How can we fix medical pricing?

Great Debates
1

The Times ran a fascinating piece analyzing how much various insurance companies paid for medical procedures.

Bottom line is that their costs are all over the place, sometimes a lot higher than what an uninsured person pays. It’s not like any particular company is worse than any other - things vary wildly, just the opposite of what you’d expect to see in a market with information available.

They are trying to keep these costs a big secret, even thought there is a law requiring them to expose it. And self-insured businesses get no more information from them than you or I.
Why this occurs is clear - it is to the benefit of insurance companies to pay more since they only get a percentage of what they pay out. The question is what to do about it.
Will forcing them to publish prices have side effects? Will hospitals survive if forced to be more efficient?
My lack of a position is because I don’t have one, though I tend to a market with full information. But I’m on Medicare where the prices are imposed and usually a lot cheaper than what the insurance companies pay. And I know doctors and hospitals moan and groan about this.

2

No, this can’t be solved. In fact, the United States is the only place in the first world with a medical system precisely because this is the only possible model on which it can work. I mean, it certainly isn’t like everywhere else in the developed world mitigated these problems decades ago. We’d never want to imitate those systems.

In all seriousness, it’s yet another dead wood problem in one of our institutions. Our medical apparatus depends on fleecing patients because the entire structure, head to toe, is full of rotten dead wood. We’ll probably have to completely rebuild our medical infrastructure or at the very least completely restructure it into something entirely alien to what we have now.

That wont be pretty. That will piss off a lot of special interests. And a lot of ideology-first people will be duped into defending status quo.

3

Yeah, Medicare for all would solve it just fine, but I was wondering if there was something that could be done in our current fucked up system.
When I get insurance statements I see what the list price was and what Medicare paid. There is often quite a large difference.

4

I don’t get this. Why is it a benefit to the insurance company to pay more?

I’m reminded of something that happened to me recently. On a Saturday night I got a call from the neighbour of some land I own telling me one of our trees had fallen onto his garage roof. Could we fix it please? I called my garden guy and he went around the next morning and told me the job was too big for him and he recommended a company. I called the company and they sent someone around that day (Sunday) to assess it. He sent me a message,

“$5500 to clear the tree, let me know if your insurance is happy with that and we can proceed.”

I replied,

“Sorry, we don’t have insurance and we can’t afford that, just leave it for now.”

He came back with,

“My mistake, I thought this was an insurance job, we can do it for you for $3200.”

Me,

“Thank you for going out on a Sunday, but no thanks, we will see what else we can do. I’m happy to pay your callout fee.”

So there’s a $2300 insurance “premium” right there. An inflated price because the insurance company is a giant who will just rubber stamp whatever bills come their way. The problem with inflating prices for insurance companies is that we, the consumer, end up paying for it in our premiums anyway.

The punchline is that we called someone else who went out on Sunday night and removed the tree for $600! Needless to say, he is now our garden guy.

5

No, just the opposite. If you do not have insurance they will bill you some ridiculous figure that will likely be 5 times the prices that have been negotiated in their contracts with insurance companies. If you have no assets or income, then it is their problem, and they will negotiate to try to get paid some lower figure. If you do have assets or income, then it’s your problem - and you are probably in a very difficult situation. They will try to force you to pay far MORE than any insurance company would pay, and your legal position is very unclear since you benefited from the service they provided. Either way, the bill you are initially presented with is going to be some ridiculous astronomical figure.

If only it worked this way. Have you ever tried to get a medical provider to quote you a firm price for a service beforehand?

6

This is a common situation with car repairs. Some body shops will ask if it’s insurance or private before quoting.

7

I live outside the US so the medical situation isn’t particularly relevant.

8

Not always.

As someone who has on a couple occasions been without medical insurance and needed to negotiate, on several occasions I was given a 50-60% “discount” on “retail” prices for procedures without a wallet biopsy first. Again, they were willing to chop the price based solely on being completely uninsured without an inquiry as to how much I was able to pay. Being poor was the second round of negotiations.

Apparently, dealing with insurance companies is that much of a hassle that medical providers will chop the price because they won’t have to spend time and money on pursing payments from a third party.

Which is not to say providers are saints - they aren’t - just that the insurance companies are often worse.

Yep.

Not always possible but I have gotten it out of them. In one case in writing, which came in handy later when the billing department started getting nasty. (That was Rush Medical Center in Chicago, if anyone is interested, and years ago, so who knows if I could manage that again?)

9

Yes. If only more people questioned medical charges, maybe things would change. I turned down ambulance transport until I could determine the charges, eventually saving money. I also stopped a dermatologist from doing a minor procedure until I was told what I’d be charged if my insurance didn’t cover the procedure. I walked away from that situation.

Would you drive a car off the lot without knowing what you were being charged?

All right. I’ll talk to my boss. See, they install that TruCoat at the factory, there’s nothin’ we can do, but I’ll talk to my boss.

10

To fix this you’d have to fix greed. Good luck with that.

11

Easy (in every way except politically): Universal single payer medicare.

Problem solved.

Next question. :slight_smile:

12

Although in (US) medical I’ve often seen the converse: An inflated invoice “because the insurance company is a giant who…” can and will (or have already in provider contract negotiation) haggle them down savagely to settle at a significant discount from what’s the nominal “list” price. So, a perverse incentive.

To use Broomstick’s example, it may be the hospital were already expecting to count only on about half of that “suggested retail price” getting paid at the end of a good day.

13

I think when most people need an ambulance they just aren’t in a position to negotiate. Sick people in general aren’t in a good position to negotiate. When I was laying in the hospital knocking on death’s door the last thing my parents were thinking about was how much the bed would cost each day or the price of medication. And even if they had thought of it, were they going to go through the trouble of actually moving me to another more reasonably priced facility?

