05/09/2024
Why
Why
Why
First Let me give the short answers
because
1. It does not cover all individuals. Some are exempted. And if you see carefully, those who need healthcare the most are the ones who are being exempted
2. It does not cover all diseases. And if you see carefully, those diseases for which you need money the most are the ones who are being exempted
3. It does not reimburse fully.
4. Claims are rejected for filmsy reasons
because
1. It raises the cost of healthcare.
When a person pays for healthcare himself, he/she pays only for the expenses incurred in the hospital for his treatment
When government pays for healthcare of its citizens, it pays only for the expenses incurred in the hospital for his treatment
But when you bring in the Insurance
1. You need additional Staff in the hospital to process the claims
2. You need additional Equipment (Scanner, Printer, Computer, Internet) to process the claims
3. You need additional Paper work
4. You need additional Space to store the documents and also people to work
5. The payment comes after weeks to months and the interest for this has to be paid
6. You need accreditation for the hospital and this needs more money
7. Insurance company has staff
8. Insurance company has equipments
9. Insurance company does paper work
10. Insurance company does marketing
11. Insurance company get profit
So
Instead of paying for only your treatment, you end up paying for your treatment and the above 11 factors.
This essentially makes the cost 200 to 300 %
So
If your hernia surgery costs Rs 50000 without insurance, it will cost Rs 150000 with insurance
because it worked (or at least seemed to work in the past and the early adaptors were happy and it is the late entrants who are going to suffer
The patients were happy because they got treatment without paying the full bill
The doctors were happy because they got more patients
The hospitals were happy because they got more revenue when they got more patients
Here to
The cracks are visible now only
But in any Ponzi Scheme (or MLM ) the early adaptors are the ones who staunchly will defend the scheme when the later entrants point out the problems. Even in Health Insurance that is happening and this is exactly what a Ponzi Scheme is all about.
Just because something worked for the early adaptors, it does not make it good
Let us delve deeper as to why it looked so rosy in the beginning but has become a Ponzi Scheme now. For this we need to learn few fundamentals
1. Difference between AMC, CMC and Insurance
2. Advances in HealthCare in the past 3 decades
1. Difference between AMC, CMC and Insurance
AMC or Annual Maintenance Contract is an agreement between the manufacturing organization and a service provider for the ongoing maintenance of certain assets. It's a contractual obligation with a defined set of deliverables and service levels against an economic consideration.
While an annual maintenance contract is a great way to cover basic service on products, a comprehensive service contract (CMC) covers any additional spare parts, labor, or transportation costs that come up for techs while servicing those products.
Warranty is a form of AMC / CMC for fixed time
Insurance is a contract (policy) in which an insurer indemnifies another against losses from specific contingencies and/or perils. Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to protect against the risk of a contingent or uncertain loss.
You have Warranty or AMC / CMC or for your computers / UPS etc. That is to cover the “wear and tear” expected in “normal course of action”. This does not cover any unforeseen action. This is for “breakdown”
If you insure your computer, that covers some unforeseen eventuality like Fire / Theft and does not cover wear and tear in normal course of action. This is for “Accident”
In case of Computers / Cars, the concept of Warranty vs Insurance is clearly defined. We all know what is “breakdown” and what is “Accident”. You don’t confuse one for another. The Scopes are clear and the Company which provides you warranty or AMC / CMC does not pay you money when the car is stolen or burnt or meets with an “Accident”. The Company in which you have insured against theft and fire does not give money for the “breakdown” / spare parts getting old and worn out
But
What happens in Health Insurance
You are applying an Insurance Model - a form of risk management, primarily used to protect against the risk of a contingent or uncertain loss / “accidents” - to address “breakdowns” / wear and tear where you have to ideally use the AMC / CMC
This is what makes and the insurance company is faced with many claims and they either refuse to cover people who most need healthcare making and they refuse claims giving filmsy reasons making
Now
You will have a simple questions
There are 1000s of people involved in Insurance Companies. They have the best Management Graduates, Best Lawyers, Best Accountants and best doctors as advisors. They all have run beautiful companies which helped so many patients. Do you say that all these best Management Graduates, Best Lawyers, Best Accountants and best doctors working in Insurance companies did not realise that , , have realised it and your are more intelligent than them. Why should I take your single voice as correct instead of the wisdom of past 10 decades
I will answer this
Most of the models on which Health Insurance Operates were all derived 60 years ago.
