Healthcare system overview | Health care system | Heatlh & Medicine | Dialogue between Salman Khan and Baker

SALMAN KHAN: And

then correct me. Expose my ignorance. So clearly, you

have your providers. Those would be your doctors,

and nurses, and all the rest. LAURENCE BAKER:

Hospitals, pharmacies, all kinds of people

are your providers. SALMAN KHAN: OK, so everyone

who's providing health care. 

So that's right over there. So that's hospitals, doctors,

pharmacies, all the rest. And then they are providing

the health care to someone. So those would be the patients. Let me do that in another color. LAURENCE BAKER:

Call them patients. Yeah, sometimes

you get the details 

like people become patients

after they need health care. But some people just

have a question. They're not really patients,

they're just asking. SALMAN KHAN: OK. What would you call them then? LAURENCE BAKER: Call

them population. SALMAN KHAN: Population. So just the population of

the world, or of the country, or whatever-- people. And then someone

has to pay for this. 

And so for the most

part, this is insurers. LAURENCE BAKER: Yup. Insurance companies. In the olden days--

like if you go back 100 years-- we didn't

really have insurers. We had patients and providers. And patients would-- if they had

a question, they had a concern, they go to the provider. They'd make some deal,

pay them some money, 

do some service for

them and work it out. We got insurance

companies really only in the last

100 years, maybe. Really starting in

the US in maybe 1930. 1940, they started

to become popular. So that's kind of

a new renovation. And those three

things work together. SALMAN KHAN: And the

general term-- and this is a word I've seen a

lot, and sometimes it's 

a little confusing because

it's very close to payer, you hear of these payors. And that would be

including anyone who's paying for the

paying for the service. And insurance companies

would be included there. LAURENCE BAKER: Right. 

So we have-- we

call them payors. Sometimes we call

them health plans because they arrange for some

of the care that people get. And payors could be private

insurance companies, or they could be government

payors-- government insurance companies like Medicare. SALMAN KHAN: And the insurance

companies themselves, 

they're not doing this out of

the goodness of their heart. Someone is paying them. And for the most part

in the United States, it tends to be employers. LAURENCE BAKER: So right. So if we made another

arrow on your diagram here, it would be from

the population-- or maybe from the patients--

to the insurance companies that 

provides the money for

the insurance companies to use to pay for the provider. So patients might buy

an insurance company-- or not an insurance company,

buy an insurance policy. SALMAN KHAN: Only if

they're very well healed. LAURENCE BAKER: Some of

them buy the whole thing. But they just might

buy their own policy. Go buy an insurance policy,

pay them a premium directly, 

the insurance company

collects that money. Or, for most people, they

work for an employer. The employer makes

the arrangement to buy that insurance and

then implicitly charges the population, the

patients for that. Maybe directly by

having them contribute some of their salary. 

Maybe implicitly by just

reducing the amount of cash they give them every

month, and instead giving them this

insurance policy. So people do that. And the other piece that's

floating around in here is that in some cases,

the population pays taxes to the government that

then functions essentially 

as an insurer, like the

Medicare program, where there's insurance provided to people

that's paid for by taxes. So there's some different

funds flows going around here, but always money

going from patients to insurers, through employers

from taxes, by direct payments. Those insurers

collecting the money and then paying for a

bunch of the care that's 

provided by the providers. And that's the

basic arrangement. There's one more

tiny piece, which is that sometimes patients pay

the doctors or the hospitals directly. You go you have

a $20 co-payment. And so there's a small payment

that goes back and forth. SALMAN KHAN: Your

copay is kind of there just so that-- it kind of makes

the insurance company feel 

good that you're not just

using it willy-nilly-- that you have to

pay your $10 or $50. LAURENCE BAKER: Absolutely. So insurers know

that once they start paying the providers

for the care, and the patient says

it's totally free, people might use

stuff that might be worth a little tiny bit, but

it costs a lot for everybody to pay for. 

So if you put a

co-payment on there, it makes people think

twice about using things that they don't really need. SALMAN KHAN: Right. That makes complete sense. And then within this ecosystem--

we hear a lot about HMOs. My perception is that's a

combination of the insurance company and the provider. It's kind of in one package. LAURENCE BAKER: Right. 

