The anatomy of a ripoff
nydailynews.com
nydailynews.com
The article does mention that Medicare typically pays fees that are below actual cost for the procedures, and that hospitals must therefore increase charges to other customers (the article says they must do this to make profit, but actually they must do this just to break even and stay in business).
But the problem goes even farther than that. Because Medicare is essentially a monopsony and gets to call the shots as far as charges are concerned, it actually matters far less what the actual costs are. As a result, few hospitals today have modern cost accounting processes, and so they only have wild guesses as to what a given procedure costs. Obviously, then, their charge list is going to be made largely from guesswork, and so it's very much expected that two different hospitals will, at the micro per-item level at least, have very different charges.
Medical care is the most highly regulated industry in the economy, and so nothing you see happening is going to bear very much resemblance to reality. And in the coming years this isn't going to get any better. What you are likely to see, though, is increased politicization of these charges, as the political process takes even greater control of the industry.
You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?
I think it does follow logically. I'm assuming that the regulations were intended to serve some purpose. If the system was working as the regulators/legislators wanted, there would have been no point in regulation. The regulations were created for the purpose of altering the way things would normally work out.
By analogy, if we see a canal, it's probably a safe assumption that the waterway doesn't resemble the natural flow of water. The only reason to build the canal is that something was needed to be different from the water features that were present.
The person he's talking to doesn't believe that putting a strawman argument into someone else's mouth is an honest debate tactic.
This question has nothing to do with ideology. As a matter of pure logic, regulation changes what the market is doing naturally; that's the whole point of the regulation.
This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it.
Now, given that the system is highly regulated, it's clear that the regulators have screwed up.
However, this on its own doesn't tell us that the free market was good; it just tells us that the current regulatory regime is crap.
Going from : >>This is a non-judgmental conclusion. One doesn't have to say that the market state was good or bad, or that the regulated state is good or bad. Simply that a regulated market differs from a free market. That's it.
to
>>Now, given that the system is highly regulated, it's clear that the regulators have screwed up.
is making a jump.
It is not a necessary that the regulators messed up - it is also possible that the parties being moderated, are actively subverting the system.
/pedant
I will agree with your point behind it all - ie that in such a system it is LIKELY that there is fault by the regulators. This type of fault, the extent of responsibility for the final outcome, these are complex questions which need more than just stating that the regulators were out of line.
You could say that X and Y are responsible for crime A. The punishment/responsibility would depend on a variety of factors. That is the question that requires answering.
As I see it, that is a problem with the regulation.
By analogy, when a hacker breaks into your system, you can't say, "our security checks weren't wrong; the users just weren't supposed to enter those inputs". It's your job to anticipate all the possible bad inputs, and guard against them.
Similarly, it's the job of the regulators to anticipate all possible routes around the regulations, and account for those.
Now, a bit of thought will lead to the conclusion that this is impossible except in all but the most trivial cases. I submit that this does NOT give us leave to shrug and just go through it anyway. Instead, it should force us to step back and consider whether the intended benefits of the regulations are great enough to counterbalance the cost of the complications that are certain to occur down the road.
(and I note a certain irony in your pseudonym "intended", since the problem here is UNintended consequences)
>You make it sound like one follows from the other in an obvious way. Can you expand on why that would be?
Two factors: incentives and information.
Regulators do not, by definition and intent, have the same incentives as participants.
They're also not involved, so they lack information.
Here's another way to think of it. When a biz goes bankrupt, employees lose their jobs, owners lose equity, and regulators go to lunch as usual.
If a regulator mis-estimates costs by 1%, that's fantastic. If a supermarket mis-estimates costs by 1%, it goes out of biz (because their margins are less than 1%).
Paying people on a cost-plus basis provides them with an incentive to maximize costs, whether they're doctors or defense contractors.
Then there's also the FDA's use of production quotas for drug production. We had a big shortage of Aderall recently because the FDA has to give permission ahead of time for a given amount of production of the drug for each company. And when the FDA decided that one of the producers wasn't up to snuff and was no longer allowed to make the drug, it failed to raise the quotas of the other producers to compensate.
To the extent that you run a section of the economy like the USSR was run, you shouldn't expect it to be run efficiently. The US healthcare system would still have quite a ways to go before it becomes quite that bad, but its closer than most people seem to think.
As I understand it, the DEA, not the FDA, sets the quotas. They're currently arguing publicly over the shortage: http://www.nytimes.com/2012/01/01/health/policy/fda-is-findi...
The DEA claims there is no shortage (insert Star Wars hand wave here) while the FDA wants them to raise the quotas. (How Soviet does that sound?)
No disagreement on the rest of your comment.
My guess is that those problems would remain even if we completely deregulated healthcare otherwise, because there is very little political support for widespread drug declassification (maybe marijuana will happen in my lifetime, but I doubt much else).
