The malpractice treadmill (will it take off?) illustrates the same logic.
Doctors don’t set out to cause injuries, quite the opposite. most are good. But - accidents happen, bad outcomes happen, greedy relatives happen, etc. Lawsuits happen.
The doctor pays malpractice. So unless he’s incredibly unlucky or incompetent, he’s free and clear. The insurance company pays any settlements.
The insurance company doesn’t care. They want to collect more in premiums than they give in payouts. If it’s cheaper to pay than fight, they will pay Danegeld to get rid of a lawsuit. Right or wrong is irrelevant.
Greedy lawyers will work on contingency to sue. They know insurance companies might pay them off regardless of the merits, so there’s no downside to filing a lawsuit. There is an attitude (true or not) that juries may award on the basis of pathos rather than logic - “the insurance company has lots of money and this guy seems to be really badly off…” Contingency means the lawyer will keep 30% or more, so this raises the amount the injured party sues for.
The doctor doesn’t care, because if his malpractice costs go up, he raises his fees.
To use Canada as a counter example - it is far more common that the lawyer’s fees of the winner are paid by the loser, so there is a significant downside to filing a lawsuit if the case is weak, and less downside to fighting it if your case is strong. Also, the medical bills are paid by the provincial health plan, so the out-of-pocket expenses being recovered are much lower - lost wages, etc. Canadian awards for “pain and suffering” and such intangibles are, from what I’ve read, much lower and more limited than in the USA. At a certain point, the damages don’t reach the level to make lawsuits worthwhile.
I believe this is correct. The factors driving the increase in health care costs are the same in the US as those in other countries. The population is aging, new drugs and treatments are more expensive, people live longer and thereby incur greater lifetime medical costs, etc.
Another factor that has driven up healthcare costs in the US are end-of-life issues. The majority of healthcare costs are incurred in the first year of life, and the last six months of life. US doctors tend to treat marginal cases in both those periods more aggressively than in other countries.
So so true. Here is an example.
I was prescribed a medical device covered by insurance at 80%. Insurance told me who to buy it from. Someone came to my house, set it up, gave me a quick lesson, I signed an agreement for monthly payments. More than a year later I called to ask when would these bills quit coming. I was told the insurance co would negotiate that with them. I said no I’m paying my 20% and it’s a simple small appliance I could have bought 10 of by now. She said what I’m paying for is a care agreement, if I need adjustments, replacements, supplies, they come to my house for free, and eventually I own the machine. She wouldn’t tell me the total cost or when I own it. I bitched enough that we (with the ins co) settled on one more reduced payment to end the agreement. This thing cost the ins co way more than I would have purposely paid for it. Like thousands more. And if I hadn’t questioned it, they would still be paying. Most people probably don’t watch for ripoffs like this. That’s how they become routine and accepted.
When I was growing up in the 60’s, leukemia for example meant death in a few months. The human interest news stories even spawned jokes…
“Mommy, mommy, why is Santa Clause here in September?”
“If I’ve told you once, I’ve told you a thousand times, Sheldon, you’ve got leukemia!”
Today, instead of a quick death and a limited medical bill, these sorts of problems involve plenty of specialist visits, chemotherapy, even bone marrow transplants, etc.
The same can be said of other medical issues. There did not used to be treatments for heart attacks, other than “take it easy”. Now we have angioplasty, stents, bypass surgery, and ultimately transplants. Other sicknesses are also treated with transplants, a relatively new development since the 1960’s.
Not infrequently you will read studies that new drugs at 10 times the price are not much more effective than older public domain drugs. Guess which ones doctors tend to prescribe?
I agree this is a big element. Let me use an example. I wanted to get some nose surgery done and although it was not cosmetic, it was not absolutely necessary.
After I looked at my insurance (provided by my employer), the maximum I would have to pay for the procedure was like $300. So it did not matter what the doctor charged. They could have charged $300, $3,000 or even $30,000. It didn’t matter one bit to me, I only had to pay $300, so I got it done.
The shielding of the consumer from the costs of their decisions is huge part of the rising costs.
If you’re talking about “for the patient” it’s because in the U.S. (as all of you probably know by now) the idea of “universal healthcare” has never really been embraced (well, at least not until the last couple of years…sort of).
If, however, you’re asking why the cost of medical aid and procedures is as high as it is when compared to the cost of similar procedures done elsewhere then I have no idea although I would guess that it has something to do with medical insurance companies.
