Health Insurance Nuts and Bolts 3: How To Pay Your Doctor

So you’re a doctor with your own practice. Congratulations! Time for you to treat some patients and pay down some of that student loan debt.

To make things easier, let’s suppose you are a dermatologist. You perform a very standard set of procedures with a very low rate of complications. In other words, for any procedure you perform on a patient, you have a pretty good idea of how much time it will take and how much medical equipment you are going to use.

After looking at your cost of living, the rent you pay for your office space, and the wages you pay your staff, you decide that you will perform an excision of a sebacious cyst for $1,000 (note: I’m completely making this number up. I have no idea what the procedure actually costs).

Well, that’s what you would charge somebody without insurance, anyway. The truth is the vast majority of your patients will actually have insurance which means when they need tohave a cyst excised, you are going to get your money from the insurance company, not from your patient.

So in comes Xantar Insurance and they make you an offer: whenever you perform a sebacious cyst excision on one of their members, Xantar will pay you $850. Why would you take this offer? Xantar tells you that they are a pretty big insurance group with thousands of members. On average, 100 of their members need to have a sebacious cyst excised every year. What Xantar is offering you is a discount in exchange for greater volume. After thinking about it, you might decide this is a fair deal and sign a contract. You are now a covered provider under Xantar Insurance.

The thing is Xantar probably isn’t the only insurance company in town. Maybe there’s another insurance company (let’s call it FFFreak Insurance) whose members only requires 70 excisions per year, but they’ll pay you $900 per procedure. You might be happy to accept that, too.

So now you are a dermatologist with three separate price points for the same procedure:

  • Members of Xantar Insurance can get their cyst excised for $850
  • Members of FFFreak Insurance will cost $900
  • People without insurance will have to pay $1,000

(By the way, remember that insurance companies are facing their own economic calculations which I described in Part 1)

We haven’t even gotten into public insurance programs like Medicare, Medicaid, and CHIP. All of them also pay different rates to doctors than private insurance. And remember, out of all these groups, only people without insurance actually know what a procedure costs. People who have insurance will pay a co-pay or some amount under a deductible and have the insurance company pay the rest—they have no idea what the procedure really costs.

This doesn’t just make the healthcare system very complicated. It also means that healthcare cannot function as a market. One of the first things people learn in Econ 101 is that a market only works when there’s price transparency and information symmetry (i.e. the price of everything must be clear, and everybody in the market must have the same information). Both of these are not true when it comes to paying doctors.

You can call up a retailer and ask what the price of a TV is, but you can’t call up a hospital and ask what the cost of an angiogram is. And that’s why in the American healthcare system, “Let the free market sort it out” will never work. Health care is not a functioning market in the first place.

Health Insurance Nuts and Bolts Part 2: Medical Loss Ratio

I was asked about administrative costs and overhead in my previous post about insurance, so I wanted to expand on it in a new post.

What he is referring to is called the Medical Loss Ratio (MLR). That’s the proportion of the insurance company’s revenue that is spent on actual medical care.

Let’s suppose that Xantar National Insurance collects $1.2 million and has to pay out $1 million to doctors, hospitals, therapists, and other care providers. This leaves $200,000 for Xantar to use towards worker salaries, marketing, overhead, and cocaine for the CEO. The medical loss ratio is the medical payouts divided by total revenue or in other words $1 million/$1.2 million = 83%.

That’s actually pretty good by many standards.

Before Obamacare, there was no regulation of the MLR. It wasn’t unheard of for an insurance company to have an MLR of 70% or even lower. 1 out of every 4 dollars in insurance premiums were going towards something other than actual health care.

Obamacare put in a regulation that said that insurance companies must maintain an MLR of at least 80% (some really big insurance companies had to hit 85%). This regulation applied to ALL insurance, not just insurance sold on If an insurance company ended up with too much surplus, it had to refund the money to its members. Last year, insurance companies paid out about $2.4 billion to 8 million Americans. The healthcare industry is worth several trillion, so that’s not much in the grand scheme. But it’s something.

By the way, government programs like Medicare regularly achieve an MLR of 95% because they aren’t trying to make a profit, government workers aren’t paid as much as private sector workers, and the government doesn’t spend a lot on marketing. This is one reason why ideas like the Public Option or Medicare Buy-in scare conservatives and insurance executives so much. They cannot possibly compete.

Legal stuff: my healthcare posts are for public consumption and available to all. You may copy or share this post to wherever you like as long as you give me attribution.

Health Insurance Nuts & Bolts Part 1: The Basic Business

Want to understand how insurance companies do what they do? The math is complicated, but the core business is actually pretty simple. The insurance company’s revenue is the premiums that it collects from members. Its cost outlays are the payments it makes to hospitals, doctors, and service providers. When it collects more in premiums than it pays out, the insurance company makes money. And insurance companies want to make money.

