The cost of health care
June 24, 2012 3 Comments
I had just wanted to go over a few basic things about the extraordinarily inefficient nature of American health care with my class this week, but ended up spending a lot more time than I anticipated as the students had a lot of nuts and bolts question about the crazy way the system works. Anyway, excellent piece in the Times yesterday about the craziness of pricing everything. Here’s a bit:
Hospital care tends to be the most confounding, and experts say the charges you see on your bill are usually completely unrelated to the cost of providing the services (at hospitals, these list prices are called the “charge master file”). “The charges have no rhyme or reason at all,” Gerard Anderson, director of the Center for Hospital Finance and Management at Johns Hopkins Bloomberg School of Public Health. “Why is 30 minutes in the operating room $2,000 and not $1,500? There is absolutely no basis for setting that charge. It is not based upon the cost, and it’s not based upon the market forces, other than the whim of the C.F.O. of the hospital.” [emphases mine]
But, hey, it’s just the free market at work– right? Markets really are a great innovation and generally really make for more efficiency. But, free markets depend upon a lot of things that don’t exist in health care, like the ability to compare prices in a meaningful way:
With so little pricing information available, expecting people to shop around for quality care at the lowest cost — something that’s not always possible in emergency situations — is also asking a lot of consumers. “I have always found a bit cruel the much-mouthed suggestion that patients should have ‘more skin in the game’ and ‘shop around for cost-effective health care’ in the health care market,” said Uwe E. Reinhardt, a health policy expert and professor at Princeton University, “when patients have so little information easily available on prices and quality to those things.”
Of course, even if there were prices for everything, if your regular doctors says “I perform procedures at Hospital X” hospital X is going to be where you have the procedure. Buying knee surgery is quite different than buying a car.
About Steve Greene
The psychological dynamics of buying a gallon of milk, a flat screen TV, car insurance (which is mandatory if you drive) are completely different than “buying” another month of critical care that might keep grandma alive for 5 more months instead of 2 months. Folks don’t generally consider the cost of a procedure if it is going to prolong the life of a loved one. The whole premise that the health care industry can be made more efficient and competitive by relying on market- based consumer behavior is a crock.
If your right, and I think you pretty much are are at the present time, but only up to a point, and I don’t think it needs to be so.
If your going in for heart surgery, you want the best money can buy. But the reality is, most people can’t afford the best money can buy. And their insurance won’t pay for it.
The really wealthy can afford to fly in the best, or be flown to the best. Naturally, there are times when there simply is no ability to make any comparison, and you get what you get, no matter if the guy is the best, or one more screw up away from having his/her license pulled.
On the other hand, people are going in for corrective vision eye surgery based on price. Competition and price information has driven down prices tremendously. There is the possibility of creating specialist clinics that do nothing but knee or shoulder surgeries all day, and also drive down prices. Some probably already exist.
I’m not sure if your example is a good one, because Granny has lived a long time, and it’s probably more important to many that she has a decent death and quality of life rather then simply hanging on for every possible second. Or at least should, coming from a person who worked in a long term care facility for almost two decades.
No, I think your example is more germane to little Billy or Sally after some terrible accident or finding of cancer. But eventually the bills do come due, and one hospitals care isn’t largely different from another. You have your top tier, your middle, and maybe your lower, which are not all that bad. But if the problem is Mom or Dad, believe me, at some point the one in the hospital bed will be wondering how much this is going to cost, and will they lose their house to pay for it? Will Billy or Sally still get to go to college?
The time of the emergency will pass but the need for care, surgery, all sorts of healthcare related costs will continue, both in and out of the hospital, and if people were sane and given the opportunity and information, they certainly would make comparisons, because the costs are so incredibly high, and the consequences to a families economic future are so dire after such an event.
There could certainly be ombudsmen, or the healthcare equivalent to financial advisers or websites with information. But only if the financial information and information on the outcomes of patients for all doctors, hospitals, clinics, physiotherapists, etc, is made available to the public.
I won’t even bother mentioning alternative systems like other countries, because I don’t think there is a chance in hell of it happening in the US.
Now, I’ve put off cutting the lawn as long as I can.
What I have seen is that hospitals and doctors do not give you a chance to shop around and make informed decisions (which is something that a free market needs). If you ask the person behind the counter how much a procedure is going to cost, they give you a blank stare. They don’t know themselves! Even if you try to shop around, the information needed to do so is simply very difficult to find at best.
Until that changes, free market solutions to health care are going to fail.