Friday, August 9, 2013
This Wasn't Cheap
I had occasion to speak to my insurer today to clarify whether cardiac rehabilitation is included (it is). It turns out that the bill from St. Alphonsus Medical Center for this came to $118,000. Obviously, that will be marked down under the contract with Blue Cross -- but it is sobering to imagine getting a bill like that if you did not have health insurance. Even millionaires would be sobered by such a bill.
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If you were paying cash it would come to about $40,000. Still not cheap, but way better.
ReplyDeleteIf you did not have health insurance, you would not get a bill like that. The Cleveland Clinic is possibly the top surgery center for cardiac conditions in the world and certainly in the country. Quadruple bypass is $65k cash on the barrelhead. The catch is that you have to go in via their international center. The US is a player in medical tourism.
ReplyDeleteAnd yes, they do take credit cards.
This is one of those situations where it is clear that the free market would provide a cheaper alternative than the current, severely distorted insured arrangement. But how to to there without putting a lot of people in the position of no insurance, and can't afford it?
ReplyDeleteI don't pretend to know all that needs to be known, but I don't the prices are straight-up believable--consider who has rules about what th4ey will pay vs, the total that needs to be covered.
ReplyDeleteA simple shift would be to promote insurance products where you pay up front and have the insurance pay you instead of the provider. That immediately gets you lower prices and kicks in the impulse to price shop. Yes, you would have to get bridge financing to cover between the time of service and when you would get paid. That's unavoidable.
ReplyDeleteThis reform would expose the stinking mess that is the struggle for doctors to get paid and pressure insurance companies to fix their delay games because they would now be doing it to their premium holders, not to relatively powerless employees of the service providers. It would also lead to the end of upcoding because at the time of service and the place of service they would have to lay out the codes and if they are overcoding, you could dispute it, something that is much more difficult 6 months later when things are pretty much reduced to he said/she said.
The societal bet is that the distortion unwinding would generate savings that exceed the cost of the bridge financing. I think that's a pretty good bet to make.
Glad you are with us! Speaking as a drone in the insurance industry, and not saying anything you don't know, insurance is a net loss. It allows people to not save, and still get their bills paid. It might even be considered a form of 'savings' that results in a negative return.
ReplyDeleteA wise government might even outlaw insurance entirely, as a drag on the economy. Still, even before it became a 'benefit' paid by employers, there was an insurance market supported by people making free choices, just not nearly as intrusive as now.
Reply to TMLutas, I agree. I sometimes advise people, if they ask me, that the insurance company doesn't mind if they pay cash, and submit the bills themselves. Then we pay them directly, and they may get a lower total price, while we also might save some money.
ReplyDeleteA simple shift would be to promote insurance products where you pay up front and have the insurance pay you instead of the provider. That immediately gets you lower prices and kicks in the impulse to price shop. ...
ReplyDeleteI don't think this is a good idea at all. My insurance company is in a much better position to price shop than I am. They are more knowledgeable and able to demand volume discounts. Furthermore I don't especially want to have shop around for medical care particularly when sick, I would prefer (to the extent that this is practical) to pay for the service of selecting care providers.
Happy to hear you're on the road to recovery, Mr. Cramer.
ReplyDeleteYour unfortunate (or fortunate, depending on your perspective – as you pointed out in a previous post) circumstances do bring up broader topical issues of consideration and discussion, I think.
While I am certainly no defender of the artificial State- and insurance-induced healthcare inflation we are experiencing, I nonetheless find it interesting that many people are willing (and in some cases, enthusiastically so) to pay similar costs for consumer products (e.g., homes, cars, and the like) while they are apparently unwilling to do so for lifesaving/life-extending medical procedures.
The irony of the populist perspective that rationalizes a desire for nationalized (free) healthcare is that some folks insist such services are vital and thus far too critical to be costly… yet according to basic praxeology if healthcare is a truly critical (valuable) service then folks should valuate it accordingly and purchase it in lieu of other goods or services. Ranking subjective valuations by priority is the essence of market exchange (i.e., to give up something less valuable for something more valuable), yet in this particular instance normal paradigms are seemingly turned on their head due to a number of external motives, artificial variables, and plain old ignorance.
