I don’t think you really understood my point at all…
I have not argued for price transparency, or that costs will come down if consumers can shop around, or that consumers will be able to correctly choose between more expensive care that is great versus less expensive care that is crummy. There are arguments to be made around all of that, but those aren’t the ones I’m making.
I am simply making a simple point: When we separated the patient’s responsibility for the bill from the cost of care (mostly back in the latter half of the 20th century) we created a system with no upper bound for the cost of care, and that system is what has fundamentally driven the costs up.
How to put that monkey back in the cage is a completely different issue.
But the reason that we are in the pickle we are in (very high costs with only average return on general wellness) is that for the last 40 years or more we’ve had a system where the consumer pays a fixed cost to a third party payer (or, in the case of a retiree, has the government as the third party) and is then free to consume without bearing any more cost burden.
We have created an “all you can eat” buffet with a fixed price to the diner and an assumption that lobster and caviar should be on the buffet menu. In that environment, the diner is unconcerned whether or not the caviar costs more than the chicken. The fixed price for the meal (the cost of insurance) may rise, but every diner has no incentive to eat chicken because the incremental cost of caviar does not accrue to them. Worse, the entire buffet is now mostly caviar. It’s actually kind of difficult in our current system to get plain old inexpensive, basic medicine that is excellent–and have any savings accrue to the consumer.
We are now fully trained to deride “socialized meals (medicine)” with external controls on cost, and we wonder why our meals are so expensive…
The intent of my post was not to suggest a current solution but to explain why we are in the pickle: We separated out cost from consumer.
I agree with Chief Pedant that the general public is mostly only concerned with what they pay for insurance and out of pocket medical costs and not the total costs of health care. The only time patients see those costs is usually on an explanation of benefits form that shows how much the insurer is paying.
I had back surgery a few years ago for a herniated disc in my back. It was an outpatient procedure and I was out of the hospital the same day. Total cost billed to my insurance company for the procedure? $84,000. With ridiculous charges like those its no wonder that insurance rates are so high. It is my experience that doctors bill (or at least receive back) more to Medicare than to private insurers as well which adds to the problem with its solvency.
I think we need to slowly implement a single payer system for health care. The insurance companies will do everything they can to prevent that but I think it is the only way we have a chance to provide health care to everyone while trying to bring down costs.
I understood your point just fine. Please re-read what I wrote as I addressed most of what you are saying and the only logical conclusions that could be drawn from it.
Again, this is correlation, not causation. MRIs didn’t become expensive because insurance compares were covering the costs. In fact, they likely lowered the costs given their vested interest in doing so, and the collective information they have in terms of determining a provider’s actual costs of service. Patients, whether they are paying or not, cannot do that. Insurance companies are not suckers, patients are. Ina world where people, via their indurance companies, pay billions for boner pills that work, you have parients paying billions for multivitamins, penis enlargement pills, and homeopathic treatments that don’t. Consumers don’t make informed decisions in terms of price or anything else if they don’t understand or appreciate what they are buying.
This world where you tell somebody they need an catscan, then they decide if it’s worth the cost is fictional, and will likely cost more in the long run since emergency care is mandated. It’s not as if a patient is going to agree to die on the street for lack of money. They will not forgo serious treatments for lack of solvency; they will lie, cheat, and steal to get it. It doesn’t matter if they pay directly or I directly.
More importantly, it’s not routine medical care, the kind which could theoretically be paid out of pocket, that is raising health care costs. It’s end of life costs, expensive procedures, and long term illnesses. Those things cannot be paid for by most individuals, so you need insurance to spread the risk and costs. The direct costs of providing the care are too high, so there is little space for prices to fall, and little incentive to innovate absent any profit motive. Just because I am cutting a check doesn’t mean dialysis or back surgery becomes cheap. It would either become more expensive, providers would stop doing it, or the government would have to subsidize it like they do flu shots and vaccines.
Additionally, then you have a situation where you are billing individuals after the fact, who can often won’t be able to pay. That is another logistical nightmare you introduce.
