Is HMO really that bad?

[Quattro Pete]

Right now I'm on PPO with Blue Cross Blue Shield, but there are two major downsides to it:

1. The company doesn't pay 100% of the premium, so I end up paying out of pocket $40+ each month.

2. The PPO has a $500 annual deductible. I recently got some blood tests done, and out of a $600 bill (ridiculous in itself), I'm stuck with having to pay $250 out of pocket.


By comparison, if I switch to HMO, the company pays 100% of the premium and there is no annual deductible. Copays are the same. The only downside is that I have to go through my PCP if I need to see some other specialty doctor, but I really don't see it as such a big deal. I rarely go to the doctor in the first place, and if I do go, it is going to be my PCP.

What am I missing here? Am I crazy to think about switching to HMO?

 

[CivicFan]

HMO works like a subscription. It's called capitated payments where a provider receives a per member per month payment from the HMO for a group of HMO members. That's it.

This is in contrast with the models like PPO which are pay for service arrangements.

The providers participating in managed care schemes are incentivized to provide fewer services - if they provide less service then their cost will be less than what they got from the HMO and they make a profit. If they are unlucky enough to have a sicker or elderly population then they provide more service and they make a loss.

The concept behind the HMO model was that the providers would be inclined to do preventative health maintenance so that they would have a healthier population and the costs would be less in the long run. Unfortunately, given that there are other models out there besides HMO-s, the more reasonable approach is to reduce the services provided to the HMO members. Obviously, the issue is more complex than what I described but this is a pretty good 5 second primer.

The bottom line is that as an HMO member you may find out one day that a test that you took for granted is not necessary, and things like that. It may really not be necessary, or they may skimp.

 

[daves66nova]

I thought this about High Mileage Oil being bad!

 

[Gary Allan]

Quote:
The providers participating in managed care schemes are incentivized to provide fewer services - if they provide less service then their cost will be less than what they got from the HMO and they make a profit.


How so? I need a play by play to see this. For example, let's take a general practitioner. 8-10 hour day ..office costs. Empty - 8-10 hour day ..office costs.

Radio imaging office. Machines ..technologists - office people. Full - empty - same money?

etc..

Now if they ALSO have pay per fee "customers" that the HMO's are competing for space, then they're losing money.

 

[JTK]

Pete you've got a good deal either way. I've got a BCBS PPO also. A family plan. It costs me ~$200/mo and only covers 80% once the $300/person deductibles are met. We used to have about 20 choices, HMOs included. Those days are long gone.

Joel

 

[Gary Allan]

Oh, yeah ..he's got a great deal with the PPO. The deductible thing has me

In our plan that's only if it's out of network (not to be confused with HMO type non-referral).

Ours is $260 for the 3 of us. $25 copay $35 specialist.

 

[CivicFan]

In any given market there are 2-3 payers so the HMO-s don't really compete with the PPO-s - they are product lines of the same company usually.

getting back to the incentive to under provide service... A provider will get a monthly check from the HMO to cover a given population.

Let's say the population to cover is 1,000 people and a physician gets $10 per month per member, $10,000 a month in total. Let's say these 1,000 need $9,000 worth of service every month. the physician makes $1,000 that month.

Then the [censored] breaks loose and one member gets very sick and consumes $1,200 worth of service the next month. The physician provides $10,200 worth of service but gets paid $10,000. S/he is out $200. So the incentive here is to provide service to that one outlier worth less than $1,000. Dropping that one patient is no option because s/he is part of a group.

The idea is that the physician will treat the group with preventative care in order to avoid the unfortunate illness from happening. but since the members jump in and out of plans, a physician is not really able to do that. They rely on statistics and manage risk but there is always the temptation to skimp on services.

 

[Gary Allan]

Quote:
Let's say these 1,000 need $9,000 worth of service every month. the physician makes $1,000 that month.


..and this care is provided in what manner? Time? Material? Does it include outsourced costs to other supporting services?

This is what my numb brain is missing.

If I'm operating an office 50 hours a week and getting a fixed fee for that 50 hours. There's no way I can over spend. OTOH, if the HMO clients are choking the waiting room getting "paid for" service and I have less room for "pay as you go" clients ..then I'm losing money ..so to speak.