Given that, in layman's terms, economics is simply a study of the pursuit of infinite wants via finite means, this weird paradox sends the signal economically that some individuals value certain consumer products (whatever they may be) more than their own medical welfare, or lives for that matter, which is frankly difficult to understand. How some people will decry financing $50,000 for a life-extending procedure (an objective that is presumably important to them) but have zero problem financing a similar amount for a new automobile were the circumstances different is an irreconcilable paradox, it would seem. While the situation I present here obviously does not address people who simply have no means, the vast majority of folks I talk to who are on the "free" healthcare bandwagon are people of the means necessary to obtain quality healthcare, and do – they just do not wish to because, I am left to presume, they hypothetically valuate other things greater for the given price(s) in question, even though their actions speak otherwise.
While I maintain that a true free market – though this will never be practically allowed for a plethora of reasons – would dramatically reduce these costs relative to what they are today, they will nonetheless always be priced at a premium relative to other market goods and services because deep down, even if some do not wish to admit it, quality healthcare is generally and inherently valuated much higher than other market goods and services. Even those who do want to pay so much begrudgingly do so in lieu of death, unless of course they have at their disposal an option to shift these costs to others. (Typically, no cost is too high in such circumstances; all of a sudden when someone else is paying the bill, high prices exchanged for lifesaving procedures are viewed as justly acceptable). Even if the State were to implement price controls, these naturally higher costs would be shifted and realized through costs of debt (e.g., taxes, inflation, etc.) and/or generally proportional reductions in quality.
Healthcare is inherently expensive because of basic economic principles, which is ultimately why those who fail to understand simple economics will almost invariably fall into the impracticable paradox camp. Whether they realize it or not, they will not be substantively arguing for reduced costs, per se, but rather cost reassignment.
Thoughts?
Mr. Shearer: I agree that an insurer is in a far better position to negotiate prices than an individual, simply because of the volume. There is one other aspect to the insurance company that is advantageous: they are in a position to watch for shady or questionable medical procedures where an individual simply does not have the knowledge. If a doctor tells me that I need to have X done, when it is really not needed, how will I know better? Most doctors are ethical, and will not recommend procedures that are not medically necessary, but there are some who will put their patients through unnecessary suffering and expense just to increase their income.
ReplyDeletekeathwarlick points to the absurd situation where people will gladly finance a $50,000 luxury car, but hem and haw about spending that kind of money on a life-extending medical procedure. Here's why:
1. The luxury car is clearly perceived as a luxury -- not a necessity. It's irrational, but people have a sense of entitlement to something that extends life or reduces suffering in a way that they do not concerning a car or a fancy TV.
2. The luxury car has a warranty, and resale value. If it fails to perform, you can demand correction. If you tire of it, you can sell it, with only some depreciation. The same is not true for surgery!
"A wise government might even outlaw insurance entirely"
ReplyDeleteActually, while it might be possible to imagine a more UNwise thing for government to do, I'm not actually able to come up with an example off the top of my head.
The pooling of unpredictable and somewhat rare risk is one of the important factors in enabling modern industrial civilization. However, if all you really mean is that government might ban calling something insurance that isn't really insurance--that's a different matter, and you might well convince me.
Kirk Parker, sorry, that wasn't a serious proposal, more of a joke. I am pretty libertarian, and would rather the government didn't run around banning things. But insurance, as it works now, is so far from a free market, that we have no way of knowing what might emerge if the government were to take it's hands off. I suspect insurance would become a lot rarer, and cheaper.
ReplyDeleteI am not sure that government getting out of the insurance business would actually make it rarer. It would certainly move things around, and in perhaps a more rational manner. The tax treatment of employer paid health insurance relative to employees trying to buy their own creates absurd distortions in the market, doubtless more severe than the distorting effects of health insurance itself. I would expect in a free market that disaster health insurance (to cover things like heart surgery) as opposed to seeing the doctor for antibiotics would be relatively cheap.
ReplyDelete