A major issue is despite the fact that health care costs double in the US what it costs in other nations, hospitals are still barely able to break even. A lot of hospitals have been closing due to financial reasons. I think the average hospital profit level is about 3%.
True reform is going to bankrupt a lot of hospitals, which I think is why the government keeps dragging their feet on this. Even Trumps law which requires hospitals to publish prices only imposes a $300 a day fine if they don’t, which means a lot of places will just choose to pay the fine instead.
To truly fix the overpriced system we not only need transparent pricing for all medical centers in the US, but we need to open the health care system to international competition and give people the option to pick which one they want. A surgery that costs $80,000 in New York may cost $30,000 in Alabama and $3000 in the Caribbean when done with doctors trained to western levels. Drugs that cost $500 a month here may be $100 a month overseas. With international competition, a lot of domestic health care providers would find themselves unable to compete w/o major reforms.
But you also run into the issue that the vast majority of us have no medical training. People being expected to pick which medical services they need when the average American reads at an 8th grade level and has no medical training is going to cause a lot of issues.
In the US we spend 3.8 trillion on health care. Medicare for all may cut 400-500 billion out of medical spending. We’d go from about 18% of GDP going to health care, to maybe 16%, still far higher than the OECD average of 10-11%.
Their “rack rates” are sheer fiction. They don’t expect to get that from ANYONE (though I’m sure they HOPE a cash-pay patient will be dumb enough to do so).
Two tales of my own, which I know I’ve told before.
Gallbladder surgery. Hospital billed something like 40,000. The insurer paid something like 2,000. That is a 95% discount from rack rate.
Colonoscopy: as a frequent flier there, I’ve got a fair idea of what the various parts (doctor, facility, anesthesiologist) cost. Anesthesiologist billed about 1,300 - of which insurance paid about 300.
A friend’s daughter had one - at an in-network facility where it turned out the anesthesiologist was NOT in-network - something they found out when they got a bill for 4,000 dollars from the anesthesiologist. Yes, TRIPLE the fictional rate mine requested. My friends were, not surprisingly, panicking. They paid a few hundred, and called the office to try to figure something out - and were told the anesthesiologist’s office had written off the difference.
Not just that - but there are studies showing that where physicians own facilities to which they can refer patients, use of such services goes WAY up. There’s a pretty substantial motive there for overuse. I can’t find the article I remember reading, but it compared usage of a specific group of services in an area before and after a local medical group set up their own facility to provide the service.
Not that doctor-owned facilities are necessarily eeeeeevil - my colonoscopies are done at such a place, and having accompanied a friend when she had hers done at a hospital, there was a bit less bureaucracy involved, AND hers may have cost a bit more (I did not see her bill).
Another issue is that we Murricans are used to nearly-instant gratification when we seek medical care. My own recent behavior (arguably, misbehavior) serves as an example. I injured myself over a weekend - a hyperflexion knee injury, where I fell and basically my heel and backside were in direct contact. The other time I had done something similar (other knee) it hurt for a few days then was fine.
This time, it seemed to be worse - and Doctor Google had some suggestions as to possible more severe injuries including damage to the meniscus and/or ligaments, requiring surgery. So I called the orthopedist’s practice that Monday morning, they slotted me in, I got an x-ray and the doc put my knee through some paces - and was told that a) I had some arthritis (no new there), and b) there was no evidence of anything worse. The doc offered a steroid shot to relieve the pain, which I declined.
I used Advil for a few days. 3 days later, all was fine. If I had NOT gone to the doctor, the outcome would have been identical. But to have that kind of availability, there has got to be a LOT of excess capacity out there which itself drives up costs.
The tales you hear of having to wait MONTHS for some basic stuff in countries with less-insane medicine may be true in some cases - I suspect the articles touting that do some cherry-picking of cases to support their viewpoint. I know a Canadian friend who needed gallbladder surgery had to wait a few months and then take whatever slot she was given - whereas I could have gotten mine removed a few days after I saw the surgeon - and I was able to meet with HIM within a few days of calling his office.
Yes, this is the biggest issue. The 1000 bed hospitals in big cities may survive reform but the little dinky 25 bed hospitals in small towns are barely keeping their heads above water. If too many of those smaller hospitals go down we could see situations like a person with a heart attack needing a 2hr drive to get to an ER.
I lean to the right but I don’t see a good solution other than moving to a single payer. The insurance companies have too much power.
On a side note, the listed prices almost always include the wages of a person. It’s not that the bandage itself cost 97 bucks but that a nurse making $50 per hr put it on then checked on you 20 minutes later.
When insurance costs only represent 7% of the total cost of care in the United States, what do you imagine happens to hospitals under single payer that is better for them than under the insurance system? Single payer is better for society and patients, it will absolutely not be better for doctors and hospitals.
That is an interesting point of view. A big reason why small hospitals are barely surviving is because they are legally required to treat everyone and many lower income people treat the ER as a walk in clinic. They never pay and the hospital eats the cost each time. Those freebies are very expensive to the hospital.
If all patient visits were paid for by a single payer there would be no need to overcharge in other areas. Everything could simply be charged at cost plus 5% (or some other sane percentage markup).
For most smaller hospitals at least, a single payer system would immediately make them much more financially viable.
You don’t actually need single payer for that, you could just require something like the Medicaid program cover all the costs of uninsured emergency visits, as an example. The existence of private insurance is not why hospitals have to treat uninsured people for free when they come into the ER.
It’s my policy to post our Medicare and self-pay rates on the wall, and we will give quotes to anybody who says they are self-pay or Medicare-only before locking in their appointment. Our self pay rates are a flat 115% of the Medicare rates, and Medicare rates are public knowledge (even if most people don’t know how to find them). Usually a self-pay patient will ask.