One simple example, which I don't really have time to explain here, is the health insurance system which makes it so that people generally do not consider price when purchasing medical care. Of course that is going to lead to price distortions.
Another simple example is the inflexibility in the supply of doctors, which is ultimately due to government regulations (many would argue that this is a good thing)
This is a pretty big logical jump.
I'm American, but have been living in the Netherlands for a while. Health care is probably more regulated here than in the US, yet in all of the ER visits I've experienced (myself or friends/family) I've never seen bills like that. Regulation does not have to cause bills like that.
Something is very wrong if sick people in life threatening situations are being charged hundreds (or thousands!) of times for the same care based on whether or not they have insurance. That screams "more regulation is necessary" to me.
Regulation does actually cause bills like that. It's just that in Europe, you don't ever see them.
The UK with near mandatory, see below, universal healthcare the cost of per capita is lower still [1 ibid]. In the UK if you opt out of public healthcare you can't mix and match services beyond the GP level, this may change in the future.
Obviously with a mandatory universal care the overall cost to the public at large stands a high chance of being lower; efficiencies of scale. The downside is that at the individual level you may be subject to "postcode lottery" healthcare. In many countries this leads to individualism raising the costs of healthcare for everyone.
Everyone wants to be treated the best; the problem is that regardless of the system you chose this is impossible.
[1] http://en.wikipedia.org/wiki/List_of_countries_by_total_heal...
I disagree. The USA differs significantly from Germany, both in cultural aspects and genetic/racial makeup. Different lifestyles contribute significantly to life expectancy differences, as does heredity.
What do you mean by this? You can have pretty much any health service privately in the UK if you want to pay for it e.g. from BUPA:
You can't opt out of the NHS in the UK, except by not paying taxes, which usually results in a spell in prison.
While mixing and matching might seem sensible I suspect that the resulting administrative complexities might introduce the same kind of inefficiencies that the US system appears to suffer from.
If I recall correctly, the United Kingdom, with its much-maligned National Health Service, spends about 40% of what the US spends per capita on health care, and yet when you measure things like life expectancy, Britons are as healthy as Americans. That gives you an idea of how much money is going down the tubes due to administrative inefficiency.
It's hardly clear the money is going down the tubes due to administrative inefficiency. It might just be spent on unnecessary medicine, and costs might be higher in the US.
According to one fairly decent source, administrative inefficiency is a pretty minor contributor - the biggest contributor is outpatient care.
http://theincidentaleconomist.com/wordpress/what-makes-the-u...
RE: administrative inefficiency, from my limited experience (laying off teachers in local gov't back in 2004 because healthcare premiums were going up by 15-18% a year), the administrative overhead in actually managing the insurance is pretty small as a % of the costs paid to hospitals.
But then you step back and think, well what the hell, why are the costs paid to the hospitals so high? Because the whole system's broken. So if you try to measure administrative overhead, it looks small, but the general administrative system is creating this environment where the costs themselves are through the roof. Some is unnecessary medicine, a lot seems to be the completely arbitrary price structure. In the linked article, one hospital charged 6 bucks for a treatment, another charged several thousand. That's not a market.
But most economists don't learn this in school. They just learn "monopoly = bad, government = monopoly".
Most doctors offices have given me anywhere from an immediate 20-50% discount for immediate payment. I even got a 66% discount last year for paying before the procedure.
The reasoning behind it is simple..
If you did $100 of work and weren't going to get paid for 3-6 months, you would charge more than $100. There's the time value of money. If you have to spend a lot of time and effort to get that money, you would charge significantly more. If you knew that you would have to give up some of what you asked for, you would charge more. (When I worked in a hospital, we had one person that her only job was to call and argue with insurance companies.)
Now.. on the flip side. If you did $100 of work and were used to Net-90 or even Net-30, what discount would you accept to get the money now? And not just now but with zero arguing, effort, etc?
Oh.. and with an HSA, I have consistently gotten same day appointments when there's a "two week wait" for people paying with insurance.
In that case, it's simple cash flow management.. if you have one slot open and you can take a customer that will pay 3-6 months later but only with lots of effort OR a guy who will pay less but before they leave the office, which would you take?
That still doesn't explain being charged several thousand for an x-ray, though. That's 150 year old technology, this isn't like Dr. House and a team of neurosurgeons at work here.
If you want to try and understand this stuff, you have to abandon the idea of the charged cost of a procedure relating to how much it cost to provide. It's truly depressing.
This econtalk podcast does a good job diving into the nightmare of non-prices in the medical system: http://www.econtalk.org/archives/2008/12/lipstein_on_hos.htm...
I'm sorry that data driven liberalism conflicts with mainstream ideology and your favored talking points.
