Why our Healthcare is so Expensive

[Elrostar]

I haven't read the article yet, but I will point out an interesting story that was on Planet Money last week about the Health Care situation. It pointed out that yes, the problem with spending money in health care is that at any given point in time, you're never spending your own money.

If you have car insurance, and your car gets damaged, you have a financial interest in getting the most out of your insurance by having the most expensive repairs done to it that are covered by your insurance. That's just how it works, economically. Why have a cheap repair done when you could have an expensive one done? And the mechanic who's done the repair, why should he do a cheap repair when he could do an expensive one?

But there is one player in the game who should have an interest in lowering the costs, and reducing the amount of money spent on health care, while continuing to provide good quality service. And that's the insurance companies themselves. They have the perfect economic incentive to do this. If they can provide the same level of care to people, for less money, they can offer better plans for lower premiums, and make more money. So why aren't they trying to overhaul the system?

I guess it's not the most efficient and easy way for them to make money? I'm not sure. But it's an interesting question.

[MinDonner]

People in the UK getting a bit put out that the NHS is slandered in the US health care debate

:)

I would also like to share this one - US wingnut uses Stephen Hawking as an example of great US healthcare...

[Kalbear]

But there is one player in the game who should have an interest in lowering the costs, and reducing the amount of money spent on health care, while continuing to provide good quality service. And that's the insurance companies themselves. They have the perfect economic incentive to do this. If they can provide the same level of care to people, for less money, they can offer better plans for lower premiums, and make more money. So why aren't they trying to overhaul the system?

I guess it's not the most efficient and easy way for them to make money? I'm not sure. But it's an interesting question.

Because that assumes a lot of things. That assumes that they care about the best care, or that this even matters in the market economy (it doesn't). What they care about the most (as many insurance companies do) is minimizing their own risk. The best way, by far, for an insurance company to make more money is to refuse to insure or refuse to pay out on expensive cases. Do that, and you'll be making hand over fist.

Cutting costs, spending less - none of these things make them money directly. They make them more desirable, but they make every insurance company equally more desirable. That doesn't help anyone; it's like saying that insurance companies for cars should subsidize repair centers around the world to make them more electronic. Would it cut the cost of repairs? Yes. Would it make a mandatory insurance any cheaper? Doubtful.

This also assumes that the consumer has actual buying power. More often than not, this isn't the case. More often than not, insurance is provided by the employer, not the employee, and there are no actual choices involved. The person who is buying the healthcare for the company is doing so because it's a requirement in most modern businesses to have a health plan. That doesn't mean they want a good one; they want an adequate one that will past muster early on. That's about it. And more importantly, they want the cheapest one they can get. That doesn't scream 'good' healthcare to me; that screams a bullet point.

[Mlle. Zabzie]

I agree with McBigski that subsidized insurance doesn't help. I don't necessarily think that vouchers are the answer, but I do believe that because most consumers of health care are not paying full price for their health insurance the incentive structure for both the consumer and the insurance company is not efficient.

[Nymeria Sand]

Yes JL, the root of the problem is that we think someone else is paying for it. Which is why making it government cheese still won't actually result in cost savings without additional benefit restrictions.

Explain. I've seen this argument before, but no one has actually crunched the numbers and come up with a reasonable explanation for why they think that.

We ought to decouple health insurance from employee benefits.

I think this is the only thing you've said that I actually agree with. Health care costs kill small businesses. Take away that burden on them and they'll do much better. How's that for a free market solution? But you can't shift that to the consumer. They have no way to pay for it. Which leads me to...

Give all citizens a health care voucher and let them choose their own plan or doctor.

So, you're prepared to give each person at least $12,000 a year in vouchers for health care? I doubt it. The amount McCain proposed--$5000--is nowhere near enough to cover the cost of insurance. Not even close. And that's for a healthy family. If someone has a medical condition, that cost is going to skyrocket just for the premium, not counting deductibles and co-pays. My boyfriend pays $1500 a month with a ridiculously high deductible (like $20,000 out of pocket) simply because he had bypass surgery a couple of years ago. To get a lower deductible, he was looking at over $2000 a month. And that's after several companies turned him down for a pre-existing condition. Who can afford that? And how is that cost effective?

