What the hell happened to the health care system

November 28, 2008 11:53 AM

I don't understand why health care suddenly costs so damn much. I can understand a few factors - nurses' pay has gone up, new treatments are more expensive (and doctors prescribe more expensive treatments - sometimes unnecissarily) but these factors don't seem to explain how insanely costly health care has become. And where is all that money going? Again, I understand that CEO pay has skyrocketed in the last 20 years, but is that enough to explain the enormous cost of health care these days?

Another area of confusion for me is how little time doctors (and nurses) can now spend with patients. I understand doctors are pressured to see more patients, but how does that work on a practical level - has the ratio of primary care providers to patients changed significantly in the last 10 or 20 years? Is a higher percentage of the population seeking health care? If not, how can it be that each doctor is seeing so many more patients a day? I'm confused!

posted by serazin to health & fitness (43 comments total)

I wonder how much of it is doctors' malpractice insurance. And I wonder how much of that is brought on by the profusion of more and more lawyers soliciting people to hire them for "faulty" medical care (in almost all of the ads for these services I've seen on the subway, it's almost all about the "make money" angle than it is the "get restitution for having been wronged" angle).

I am not a doctor or a lawyer, or an ad person for that matter, but I wouldn't be surprised if malpractice insurance comes into it in some fashion.
posted by EmpressCallipygos at 12:02 PM on November 28, 2008

Doctors are not seeing any of that money, and no fixed costs of doctors are being passed along to patients.

Better technology, such as MRI imaging and expensive drugs, accounts for some portion of the cost. (30 years ago, if you had high cholesterol, the treatment was "cut out lobsters." Now it's "take this costly pill every day for the rest of your life.")

A large amount of the cost - no one knows how much - goes into middlemen such as insurance companies and pharmacy benefit managers. These companies derive shareholder value from

1) collecting money to guarantee the provision of care

and then

2) not providing care or

3) negotiating to provide subpar care at cut rates. For example, if I can't keep the office open on the revenues from seeing 3 patient per hour, I am going to try to see 4 patients per hour.

Hundreds of billions of dollars per year are allocated to reward the performance of #2 and #3 above. To my mind, those dollars, while good for shareholders, are bad for the real stakeholders - sick people - and are not just wasted, but in fact paying for social harm.

Fee-for-service, where a doctor decided what his time was worth and charged that, is a fading memory. Medicare sets prices for the 65 and older - those prices are fixed - and private insurance companies contract to pay "a percentage" of that. They collude to set prices freely and have anti-trust exemptions.

Meanwhile, if I speak to my partner about what his fee schedule looks like, we both go to Federal jail.

At least that's what it looks like from my end.
posted by ikkyu2 at 12:12 PM on November 28, 2008 [20 favorites has favorites]

Debasement of the dollar.

On top of that, government and large insurance payers that can better afford huge bills than the average person, and question the charges less. So doctors order more tests (the malpractice risk thing plays a part here) and hospitals charge more for them.

Then there's a vicious cycle where preventative care costs for the reasons described above, so the poor avoid it (and make bad health choices besides) then go into emergency rooms where they are obligated to be treated. That cost is calculated based on the already high prices, then written off, driving up costs further for those who do pay.

I hear that health care for illegal immigrants drains on the system for the same reasons, only more so. I'm somewhat skeptical of the impact however.

But I'd like to point out that there are more of these questions lately. "Why is food so expensive?" "Why is energy so expensive?" "Why is health care so expensive?" I saw this debated during the recent political campaigns and everyone is treating symptoms rather than the root cause. Fix that first, then the rest if there are lingering issues. But you laughed at the one candidate that brought this up and you'll probably laugh at me now.

Oh, and my health insurance premiums went down by a dollar per pay period this year, so nyah.
posted by vsync at 12:15 PM on November 28, 2008

I wonder how much of it is doctors' malpractice insurance.

This is a red herring issue by insurance companies. They use it as an excuse for jacking up their malpractice rates, but in reality tort payout is only a small percentage of their payables. The real issue is insurance companies making bad investment decisions and then having to answer to shareholders. They pass these costly decisions on to consumers and doctors (who in turn have to pass them on to consumers).
posted by Pollomacho at 12:18 PM on November 28, 2008 [4 favorites has favorites]

I've been trying to understand this as well, and I'm not doing so well at it -- I've heard that medicare/medicaid pays a lot less than insurance rates (I've seen stats of 1/3 to 1/4) so insurance is billed higher to make up for this -- maybe someone that knows more about this could comment.
posted by cestmoi15 at 12:37 PM on November 28, 2008

On top of that, government and large insurance payers that can better afford huge bills than the average person, and question the charges less.
Where'd you get the idea that large insurance payers question charges less?
posted by peacheater at 12:39 PM on November 28, 2008

The really simplistic big picture answer is that supply increases demand, and technology increases supply. Nowadays, more and more things can be treated (whereas in the past you got better on your own, or didn't), and more is diagnosed (better science).

