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View Full Version : A perfect example of what is wrong with the Healthcare Private Market



stuboyle
2-3-11, 12:23pm
Here is a perfect example of what is wrong with the Healthcare private market.

I receive a benefit statement from my health insurance company from a recent blood test my DW received. Here is a summary:

Total Charges Submitted $460.11
Allowable Charges $66.19
Insurance pays $59.58
I pay $6.61

So, if we didn't have insurance we have been charged $460.11 but because I'm insuranced with you typical mega corporation the lab only gets $66.19.

Where is the invisible hand that Adam Smith keeps talking about? :confused:

Gregg
2-3-11, 1:01pm
I think "the hand" IS at work here, stu. I'm assuming you made the choice freely to sign up for your insurance plan (no coercion). I'm also making the assumptions that the lab freely agreed to accept that plan as a way to receive payment for it's product and that the insurer had predetermined and published what it would be willing to pay for that product. There may be an accounting/tax advantage to the lab submitting a $460 bill, but my guess is that they already knew how much they would be paid from you and from your insurer and they decided to sell their product at that price.

As it is your DW would be silly, economically, to go elsewhere for the test, but if you didn't have the insurance you do then you would have been free to shop around to find it cheaper than $460.11. As I understand it Smith's invisible hand talks of markets naturally stabilizing in terms of prices and available products, but it does not state that the markets become static or that stabilization will be a quick process. If state lines dissolve regarding insurance there will be all kinds of people jumping ship in high cost states, but I bet it won't take long before prices stabilize across the country.

freein05
2-3-11, 1:04pm
We had something similar happen. My DW had changed to a high deductible plan the first of the year and had not received her new insurance card when she saw a doctor. She told the doctor she did not have her card yet but because of the high deductible she would have to pay cash anyways. He was a specialist and the 15 min he spent with her in which he only went over test results would cost $197, for 15 min.

A week later we get a bill from the medical group for an additional $150. My wife calls them, they say the reason the the additional $150 is she does not have insurance. She told them she does have insurance and now has her card. They said to bring in her card and they will do away with the additional $150.

You would think someone paying cash would get the best deal but not in our private insurance world. The insurance companies have contracts with medical providers basically setting the price that even cash payers pay.

stuboyle
2-3-11, 2:52pm
@Gregg I guess I have to agree with you that for the parties that pay the $66 then "the hand is at work". In my opinion, it is not working for those who don't have insurance very well at all. There are 2 reasons I think this occurs that come to mind:

1) Lack of transparency - It's not necessarily easy to price something as complicated at medical tests. Its not like can go to eBay or Priceline.com to find the best deal It helps to have professionals (ie insurance companies) to find a competitive price.

2) Lack of competition - You have basically just a few labs competing so you have an ologopoly

As freein05 points-out, a lot of people pay cash and are still charged more. You think they should be charged less since they don't have to hassle with filing with insurance companies.

Now, I think there is a law which prevents medical providers from charging different customers different prices for the same service. So they charge everyone the same $460.11 to everyone, file with the insurance, receive the $66, then write-off the rest. While they have compiled with the law, they are violating the spirit of the law.

IshbelRobertson
2-3-11, 5:38pm
Thankfully, I live in a country with an NHS!

winterberry
2-3-11, 6:03pm
stuboyle and freein05, the stories you shared are outrageous. The only hand I see is the hand of greed.

Gregg, how many options do you really think the uninsured have? Shop around where? And what if they can't afford health care at any price?

Ishbel, how do your fellow citizens feel about the NHS? Here in the USA we hear stories about people in countries with an NHS who have to wait forever for treatment. I think those stories are blown out of proportion. I wouldn't mind waiting if it meant that my brother and my son would have coverage. Have you had to wait for treatment or ever been told that you couldn't have the treatment you needed? Is it convenient for you? What country do you live in?

bae
2-3-11, 6:58pm
It seems to me the market isn't what people think it is.

I buy my own health insurance, out-of-pocket, and it has a really high deductible. So, for routine care, I end up paying the bills directly. Except, I don't, because the insurance company wants the bills run through them so they can track my yearly and individual deductible.