Let’s illustrate this with an extremely simplified example. Suppose we form an insurance company called Xantar National Health. It has 1,000 members who each pay $100 per month ($1,200 per year). So Xantar collects $1.2 million every year.

Suppose heart bypass surgery costs $100,000. This means if more than 12 of Xantar’s members require heart bypass surgery, then Xantar will lose money (and that’s before we get into the salaries and overhead that Xantar pays employees). Xantar employs the best statisticians and public health researchers who will find out whether this is a reasonable risk.

But Xantar can also use a bunch of tricks to boost profitability. Older people usually need more medical care than younger people, so Xantar will charge higher premiums to older people. Women also use more medical care than men (pregnancy is expensive), so Xantar will charge higher premiums to them, too. And people with pre-existing conditions also usually use a lot of medical services, so Xantar will just flat-out refuse to offer them insurance. Even better, Xantar can write a clause into the insurance contract which says that there is a maximum amount of dollars it will spend on your medical care and then after that you’re on your own.

You may recognize these as practices which used to exist before Obamacare and are now either banned or heavily regulated. Basically, Xantar wants to have a membership that is made up of mostly young men who almost never go to the doctor, and it will do everything it legally can to get that population. Obamacare made that much harder, but Xantar isn’t going to stop trying to find ways to squeeze out more money.

For example, maybe there’s a doctor who will do heart bypass surgery for $90,000 instead of $100,000. So Xantar now declares that all members must use THIS doctor instead of any other doctor. This is why you now see that most insurance policies on the Obamacare exchange have a very narrow list of doctors that they cover.

Or Xantar could deliberately keep premiums very low in order to try to attract as many young people as possible. Then after a few years, Xantar jacks up the premiums. Sure, members will grumble, but most of them will stay because they won’t want to go to the trouble of switching to another insurance company. This is what actually happened when premiums jumped up in 2016: before then, insurance companies were keeping profits low or even taking a loss in order to build up their membership. 

The bottom line is insurance companies are trying to boost profits because that’s what they do. And that’s why a lot of people think the government should get into the healthcare business instead of private companies. Whatever else you may say about the government, it isn’t trying to make a profit. 

In a few days, I’ll write up a post to explain all the kinds of government healthcare systems there are around the world and how I think they would work in the United States.

Copyright: My posts about healthcare are free to the public. You may share or copy this wherever you like as long as you give me attribution.

Her Story is a New Kind of Interactive Murder Mystery


To start, all you see is a computer screen displaying a version of Windows from the early 90s. This is the interface for a police archive of interrogation videos, and you dig up the videos by typing terms into a search bar. To start with, the search bar is already filled with the word “Murder” and inputting that search gives you four video clips. They all show a woman being interviewed by the police about a murder. However, the clips are very short and don’t depict the whole interview. You will have to type in more search terms based on the scant clues provided in the videos you’ve already seen, and doing so turns up more videos for you to watch to help you figure out what happened.

Where it all startsn
Where it all starts

This is the setup for Her Story, a new game that has just been released on Steam and mobile platforms. Actually, to call it a game would be a stretch for some people. There is no enemy in the traditional sense, and you can’t even influence events. All you can do is keep entering search terms and watching videos. Can a search bar really be a game? Perhaps in the sense that 20 Questions is a game. In the end, Her Story is an experiment in a novel form of storytelling, and whether it works for you will depend largely on how well you accept its premise and the gimmicks that make it work.

Continue reading “Her Story is a New Kind of Interactive Murder Mystery”

5 Ways to Improve Arrow Next Season

The finale of Arrow has aired, and the consensus view is that this whole season has been a mess. I certainly don’t disagree with that, and in fact I am probably harsher in my outlook than most people who are still watching. I think that current head writer Marc Guggenheim is simply a bad writer who seems to think that we should find the show to be awesome just because it depicts comic book characters.

Some of the ways to make the show better next season are pretty obvious: make the dialogue better, get a good villain portrayed by a strong actor, write character allegiances that actually make sense, and next time you say a character won’t forgive something, make sure they actually don’t forgive it when it actually happens. They are certainly necessary, but for this post, I’m going to concentrate on some of details that I think people are discussing a little less.

1. Give the women some independence and agency

This season was just a bad one for women. Sara was unceremoniously killed just to motivate the characters for the first half of the season (the fact that she’s coming back for Legends of Tomorrow may indicate that the writers realize how stupid that was). Thea was manipulated at every turn and then was also killed in order to force Oliver to join the League of Assassins (she got better, but she was still reduced to being a plot point). And Felicity’s primary function was to be a love interest for two of the characters. Before this season, all three of these characters had rich backstories and interesting motivations. In Marc Guggenheim’s hands, they became pawns to be moved around by the men.