(As an aside, overdiagnosis, and expensive, high-tech, but marginally effective treatments are another cost driver.)

So, (1) modernly, you know you're sick, and there's something you can do about. And then (2) what's it worth to you not to be sick? How much is your health worth? So - they can charge whatever they can get away with. The system is not run by kindly old doctors. It's run by business-creatures. (rant rant rant!) They charge whatever they can get away with. I'm sure you've read articles about medical tourism, about Americans going to India or Mexico where they get good medical treatment at a fraction of the cost at home.

The fundamental philosophical question that society must answer is, Is health care a basic right?

On to part 2: the business of primary care

Profit = (number of patients) x (profit per patient)

To maximize profits, see more patients, and charge them more. The doctor has to get paid, and the nurse, and the receptionist, and the billing specialist, the lab tech. And rent. And malpractice insurance isn't cheap.

Example: a primary care doctor spends an hour talking with a depressed teenager. One eighth of the office's work day. The insurer refuses to pay for that, because that's a psychiatric procedure, and the primary care doctor is not a psychiatric specialist.
posted by coffeefilter at 12:42 PM on November 28, 2008

This is a red herring issue by insurance companies. They use it as an excuse for jacking up their malpractice rates, but in reality tort payout is only a small percentage of their payables. The real issue is insurance companies making bad investment decisions and then having to answer to shareholders. They pass these costly decisions on to consumers and doctors (who in turn have to pass them on to consumers).

What Pollimachio said is very much worth repeating.

It's not the salaries of the workers.
posted by reflecked at 12:52 PM on November 28, 2008 [2 favorites has favorites]

Link to movie Sicko streamed online free. This movie is biased in this way or that -- Micheal Moore is not exactly an accurate reporter in all or perhaps even any respects -- but it might still give a clue or two toward the larger picture; appalling view of insurance company policies, for sure.
posted by dancestoblue at 12:53 PM on November 28, 2008 [1 favorite has favorites]

Better technology, such as MRI imaging and expensive drugs, accounts for some portion of the cost.
I agree with this, and also... we have higher costs and levels of treatments due to the complications of our nation's high obesity rates. This, coupled with the ability to better manage diseases and chronic conditions (mentioned above) is no small potatoes in the world of health care costs.
posted by smalls at 1:00 PM on November 28, 2008

Example: a primary care doctor spends an hour talking with a depressed teenager. One eighth of the office's work day. The insurer refuses to pay for that, because that's a psychiatric procedure, and the primary care doctor is not a psychiatric specialist.
I'm not so sure about this one. In my experience, the claim would most likely go in under something general such as "office visit" or "consultation", and the claim would get paid by the insurance company. I'm not sure the doctor would go into using psychiatric billing codes (well at least, I've never seen it). I'm also not sure how this translates into higher medical costs, other than the doctor taking 45 minutes longer than expected with a patient.
posted by smalls at 1:08 PM on November 28, 2008

I hear that health care for illegal immigrants drains on the system for the same reasons, only more so. I'm somewhat skeptical of the impact however.

When an illegal immigrant pregnant woman goes into labor, the hospital must give her the same treatment as any paying patient. If the baby has "special needs," those NICU costs are passed on to the major insurance companies who use the premiums from their subscribers. There are many, many more examples (my best friend works in the claims department of a major medical insurance company) of similar cases where, by law, certain hospitals must provide treatment to people who cannot pay for it. But those EKGs and ultrasounds and CT scans provided at no charge to the indigent do cost money and someone has to pay for them. Thus the cost is passed down to those folks who either have insurance or who can afford to pay for their medical care upfront. Ask a doctor who works at a city hospital that is bound by law to treat indigent patients and you'll see how many of our health care dollars are spent on people who come to the emergency room with one bogus complaint or another when all they want is a bed for the night and a hot meal. True, these incidents may be limited to certain inner-city hospitals, but multiplied across the country and various ERs, it adds up to many millions of dollars spent for useless tests (said complaintant has vague stomach pains or some such and undergoes blood tests and other medical screenings when all they really want is either a prescription for Vicodin or a place to sleep.) In the end, all of these costs have to be picked up by someone, and in most cases that translates to higher Blue Cross or other insurance premiums.

There are many other factors, including the fact that certain nations have price caps on prescription costs, so the US has to charge its citizens more to make up the difference (it costs an average of $500 million to get a new drug to the stage where the FDA reviews it for use on the market).
posted by Oriole Adams at 1:19 PM on November 28, 2008

A hospital, unless the hospital is part of a nonprofit or a college with other revenue sources, is a business like any other that has to return on an investment made by it's shareholders or other owners/investors.

Fortunately (or unfortunately depending on point of view), they're also one of the few businesses that's legally and ethically required to treat patients who have no way to pay their bills.

It's also an industry that's legally obligated (thanks to our wonderful tort law system in the States, which is mostly for the enrichment of lawyers) to do everything they can to make sure that the person that comes into the emergency room with chest pains is actually just experiencing a panic attack and needs a sedative -- as opposed to a transient heart condition that is going to strike again and cause them to drop dead the moment they exit the ER's doors.