In fact they have two series of posts (one being what Yummyfajitas posted) that are basically required reading for anyone interested in discussing the healthcare problems in the US. I would also recommend their 10 part series on healthcare quality.
More broadly, this is a problem at other areas of what we consider to be "free market" economies. Healthcare and defense are classic instances, but many group-negotiated services (utility contracts, broadcast media, "free" online services, even Microsoft's software sales channel (mostly OEMs and corporate site licenses, not individual end-users) violate base assumptions of free market economics.
While microeconomics is hugely useful describing behaviors in which it applies, I'm increasingly coming to believe that only a small fraction of what we consider to be free market activity in fact meets the core assumptions.
But yes: US healthcare is hugely inefficient.
Half-assing it between the two will work far worse than most people expect.
I think the main problem with the US healthcare system is that it's a elephantine monstrosity, a system that tries to hit every corner case with an ad hoc exception, and which nobody can understand more than a fraction of. And there are various boneheaded implementation details, the equivalent of bubblesort - like using the frigging labor theory of value to set physician reimbursement rates. And complex interdependancies that cause different parts of the system to affect each other for very non-obvious reasons. For instance, a rule to prevent people from defrauding Medicare now prevents corporations from giving free birth control to college students like they used to. </rant>
I get that they set their prices in a way that distorts the market to some extent but it seems that that distortion is far less than what the really-smart-guys-in-suits have been able to manage all by themselves.
I understand the impulse that markets make things better. I really do. Look at computer parts for example, there's a robust market that keeps driving down prices and really delivers. But what about the healthcare industry resembles a sane market at all? There's effectively no market forces at work, due to the way that private sector businesses have structured it.
It seems that they're afraid of the millions of dollars of lost revenue, without considering the greater sum of expenses that they'd free up.
As a matter of fact, I can't recall ever reading an op/ed or anything by a hospital administrator complaining that they're being fleeced by medicare and losing a bunch of money on it. But I've seen a billion op/eds in the same template as TFA, bemoaning the byzantine and obfuscatory private insurance regime as something that completely destroys any market forces that should exist in the industry. I mean, one hospital charged one thousand times as much as another for the same treatment.
I have to conclude that bringing up medicare while the private insurance industry system is this flagrantly broken is nothing but a red herring.
I don't think a month goes by when I don't ask her this question. Something always comes up, where she's saying "Medicare just denied another $500K payment" or somesuch. And I'll say to her "you live by the sword, you die by the sword".
She admits that the net profit via Medicare is negative. But the decisions makers don't want to consider it. In this case, it's possible that they consider it their mission because they are a Catholic hospital. I can't see any answer in the general case.
And yes, there is inefficiency unrelated to Medicare, and yes, I've seen the anecdote about how doctors who own an MRI machine refer patients to get MRIs six times more frequently.
But Medicare underpaying, alongside what I remember hearing was a "bad payor mix" from ER patients, hurts.
If you're truly curious about how healthcare works, follow this blog http://histalk2.com/ and get a flavor for what's concerning IT people (which oftentimes is money).
But they can't very well give you a bill that with a line item that says "shifted costs from the old guy in bay 3 - $900".
Many hospitals do; many don't because they feel it's a moral obligation to provide care to Medicare patients. Here's an example of that attitude: http://www.kevinmd.com/blog/2011/12/dropping-medicare-break-...
In order to stay in Medicare/Medicaid (which, as I said, many see as a moral requirement), hospitals are often required to lay off staff. Here's an example of 100 layoffs at Dartmouth Hitchcock hospital: http://www.unionleader.com/article/20111109/NEWS02/711099983
For example, at one hospital where my family member works as a therapist: The hospital receives federal funding for area X, so the clinic area Y must accept Medicare. in Area Y, medicare pays far less than private insurance per hour of therapy, doesn't reimburse for patient no-shows, but doesn't allow the clinic to drop no-showing patients. So the clinic section of the hospital ends up paying staff hourly wages to do nothing some of the time, and is barely treading water the rest of the time.
Now, there's overhead, so it's better to have a full clinic with Medicare underpaying than a half-full clinic with no Medicare, but it's still a ripoff: private insurance / private pay is paying more for the same service than Medicare. If private insurers could and would demand the same terms as Medicare, the clinic would die.
Finally, maybe Medicare is still a good deal, due to that Area X funding? Maybe, but that's in a totally separate area, distorting the economics of both areas X and Y. It leads to political BS where the fancy X ward swimming in money and building a palace (like http://www.seattlechildrens.org/, have you seen that lobby?), so they pressure clinic Y to beg for donations from their own staff to stay afloat.
I was a management consultant in the healthcare industry in a previous life. One interesting study I did found a direct correlation between percent of patients on medicare/medicaid and hospital profitability...
