Health Care in the
United States has a language that is very different from the rest of us. David
Goldhill has referred to this as “island speak” in his wonderful book, Catastrophic
Care. Goldhill discusses the use of
the word “cost” in place of the word “price” and maintains this choice of
language is purposeful: “The distinction isn’t just a linguistic one— with
“cost” serving as a polite synonym for “price.” Calling costs “prices” would
recognize that they are in fact the industry’s active and calculated responses
to incentives created by us.
So what? Goldhill
observes in the same year that gas prices went up 1200 dollars for the average
American household, we had a national outcry for action to find out what was
wrong. Congress had hearings with the major oil companies summoned before House
Committees. Our government wanted answers! However, health care costs increased
$1110.00 for the average American household in the same year and there was not
a peep of protest; it all seems so inevitable; these “costs.” Prices on the
other hand have an evil hand at work. More recently, when oil prices plummeted
and gas prices followed, there were no calls to find out what evil was at work
behind this scheme. Apparently, the market is only a problem when prices are
going up.
The use and misuse of
the word costs provides good cover. Many providers and others have no
idea of what their costs are in the US health care system. Historically, since
the US government took over 40% of the health care system in 1965, this has not
been necessary. The large hospital systems have learned to overcharge on their
“charge masters,” then the patient surrogates, insurance companies and CMS, tell
the providers what they will pay; typically this is a third of the bill being
charged. Instead of a market using price to regulate what is produced in terms
of health services, we have centralized planners establishing prices. Recently,
CMS decided not to reimburse for “readmissions.” A good decision. Now the unintended
consequences: the providers, being more of them and certainly more creative
than the planners at CMS, have now framed a “readmission” to be an “observation”
so they can get paid. CMS is now trying to figure out what to reimburse for an
“observation.”
This charade reminds me
of the observation from Dr. Thomas Sowell in his book Basic Economics on the role of central planners in the
former Soviet Union tasked with setting prices:
“The significance of
free market prices in the allocation of resources can be seen more clearly by
looking at situations where prices are not allowed to perform this function.
During the era of the government-directed economy of the Soviet Union, for
example, prices were not set by supply and demand but by central planners who
sent resources to their various uses by direct commands, supplemented by prices
that the planners raised or lowered as they saw fit. Two Soviet economists,
Nikolai Shmelev and Vladimir Popov, described a situation in which their
government raised the price it would pay for moleskins, leading hunters to get
and sell more of them:
State purchases
increased, and now all the distribution centers are filled with these pelts.
Industry is unable to use them all, and they often rot in warehouses before they
can be processed. The Ministry of Light Industry has already requested
Goskomtsen twice to lower purchasing prices, but the “question has not been
decided” yet. And this is not surprising. Its members are too busy to decide.
They have no time: besides setting prices on these pelts, they have to keep
track of another 24 million prices.
However overwhelming it
might be for a government agency to try to keep track of 24 million prices, a
country with more than a hundred million people can far more easily keep track
of those prices individually, because no given individual or enterprise has to
keep track of more than the relatively few prices that are relevant to their
own decision-making. The over-all coordination of these innumerable isolated
decisions takes place through the effect of supply and demand on prices and the
effect of prices on the behavior of consumers and producers. Money talks— and
people listen. Their reactions are usually faster than central planners could
get their reports together.”
A simple solution is to post prices for all providers. Why
is this never on the agenda? Singapore spends about 4% of their GDP on
health care and is one of the wealthiest countries per capita on the planet.
The following link will take you to a price table that is impossible to find in
the United States: http://polyclinic.singhealth.com.sg/Pages/FeesAndCharges.aspx
This is just the top level of prices for one provider. The
Ministry of Health provides transparency on pricing for all providers and
typical operations. Patients are free to choose where they spend their
health care dollars. Singapore’s 4% compares to our 16%-18%. Countries in
Europe spend on average about 8-9%. Singapore’s market approach, putting the
patient in charge, outperforms the socialist countries and certainly our crony
capitalist approach in the US.