Thanks to this weird legal and regulatory system, the industry's run on a giant cost-averaging scheme by multinational corporations. When people go overseas get procedures done, they're getting an acceptable quality of care and leveraging their first world dollars into a second or third world economy. The pharma company and medical supplies company doesn't make the same amount, but they also sold the hospital in the third world country a 5 year old used bed from a stateside hospital and can manufacture the drugs to a lower regulatory standard.

When doing a procedure in the US, you're getting the very tip-top quality of care with new equipment replaced every few years, and you might get it as soon as payment can be arranged... but you don't get the exchange rate leverage. When doing a procedure in a country with a socialized single-payer healthcare system, you may be on a years-long waiting list to have a non-emergency but medically necessary procedure to get done, because the single-payer system can only statistically cover a certain number of procedures per year.

And let me remind you again that the hospital legally and ethically needs to provide to you the same level of care that they provide an illegal immigrant with no money and no insurance.

It's not as simple to fix as the politicians would make you believe.

There's different shades of this opinion depending on your political leaning, but the same answer over and over is going to get replayed: healthcare is expensive the way it's conducted in our very expensive first-world economy, and it's going to continue to do so either until the legal system or the medical payment system (and probably both) get fixed.
posted by SpecialK at 1:21 PM on November 28, 2008 [4 favorites has favorites]

I think the administrative costs of running a hospital are pretty huge, like billing, etc. In addition, that is, to what other people mentioned.
posted by anniecat at 1:23 PM on November 28, 2008

I've heard that medicare/medicaid pays a lot less than insurance rates (I've seen stats of 1/3 to 1/4) so insurance is billed higher to make up for this

No, that's against the law too. You have to apply the same fee schedule to all patients.
posted by ikkyu2 at 1:26 PM on November 28, 2008

I should know better than to come into the health cost questions by now because I get so fired up. But here's my own personal beef with the system, and it's probably more speculation than anything else, but... I am on a crappy insurance plan that has a very high deductible, and I never know how much anything is going to cost me. Neither does my doctor, which is fine because it's not his primary concern to keep on top of test and medication costs. He's just trying to fix me. It's a mess because no one really has all the tools required to manage all the costs, because those costs are coming from so many different places (malpractice insurance, tests via outside labs or imaging centers, basic office operating costs). So I go in with a UTI and a family history of kidney issues, and I leave with a $900 bill for my visit and my tests from a lab. And I'm like "damn, if I had only known, I'd have just asked for the cipro and told him to leave the rest). It's just impossible to manage. Health insurance companies tried this with the gatekeeper HMO's, and it failed miserably. I wish I could tell you guys where I worked to get such sucky insurance, because you'd be shocked. Or maybe not.

Anyway, I've gotten better at managing costs for myself. I generally remind my doctor now that I am paying out of pocket, which sometimes helps regarding his course of action. Or I just go to the minute clinic for $70 and save everything else for my yearly physical. I don't know what the fix is, but if my insurance company expects me to manage my own costs, then I should probably have some better tools to be able to do so, right?
posted by smalls at 1:39 PM on November 28, 2008 [1 favorite has favorites]

A small (or not so small) medical practice is like a small business in a lot of ways. It is a small business, I suppose, with the risk and bottom lines that entails. The majority of their payments come not from their customers, but from large companies that have an interest in paying out as little as possible- and can refuse to pay for treatments after they've been rendered. This doesn't explain why "health care is more expensive" (to which I say, compared to what? Has it actually increased in price that much more than it would through inflation, when you consider how much more it offers than it did in the past?), but maybe it gives a slightly different perspective.
posted by MadamM at 1:40 PM on November 28, 2008

You have to apply the same fee schedule to all patients.

On all of the bills and insurance statements I get, I see four numbers:

1) the hospital or doctor's charge for the treatment
2) a "negotiated rate" for the treatment
3) the insurance coverage applied to the "negotiated rate"
4) the amount not covered, that I as the patient need to pay out of pocket

If you have to apply the same fee schedule to all patients, what's the deal with the discrepancy between 1 and 2 on my bills?
posted by I EAT TAPAS at 1:48 PM on November 28, 2008

The "passed-on costs of caring for illegal immigrants/poor folks who abuse the system" is a crass meme that reeks of classism and racism, they same way poor black folks are scapegoated for the subprime mortgage crisis. Other industrialized nations seem to be able to provide care for their poor without their systems falling apart.

The costs required to care for those who cannot afford it could easily be absorbed if the insurance companies weren't busy raping doctors. My father, a surgeon who provided E/R care in addition to his private practice, left his practice in PA a few years ago because his malpractice insurance premiums made it impossible to care for his patients.

