One of the reasons that health care costs so much in the US is because general hospitals are not required to publish their costs. Claiming that publishing their costs would contribute to collusion and higher prices, they hide their costs from consumers. Hiding costs is precisely what does allow for collusion. That's a main reason why your health care costs are so high. Why do the general hospitals hide their costs? Because the United States Congress allows them to by law.And you thought American health care was inefficient because the free market doesn't work. News flash! US Health Care is hardly a free-market industry. Health care in the United States continues to gravitate further away from the free market. Subsequently, health care costs rise--while fewer and fewer people can afford to pay for even the insurance to protect against these costs.
The other day I went to the grocery store. Here's what happened.
I don't do the grocery shopping very often, so it surprised me to find out that my grocer had established a new policy. By edict of the federal government (I found out from the cashier as I got to the checkstand), there was not one price tag anywhere in the cereal aisle. I, however, love cereal, so I grabbed a couple of bags and a few boxes of the stuff, which would last us a week and allow us to add to our food storage.Okay, so the previous story didn't really happen (except for me seldom doing the shopping but loving to guess the final cost when I do). But such tales are the daily reality in the health care industry.
I'm a pretty good mathematician, so I always like to guess what the cost of our groceries will be. When the final tally rings up, I'm usually within a dollar or two. Imagine my surprise when my guess was off by over fifty dollars! "Holy cow!" I exclaimed to the cashier. "That can't be right." "Oh, it's right alright," she said as she handed me my receipt. "You bought cereal." I looked at the receipt but couldn't find anything to indicate why my guess had been so far off. But I did notice, based on the cashier's warning, that the costs for the boxes and bags of cereal were not to be found on that little slip of paper.
When I got home, my wife took one look at the cereal and asked sternly, "What in the world did you buy cereal for? Don't you know how expensive it is now? I send money to our friends in Mexico and they send me the same stuff for much cheaper."
Do you think the price of cereal would go up or down if no one knew what they were being charged for it?
...So do I.
Health care is no different in that respect.
In her book Who Killed Health Care? Regina Herzlinger explains the rationale that general hospitals have used to keep hidden the exorbitant charges they pass on to the consumer--and that Congress has bought...hook, line, and sinker.
In a blatant display of their self-serving agenda, the general hospitals convinced the U.S. Congress to ban further expansion of specialty hospitals.Non-profit general hospitals in the United States are often far from non-profit. One hospital described in Herzlinger's book made $567 million profit in one year--after paying out outrageous salaries to its executives.
...no one alleged that the specialty hospitals were bad for the consumer's health. No, instead, the general hospitals alleged that the specialty hospitals were bad for their health [read profits].
To achieve their goals, the general hospitals used another variant of the competition-is-killing-us argument. They alleged that the specialty hospitals are focusing only on high-profit procedures...[which is not true].
Who Killed Health Care? pages 80, 81, 82
Ironically, however, this particular health care problem is not simply with the general hospitals. It is with national lawmakers who have colluded with the health care providers. And true to form, prices have gone up.
Other countries, whose health systems are not so protected by their governments (no, not Candada) are making it financially feasible for Americans to travel overseas, stay for several days, and get better health care for much cheaper than they can receive in the bureaucratic nightmare that is becoming the US health care system.
Hopefully now, you can see that more government control of health care is not the solution to America's skyrocketing health care costs. In nearly every example where government has affected health care, government collusion has caused health care costs to increase. Ironically, one area where prices have actually gone down is in lasik eye surgery--because government has stayed largely out of this arena.
We don't need more socialism. We need less.
Put the prices back on my cereal!
A good example of this is my wife's recent appendix removal. The hospital bill said that the entire surgery and stay in the hospital was around $27,000. After negotiating with the insurance company, they brought it down to $12,000. They then said we were on the hook for about $1,000. Despite all of this, we still got bills for about a half dozen companies for varying amounts related to the incident.
ReplyDeleteAfter all of this, I have absolutely no idea how much it costs to have an appendix removed in emergency surgery. (I can't even be sure how much we paid out-of-pocket unless I total up and reconcile about a dozen statements.) I'm pretty sure the hospital isn't too clear on it either.
Health care is not working under free market principles because of health insurance and government subsidies. Health insurance drives up the price because insurance companies can pay more than the patients so DR. and hospitals can charge more. If there was no health insurance and everyone paid out of their pockets there is no way hospitals could charge that much and stay in business.
ReplyDeleteIn defense of insurance companies (no I don't work for one, but I have some experience working with them), because they hold the purse strings they are a big reason why doctors and hospitals can't pad their revenues by giving Jesse's wife 15 extra x-rays during that emergency room visit. Insurance companies employ doctors who look at those bills they get from the hospital and when they see that bill with 15 x-rays on it they won't pay it. If the doctor doesn't get paid for it, the doctor won't do it.
ReplyDeleteBTW, interesting post Frank.
ReplyDeleteJesse,
ReplyDeleteThat's a perfect example of what I'm talking about. I remember after each of my children were born, the nurse came in and gave a "free" goody bag to my wife of such things as diapers, formula, etc. We never did see the itemized bill, and I suspect that this is the EXACT reason companies felt like they could "give away" these "free" products, because it would never be deciphered from the bill that they really weren't free.
Ken,
I agree in part with what you say, but I still support some sort of health insurance. The sort that would work better would be (1) Health Savings Accounts, and (2) something that is not associated with one's employer. My health plan effectively costs over $16,000 per year, but I don't cost my insurer nearly that much, but I can't take the balance and invest it someplace else.
Cameron,
I agree somewhat, too, with what you say about insurance companies. One thing they/employers do that doesn't work, however, is reduce the number of physicians we can work with--by establishing preferred provider lists. This ultimately reduces competition and raises costs.
The gatekeepers at the insurance companies do send very clear messages to care providers about what they will pay for and what they won't pay for. This produces an incentive for care providers to provide those services/products for which they will get paid. Sometimes doctors charge under a code the pays well, even though, the service/product provided does not match that code.
ReplyDeleteCare providers also are incentivized to practice in a legally defensive mode. Even though a service/product may not be necessary for a given patient, they may provide it anyway to cover their bases. In these cases, what is best for you is not determined by your care provider, but by a jury and a cadre of personal injury lawyers.
All of these kinds of things are invisible to the patient. But remember that in our system, the patient is rarely the actual main customer. That role is filled by insurance companies and the government. Thus, they have more say in your medical care than you do.
Ken,
ReplyDeleteI disagree with part of that. My Dental Provider is a Metlife Preferred Dentist. This means that he as agreed with Metlife that when one of their patients comes in for treatment that if a procedure costs more than MetLife covers for that procedure, too bad for him.... He accepts whatever MetLife covers as payment in full.
If Insurance companies would do that more often, how much better off would we be?
I just hate IHC because I always feel like a number with them. My Doc doesn't even have an answering machine. If I want to talk to him about something I either have to play phone tag for 2 weeks, take a day off so I can get his call, or tell my wife about it and rely on her to talk to him about MY body.
Drives me CRAZY.