This is wrong. Most people have deductibles, and they also have things in their lives that make dropping everything to go to the doctor burdensome. Either way, it’s easier to collectively recognize savings when the third party is a much, much better negotiator.
Your analogy fails because people don’t want “consume” expensive healthcare because the marginal costs are low. Do you have old people volunteering to have their knees and hips replaced out of desire to use more healthcare? People like lobster and caviar; people NEED expensive medical care, and use it at a large direct and indirect cost to themselves.
Let’s continue with this tortured analogy a little more. In the real world, you tell people they have to pay for their caviar, but in medicine, almost nobody can afford it, and we’re very reluctant to take it off the menu. Additionally, if you need emergency caviar, we will provide it at a much higher cost which you will likely not ever pay.
But you are misdiagnosing the problem. We are seperated them from the costs because they are too great for most individuals to bare on their own. The risk needs to be spread. That’s made things more expensive only indirectly as it has provided more incentives to innovate.
Would you understand a detailed itemized bill anyway? I dont say that to knock you, but to ask why you care to see a detailed bill. Would you shop for a lower price?
How much did the insurance actually pay? The bill means next to nothing. But honestly, how much should your surgery have cost in your estimation? Do you think any competent person would perform it at that cost?
I am a CPA, so I would certainly understand the bill, as I do accounting work for health care as part of my job. I am interested in the detailed bill to make sure the hospital is not charging for things that did not occur.
I do not remember the exact amount paid by the insurer, but it was around 75 to 80 percent of the amount billed. The itemized items on the bill that I remember being the most surprised at the cost of were the costs for the Anesthesiologist. I thought it was a little much to charge over $25,000 for that for a procedure that took 35 minutes.
As far as the Medicare billing, you may be right. I have certainly not researched the issue, and was just going from past experience with family members where medicare paid a higher percentage of billed costs on all the bills I took care of than private insurers did.
Define “expensive.” Lots of things are routine. If you’re stumped, you go fishing. I suppose we should only cure common ailments. If you can’t be diagnosed in a few minutes, just die.
Well something has to change. If I got insurance through work, I’d have to claim bankruptcy. Even after that, I’d only be able to afford basic living expenses and the insurance, maybe. Forget anything like 401k, a car payment, anything like that. All that doesn’t take into account that I’d have to pay $3k before the insurance kicked in. Great for sudden onset cancer or something, sucks for everything else. Otherwise it’s the uncontrollable weeping over the hundreds of dollars swallowed up for nothing year after year.
I know insurance can be great. I had a mother pass from leukemia. My father, however, has had semi-serious need of it maybe once, and could have paid his bill out of pocket dozens of times over, for all he’s paid into insurance. That’s money he could have saved for when he does need it.
I don’t really see any way of winning, here. All I know is that works annual benefits meeting always depresses me…
Health care inflation has gone down the last few years, it has only been around 3-4% a year, vs the 5-7% a year you see in boom times (It has averaged barely 4% for the last decade, somewhere around there). But at work the insurance rates jumped 44% last year, and about 35% each year the two years before that (I don’t know what it was before that). With medical bills going up 3-4% a year, but insurance going up 30-44% a year, the insurance industry is in a death spiral. They jack up their rates so healthy people quit, leaving on the sick. So they jack up rates again which repeats the cycle. The rate of health insurance inflation is 10x the rate of medical inflation, at least for me. If you divide by 72, then medical costs double every 18 years but insurance rates double every 2 years.
I went to a physical therapist for about 40 minutes of tests and a brace. The cost was about $1400. The therapist probably makes $21/hr, and the brace was no better than one I bought online for $30. Our system sucks so bad.
Single payer is a good idea, but it will only save about $400 billion a year. That sounds like a lot, but even with those savings we will still have a health care system far and away more expensive than anything else in the world. We need comparative effectiveness and efficiency research. Atul Gawande has written about this, so did OMB director Orszag. We could provide high quality care for about 50-70% of what we spend now if we focused on efficiency.
