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The Inexplicable American Consumer Is Putting The Screws To Health-Care Expenses
Wolf Richter www.testosteronepit.com
There has been anecdotal evidence. But now The Wall Street Journal in its story about GE’s quandary confirmed it: the toughest creature out there that no one has been able to subdue yet, the inexplicable American consumer, is apparently accomplishing a miracle: putting the screws to runaway health-care costs. One of their targets: over-used, over-hyped medical services, such as MRIs and CT scans—an industry bubble that has been ballooning by the double digits for decades. Motive? Profit.
It may be early for a victory lap: critics contend that “the health-care system is still overrun by unnecessary imaging at prices that are much higher than in other countries,” the Journal writes. “A study by the International Federation of Health Plans found that US fees for an MRI were about 80% higher than Germany’s.”
American health care costs are beyond legendary. Employer plans that cover a family of four are expected to break the sound barrier of $20,000 this year, up 7% from 2011, and up 117% from ten years ago. The country is spending $2.6 trillion on health care a year, or 17.9% of GDP! Yet, in terms of life expectancy, these expenditures don’t add up. Depending on who is counting, the US ranks somewhere between 38th and 51st place. On the latter list, US life expectancy of 78.49 years is almost 11 years lower than Monaco’s.
The Journal describes the inherent conflict between GE’s health-care division, which generates $18 billion in revenues by selling MRI machines, CT scanners, and the like, and the health insurance program for its employees, which costs $2.5 billion. While the health-care division wanted to sell as many imaging devices as possible, cost cutters wanted to contain the spiraling health-care costs. The cost cutters won—and introduced high-deductible health plans. After two years, the use of imaging technologies dropped by as much as 25%.
Other large corporations are implementing similar plans. In my experience, high-deductible plans have become nearly standard in small companies—to combat skyrocketing costs. What they have accomplished in the process, without planning it, is introduce a new watchdog into the equation, and not any old watchdog, but the sharpest one out there: consumers motivated by profit.
Many companies offer options, where the employee portion for family coverage may drop from, say, $1,200 per month for a classic plan to $600 per month for a high-deductible plan with a maximum out of pocket of $4,000. People do the math. They’d save $600 per month, or $7,200 per year. Any expenses would be capped at $4,000. Savings: $3,200. Plus any out-of-pocket expenses they would have to pay under the traditional plan. These plans qualify for Health Savings Accounts—and contributions to them are deductible from federal income taxes (but not from California income taxes!!!).
For healthy people, a high-deductible plan with an HSA account is financial nirvana. For people with chronic illnesses that are expensive to treat, such a plan may be less advantageous, but may still be a good deal (check your numbers carefully!). It’s a tough plan for those who don’t have the discipline to put aside the monthly savings so that they can pay their big deductible down the road. But it’s a fiasco for those who can barely pay their premiums and have nothing left to put aside—a growing part of the population [read.... The Pauperization of America].
While it’s still nearly impossible to get accurate pricing in advance of medical treatments—and thus price competition remains illusory—it is possible to question the need for certain procedures. Insurance companies who are trying to deny coverage for procedures they deem unnecessary can get into hot water. For them, the path of least resistance is to pay, and then raise premiums. But when a consumer, motivated by profit and a desire to stay healthy, deems a procedure unnecessary, it’s a different story. Suddenly, the profit motive of the industry smacks into the profit motive of the consumer. Rudiments of checks and balances!
Those are personal decisions. But consumers are motivated to think about them and empowered to make them—rather than handing the entire process over to the industry. And when the toughest creature out there has a major medical event that fulfills the deductible, he or she can spend the rest of the year catching up with accumulated elective procedures: cataract surgery, hip replacement, brain transplant.... For free.
It has had an impact. In 2012, plans with deductibles of $1,000 or more made up only 19% of employee-sponsored health plans, according to the Journal. But the radiology industry is now contemplating stagnation: demand by privately insured patients (rather than those covered by Medicare) declined by 5.4% in 2010. And GE saved 15%.
The cellphone in your pocket is NASA-smart. Yet it costs just a couple of hundred dollars. So why is it that rising technical capabilities lead to drastically falling prices everywhere, except in your medical bill? The answer may surprise you. Read.... “Why Your Health Care Is So Darn Expensive,” by Alex Daley and Doug Hornig.
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You are correct about over-treating very elderly seniors. It is horrifying to see 90-year old men with their chests torn open and ribs smashed after a Coronary Artery Bypass Graft. What is the purpose of this... it is nothing but torture to an old man. It is also very expensive... but don't even mention age-limits for certain types of heroic treatment... otherwise you would be discussing death panels (when really the issue is the ethical practice of medicine). You cannot tell me that any 94 year old would voluntarily undergo open-heart surgery if all of the risks and benefits were explained properly.
My 42 year odl friend has kidney problems and is on dialysis. I was amazed to see barely breathing 90 year olds getting dialysis 3x a week. The nurse there was candid. She said that's where they make their money...ie., massive reimbursements from Uncle Sam for dialyzing these people, many of whom are completely out of it with Alzheimers, etc.
I don't know the solution, but it's no wonder the system is broke.
This is one of the side effects of capitalism. The system is there to earn/collect money and they collect just as much, maybe more, from working on the 90 year old as they would on someone younger. It's the profit motive at work.
If you don't like capitalism, there are alternatives.
Funny thing about insurance, it is much more akin to socialism than capitalism. Jump in the pool, all for one and one for all.
So what you are describing is really one of the side effects of socialism, albeit an odd sort of limited kind voluntarily elected by its participants to alleviate some risk.
The profit motive is also at work when a felon robs a bank and shoots a lot of people.
I have no problem with the government acting to stop bank robbery.