The higher the percent of medicare and medicaid patients, the lower the profitability. The correlation was essentially a straight line.
Uh huh. Talk to the (quite profitable) utility companies about that.
- - - - - Quote
Regulation and the Health Care Market
The health care industry is one of the most heavily regulated industries in the United States. These regulations stem from efforts to ensure quality, to facilitate the government’s role as purchaser of care, and to respond to provider efforts to increase the demand for their services. Hospitals and nursing homes are licensed by the state and must comply with quality and staffing requirements to maintain eligibility for participation in federal programs. Physicians and other health professionals are licensed by the states. Prescription drugs and medical devices are regulated by the Food and Drug Administration (see pharmaceuticals: economics and regulation). Some state governments require government permission before allowing a hospital or nursing home to be built or extensively changed. All of the above regulations restrict supply and raise the price of health care; interestingly, those who lobby for such regulations are medical providers, not consumers, presumably because they want to limit competition.
Some state governments limit the extent to which managed care plans may selectively contract with providers. All state governments have imposed laws governing the content of insurance packages and the factors that may be used to determine insurance rates. While these may enhance quality, they do impose costs that raise the price of health insurance and increase the number of uninsured. In testimony before the Joint Economic Committee of the Congress, one analyst reported the annual net cost of regulation in the health care industry to be $128 billion.10
The second highest reimbursement district in the country is in Texas, which passed a draconinan tort reform law back in the 90s (if memory serves), so you can't blame courts or defensive medicine directly.
Planet Money had some good coverage of the joke that is medical billing a couple of years ago:
http://www.npr.org/blogs/money/2010/07/06/128338526/ex-ambul...
http://www.npr.org/blogs/money/2010/07/01/128243987/medical-...
http://www.npr.org/blogs/money/2009/11/podcast_paying_doctor...
http://www.npr.org/blogs/money/2009/08/the_wild_wild_west_of...
Should you really have to threaten to declare bankruptcy to settle a hospital bill?
Here's the thing: in the 90s experience, I received a complete itemized bill, organized by time and day, for everything that was done to me. I didn't have to pay, my insurance did, but I received copies of the bill. In the 00s, I received virtually nothing. Again, my insurance paid, and I was just given the very briefest of letters explaining that I was covered, and how to handle short term disability, and the like.
I found receiving the complete itemized bill truly enlightening. What I learned was:
+ exactly what was done to me in the hospital and when
(I was not in a position to understand when I was admitted)
+ exactly what was being charged
+ exactly how expensive everything was
+ some charges did seem erroneous, perhaps for treatments that did not take place
It helped me appreciate the efforts by others to get me that coverage. And it let me return some of that by giving me a way to check for mistakes in the billing.
I hope everyone has the coverage they need when they need it.
I do think that part of every medical service should be a completely itemized bill. I think it's a useful reference for the patient, I think it's a simple way to inform everyone on the complexities and costs of healthcare, and it's a simple way to encourage informed use, and correct mistakes.
If everyone had these bills, there would be websites developed to explain, compare, manage them, and it would help eliminate many of the games that hospitals seem forced to play.
So it would also encourage better accounting and put better incentives in place to have that better accounting.
They sometimes show me the paperwork Kaiser gives them, but I don't remember ever seeing an itemized bill. I'd find it insightful, as I think they would too, to see a list of expenses. I'd also like them, and everyone (especially seniors), to see how much of those costs the government bears.
Although I don't get too deeply into the politics of it with them, my grandparents are part of that Fox News senior demographic that would probably happily repeal "Obamacare" while being kept blissfully unaware of the benefits they enjoy because of government assistance.
At the risk of being pedantic, this is one case where one needs to remember that the government never bears any costs of anything. To the point:
I'd also like them, and everyone (especially seniors), to see how much of those costs their fellow taxpayers bear.
That's not my impression of what happened, but it could fit what I observed, and the concept of diagnosis-related groups seems useful.
"diagnosis-related groups" reminds me of how car repair is sometimes done. A made-up example: a tune-up on your model of car at the local mechanics is $350, regardless of how much time it takes or parts required.
Still, at the end of the day, they give me an itemized bill detailing everything they did, and put in, including waste fees they might be paying.
While some of that may be useful for marketing/upsell reasons, much of that keeps me better informed as to the state of my car.
In my 00s experience in the hospital, there was literally none of that, except for one thing: they gave me a manufacturer's warranty card, which was weird beyond belief, but I guess nice to have. Other than that, no detailed list of what had just happened.
If DRGs are the future for billing, I'm not sure they are the best future for doctor/patient/hospital communications.