Healthcare is going to be like everything else in life. Those with money, will always get better health care.
People who take better care of themselves, i.e., eat right, exercise, don’t smoke/drink, do drugs, etc will need less health care be less of a burden on the system.
It is not feasible to think we can have a humanitarian system where everyone gets the BEST healthcare and everyone is treated the same…it will never happen.
So if you want to live a long, good healthy life…get educated, get a good job/start a business, and take care of yourself. People need to accept the fact that they may not get the best available because of limited resources and funds.
I guess we’ll have to agree to disagree. I’m not saying the costs should be born by individuals and we should not have insurance. I am explaining to you why the costs have become so insanely high.
For what it’s worth I’ve spent a lifetime in medicine and a fair amount of that time sorting through this particular aspect of it.
Medicine began to get very expensive when third party payers–including the government–began to pay for things. What this did was separate the cost of care from the patient consuming it.
Consider a persona with a painful hip. If a third party is going to pay for it, I want a new one. I want the best one you can get and I want it put in by the best doctor in the best hospital. If I have to pay for it, well…hmmm…let me wait a bit.
Now let the third party pay for it and let every single aspect of the care also be paid for by a third party. Do I want the least expensive physician? The cheapest hospital? Hell no. I want the best care.
If you look over over the past 40 years in medicine, you’ll see what I mean. The problem with most folks who look at root causes is that they are looking at today’s system. But the root cause question to ask is: How in the world did it become this way? How did we get such a ridiculously expensive system with such minimal return for the money?
And the answer is that we made the cost of care irrelevant by having third party insurance pay for unlimited care. Into that unlimited sum of money came any number of groups–including caregivers, pharmaceuticals, hospitals and suppliers–who sold their goods and services into a system which basically never made the consumer bear the direct cost of their particular care, and gave back to the consumer no benefit for under-consuming.
As an Internist and ED doctor, I’ve been the physician at the bedside of hundreds of dying patients over my career. Patients dying incredibly expensively, often hopelessly. And I assure you: the cost of that care is almost never a consideration to the patient or family. They aren’t bearing it. Either the government or their insurer is. We-all of us in healthcare–don’t really care what something costs. If you come into my ED and demand a stat MRI for your backpain, I’ll do my best to get you one, and neither your nor my primary concern will be whether or not there is a more efficient or appropriate way to get your back evaluated. If your mom is on the ventilator in the ICU surrounded by 5 specialists and now needs dialysis as a last gasp effort, we’re gonna give her that dialysis, and we’re not going to lecture you about the cost. If…well, you get the idea.
What drives all of this is that there is absolutely no reason not to eat the caviar once you’ve paid for an all-inclusive meal.
One of the best answers I have seen. My mother recently passed from COPD she was 94 years old. The last year incuded months in ICU. The outcome was certain, how long it could be delayed was all we were working with. She had zero quality of life the last year yet my entire family including me insisted on the best healthcare available because we had allready bought into the sytem and were not liable for any additional costs. I hate the thought of death panels but all the advancements in medicine have allowed us to stretch things out for unreasonably long periods. My mothers last year of life probably cost more than what my father had earned throughout his lifetime. It just is not sustainable.
Health care isn’t like other consumer goods you either need none or a ton of it. People aren’t window shopping TVs for $700, they usually either need 1-2k a year in medical care, or 50-100k a year.
And if this were why health care is so expensive why does this not happen in other nations where the consumer is not the person who pays? In dozens of countries the consumer doesn’t pay the bill, insurance or the private sector do. Usually as a bigger % of the check than consumers (who I believe pay about 20% of medical bills in the US).
I don’t see the evidence for this overall. There is some truth to some areas of it (comparison shopping for durable medical goods or Rx can save money), but we are not doctors and people are not going to make good medical decisions for themselves.
Plans that involve medical experts determining which interventions are the most effective and cost effective, then giving that advice to doctors would be better than civilians with no medical background being expected to navigate complex medical decisions with no training based on things like cost or income.
