Irrational Pricing Increases Health Care Cost

I have reached a certain age where my primary care physician recommended a colonoscopy. He referred me to an outpatient facility owned and operated by an LLC whose primary shareholders are the physicians. The appointment was scheduled in three weeks on the Monday of my choice. In and out before lunch missing only one day of work.

The bill for these services was $3400. The insurance company paid $875, my share was $75, and the physician group wrote off the rest. If the physician would do it for me for $950 I wouldn't need the insurance company. One must ask: WHY?? What has created this irrational billing system? What is the lowest price they would accept? Why do we need a layer of bureacracy/cost to get the best price?

It all started with Medicare in the mid sixties. The federal government created a health insurance plan for citizens over the age of 65. The government was bringing a large group of patients and demanded anyone providing health service to these patients accept a discount. Medicare covered less than 10% of the population so that was accepted.

Succeeding Congresses established Medicaid for poor people; then raised the definition of poor to include families earning up to $80,000 annually. Every congress has saved money by increasing the discount.

Healthcare providers increased the price of their services to offset the losses from treating Medicare and Medicaid patients. Congress then demanded they prove that they have made a good faith effort to collect their posted fees.

So Congress increases the discount and health care providers raise their prices in self defense.

Insurance carriers got into the game in the late seventies by creating managed care. Billions of dollars were made by middlemen whose only contribution was giving healthcare providers a means to provide discounts to their patients. Those who do not qualify for one of the federal programs or private managed care plans are trapped in paying full price for services. Government rules require them to pay inflated prices so providers can get acceptable reimbursement from the government. The healthcare providers write off the unpaid bills as uncollectible or the local government pays the costs.

NOTE: NOBODY IS DENIED NECESSARY TREATMENT FOR LIFE THREATENING ILLNESS. The treatment may be delayed or scaled back; but TREATMENT IS NOT DENIED.

Today the government pays for over 40% of the health care provided in the US and the progressive politicians in congress are maneuvering to increase that to 100%. The apparent purpose is to enhance the revenue of the federal government to cover the trillions of unfunded liabilities from Social Security, Medicare, TARP, and the economic stimulus.

Insurance companies are supplementing the income shortfall to healthcare providers created by the government. When (not if; WHEN) the government becomes the sole provider there will be nobody to cover the losses imposed on healthcare providers by congress. This will cause them to cutback on services or go out of business altogether.

Lower reimbursement = fewer healthcare providers. Fewer healthcare providers = long waits. Long waits = National Coordinator of Health Information Technology (aka Death Panels). National Coordinator of Health Information Technology = rationing. Rationing = denial of care.

BONUS: Sick people will just die, thereby reducing the unfunded liability of Social Security and Medicare. Remember, when they are talking about pulling the plug on Grandma; someday we will all be Grandma.

Here are three things that would reduce the costs of healthcare.

1) Charge for procedures and not fees for service. For example:birthing has been bundled into one price from prenatal through year one and includes professional services and hospital charges in many locations.

2) Allow people to purchase pharmacuticals in Canada or Mexico. Drugs are cheaper in those countries because of government price controls and consumers in America pay more to subsidize this practice. Big pharma will stop playing that game if we could purchase our drugs in these countries too.

3) Put a cap on damages for pain and suffering in malpractice cases. It has worked in Texas and would work nationwide.

Here is the one thing that will NOT reduce the costs of healthcare:

Allowing the government sell insurance in competition with private insurance companies. The government will most certainly engage in predatory pricing as they tax private insurers to pay for the cost of providing health insurance at a loss. This will force private companies out of business and then the government will have a monopoly on health care.

Monopolies NEVER work. Never.