Month later we receive bill for ~$1,400. After quick googling we find that if she would go to any local hospital and pay up front with cash, it would cost her maximum ~$400. Obviously, she went back to hospital to find out what's wrong with them (hospital owned by insurance company, so it is very wrong). There they found they did not record her insurance info, excused and said they will send corrected bill.
Month later we received her new, corrected bill. $74.68
You guys in USA have something very-very-very wrong with health care industry =)
Wait what?
How on earth is that allowed to happen!
I talked to the hospital at length to try and understand this change in procedure. Apparently the number of patients with high-deductible plans is growing, and people don't realize what that means. When you visit the E/R and your plan has a $5000 deductible, that's what you're gonna pay. People freak out. People refuse to pay. The hospital starts calling to make sure people understand their obligations. It seems the people they use to rely on for cashflow are disappearing.
Too bad it becomes illegal in 2014.
http://www.healthcare.gov/law/resources/regulations/preventi...
The fact that high deductible coverage may be possible for the non-"recommended" chunk of services is a good thing, however.
(I say "may be possible" since 3 actuarial firms couldn't read the law and come to an agreement on what it says.)
http://www.rand.org/health/projects/hie.html
Unfortunately, we never repeated the rand experiment, so it's a bit dated. For some reason we never tried repeating it before pushing massive changes in the law.
The RAND health experiment studied 30 measures of health. Two of them were statistically significantly improved - vision (due to free eyeglasses, p=0.001) and blood pressure (p=0.03).
Simple math shows that 0.97 ^ 30 = 0.4. This means that the RAND experiment had a 60% chance of showing an effect in at least one particular submeasure even if there was no effect in any of them.
(The result on eyeglasses is strong enough to avoid this effect, however. So we can conclude that free glasses help people see better.)
Converting to high-deductible is a problem if you're living at or above your means and are approaching middle age. But presumably regardless of your socioeconomic status, if you're just starting out in the market, given the choice between high- and low-, you're better served with high-.
Now, one could suggest that I change my plan to a non-high deductible one so that I don't have to keep that money sitting around in savings, but then my costs per month would go up $300, whereas my high deductible plan is entirely paid for by the company I work for. I don't go to the doctors nearly enough to that the extra money I spend per month would counter-act the amount I am paying out of pocket now because I never reach my deductible.
If you don't have an emergency fund (~$1000) and a few months of living expenses saved up, please try and do so.
* Low-deductable insurance is inherently more expensive.
* The difference in premiums between low- and high- deductible insurance gradually funds your HSA.
* When you're young and you start your HSA, you also happen to be actuarially less likely to need the money going into your HSA, so it grows to cover your deductible (or, the savings gradually displaces whatever you deposited to start your HSA; whatever).
In the presumed common case, your deductible is fully funded by your HSA which is itself fully funded by the difference in premiums over a few years. That's all money that would simply have been remitted to your insurer if you had a low-deductible plan. The high-deductible plan leaves you better off.
(There's also the more meta point that health insurance exists to keep you from being bankrupted by e.g. appendicitis, and not as a cost-saving plan for routine care.)
People should be able to afford one deductible per year. Not sure what you mean by multiple hits.
I agree with yummyfajitas, but bottom line is, you should only get a high deductible plan if you can afford it. Thinking about a 5k bill as you head to the ER shouldn't be a problem then. If you can't afford it, d;not get it.
Of course, therein lies the problem: people who can't afford it choose it because its the cheapest. Its a problem, but banning high deductible plans for everyone is certainly NOT the solution.
The worst-case scenario with such a plan is that you end up with a chronic condition that requires extensive treatment every year, at which point it will cost you $5000 per year. Oh, and that's typically a per-family deductible, not per-person.
Just to put that in perspective, health care spending in the US as of 4 years ago was about $7400 per person. It's likely higher now. So if we managed to get into a situation where everyone was spending $5000/year on the deductible and $100/month on premiums, that would actually be less spending... and that assumes that everyone is sick all the time.
Now in practice, we won't get there; even high-deductible plans cost have more than $100/month premiums when you take away employer subsidies. But the point is that having high deductibles and HSAs that automatically get money put into them every year for those who can't afford to do so themselves is not a completely unreasonable approach to the situation. Actually getting the politics and details worked out could take some work, of course.
A little better...
"HSAs that automatically get money put into them every year for those who can't afford to do so "
That's encouraging too, although I bet it doesn't refill at the same rate as topping it up yourself?
I still think it's the wrong thing to do, though. I can appreciate the market pressure idea, but there are other ways to lower prices charged for procedures, and this way still involves people actually worrying about whether they have enough money for health care. Do Americans realize just how much mental angst they cause themselves actually devoting this mental energy to worrying about whether they will have enough money to make themselves not sick, if they get sick? All this pride or whatever at choosing clever HSA solutions or having an awesome work health care policy is simply relief at not having to worry about health care bills. It's not a value add, you're simply avoiding the horror of a double whammy: getting very sick and going bankrupt (or seeing your lifestyle change drastically due to budget concerns). It's the awesome opportunity to get completely fucked.