Under the confines of how you're stating it (albeit the 5second tour) there's no way the practice and go negative unless you take "unrealized revenues" into the mix and call it a loss.

Now if the primary on the HMO client is given the total revenue that the insurer is going to provide for the client ..in total ..and all services ..from any and all sources ..are going to be charged against that payment, then ..sure..now it will make sense.

 

[Kruse]

During the time I lived in Dallas, TX, our first two kids were born. We were on Kaiser Permenente HMO. (Pretty sure they now have pulled out of the Dallas area, BTW) Unless there was an emergency where we absolutely couldn't make it there, Kaiser told us that they would be delivered at Medical City hospital in Dallas. They had the LDR (labor, delivery, recovery) rooms and the TOTAL cost (out of pocket) for each kid was $35, due when my wife and kid were to be released.
As he kids grew, we loved it because a doctor visit was $5 (OOP) and the medicine bill was $5, also out of pocket, no matter how much medicine we needed. The pharmacy was in the same building as the doctors office. We LOVED the plan.
The downside was that we couldn't request a doctor, we had to take whoever was on duty. Also, like previously mentioned, we had no hospital choice, unless it was an emergency. I'm sure there were some other down sides, but we were lucky enough to be healthy that we never saw the down sides.
We are currently on regular insurance, so I can't state any more about them.
My $.02 worth.

 

[CivicFan]

Originally Posted By: Gary Allan
Quote:
Let's say these 1,000 need $9,000 worth of service every month. the physician makes $1,000 that month.


..and this care is provided in what manner? Time? Material? Does it include outsourced costs to other supporting services?

This is what my numb brain is missing.

If I'm operating an office 50 hours a week and getting a fixed fee for that 50 hours. There's no way I can over spend. OTOH, if the HMO clients are choking the waiting room getting "paid for" service and I have less room for "pay as you go" clients ..then I'm losing money ..so to speak.

Under the confines of how you're stating it (albeit the 5second tour) there's no way the practice and go negative unless you take "unrealized revenues" into the mix and call it a loss.

Now if the primary on the HMO client is given the total revenue that the insurer is going to provide for the client ..in total ..and all services ..from any and all sources ..are going to be charged against that payment, then ..sure..now it will make sense.


The doc gets paid to take care of a group of people and all their needs under an HMO plan. The terms of the contract state that the doc cannot turn away patients but usually they will put barriers if they have to (a doc opening a practice in a healthier part of the town, or having an office on the second floor without an elevator). They are free to have other patients, too, and can operate as many hours as they want.

I guess I am not understanding when you state that they may not make losses even if they have outliers. They get a fixed fee per month under a contract negotiated every year. There is the cost of the service provided (salaries, rent, utilities and supplies) and there is the opportunity cost (more lucrative commercial insurance patients or medicare patients).

 

[opus1]

Depends on what you're looking for and how lucky you are with doctors.

A coworker swears by her HMO doc because the doc will not hesitate to refer her to a needed specialist. The woman has some medical issues that, in her doctor's words, are too complex for her to try to resolve when there are specialists trained to do so.

My experience hasn't been as good. I was in an HMO for a while and had a problem with my foot that my PCP insisted on dealing with himself. Among other things, he didn't do the job right so the problem recurred, and in an effort to "help" me, he had me come to the clinic on Saturday so I wouldn't have to burn up sick-time (which I was more than willing to do). The clinic was open on weekends as an "urgent care/ER" setup, and it was his weekend to cover. Only problem is that the office then tried to hit me with an ER visit copay and I had to argue back and forth with them that it was the doctor's orders that I come in that day, not an emergency, and I wasn't going to pay as though it was an ER visit.

Once I got on to PPO, I went to a real podiatrist, problem solved and permenantly.

I've also noticed that the doctors that I like tend not to be in the HMO network in my area, but a couple that I've seen on an urgent-care basis that I don't like seem to be in every HMO plan available to me.

And I stay away from dental HMO's like they were poison. My old dentist told me that he refused to join any DMO's even though it cost him patients because the networks in his area don't even pay him enough to cover his basic costs, never mind any sort of profit; and he refuses to lower his standards in order to meet some network's costs.

My

; of course YMMV.

