Why Are Medical Costs So High?

[mRx 16]

You’re a doctor. You need to bring in $3,000 apiece for your most common procedure. But Medicare and Medicaid – which pay for about half your patients – have just told you they’re only going to pay you one-third of what they’re billed. What do you do? You don’t need to be a CPA to know the answer is to start billing everyone $4,500 for your procedure. The half of your patients who pay full price thus pay $1,500 extra, covering the $1,500 shortfall for each Medicare/Medicaid-covered procedure.

Now the tricky question: If someone who’s NOT on Medicaid or Medicare visits your medical office to have this procedure done, and promptly pays his or her $4,500 in full, how much has he or she paid you, this year?

And the answer is: $6,000. Those who are not on Medicare or Medicaid are known as “taxpayers.” Where do you think Medicare/Medicaid got the $1,500 to pay for the welfare patient? The taxpayer pays $4,500 for his or her own procedure, and then an extra $1,500 in taxes to fund someone else’s.

For all those who have written in insisting that we need government to pay our medical bills because they’re so high, let’s keep this simple:

Medical bills are really high because the government promises to pay most of them, the same way government-backed “college loans” have driven up the cost of college, by allowing colleges to charge you whatever you can afford plus whatever the government will loan.

Perhaps it’s still technically a minority of Americans who are currently “covered” by Medicare and Medicaid. But since the old and the poor (the latter often skimping on health maintenance and prevention) use the most medicine and medical care, the majority of medical COSTS are covered and “paid for” by these two socialist programs.

Some say as much as two thirds.

If we switched over to “cash only” medicine tomorrow – no government or even private insurance payments allowed – what do you suppose would happen to medical costs?

Remember, the doctor who’s been accustomed to billing $4,500 for a procedure really only gets $1,500 from Medicare/Medicaid, a scheme that’s already jacked up YOUR cost by 50 percent.

Of that $1,500, another $500 (and that may be understated) goes to pay doctors’ non-medical office staff who negotiate bills and payments with the private and government “insurance” firms.

So the doc who “billed” $4,500 expected to get about half that. The rest is only “in there” to buy off this unholy private-public “insurance” bureaucracy.

If he could fire all those non-medical “billing” people in his office, and if the doctor could again assume that most patients might pay the full amount billed on a timely basis, in cash, he or she could drop many posted charges from $4,500 to $2,000 overnight.

And what if that still didn’t produce enough business? Could our M.D. somehow manage to drop that price again, to $1,500, advertising “Lowest rates in town”? In a true free market, he’d have to. Streamline his costs of “regulatory compliance,” and he could probably do even better.

Not only that, in a “cash” environment, conversations might be heard in the examining room which are virtually unknown today. Conversations starting with:

“There are three ways we can handle this problem. The middle course will cost $500 and probably not do much good, which means you’ll just have to come back for the $5,000 ‘third-choice’ procedure, anyway. But first we may want to try something real simple that’ll take a few weeks but will only cost you fifty bucks …”

Or: “There are three medicines I can give you for this. The first two were recently patented and would cost you $500 a month and the salesgal who comes by to promote them has great knockers and wears short skirts and gives me all kinds of free notepads and ballpoint pens. On the other hand, there’s an old generic drug that’ll probably do just as well or better for five bucks a month. Want to try that first?”

Doctors long ago fell out of the habit of discussing things this way. It sounds “unprofessional.” But it’s no more “unprofessional” than a roofer telling you about something he can try to repair your chimney flashing before you go to the expense of replacing your entire roof. The difference is that roofers know you’re likely to contact someone else – someone who won’t make them wait a month for “an appointment” because the number of practitioners in that profession aren’t as artificially limited by the state licensing agencies – if they get too arrogant and don’t tell you all your options.

As medicine has gotten better, some treatments have been introduced which are just plain more expensive. But a true free market always works to reduce such costs. Compare the inflation-adjusted price of a color TV today to one in 1963.

Government, on the other hand, pays on a “cost-plus” basis. Far from creating pressure to make things cheaper, this creates an incentive to jack prices up, which is why taxpayers pay 20 bucks when a candy-striper brings a Medicare patient two aspirin in the hospital.

If government had undertaken to start buying us “free” color TVs in 1963, from only “licensed” suppliers, they’d still be clunky 300-pound “console” models and they’d now cost $12,000 apiece.

No, from regulation designed to limit entry into the field (reducing price competition), to licensing, to socialist government “insurance” schemes, it’s primarily government meddling that has made a nightmare of our medical costs. So now we’re prepared to believe the politicians when they tell us the solution is not a return to the free, unregulated, pre-1916 market in medicine, but rather … more government meddling, by the same people who have been busy “fixing” the banking industry since 1913?

