Moving beyond the PPO

A couple of days ago, Heather Caspi published a post in HealthcareDive.com entitled "The mystery of the disappearing PPO plans". We completely agree that the problems she points out are glaring. We do not think, however, there is any mystery in the PPO plans failure.

We are seeing first hand the destructive force of PPO’s - Prefered Provider Organizations - and what happens when they overreach their scope of practice. For the past three decades, PPO’s have been dictating in 80% of the cases what doctors and hospitals will be paid for a particular service. All done under the premise of keeping costs under control while never exposing the true function of a PPO contract - that is, control! Today when we have 80% of the insurance marketplace effectively controlled by three national health insurance companies, PPO’s are about to strangle the free healthcare marketplace in this nation (or, rather, what’s left of it after decades of systematic abuse).

In this case the cause of the decline is not understood. In the case of Cigna pulling all PPO’s from the Florida market for 2016, it was the case of fraud within their network. They say they will be back in 2017 with much more restrictive plans to control fraud and overuse of services. In all cases, the primary problem is the fact that the PPO’s are connected to the insurance companies and not to the consumer directly. Once we state the problem correctly, it becomes readily apparent that the real (in fact, the only) solution is to shift the providers (and power) from the insurance companies to the consumer. Yes! - we do emphasize the fact that the doctor having to work for the insurance company and not the patient is the major flaw in our system. What we need is a system where the doctor and hospitals all work for the patient and their financial reimbursement and public reputation depends on it.

The healthcare industry can accomplish this by providing insurance policies that provide the reimbursed amount to the consumer rather than the provider (a system otherwise known as "reference based pricing") thus creating a transparent and free marketplace where doctors and hospitals would have to compete for customers on quality and price and gradually allow the consumer to accrue benefits via savings and quality. The system of reference based pricing has been working for decades under PPO contracts. The crucial difference we advocate would be that each insurance company should have one price schedule for all the insured and the benefits and savings are consumer directed. Consumers, empowered with the backing of their plans, would be able to pay direclty to providers who offer the best service for their specific needs.

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