A smaller portion of the blame does need, IMO, to be laid at the feet of the Agri-Industrial Complex, who promote a diet of cheap, unhealthy foods, which leave a high percentage of Americans with chronic "conditions" (like diabetes and high cholesterol) that need a lifetime of medical care.
posted by mkultra at 1:54 PM on November 28, 2008 [3 favorites has favorites]

mkultra: Other industrialized nations seem to be able to provide care for their poor without their systems falling apart.

An addendum: My father now works for the Bureau of Indian Affairs, at a hospital on a Navajo reservation in New Mexico. They, most of whom live below the poverty line, get state-of-the-art care, 100% funded with government money. So I'm not talking out of my ass when I say that it can be done.
posted by mkultra at 2:00 PM on November 28, 2008

We're not treating the same population we were treating 20 years ago. On average, we're older, and fatter (both of which will result in more medical intervention), and we're living longer, too. So take that into account.

There are many other factors, including the fact that certain nations have price caps on prescription costs, so the US has to charge its citizens more to make up the difference
posted by Oriole Adams at 4:19 PM on November 28

Canada has a price cap on prescription costs, but also provides proof-of-concept funding to researchers. When people criticize regulated drug costs, they'll mention one of these facts but not the other, which is, at least, incomplete.
posted by joannemerriam at 2:50 PM on November 28, 2008

You have to apply the same fee schedule to all patients.

Is this true of drugs too?
posted by drezdn at 2:51 PM on November 28, 2008

You have to apply the same fee schedule to all patients.

Is this true of drugs too?
posted by drezdn at 5:51 PM on November 28

At least in New Hampshire it can't be, because I get charged for birth control at Planned Parenthood according to how much I can pay.
posted by joannemerriam at 2:58 PM on November 28, 2008

Worth a read: Almost Half of Primary Care Physicians in US Would Quit If They Could. Note that it's a survey done by an industry group and there are lots of qualifiers on that, but the background on how much red tape and wrangling with insurance companies goes on behind the scenes might be germane to these questions.
posted by el_lupino at 3:12 PM on November 28, 2008 [1 favorite has favorites]

And also, on the "why is it so bad all of a sudden?" score, it's worth remembering that the last time we visited all these issues was the early 90's. We bought ourselves some time on this in the US by moving more people to managed care plans (either HMOs or PPOs) and the years since then have been more boom than not. But about all the blood that can be squeezed from managed care has been squeezed, the boom years are done, and we have a greater proportion of people in their 50s and later (who tend to need and seek more care) than in years past.
posted by el_lupino at 3:16 PM on November 28, 2008

If you have to apply the same fee schedule to all patients, what's the deal with the discrepancy between 1 and 2 on my bills?

Simple. By law, every patient has to charge the same fee. And they are. Now, whether or not the patient's insurer, be that a private company or the government (Medicare or Medicaid) wishes to pay that amount remains to be seen. Usually they do not. In the cases of private insurers, they will negotiate with the hospitals and say "okay, Bob's Hospital, a lap choly (keyhole gallbladder removal) is being billed out at $14,500 all inclusive. We at Big Bad Insurer think that it should be lower than that, more like $8,200, and if you agree, we'll continue to let our BBI customers use your hospital." So the Bob's Hospital agrees, because 10 lap cholys a month on BBI customers at $8,200 a pop is better than none if BBI customers have to go to Joe's Hospital to have their care covered.

What BBI doesn't bring to the table here is that some customers have HMO coverage, some have PPO coverage, some have plans with high deductibles, some with low, differing levels of coverage for different things, so some customers will have that entire negotiated $8,200 paid and have no out of pocket, some customers will only have a percentage paid. That's between the BBI customer and BBI, so the hospital billing people only apply the information that BBI gives when the claim is submitted, they aren't looking at the particulars of your plan, as a BBI customer.

So you have your lap choly, and you get your bill:

1. Lap Choly - $14,500
2. BBI adjusted Cost - $8,200
3. BBI payment (80% + $150) - $6,710
4. Payment Due - $1,490

If you had a different BBI plan, you might not owe anything. But that has nothing to do with the doctor/hospital.

With the government it's even simpler. They say "here is our big book of what we'll pay, and because you accept Medicare/Medicaid patients, by law, you have to take whatever we're willing to pay for the procedure, period." There is no negotiation.

And of course, if you're one of the 1 in 6 with no health insurance at all, that bad gallbladder that cost your next door neighbor the equivalent of a new washer and dryer is going to cost you the equivalent of an new (economy) car. Fortunately, the hospital will gladly arrange a payment plan, and you can pay them $100 a month (plus interest and fees) for the next 20 years.
posted by Dreama at 3:17 PM on November 28, 2008 [1 favorite has favorites]

"(thanks to our wonderful tort law system in the States, which is mostly for the enrichment of lawyers)"
and
"healthcare is expensive the way it's conducted in our very expensive first-world economy, and it's going to continue to do so either until the legal system or the medical payment system (and probably both) get fixed."