Here's what will happen. If you give insurance companies an incentive not to give discounts for groups, they will jack up their prices big time and claim supply and demand. The insurance companies won't be able to help themselves--they'll drool over the idea of getting a potential client pool of 303 million people and they'll find any way they can to make money. You know that's what'll happen. And that voucher won't be worth a nickel. And so the people get screwed again. That's what happened when HMO's were invented, and it will happen again, only this time it'll be the nail in the coffin for a lot of people.

[Rhom]

I didn't bother reading the article, however as a chiropractor of five years with three years in my own practice I feel the summary is almost self-evident from my perspective.

I'll be honest... I charge what the insurance market allows. My cash rates are what's considered "reasonable and customary" for my area. My fee schedule is set by the individual insurance company; in some ways it sucks, in other ways its beneficial to me. One bad thing is that I have watched reimbursement for my primary procedure (an adjustment to 3-4 regions of the spine) drop by $12 under Anthem from $37 in 2004 to $25.36 today. The good side is that you can charge otherwise exorbitant fees for procedures that might otherwise not be paid for. A good example of this is Kinesio Taping. I first heard about it at a seminar in January. I was intrigued, so I ordered a textbook ($100) and a roll of tape (6ft for $12) and taught myself. For the material costs of a 6in strip of tape and my time and self-taught expertise, I can charge up to $60 depending on the region of the body treated. Whether I charge the $25 allowed by the insurance for just the adjustment... or if I slap on some tape and other adjunctive therapies to bring the charge up closer to $70, the patient pays the same co-pay.

In my own experience, I have found that patients who pay for their own care take much greater "ownership" of their condition. Anytime that I have offered a free visit as a promotion, the percentage of kept appointments is always lesser. Patients on Passport (the KY version of Medicaid similar to the AZ Access mentioned above) pay nothing out of pocket and have horrible compliance stats at my office. The patients who are much more likely to keep their appointments are the ones with high deductibles and co-pays or that pay straight cash.

Already mentioned are the people who pay cash for cosmetic procedures. I have often pointed out in public talks that people find money to pay for what is important to them. I generally follow this up by mentioning that if the health is on the inside of the body, we are less likely to pay for it than if it is on the outside. People pay thousands of dollars for braces to straighten their teeth, but the effort to care for the internal workings of their body continues to be beyond them.

My stance is that our country has become "entitled" to health care. We see it as something that we have a "right" to and not a "responsibility" for. In my opinion, health insurance should be there for emergencies or catastrophes and routine stuff should be up to us. Slap a high deductible on plans, say $5000. Not enough to medically bankrupt you in an emergency, but enough to deter going to the doctor's office for a cold. Patients would "ration" their own care and would seek out doctors with a track record of getting patients well and not just running unnescessary tests.

Lastly, the pharmaceutical industry has taken prescription drug marketing to the masses. Explain to me why Nexium is advertised during football games? Can Joe Schmo get off the couch and go to the corner pharmacy and buy it? No, that's just as illegal as if he were to try and buy cocaine. So why are we advertising something to a population that cannot purchase it legally? Answer: It creates a demand. Joe Schmo goes to his doctor and demands the advertised medication and many doctors will prescribe it whether it is indicated or not; if one doctor doesn't, another will. And then they'll go get the insurance to pay for the majority of the drug.

This same thing goes on with diagnositc testing; I've lost count of the number of patients who asked me about getting an MRI and I told that their symptoms didn't correlate with anything an MRI might show us. A few missed appointments and a couple weeks later, they show back up and tell me that their family doctor ordered an MRI for them. "Oh yeah? What'd it say?" "Nothing." "Oh." Well that's all fine and good... another couple grand down the drain for no reason.

Not related to this topic per se... but I could also save insurance companies millions of dollars if they would just ask me how. Stop sending out checks in the mail for $0.02!!!!! Yes, I have actually deposited checks for 2 cents on multiple occasions. Envelopes, postage, additional paper to explain the payment... for two pennies that could have just as easily been included on the other check that you sent me in the mail that same day.

[BloodRider]

Price obscurement is a common tactic, and is, in my mind, an anathema to capitalism. There is a distinct difference between competing on quality, service level, learning curve, etc. - any of Porter's Barriers to Entry. Typically these barriers That difference is when you interfere with the flow of information in a market, you destroy competition. Look at the markets where this type of activity has happened. Creditt Cards (and banking in general), pay-day loans, health-care, all of 'em attempt to keep the real price obscured so that you can not make an informed decision.

