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Despite The Cost of Living, It Remains Popular
R. Alex Whitlock
The South Florida Sun-Sentinel
reports that health care costs for the uninsured are causing everyone's rates to go up:
About 45 million Americans lacked health-care coverage in 2003, according to the U.S. Census Bureau. Washington-based Families USA said people without insurance pay about a third of their health-care costs, leaving doctors and hospitals this year with more than $43 billion in unpaid bills. Providers raise prices for other patients to make up the difference, the report said.
"When the uninsured get care in an emergency room, someone has to pay for it," Families USA Executive Director Ron Pollack said.
What I find interesting about this is the prospect that a number of people will read it and believe that if they were insured these costs would somehow evaporate. Or that someone else would pay for them becuase the employers that are cutting benefits in the first place would never pass on the costs of mandated coverage to the rest of the company's employees and/or their consumers.
Now granted, use of the emergency room for non-emergency room issues is a serious issue, but it's not one limited to the uninsured. A number of people don't want to wait for appointments and know that the emergency room will see them right away. All they're paying is the deductable, so why not, right? A bigger issue in this picture is that people can't afford $100 to go see a doctor (or don't want to wait until normal clinic hours or an appointment), so they'll deal with the creditors over a $500 ER bill that they frequently will not ultimately have to pay. Insurance will knock that $100 to $20-40, which may be more digestable, but (a) to whatever extent that they take more out of the system than putting in to it (the costs on the provider end don't go down just because the patient is paying less) someone else is paying for it anyway (causing a different form of the lament we feel when we read this article), and (b) after the deductable is met it could easily encourage more rather than less unnecessary ER visits. The doctors may not have to recoup their expenses with the rest of us, but the insurance companies will.
The bottom line is that healthcare is expensive. This is not because of evil pharmaceutical companies, greedy doctors, mean capitalism, or tightfisted employers. It's because a doctor's education costs run six-digits high, drug innovation isn't cheap, and consequences of error are high and therefore so are jury awards in malpractice cases. No matter how we handle our healthcare, these things will remain somewhat constant. The best that we can do is provide the best incentives for responsible use of our resources. Does the current system do that? No, and that's probably the only thing I agree with the nationalize health care crowd. But since each of us are likely to find the current system preferable to what the other has in mind, the stalemate will likely stand.
ADD-ON: An
interesting perspective in the WSJ's Opinion Journal comparing experiences with the American and British health care systems:
There is something seriously out of whack about 10 therapy sessions [in America] that cost more than a month's worth of hospital bills in England. Still, while costs in U.S. hospitals might well have become exorbitant because of too few incentives to keep costs down, the British system has simply lost sight of costs and incentives altogether. (The exception would appear to be the few remaining private clinics in Britain. The heart procedure done in the private clinic in London cost about $20,000.)
"Free health care" is a mantra that one hears all the time from advocates of the British system. But British health care is not "free." I mentioned the cost of living in London, which is twice as high for almost any good or service as prices in Manhattan. Folks like to blame an overvalued pound (or undervalued dollar). But that only explains about 30% of the extra cost. A far larger part of those extra costs come in the hidden value-added taxes--which can add up to 40% when you combine costs to consumers and producers. And with salaries tending to be about 20% lower in England than they are here, the purchasing power of Brits must be close to what we would define as the poverty level. The enormous costs of socialized medicine explain at least some of this disparity in the standard of living.
As for the quality of British health care, advocates of socialized medicine point out that while the British system may not be as rich as U.S. heath care, no patient is turned away. To which I would respond that my wife's one roommate at Cornell University Hospital in New York was an uninsured homeless woman, who shared the same spectacular view of the East River and was receiving about the same quality of health care as my wife. Uninsured Americans are not left on the street to die.
Observations
Alex,
Couple of points.
First of all, one of the most interesting proposals I've heard on HC recently is the notion that, akin to automobile insurance, we require everyone to have some kind of health insurance. Contrary to what you suggest, this IN THEORY would, in fact, lower the HC costs of the uninsured by essentially making many millions of more people insured. IN THEORY, this would also lower the costs of the previously insured, since risk would be spread against a much larger pool.
I'm not saying I'm completely behind this idea, or that I have the details worked out in my head, but it's an interesting idea, IMO, and combined with other interesting ideas for HC (like health savings accounts, for example), might well be worth exploring.