And to those who say, “That’s unthinkable! Snake oil and charlatans! We want regulation! It makes us feel safe!” – First, licensing and regulation are protection rackets. They keep supply down and prices up. If regulation guarantees our safety, why can’t we sue the regulators when the doctors they “regulate” screw up?

But second, answer me this, just once: America was supposed to be made up of 13 – now 50 – sovereign states, little greenhouses free to try all different ways of doing things. I’d gladly move to the one state – one out of 50 – where medical liberty is restored, providing it also imposed no state income tax, no helmet or seatbelt or anti-smoking or “endangered species” or “global warming” or rural “speed limit” laws, that it “allowed” incandescent lightbulbs and full-sized rifle magazines and full-sized toilet tanks and encouraged the private ownership of machine guns.

(I just described all of America in 1912, a place where our grandparents seemed pretty happy, only without the racism that CREATED the Wars on Guns and Drugs.)

Which state is that? If there are a couple million of us who want to try it another way, why can’t we have just one state to call our own? We’re even willing to settle in the most inhospitable, God-forsaken desert you’ve got.

If you liked all the taxes and regulations back in California or Illinois or New York or wherever you came from, why did you come here, determined to try and make this state just like the one you fled?

Do you know the meaning of the word “hubris”? Has it never occurred to you the miners and ranchers who were already living in Nevada might have set things up just right for conditions here, and that you might want to check with them before you blithely insist on changing things in America’s last endangered refuge of freedom to be just like that decaying, jobless hellhole you ran away from?

October 28, 2008

Vin Suprynowicz is assistant editorial page editor of the daily Las Vegas Review-Journal and author of The Black Arrow.

Copyright © 2008 Vin Suprynowicz

[Scott & Lai 12]

[Mr. Big Dog 10,747]

Well, that doesn't quite explain how the procedure for which the good doc "needs" to pull in three grand is done for half that in any other developed country around the world. That, I think, is where some of the problem lies. The article also doesn't quite account for the fact that the procedure which needs to bring in three grand is billed at 9,000 to the uninsured while insurance companies get a discount on the same procedure and are only on the hook for 2k or less.

Case in point, a friend of mine who broke her ankle and had to have surgery done to fix the mess. Hospital billed a whopping 17k for the deal. The private insurance contract allowed for a little over 4k which is what the hospital got paid. Case in point, my wife's pregnancy beginning to end was billed at over 35k. After negotiated discounts, the private insurance paid just over 7k.

No medicare and medicaid here. No taxpayer.

The article is BS!

[SMOKE 1,426]

Why Are Medical Costs So High?

simple answer- the gov't doesn't regulate the pricing like they do in other countries, so they can charge what ever they want.

more in depth answer- the medical field has both dems & reps in their pocket, so the the simple answer doesn't happen.

bottom line- pay or suffer/die.

[DeadPoolX 9]

It's the malpractice lawsuits and insurance companies that hurt us all. Doctors need to pay anywhere from $80,000 to $200,000 per year simply to cover their butts. In addition, insurance companies pay the doctor whatever they feel is adequate. Knowing this, it's obvious why physicians charge the prices they do and often order unnecessary tests.

[britty 1]

It's the malpractice lawsuits and insurance companies that hurt us all. Doctors need to pay anywhere from $80,000 to $200,000 per year simply to cover their butts. In addition, insurance companies pay the doctor whatever they feel is adequate. Knowing this, it's obvious why physicians charge the prices they do and often order unnecessary tests.

I couldnt have said it better myself.

[keltic 1]

It's the malpractice lawsuits and insurance companies that hurt us all. Doctors need to pay anywhere from $80,000 to $200,000 per year simply to cover their butts. In addition, insurance companies pay the doctor whatever they feel is adequate. Knowing this, it's obvious why physicians charge the prices they do and often order unnecessary tests.