Ironically, the most independent-minded woman this season was Laurel. I thought her motivations were really stupid and that Katie Cassidy was incapable of selling her as an action hero, but at least she was going her own way without being mind-controlled or told what to do.

2. Bring back the ridiculous cool archery

Remember in the pilot episode when Oliver threw a bunch of tennis balls in the air and then nailed them all to the wall with arrows before they hit the ground? Or how about that time he shot an RPG out of the air? Those moments have mostly disappeared this season, and that’s been to the show’s detriment. It’s Oliver’s defining characteristic. Yes, it’s unrealistic, but that concern sort of goes out the window in a world with the Flash and a pit of water that can resurrect the dead.

In the comics, Oliver Queen has been known to curve the flight of arrows, fire them backwards over his shoulder, and shoot an arrow right down the barrel of a gun. How awesome would it be to see that happening on your TV screen?

3. Stop with the secret keeping

It just doesn’t work. It always ends up making people look stupid. Cut it out.

4. Make the stakes smaller

In season 1, the eventual big threat was an earthquake machine which would destroy a big portion of the city. In season 2, the threat was an army of superpowered soldiers overrunning the place. In season 3, it was a biological weapon. At this point, I think the trope has been played out and has nowhere else to go (incidentally, this is the same criticism I have of the Marvel movies and why I’m strongly unenthusiastic about the upcoming Infinity War). There’s only so many times you can threaten Starling City with utter destruction before it just gets boring.

There are plenty of other ways to generate dramatic tension. You could put one of the character’s lives at risk by infecting them with some disease so that our heroes have to spend several episodes searching for the cure. We still haven’t resolved Detective Lance’s feelings about costumed vigilantes (and he did have some good points when he was allowed to articulate his opposition to them). And how about Oliver’s unknown baby? The revelation could do all kinds of interesting things to the character dynamics.

5. Have some fun

Arrow has always been on the darker side of TV shows, but this season has gone a little overboard. Remember when Felicity would babble too much and inappropriately say what she really thought? Or when Diggle complained about always being cast as the chauffeur during undercover operations? Remember that moment in Season 1 when Oliver and Felicity were in an elevator with a guy hitting on Felicity and Oliver deliberately spilled the guy’s papers in order to get rid of him? Now try to think of a similar moment from this season. The closest we’ve gotten is Nyssa being pleasantly surprised at how good milk shakes taste.

I’m not saying Arrow should be a comedy. But it did allow humor to show up sometimes, and behind-the-scenes videos have shown that all of the cast members are pretty funny people. Humans living in even the bleakest environments have nonetheless usually found something to laugh at. It’s how they survive. Relentless tragedy and grimness just gets monotonous after a while.

Supergirl: Hero or The Devil Wears Lycra?

Our first look at Supergirl is here, and the reaction seems to have been decidedly mixed. On the one hand you have people who think it looks like fun, the special effects are pretty good, and the lead seems very appealing. On the other hand, a lot of people are disappointed or even angry that the show seems to be a light rom-com. Take a look at the trailer below and see for yourself. Then follow me below the fold for my thoughts.

Continue reading “Supergirl: Hero or The Devil Wears Lycra?”

Secret Word is How Not to do a Censorship Game


Truthfully, the vast majority of you are never going to see this game and probably would never have heard of it if you didn’t read this review. I’m really just writing this to express my frustration and annoyance with it. If you want to know whether you should give this game a chance, I’ll just tell you right now to turn around and walk away. It’s worthless.

At first glance, Secret Word seems like a call back to Blackbar which I reviewed very favorably a few months ago. The game presents you with text with certain words blanked out, and you advance by guessing the words to fill them in. The difference is Blackbar was a unique work of art which used the medium of mobile gaming to tell a story in a new way while Secret Word is just a cynical cash grab.

Ads are not a problem by themselves, but the unfortunately there are a lot of other attempts to extract money from the player
Ads are not a problem by themselves, but the unfortunately there are a lot of other attempts to extract money from the player

The game has ads running across the bottom of the screen. That in itself is not really a problem. The developer has to make money somehow, and it’s not that hard to ignore an ad. But in the screenshot above, you’ll also notice a coin counter. You use the coins to buy hints which either give you a single letter or an entire word, depending on how much you spend. The game gives you 100 coins to start, but when you run out, you have to buy more with real money. And Secret Word does everything it can to try to make sure you have to spend that money.

Let me know if you can figure out what the other two words are. I’m out of coins.

