SALMAN KHAN: I'm here with Professor Laurence
Baker at Stanford Medical School.
And what we're going to talk about now
is the overview of the health care system.
LAURENCE BAKER: What is the health care system?
SALMAN KHAN: Yeah, and who's in it?
LAURENCE BAKER: And who's in it?
And what are they doing?
SALMAN KHAN: I think I could give a go at it.
LAURENCE BAKER: Go for it.
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.
That makes a ton of sense.