I'll take that bait, SpecialK. Look at this:

No evidence of significant effects on health care costs

The cost of medical malpractice claims and litigation is so small a part of national health care expenditures as to be insignificant—even as calculated by Towers Perrin, which indicates its tort cost estimates (Chimerine and Eisenbrey 2005). According to Towers Perrin, medical malpractice tort costs, broadly defined to include the costs of insurance industry overhead (including profits) and claims handling, as well as all claims paid without litigation, totaled $28.7 billion in 2004, only 1.5% of the nation’s $1.9 trillion bill for health expenditures. The Congressional Budget Office (CBO) concludes that “even a reduction of 25 percent to 30 percent in malpractice costs would lower health care costs by only about 0.4 to 0.5 percent” (CBO 2004, 6). To put the insignificance of this into context, health care inflation in 2004 would have been 7.8% instead of 8.2%.

If, as Towers Perrin has claimed, damages awarded to plaintiffs are 46% of total tort costs (Tillinghast-Towers Perrin 2003, 17), and non-economic damages are about half of all damages awarded to plaintiffs, then fully eliminating noneconomic damages in medical malpractice (and the attorney fees associated with them) would have a negligible effect on U.S. health expenditures, reducing them by 0.5% or less.5 It follows logically that legislative changes like those recently debated in Congress that would cap such damages at $250,000 would have an even smaller effect.
posted by lockestockbarrel at 3:18 PM on November 28, 2008 [5 favorites has favorites]

I'll take up lockestockbarrel's point and respond that it is not the cost of claims and litigation, so much as the perceived risk, which raises the cost of malpractice insurance and causes unnecessary tests and treatments to be performed. One of my local specialists is moving out of state, as the cost of malpractice insurance is now too high to make their small practice economic.
A second cause is the indefensible administrative costs imposed by you guys insisting that this is a matter for private insurance. Indefensible because in the UK and Canada, the Government achieves huge economies of scale by (a) having one set of administrators for everyone, (b) managing demand by constraining supply (waiting lists for non-urgent care), and (c) negotiating with Big Pharma over the price of prescription drugs. In the private system, you have five csets of administrators involved: one set to administer delivery of healthcare, one set who make sure that the supplier gets paid, one set who determine what care the insurer will pay for (based on cost-benefit to the insurer rather than patient prognosis), one set who spend all their time trying to deny or reduce insurance claims, and a set who spend all their time negotiating the differential between bulk provider published rates and what the insurer will actually pay.
The third reason is that people in the US economy expect to pay a lot for healthcare. The US is a relatively rich country that traditionally spends a higher percent of individual income on healthcare. Prices are fixed at what the market (in aggregate) will bear. Problems arise because of inequalities in the distribution of income and health benefits, which lead insurers to focus increasingly on the decreasing proportion of the IS population with private health insurance. They need to keep their income levels growing, to meet investor expectations. So premiums rise, year-on-year. It's a self-fulfilling prophecy, if you look at the economy systemically.
posted by Susurration at 4:44 PM on November 28, 2008 [1 favorite has favorites]

But here's my own personal beef with the system, and it's probably more speculation than anything else, but... I am on a crappy insurance plan that has a very high deductible, and I never know how much anything is going to cost me. Neither does my doctor, which is fine because it's not his primary concern to keep on top of test and medication costs. He's just trying to fix me.

No, you know what? It's not fine. Not only does it matter, but how the hell am I as a doctor supposed to make rational decisions about health care costs when these kinds of shenanigans are going on?

So I go in with a UTI and a family history of kidney issues, and I leave with a $900 bill for my visit and my tests from a lab. And I'm like "damn, if I had only known, I'd have just asked for the cipro and told him to leave the rest

What about the malpractice liability for missing the right diagnosis? Would you have told him to leave that? Doesn't matter if you would; lawyers have ensured that such agreements aren't binding.

What about if your health insurance's refusal to pay for the right test makes your doc miss the diagnosis? Does your insurer share liability? No, the insurer is protected from this liability. By lawyers. The liability remains still all on the doctor, even if you can't afford to pay for the right test to learn the diagnosis - the doc is still liable.

Lot of health care dollars - billions - directed to making sure of these kinds of things. You can bet it's not doctors allocating those dollars this way.
posted by ikkyu2 at 6:17 PM on November 28, 2008 [3 favorites has favorites]

A lot of it has to do with the negotiation process discussed by Dreama, but it's worse than she makes it out to be. For example, Medicaid in Pennsylvania pays 48 cents on the dollar. So if a Medicaid patient runs up a $10,000 bill, the hospital gets $4,800. Insurance carriers generally negotiate through the process Dreama described to a few cents above the Mediplan compensation rate in their particular state.

Now say you're a hospital, and you know that you're only going to get paid about 50% of what you bill. Say you 1) know how much money you want to get out of a given set of procedures, and 2) aren't stupid. What do you do? You raise your rates to compensate for what you know you're going to get. So if you want to take home $6,000, you bill $12,500.