Thank you. People always underestimate how detrimental all the 'sue-happy' ####### is. When someone sues the hospital and gets a settlement or an ordered payment, whether rightly or not, that cost has to be made up somewhere. That is on top of the malpractice insurance and lawyers' fees. But hey, a patient can refuse to follow directives that will prevent certain problems, but it is the hospital/doctor/nurses' fault when there are adverse consequences. Especially with OB/GYN. Mom's can refuse to quit smoking/doing drugs/drinking/whatever else they don't want to have to do without. When the baby is born and has problems that are related to said behaviors, it is somehow the fault of the hospital and its staff. And the parents can sue for 18 - 21 years or so, depending on the state. Or, mom's waters break and she waits awhile to come to the hospital. Infant is born with problems that are related to exposure to GBS (Group BetaStrep) or E. Coli (easily in the perineal area). Parents refuse to allow antibiotics, because you know, the medical staff are just trying to push medications and unnecessary tests and stuff on their child. Baby goes home and stops breathing. Call an ambulance (how much does that ride cost?) and rush to the hospital. Successfully revive the baby and start antibiotics. However, baby has sustained brain damage from the lack of oxygen while not breathing before the ambulance gets there. Parents go to court when the child should be starting kindergarden, but has obvious developmental delays. They present their story of their poor victim of a child, who the doctors should have MADE them stay and give the meds. It tugs at the heartstrings of the jury. Big bucks. Hmmm. OK. It happens. Ever wonder why ppl have to sign so many papers at the hospital?

Because of how highly litigious things have become, there is often a hard time attracting doctors to certain fields. And as far as licensure, I wouldn't want someone to touch me that hasn't been educated as they should and have had some sort of checking to make sure they aren't a quack.

Also...

People also underestimate how much it costs to buy and maintain all the medical equipment. One isolette in the NICU costs around the same as a BMW. ONE. Then there are IV pumps, syringe pumps, thermometers, glucometers, blood gas machines, refrigerators for meds, separate refrigerators for breastmilk, pyxis machines for storing medications, computers for ordering and charting, fax machines, printers, phones, phototherapy lights, warmer beds, cribs, cardiorespiratory monitors, EKG machines, EEG machines, Ultrasound machines, portable XRAY machines, ventilators, oxygen blenders, wall-suction machines........... All that and much more are required to be available and are used constantly. That all has to be paid for. That all has to be maintained in good working order. Then there are all the supplies that are 'single-use' only, for prevention of infection. Oh, then don't even think about how much stuff is needed for isolation if the baby has something that has the potential to spread. I suppose we could get rid of it all and go back to the way things were in 1912, but tell that to the mothers and fathers of all those infants who would die without this equipment. I am not talking about just micropreemies (23 - 25 weeks). Some 35 and 36 week infants wouldn't survive. Heck, some fullterm infants wouldn't survive. That is one little corner of the hospital.

And, those 2 aspirin that cost you $20? Wanna know why it costs that? Because it has to be counted twice (or more) in the pharmacy, and then checked again by 2 MORE people (RNs) before it can be brought to you. Oh, and what about the aspirin that expires before it is used? That has to be thrown away, and the cost... how is that made up? Now, multiply that by thousands of meds. That is just the pharmacy.

Ok, I am stepping off my soapbox.

Edited November 28, 2008 by keltic

[justashooter 430]

Wow. It's insane. I just hope Obama can do something about these kinds of things when he's president.

[mRx 16]

Well, that doesn't quite explain how the procedure for which the good doc "needs" to pull in three grand is done for half that in any other developed country around the world. That, I think, is where some of the problem lies. The article also doesn't quite account for the fact that the procedure which needs to bring in three grand is billed at 9,000 to the uninsured while insurance companies get a discount on the same procedure and are only on the hook for 2k or less.

Case in point, a friend of mine who broke her ankle and had to have surgery done to fix the mess. Hospital billed a whopping 17k for the deal. The private insurance contract allowed for a little over 4k which is what the hospital got paid. Case in point, my wife's pregnancy beginning to end was billed at over 35k. After negotiated discounts, the private insurance paid just over 7k.

No medicare and medicaid here. No taxpayer.

The article is BS!

Medicare/Medicare and liability insurance are contributors to the whopping cost, but they are not the original sin. The partnership of State and Medicine is.

The American Medical Association has restricted the supply of medical professionals through control of medical schools and their admittance policies. State licensure also furthers the restriction. This gives the few complete control over the medical market. It's a monopoly, plain and simple. The basic market mechanism of supply/demand tells you that this will cause prices to skyrocket. Everything else is just icing on the cake, but not the cake itself.

It really is a brilliant scam, because somehow we are convinced that we can solve this problem with more of the very thing that caused the problem to begin with.

The article is not BS. You just have to see through to the real issue.

[one...two...tree 2,762]

HMO's operate the same way. I received a statement from my HMO back when I had knee surgery - the total bill was $28,000, but the HMO only paid about $3,000, which was acknowledged as payment in full. So it's not just Medicaid and Medicare. Also, my parents are retired and on Medicare, but they also have supplemental insurance for what Medicare doesn't cover....which costs them something upwards of $1,000 a month in premiums. I'm not sure how Medicaid and Medicare determine what is a fair price for medical services and supplies, but the HMO's negotiate with the doctors and hospitals as to what is a fair price.