With a high deductible, and limited coverage, this puts you in the middle of the nightmare that is modern American healthcare pricing and billing. Simple, common items (a CPAP hose, for instance) don't have a "price" as you and I understand it if you go through the system. It's a fictional price, and nobody involved seems to know what anything really costs, or what you'd have to pay for it if you just had cash.

The customer is the insurance company, not you. The processes, procedures, charges, and contracts are between the insurance-company-customer and the healthcare provider. You are incidental to the process.

And get run over. You are not the market at all. Information and signalling don't travel efficiently, if at all, between you and the other entities involved.

Now, sometimes you can still find healthcare providers that view you as the actual consumer of their services. Treasure them.

Last year I had to get a sleep test done, and a CPAP titration test. In Ages Past, this was a relatively simple deal, and not terribly expensive, and you could do it all at once. Now, in my area, the insurance companies demand an individual all-night sleep study (at a out-of-pocket cost of $1200) then a titration study on a different night (at a cost of $1500). Then they *rent* the machine (using your dollars) for the first 6 months, before purchasing a $500 machine for $1400 for you. Again with your dollars. And mountains of paperwork to bill and process it all.

Now, a dentist can do the same thing for $200, and prescribe and sell the same auto-titrating machine for about $600....

freein05
2-3-11, 7:14pm
Since dentist are for the most part not involved in the medical insurance industry I get a 20% discount at my dentist for paying cash. The same for eye care. That is the way it should be for all medical providers. The health care industry and health care insurance industry are not free market and I doubt if they can be. In our whole county there is one hospital and maybe 20 to 30 doctors. Health care is now a big business I think it accounts for 16% of our GDP.

janharker
2-3-11, 7:42pm
And on a slightly different note, this week I wrote a check from my regular checking account to deposit into my HSA account. Nothing doing. It had to be done over the internet. I wonder what would happen if someone wanted to deposit cash into the account. I suspect that this is just an indiot-syncricy of PNC bank. But still.

Gregg
2-3-11, 11:12pm
Gregg, how many options do you really think the uninsured have? Shop around where? And what if they can't afford health care at any price?


Let me be clear that I'm (mostly) just playing devil's advocate. But even with that in mind, the uninsured DO have options. The more money they have, the more options they have and anyone in this country has the right to shop around for their care. Just like where to buy jeans or a car or any service you can think of. Even people who are destitute DO have options.

My SIL is an emergency room RN. I don't know the exact percentage of patients that come to her uninsured, but she assures me it is a LARGE majority. I also do not know the laws and policies of other states, but in my home state if you walk into an emergency room you WILL be treated for whatever ails you. The uninsured around here don't get preventative testing, but they sure as he!! get care. Most of them don't pay for it. Not a penny. We all know who does pay for it. Please do not try to make it sound like care is not available to someone who needs it and to a whole lot of people who really don't. If you, the proverbial all of us "you" (not picking on you winterberry), don't think that is true I strongly suggest you head down to an emergency room near you and spend a little time observing what is going on.

Zigzagman
2-3-11, 11:24pm
The more money they have, the more options they have and anyone in this country has the right to shop around for their care. Just like where to buy jeans or a car or any service you can think of. Even people who are destitute DO have options.

Capitalism at it's best!!

Peace

bae
2-3-11, 11:36pm
But even with that in mind, the uninsured DO have options. The more money they have, the more options they have and anyone in this country has the right to shop around for their care.

This is not strictly speaking true, because as I mentioned previously, the market isn't really functioning anymore to deliver services to end-user customers directly.

My resources for my recent adventures dealing with the health care industry were essentially unlimited. And yet, the products I wanted simply weren't available easily to an individual consumer, no matter what the price, unless one wanted to get really really silly and buy your own medical center.

What I see is a market failure.

I can pick up a phone and have a Gulfstream at the runway by my house in an hour, to take me just about anywhere, but try and find a specialist who can see you *right now* - it's tricky at any price, unless you know you have an issue considerably ahead of time, and can have minions line up ducks for you.

winterberry
2-4-11, 12:11am
My SIL is an emergency room RN. I don't know the exact percentage of patients that come to her uninsured, but she assures me it is a LARGE majority. I also do not know the laws and policies of other states, but in my home state if you walk into an emergency room you WILL be treated for whatever ails you. The uninsured around here don't get preventative testing, but they sure as he!! get care. Most of them don't pay for it. Not a penny. We all know who does pay for it. Please do not try to make it sound like care is not available to someone who needs it and to a whole lot of people who really don't. If you, the proverbial all of us "you" (not picking on you winterberry), don't think that is true I strongly suggest you head down to an emergency room near you and spend a little time observing what is going on.