14

This. Based on my limited experience, if you’re price-shopping ambulances, you don’t need an ambulance.

15

I’d had a heart attack but was stable. I was being sent from Hospital A, where they didn’t do angiography/stents to Hospital B, five miles away, where they did. My cardiologist worked both locations. I would have ideally driven, but my doctor argued against it and I’d have to have my IV catheters removed, then reinserted. I would have had to leaved AMA which might interfere with my insurance.

I made some calls to my insurance company and determined I had full coverage as long as my “home ambulance company” was used. So, I got a free ride but had to wait for the ambulance to drive an hour to get me. Had I been taken by the ambulance idling out front I would have paid full price.

16

After my stent was placed I was discharged the following day. My nurse brought my morning doses of medication, which I declined. Had I taken them I would have been charged an outrageous markup. Instead, I filled the scripts on my way home from the hospital and took them an hour or so later.

17

OK, I can see that

18

This here is proof that the pricing system is broken.

You made the choice to have an ambulance drive an hour to you, pick you up, drive 10 minutes to your destination, then drive an hour back home rather than have a local ambulance do it. Not because you actually needed a special ambulance, or because it would actually use fewer resources, but because our broken system made it significantly cheaper for you to choose the ridiculous time and resource consuming option.

You also were incentivized to refuse medication, not because it would reduce the cost of providing you with care, but because it would reduce the price of providing you with care.

Learning how to ‘work’ the broken system doesn’t fix the system, fixing the system fixes the system.

19

@kayaker made a lot of very smart decisions there that most people will never make for a number of reasons.

I will clarify something stated–the insurance companies do not get paid more based on a claim being for a higher amount. In fact the insurance companies actually make more money from: a) paying out fewer claims and b) paying out smaller claims when they do pay out claims. The insurance companies actually have a profit-motive to reduce the amount of money charged for medical procedures.

This often confuses people because insurance companies are regularly blamed as being basically the entire reason healthcare costs are so crazy in the United States. That confusion is deliberate. The main driver of healthcare costs in the United States is healthcare providers, particularly hospitals, surgical centers, and large medical groups. Your local General Practitioner working in a family practice is probably less a culprit. The secondary driver is pharmaceutical companies. And only ranking in at third place is insurance companies. However, that is only factoring in direct % of costs.

The structure of our group health insurance system has an effect of obscuring costs and making it a “low information market” which likely contributes more to the health care cost issue than would be reflected just in looking at nominal values.

I think ANYONE serious about this discussion, looking for a lay person friendly, but extremely in depth and rigorous explanation of this situation should consider this 2013 article that was published in Time Magazine to be mandatory reading:

Bitter Pill: Why Medical Bills Are Killing Us | Time

If you want to fact check me on what the major drivers of cost are, the CDC puts this data out every few years, it’s also worth looking at:

Health, United States 2019 (cdc.gov)

Quick breakdown (all # in millions):

Total Health Care Costs in 2018 - 3,649.4

  • Hospital Care - 1,191.8 ( 32% )
  • Professional Services - 965.1 ( 26% )

Those two are the biggest line items directly relating to provider imposed costs, and constitute around 58% of the total, you can look at the PDF for more detail, but some other significant provider-imposed costs related to long term nursing homes and home health care.

Now on to the common boogeymen:

Prescription Drugs - 335 - 9.7%
Net cost of health insurance - 258.5 - 7%
Medical Equipment - 54.9 - 1.5%

I frankly thought back in 2013 the Time article would be a watershed, because it is so well written and the evidence so well presented, but it was not. At the end of the day it’s simply the reality that while the vast blame for our costs are related to the behavior of providers (a broad term that encompasses lots of large companies) almost all of the blame is levied on health insurers and sometimes on big pharma. At the end of the day there are lots of people who really don’t want to negatively attack doctors and hospitals and they really want to attack health insurance companies.

20

Another interesting fact–it was industry groups representing physicians and hospitals that killed universal healthcare under Truman. It was those same industry groups that later built out the first form of American health insurance we are familiar with today–BlueCross–was dreamed up by a hospital executive in the late 1920s (BlueShield that it later merged with was the invention of lumber companies to provide health benefits to their employees.) They specifically built it out to benefit them economically. It was understood that they can have fancy procedures and services, but if the cost is catastrophic lots of people just won’t pay it. So if they create these member benefit organizations, that pool member resources and collect monthly premiums (just like insurance! even though it has many differences from traditional casualty insurance), ordinary people can keep getting procedures they otherwise couldn’t afford.

Participation in these membership organizations increasingly became linked to employer provided benefits, or union provided benefits, and it was one way employers were able to give employees “fringe benefits” when wage controls were in place during WWII.

The providers can continue to charge big money for them, employers provide at low or no cost to their employees a fringe benefit (that isn’t that expensive for the company) and everyone is happy.

Of course, everyone is not happy. People thought it was fine in the 40s through 80s or so because the overall cost structure was just low enough that a lot of the problems weren’t apparent. It really wasn’t that expensive for employers to prop up these benefit associations, and even the ones who made employees pay a premium, the premiums just weren’t a very big % of take home pay, and the deductibles and costs when you needed care just weren’t that high. All of these have massively outgrown GDP growth, and thus are now a much bigger % of household and corporate budgets. Also government budgets.

In many ways the motivations Justin Ford Kimball had when he developed BlueCross are still at play today, it has succeeded beyond his wildest dreams, and has totally obscured his industry being the real heavy and created a boogeyman that soaks up almost all of the public discourse.