Originally, people actually paid their doctor for his services. Unfortunately, sometimes the bill, like for surgery, was pretty large. Some companies came along to play on patient's fear and offered them Health Insurance. They said, "If you pay us some money monthly, we will help you with those large medical bills when it comes time, by paying a large part of it from your money." They made overhead and profit from investing your money while they held on to it. This didn't work for long since it was so hard to guarantee their investments. To solve this, they raised the premium to take a cut off of the top first.
Doctors then made their first mistake. They told patients (for marketing) that if they came to see them at the office, they would help by filling out their insurance forms. Many patients didn't use their insurance due to how hard the forms were to fill out. This was such a marketing point that it took less than 10 years for every doctor to start filling out insurance forms for everyone. At that time, the insurance plans still paid the patient directly. I have had many times personally where it would take 6 months to get the insurance company to admit that they already paid the patient. When I then contacted the patient, they told me that they already cashed the check, spent the money and wanted to know if they could send me $10 per month.
It didn't take long to realize that we need to get the insurance companies to pay the doctor directly. This was the second mistake. To do this, the insurance companies required that we sign a contract with them to fill out the forms a certain way and take a discount from our usual fees. Blue Cross offered me a 0% discount in my first year of practice (there had to be a catch). By the next year, they showed me how I had over a hundred patients on this plan and if I wanted to keep seeing them, I would have to accept only 90%, with the patient still stuck with their 20% co-pay. The next year, it was 80%. This year, it is 38%. If I don't like the contract, then they will tell all of my Blue Cross patients that I no longer am on their plan and they will find another doctor to see all of those patients. This is business blackmail. They have admitted that they are cutting back on payments to doctors slowly, until enough doctors and hospitals bail-out of the health plans and Blue Cross is left with the "bottom feeders" that are willing to live on a pittance. When they have only enough doctors to fulfill their obligations, then they will have found the "bottom market value". The high quality doctors will have quit and left only the ones that can provide short, low quality and un-personalized care.
As doctors incomes started going down, and their overhead went up, they tried to compensate by raising their fees. This was actually taken into account by Medicare, Medicaid and some insurance companies during the 1980's, but is now considered moot. The only people who deal with a doctors fee are the uninsured, cash patients. There for years, these were the patients that doctors and hospitals wanted since their charges would make up for the amount lost to insurance write off. Unfortunately, this group of people are the ones with the most financial hardship and are the ones who need to be allowed to pay the minimal amounts that insurance companies allow.
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