I think this element and the corrective measures suggested are overstated. The fact is that an insurance company will not actually pay whatever the doctor charges. They negotiate rates, and rates not in line with industry rates will not be accepted.
Additionally, there is not too much evidence that consumers are particularly price sensitive for the small or the really large costs for healthcare. Until J&J had supply issues, Tylenol had the majority of the acetaminophen market share despite being a good deal more expensive and being placed right next to generics. Advil still has 51% of the ibuprofen market despite only having had a patent monopoly as an OTC drug for 2 years, almost 30 years ago. There is literally no reason why people should buy branded OTC pain meds, yet they seem to most of the time at what is often a much higher cost. That’s pretty damning evidence that people vote with the wallet.
On the high end, people will agree to pay whatever in a life or death or emergency situation because the situation is inherently coercive. Would argue over a bill if you had a broken leg that needed to be set? People paying out of pocket will work for some procedures, but most of the expensive and common decisions we make are still economically irrational despite people having to personally pay.
Even if people were sensible in areas where they could be expected to, the aggregate costs would not likely change a whole lot since the price paid has very little to do with the direct costs of the procedure. The price is just whatever they can charge to make money in aggregate.
One issue that is often ignored here is that healthcare is expensive here in part for many of the same reasons we spend so much on defense. The US subsidizes the rest of the world to a large extent in terms of R&D, and medical technology. Many countries, like India, can set price controls for drugs, or force companies to license their drugs at below “cost”, or circumvent patents because these companies know they can make up for it in the US market where they can advertise, jack up prices, etc.
This would explain why healthcare costs are so much higher in countries with UHC systems where the consumer pays little or nothing (directly) for most types of care, then. :rolleyes: :proper rolleyes:
Direct malpractice lawsuits are peanuts. The first thing that came up when I Googled annual malpractice costs is this 2010 article: “55.6 billion a year, which is 2.4 percent of annual health-care spending, …”.
But: $45.6 billion of that is “defensive medicine”. So actual malpractice is around $10 billion or less than a fifth of the 2.4 percent. So under half a percent of health care spending.
Compared to the gouging go on all of the place, this isn’t anything to worry about. It’s used as a distraction from the real issues.
Mrs. FtG worked in health care related stuff. An item in an office catalog might cost $5. The exact same item in a hospital supply catalog would be $20.
To make matters worse, the last place she worked contracted to a company to be the sole supplier “to keep costs down”. Of course the new company charged more than anybody else. Plus, they didn’t carry everything and it took an incredible effort to order something from outside. Weeks would be added getting something. Never mind medical urgency.
It was widely believed that the contractor simply bribed an exec for the contract. No reasonable person would agree to such a system.
As I said, the one who originally pays out the cash (usually the employer) is not the one who pays the actual bills (usually the insurance company) and the one benefitting (the patient) does not usually pay either role.
In UHC, the one paying the money and the one paying the bills are the same. There is a real savings in keeping costs down. Additionally, there is the “not for profit” angle, that there is no real incentive to increase the amount of cash flowing through the UHC body’s hands.
Finally, in UHC there is the monopolistic aspect. In Canada a doctor that refuses to abide by the provincial fee schedule has to find patients willing to pay cash out of pocket who then get no reimbursement. Other than the 1% and some organizations like pro sports teams, there is not a big market. “Extra billing” above the fee schedule puts him outside the UHC system. The system is good enough and covers sufficient costs that no employer offers a replacement health insurance option as a benefit.
I assume a doctor could go his whole career in the USA refusing to accept anyone who bills through Medicare, and can set his own fee schedule (within reason).
An additional point - I read one doctor mentioning that part of his agreement with one medical insurance provider was that he (had to have) guaranteed them they received his lowest price. If he had poverty-stricken patient, he could not give him a cut-rate bill without giving the same rate to the insurance company - so effectively his contract forbade him from setting a 'charity rate".
The same reason a lot of things are more expensive in this country,
Assholes in suits, and his asshole friends in suits…
A lot of unnecessary overhead, simply to pay for the assholes in suits…
A lot of unnecessary paper pushers, which much like the assholes in
suits will never cup you balls and ask you to cough… They have nothing to do
with “health care”, but they add to the expense…
Much like education, too top heavy, and the people at the top make tons
of money, while the people actually performing the services, doctors, nurses
(teachers on the education front) are taking it in the shorts…
We also have this giant mess called insurance companies, which is nothing
but paper pushers and assholes in suits… That’s 20% of healthcare dollars right
there. Pretty much every first world country but the US doesn’t have that burden.