Gregg, I am a nurse, too, and I know that anyone can get treatment. The fact that we pay for it anyway is a good reason to make it official. If poor people did get preventative care it would save all of us a lot of money.

A little over a year ago my brother, who is schizophrenic, almost died. His aorta dissected. He was flown by helicopter to the hospital where they did surgery on him that lasted over five hours. Post op he had every conceivable complication -- stroke, infection, bleed. He had to have a second surgery. He had a tracheostomy and a feeding tube. And he was not a cooperative patient. He kept pulling his tubes out. He really didn't know what was going on. He spent seven weeks in the hospital, three of them in ICU. For six weeks he had "one to one" care because he couldn't be left alone. His discharge planning was a nightmare for the social workers. No one wanted him. Finally he was accepted at a new rehab facility that needed patients. After a few weeks at rehab during which time he mostly slept because he was so heavily sedated, they sent him home. The social worker at the rehab was unable to find a doctor who was willing to be his primary care physician. After about fifty phone calls I found someone who would take him, but not right away. We have encountered one obstacle after another all along the way with trying to get his medications reordered and get him the care he needed when he was having drainage from his surgical wound. So, yes, he got care. Yes, the taxpayers paid for it -- I wish I knew how much, maybe a million? And yes, there could be a better way. Although the front end emergency care was there, the followup care wasn't. Which is why so many poor people just go to the ER for whatever ails them. They can't get the care anywhere else.

Gina
2-4-11, 12:15am
Originally Posted by Gregg
But even with that in mind, the uninsured DO have options. The more money they have, the more options they have and anyone in this country has the right to shop around for their care.
This assumes it is not an acute emergency situation requiring immediate attention. Then, even if you can afford general care, you are a sitting duck as to cost.

freein05
2-4-11, 12:49pm
Aetna the big health insurance company announced yesterday it's 2010 profits had increased by 30% and it is now paying a very good dividend. I wonder if that has something to do with the increase in health care costs. I don't think health insurance companies provide medical care.

Crystal
2-4-11, 12:56pm
Let me be clear that I'm (mostly) just playing devil's advocate. But even with that in mind, the uninsured DO have options. The more money they have, the more options they have and anyone in this country has the right to shop around for their care. Just like where to buy jeans or a car or any service you can think of. Even people who are destitute DO have options.

My SIL is an emergency room RN. I don't know the exact percentage of patients that come to her uninsured, but she assures me it is a LARGE majority. I also do not know the laws and policies of other states, but in my home state if you walk into an emergency room you WILL be treated for whatever ails you. The uninsured around here don't get preventative testing, but they sure as he!! get care. Most of them don't pay for it. Not a penny. We all know who does pay for it. Please do not try to make it sound like care is not available to someone who needs it and to a whole lot of people who really don't. If you, the proverbial all of us "you" (not picking on you winterberry), don't think that is true I strongly suggest you head down to an emergency room near you and spend a little time observing what is going on.

Depends on your area and the emergency room too. Big cities, impoverished areas -- they DO turn people away unless life threatening. And waits can be very long just to be seen. I waited with an uninsured relative for 2-1/2 days in a California emergency room a few years ago. Things have not improved since then.

Gregg
2-4-11, 1:00pm
So many good examples that all work to show the complexity of the issue. Winterberry, I think most of us would agree that there must be a better way. There is no logical argument, economic or humanitarian, against finding a way to provide preventative care &/or screening. My frustration shows through sometimes because some would make the US out as a county void of all compassion who provides no avenue for care when the truth is quite the opposite. Oh absolutely there are huge opportunities for improvement (as your brother's case clearly shows), but people are not left to die in the streets, either.

Zigzagman, even in the halls of socialist Europe, where the healthcare systems are so often held up as a shining example of what is possible, those with the means have more options. Not the least of those is travel to the United States or somewhere else in search of specialists. I wasn't trying to defend or condemn that, just trying to state a simple truth.