But if this HSA/whatever is some kind of compromise towards progress... well, hope it works.
That's encouraging too, although I bet it doesn't refill
at the same rate as topping it up yourself?
I think we Americans have a pretty good idea of how much the current situation sucks. The issue people worry about has three aspects (in a very oversimplified view):
1) How do we make it not suck for individuals? 2) How do we, as a society, stop spending 16% of GDP (and climbing) on healthcare? 3) How do we avoid some sort of explicit rationing?
People's worries are that a lot of proposed solutions for #1 seem to imply giving up on #2 or #3. I suspect the worries about #3 are overblown, but it's hard to say without doing an experiment of course.
Luckily, perhaps, experimenting on humans is considered acceptable in politics. ;)
And even if you did, one incident would wipe that account and you would need to replenish it ASAP.
What's the difference between a $1K deductible and a $10K one? How's that going to make one bit of difference?
Consumers have no say in how much the procedures cost. There's no "price pressure" from anyone but the group buyers, those being the insurance companies and Medicare.
In the world joezydeco lives in. Apparently high deductible plans have already caused hospitals to change their procedures.
Consumers have no say in how much the procedures cost.
Consumers now have an incentive to shop around or try alternate treatments.
With a low deductible plan, their only incentive is to find the doctor they like the best or the hospital closest to their house.
When I'm rushed to the hospital after a taxi runs me down on my motorcycle, I'm not in a position to shop around.
When I'm sick with a flu and subsequent sinus infection, barely able to perform basic daily tasks without mental exhaustion, I'm in no position to shop around.
The wannabe-libertarian ideal doesn't work for healthcare.
To compound this problem further, I've worked on federal grant applications that ask what the "cost of care" is. Since the hospital has no means of calculating this, I've been told to just sum the charges for each patient. As the writer experienced, the charges can often be a full order of magnitude greater than the cost. You can imagine how yucky this gets.
Someday I would like to walk in to a Best Buy, pick up a Playstation 3, and then inform the cashier that I will only be paying $20 for it. I wonder how well that would go over...
Interestingly, medicare does roughly the same thing - multiply the private sector cost by some number less than 1.
It works like this:
1) They send a bill with no information about the services performed.
2a) You waste your time tracking down what it was and then pay it.
OR
2b) You pay the bill without wasting your time to verify.
3) They wait somewhere between a month and 6 months.
4) After receiving payment, they bill you again for the same services.
5a) You waste your time tracking down the services and the fact that you already paid. Then you waste more time calling and forcing them to stop billing you. You get an "Oops, sorry! I can't imagine how that happened."
OR
5b) You pay the bill without wasting your time to verify.
Repeat steps 3 through 5 until they've sucked as much time and money out of you as possible.
Each time I've dealt with it (mostly helping relatives with their confusing bills) there's been double and triple billing, and billing for procedures not performed, and for work done by people that weren't present, or on days the patient wasn't even present. The more complex the treatment, the more entities jump in to the feeding trough for a share. You have to keep extensive records of everything actually done, which is not always possible if you are not with the patient 24/7. Then when the bills come they are full of hundreds of cryptic codes. You might have some procedure done that takes 30 minutes, and get 20 different bills from 10 different entities, sent over a period of 18 months following the procedure, which apparently now lasted days and involved dozens of people, medicines, tools, and tests, some done multiple times.
The primary reason medicine costs crazy amounts in the US is because of corruption and fraud. Sending a lot of these people to prison could do a lot to reduce costs and straighten things out. That and single payer.
¹Which is to say: Consumers in bad financial situations will dispute or default on overcharges, but they’ll do the same for correct bills. Insurance companies will occasionally dispute an overcharge, leading to six months of paperwork back and forth until they agree on what to pay, but they’ll put correct bills through the same wringer.
Universal Healthcare, get it.
It's really good. Honest.
I think this article makes a pretty good argument for Universal Healthcare
Private healthcare would have to start providing actual costs to insurers, and insurers would have to accept that those costs include losses from people without insurance for competition to take effect.
A better solution would be to allow nonprofits to hold large amounts of money, i.e. save during the good times, and to allow them to operate across state lines.
Universal healthcare let me go to a hospital get 3 x-rays and a doctor to tell me nothing was broken. Took 3 hours, but multiple people apologised for it taking so long while I was there (to be honest, I thought it was quick. A sore finger must just about be last on the list of emergency room priorities.)
Total out-of-pocket to me: $0.
I expect if I was in the US i'd currently be sitting here awaiting a bill for several thousand dollars.
