Rational Expectations I
Robert Lucas was recently awarded a Nobel Prize in economics for a theory he calls "rational expectations". Lucas was referring to monetary theory of the business cycle, but his term makes one wonder what rational expectations pertain to the orthodontic world. This thought is particularly apt at a time when we are being bombarded with visions of managed care in health services.
Managed care is a program of contractual arrangements--usually among employers, dentists, and a third party--administered by the third party and aimed at controlling the costs of health care. The program signs up patients on the one hand and professionals to treat them on the other. The professional is supposedly guaranteed a patient source in return for accepting a relatively low fee and other restrictions imposed by the third party. Having signed a contractual agreement, the professional becomes an employee of the third party. The attraction is that the need for practice building is reduced or eliminated.
Most orthodontists who operate on a fee-for-service basis are involved with third parties even if they do not sign managed-care agreements. The most recent JCO Orthodontic Practice Study showed that 40% of the patients in the average practice have some insurance benefits, and that the income from these patients amounts to 25% of the average practice's gross income. Orthodontists accept this involvement to accommodate their patients who have insurance coverage and to increase their case load. However, only a small percentage of practices are actually enrolled in managed-care programs.
Insurance companies are not in business to provide a high standard of care. They are not opposed to it, but it is in their economic interest to give their subscribers less care and the professionals less money. The administrative costs of third-party programs, which have been variously estimated at 25% to 40%, must be paid by someone. If orthodontists accept patients with insurance benefits, they surrender some of their freedom to decide who will be treated, when they will be treated, and for how long and how much they will be treated. The greater the percentage of insured patients in a practice, the greater the loss of freedom.
Having said that, it is not a rational expectation that orthodontists will withdraw from any participation in insurance programs by refusing to accept patients with insurance benefits. What is more disturbing is the steadily increasing percentage of orthodontic practices that are willing to accept assignment of benefits. In the latest JCO Study, this figure was nearly 75%. When assigned benefits pass from the insurance company to the orthodontist, a direct link is established between payer and payee that can have unhealthy consequences.
The patient is the insurance company's client. The orthodontist is not. Whatever the arrangement is between the patient and the insurance company, it should not concern the orthodontist. The benefits should pass from the insurance company to the patient. The orthodontist's fee should be paid by the patient to the orthodontist.
It has been said, and it certainly has been the experience of many, that when the benefit goes to the patient, it may be spent on something other than orthodontics. But it is routine practice for an orthodontic office to run credit checks on prospective patients. People who do not pay their bills should be carefully monitored if they are accepted for treatment. Everyone has the option of where to place the orthodontist's bill in the pile, and every practice has some slow payers. It is giving up too much to seek to alleviate that tardiness, or to tolerate more marginal credit risks, by accepting direct payment from an insurance company.
The orthodontist should seek acceptance of the treatment plan and fee from the patient alone. Neither the treatment plan nor the fee should be subject to the scrutiny of a third party. A statement from the orthodontist to the patient should be all the verification needed by an insurance company that orthodontic treatment is being performed. Progress reports should be made to the patient and not to the insurance company. A great deal is lost in the doctor/patient relationship when the patient's responsibility toward treatment is lessened. In our eagerness to find more patients, we may be too willing to accept responsibilities that do not properly belong to us.
It may not be a rational expectation that orthodontists will bow out of third-party programs or that these programs will disappear. Such an outcome would not necessarily even be desirable. After all, insurance coverage makes it possible for some people to have orthodontic treatment who otherwise would not. A rational expectation, however, would be to limit the intrusions of third parties into our practices and into the professional prerogatives of our specialty. Severing the umbilical cord of direct payment would be a start.