The U.S. health care system is broken. It's also a government directed, favor granting, cronyism based non-market system with out-of-control costs and a secretive pricing mechanism that makes absolutely no sense.
It's also full of mystery about how things are priced and the third party payer model means essentially that nobody acts as an effective monitor on the cost, quality and delivery system. As a result, health care pricing is out of control.
While at first glance very few individual customers appear to have any of their own skin in the game, in fact all of We the People have our skin in the game. We can't afford to allow America's health care 'system' to continue its wasteful and largely unproductive crapshoot ways.
Not for profit hospitals earn more than for profit hospitals, although both earn outsized profits by overcharging through something called the 'chargemaster' pricing system. There is no effective market as Congress, hospitals, doctors, insurers, medical device makers, pharmaceutical companies and Medicare and Medicaid rules and regulations have combined to make the 'secret' system too costly for no good reason.
ObamaCare won't help make things better either (probably much worse, in fact), although this specific piece of legislation didn't have anything to do with creating the unaffordable health care mess in the first place. Congress and the medical profession and industry had screwed that up long ago.
All this has to change for the better, but it's not happening. Not at all.
U.S. Health Care Costs at a Glance
Health care costs are by far our nation's biggest financial problem in need of a solution.
And the American Medical Association is by far our nation's most powerful and unproductive labor union.
Hospitals, medical device makers and pharmaceutical companies are big parts of the problem too. Especially not-for-profit hospitals.
Meanwhile, American health care costs are by far the most expensive in the world.
The pricing system is a mysterious crapshoot which is rigged against the ultimate payers, including taxpayers and individual paying patients.
That's why oldsters like for Medicare to pay their health care bills. Its costs aren't at all apparent or important to them. At least not directly.
And now government has added to the high priced circus by enacting ObamaCare, which comes on top of all the bad things Congress has done with respect to health care over the previous several decades.
Unfortunately, much more heat than light has been shed on this entire health care mess in America. Until now, that is.
Time Magazine has published a comprehensive analysis of Medicare reimbursement rates compared to private insurance. In simple language, prices charged to individuals and their insurers for the exact same procuedures are far and away higher -- dramatically higher -- than comparable charges paid by the Medicare system. Our third party based health care pricing, cost, delivery and overall reimbursement system is completely broken, in other words.
Doctors and hospitals are using Medicare to drive high volume and revenue per transaction and customer (Wal-Mart pricing model) in exchange for comparatively 'low' fees and then sticking the non-Medicare private sector patients with dramatically higher fees for the same procedures (the Rolls Royce pricing model). When blended, the Medicare volume benefits and the non-Medicare pricing strategy make for a very lucrative health care industry.
Doctors, hospitals, drug companies and medical device makers all enjoy the rewards of a lucrative non-market based system which is sponsored and protected by the government rule makers. We the People get the shaft.
And as a result health care in America has become a very costly, unaffordable and out of control chaotic 'system.'
The Harsh Facts About Our Broken Health Care "System"
Make health care more like Medicare summarizes the just released longest article ever published by Time. I recommend that you take the time to read the entire article. And if you don't want to read it all, read the first few pages and then skip over to the last few pages. You'll be glad you did.
In any event, the Time story is both very educational and a bit sickening as well. Here's the summary:
"Steve Brill, founder of Court TV and the magazines American Lawyer and Brill’s Content . . . is a go-big-or-go-home writer, fond of the long, meticulously reported piece. So it’s only fitting that his detailed critique of America’s out-of-control health-care spending, the cover story in this week’s issue of Time magazine, took seven months of research and clocks in at 36 pages . . . . And the epic article winds its way around an interesting thesis: While the steady growth of Medicare spending is a public-policy problem—along with Medicaid, Brill writes, it’s “what’s driving the federal deficit”—the health-care system would be in far worse shape if Medicare weren’t around.
Central to Brill’s argument is a Health Care 101 explanation of how Medicare sets its reimbursement rates for medical procedures. “Medicare collects troves of data on what every type of treatment, test and other service costs hospitals to deliver,” he explains, factoring overhead, salaries and a multitude of other expenses – but not leaving room for much of a profit margin, if any.
Brill then offers several real-life examples demonstrating the huge spread between the Medicare reimbursement rates and the rates that hospitals and doctors try to charge to private insurers and patients paying out-of-pocket. A blood-protein test that Medicare reimburses at $13.94 gets billed at $199.50 to an uninsured 64-year-old; a stress test for the same patient gets marked up from the $554 Medicare rate to almost $8,000. Three CT scans for a slip-and-fall victim? Medicare would have paid about $825 in total; but a Connecticut hospital billed the patient $6,538.
Brill also points out the many ways in which Medicare fails to control costs: The system is constrained by law from using its buying power to negotiate lower prescription-drug prices, for example; and it lacks incentives that would keep patients from pursuing medical care they don’t need or keep physicians from “over-doctoring.” Doctors and hospitals have long complained that Medicare reimbursement rates don’t reflect their true costs, and while Brill thinks that some of this amounts to crying poor—citing examples of high hospital profit margins—he concedes that “no doctor could hope for anything approaching the income he or she deserves (and that will make future doctors want to practice) if 100% of their patients yielded anything close to the low rates Medicare pays.”
Still, Brill concludes that the our health-care system would be more efficient, and more affordable, if it were to become more like Medicare, with pricing that’s predictable and transparent. “Unless you are protected by Medicare, the health care market is not a market at all,” he concludes. “It’s a crapshoot. “ And at least for now, it’s a crapshoot that retirees can skip once they turn 65."
To repeat, I recommend that you take this opportunity to become more informed about our health care cost, pricing and reimbursement system. It's a mess and one that affects us all.
Health care is the biggest single financial issue facing America today.
Getting to a better reality by seeking the truth is always preferable to remaining ignorant (not to be confused with stupid) about important things affecting our individual lives and overall well being as a society.
So together let's seek that truth about health care in America, our nation's biggest financial problem and one which is desperately in need of a lasting and affordable comprehensive solution.
That solution can only come from transparency and an open and honest national conversation, which this article will help facilitate. Of that I'm certain.