I am of the opinion that anywhere these tactics go on is a place where the gov't is justified in stepping in and enforcing changes. To me companies that collude to make it very hard for the consumer to price their product is as dangerous to capitalism as a monopoly. Just like the anti-trust laws broke monopolies up, so to should there be pro-information laws to better the free flow of information.

[Mlle. Zabzie]

I am of the opinion that anywhere these tactics go on is a place where the gov't is justified in stepping in and enforcing changes. To me companies that collude to make it very hard for the consumer to price their product is as dangerous to capitalism as a monopoly. Just like the anti-trust laws broke monopolies up, so to should there be pro-information laws to better the free flow of information.

Look, I'm in favor of more information as much as the next person. However, using securities regulation as a case study, I don't know that more information actually is helpful. There is such a thing as information saturation, and there is an opportunity cost for gathering all of the information. There may, in fact, be enough information available in the market place though it may not be readily apparent from the face of the document (there was a recent Slate article regarding the cost of delivering a child on a non-employer-sponsored plan - you'd be disgusted, but perhaps unsurprised, as to what kind of material information was buried in the fine print). What we need is readily ascertainable information.

I spend a good chunk of my life writing disclosure for securities law purposes (that not many people actually read, I'd guess). The SEC does its best to make sure that the information included in prospectuses, etc., is written in plain English and that the terms of the security or transaction are apparent on the face of the document. They (and we) do not always succeed. However, something along those lines in the health industry would be more helpful (and might be more used than securities regulation disclosures because they affect more people more directly). However, are we really willing to pay for the establishment of a national regulatory body that reviews all disclosures on health plans that go to the market? Is that really the best use of our health dollars?

Spearately, I think others in this thread are correct - individual consumers do not have the collective bargaining power to get "market" deals from insurance companies. Funny - people are "irrational" about their health.

[Jaime L]

My stance is that our country has become "entitled" to health care. We see it as something that we have a "right" to and not a "responsibility" for. In my opinion, health insurance should be there for emergencies or catastrophes and routine stuff should be up to us. Slap a high deductible on plans, say $5000. Not enough to medically bankrupt you in an emergency, but enough to deter going to the doctor's office for a cold. Patients would "ration" their own care and would seek out doctors with a track record of getting patients well and not just running unnescessary tests.

This is exactly what the article is recommending. You really should read it.

Think most of the people in this thread get it, and are hitting the nail right on its head with comments about the "entitlement" mentality that's poisoning this debate (the ironic factor is this is one area where the Republicans are unctuously encouraging the entitlement mindset when true conservatives would be arguing for a healthy functioning market [read: not our current Healtchare economy]) I'll comment on some of the other responses in here, later, when I have more time. But I really think, among the rationale among us, there are two kinds of people: 1) Those who agree with the lionshare of the problems the article identifies (though may disagree with his ultimate conclusion) 2) those who object to what they think the article is about without actually reading it.

This article is one of the few that gets the economics right, without resorting to taking wild stabs in the dark (really just hopeful guesses) at what's causing the cost of Healthcare to double since 2000 (It's technology! It's greedy insurance companies! It's just the price we pay for better care!") The system is a series of inefficiencies built into every aspect of it: from hospitals, to doctors, to insurance companies, to the government, to the end consumers (us). And what's particularly remarkable is how it manages to function in a way that neither Liberals nor Conservatives would choose. It neither provides care for everyone...nor does it function like a free market. It hurts both consumers...and businesses. Is there any industry in this country that's more of a Kafkaeseque hell incarnate than healthcare?! It's a little embarrassing that our leaders are just getting around to talking about it now...and even more embarrassing what they're actually choosing to focus on.

[Annelise]

Slap a high deductible on plans, say $5000.

Holy crap that would suck.

[Annelise]

The system is a series of inefficiencies built into every aspect of it: from hospitals, to doctors, to insurance companies, to the government, to the end consumers (us).

I'll say. I just got popped for $150 test that I didn't want, that my doctor ordered saying it was covered under my insurance. No, no it's not insurance informs me 3 months later. Fucking my own fault, I should have said no. Live and learn.

[Lady Greywolf]

It is an understatement to say this is a very complicated and emotional issue. I do not mean to offend people, but certain norms have developed in the US which have been major contributors to our current "health care/insurance crisis".

Point: The following quote from the article identifies opportunities to decrease our health care expenses.