So, yes, I pay for it. A big chunk of my pay packet goes to tax, but i'm happy knowing I can receiving good treatment without having to work out if I can afford it.
I'm also happy it means those less fortunate than myself (re: current income levels) will receive the same level of treatment.
After hitting the road and dusting myself off, it meant I didn't have to do a cost/benefit analysis of going to hospital vs. walking it off.
I don't expect thousands of dollars in bills in the future.
The point that I find worrying the most is, that it is impossible to figure out the costs before you get treatment. Also I am surprised, that there are no prenegotiated rates for treatment-procedures. The way it works in Germany is, that there is a catalog which contains all the standard procedures and a price that can be charged for the treatment/procedure, this system dates back to 1924. While "upselling" (doctors performing tests that are not necessary) is pretty common, prices are quite reasonable. Actually there are two catalogs, one for private insured patients and people without insurance (its almost impossible to be uninsured in Germany) and another one for public insured, the later one is based on a points system rather than prices and is supposed to be an administrative nightmare for doctors.
If you take the time to discuss with doctors (I have several friends who are doctors in Germany and my family is a doctor family in France) their life is really nice. Way more relaxed than any other engineer working for a company under standard pressure. The only ones who are pushed like any other worker in a company are the ones in hospitals.
It seems like the majority of the problem here is that we let the insurance companies bargain with hospitals, so everyone pays a different rate. Just make everyone pay the same rate and let insurance worry about how to drive the costs down across the board by encouraging people to get/stay healthier and reducing the burden on the hospital.
I really think this is the way insurance should be. I have a strong incentive not to needlessly get every possible test done or seek medical care that I don't need. I check my bills very carefully. I already located urgent care clinics that I can go to when I don't really need to visit the ER. I won't go to the doctor for a runny nose. It makes consumers care about costs.
I'm far from an expert on US healthcare and I'd love to get other peoples' more informed views on this. Could we put everyone on high deductible plans? If people can't afford their premiums or deductibles then perhaps there could be government assistance to pay those things based on their income. What would the pitfalls be in such a system?
Note that the contribution is pre-tax, so if you're at the 25% marginal federal rate and contribute $3000 you have to compare that to getting at most ~$2020 in after-tax money: HSA contributions are not subject to FICA (7.65%) or federal income tax (25% on the margin per above assumption). They're not subject to state income taxes either; those can range from 0% to 12% depending on state and income level.
Another important thing to keep in mind is that this is a health _savings_ account. Your contribution stays in the account if you're not spending it on actual medical care; it doesn't disappear at year end. Money in the HSA can be invested if desired (though it's probably a good idea to leave at least the deductible amount in liquid funds). Interest, dividends, and capital gains on the money are not taxed. When you reach retirement age, you can withdraw the money for any reason, not just medical care.
So basically an HSA is just like a traditional IRA in terms of tax treatment, but with the added ability to make early withdrawals to pay for medical care. The only drawback is that you can only open one if you have a high-deductible plan (defined as at least $1200 for an individual and $2400 for a family, as of this year). So you're basically gambling that the tax savings and possible future growth of the money, plus what you save on premiums, will be higher than the deductible.
Going back to our case of a single individual at the 25% marginal rate, with $100 premiums for the high-deductible plan and $300 premiums for the low-deductible plan, the difference in premiums is $2400. If you're depositing those $3000, your tax savings are about $1000. So you'd have to spend more than $3600/year on average on medical care to lose out. For most young-and-healthy folks, spending on medical care is likely to be less than this. Note that the 25% bracket starts at a taxable income of about $34,500, so figure a salary of at most $50,000. If you're earning more than that and are single, chances are an HSA is a good deal for you.
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Taxed as single payer or taxed as hidden costs, anyone with insurance is being taxed for those without insurance. At least with single payer, you know those receiving treatment are now kicking something in as well.
So the whole question of whether we should pay is a charade. We do pay and if Americans were remotely willing to let people die in the gutter, there would already be people dying in the gutter.
People might as well be arguing about whether or not we ought to live on Mars next year. [2]
[1] Many young people in the US spend significant amounts of time uninsured. Many families will also fall in and out of coverage as household members switch jobs, as marital statuses change, etc. Most of us make largely the same decisions, but by dumb luck alone some will acquire an illness or be involved in an accident during a period of non-coverage and be, if not bankrupted outright, seriously financially penalized for the grand sin of having only been as conservative and careful as everyone else.
[2] Which is to say: a question that isn't wrong to discuss, but one that's irrelevant to any practical discussion about housing costs.
It'd only be fraud if the government was paying for it.
[Edit]Some hate against my comment. For those that fail to understand...
It isn't fraud if you go to a gas station that is charging $0.10 more a gallon, and fill up there. It's fraud if you pay for that gas, and its water. The insurance is still buying the same drug, they have just chosen to negotiate a price that is higher with one hospital than another. They have their own reasons for deciding that price.