They were based on the availability of treatment those days. They did not take into account the rapid advances in HealthCare in the past 3 decades
Since less treatment was available those days, the number of claims was less. So they paid the full claims. Thus it appeared to work
Though they were paying for breakdowns, they were not paying for all breakdowns
Those days, the number of mechanic shops were less. The number of tools were less. Many of the breakdowns were unrepairable. So the cars were either discarded or used which the problems unresolved.
Note that the companies were not paying for all breakdowns
They were paying for the cars which were taken to the mechanic shop alone
So
In the earlier stages, though people had diseases, the treatment was not available or accessible. So many died or lived with diseases
So
The number of claims per 100 people diseased was much less
So
Because the number of people who could claim money from insurance company was less and hence the system appeared to work. It was paying every one. It was paying the patients, paying the hospitals, paying the insurance companies. The best Management Graduates, Best Lawyers, Best Accountants and best doctors as advisors in the insurance companies were all happy
They thought that this model can be vertically and horizontally scaled and they can get more profits
Alas, they were in for rude shock
[
There is only one Health Insurance which is not a Ponzi Scheme. That is the Third Party Vehicle Cover. It is the only Health Insurance which addresses “Accidents” and not “Breakdowns” and hence it will work even in future
]
In the past three decades, Healthcare has advanced so much. Healthcare is made more available and more affordable.
In 1980, 1 in 1000 of individual aged 70 must have had an angiogram
In 2024, it is almost 50 in 1000
(OK, This is just my guess. If you have the correct figures, please give. I will change. But the concept is same)
So
More and more people are doing a procedure which was available
Same will apply to Knee Replacement, Hip Replacement etc
The next change is
Treatment costs for a disease have escalated many times
In 1980s
Treatment for a Myocardial infarction was tablets and rarely injection. Today it has extended to Angio, Angioplasty, CABG
In 1980s
Treatment was Most Cancers were surgery or relatively inexpensive chemotherapy drugs and relatively inexpensive radiation
Today
We have Lap, Endoscopy or even Robotic Surgeries,
We have Gamma Knife, Proton Beam
We have newer Chemo Agents in lakhs
All these cost too high
The 1960s financial model of insurance does not work
Now Best Management Graduates, Best Lawyers, Best Accountants and best doctors as advisors in the insurance companies can sit again and realise that this won’t work in future and close the insurance companies or change from “insurance for accident” to “warranty for breakdown” model.
Why they are not doing?
It is not that they are evil individually
It is just that they don’t realise the change
But
Here is where Human Psychology comes in
People are resistant to change
And
Those in the system are the ones who will find last that the system has moved.
So
The insurance companies, those working there, doctors, hospitals who had got claims reimbursed in the past, patients who had got claims reimbursed in the past are all inside the system and they do not realise that it is a Ponzi Scheme
They assume that these rejections are due to b
If the Mouse is living in a maze with a cheese, it will at least realise that cheese has been moved
But
If the mouse is living inside the cheese and eating it, it will take a long time to realise that the cheese has been moved
To Sum Up
because it paid in the past but won’t pay here after
because they give filmsy reasons to reject and people consider rejections as mistakes / stupidity of that one person who rejected it instead of realising that the person is forced to reject because he/she has been given a target. The target to reject is being increasing year by year because the claims number and claims value have increased.
because you are paying unnecessary cost and making health care even more expensive in having a Ponzi Scheme. Many people often say that “you are one hospital away from poverty”. When Capacity to pay is so less, why pay unnecessary for the insurance companies and make healthcare even more costly and even less affordable