Patients with deductibles or coinsurance, we do our best to give them an estimate before they talk to the provider and again before any testing is performed. Sometimes we screw up, sometimes we just can’t know because I’m not going to spend three hours sifting through a filing cabinet to calculate the rate sheet for each particular service.
I manage a specialist’s office. The dynamic for a hospital is going to be very different.
That’s what we all think. But the data in the Times article shows that sometimes the cost to the person is less than the cost to the insurance company.
My dentist gives me a discount, and given the high cost of dental insurance without a company paying and the low cap, I pay less now than if I had insurance.
Under ACA in the US, the overhead an insurance company can charge is limited to a certain percent of the payments they make to providers. So, the more payments, the more overhead, which include profit.
I was the beneficiary of something similar. I started work for a research center for Western Electric, the Bell System manufacturing company. Once a year the board of directors of WeCo would come, listen to talks in the morning, sign the check, and go golfing for the afternoon. Why so easy? The profit the Bell System made was to a certain extent a function of capital spending. Since we were part of Western, our budget got added to the capital base. If regulators looked at it, they saw this money being devoted to reducing manufacturing costs, and who can argue with that? So every dollar they paid us increased Bell System profits.
Basically the same thing is going on here.
Have you ever tried to get a quote from someone who didn’t know exactly what they were quoting for? Part of the issue here, is that charges are based on the codes the doctors put in. The CPT codes have variables based on complexity and time. Something like an MRI is different. It’s pretty straight forward. But a colonoscopy? It can be more difficult or time consuming. Will there be biopsies? What if there is bleeding? You don’t know until after what actually happened, how complex, how much time and supplies were needed.
I’m not saying the system isn’t broken, but medicine is McDonald’s either. There is no menu with listed prices.
I would be interested to see a law that all hospitals can only charge the lowest negotiated rate they have (for a given procedure or service) to anyone without insurance. No charging $40,000 for a procedure they are willing to offer to an insurer for $2,000.
Following my coronary artery stent procedure I was supposed to have a follow up appointment with the cardiologist. When I arrived for the appointment the receptionist took my insurance card and started on my paperwork.
After some time, she told me there was a problem. My insurance copay for the exam was $150, and she’d never seen anything like that. In fact, for uninsured patients their fee was half of that ($75)!
She made some phone calls and determined this was correct. I told her not to bill my insurance, just let me pay cash. Nope, couldn’t do that, so I paid $150 with a credit card.
The cardiologist spent two minutes with me, determined I was doing well. That was six years ago and was the last cardiologist I’ve seen.
This is not my experience (keep in mind I manage a specialist’s office and not a hospital).
Most commercial payers present their prices as a percentage of Medicare rates, usually at or over 100%, with various special cases. Medicaid contractors, VA, and other public healthcare are usually set to a percentage at or often below the Medicare rate. Big companies you recognize such as BCBS or UnitedHealthcare, for various plans and affiliates, have their own rate sheets they revise each year. For small operations such as our practice these last are take-it-or-leave it contracts: if you want to accept this major commercial insurance, and they have someone else within a reasonable distance competing with your specialty, you take their rates or you turn away patients.
So now to the accounting side for the doctor’s office. Every single health insurance contract contains a provision, insurers only pay the lesser of the billed amount and the contracted amount. We the doctor’s office could send each bill tailored to the insurer’s specific contracted rates, and only charge what we are allowed to. But uh, who has time for that? I mean, we have one doctor in our practice and do business with over four hundred different health plans…
Instead, we bill a really high number for everyone and let the insurance companies determine how little they want to pay. $500 for a new patient office visit, let them mark it down to $150-200. For self pay patients our rates are technically the result of a self pay “discount”.
That would be good. I think there is now a law or regulation saying that hospitals can’t dump out of network specialists on you who charge a ton. So that’s a start.
Individuals can’t negotiate, especially when they are having a heart attack, but insurance companies can. However they are at a disadvantage, in that the growth of gigantic medical systems has reduced their negotiating power, as mentioned in the article. Around us Sutter Health owns a ton of hospitals and medical centers. An insurance company not covering doctors and hospitals in their system will be at a serious disadvantage in negotiating contracts with companies they’re insuring.
The article talks about Stamford Hospital. My new grandson was born there. My daughter’s room was a lot nicer than the room where my wife was when my daughter was born - in Princeton, so not exactly a bad town. My wife was in a double room which was smaller than my daughter’s single room. And my daughter and her husband got a lobster dinner one night as a standard part of the birth package.
It’s kind of like college dorms - they get fancier and fancier to attract customers.
The dinner’s expense was trivial - but the cost of big rooms isn’t.
BTW, I’m old enough to remember the TV ads from the AMA against Medicare, predicting doom if it passed. So I’m not blaming the insurance companies totally.
I used to work in a cushy job for a monopoly, but when the Bell System got broken up we had to become a lot more efficient. It was a bummer for us, but good for the country as a whole. The number of empty MRIs I saw when I had mine make me think there is a lot of room for improvement in medical care. One of the fastest ways of getting into the 1% is being a surgeon in a select number of specialties. Is that really a good idea?
I went to an oral surgeon whose office was him, one assistant, one receptionist and one insurance person. That’s a ridiculous amount of overhead. And I bet your situation is worse. One more advantage of single payer…
So far as I am aware, the only such percentage based profit margins are for medical/pharmaceutical providers (especially with expensive drugs, see ASP pricing) and their downstream contractors (such as medical billers, suppliers).
I’m not sure whether pharmacy benefit managers who are also pharmaceutical distributors (looking at you, CVS) negotiate some sort of percentage-based kickback with manufacturers when they lock insurers into higher drug prices.