 

[eljefino]

I have a PPO but there are no preferred providers near me. A preferred provider has to quote me a price for a procedure and stick to it.

Instead I get "participating providers" who bill me 6-8 months later and there's always some loophole where I pay a fortune and the insurance skips out.

Although I'd love to have "market forces" steer me to a good cheap doctor, it ain't happening here.

 

[CivicFan]

To insist on "market forces" in healthcare is lunacy, IMHO.

 

[Tom NJ]

Originally Posted By: Quattro Pete
I end up paying out of pocket $40+ each month...The PPO has a $500 annual deductible.


Count your blessings, and be thankful you aren't retired in New Jer$ey!

I just bought a private health insurance policy for my wife and I - a PPO through Oxford. Our deductible is $2,500 each, after which we pay 30% coinsurance up to the max-out-of-pocket limit of $5,000 each. And for this wonderful coverage we have the privilege of paying a policy premium of $1,260/mo!

The same company offers an HMO which has no deductible or coinsurance, but the policy premium is $5,000 more per year, so basically I would be prepaying a hospital stay each year (PPO max-out-of-pocket = $5,000 each), even though neither of us have been in a hospital for many years. In our case, if we knew we would need hospital care, the HMO would be better, but that is a low probability.

Based on our typical health needs, I expect our out-of-pocket medical costs for 2010 to be $17,000. If one of us needs a hospital stay, that goes to $22,000 and if both are hospitalized it goes to $27,000. Good thing I planned for these costs before retiring!

New Jer$ey is expensive, but there are some upsides. NJ is one of only five states that guarantee acceptance, regardless of your health or pre-existing conditions. Policy premiums are based on state rules that 80% of revenue must be paid out in benefits. That seems fair on the surface, but the end result remains incredibly high medical costs.

Tom NJ

 

[CivicFan]

Tom NJ, $17k for a family of two is pretty much the same cost as what it costs anyone else - the national average is around that much. I pay a similar amount even though I pay $250 a month. The rest of the premium is hidden from me because it's the employer that pays (basically, the bottom line is that the salary is reduced by the variance amount). But being in a large group, my out of pocket expenses are much lower as I am not as risky.

The down side of buying individual coverage is that you are not in a large group hence you are higher risk. That's why you can only get a High Deductible Health Plan. It's basically a barrier for you to incur high costs to the insurer and my guess is that unless there is, God forbid, a catastrophic event, you are pure gold to them.

 

[Tom NJ]

Hi CivicFan,

Yes I understand that the total average health costs are high countrywide, but in my case I bear the brunt of it out of my pocket since I am no longer employed.

The coverage I had when employed provided $500 deductible and 10% coinsurance up to $1.500 max-out-of-pocket, a real deal compared to now. The total policy cost was only $9,140/year, of which I paid 20%. My new policy is $15,120 of which I pay 100%.

I'm not sure your salary is reduced by the variance amount, i.e. the amount paid by the company, as salaries are competitive and market based.

My point is anyone getting coverage through an employer group plan should count their blessings as they have a great deal compared to private coverage.

Tom NJ

 

[Drew99GT]

Originally Posted By: CivicFan
To insist on "market forces" in healthcare is lunacy, IMHO.


You'd rather have the same people running SS/Medicare in charge? 106 trillion dollar present value liability? Almost twice world GDP?

 

[eljefino]

Since my (employers and my match) family policy premiums are 160% of my 15 year mortgage payment, some ordinarily revolting ideas are looking more attractive.

 

[CivicFan]

Originally Posted By: Tom NJ
My point is anyone getting coverage through an employer group plan should count their blessings as they have a great deal compared to private coverage.

Tom NJ


Amen to that. Until the system is somehow fixed, your words should be written in gold letters for people younger than 65 years old or not desperately poor.

 

[eljefino]

Originally Posted By: CivicFan
Originally Posted By: Tom NJ
My point is anyone getting coverage through an employer group plan should count their blessings as they have a great deal compared to private coverage.

Tom NJ


Amen to that. Until the system is somehow fixed, your words should be written in gold letters for people younger than 65 years old or not desperately poor.


The breakout-idea small businessman in me asks why we should give so much power to existing undustrialists.