JCL Blog

Third Party Payer Systems Under Siege

The passage of the Obama Health Care plan establishes a crack in one of the most dysfunctional third party payer systems that plagues us.  It is interesting to note that some other third party payer systems are also threatened.  Could it be that we are seeing the end of this business construct -- even though it has been in place for so long?  Here are some examples:

Health Insurance:  By far the largest and most complex.  With employers paying premiums to insurance companies, insurance companies paying for services, and employees as the "customer" getting market rationality into purchasing decisions seems hard to even imagine.  Add to this the prospect of insurers pursuing reimbursement from the government, new layers of taxation, doctors and hospitals sending bills to both insurance companies and the customer -- and we have alot of cleaning up to do.

Advertising:  Pretty simple.  Advertising pays the newspaper, magazine, radio, or TV production company and the "customer" gets the content for free or close to it.  Most attempts to get the customer to pay directly for content fail but we pretty much all agree the media industry is in decline. 

Mortgage "Products" and other Financial Derivatives: Get extra money out of your house and use it to go on vacation.  Seems like pretty simple finance until the terms of the mortgages were so easy to get that the money was free.  Here the third party structure was fragmented and hard to identify -- since it was really a general injection of cash into the economy.  On a larger scale you had firms that called themselves banks making big bets on synthetic financial inventions to the extent that the business we all thought they were in was a footnote on their financial statements.  It would be great if this was behind us, but there are already signs that the banks are back at it already.

Public Education System:  We believe in the importance of education just like we believe in national security, so we fund it through tax revenue.  Today it seems that anyone with the means moves out of the public education system and into private schools. By virtue of the tax system however, they private schoolers are still paying for the public system, so we have a significant and growing third party payer system here too.

All types of Agency:  Travel agents, real estate agents, and many other intermediaries that deliver services to customers while getting paid by someone else, are in decline as transactions get more and more direct.

So are we on the verge of a world where customers will pay directly for the services they value?  It might actually be easier to sort some of this stuff out if we gravitated back to making rational purchasing decisions and paying for the products and services we get.