Now say that you know you're going to wind up not getting compensated at all for a significant percentage of the care you provide, particularly emergency care for the indigent/impecunious. Emergency care is just about the most expensive way of handling any particular problem, but because it's the only place where you're guaranteed care, a lot of poor people pretty much treat the ER like a family physician. This costs hospitals a lot of money. As in individual emergency rooms can easily lose $2-10 million every year. You have to get paid for that somewhere, unless you want to close up shop, so you add that into the bills you know you will get paid for, again billing more than you actually need to account for insurer/government discounting. So all of a sudden a procedure for which the hospital would normally be willing to do for $6,000 is being billed at $13,750, of which the hospital hopes to get $6,600, $600 of which is intended to cover losses elsewhere. Or something like that.

But why do those people go to the ER in the first place? Well because even if you could have afforded the $1,000 or $2,000 the hospital really wants, or even the $500 it might be willing to take (hey, it's better than nothing, no?), care at those prices is now being billed at (if you use my numbers above) $2,290 and $4,580, respectively. So, when you know you can get treated for free in the ER, why bother?
posted by valkyryn at 6:20 PM on November 28, 2008 [3 favorites has favorites]

IMO, The rise of for-profit (investor owned) hospitals and HMOs, as opposed to non-profits.
posted by fings at 6:39 PM on November 28, 2008

Thanks y'all for your many thoughtful ideas here. Piecing together a few of your perspectives I think I have a bit more of a sense - though perhaps still no definitive answer.
posted by serazin at 9:47 PM on November 28, 2008

Healthcare, at this level, has never ever been cheap. The level of healthy a typical Westerner has is extremely high. Its not suddenly expensive, its just expensive. Think of all the treatments that are available. Think of all the diseases and injuries we treat. Think of the high level of care you get. Think of all the times you've been to the doctor for something that a person in a poor country would have been forced to tough out.
posted by damn dirty ape at 10:36 PM on November 28, 2008

If you have to apply the same fee schedule to all patients, what's the deal with the discrepancy between 1 and 2 on my bills?

There are the occasional patients with fee-for-service coverage, and the occasional health plan that pays urban Medicare rates (which can be 50% more than rural Medicare rates.) Given that, you don't want your fee schedule to lowball such payors. It's like leaving money on the table if you do.

If you think any doc has even a tenth of a second's worry about charging insurance companies, after all the torture they put us through with prior auths, denials, and paying 10 cents on the dollar, you can think again. Health insurers and their claims departments can rot in the burning pits of Hell with their backs broken until the end of time and I wouldn't shed a tear.
posted by ikkyu2 at 11:44 PM on November 28, 2008 [1 favorite has favorites]

There are many other factors, including the fact that certain nations have price caps on prescription costs, so the US has to charge its citizens more to make up the difference (it costs an average of $500 million to get a new drug to the stage where the FDA reviews it for use on the market).

This is a bullshit repeater service of the usual blown-smoke right-wing talking points on health care in this country.

Eg. for FY07 GSK had $45.8B in sales, with a cost of goods sold of $10.6B, R&D of $6.6B, a gold-bricked SG&A (aka overhead) of $11.8B, paid $4.2B in taxes, leaving an after-tax profit of $10.B.

So GSK's expenses were, in order:

overhead, profit, manufacturing, R&D, and taxes.

The bottom line is that health care is a "your money or your life" proposition -- to the extent that the free market is allowed to unfold in all its wonders.
posted by troy at 12:46 AM on November 29, 2008

Firstly, it's a USA problem - getting the same or better healthcare elsewhere in the world is much MUCH cheaper.

This graph isn't perfect, but it gives an inkling of how far out of whack the USA is.

There are a lot of reasons for it - I design systems for a living, and I could not design a system as bad and inefficient and slef-reinforcingly-self-destructive and ridiculous as the US healthcare system if I tried. It just blows my mind how moronic and self-reinforcing every last aspect of it is. The whole thing is a collection of vicious cycles and downward spirals feeding off each other in a whirlwind of inefficiency and insanity.

It's complex, but to simplify, the biggest reason why it's so expensive is that instead of paying your doctor's salary and getting healthcare in exchange, (like in other countries), you're paying your doctor's salary, and also paying the salaries of several additional people who are contributing nothing to society, but just push around paper. Parasites. Middlemen.

In other countries, there is a small management overhead, but it's as nothing compared to ridiculousness of all the garbage standing between you and your healthcare in the USA, and every layer of that garbage is taking their cut as profit.
posted by -harlequin- at 4:30 AM on November 29, 2008 [3 favorites has favorites]

The bottom line is that health care is a "your money or your life" proposition -- to the extent that the free market is allowed to unfold in all its wonders.

Yes, when I describe the system as "inefficient" I mean in terms of delivering the best healthcare per dollar, to the buyer. But the system is highly efficient at parting sick people from their gold and delivering little (or nothing) in exchange, and for some people, that was (and is) the goal.

So it depends what you want the healthcare system to be. I take the view that healthcare should be like roads and schools - a social good. As such, to me the USA has third-world healthcare. If however you take the view that healthcare should be about making as much money for as many people as possible, then the USA has an extremely good system.
posted by -harlequin- at 4:39 AM on November 29, 2008

There are many other factors, including the fact that certain nations have price caps on prescription costs, so the US has to charge its citizens more to make up the difference (it costs an average of $500 million to get a new drug to the stage where the FDA reviews it for use on the market).