Even if we need rationing, which we do, it should be people who are well trained in health care economics and medicine who make those decisions, and they should make them on a utilitarian decision of the most good for the most people for the lowest cost.
Fair enough, although you could perhaps make a more compelling argument for you beliefs. If what you say is true, then why does there not seem to be much correlation across countries wrt to those who have similar systems?
Wouldn’t that logically follow from your argument given your anecdote about how few of the multitude of patients you have seen ask about price? Your anecdote did not serve as a history lesson, it seemed to me to be prescriptive.
I don’t think there is much causal evidence to substantiate this. Although it did play a part in incentivizing actors to improve and regulate medicine, and care for a greater number of people, I don’t think the evidence is there to say it was a net drain on the system.
A new hip costs about 39k. The average person cannot afford a new hip, so saving is not really an issue for many, if not most. Second, very few insurance policies allow you to buy “the best”, so your example rings false. Insurance companies are not in the habit of paying doctors more for the same service because they are “good”, nor are they in the habit of letting you pick any person you would like.
Second, even if you argue that insurance allows a suffering patient to get a new hip, or whatever else, sooner than they otherwise would, that does not mean the cost of providing that service was greater, nor does it mean the cost/benefit would be worse since there is an opportunity cost that is involved with delaying treatment. The question of expense is always looked at relative to one’s resources. Since delaying treatment can mean higher costs, and lost wages elsewhere, it is often not a bad thing to facilitate people getting treatment.
Lastly, non-urgent and one-time treatments are generally not what accounts for the bulk for costs in the system. It’s not because some guy decides to splurge on a new hip that the system is shaky. It’s because we have a small percentage of people utilizing a great deal of treatment at a high costs.
Which, again, would not change just because someone is paying. At best, you would ration it based on ability to pay upfront. I have explained why that is problematic already so you can re-read my prior posts if you like.
It became this way because people don’t want to die, and we decided as a society that it is often best to prevent that even if it’s at a high cost. We also administer care inefficiently, and spite ourselves by lowering taxes and regulations to a level that will not support the level of care we desire. Insurance companies are not great, but they are also not a root cause either. Spreading risk was necessary and attractive because it give comfort to the healthy, and care to the sick.
Once again, insurance doesn’t provide unlimited care, nor do they provide free care. More importantly, the guy paying the bills still cares about mitigating the cost. What makes you think insurance companies are in the habit of paying whatever a provider requests for whatever care one might desire? It doesn’t happen.
Yeah, but those are the easy cases. Plenty of old people don’t die from things they would otherwise die from if they had to pay for them. End of life costs are not always obvious or avoidable beforehand. More importantly, advanced emergency care would like not exist for anyone if people had always been expected to pay the cost individually. ICU bills can run 10k/day. Why would anyone have an ICU knowing only the truly rich would be able to pay?
Then you are a shitty doctor. If you allow patients to demand tests and procedures you do not think are necessary, then why do we even need you there?
As I have pointed out before, the analog to caviar in your example (expensive healthcare) has plenty of disincentives to consumption and over consumption. Not only in terms of time, cost, and effort, but also because people don’t have a desire to get expensive surgeries and tests they don’t need.
Most Health Care Economists also point to that as one of the big reasons why the US system is so expensive. They call it an externality. Other countries using insurance-based UHCs have legislation to compensate for this.
And its reinforced by the fact that medical treatment has no price elasticity. You got no ability to refuse life-saving medical treatment if the cost is too high. And the fact that the system has high barriers to entry, it is very difficut to break into for new providers. Which means conglomerate behavior is more profitable than competitive.
It is not the only reason, though. Fragmentation is a big one as well. Medicare, Medicaid, VHA, insurance companies…the US has an enormous number of separate bureaucracies doing the same job. And a gatekeeper function much larger than other countries. And this leads to an enormous number of bureaucrats dealing with billing. I’ve heard that some US hospitals have one empolyee doing credit checks and billing for every bed they have!
There are smaller reasons as well…defensive medicine, higher salaries, tort…but they are not that big, even in total.