"Nutrition, exercise, education, emotional security, our natural environment, and public safety may now be more important than care in producing further advances in longevity and quality of life. (In 2005, almost half of all deaths in the U.S. resulted from heart disease, diabetes, lung cancer, homicide, suicide, and accidents—all of which are arguably influenced as much by lifestyle choices and living environment as by health care.)"

Americans incur absurdly high health care costs due to their current lifestyles. The numbers vary a bit, but most sources agree that 70% of Americans are overweight, 1 in four children under 4 years old are obese and by year end 1 in 5 children under 18 will be obese. Obesity is one result of lifestyle choices for all but <1% of the population who do have a disorder leading to obesity. Through education we can change these numbers. The first step is to hold everyone personally responsible for their own body.

Point: Insurance is for the catastrophic events in our lives.

"The reason for financing at least some of our health care with an insurance system is obvious. We all worry that a serious illness or an accident might one day require urgent, extensive care, imposing an extreme financial burden on us. In this sense, health-care insurance is just like all other forms of insurance—life, property, liability—where the many who face a risk share the cost incurred by the few who actually suffer a loss."

When I try to use the insurance my husband and I have it is more trouble than it is worth! I spend hours on the phone talking to people who really could not care less and get paid to say no. Whether it is a private or public insurance plan the experience of trying to get a referral, inquire about a claim, argue about a claim, try to get a claim paid (after trying to decipher the codes) will be the same.

Point: Under the current system, many doctors and other health care professionals do not get paid for a being your health coach.

"Most physicians, meanwhile, benefit financially from ordering diagnostic tests, doing procedures, and scheduling follow-up appointments."

That is the fault of the system not the physician. The doctors get paid a set fee to the visit no matter how long they spend with the patient. The practice they are part generally requires them to see 30-40 patients per day. I do know physicians who used to make house-calls to patients who could not get to them. The insurance companies made them stop. They did not get paid for those visits nor were they covered by their malpractice insurance. (btw- 15 years ago malpractice insurance for a GP in Maine ran about $55,000 and now it averages closer to $300,000).

Point: "At $2.4 trillion and growing, our nation’s health-care bill is too big to be paid by anyone other than all of us. "

The best way to decrease this cost to our society is to increase the wellness of each individual through educating adults and children on nutrition, stress management and exercise and then encourage implementation of a healthier lifestyle. Through this approach we will reduce the incidence of expensive lifestyle-induced diseases. This could lead to fewer patients and increased competition among hospitals and practices for your business as a patient.

Overall, take responsibility for your own body and encourage others to do the same. Again, this probably won't be a popular set of opinions, but they are mine and I do live in the USA where free speech is ensured.

[Annelise]

The first step is to hold everyone personally responsible for their own body.

Howso? How would you want to see that reflected in healthcare reform?

[Rhom]

Holy crap that would suck.

Would it? I don't spend near $5000 for visits to a doctor in a year. In fact, I have a private plan through Anthem that costs a little over $100/month and I don't even approach $1200 a year in doctor's visits.

If I was a gambling man, I'd just drop the insurance entirely. The only reason I carry it for just the type of scenario I outlined.

I'll say. I just got popped for $150 test that I didn't want, that my doctor ordered saying it was covered under my insurance. No, no it's not insurance informs me 3 months later. Fucking my own fault, I should have said no. Live and learn.

I wouldn't be so sure. When I was still married, my then-wife received a bill from her doctor's office saying the bill remaining after the insurance had paid was $300. Since I spend a good amount of my day dealing with insurance nonsense, I called the insurance company. The ignorant slut on the other end of the phone who is probably making double what I pay my staff was clueless about even the most basic aspects of CPT coding and diagnosis. (Those are the little numbers that signify what your problem is and what procedure was done.) Eventually, I was able to escalate my claim up one level and the supervisor acknowledged that I was correct and it was a covered procedure. It actually made me mad at both the insurance company and the doctor's office because I never let my staff pass a bill along to a patient when I know its a covered procedure in my office.

[The Space Pope]

My stance is that our country has become "entitled" to health care. We see it as something that we have a "right" to and not a "responsibility" for. In my opinion, health insurance should be there for emergencies or catastrophes and routine stuff should be up to us. Slap a high deductible on plans, say $5000. Not enough to medically bankrupt you in an emergency, but enough to deter going to the doctor's office for a cold. Patients would "ration" their own care and would seek out doctors with a track record of getting patients well and not just running unnescessary tests.