Blackbar essentially played fair with its puzzles, setting things up so that you could figure out the missing words if you employed a little lateral thinking. In Secret Word, however, many of the puzzles are a complete guess. It’s clear that the developers are only interested in trying to get the player to spend coins and pay real money.

The core story behind the game isn’t even very interesting. And as a final straw, the game periodically sends annoying notifications to try to get you to keep playing if you haven’t opened the app in a while.

I’m not sure why I’m still wasting time on this review. I’ll just leave it here and tell you these developers don’t deserve your money.

10 Questions for Arrow

  1. If the Canary jumps off the rooftop of a building with no way to save herself and the Arrow doesn’t manage to grab her hand in time to save her, does she become the Splat Canary?
  2. If police officers are chasing a deadly archer and they find him along with several other archers on a rooftop, why would they just let those other archers go?
  3. Along the same lines, why does Captain Lance trust the word of someone who kidnapped him and employs a bunch of really obvious archers who could be the copycat of the Arrow?
  4. Why is Oliver taking responsibility for Laurel’s decision not to tell her father about Sara’s death?
  5. Why did Laurel think it was a good idea to march three uncostumed, really obvious Arrow associates into police headquarters to see Oliver? And why didn’t Captain Lance arrest them?
  6. Did Shado never tell Oliver about her twin sister that entire time on the island?
  7. After Oliver learned his lesson about the power of telling the truth from Shado’s sister, why did he spend the next two years of his return to Starling City busily keeping every kind of secret imaginable?
  8. Are the police really going to believe that Roy Harper is the Arrow when he’s noticeably smaller and skinnier?
  9. Why does Thea keep disappearing at random throughout this episode? Doesn’t she at least want to visit her brother in lockup?
  10. What exactly was the point of the Ray Palmer storyline when all this other stuff was happening?

The Trace Is a Sterling Whodunnit (That’s Too Short)


There’s no shortage of murder mystery games on iOS, so any new entries in the genre will have to do something pretty new and do it well to get attention. The Trace came out just a few days and immediately started attracting buzz on blogs and on the App Store, so I decided to give it a look.

Arriving at the scene of the crime.
Arriving at the scene of the crime.

Continue reading “The Trace Is a Sterling Whodunnit (That’s Too Short)”

Agent Alice Brings the Annoyance of Freemium to Hidden Object Puzzles


Ask any serious gamer about what they disdain most in the industry and at some point they will probably mention hidden object puzzle games and freemium pay-to-win games. And that’s with good reason. Hidden object games are fundamentally kind of lazy with not much of a gameplay element, and what gameplay exists is often ridiculous (why exactly do I have to point at a raccoon, a fedora, and a keychain before I can examine the bloody glove?). And freemium games are despised because they look like a bait-and-switch with a not-too-transparent cash-grab. So a game like Agent Alice which combines the two genres would not seem to hold much promise at first glance.

Well something is certainly disastrous.


I’d like to tell you that Agent Alice does better than expected, but it doesn’t really. I can actually see some potential here, but the irritating freemium aspects of the gameplay just don’t work. And there aren’t enough other good qualities to get me to keep playing.

The story is more or less a murder mystery told through cutscenes and static dialogue boxes. Whatever else you might say about the game, the art really is quite well done. Characters are well-designed, and there’s never any trouble seeing anything.

Freemium games generally use two tricks to get players to pony up cash. One is to put some obstacle in the way which requires an item or a certain rating in order to pass. Theoretically the player could come up with the necessary requirements by grinding away at something, but many would prefer to just pay cash to get past it. The other freemium trick is to set a timer that counts down and which the player must wait out before proceeding (for example, building times in Farmville and the like).

Agent Alice uses both of these tricks in its efforts to get money out of you. Most actions in the game require stars to perform, and you earn stars by completing timed hidden object puzzles. Doing a hidden object puzzle itself requires energy which slowly replenishes over time. And then some tasks just outright require you to wait a while before you can complete them unless you want to pay money. The actions are part of the story of Agent Alice’s investigation, but they all tend to be very small and mundane such as “read the letters” or “talk to the witness.” Meanwhile, the wait times can sometimes go on for literally days.

Spending a hard-earned star to “Patch Wanda up” will take all of ten seconds, if that.

All of this would be fine if the story was worthwhile, but it really isn’t. Dialogue is very sparse, and characters are completely flat. There simply isn’t any emotional investment in what’s going on. You talk to a witness and get a completely functional line like, “She was in love with her co-star” and that’s it.

The thing is I can actually see a way to make this format work. Agent Alice is free, and if the cash-grabbing was less blatant, I would even be tempted to throw a few bucks at it in exchange for a few hours of entertainment. But instead the game just reaches for too much. As a business model, I would call it an interesting experiment. As a game, it’s not worth recommending.