I think bae's point is well taken and shows it is arguable how much advantage can be gained by even well above average resources. I'm a huge believer in the free market, but would tend to agree that shows the market has failed here. Of course the real argument comes when we try to address WHY the market is failing. Is it greed or is it over-regulation? Not sure I have the energy to open that can of worms right now, but it's not hard to guess how the ducks would align if we did.

freein05
2-4-11, 1:12pm
To make the free market work in health care we need to start at the bottom. Medical schools can cost $200,000 or more there needs to be a method to not only reduce the cost but also the number of medical students graduating. We live in a small rural community. I believe my doctor had all or part of her medical school expenses paid by the government for spending at least 5 years in our community. She stayed here and we are lucky to have her. She is as good or better than any doctor I had in the big city. She knows her patents and cares about them. The other day I had an appointment and got there 1/2 hour early and decided to take a nape in my car. I feel asleep and 5 min after I was due for my appointment she came out and woke me up. Where else but in a small town would a doctor do that.

Gregg
2-4-11, 2:50pm
To make the free market work in health care we need to start at the bottom. Medical schools can cost $200,000 or more there needs to be a method to not only reduce the cost but also the number of medical students graduating.

In my way of thinking costs of care would go down if the number of med students graduating went UP. Also more reliance on PA's and RN's, especially in low population settings like you and I both live in, Free. As supply approaches demand prices tend to fall. I do agree that med school shouldn't have to be so prohibitively expensive. There isn't much doubt that the cost has kept countless of intelligent, compassionate people out of the profession. That's a shame. Everyone would love to have a doctor like yours.

bae
2-4-11, 3:03pm
Is the major cost the doctor's time? My doctor will see me, and even make house calls, for $50. If I pop into the clinic to see the nurse or PA for something quick, they often don't even bother to charge.

From my experience, the major cost sure doesn't seem to be the labor-value of the doctor, but is elsewhere.

jp1
2-7-11, 9:36pm
In my way of thinking costs of care would go down if the number of med students graduating went UP. Also more reliance on PA's and RN's, especially in low population settings like you and I both live in, Free. As supply approaches demand prices tend to fall. I do agree that med school shouldn't have to be so prohibitively expensive. There isn't much doubt that the cost has kept countless of intelligent, compassionate people out of the profession. That's a shame. Everyone would love to have a doctor like yours.

Actually I recall listening to a show on NPR (this american life I think) a couple of years ago where they showed that actually the exact opposite happened. Some years ago (the 70s or 80s?) more docs graduated. Since there were the same amount of patients they had to figure out how to bill enough to make a living. So what did they do? More procedures. It's another example, as bae mentioned, of the failure of the market. The insurance companies have decided to pay for procedures when doctors order them. The patient agrees because they trust doctors. The doctor needs to cover his costs and make a living so he orders extra tests because that's the way he can work the system to get more money.

In order to stop that from happening we need to rethink entirely our current healthcare structure. If insurance companies didn't pay, and doctors didn't bill, on an a la carte, by the procedure, structure but instead had a prix fixe billing system by the illness, for example, there'd be less incentive to do needless procedures.

bae
2-7-11, 9:56pm
The doctor needs to cover his costs and make a living so he orders extra tests because that's the way he can work the system to get more money.


Weird. When my doctor orders tests, I pay the lab, and he doesn't get hardly anything out of the deal.

Then again, doctors are notoriously poor businessmen.

SoSimple
2-7-11, 11:26pm
There is more to healthcare than preventing someone from dying. To beat on my favorite drum, (again), chronic health issues are a much harder problem to solve. Imagine if I had no health insurance and showed up at the ER because I was in too much pain to walk from my arthritis. They would do . . . what? Dose me up with some painkillers? Sternly tell me that I should really go see a doctor? Get me admitted, somehow, for some kind of "evaluation" at which I'd be told what medication I really had to be on?

Now, okay, if I had no health insurance and was truly impoverished, I'd probably qualify for medicaid, so I'd get (sort of) coverage anyway. But let's quit pretending that the healthcare provided in the ER is all the healthcare that someone requires to be healthy. ER's do a great job of saving your life or patching you up, but do diddly-squat for health maintenance or treating chronic health problems.