I have no problem with the government acting to stop hospitals and doctors from unethically grabbing fistfuls of money from the medical insurance jar. It isn't an alternative to capitalism. It is a necessary component of the free enterprise system.
Both the insurance companies and the health care providers do it for the money. And the more they do it, the more money they receive. How is that socialism rather than capitalism? The government is in on the scam as well. The insurance and health care industry spend huge amounts of money to buy the necessary access to government. Medicare Part D is an excellent example. It was the profit motive that caused the health insurance companies and big pharma to push for its passage. The government doesn't act to stop these bank robberies. It helps ensure the robbers get paid.
If medical care was a cash for service industry, or had no or at least a minimal amount of government subsidization:
1) The (at minimum) 50% of what are now unecessary testing, prescription and consumption of pharmaceuticals & absolutely worthless surgeries (think back surgeries, as just one of many examples), would be eliminated.
2) Medical treatment providers, Big Pharma and medical equipment manufacturers would be forced to find greater efficiencies (in the manner other industries have been forced to) in order to re-price their products and services based on a true, unsubsidized, supply-demand curve.
3) Far more cost-effective treatments would be suddenly heralded. Example: You're 25% overweight and have a junk food diet, while getting zero exercise, and now have type II diabetes, cardiovascular and other problems? Start eating healthy and get a minimum of 20 minutes of exercise 3 to 5 times a week (you don't have do a biatholon; walking or similar is fine). Voila. All better.
Insurance is a business, like any other. $$$$$$$$$$$$$$$$
bullshit -they deserve a fraction of what they make
kind of like pharmacists
Monopolization of medical care (major hospital buying out small rural area hospitals) on a local level is an issue you should be angry with. Or perhaps compensation to CEOs. Or perhaps the cost of equipment or medication or the hospital stay.
But a physician who spends a decade in medical school during the prime of his life deserves to be compensated appropriately if you want the cream of the crop to go into medical care.
Radiologists work 12-18 hours a day, in a dark room, dictating for the entire time. And treatment relies on their conclusions.
http://www.modernhealthcare.com/article/20120811/MAGAZINE/308119932#
CEO of a hospital can make up to a 1/4 million a year.
Around the first of August, I collapsed a mole tunnel at an awkward angle and felt a 'pop' I knew wasn't good. Sure enough, the next day, I was in a fair amount of pain and was avoiding putting pressure on the exterior metatarsal of the affected foot. The following day, I went to the walk in clinic of the HCA medical center half a mile from my house. They took X-rays, and the practical nurse said he didn't see a fracture, gave me some pain meds, and said if it wasn't noticeably better in 10 days, come back. He added that the radiologist would look at the X-rays. That night when I ordered take-out, I realized that I hadn't turned my phone on after I charged it the night before, and when I turned it on, found a message from the medical center telling me that the radiologist had seen a fracture and they were setting an appointment with their orthopod. This was Friday, after business hours, so it was moot until Monday. Saturday, I noticed the swelling had gone away, and by Monday, I noticed that it had barely bruised at all. I surmised that the fracture the radiologist had seen was in his referral bonus and by Tuesday realized that the hydrocordone they gave me was wearing my ass out, so I stopped taking it. By the weekend, I was walking normally. I will be generous and ascribe this incident to liability avoidance.
zhandax
Interesting I had almost exactly the same thing happen. The emergency room PA/doc? couldn't see
any fracture, but the radiologist claimed he did. A heavy marble topped Sideboard broke a leg and fell
on my foot. As a result I had plenty of bruising so my course of recovery was slower.
I really think the "cracked" metatarsal was to kick it into another diagnostic group and more billing for the hospital.
BTW, if I could find a label on the piece of funriture, I'd put a lawyer onto the importer of that incompetently designed, dangerous POS. :-)
What a load of crap.
I'm going to puke all over my keyboard the next time I have to read somebody's drivel about how I deserve what I make because some other crook has gamed the system to make more than I do.
Strip doctors of their current power to limit medical schools and control their numbers via state licensing boards and let a free market determine what the profession will earn, then doctors can find their true worth, sort of like engineers and computer programmers have done over the past decade, and blue collar workers, even highly skilled ones, have done in the decade before that. Turns out it is a whole lot less than they thought.
Monopolies, a huge pool of insurance money, favorable tax treatment, the impossibility of finding out beforehand any prices for medical services, and the complacency of the sheeple have caused a gravy train to run right to the doorstep of medical personnel for the last 60 years.
Your hubris over what you think is appropriate compensation for yourself in the absence of market forces is killing me, and thousands of other patients who can no longer afford to keep you living the life to which you have become accustomed.
The provider youre describing is an outside service the hosp has contracted with which has absolutely no bearing on patient charges.
@trillion_dolar_deficit
Is your position that input costs have no effect on pricing to the end customer? If so, FYI, hospitals bill patients their cost plus a rate of return.
It's shocking but at the same time I know somebody who just spent a week in the hospital - total bill: $150,000. People work hard their entire life and will never save that much money, yet 1 week in the hospital will essentially force the average American into bankruptcy.
I spent a week in a German hospital this year and the total bill was $9,000. It included an expensive procedure and the doctors as well.
The system is out of control. My wife was kept overnight for something stupid (we both knew the Dr. was being overcautious), the hospital billed the insurance company $40,000!!!!!! and the insurance allowed $3000 of it. Can't wait for Obamacare to kick in and fix it </SARC>
Madness, shear madness.
Could we be seeing yet another bubble starting to burst?
Education is hard on its heels.
BTW, a hip replacement for a German Shepherd is about $4000, I've heard.
Thats about what a person can get it for in India. The docs are using the same tech,parts, and probably training too.
I don't think $4K would cover your deductable Stateside.