This is completely misleading.... the US does NOT subsidise the medications of countries where price caps on medication exist. Price caps work by making the patient pay a certain amount (in Australia, $31.30), with the government contributing the remainder of the amount that the pharmaceutical company charges for the drug. It is conceivable that the government might demand a lower price for the drug (seeing it is essentially the only customer in that country that purchases the drug), however, the effects of that on pricing both in that country and in other countries would be purely speculative.
posted by ryanbryan at 5:11 AM on November 29, 2008

To my mind, those dollars, while good for shareholders, are bad for the real stakeholders - sick people - and are not just wasted, but in fact paying for social harm

Got it in one.

Basing national health policy on private insurers really is like putting Dracula in charge of the blood bank. It's insane, and I have never understood why the US public has still not forced its representatives to implement a proper national health scheme.

Socialized medicine works, people. It works just like a great big insurance company that has the hundred-pound-gorilla monopoly customer power to dictate prices to Big Pharma, does not want to divert your insurance premium (i.e. taxes) into the pockets of private shareholders, and whose management you get to hire and fire (i.e. elect).
posted by flabdablet at 5:58 AM on November 29, 2008 [2 favorites has favorites]

I'm going to come back in here and agree with flabdablet (and others) who argue that socialized medicine works. I came here from the UK - a country with a relatively low per capita GDP. Yes, our system is constantly under fire because it is straining the economy. But we have a separate charge on our tax for it - an equivalent % to the Medicare/Medicaid tax here. Because the system develops such economies of scale and rations non-urgent care, very few people die from preventable conditions (there are still mistakes). If you want faster care, or newer, experimental drugs, you can buy private insurance or pay for it yourself. But you do - always - receive the care that you need.

This is the one issue that I get steamed up over, just because I don't understand the "big government" vs people dying tradeoff. (I don't see that any morally-defensible position could even argue for a tradeoff). I see people every day in this big, affluent, east-coast city who are deformed, damaged, and left in pain in ways that I would never see in the UK. We would never leave people physically twisted after an accident or in pain when they walk, if this were preventable with surgery. We would not leave people with large numbers of missing teeth and no dentures. We would not leave senior citizens without access to arthritis medicine when they are in pain. We have care workers who visit disabled and senior people to make sure they have cooked meals, shopping delivered, physiotherapy, and problems sorted out (e.g. with utility companies).

This is the richest country in the world, folks. If a pathetic economy like the UK can do this, then you can. I sometimes feel like I am living in a third world country, when I see how people suffer here - quite preventably - to maintain a for-profit healthcare system which is in imminent danger of collapse anyway. I pay slightly more tax here than in the UK, where everyone gets healthcare that is free at the point of delivery (with a $15 co-pay for prescription drugs), plus we have universal, free fire-service, policing, and education (with a slight top-up at University level, which is waived for low-income kids). Where does all the US tax money go? It goes into the for-profit systems that you prefer in the name of avoiding big government. If you equate "big government" with providing for the people, then you get the government that you deserve. My idea of "big government" is one that intrudes into my personal life, dictating who I can or cannot marry, legislating for moral values, and using my tax dollars - and the lives of young people - to pay for wars that only benefit the oil industry. I'm doing OK -- but only because I work for one of the declining number of organizations that still provide full healthcare insurance (and because I have not faced any serious health issues that tested the limits of that coverage). The majority of people in this country are one serious illness away from bankruptcy.

If you let your politicians cosy up with for-profit healthcare companies, it is your fault. You can change things -- but it has to start with voter dissatisfaction. Don't let yourselves be bought off by stupid deals like the medicare bill a few years back that provided a pathetically small level of prescription drug benefit to seniors in exchange for legislating to make medicare negotiation over drug prices illegal. WTF were you all thinking to let your representatives get away with this?
posted by Susurration at 3:12 PM on November 29, 2008 [3 favorites has favorites]

It is conceivable that the government might demand a lower price for the drug (seeing it is essentially the only customer in that country that purchases the drug), however, the effects of that on pricing both in that country and in other countries would be purely speculative.

This is another funny thing. Other countries use the free market to help sick people, eg. a large collective buyer making deals with the drug companies along the lines of "How about you give us a big discount on your patented drug X (which we can't get from anyone other than you), and in exchange, we'll also buy our supply of unrelated generic drug Y from you (which we could buy from anyone, and so need not buy from you)", and have drug companies to compete against each other to offer the best prices in order to make the sales.
Whereas in the USA by comparison, the big Medicaid bill that was passed a few years ago explicitly prohibited this kind of bargaining!

