredible blessing for a select few, is a ridiculous scam for most people. 

#2. There are alternative ways to protect you and your family from catastrophes that cost a fraction of what you may be paying for traditional insurance. 

#3. While paying cash for your routine healthcare needs can feel expensive at the moment, in almost every case, it ends up being astonishingly cheaper overall. 

#4. If you are depending on your insurance plan to help you become healthier, you'll never get there. You have to value your health more than the corporate execs running your insurance plan. 

#5. Investing a few thousand dollars a year in your health care is of immeasurably greater value than the tens of thousands most are wasting on sick care. 

There you have it. A (somewhat) brief explanation of why I'm cash-based and out-of-network - both in my practice at Precision Functional Medicine, as well as with how I handle the healthcare needs of my family. 

I hope it at least got you thinking!