So over time, the US has had

different kinds of insurers out there. In the private market,

especially, there's been a lot of innovation

in the last 30, 40 years in types of

insurers that are out there. So we have different

insurers that have behaved in

different ways as we've 

gone through those

evolutionary cycles. So one version of that is

what we call an HMO-- a health maintenance organization. And that's really just jargon. You have to dig into it to

figure out what it means. But in a lot of

cases, what that is is a company that's

acting as insurance. 

So you pay a premium to them if

you're a patient or a person, and you buy some coverage. And then they'll

cover your care. But they'll do that by trying

to integrate themselves with the providers. And so the

organizations either are integrated because the HMO hires

doctors directly, or maybe owns 

the hospitals-- like Kaiser

Permanente, for example. Or, in some cases it's a

contractual relationship. It's not exactly the same. SALMAN KHAN: So not all of them

is tightly linked as a Kaiser, where it's like, you go

to this building that says Kaiser on it. And that's where your doctor is. It could be doctors just

have their practices, 

but they're tightly

linked with a-- I think that's how, what Blue Shield? Or one of those. LAURENCE BAKER: Yeah,

Blue Shield, or Aetna, or some of these

different companies. And you can start to

dig into the details and every one will be a little

bit different from the other, but they're contractual

relationships. SALMAN KHAN: And

the difference-- I think this is something

everyone faces when they sign 

up with insurance

with their employer-- I had to do it recently--

is-- they all say, you have to pick HMO versus PPO. And they're within

the same policy. And so my perception is HMO is

you have set list of doctors 

that they probably

pre-negotiated pricing with. LAURENCE BAKER: Yeah. So the difference

between HMOs and PPOs gets a little bit

into the details SALMAN KHAN: OK. I don't want to get too into-- LAURENCE BAKER: We can sort

of think about it in the way that you're talking about it. So an HMO will have

a list of doctors that you're supposed to see. 

And you'll have to go see

the doctors on that list. And a stereotypical one, if

you don't see the doctors on that list, the

insurance company's not going to pay

for you care, you're going to pay for yourself. And in the stereotypical

HMO, there's going to be a fairly

tight management between the insurance company

and the doctors about what's 

going to be done, what's

allowable, and so on. SALMAN KHAN: And in the

most tightly linked case, they'll be the same. They doctors will be

employed by the company. That's like Kaiser. LAURENCE BAKER: As you think

about it as a spectrum, if you move a little bit

away from that to a PPO. What's happening in

a PPO is you're still going to get a list,

so you're going to be encouraged to

see those doctors, 

but maybe it'll be a

little more flexibility. Like, if you decided not

to see someone on the list, the plan would still

pay some amount. Maybe not as much as they would

if you saw someone on a list, but something. Whereas in an HMO,

maybe nothing. And the plan will probably

work a little less hard 

at managing what those doctors

are doing to try and limit access to, say,

high cost services. HMO will tend to

work harder, PPO tends to work a

little less hard. So it's a little

bit of a spectrum. You're kind of moving from more

managed and more concentrated to a little less managed, but

still more so than the system 

we had, say, in

the '50s or '60s, where anybody went

to any doctor, and any doctor did

whatever they wanted. And the insurance company

just paid the bill, and there was no integration. So it's a little bit of a-- SALMAN KHAN: So that's

the main motivation why insurance

companies are trying to get more integrated

with the providers, 

is because-- just like you

said, in the '50s and '60s, you have the provider

providing a service. And obviously the

patient like the service. And then you have a third

party paying for it. And so there's no check

on-- the person deciding and the person getting it says,

yeah, let's get more service. And someone else is-- right. 

LAURENCE BAKER: So we

created a big issue. Insurance companies are

kind of an interesting thing in a health policy world. Because we have to have them. We have to have them to

manage the risk associated with getting sick. You get sick today

and get a huge bill. And so we can't leave people

on their own for that. We got to have

insurance companies. But as soon as you create

insurance companies, 

and I can have, implicitly,

all my neighbors pay for the health

care that I want, then I might start using things that

turn out to be an efficient. And so you got to have

them-- insurance companies. But you got to manage what

happens when you have them also. And so that's the

integration between providers 

or co-payments and utilization
review, and all these things, are basically attempts
by insurance companies to try and manage
what economists would call the moral hazard. The using additional services
that you don't necessarily need because everybody else is
going to pay for it for you. SALMAN KHAN: It
makes complete sense. Well thanks.