This is terrible idea. Especially the part I highlighted here. YOU WANT PEOPLE TO SEEK PREVENTATIVE CARE!

It's the same issue with vouchers. They discourage people from seeking care due to cost and that's exactly what you DON'T want to happen.

The problem with the article is that while he does a decent job of identifying problems with Health Insurance and pointing out why it doesn't operate like the fairy tale free markets of Econ 101, his solution is to try and force health care into more of a free market mold, while ignoring how this fucks up the whole point of health care in the first place.

[Lady Greywolf]

Howso? How would you want to see that reflected in healthcare reform?

From a reform perspective, this could include monetary incentives for results producing activities. For example: For women; achieving a body fat <25% gets a year end tax rebate (or credit or other monetary reward). Maintaining that for 2+ years gets you a credit every year. It is easily measured and reportable. People with >31% have an extra tax. Delay the implementation just long enough for people to adjust and for those who choose to make changes to achieve their results.

From a social perspective, is it really ok for a person to pull from a pool of resources (insurance) meant for everyone to have in place should they need it (emergencies or just plain bad luck), just because they choose to live a lifestyle that promotes illness? I don't think so.

[Annelise]

Would it? I don't spend near $5000 for visits to a doctor in a year. In fact, I have a private plan through Anthem that costs a little over $100/month and I don't even approach $1200 a year in doctor's visits.

If I was a gambling man, I'd just drop the insurance entirely. The only reason I carry it for just the type of scenario I outlined.

I understand. I'm not sure if it's just you, but there's 3 of us in our family. Kid doesn't get sick as much now that he's older but when he was going through that ear infection stage, yikes. Or when he had those frequent checkups when he was a baby. We also already pay $6000 out of pocket for his speech therapy. We all have shit for eyesight, so everyone has to go to the eye doctor and get new contacts/glasses and updated prescriptions each year. Make sure we don't have retinal tears and so on. 3 physicals a year plus a gynie trip for yours truly. (I suppose I could combine that with my physical and maybe save the cost of an office visit, although still have to pay for the test). The once a year ER trip that results from some moment of idiocy on one of our parts.

[The Space Pope]

From a reform perspective, this could include monetary incentives for results producing activities. For example: For women; achieving a body fat <25% gets a year end tax rebate (or credit or other monetary reward). Maintaining that for 2+ years gets you a credit every year. It is easily measured and reportable. People with >31% have an extra tax. Delay the implementation just long enough for people to adjust and for those who choose to make changes to achieve their results.

From a social perspective, is it really ok for a person to pull from a pool of resources (insurance) meant for everyone to have in place should they need it (emergencies or just plain bad luck), just because they choose to live a lifestyle that promotes illness? I don't think so.

Sounds like another fabulous way to make people avoid the doctor.

[Caliban]

From a reform perspective, this could include monetary incentives for results producing activities. For example: For women; achieving a body fat <25% gets a year end tax rebate (or credit or other monetary reward). Maintaining that for 2+ years gets you a credit every year. It is easily measured and reportable. People with >31% have an extra tax. Delay the implementation just long enough for people to adjust and for those who choose to make changes to achieve their results.

This sounds like a bad idea.

Ive had my job for 2 years almost exactly, and I looked into my W2's ive paid out $3,157.5 on insurance for the two years and I made one claim on a 5 minute doctors visit, chest X-Ray (negative, took them about 90 seconds with the machine and 90 seconds of actually looking at it) and the bill was $750 or so and I paid $350 after the claim.

That is absurd.

[Annelise]

I wouldn't be so sure. Eventually, I was able to escalate my claim up one level and the supervisor acknowledged that I was correct and it was a covered procedure. It actually made me mad at both the insurance company and the doctor's office because I never let my staff pass a bill along to a patient when I know its a covered procedure in my office.

You're right, I shouldn't acquiesce so easily.

Lady Greywolf,

From a reform perspective, this could include monetary incentives for results producing activities. For example: For women; achieving a body fat <25% gets a year end tax rebate (or credit or other monetary reward). Maintaining that for 2+ years gets you a credit every year. It is easily measured and reportable. People with >31% have an extra tax.

I just don't see how that would fly from a government intrusion perspective. If you tie it to taxes in that manner, you would have to mandate that people go in for a physical. Big Brother is weighing you and so on.