Likewise it would be fraud if the government was paying for it, since they have set rates. To achieve a higher payment would require billing them for some other product.
Scenario 1: A gas station with bags of ice sells out their inventory of ice and beer to a local fraternity, so they can keep their beer cold while they're on the road.. Then a diabetic guy comes in, looking for a way to keep his insulin supply cold. Too bad for him, the ice is gone.
Scenario 2: That gas station jacks up the price to $100/bag during the evacuation. The frat guys aren't willing to pay that much for cold beer, so they grumble and just buy some bottled water instead, since that doesn't need to be cold to drink it. The diabetic guy comes in looking for ice. He too grumbles at having to pay $100, but his insulin supply will now stay fresh.
This is a little contrived, but I think it illustrates that even in extreme cases, the system of pricing in a free market allows each participant in the market to communicate his priorities and his ability to substitute other goods. My example shows how the frat guys want beer, but not enough to pay that huge amount -- which leaves the way open for the diabetic to show that the ice is really, really important to him.
The same effect explains the semi-mythical $75,000 toilets in government procurements; yes, the government may often over pay, even somewhat obscenely, but typically those sorts of stories are because of accounting doing things like dividing the bill evenly according to every item. Yes, you got a $75,000 toilet, but you got a $75,000 MRI machine on the "same bill".
Health care can't be forced down by price (at least, life saving health care), so you either have to stop providing care to those that need it but can't pay, or pass along the costs to others.
I'm not saying those approaches don't have flow on effects, because they do but they can be used to lower costs. Don't assume price cannot be controlled by governments or industry, because it can be, and is.
Medical school is entirely too expensive, which limits doctors going into general or emergency care, which causes further strain on the system.
Back when I was uninsured I was very frustrated that no one anywhere ever knew how much anything cost, and frequently gave false information.
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Considering that the per capita medical costs in the US are about twice that of the other OECD countries, clearly there's more than just cost-shifting going on.
Whatever your views, as a matter of law (well before "ObamaCare") we are still going to subsidize medical care for the old, poor, children, and the irresponsible through our taxes and direct payments.
http://www.theatlantic.com/magazine/archive/2009/09/how-amer...
One would expect a stay at the Good Samaritan Hospital to be free.
NB: Note that NHS is based on treatment being "free at the point of delivery" - everyone knows that it's not "free" and we pay for it through NI and other taxes and people who can't (or even won't) still get the same treatment.
(See also the prescription tax in England, although there the average cost of a prescribed medicine <= the prescription tax. Here in Scotland we abolished the NHS prescription tax a year ago; the system didn't subsequently collapse under the weight of freeloaders asking for prescriptions for stuff they could buy over the counter. Draw your own conclusions as to whether such taxes make sense ...)
Helpful mostly to people with chronic conditions (IIRC unemployment/disability benefits tend to include relief of prescription charges).
I was quite happy with the prepayment scheme, so really the only difference is I now pay them £60/yr (quarterly cards, oh the optimism) less directly.
As an additional pointless anecdote, I do actually get a prescription for Paracetamol, since it means I can get it in boxes of 100 rather than the stupid 16/32 purchase limit for OTC sales. It's easier for my doctor to tick the box than write a short note for the pharmacist, it seems.
Obviously it's a bit different for you as you're receiving it under medical supervision for a chronic condition, but imposing that cap on ad-hoc purchases cut the death rate (by both pre-planned suicides and idiots who didn't take the health warnings on the label seriously) by around 20-25%.
(Personally, speaking as an ex-pharmacist, I avoid the stuff.)
That fatality reduction sounds incredible though. Since just about every corner shop sells the stuff, I'm surprised it cut the suicide rate by that much - I'd have thought it more likely the aforementioned idiots who think OTC means it's harmless, and a handful is just the thing for yesterdays hangover before hitting the pub tonight.
Out of curiosity, do you have a reference? I'm wondering if it breaks down the figures for the "nuke-your-liver trying to get high on codeine" crowd against the others as well.
http://www.plosmedicine.org/article/info%3Adoi%2F10.1371%2Fj...
It's important to read beyond the initial summary, though, as this is a rather nuanced report with some interesting side-observations. For example: A study in London three years after the regulations were introduced found that 46% of people presenting with overdose had purchased potentially toxic amounts of paracetamol in a manner contravening the spirit of the 1998 legislation.
I don't know what happens when they find out that you're uninsured, however it's possible to have no health insurance.
At the doctors or at the hospital just say you have private insurance and you'll get a invoice after the treatment.
My whole point is, the invoice amount would be not quite close to what that Amarican hospital charged.
[Edited for clarification]