So (yet) another reason is that the US government is so corrupt that it passes legislation written by drug companies to enshrine into law the profiteering wet-dreams of those drug companies.
posted by -harlequin- at 3:49 PM on November 29, 2008

Giant pharmaceutical companies, medical equipment companies, and anybody else wanting to make money markets incredibly heavily to patients, doctors and hospitals. There's a lot of profit built into the US healthcare system. Some patients will ask for tests. Some doctors will be swayed by pharma marketing, and prescribe more expensive medication. Hospitals may stock different surgical tools to meet the preferences of various surgeons. All that profit makes the system more expensive. For what seem to be a lot of reasons, healthcare in the US is not made more efficient by the free market.

In this economy, with layoffs announced everywhere, I'm terrified of losing my job, because I'll lose my healthcare insurance. It's a crappy way to live.
posted by theora55 at 10:45 AM on December 1, 2008

US medicine is such a byzantine institution that I doubt any single person could answer why it costs so much.

There are a lot of different aspects to US medicine, as well-- hospitals, family practice, drugs-- and each has its own unique reasons for being expensive.

I can talk about the hospital experience a little bit.

1) If you go to a veterinarian and buy a liter bag of normal saline, it'll cost you roughly twenty bucks. If you go to the hospital and nurse runs a liter of normal saline into your IV, the hospital will charge you close to one thousand dollars.
a) It is very unlikely that anybody will actually pay one thousand dollars for this service. Prices are negotiated with individual insurance providers. Actual negotiated prices are top secret.
b) Although malpractice costs are actually very low (both in comparison to other costs, and in comparison to malpractice that's never investigated or compensated), the fear of malpractice is very high, and the tolerance of risk is very, very low. While anybody can hang an IV bag, hospitals pay highly for assurances. If the bag of saline for your animal is contaminated, maybe somebody's pet dies. If a human patient dies, it's a big deal. Hospitals pay a lot of money for extremely tight tolerances and controls on their equipment and their staff. (As I mentioned, this is less about malpractice than it is about the fear of malpractice; and believe it or not, even hospital administrators have consciences, and don't want to be responsible for deaths.)
i) These extremely low tolerances for error permeate the hospital. A telemetry box is like a little portable EKG machine. It measures voltages from 3 to 5 spots on your chest and transmits this data to a central receiver. Any of you electronics geeks should start thinking about expensive it would be to build this device (the transmitter only). I'm guessing less than fifty bucks. Yet the hospital pays over a thousand dollars for each box. After all, what happens if the box is wrong? What if you race into room 23 for an asystole alert while it's really room 22 that's coding? A lot of the cost of that box is payment for the reputation of the vendor.

2) The better we do our job, the more expensive our job is going to get. Every time we add five years to the life expectancy of a patient with congestive heart failure, we end up with five more years of hospital visits, and maybe we end up with a patient who doesn't just suffer from CHF, but from dementia and COPD as well. Almost every time we manage to restart a fibrillating heart, we end up with an encephalopathic patient who's going to need life-long care complicated by pneumonias and decubiti.

3) It's very easy to raise our expectations of medical care; it's very difficult to lower those expectations. Once the standard of care for a patient complaining of back pain becomes MRI with an offer of surgery if indicated, the cost of treating back pain has just exploded-- and no physician will ever again be able to say, "You're going to have back pain for the rest of your life. We're not going to be able to do anything about it." (No, I don't believe those papers that talk about the cost of not treating an illness. Those are not impartial statistics. They're cherry-picked collections by specialists trying to convince the audience that that particular specialist's field of expertise is more important than other fields, and deserves more money thrown at it.)
a) Family members used to help immensely with patient care. Now, we don't trust them to do things right, because a few of them have screwed things up. We used to let patients self-administer their own home meds while in the hospital. Not anymore. We used to let ambulatory patients visit the kitchen themselves. Now that's a sanitation risk. What this means is a shrinking ratio of caregivers to patients-- and that's expensive.

4) Almost all hospitals have charity care programs. That has not always been the case. How do you think homeless people with cellulitis were treated fifty years ago? Probably inadequately. Now, not only do we admit them and administer IV antibiotics-- we also realize that they are unlikely to maintain IV lines and sanitary conditions if treated on an outpatient basis. That means we admit them for an entire week where a wealthy person would be admitted for a day, then scheduled for home health or regular outpatient antibiotic infusions. These treatment costs, of course, come from someplace.

I don't mean to suggest that this wall of text is anywhere near a complete list of reasons for rising health care. It's not even everything that I know about. I'm just hoping to give an idea both of how complicated and detailed the problem can be-- and of how the problem doesn't have a simple, "slash the waste!" fix. In many cases, the extra cost is due to us doing things better than we have in the past. It's really popular to argue that no cost can be attached to human life, but in health care, that's just not true, and it's disappointing to see policy makers and administrators (and providers) refusing to acknowledge that maybe, if we want to cut health-care costs and serve more people, and hopefully prevent some injuries and deaths, then we have to accept a certain level of risk and error: thus, accept a certain number of injuries and deaths.
posted by nathan v at 2:40 PM on December 3, 2008 [1 favorite has favorites]