Vision Plan Economics 101

I monitor a number of consumer chat forums and frequently see posts complaining about the high cost of eye care and glasses.  Why does it cost so much to see the eye doctor?  Let's explore that topic today.

Pretend for a moment that you are a business owner selling widgets and you only have the capacity to produce 1,816 widgets a year with your current staffing and equipment.  Your cost to simply turn on the lights every day is $222,500... that's the amount you have to pay annually for utilities, equipment, and staffing and doesn't include any profit for you.  Dividing $222,500 by 1,816 widgets means your cost per widget is $122.50.  This means you must sell each widget for MORE than $122.50 or you don't get paid.

What happens if a company you've contracted with says they're going to sell an awful lot of those widgets for you but they'll only pay you $100 per widget?  You know you're going to lose money on each widget, but if you sell enough of them you'll be able to float paying the bills and your staff... and with luck, you can make it up on other clients that come along.

Believe it or not, but that's how the eye care industry works!  We surveyed many independent eye care doctors to come up with the numbers indicated above.  The average doctor can see 1,816 patients per year.  The average overhead for a doctor is $222,500.  One difference... the average vision plan reimburses the doctor about $50 for an eye exam.

The doctor has to make some decisions if they want to survive in business very long:

• Cut their overhead expenses.  This could mean reducing staff, finding less expensive materials, or forego investing in technology.
• Increase the number of eye exams they can do in an hour.  1,816 patients comes out to being just under one patient per hour based on working 50-weeks per year.  If the doctor cuts the amount of time they spend with you, they can see more patients... personally, I don't want the doctor cutting into my consultation time, but that's just me.
• Limit the number of appointments available for patients with vision plans that don't pay well.
• Increase the cost of lenses and frames to make up the loss.
• Sell more in the optical department.

Doctors accept low paying vision plans because they feel they have to, not because they want to.  Many patients will pressure their doctor to take the cheaply priced vision plan they just bought, and then complain about the high cost of the glasses they want... but hey, that's human nature.

I was raised to believe that "you get what you pay for" and that holds true with vision plans.  A cheaply priced vision plan means you're going to pay more at the doctor's office.  Why?  Because that cheaply priced vision plan cannot pay the doctor enough to sustain their overhead, so you may find yourself paying more in the optical department.

That leads to the question, "how can the local retail store sell 2 pairs for $99 and my doctor can't?"  Well, that's a whole different subject about QUALITY that we'll save for another time.