Saturday, February 20, 2010

The Real Cost of Healthcare

(preface: Any potential solutions outlined here are not universal and may not be feasible for all cases, but that doesn’t mean nobody can do it!)

It seems health insurance companies raising premiums for individual members (as opposed to a group health plan) and people are upset about it. (Here, here, and here are some recent news stories about it.) Well, they should be! How can anyone afford healthcare, especially without insurance?

But wait! Why do insurance companies raise rates? Profit, of course! But they also do so to compete with the cost of the healthcare they ultimately pay for if you get hurt. The total bill that an insurance company (or an uninsured individual!) receives for emergency medical care can be staggering. While most bills really aren’t this high, some can easily total $50,000 to over $1,000,000 for one hospital visit!  It shouldn't cost a year's salary (or any multiple of it) to get urgent medical care.

While most bills won’t be that high, a simple visit to the ER, regardless of what treatment one receives is almost certainly an instant $500 – or more - bill. One reason for this is to entice the injured to seek out other sources for their care, unless an ER visit is absolutely necessary. The basis for this is the hospital doesn’t want to have to accept every individual who needs help; they would be inundated by too many cases to handle efficiently. If someone can receive care at another, non-emergency facility, then it is for them to receive it elsewhere.

However sound that logic may be, setting an arbitrarily high fee for a visit is not the way to handle it. The reason for this is sometimes people don’t have another option. For example, they get hurt late at night, and an urgent care center (as opposed to an ER) would surely suffice for them to receive appropriate treatment, but at 2 in the morning, there are no urgent care centers open, so their only option is to wait it out, which could potentially be worse, or go to the hospital ER.

Instead the hospital could open up an adjacent UCC, and have that operate 24 hours like the ER, with one centralized triage process. Those patients who need immediate emergency care can be shuttled to the ER, and those who don’t can be directed to the UCC. From there, charge a nominal fee for triage (so the bottom line doesn’t suffer) and you have your solution to the over-crowding issue. Why isn’t this already done? Doctors don’t like working nights (hence the not-open-late-UCCs)? Hospitals don’t want to invest in infrastructure that would actually decrease profits (despite helping the general public)?

Let’s segue into the next point about why medical care costs so much. Doctors (and facility administration) have big paychecks. Why? Because they provide an important service. Surely that’s true, but then, so do teachers, firemen, policemen, etc. Teachers in particular are important, for if it weren’t for them, we’d have no (well trained, educated) doctors! But the pay for teachers is for another discussion… Back to doctors, another reason they make so much is offset the cost of their education. (Wait, is that another conversation about teachers coming back???) Doctors, especially emergency doctors, also deal with a great deal of stress that many would not want to be burdened with, but does lots of money really help offset that? Does a nice, fancy car and nice, fancy house make failing to save someone’s life that much more tolerable? And counter to the stress, does successfully saving a dying patient not reward the doctor? Bottom line here is that being a medical anything is a respectable and worthwhile career, but how much do you really need to compensate for it?

Another cause for excessive medical bills is the equipment and medicine used by the hospitals. Medical facilities have minimal control over the cost of these externally supplied resources, so the trickle down goes to the manufacturers of said resources. There are, of course, a number of factors that increase the cost of these goods, such as R&D, manufacturing and shipping costs, and employee compensation. As part of employee compensation, executive compensation also comes into play. (Here is a single source listing of executive salaries from 2007. There are more out there, so look them up if you want to see.)

Some of these individuals make so much money in one year that unless something seriously changes, most Americans will not earn this in their lifetime. With some quick math (of course hypothetical), if an individual works for 50 years before they die/retire, starting at $10.00/hr, and accounting for no increase aside from 3% cost of living increase annually, that individual will have only made $2.3 million in that time. Someone starting at $15.00/hr with an annual 5% increase will make only $6.5 million in that time. The top 9 from that list linked to above made about double that in one year. (More on executive pay later…) With so much money being made/paid to individuals, wouldn’t one think that the excess profit can be reduced in order to help the greater good? To add to that, if costs came down, those who choose to forego medical care/pharmaceuticals due to the cost may actually start to buy these products, and these companies may see an increase in sales. Maybe not, but what’s the harm in helping people get access to care they need?

Lastly, there are just some interesting charges/fees for things that just don’t make sense. $800 dollars for an overnight stay at a hospital? This is not five-star quality. And yes, there are people who monitor patients and drugs may be given blah, blah, blah, but those ‘extras’ are also billed for in addition to the room and board fee. That $800 covers just the room and board. What about little things like $8.00 for a gauze pad, when Walgreens will sell 25 of the same pads for a whopping total of $8.00. And worse still, $100 for a few pills of ibuprofen?!? CVS sells bottles of 1,000 pills for $20!! And while the hospital variety may be more potent, surely the difference can’t be that great, otherwise it’d kill you.

Sure we need healthcare reform, but not health insurance reform. Government subsidy of insurance would just lead to an increased cost of care, because those supplying the goods and services will nearly be guaranteed to be paid - out of all our pockets. What we need is to get control of the profiteering on the part of those who provide the goods and services themselves.

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