[mRx 16]

Why Are Medical Costs So High?

simple answer- the gov't doesn't regulate the pricing like they do in other countries, so they can charge what ever they want.

more in depth answer- the medical field has both dems & reps in their pocket, so the the simple answer doesn't happen.

bottom line- pay or suffer/die.

While the government doesn't directly regulate the prices, through the passing of legislature, it allows the AMA to.

If the government controlled the pricing directly, it would really be no different cost-wise, as I'm sure congressmen will keep the AMA lobbyists happy, as long as they keep the campaign dollars flowing .

[mRx 16]

HMO's operate the same way. I received a statement from my HMO back when I had knee surgery - the total bill was $28,000, but the HMO only paid about $3,000, which was acknowledged as payment in full. So it's not just Medicaid and Medicare. Also, my parents are retired and on Medicare, but they also have supplemental insurance for what Medicare doesn't cover....which costs them something upwards of $1,000 a month in premiums. I'm not sure how Medicaid and Medicare determine what is a fair price for medical services and supplies, but the HMO's negotiate with the doctors and hospitals as to what is a fair price.

HMO's are a governmental attempt to counter the high costs that they created. As to HMO's negotiating with doctors on the price, the mere presence of the government intervention actually raises prices. The middleman's gotta get paid too. In a non controlled medical world, the patient would negotiate directly with the doctor, just as with any other business. And medical practice is a business. They offer a service to a service for a price. We don't need a government agency to negotiate the price of a loaf of bread at the supermarket. Hospitals should be no different.

Dismantling the AMA, FDA, and releasing the stranglehold of coercive government control, allowing the free-market to reassert itself, is the only way we are going to lower costs.

BTW Steven, that's a tight painting in your sig. Looks like a heavenly ####### of sorts.

[mRx 16]

Wow. It's insane. I just hope Obama can do something about these kinds of things when he's president.

What are you Kaydee's boyfriend or something?

[Mr. Big Dog 10,747]

Well, that doesn't quite explain how the procedure for which the good doc "needs" to pull in three grand is done for half that in any other developed country around the world. That, I think, is where some of the problem lies. The article also doesn't quite account for the fact that the procedure which needs to bring in three grand is billed at 9,000 to the uninsured while insurance companies get a discount on the same procedure and are only on the hook for 2k or less.

Case in point, a friend of mine who broke her ankle and had to have surgery done to fix the mess. Hospital billed a whopping 17k for the deal. The private insurance contract allowed for a little over 4k which is what the hospital got paid. Case in point, my wife's pregnancy beginning to end was billed at over 35k. After negotiated discounts, the private insurance paid just over 7k.

No medicare and medicaid here. No taxpayer.

The article is BS!

Medicare/Medicare and liability insurance are contributors to the whopping cost, but they are not the original sin. The partnership of State and Medicine is.

The American Medical Association has restricted the supply of medical professionals through control of medical schools and their admittance policies. State licensure also furthers the restriction. This gives the few complete control over the medical market. It's a monopoly, plain and simple. The basic market mechanism of supply/demand tells you that this will cause prices to skyrocket. Everything else is just icing on the cake, but not the cake itself.

It really is a brilliant scam, because somehow we are convinced that we can solve this problem with more of the very thing that caused the problem to begin with.

The article is not BS. You just have to see through to the real issue.

I see you're still avoiding the question how any other developed country manages to keep medical costs lower while sporting more government internvention than we do here.

[Empress of Groovy 373]

I can understand the temptation to blame the government for everything, but how would this proposed cash-based system work for the millions of people who have chronic conditions or serious diseases that require a lot of care? Should a cancer patient of average means have to haggle with a doctor about getting affordable chemo and surgery?

The problem w/ Medicare and Medicaid is that they function just like private insurance. The reason they exist is that the structure of health care-as-commodity in the U.S. has priced large numbers of vulnerable people out of the system. Continuing to treat medicine--all types of medicine--as a commodity will only leave increasing numbers of people out. I agree that Medicare and Medicaid contribute to the problem because they are insurance plans, with copays, provider lists, eligibility requirements, and everything else. They reflect the uniquely American system rather than determine it. Private medical insurance existed long before Medicare and Medicaid were introduced in the 60s.

I'm also suspicious of any writer who glamorizes the good ole days. "...America in 1912, a place where our grandparents seemed pretty happy." Wot?