One factor is that the normal mechanic of price discovery through interacting buyer and seller is out of whack. The main buyers of health care, HMO’s and insurance companies, have an incentive for high prices, not low prices!
Sure, an insurance company wants to save money in the short term, or on an individual case. But their long-term profitability will be proportional to the total cost of health-care. If the standard cost of medical care goes up 20%, premiums will go up 20%, and so will insurer and HMO profit.
Market economics fails when the buyer and seller both want high prices. One hears of the effect constantly: “… but I didn’t care; my insurance covered it.”
Yes, businesses over a certain now legally have to offer affordable health insurance to “full-time” employees, but among other loopholes the fine for not doing so is less than cost of actually providing insurance. :smack:
One factor, not the most important, but not insignificant, is that most hospitals are run for profit. When I was growing up, nearly all the hospitals were either teaching hospitals attached to a medical school, affiliated with a religious organization (the hospital I was born at was called “Presbyterian” although it has been taken over by a medical school), or municipal. I suppose for-profit schools existed, but even they had to compete with the non-profits. Now most hospitals are privately owned and very profitable. Every week the NYTimes Sunday magazine will have one or two full-page ads (occasionally, two page spreads) explaining that if you have cancer or some other serious disease you should come here for the best treatment.
Here in Quebec, the hospitals get block grants from the province and manage it as frugally as they can. There are downsides to this, to be sure, but we are spending not much more than half per capita than Americans pay and with overall better outcomes. Obamacare will be an improvement, but all the providers, including the insurance companies, will still have their hands in the till.
In the US we spend about $95 billion a year on medical R&D. That is public and private. I assume about 30-40% of that is public, so that leaves about $60 billion in private medical R&D.
Considering that if our health care were as efficient as what they have in europe as a % of GDP, it would cost a trillion dollars less the R&D budget can’t explain the gap.
The big problem is lack of comparative effectiveness & lack of transparent pricing. The prices aren’t transparent, which prevents competition. And there is not much incentive to promote cost effective treatment. If anything our system is designed to promote the most expensive treatments. The Da Vinci robot system doesn’t really work better than human surgery, but ti is more expensive. I’ve read the robot could’ve been made more reliable but was built with planned obsolescence in mind so hospitals had to keep buying parts. Name brand drugs that cost $500 in the US cost $200 in Canada, and generally don’t work better than the $30 generics.
Single payer is nice, and it would save something like $400 billion a year. But we’d still have a far more expensive system than nations which have private insurers like the Netherlands.
The real question is what happens with our health system? A lot of people are priced out of everything except primary care, generic medications and emergency care. A lot more people are having to use alternative therapies and the internet since hospitals and specialists are too expensive, or not covered.
Since health care is something you either really need or by and large don’t need, I don’t know if/when critical mass gets reached. I think the brain dead mantra of ‘America has the best health system in the world’ has fallen apart in the last 15 years though.
I worked many years for the US’s largest health insurer.
Fraud and abuse is rampant. Millions are spent daily on false claims, faked information, and unnecessary procedures.
Also, as with most large US corporations, one driving motivation is to reduce staff. To do so, as much claims processing as possible is done by computers, rather than humans.
Those imagined hordes of paper shufflers are imaginary. Claims are input, processed and paid with little or no human intervention. Most are paperless, so there’s nothing to shuffle.
The insurers hire experts (physician consultants and lawyers) to design benefit packages and sets of conditions under which procedures should or should not be paid, and these go into programs that govern what’s paid, how much, and which are denied. The consultants then move on to another project or company. The insurer will keep a small staff around to review claim appeals and tweak the systems, but generally they are continually looking for ways to get rid of employees, as they are a drain on the bottom line.
Creative billers/health care providers have learned how to game these systems for maximum cash, without being arrested for fraud. They can tap into consultants for hire who can and do teach these health care providers how to maximize their profits by taking advantage of the mechanized nature of health insurance claims processing and payment.
Other consultant groups offer services that constantly audit hospital, physician or other provider financials to make sure every dollar owed has been collected. That’s one reason insurers had to start imposing strict time limits on filing a claim. Going back to a 5 year old claim to verify that a payment was or was not issued is a costly process for the insurer.