Second, the issue of the ER being a portal for care is one I know something about. I've blogged on it <a href="
http://trivialpursuits.type...">here</a>, and in much greater detail on TP v. 1.0.
Third, I have some issues with your concluding paragraph:
<i>The bottom line is that healthcare is expensive. This is not because of evil pharmaceutical companies, greedy doctors, mean capitalism, or tightfisted employers. It's because a doctor's education costs run six-digits high, drug innovation isn't cheap, and consequences of error are high and therefore so are jury awards in malpractice cases.</i>
First off, I know this is just a blog post, but I think there are a lot more reasons why HC is so expensive other than the three you mention, and I'm not sure how much weight I would assign to the factors you do identify.
Second, I'm not at all sure how much effect jury awards have on overall HC expenditures. An astoundingly high percentage of the federal budget goes to pay for HC. This sum is generally larger than the GDP of most of the world's nations, and dwarfs by orders of magnitude the total sums of money awarded in med mal cases or settlements.
Federal reimbursement through Medicare, Medicaid, and other programs are obviously not med mal payments, and yet these sums continue to increase at hyperinflationary trajectories.
My point is not that med mal awards are not a piece of the puzzle, but only that they are a very, very, very small piece of the puzzle.
There are much, much more important and more significant factors in the hyperinflationary growth of health care expenditures. Chief among them is the allocative inefficiency of third-party payors, which places no incentives on either suppliers or consumers to manage health care efficiently.
Anyway, it's a very complicated issue, one I'm going to devote my life to studying and working within. I hope you don't take offense -- I know this is just a blog post, but I'm obviously interested in the subject.
TP,
I appreciate your input. Requiring medical insurance is indeed an interesting option and it might help in ways that other solutions would not because it would force people to put money aside for health care rather than spend it on consumer items and then cry fowl when they get sick. The only problem I have with it is that you can opt out of auto insurance by not owning a car and you can't opt out of health insurance without dying.
I'll mostly defer to your judgment as to the factors that I cite. There are a whole lot of components to health care that cost a whole lot of money. That's the point I was trying to make. And I agree that there are definitely inefficiencies in our system, which I was trying to say in the last paragraph, but even cutting a lot of those out, this is expensive stuff.
As far as Medicare and Medicaid go... don't even get me started. But from what I know Medicare and Medicaid payments to health care providers are not extravagant, meaning that costs are going up due to increased usage rather than increased cost per usage (doctors are rather up-in-arms by the lack of increased cost-per-usage to meet their expenses). That sort of thing tends to happen when a service is provided to people who don't have to pay for it themselves.
That's why the notion of nationalized health care scares the living crap out of me. How much or how little health care one uses is elastic. I think you and I agree that there is a better way (and we even seem to be thinking along similar lines as to what they way might be), but I would rather have our current inefficient system than open the door for what could easily eventually become a Medicaid nation, or worse, a completely federally run healthcare system.
If I was saying or implying that medical costs will remain constant, then I wasn't saying or implying what I meant to be saying. What I was getting at is that this is all expensive and the notion that the barriers to health care are man-made or capitalism-induced is not correct.
Understood all the way around. Don't take me to be a proponent of nationalized health care. I don't think there's any easy answer -- neither a fully privatized nor a fully nationalized health care system is going to "solve" the HC crisis in this nation.
Medicare/Medicaid payments are not typically extravagant in terms of amounts per unit of care, but there is upward pressure on the system caused by a phenomenon known as DRG creep, and by the enormous amounts of fraud perpetrated on the government (a huge chink of the DOJ's civil enforcement efforts are devoted to medicare/medicaid fraud).
The DRG creep thing is interesting where both sides kinda talk past each other. On the doctor's end, the general sentiment is that they don't bill for nearly enough becuase they lose track of the tests the run and things they check for and whatnot. One of the ways that EMR is supposed to pay for itself (in addition to increased efficiency) is making the Medicare/Medicaid coding easier so that they can bill for more of what they do. The government, meanwhile, believes that it's the one being shortchanged. There's some concern in the medical community that the increased coding and claims is going to start looking suspicious even when it's simply a matter of more effective billing procedures.
(Disclaimer: None of the above information was obtained through or perspective informed by Camille. She does, however, get a ton of periodicals about the industry, which I read pretty thoroughly. If Medical Economist ever stops sending freebies, I'm gonna have to pony up the dough.)
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