Just post the prices…please! Put the patients in charge of
choosing their health care services.
References:
Goldhill, David (2013-01-08). Catastrophic Care: How American
Health Care Killed My Father--and How We Can Fix It (pp. 22-23). Knopf
Doubleday Publishing Group. Kindle Edition.
Sowell, Thomas
(2010-12-28). Basic Economics: A Common Sense Guide to the Economy, 4th Edition
(pp. 17-18). Basic Books. Kindle Edition.
I like what you wrote...this triggered some thoughts below.
ReplyDelete"The large hospital systems have learned to over charge on their “charge masters,” then the patient surrogates, insurance companies and CMS tell the providers what they will pay; typically this is a third of the bill being charged. Instead of a market using price to regulate what is produced in terms of health services, we have centralized planners establishing prices."
Here are my thoughts... please check my facts.
For those surrogate price controllers, they use a term "normal and customary charges" to communicate the prices they will accept and pay. They negotiate down the price from the original Chargemaster price. Anything over the normal customary charges is the responsibility of the patient. Of course, the patient NEVER knows what the negotiated price is before they receive the insurance bill. The charges on their bill, is routinely a surprise, since no one published the prices before the procedure. There are no contracts for service.
For those without an insurance surrogate, the Chargemaster does NOT reduce their prices. The sky is the limit. Only a lawyer can be used at this point when the patient or their family are forced into bankruptcy to negotiate a reduced price. In other businesses, we would call "fraud" and "racketeering". But because this comes from those health care corporations who are "taking care of us", we trust them and assume they only charge us a price which reflects a reasonable margin above their costs. How childish we are to assume this. In Goldberg's book, he provides data which shows profit margins up to 1000%, from so-called Non-Profit caring institutions like the Sisters of Mercy and MD Anderson.
Instead of paying insurance companies to negotiate prices for us, why aren't prices posted and a contract signed before procedures? We don't have insurance, we have price negotiators! If the Feds want to be part of our health care and keep us from being overpriced, why don't they create a law to ensure all procedures will require a price PRIOR to the service? Even for emergencies, if pricing was posted and test prices were posted, people could make choices, with knowledge, instead of blind trust. And if mistakes are made, the patient is NOT required to pay for the REWORK (medicine, rooms, care for preventable infections or errors). We should give patients the same service as our automobiles. If the mechanic makes a repair and causes problems with our engine, they pay the costs of the repair. But not in health care, the patient not only pays with suffering, but they get the bills too! No wonder lawyers have plenty of cases to choose from.
Make no mistake, the physicians and nurses are not a part of this pricing strategy. The extreme profits are distributed to the CEO and Chargemaster by the "health care" corporation in salaries and bonuses, while physicians and nurses salaries are modest in comparison to their role in our care. Physicians and nurses are badgered by management with time quotas and high ratios of patients to caregivers. They are told to reduce costs and they are tightly controlled. But cost reductions are not reflected in the prices charges, they are reflected in the increase margins and bonuses. No cost reduction is passed down to the patients as business corporations routinely do. We are a captive, emotional market which allow us to let others "take care" of us and we assume they are charging us "fairly". How naïve we are!
Jane, I think this is exactly on point. One doctor noted in Goldhill's book, "I am still paying off my student loans and my CEO is being paid like a rock star." Apparently, the money making scheme is not being shared with the health care professionals who work for these large systems. As noted in the Steven Brill article, The Bitter Pill, the so-called not-for-profits are some of the worst in taking advantage of the "charge whatever you want" business model.
ReplyDeleteToday, a woman found out a boot priced at 69.00 dollars was given to her for the grand bargain of 962.00 US dollars! Here is the story: http://www.kevinmd.com/blog/2015/06/the-saga-of-the-boot-illustrates-the-problem-of-health-care-costs.html
ReplyDeleteHere is a link to the Washington Post --The top 50 hospitals that gouge patients the most, interactive site: http://www.washingtonpost.com/graphics/health/hospital-price-gouging/
ReplyDelete